Midwest Market Reports

The Secret Is Out About Investment in Columbus, Ohio

by Kristin Harlow April 7, 2022

There was a time when an investment in the Columbus, Ohio commercial real estate market had to be justified to outsiders and required a higher return to attract investors. After all, it sits squarely in “fly-over country” in the heart of the rust belt. With the exception of getting a superior return, why would an investor choose Columbus, over say, New York or Chicago? But that’s all changed. Cap rates are now as low as, or lower than, other major markets. Investors have been driven to those markets, despite having a lower cap rate, because they knew rent growth was continuous and the sales price would appreciate over time. For decades, Columbus’ sales prices had remained stagnant due to a lack of increase in lease rates. However, over the past two years, lease rates have been rapidly increasing in the industrial market, and projections expect that trend to continue. The Columbus office market hasn’t seen the same rental appreciation — yet. But projections indicate that there will be rental appreciation in office as well, mostly due to increased demand and lack of speculative development over the past two years, but also due to rising land and construction costs. Because of …

April 7, 2022

Illinois Industrial Market Reports Midwest Midwest Market Reports

The New Paradigm of Chicagoland Industrial Market

by Kristin Harlow March 24, 2022

The industrial market will be forever changed by the COVID-19 pandemic. Before the pandemic, demand for industrial space was closely tied with gross domestic product (GDP), with demand rising and falling alongside the U.S. output of goods. The pandemic has accelerated an already shifting economy to an “on-demand” economy. This shift was created by technology companies fulfilling consumer demand via the immediate provisioning of goods and services, and has now led to industrial warehouse demand being more in line with consumer spending versus GDP. Consumer spending and personal income are at all-time highs, with e-commerce sales growing exponentially throughout 2020 and 2021. Companies have been leasing warehouse space at a meteoric rate, driven by the need to store goods to accommodate the demand and mitigate risk from supply chain complications that have been brought on by the pandemic. Over the past two years, millions of square feet of warehouse space in the Chicagoland area have been leased for e-commerce use to tenants such as Walmart, Wayfair, Hello Fresh, Imperfect Foods and, of course, Amazon. Additionally, as traditional brick-and-mortar retailers transition to greater online sales, they require more warehouse space for goods storage, which has led tenants such as Target, Walmart, …

March 24, 2022

Illinois Market Reports Midwest Midwest Market Reports Office

Success in 2022 Chicago Office Landscape May Boil Down to Who’s Minding the Store

by Kristin Harlow March 17, 2022

When it comes to which office properties will succeed in the coming years, success may boil down in part to who is minding the store. Like most big cities, Chicago’s office market has been tested by the pandemic, and office property owners face a far more competitive environment. Year-end 2021 office vacancy rates were nearly 18 percent in the central business district (CBD) and over 25 percent in the suburbs, or 44 percent and 35 percent higher, respectively, than two years prior, according to NAI Hiffman research. Hybrid work is here to stay, and some employers are shrinking or shifting their office footprints. When the pandemic is finally in the rearview mirror, office demand is not going to be the same as it was a couple of years ago, although we are still figuring out just what it will be. Which office properties survive and thrive in post-pandemic Chicago and nationwide will depend on many factors, including the property’s age or condition, its location and, increasingly, how well the property is programmed and run. That includes satisfying tenants in terms of everything from air quality to event assistance; meeting lenders’ environmental, social and governance (ESG) requirements and other new demands; …

March 17, 2022

Industrial Market Reports Midwest Midwest Market Reports Minnesota

Twin Cities Industrial Sector Marked by High Demand, Exploding Liquidity

by Kristin Harlow March 10, 2022

2021 has been an absolute whirlwind for the Minneapolis-St. Paul (MSP) industrial market. Plunging cap rates, liquidity growing faster than ever and a sharply felt shortage of new supply have defined the last year and will continue to define 2022. New faces on the development side are entering the market right and left to capture the huge profits to be had from the supply/demand imbalance. New construction has been stabilizing in six to eight months and institutions have ear-marked MSP as a forward-sale market. The following are a few of the salient trends that should be considered when contemplating the MSP industrial market. Liquidity growth Since the last trough in 2016, the MSP industrial market has experienced an average 30 percent year-over-year growth in sales volume. 2021 experienced nearly half a billion dollars more in industrial investment sales than 2020, according to Real Capital Analytics. Cap rate compression Over the last year, the MSP industrial market has experienced change unlike in any other year. Entering 2021, the low-water stabilized cap rate was 5.15 percent, but by year-end, that had sunk 82 basis points to 4.33 percent. Warehouse rates in the $8 to $9 NNN range, once rare, are now commonplace; …

March 10, 2022

Market Reports Midwest Midwest Market Reports Minnesota Retail

Work-from-Home Boosts Suburban Minneapolis Retail Market

by Kristin Harlow March 3, 2022

The metro Minneapolis retail real estate market is healthy overall coming out of 2021, with suburban submarkets on fire in many cases and urban submarkets generally subdued. A major overhang of supply was absorbed across the region last year as construction slowed dramatically, pushing retail vacancies down, rents up and sales prices of single and multi-tenant assets higher overall. It’s a testament to the market’s overall stability and resilience given the multiple waves of COVID, and events surrounding the George Floyd case that was prosecuted last year in the city. Work-from-home effect With many white-collar professionals still working from home and the center-cities tougher on mask mandates and vaccine requirements, the suburbs have shone the brightest. Vacancies were as low as 6 percent in some areas, with the overall market at 8.2 percent at year-end, according to the Minnesota Commercial Association of Real Estate/Realtors (MNCAR). Among the strongest performing submarkets have been Apple Valley, Maple Grove, Coon Rapids and Woodbury. The metro’s eight regional malls are generally faring well, unlike in some other markets across the U.S. that are more over-supplied. That said, there’s some adaptive reuse going on, including in the northwest suburb of Maple Grove where a freestanding …

March 3, 2022

Indiana Market Reports Midwest Midwest Market Reports Multifamily

Indianapolis Housing Market Positioned for Growth

by Kristin Harlow February 24, 2022

The United States has been experiencing a housing crisis for years, one that is perpetuated by the COVID-19 pandemic. Whether it’s a lack of affordable housing properties for low-income families, a steady increase in housing prices over the years or exponentially high demand for new homes, the U.S. housing market within the past decade has been a wild ride. Indianapolis growth In the heart of Indiana, we’re seeing a hopeful trend. Indianapolis (Indy) was ranked as the fourth best housing market positioned for growth in 2022. A variety of factors could contribute to this distinction. For one, Indy is a thriving city and centrally located — not just within the state, but in the U.S. It’s home to two professional sports teams, and recently named one of the best cities for creating tech jobs by Forbes, with Fortune 500 corporations like Eli Lilly and Salesforce headquartered throughout the vibrant downtown. Marquee universities such as IUPUI, Butler and IU Medical School also bring more jobs into the fold. The 2020 Census found that metropolitan areas like Indianapolis are at the forefront of the state’s growth. Marion County remains the most densely populated county with more than 950,000 residents. Currently, the average …

February 24, 2022

Market Reports Midwest Midwest Market Reports Office Ohio

APTC: Don’t Just Accept Your Tax Assessment

by Kristin Harlow February 22, 2022

By Cecilia Hyun, Siegel Jennings Co. Since early 2020, the COVID-19 pandemic has upended lives and disrupted the normal course of businesses, including those in the commercial real estate market. As in many other sectors, however, this public health crisis has not affected all commercial properties equally. Real estate occupied by essential businesses such as grocery stores, sellers of household goods and warehouse clubs, for example, have weathered the pandemic well. A few have even increased their market share. By contrast, many office buildings, hospitality and non-essential retail properties have suffered severely. Taxing jurisdictions and assessors have responded to the crisis with varying degrees of success. The Ohio Legislature passed special legislation (spearheaded by Siegel Jennings Managing Partner Kieran Jennings) to allow a onetime, 2020 tax year valuation complaint for a valuation date of Oct. 1, 2020, since the usual tax lien date of Jan. 1 would not have shown the effects of COVID. Other assessors applied limited reduction factors to account for the sudden pandemic-induced decrease in property values. As values recover, it is important for taxpayers to monitor still unfolding consequences as they review their property tax assessments. Initially, hotels and experiential property uses suffered the steepest losses …

February 22, 2022

Market Reports Michigan Midwest Midwest Market Reports Retail

Detroit Retail Market Running Strong as New Year Begins

by Kristin Harlow February 17, 2022

The “retail apocalypse” predicated on the pandemic never really materialized. Instead, we’ve seen retail do what it always does: evolve. Much as the rest of the country, metro Detroit’s retail real estate market has evolved and come back in a big way. Tenants on the move As vaccines were adopted and the economy allowed to reopen, the economic rubber band snapped back quickly and stronger than many of us could have predicted. Retailers were dusting off pre-pandemic expansion plans and back to signing leases in 2021. We saw new openings and new market searches from BJ’s Wholesale Club, Burlington, Carvana, Chick-fil-A, Chipotle, Starbucks, Crunch Fitness, Edge Fitness, Gabe’s, iFly, Jollibee, Meijer, Portillo’s, Ross, Shake Shack, Smoothie King, T.J. Maxx, Total Wine & More and Tropical Smoothie Café. 2021 also presented a big void in the Michigan furniture market following the bankruptcy of Art Van (which controlled 30 to 35 percent of the market). Numerous players including Gardner White Furniture, Ashley Furniture and Value City Furniture all quickly snapped up this real estate, immediately increasing their market share. Other categories that continue to seek space include car washes (which has to be one of the most active categories out there …

February 17, 2022

Market Reports Michigan Midwest Midwest Market Reports Office

Office Downsizing Trend in Detroit Will Likely Continue in 2022

by Kristin Harlow February 10, 2022

A lot has changed in the world since the beginning days of the COVID-19 pandemic in early 2020. Fast forward to November 2021 and the world is a very different place. Over 46 million people have been infected in the United States alone with over 750,000 deaths officially attributed to the virus. Most businesses have been forced to shut down in-person work for some period of time and many have instituted remote work programs until the beginning of 2022. The real question on everyone’s mind is when will we return to normal and more specifically, what will the new normal look like? Although we will most certainly have to deal with the aftereffects of COVID-19 and any variants that surface, there is light at the end of the tunnel. To date, approximately 427 million doses of the vaccine have been administered with over 192 million people fully vaccinated. Recently, Pfizer announced that it has developed an easy-to-administer COVID-19 pill, which when used in combination with a widely used HIV drug, can cut the risk of hospitalizations or death by 89 percent in high-risk adults who have been exposed to the virus. Given the combination of vaccinations, natural immunity for those …

February 10, 2022

Market Reports Midwest Midwest Market Reports Missouri Multifamily

Four Demographic Shifts Poise St. Louis for Lasting Multifamily Market Growth

by Kristin Harlow January 26, 2022

Fueled by a trifecta of favorable cap rates, an underserved apartment market and sharp increases in market demand, St. Louis is starting to gain momentum with the potential to become a new multifamily hotspot. As investors and developers take note, capital that typically has been focused in higher growth markets on the coast and cities like Chicago and Nashville is starting to flow into the Gateway City. The fruit of these investments is now coming to market. Despite 20-plus percent increases in construction costs, 24 percent more units — 2,057 total — were built in 2021 compared with St. Louis’ five-year annual average. Nearly 4,000 additional units are under construction in the St. Louis region. Population, personal income and job growth are the key economic drivers of multifamily unit demand. In 2020 and 2021, all three of those markers are finishing on the upside in St. Louis after pandemic dips. Employment growth is particularly promising. After slight employment declines over the last five years, St. Louis employment has grown at an average annual rate of 2.7 percent for the last four quarters. CBRE forecasts positive growth of 2 percent for the next two years and 0.8 percent for the next …

January 26, 2022

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