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Market ReportsOfficeUtahWesternWestern Market Reports

As the Global Office Landscape Changes, Salt Lake City Responds with Resilience

by Jeff Shaw

— By Nadia Letey, senior vice president, CBRE — The global office landscape has markedly changed post-pandemic. Now, amidst economic headwinds and the ongoing stabilization of return-to-office mandates, U.S. office markets like Salt Lake City are undergoing various shifts that are set to shape real estate dynamics in 2024. At the same time, Utah’s economy remains a highly desirable location to do business, in large part bolstered by an exceptionally strong talent pool. What’s Changing: Development Slowdown Poised to Ease Supply Demand Imbalances Salt Lake City saw a 42 percent year-over-year decrease in total office space under construction in fourth-quarter 2023, marking an all-time low. High interest rates, along with record-high vacancies, will continue to deter developers from breaking ground in the near term without significant pre-lease activity. This thinning construction pipeline will likely reduce supply side risks over the next several years as demand can be placed within second-generation space with elevated vacancy. Existing properties — especially in amenity-rich locations — will do well to attract tenants. The emphasis on creating a collaborative and inviting workspace will continue to be important to bring employees into the office.  Projects that are moving from planned to under construction are hedging their risk by …

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Market ReportsMidwestMidwest Market ReportsNebraskaRetail

Tenant Demand, Construction Slowdown Lower Omaha’s Retail Vacancy Rate

by Kristin Harlow

By Mandi Backhaus, The Lerner Co. As we finish out the first quarter of 2024, we reflect on the Omaha retail real estate market with consideration to the internal and external factors of trends, challenges, opportunities and the state of the economy. It can be said that the Omaha metropolitan area remains steadfast throughout difficult times. With its robust and diverse nature, anchored by industries such as healthcare, technology and finance, Omaha, although sometimes called a “flyover city,” remains a hidden gem for those looking for a steady yet vital lifestyle at an attractive cost.  This favorability trickles down to how real estate is valued and utilized in the area. According to a Merrill Lynch article, approximately $84 trillion in assets is set to change hands over the next 20 years, from baby boomers onto their children and so on. While the various generations may invest differently, one constant remains: real estate.  From a national standpoint, the unstable scenario results from a blend of factors, with inflation, interest rates and the collapse of banks in early 2023 being particularly prominent. This perfect storm had left the industry in a precarious position. The Mortgage Bankers Association revealed a 56 percent drop …

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DevelopmentIndustrialMarket ReportsTexasTexas Market Reports

Combination of New, Old Factors Reinforce Appreciation of Industrial Growth Drivers in Texas

by Taylor Williams

The more things change, the more they stay the same. More than 150 years after the old French proverb was coined, industrial real estate professionals in Texas who have a penchant for philosophy may well be seeing its application play out in real time.  While the industrial market has cooled from 2021 and early 2022, when insatiable demand drove record rent growth, there are still enough positive fundamentals within the space to counteract the likes of inflation, interest rate hikes and geopolitical uncertainty during an election year. Against that backdrop, owners and brokers are frequently reminded of how fortunate they are to be doing business in the Lone Star State. Muchos Gracias Job and population growth are the Letterman guests who need no introduction, as they have always driven expansion and value creation in Texas across all sects of commercial real estate.  But as powerful as those drivers are, they’ve been there all along. In recent years, as disruption in debt markets has slowed industrial supply growth and inflation has put pressure on tenants’ costs of occupancy, other macro-level forces have also emerged to buoy the market. Specifically, the impacts of a growing concentration of manufacturing operations in Mexico have …

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IndustrialMarket ReportsNortheastNortheast Market Reports

Industrial Development, Leasing Trend Smaller Throughout Northeast Markets

by Taylor Williams

Sometimes smaller is better.  “Sometimes” is of course the operative term in that controversial and wholly non-salacious statement. But in the context of industrial real estate, it’s becoming increasingly clear that at this point in the cycle, smaller buildings make more sense for developers to deliver as e-commerce and distribution users actively consolidate their footprints.  “Most leases in New Jersey and Pennsylvania over the last 12 months were for less than 500,000 square feet, with 50,000 to 200,000 square feet being the ‘sweet spot,’ for leasing,” says Anthony Amadeo, executive vice president at New Jersey-based developer Woodmont Industrial Partners. “There is strong demand [for that product type], but other developers are now building it too, so we’re going to see some elevated competition in that space.” This activity is occurring across the country in varying degrees. But in markets like New Jersey and Eastern Pennsylvania, where sites that can support large-scale developments are extremely scarce and entitlement and permitting processes tend to be long and arduous, the trend is perhaps even more pronounced. Yet those longstanding characteristics of the Garden State and Lehigh Valley industrial markets are only partial reasons as to why new developments and deals are effectively downsizing.  …

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AlabamaIndustrialMarket ReportsSoutheastSoutheast Market Reports

Industrial Owners Seek to Find Balance at Their Facilities in Metro Birmingham

by John Nelson

By Henry Graham of Graham & Co. As a reminder to those who may have missed my colleague Sonny Culp’s article from last year, 2021 and 2022 saw the delivery of more than 10 sizable build-to-suits to the Birmingham/Central Alabama region. Such rapid growth in the industrial sector grabbed the attention of larger industrial developers that have generally allowed Birmingham to fly under the radar. Case-in-point, in the years from 2008 through 2016, the greater Birmingham metropolitan area was essentially devoid of any speculative industrial development. Instead, the pipeline of industrial projects was centered around owner-occupied spaces and the occasional build-to-suit related to the automotive sector or light manufacturing. On the tailwinds of the recent build-to-suit frenzy and COVID-fueled supply demands, Birmingham experienced a flurry of speculative activity in 2022 and 2023 as regional and even national developers like Scannell Properties tested the waters alongside Alabama-based industrial developers.   Along a half-mile stretch of Daniel Payne Industrial Boulevard that sits just north of the central business district (CBD) and not far from the intersection of I-65 and I-20/59, four Class A spec buildings came up in rapid succession totaling 737,000 square feet. Two of those buildings are now fully leased …

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IndustrialMarket ReportsUtahWesternWestern Market Reports

The Hidden Good News of Salt Lake City’s Industrial Market

by Jeff Shaw

— By Jarrod Hunt, vice chair, Colliers — The Utah industrial market continues to perform very well given the reduction in the average deal size in 2023 (illustrated in the charts for both Utah and Salt Lake Counties below).  The entrepreneurial spirit that continues to be the backbone of Utah’s economy is evident with the smaller lease sizes. This was a welcome opportunity for companies confined to limited options for growth over the past economic run-up. However, we have seen a notable increase in out-of-market tenant inquiries, with many in search of larger blocks of space in the New Year. We expect the pendulum to swing the other direction this year with an increase in the average square footage of completed deals, an overall increase in the number of deals and a reduction in the vacancy rates, which will put a solid floor on lease rates.  The reduction in vacancy is most attributable to the stark reduction of construction deliveries in the two main county markets, Salt Lake and Utah counties (per the charts below). This dramatic reduction in speculative building activity is “on brand” for Utah, being a very disciplined market for new construction compared to several other high-growth …

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IndustrialMarket ReportsMidwestMidwest Market ReportsOhio

Location, Business-Friendly Climate Propel Columbus Industrial Market

by Kristin Harlow

By Dan Wendorf, JLL The industrial landscape in Columbus is not just thriving — it’s breaking records. As highlighted in JLL’s fourth-quarter 2023 Columbus Industrial Insights Report, 2023 marked another milestone year for the market. With over 19 million square feet under construction and surpassing 2022’s nearly 7 million-square-foot total, Columbus has solidified its position as a national industrial hub.  The report also showed total vacancy increased 3.8 percent year over year due to 15.7 million square feet of speculative completions, which finished the year at 30 percent leased. Although a modest uptick, Columbus continues to diversify its industrial scene from exclusively being known as once a “logistics and parcel delivery hub” to now being recognized for its growth in advanced manufacturing and data centers.  As exemplified by investments from Facebook, Google and Meta, the market has evolved into a multifaceted industrial powerhouse. In particular, investments in microchip factories have stimulated the need for additional warehousing from suppliers, and this trend is expected to continue in the coming year. This article explores how Columbus has become a key player in industrial development, factors motivating businesses to move their operations to central Ohio and what’s in the pipeline to keep an …

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Market ReportsTexasTexas Market Reports

Houston Owners, Brokers Dish on Demographic, Economic Drivers

by Taylor Williams

Historically, the fortunes of many commercial real estate endeavors in Houston have been tied to the energy sector.  But as developers and leasing agents across all major property types know, the market now boasts a much more diverse set of growth drivers, including regional distribution, healthcare, aerospace/defense and financial services. Each of these industries fuels growth in development and absorption of commercial space, not to mention housing. Yet even to the layman, these industries are as different as the commercial structures that house their operations. And taken collectively, the performances of Houston’s commercial properties  do not always paint a wholistic picture of the larger economy. That holds especially true in times of larger macroeconomic disruption like the present.  Texas Real Estate Business recently reached out to developers/owners, as well as leasing agents/managers who are deeply immersed in the Houston multifamily, industrial, retail, office and mixed-use sectors. By posing a quintet of questions that are — almost — equally applicable to each of these asset classes, we uncover insights on how the five major food groups are performing on a relative basis. Participating in the Q&A are Matt Bronstein, vice president at BHW Capital (multifamily); Robert Clay, president and co-founder of …

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Market ReportsNevadaOfficeWesternWestern Market Reports

Office Vacancy in Reno Grows as Investment Activity Rebounds

by Jeff Shaw

— By Jason Hallahan, associate, Colliers — Northern Nevada’s office market remained resilient throughout last year in the face of strong headwinds. Reno’s office market saw a blend of market fundamentals as net absorption declined, investment activity slowed and available sublease space shrunk. Negative net absorption in three out of four quarters brought the annual total to nearly 23,000 square feet of negative absorption — the lowest the market has seen since 2020.  Vacancy ticked up 100 basis points year over year to 11 percent by the end of 2023, though it is well below the pandemic peak of 13.4 percent of mid-2020. Average direct asking rents also softened slightly this year, though tenant demand and asking rates both remain strong among Class A office product. A combination of growing vacancy, heightened interest rates and continued uncertainty in office space needs have curbed investor appetite this year. Demand for Reno office product fell sharply at the beginning of 2023 when first-quarter sales shrank to less than 20 percent of the average quarterly sale totals from the past three years.  Buyers and sellers struggled to reach a middle ground as elevated vacancies weakened sale prices and increased borrowing costs discouraged investors. There …

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AlabamaMarket ReportsRetailSoutheastSoutheast Market Reports

Economy, Shifting Consumer Preferences Unlock Birmingham’s Retail Renaissance

by John Nelson

By Chapman Brown of Marcus & Millichap Once renowned for its industrial prowess, Birmingham is experiencing a dynamic retail renaissance fueled by a convergence of local economic growth, strategic development initiatives and shifting consumer behaviors. As major retail projects come to fruition and submarkets heat up with investment activity, the city is poised for a transformative period that promises to redefine its retail landscape. Birmingham’s retail sector is intricately linked to broader economic trends both locally and nationally. Factors such as population growth, employment rates and disposable income levels significantly influence consumer spending habits and retail demand within the city. Additionally, the rise of e-commerce and changing demographics are prompting retailers and developers to adapt and innovate to stay competitive. These factors, combined with a diverse array of buyers and sellers, are driving retail investment activity. Institutional investors, private equity firms and real estate developers are among the key buyers, attracted by the city’s strong fundamentals and growth prospects. On the selling side, property owners and developers are seizing opportunities to unlock value and redeploy capital into new ventures. Several major retail projects are currently underway, poised to leave a lasting impact on the market. One notable project is The …

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