Midwest Market Reports

Downtown Kansas City Office Market Rebounds, While Suburbs Continue to Shine

by Kristin Harlow December 22, 2016

Kansas City’s central business district (CBD) has received a great deal of media attention over the past two years for good reason. With over 3,000 new residential units delivered, the new KC Streetcar and the national trend of Millennials moving to urban areas, there has been plenty of momentum for the area and much discussion of the “live-work-play” environment. After a long period of decline, the urban core of Kansas City is experiencing a powerful revitalization. In all the excitement surrounding the CBD, however, another trend may be getting overlooked. Through the first three quarters of 2016, absorption in the CBD (the Downtown, Crossroads and Crown Center submarkets) was more or less flat after accounting for the conversion of office space to residential use and a unique listing in the Crown Center complex. Meanwhile, the suburban office market posted 580,000 square feet of positive absorption during the same period. Yes, Kansas City is in the process of rediscovering and reinventing the CBD, but the performance of the suburban market remains strong. Construction Boom The first indicator that tenants are still attracted to key suburban submarkets is the number of recent construction projects. Earlier this year, Burns & McDonnell completed a …

December 22, 2016

Market Reports Midwest Midwest Market Reports Office Ohio

Once-Dormant Office Development Pipeline in Downtown Cleveland Now Growing

by Kristin Harlow December 15, 2016

Cleveland’s relatively affordable cost of living compared with other major Midwestern cities is attracting businesses to the metro area, fueling demand for office space. A steady stream of new employment opportunities supported the 1.6 percent expansion of Cleveland’s workforce over the 12-month period that ended Sept. 30. Hiring during that period was driven by the education and health services sectors, which collectively added 9,300 positions. It is expected that by year-end 2016, Cleveland employers will have increased payrolls 1.3 percent with the addition of 14,000 workers. Office-using employment is expected to rise 0.4 percent this year, remaining steady with only a slight variation over the past three years. Cleveland’s stable economic fundamentals, coupled with businesses attracted to the city, have supported the revival of a dormant development pipeline. During 2015, just 46,000 square feet was added to Cleveland’s office property inventory. The majority of the new office completions are located downtown. In the four-quarter period that ended in September, approximately 660,000 square feet came into service. Construction Surges While office completions were sluggish in 2015, construction has picked up significantly and builders are on track to deliver more than 1 million square feet of new office product by year’s end. …

December 15, 2016

Indiana Market Reports Midwest Midwest Market Reports Office

Investment by Salesforce.com in Indianapolis Office Tower Creates Ripple Effect

by Jeff Shaw December 8, 2016

Downtown Indianapolis is already feeling the impact of Salesforce.com Inc.’s recent decision to lease more than 220,000 square feet for a new regional headquarters in the state’s tallest office building, located at 111 Monument Circle. The firm’s $40 million investment over 10 years includes expansion plans for its regional headquarters as well as changing the name of the 48-story office tower from Chase Tower to Salesforce Tower Indianapolis. This will be one of only four towers in the world that bear the Salesforce name — the others are located in New York, London and San Francisco. Salesforce.com, a publicly traded company (NYSE: CRM), is a business software provider best known for applications that help salespeople track customer contacts and marketers plan campaigns, according to The Wall Street Journal. The San Francisco-based tech company currently has 1,400 employees in Indianapolis and plans to hire 800 new employees over the next five years. The company is expected to move into the tower in early 2017. The firm currently leases space in three other buildings downtown. This speaks volumes about Indianapolis’ efforts to become the Midwest hub for technology. While Salesforce is one of Indianapolis’ largest technology employers, nearly 100 tech companies are …

December 8, 2016

Market Reports Michigan Midwest Midwest Market Reports Retail

Rebound in Labor Market Helps Metro Detroit Retail Sector Turn the Corner

by Jeff Shaw December 1, 2016

Detroit’s sustained employment growth, along with focused redevelopment and revitalization efforts, have brightened the metro area’s economic outlook and propelled the retail market this year. Six consecutive years of job gains have attracted new residents to the region and stemmed population outflow. Strong hiring trends have boosted household incomes, and retail sales are ascending as a result. The local economy is expected to create 38,000 new jobs in 2016, representing a 1.9 percent annual expansion. The local unemployment rate stood at 4.9 percent in August, the lowest rate since 2001 and just 10 basis points higher than the national level. The professional and business services sector led employment gains over the 12-month period that ended June 30 with nearly 12,000 additional workers hired. Ripple effect of jobs growth The abundance of job opportunities is also contributing to higher household incomes. Over the 12-month period that ended Sept. 30, roughly 7,500 households were created and the median household income climbed 3.1 percent. These improvements supported a 1.3 percent hike in retail spending over the same period. Encouraged by the positive economic trends in Detroit, retailers are expanding many existing storefronts, while companies such as Nike and restaurants such as Cheesecake Factory, …

December 1, 2016

Market Reports Michigan Midwest Midwest Market Reports Multifamily

Michigan’s Second Largest City Keeps Pace with Multifamily Housing Demand

by Jeff Shaw November 17, 2016

Many of the national trends unfolding in the multifamily sector are playing out in Grand Rapids, the second largest city in Michigan, with a population estimated at 195,000 and slightly more than 1 million metrowide. A combination of demographic, economic and lifestyle trends are leading to the creation of more renter households. This includes Baby Boomers, Millennials and renters by choice across all income levels. In addition, Grand Rapids is experiencing an urban renaissance that is bringing new commerce, housing and amenities into the downtown area. During the 2016 National Multifamily Housing Council conference in Orlando, Grand Rapids was recognized as one of the top three small to mid-sized markets in the country for multifamily investment. Annualized apartment rent growth in Grand Rapids has been running at a robust 7 to 8 percent for the past two years, but some momentum has been lost in the wake of a large number of units that have come on line. The annual rent growth slipped to 4.6 percent during the four-quarter period that ended Sept. 30. The average occupancy rate remains above 97 percent, but is gradually coming off a peak of 98.6 percent in the third and fourth quarters of 2013. …

November 17, 2016

Illinois Market Reports Midwest Midwest Market Reports Retail

Transit-Oriented Developments Are Transforming Chicago’s Urban Core

by Jeff Shaw October 27, 2016

Mixed-use projects are booming, and for good reason: the city as we know it is fundamentally changing. Millennials are flocking away from the suburbs and into the city center, driving development in walkable urban cores that incorporate everything consumers need to live, work and play. In Chicago, a dramatic increase in mixed-use development since the last recession has completely recast the way we think about how retail concepts fit into our unique urban landscape. Mixed-use buildings anchored by residential projects are well supported by the city’s political class because they increase density in a city that’s already bursting at the seams. Changes in the way the City of Chicago approaches zoning has led to an uptick in transit-oriented development, which allows for lower parking requirements in projects centered around mass transit hubs. The city’s transit-oriented development (TOD) ordinance, which was approved in 2013 and revised in 2015, has been the driver behind the massive influx of new mixed-use projects over the last four years. Mixed-use advantages From a purely economic standpoint, mixed-use projects boast a diverse tenant roster, which typically means less risk for investors. Land prices in Chicago have reached a point where in some cases standalone retail is …

October 27, 2016

Illinois Market Reports Midwest Midwest Market Reports Multifamily

Renter Demand Keeps Pace with Apartment Developers’ Building Bonanza

by Jeff Shaw October 20, 2016

Chicago’s diverse economy and ample employment opportunities are driving growth metrowide, which bodes well for apartment owners and managers. Encouraged by the positive economic outlook, developers are expected to deliver nearly 7,500 new units this year, the largest supply increase since 2000. That said, high levels of construction will not be at the expense of other performance metrics such as occupancy, rent and price growth. Job growth is accelerant In the first half of the year, Chicago-area employers added 34,500 workers to their payrolls. Hiring was led by the leisure and hospitality sector and the construction industry, which expanded 4.2 percent and 5.3 percent respectively over the 12-month period that ended in June. Consistent employment expansion has also boosted household incomes, with the median household income reaching $65,300 at the end of the second quarter. With the median income above the nationwide average, demand for luxury rental units is rising tremendously. These factors, in addition to the Millennials and Empty Nesters flocking to the area, will support rental affordability and demand even as rents continue to increase. This is a positive indicator of the overall health of Chicago’s economy. Employers in metro Chicago remain on track to hire a total …

October 20, 2016

Illinois Industrial Market Reports Midwest Midwest Market Reports

Speculative Industrial Development Makes a Big Comeback in the City of Chicago

by Jeff Shaw October 6, 2016

Chicago’s nearly 1.2 billion-square-foot industrial market continues to be a strong performer, garnering national attention. Tightening vacancies, healthy absorption and rising rental rates have spurred increased construction across our region. In fact, 7.7 million square feet in new industrial product came on line during the first six months of the year, with another 16.6 million square feet currently under development, earning metro Chicago the distinction of having the second largest pipeline of new inventory in the country. As vacancies dwindle across the metro area, surging demand for quality, close-in manufacturing and distribution space is driving a critical mass of new speculative development in the city proper for the first time in more than a decade. From January 2015 through the second quarter of 2016, developers delivered 317,000 square feet of spec industrial product in metro Chicago, according to Cushman & Wakefield Research. To put that figure into context, a total of 238,000 square feet of spec product was introduced in the city during the prior 10 years (2005-2014). Another 369,000 square feet of spec development is underway and scheduled to be delivered in 2017, but the new construction will only partly mitigate the pent-up demand for space within city limits. …

October 6, 2016

Market Reports Midwest Midwest Market Reports Minnesota Retail

Grocers, Redevelopment Projects Highlight Twin Cities Retail

by Jeff Shaw September 28, 2016

It’s hard to argue with the fact that the Minneapolis and St. Paul metropolitan areas are among the most economically dynamic and socially vibrant cities in the United States. With a thriving business environment, strong growth and impressive demographics, Minnesota consistently ranks in the top five of the most educated states in America, according to the United States Census Bureau. The Twin Cities also boast an expanding workforce, outstanding public transportation network and a booming economy. With 17 Minnesota-based Fortune 500 companies, it’s not surprising that the Twin Cities are competitive on a national and even global scale. The competitive energy and high-level activity in the city’s retail marketplace is being fueled in part by a surge of new retailers. The aggressive entry of new tenants to the market, along with the challenge of a 4 percent vacancy rate, is prompting quality spaces to be absorbed almost immediately. As stated in the Welsh Q2 2015 market report, over 1.1 million square feet of retail space were absorbed during 2015, the highest number in the market in over a decade. The vacancy rate for regional mall trade areas is actually closer to 2.6 percent, with numbers for the Minnetonka/Ridgedale Mall trade …

September 28, 2016

Market Reports Midwest Midwest Market Reports Missouri Retail

New Development, Healthy Leasing Activity Powers St. Louis Retail Market

by Jeff Shaw September 22, 2016

Retail development in the St. Louis metro area continues to gain momentum. Rental rates are strong, with triple-net asking rents averaging $12.30 per square foot, and are expected to trend upward as the retail market continues to grow. Absorption of existing product along with multiple new developments has created a positive forecast for the St. Louis retail market. In the second quarter of 2016, the St. Louis retail vacancy rate dropped to 5.9 percent from 6.1 percent the previous quarter with positive net absorption of 449,056 square feet. Leasing ramps up Contributing to the healthy retail market are several tenants moving into large blocks of space including two 41,921-square-foot Walmart Neighborhood Market stores now open in St. Peters. Among other store openings: • At Home has announced two 100,000-square-foot locations on the site of a former Walmart in Town & Country and a former K-Mart in O’Fallon, Mo. • Academy Sports will open two 62,000-square-foot locations in Manchester and O’Fallon, Ill. • Camping World will move into 34,710 square feet in Wentzville. • Stein Mart will occupy 31,000 square feet in Town & Country. • Bob’s Discount Furniture has signed a 28,035-square-foot lease in Manchester and a 30,000-square-foot lease at …

September 22, 2016

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