Midwest Market Reports

Low Vacancy Rate in Toledo Industrial Market Prompts Call for More Spec Space

by Kristin Harlow May 28, 2020

By Lynette Reichle, Reichle Klein Group On March 12, Ohio’s governor declared a state-wide order closing schools and gatherings of over 100 people. On March 15, he ordered all bars and restaurants to close dining rooms (but could maintain carryout and delivery) with further closings on almost a daily basis. Finally, the stay-at-home order came on the 22nd. As of the writing of this article, it is difficult to estimate the full effects of the COVID-19 pandemic and what the moves our government has taken to protect us will have on our real estate markets. Prior to the spread of the coronavirus, Toledo’s industrial real estate market had been running at unprecedented high levels in both leasing activity and new development for the past several years. While the beginning of this year was decidedly quiet compared with the fourth quarter of 2019, we had every reason to expect strong demand for industrial properties through the remainder of 2020. In fact, the Toledo market still suffers from an inventory problem; virtually every project that was built last year was a build-to-suit. Local and regional developers have yet to develop enough of an appetite to build speculatively. Further, no one in the …

May 28, 2020

Kansas Market Reports Midwest Midwest Market Reports Mixed-Use

Building Momentum: How Public-Private Partnership Revitalized Downtown Topeka, Kansas

by Kristin Harlow May 21, 2020

The city of Topeka has built significant momentum in the five years since its downtown revitalization. Capital investment and strategic planning at the city’s center had a reverberating effect across town, from the expansion of vocational-technical training to the growth of Kanza Fire Commerce Park. Public-private partnership The year 2015 was pivotal with a $9.4 million public-private investment in infrastructure and amenities along Kansas Avenue, the main downtown thoroughfare. The city invested $5.8 million in roadway, sewer and streetscape infrastructure. Meanwhile, private businesses sponsored pocket parks with statues, benches and fountains. The Downtown Topeka Foundation brought another $4 million in private funding to the effort through its “Imagine Downtown” capital campaign. Since that day, local investors like AIM Strategies LLC have purchased more than 25 buildings on the avenue for gradual restoration into thriving businesses like Iron Rail Brewing, Cyrus Hotel and The Pennant restaurant, bowling alley and vintage arcade. Popular annual festivals and parades expect to see even more traffic after the unveiling of the next phase of major downtown investment. Evergy Plaza With 30-foot digital screens and the 50-foot CapFed On 7th Stage, Evergy Plaza was developed as a hub for community and a catalyst for business. The …

May 21, 2020

Industrial Market Reports Midwest Midwest Market Reports Wisconsin

Metro Milwaukee Industrial Market Poised to Remain Strong

by Kristin Harlow May 14, 2020

The southeastern Wisconsin industrial real estate market had a banner year in 2019 and remains strong. According to Catalyst, the industrial market in southeastern Wisconsin had a vacancy rate of approximately 4 percent at the end of 2019 and that rate has moved down slightly to 3.9 percent during the first quarter of 2020. This rate is well below the historical vacancy rate in southeastern Wisconsin, which averages between 7 and 9 percent. Several submarkets are significantly lower than the southeastern Wisconsin average: Racine, where the massive Foxconn project is underway, has a 3.8 percent vacancy rate; the large Waukesha submarket, which has nearly 83 million square feet of inventory, has a vacancy rate of 1.9 percent; and the Sheboygan submarket, which has about 27 million square feet of industrial space, has an astonishing 0.1 percent vacancy rate. These extraordinarily low vacancy rates suggest that demand for industrial space in southeastern Wisconsin remains very robust and that, particularly in certain submarkets, supply has not been able to keep up with demand. While lease rates have remained fairly steady throughout the last year, upward pressure on such rates continues to build. Nevertheless, there are some signs of the market taking a …

May 14, 2020

Kansas Market Reports Midwest Midwest Market Reports Mixed-Use

Wichita’s Downtown Revitalization Serves as Catalyst for New Projects

by Kristin Harlow May 7, 2020

Wichita has been experiencing a strong downtown revitalization that has brought construction of new and redeveloped office, retail and mixed-use projects throughout its urban core over the past few years. Two years ago, companies began relocating downtown as shifting workplace demographics incorporated close proximity, “live, work, play” amenities in order to grow their businesses as well as attract and retain talent. Today’s businesses are seeking modern Class A finishes within Wichita’s center where these types of environments exist or will be available in the near future as developments continue. Downtown revitalization In the early 2000s, downtown Wichita lost many of its office users to more suburban office developments on the east and west edges of the city, leaving high vacancy rates and rendering many downtown office buildings functionally obsolete. Now this trend has reversed after the Wichita Downtown Development Corp. put together a comprehensive master plan to revitalize the urban core. Developers purchased key catalytic sites and repurposed them into economic drivers for downtown as shifting demographics brought about the need for businesses to attract and retain top talent with both onsite and walkable amenities. As new office projects downtown are beginning construction and being completed, the idea of relocating …

May 7, 2020

Market Reports Midwest Midwest Market Reports Nebraska Retail

Occupancy, Sales Per Square Foot Support Omaha Retail Scene

by Kristin Harlow April 23, 2020

Over the past few decades, Omaha has grown in both size and reputation as a Midwest gem that offers affordable housing, a solid job market, excellent schools and a central location that makes both business and leisure travel a relative breeze. As our city has grown, our lifestyle has adapted, which has had an interesting impact on commercial real estate. While some developments are flourishing, others have been struggling. Overall, retail growth in Omaha is slow, but occupancy is robust in Class A-located centers. The main corridors in west Omaha (Center, Dodge and Maple streets) have strong occupancy and rents now pushing $40 per square foot NNN for new construction. Restaurants, medical/retail (or “medtail”) and fitness have become the main drivers of recent retail space use. “Treasure hunt” discount concepts such as Ross, Marshalls, TJ Maxx, Burlington and Five Below have all opened multiple locations in the past 24 months in a wide range of demographic areas of Omaha. Mall activity Nationally, the traditional shopping mall concept has been plagued by big-name store closures as consumers continue to turn to online shopping. Locally, some traditional malls are faring better than others. Westroads, which opened in 1968, remains strong in both …

April 23, 2020

Market Reports Midwest Midwest Market Reports Nebraska

Winning the Fight on Business Talent Erosion in Nebraska

by Kristin Harlow April 16, 2020

Although an article on soil erosion might seem more fitting coming from Nebraska, the greater erosion concern for the Cornhusker State is retaining its young and talented workforce. Nebraska’s state education system ranks No. 6 in the country and its high school graduation rate ranks No. 4 in the country, according to U.S. News & World Report. But Nebraska is faced with the dual challenge of retaining young, homegrown talent as well as attracting the next generation of talent from outside the state. Nebraska is presently leaking young talent to surrounding states with an annual net outward migration of approximately 3,300 persons and ranks 39th in the country with respect to attracting talent between the ages of 25 to 29 years old, so it’s a double whammy. A 3,300-person out-migration of talent might seem fairly modest, but over time, it can and will become significant. Like a faucet that continually drips, you don’t realize the cost until you get the water bill. Taking steps to enhance both the retention and attraction of young talent is key to Nebraska’s economic success. Thankfully, such steps are being pursued in both the private and public sector. Two plans of action in particular are …

April 16, 2020

Industrial Market Reports Midwest Midwest Market Reports Ohio

Developers Flock to Columbus Industrial Market

by Kristin Harlow April 9, 2020

Columbus continues to be a powerhouse in the industrial market of the Midwest. Fueling this growth are its strategic logistics location as well as being the Ohio state capital and home to eight colleges and universities in central Ohio. Job creation in Columbus remains ahead of Ohio with employment expanding nearly 22 percent since 2010, twice the state’s rate of expansion. The region’s largest employers include The Ohio State University, OhioHealth, JP Morgan Chase and Nationwide Mutual Services. These companies employ nearly 100,000 in central Ohio. Columbus is also one of the hottest housing markets in the nation, with overall median sales prices increasing 7.6 percent over 2018 and sellers receiving, on average, 98.7 percent of the last list price at sale. Columbus has a greater access to the U.S. market within a 10-hour drive than any other major metropolitan area in the country. The area has access to 46 percent of the U.S. population within a 10-hour truck drive. This proximity continues to attract large corporations to the area, including Amazon, Facebook, Google and Walmart, who are all occupying new distribution and data centers in the region. The market’s industrial vacancy rate of 5 percent at the end of …

April 9, 2020

Market Reports Midwest Midwest Market Reports Minnesota Multifamily

How Can Minnesota Apartment Developers Access Capital While Minimizing Risk? Structured Finance

by Kristin Harlow March 26, 2020

The Twin Cities of Minneapolis and St. Paul continue to be a very attractive marketplace for multifamily investing due to an average vacancy across the metro of 3.1 percent, as well as average 2019 rent growth of 5.8 percent, according to a recent report issued by Marquette Advisors. The Twin Cities currently has nearly 30,000 multifamily units in the development pipeline that are expected to be delivered between 2020 and 2022. With all of this development activity and an abundance of local and regional banks in the area, the Twin Cities continues to be a very well-banked market, particularly with regard to apartment construction. Local and regional banks are all very active. In addition, national banks are eager to invest in the healthy, consistent Twin Cities multifamily market. But despite capital being relatively plentiful and accessible, local, regional and national developers are exploring more efficient ways to capitalize on the abundance of development activity. They also pursue ways to stretch their own equity through a variety of financing alternatives. Developers may be tapped out with their current banking relationships, or as projects get larger and more expensive, desired loan sizes may drift higher than their banks’ lending limits. Lenders and …

March 26, 2020

Market Reports Midwest Midwest Market Reports Minnesota Retail

Influx of Out-of-State Capital Creates Cap Rate Compression in Twin Cities Market

by Kristin Harlow March 19, 2020

In 2019, the Twin Cities net lease retail market experienced a historic year, benefitting significantly from aggressive western U.S. capital. The Twin Cities saw an unprecedented number of buyers from the western United States who were willing to pay a premium above local buyers for quality net leased real estate. There were 95 net lease transactions in the Twin Cities in 2019 that sold below a 7.5 percent cap rate, according to CoStar Group. Of those transactions, 33 percent were sold to buyers based in the West Coast. What’s more, of the net lease properties that sold below a 6.25 percent cap rate, nearly 50 percent were sold to buyers based in the western U.S. In comparison, in 2018, only 25 percent of the net leased properties below a 6.25 percent cap rate in the Twin Cities sold to buyers based in the western U.S. This trend helped average cap rates compress for both net lease multi-tenant pad/strip centers as well as single-tenant cap rates between 2018 and 2019. The average multi-tenant net lease cap rate in 2018 was 7.25 percent versus 7.1 percent in 2019. The average single-tenant cap rate in 2018 was 6.7 percent versus 6.6 percent in …

March 19, 2020

Illinois Market Reports Midwest Midwest Market Reports Office

Now Is the Time to Invest in Chicago’s Office Market

by Kristin Harlow March 12, 2020

There is a widely held belief that investing in the Chicago office real estate market in 2020 is potentially a bad bet. While some investors are concerned by headlines decrying the fiscal health of Illinois, the supposed overvaluing of Cook County tax assessments and softening of the Chicago market, our experience tells us those fears will create opportunities for contrarian investors willing to dig deeper. Because these misperceptions are scaring away some institutional investors, the time is ripe for continued investment in Chicago office properties to take advantage of opportunities that more cautious investors are passing up. Municipal realities At the state level, much has been written about Illinois’ fiscal health. In a report released in September 2019, government watchdog Truth in Accounting labeled Illinois a “Sinkhole State” and ranked it 49th in the nation for its financial condition. After failing to raise enough revenue by hiking taxes to fund the state’s debt, leaders from Illinois have said that massive pension reform — not tax hikes — is the way out of our current debt crisis. Consequently, office real estate investors should not be overly concerned that the state of Illinois will potentially shift the state’s tax burden onto their …

March 12, 2020

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