Midwest Market Reports

Chicago CBD Office Market in the Groove, Even Property Taxes Unlikely to Bring It Down

by Kristin Harlow October 17, 2019

Despite recent concerns of an imminent market correction, the Chicago central business district (CBD) still has room to run. There are many signs of optimism in the market, including continued healthy fundamentals and a wealth of redevelopment projects injecting new life and vibrancy into various submarkets. In the second quarter, downtown Chicago wrapped up its busiest quarter for office leasing since 2016. Additionally, the downtown office vacancy rate of 11.6 percent was the lowest it had been since 2016. To top it off, Chicago is experiencing historically high annual levels of net absorption, which potentially could put upward pressure on rents, and sublease space is relatively scarce. It’s hard to find stronger evidence of a robust CBD office market. Redevelopment projects Market statistics aside, noteworthy redevelopments have Chicagoans genuinely excited as they look forward to a new crop of influential spaces that will drive the next iteration of the Chicago office market. The real estate fairy tale that has real estate aficionados entranced — not only in Chicago but nationally — is 601W Cos.’ Old Post Office project at 433 W. Van Buren. More than 1 million square feet has already been leased at the 2.8 million-square-foot space, largely thanks …

October 17, 2019

Illinois Market Reports Midwest Midwest Market Reports Multifamily

Investors Should Take a Second Look at Opportunities in Chicagoland Multifamily

by Kristin Harlow October 10, 2019

Chicago real estate has been the subject of considerable pessimism from local and national investors due to a variety of factors. Much of this can be blamed on our unfunded pension liability, which is expected to significantly increase real estate taxes across the area in the coming years. Many institutional multifamily investors claim that their data says to avoid Chicago. Instead, they seek multifamily properties at far lower returns and cap rates in places such as Nashville, Austin and Denver. While I believe those cities offer phenomenal investments, investors across the country are missing an amazing opportunity to invest in Chicago apartment properties. Real estate taxes Everyone seems to agree that real estate taxes will rise significantly in Chicago in the coming years. Who pays real estate taxes? Homeowners, commercial landlords and some businesses. Noticeably absent from this list are apartment renters who are generally unaffected by an increase in real estate taxes. In fact, a significant rise in residential real estate taxes should create even more demand for rental apartments in the Chicagoland area as would-be homeowners shift into the rental pool. Effect of high tax rates Do Chicagoans leave the city because of high tax rates? The data …

October 10, 2019

Market Reports Midwest Midwest Market Reports Missouri Office

Multiple Office Developments Proposed for St. Louis County

by Kristin Harlow September 26, 2019

The office market in St. Louis has remained very active over the past year. With very little speculative development, the St. Louis County vacancy rate for Class A office space has experienced little change but remains at a historic low of 11.1 percent. Demand remains for large blocks of space in the more desirable submarkets such as Clayton and West County, as there are limited options for existing space. This has created an opportunity for new, proposed office developments gaining securing commitments from large occupiers. Most, if not all, proposed multi-tenant office developments around St. Louis County are contingent upon significant leasing commitments before construction can commence. A few key trends have played a major role in why developers now have the ability to attract large tenants to new developments. Tenants searching for office space in excess of 25,000 square feet have been struggling to find contiguous and efficient options. Rental rates are at all-time highs, with some of the top-tier buildings achieving rents well over $30 per square foot. Lastly, tenants are using office space differently than before and new office developments are providing more efficient floor plates with multiple on-site amenities that tenants highly value today. Project examples …

September 26, 2019

Market Reports Midwest Midwest Market Reports Minnesota Office

Strong Economy, Low Unemployment Drive Twin Cities Office Market Success

by Kristin Harlow September 19, 2019

Our Twin Cities office market remains strong as the population of millennials and empty nesters continues to migrate to first- and second-ring areas, bringing revitalization and new investment into the city’s commerce and infrastructure. With vacancies remaining exceptionally low and fewer developments on the horizon, rents have shown consistent growth. We are seeing fewer new buildings under construction for single-tenant users. Most are geared toward multi-tenant, mixed-use concepts. Newly renovated buildings with many amenities are performing well in attracting and keeping tenants. With the metro’s unemployment right around 3 percent and employers with jobs to fill, tenants have the leverage. Offering modern and high-tech communal spaces with multiple amenities is key. Tenants and buyers are leveraging this trend, therefore spaces with the allure of contemporary and updated finishes are highly desired. It is imperative that landlords and owners renovate and update their buildings in order to stay relevant in today’s market. Many tenants are simply moving from one space to another nearby because it has been updated and improved upon. That is one of the bigger challenges — improvements that keep the space relevant. Space configurations Employers often offset higher rent costs by embracing space efficiency and flexible workspace strategies …

September 19, 2019

Industrial Market Reports Midwest Midwest Market Reports Missouri

Myriad Factors at Play for St. Louis Industrial Market Activity

by Kristin Harlow September 12, 2019

The St. Louis industrial market continues to rally after posting 22 straight quarters of positive absorption. Record leasing activity and historically low vacancy have put the region on pace to deliver another 6.5 million square feet of Class A industrial space in 2019. This is in a market that averages deliveries of approximately 2.5 million square feet annually. Current drivers engendering this industrial activity include the following. Discipline Developers in St. Louis have long been known for their disciplined approach to building. Vacancy in a stable market hovers near 7 percent for the region. The vacancy rate for industrial space leading into the third quarter was 5 percent, up slightly from the previous quarter, according to CoStar. Continued speculative development, particularly in the Metro East, added to the increase. This, coupled with a large vacancy left in Lakeview Commerce Center by World Wide Technologies as it shuffles into a new 2 million-square-foot facility in Gateway Commerce Center East, were the most evident culprits. Expect vacancy to uptick slightly again in the third quarter as speculative deliveries by NorthPoint Development at Gateway Tradeport along with Exeter in Gateway Commerce Center come online. E-commerce No discussion surrounding the industrial market would be …

September 12, 2019

Market Reports Midwest Midwest Market Reports Minnesota Multifamily

Mixed-Use and Apartments: Is There Still Room for Growth in the Twin Cities?

by Kristin Harlow September 5, 2019

As a team, we work heavily in mixed-use leasing and development sourcing. Our team handles the commercial leasing on many mixed-use projects within the Twin Cities market, where we also source and find locations for mixed-use apartment developers. This article will give a current snapshot of the mixed-use retail and apartment market within the Twin Cities. What types of projects? There are many three- to six-story, podium-style apartment buildings popping up all over the urban areas of Minneapolis-St. Paul. This product type can also be found in the suburbs. The first floor, or the podium, is constructed out of concrete and allows for up to five additional floors. This is very prevalent in our market and we don’t see this changing soon. However, advanced timber construction is just starting to show itself in the Twin Cities. The mid-rise and high-rise multifamily buildings are mostly contained to the urban core areas. These projects are all concrete construction. It took up until the last five years or so to see major grocers occupy the first floor. We have observed many examples of this and have worked with some of the large nationals as well as larger, local grocers. Mixed-use does not appear …

September 5, 2019

Iowa Market Reports Midwest Midwest Market Reports Mixed-Use

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

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