Features

NEW YORK —The retail vacancy rate for Madison Avenue in New York City has made some big moves in the past two years, dropping from double digits to below 2.5 percent as luxury and fashion brands move into the market. This high-street retail location has long been known for stiff competition, not only among consumers vying for the latest haute couture, but also among retailers competing for prime space and limited consumer dollars. With a record-low retail vacancy rate on New York’s prime streets like Fifth Avenue, retailers are now expanding throughout the city as stronger growth prospects become increasingly attractive and obtainable. New York City contains nearly 57 million squarefeet of retail space, the slimmest inventory of any major market in the United States. Currently, there are only 670,000 squarefeet of new supply under construction, leaving retailers looking for the “next” neighborhood. “Retailers are growing in a calculated and cost-effective way by getting creative with store footprints and locations,” says Michael Hirschfeld, senior vice president of retail tenant service for Jones Lang LaSalle (JLL). “While their appetite for the best sites remains strong, the sought-after high-street space in the city will be limited through 2017, pushing retailers into new …

By Ann Hambly The success of a mall depends on the performance of the many different retailers in that mall — especially the anchor tenant. The owner of any mall that has a JC Penney, a Sears or some of the large Furniture Brand stores is probably keenly aware of some of the latest news: JC Penney Co. Inc. has been in trouble for some time with decreasing revenues and higher than expected losses. Fitch has downgraded JC Penney, including downgrading the issuer default ratings to junk status. Sears Holdings Corp. is bleeding substantial cash each quarter and has declining store sales. Mired in years of declining sales, Sears has closed 68 of its stores since 2009 and 125 of its Kmart stores. Furniture Brands International, which makes Thomasville, Broyhill, Land and Drexel Heritage, filed for Chapter 11 bankruptcy protection in September 2013. The reason retail is so dependent on an anchor tenant is that many leases on smaller spaces contain a “co-tenancy clause” that gives that retailer the right to a rental reduction if key tenants or a certain number of tenants leave the space. When a JC Penney or Sears is forced to close a store, owners of …

WASHINGTON, D.C. — An unusual surge in public construction in October pushed total construction spending to its highest level since May 2009 despite a dip in both private residential and non-residential activity, according to an analysis of new U.S. Census Bureau data by the Associated General Contractors of America. Meanwhile, association officials are urging lawmakers in Washington to make water and surface transportation investment a top federal priority. “Nearly every category of public construction increased in October, according to the preliminary census figures, although for the first 10 months of 2013 combined, public spending continues to lag the 2012 year-to-date total,” says Ken Simonson, the association’s chief economist. “Meanwhile, residential spending slipped for the month but still showed strong year-to-date gains, and non-residential spending remained stuck in neutral.” Construction reported in October totaled $908 billion, 0.8 percent higher than in September. But figures for August and July were revised down from the originally published levels, which exceeded the current October estimate. The total for the first 10 months of 2013 was 5 percent above the year-to-date mark for the same months in 2012. Driving Factors Public construction spending jumped 3.9 percent in October but trailed the 2012 year-to-date total by …

REBusinessOnline.com is conducting a brief online survey of brokers, lenders and the owner/developer/manager community to gauge market expectations for 2014, and we welcome your participation. This survey should only take a few minutes to complete. The results will appear as a news feature story in the January issues of our print magazines and we will excerpt findings for an article in this space in as well. Questions cover a variety of topics, ranging from the outlook for investment sales and leasing activity in 2014 to development and lending opportunities to interest rates. Note: We prefer to attribute comments we quote from open-ended responses, however you may respond anonymously if you prefer. SOUTHEAST REAL ESTATE BUSINESS For professionals located in Arkansas; Alabama; Florida; Georgia; Kentucky; Louisiana; Maryland; Mississippi; North Carolina; South Carolina; Tennessee; Virginia; Washington, D.C.; and West Virginia. Southeast brokers survey: click here Southeast developer/owner/manager survey: click here Southeast lender survey: click here NORTHEAST REAL ESTATE BUSINESS For professionals located in Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont. Northeast brokers survey: click here Northeast developer/owner/manager survey: click here Northeast lender survey: click here TEXAS REAL ESTATE BUSINESS For professionals located in Texas …

CHICAGO — Growth in STEM (science, technology, engineering and mathematics) employment and the continuing recovery in the U.S. housing market are positively impacting commercial real estate, according to a newly released report by Jones Lang LaSalle (JLL). The “Cross Sector Outlook” focuses on the impact of this employment trend on the five main property types. JLL unveiled the report at the Urban Land Institute’s Fall Meeting in Chicago Wednesday. Specifically, the report examines how the housing recovery influences all types of commercial real estate; the ways in which the millennial generation will affect office workplace strategy, retail stores, hotels and apartments; institutional investment patterns; and the indirect impact of growing industries on local real estate. “The U.S. housing market has experienced significant and welcome improvement in recent years, and the release of pent-up demand should continue to accelerate as millennials form new households in an improving job market,” says Jay Koster, president of Americas capital markets business of JLL. “This will, in turn, have a significant impact on commercial real estate, as local economies improve because of the resulting increase in jobs in the construction, real estate, lending, retail and manufacturing industries.” Broadly speaking, property operating fundamentals are improving, largely …

After an underwhelming 148,000 nonfarm payroll jobs were added in September, what should we realistically expect the October numbers to reveal? That's the question many real estate economists are grappling with as the Bureau of Labor Statistics (BLS) prepares to release the latest nonfarm payroll employment report this Friday. The partial government shutdown during the first half of October only adds to the complexity of the situation. “I would say to expect a decline in jobs added versus last month’s report — probably in the 100,000 to 125,000 range,” says Ryan Severino, senior economist and associate director of research at Reis Inc. “Uncertainty surrounding the government shutdown and the debt ceiling debacle likely had some impact on the numbers, but we have generally been seeing weakening in the data as the year has progressed.” According to the BLS, the unemployment rate in September remained flat at 7.2 percent, and the civilian labor force participation rate dipped 30 basis points to 63.2 percent. “[The September jobs report] was another indicator of a slow fourth quarter and sluggishness rolling into 2014,” says Bob Bach, director of research at Newmark Grubb Knight Frank. He added that average monthly job gains in the third …

Sterling Hale ATLANTA — If attendance at the International Council of Shopping Centers (ICSC) Southeast Conference is any indication of how the retail market is performing, things are looking up. This year’s conference, held Oct. 28 – Oct. 30 in Atlanta, attracted more than 2,500 attendees, up 9 percent from last year. In addition to the seminars offered, meetings with our clients and colleagues enabled us to observe retail trends in the marketplace firsthand. For example, one trend we have examined is that retailers are willing to think outside the box in terms of their space needs. While most national retailers have a preferred footprint or space arrangement, they are now willing to be more flexible than they previously had been in order to get into the right centers or markets. Another trend we have observed in the Southeast is that national retailers are willing to look at secondary or tertiary markets for new stores so as not to cannibalize current store sales. If retailers want multiple stores within the same vicinity, they have to make sure they aren’t taking away from their customer base by adding too many stores too close together. This has led retail tenants to look …

NEW YORK CITY — The renovation of existing properties across all commercial real estate sectors rather than new construction is driving growth and has helped balance supply and demand, according to Peter Linneman, chief economist with NAI Global. “As the U.S. economy continues to improve, we are seeing a return to stability, especially with core properties with investors looking for high-quality assets,” said Jay Olshonsky, president of NAI Global, during a recent webcast focusing on the economic outlook. Linneman noted that there is a strong industrial recovery underway led by increased demand for warehousing for products sold online, resulting in healthy vacancy levels that will continue to fall. Multifamily construction is rebounding, but is still below normal levels, and an upswing in renovations is driving capital expenditures. Underproduction from the past several years resulting in a prolonged shortage will keep rents above average, but below maximum, according to Linneman. In the office sector, construction and renovation projects are at an all-time low, but renovations that were deferred during the recession are back on track, even though jobs have yet to return to pre-recession levels. As a result, vacancy rates have seen a slower decline, but are expected to continue to …