Midwest Market Reports

Flood of Development Activity Continues in Cedar Rapids

by Kristin Harlow August 22, 2019

As I have enjoyed writing in six previous August articles since 2013, we have seen Cedar Rapids, the 2014 “All-America City,” go from flood recovery in 2008 and 2016 to record levels of development. The city set a record for building permits in fiscal year 2018 of $375 million, which was $133 million over the previous year and $29 million more than the 2012 record by $29 million. Activity in fiscal year 2019 is estimated to be a very impressive $320 million. Flood protection system reached another milestone on Nov. 22, 2018, when the city and Army Corps of Engineers officially signed the agreement for $117 million of federal funds to allow the entire east side of the river flood protection system to be completed within five years. The west side is being funded through a state sales tax rebate program and 10 years of flood bonds to allow the entire $750 million flood protection system to be completed in the next decade. This year there are already four sections under construction with several additional portions being bid over the next several months. The flood protection system will not be just berms or walls that will block the view of …

August 22, 2019

Market Reports Midwest Midwest Market Reports Multifamily Ohio

Job Growth Fuels Apartment Demand in Cleveland Market

by Kristin Harlow August 15, 2019

For the year ending in March, multifamily vacancy in the Cleveland metro area tightened to the lowest level since 2016, keeping annual rent growth climbing. Measured supply gains amid increased renter demand over the past four quarters have resulted in steady vacancy and rent improvement. These trends should continue over the next several quarters, holding vacancy below the 5 percent threshold. Favorable apartment operations are capturing investor attention. Demand for apartments is coming from an increase in employment that is allowing more people to move into rentals. Employers added roughly 14,200 positions year over year in May, nearly double the previous year’s growth. Another encouraging sign for Cleveland is that most employment sectors added jobs during this period. The heightened hiring has kept the unemployment rate below 5 percent for the past five months and the rate is down 80 basis points since May 2018. Education and health services is the most dominant employment sector, and the construction segment led employment gains during the past 12 months, staffing more than 5,300 new positions, followed by professional and business services with nearly 4,200 people. New apartment projects contribute to some of the construction jobs. Over the past four quarters, builders added …

August 15, 2019

Market Reports Midwest Midwest Market Reports Ohio Retail

Cleveland Adapts to Changing Retail Landscape

by Kristin Harlow August 8, 2019

“The retail landscape is changing.” How many times have we, industry professionals especially, heard these words over the past several years? But the reality is, it’s true. There have been countless articles, blogs and lectures blitzing us with arguments supporting or arguing against the notion that brick-and-mortar retail is fighting a losing battle against a burgeoning e-commerce industry. As many of us in the industry know, brick-and-mortar stores still hold a 90 percent market share of retail sales. While that number is shrinking, it is shrinking at a slower pace with each passing quarter. So, rather than talking about e-commerce and its potential negative impact on physical stores, I’d prefer to focus on the categories that are thriving, and in many cases benefiting from e-commerce. The fact is that pressures of e-commerce, coupled with changing consumer preferences driven by millennials and Gen Z, have forced retailers to adapt. The Cleveland market is an excellent microcosm of this retail evolution that has swept through the U.S. Here are the most notable retail trends in Cleveland. Health and beauty Perhaps the hottest category in retail right now is health and beauty. In plain terms, Americans today, more than ever, value being healthy …

August 8, 2019

Industrial Market Reports Midwest Midwest Market Reports Ohio

Cincinnati Industrial Market Absorption Drives 8 MSF in New Construction

by Kristin Harlow July 25, 2019

In 2018, the Greater Cincinnati industrial market experienced record-breaking positive net absorption of 7 million square feet, the highest level of absorption in more than a decade. This was followed by only 201,000 square feet of direct net absorption in the first quarter of this year, which at first glance could be concerning. But the good news is that 8 million square feet is currently under construction across our market. Over the past five years, new construction deliveries have been a consistent source of growth and positive absorption in Greater Cincinnati. The industrial market typically does not experience a high absorption rate in the first quarter when compared with the rest of the year. The low absorption figure in the first quarter of 2019 is actually due to lack of available supply rather than a major market change. Leasing impact New-construction, pre-leased buildings were a major source of positive net absorption in 2018. Winter weather and construction schedules limited first-quarter completions to just 520,000 square feet. The largest delivered facility was the 308,000-square-foot West Chester Trade Center #1, a bulk distribution building in the Northwest submarket. TSC Apparel moved into 196,000 square feet at the facility, absorbing more than 60 …

July 25, 2019

Market Reports Midwest Midwest Market Reports Office Ohio

Various Submarkets Attract Cincinnati Office Tenants

by Kristin Harlow July 18, 2019

Over the past decade, Cincinnati has successfully positioned itself as a formidable Midwestern city, hungry for growth and innovation. Whether you’re a startup or a Fortune 500 company, the city (and its surrounding suburbs) can provide an attractive backdrop. The Cincinnati office market largely reflects this momentum. Demand in some areas has slowed, but the office market remains steady. In fact, the office market has experienced a flurry of activity in 2019 and is awash in new lease transactions and announcements of proposed new development. The first quarter of 2019 recorded a 1 percent drop in the entire market vacancy to 14.2 percent, according to Colliers International. The central business district (CBD)’s 12.2 percent vacancy is expected to drop another percentage point, as several pending leases are soon to be announced. I-71 North dominates The most active area is the I-71 North submarket, where five lease transactions came to fruition. Eversana leased 78,000 square feet at 8990 Duke Blvd., filling the former Express Scripts building just months after it went vacant. Worldpay took down 50,000 square feet at 8845 Governor’s Hill Drive across the street from its headquarters. Smith/Halleman Partners, the owner of the multi-building Governors Pointe, attracted Resurgent Capital …

July 18, 2019

Market Reports Michigan Midwest Midwest Market Reports Office

Occupancy, Rental Rates Are on the Rise in Detroit’s CBD Office Market

by Kristin Harlow July 11, 2019

Given the pace at which the Detroit commercial office space market is evolving, updates and projections are changing with extraordinary speed. The market can look very different in just a few short months, and it’s worth checking in to see where things stand relative to the beginning of the year. CBD occupancy is high While growth remains the headline story, the focus has changed somewhat from a high level of leasing activity across the metro area to more of adaptation and evolution as landlords, tenants and brokers all adapt to a downtown market that is reaching capacity. The vacancy rate in Detroit proper is the lowest it has ever been, and office space in Midtown and downtown is getting harder and harder to come by. Deals are still being executed across metro Detroit, but with rents continuing to rise and space at a premium, the incentives landscape looks nothing like it has in recent years. Parking rates have increased dramatically with a major shortage in parking in the central business district (CBD). The monthly cost of parking has increased to approximately $250 per space downtown. Creative solutions Incentives continue and have produced new opportunity for creativity, as owners and operators …

July 11, 2019

Market Reports Midwest Midwest Market Reports Mixed-Use Nebraska

Cornhusker State Has a Knack for Mixed-Use Projects

by Kristin Harlow June 27, 2019

The term “mixed-use” appears to be all the rage, possibly a victim of its own success. A similar phenomenon occurred in the retail world with the introduction of the term “lifestyle center.” As a concept grows in popularity there is the natural inclination to capitalize on the movement, which can ultimately lead to watering down the concept. However, despite a trend toward reducing the term “mixed-use” to its lowest common denominator, namely having two different product types, Nebraska’s mixed-use developers have remained dedicated to a meaningful and synergistic combination of several product types: office, residential, retail and food and entertainment. Nebraskan’s zeal for creating sizable mixed-use projects has provided its residents a variety of developments possessing a genuine and meaningful sense of place and community. Although there’s more mixed-use projects in the making for the Husker State, for the purpose of this article we’ve chosen five projects that best represent the state’s mixed-use development. These developments not only create a desirable feel, but positively impact the larger community. Frankly, it’s one thing to have a successful mixed-use development where live, work and play isn’t just a marketing tag line. But, it’s a whole different matter when a project’s success spills …

June 27, 2019

Iowa Market Reports Midwest Midwest Market Reports Office

Office Amenities Drive Tenant Decisions in Des Moines Market

by Kristin Harlow June 20, 2019

In the last few years, the greater Des Moines metro area has been a title holder, reigning as a “Top Place to Live,” “Top City for Young Professionals” and even “Best Place to Retire.” Meanwhile the economy, business environment and commercial real estate sector hold titles like steady, stable and reliable. However, over the past 24 months, the commercial office market could add thriving, prosperous and robust to that list of adjectives. As office lease rates continue to rise 1.5 to 2.5 percent annually in quality buildings, most landlords are implementing capital improvement plans that “refresh” their assets and have begun to offer amenity packages that the tenant marketplace demands. With the unemployment rate near a historical low — an estimated 2.4 percent — it has become ever more critical and competitive to recruit and retain new workforce talent. Lease concession offerings from landlords, such as rent abatement and above-standard tenant improvement packages, have decreased since post-recession levels. Despite these positive fundamentals, headwinds are facing the marketplace. A tremendous amount of block space, some from formerly non-competitive or single-tenant buildings, has come available and concession levels could once again increase as landlords compete for tenants looking for a larger footprint. …

June 20, 2019

Indiana Market Reports Midwest Midwest Market Reports Multifamily

Greater Indy Multifamily Sector Draws Interest from Larger Pool of Investors

by Kristin Harlow June 13, 2019

Demographic shifts and the subsequent demand for affordable housing are currently impacting the greater Indianapolis multifamily sector, but the most marked influence is increased and expanded investor interest. Demographic shifts in population are influencing developers and owners in their long-term decision making when it comes to the multifamily sector. Two primary factors are at play. One, the traditional renter’s segment is changing as millennials age and delay having children. Two, national population projections are showing a decline in the prime renter’s segment as Baby Boomers begin to move into seniors housing. As a result, developers and owners are beginning to plan more senior living communities. Millennials are also impacting affordable housing occupancy rates as they want to live in walkable and amenity-rich areas without the cost of high-end apartments. This is leading to more rehabbed properties. At the moment, Class C properties in the Indianapolis area are reflecting greater occupancy movements, as occupancy declines when properties become distressed and increases when they are purchased and rehabbed. Additionally, college debt is delaying graduates in purchasing traditional homes. Both of these factors are causing occupancy rate increases which, in turn, result in a shortage of affordable housing. New housing construction costs are …

June 13, 2019

Illinois Market Reports Midwest Midwest Market Reports Office

How to Repurpose Suburban Chicago’s Vacant Corporate Campuses

by Kristin Harlow June 6, 2019

More than 50 years ago, I was witness to the birth of a new building type in Chicago’s suburbs — the great sprawling corporate campus. From Motorola and McDonald’s to Ameritech and Sears, some of the most influential brands in the world started taking root in Chicago’s bucolic suburbs as they looked to consolidate business divisions under one large roof and to provide a stimulating work environment away from the hustle and bustle of the inner city. Today, many of these corporate meccas sit vacant due to the rise in telecommuting and a shift in workforce demographics. The simple version of the narrative is that instead of people chasing the jobs, firms are now chasing the talent. And for the moment, many employees prefer to live and work in the city. While some suburbs are strongly associated with the companies who previously occupied those campuses, there is another story to tell in terms of the opportunities change can bring to these properties and their surrounding communities. As the architect who designed two of these campuses, the AT&T (né Ameritech) corporate campus in Hoffman Estates in 1989 and McDonald’s global headquarters in Oak Brook starting in 1978, I have repeatedly been …

June 6, 2019

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