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Midwest Market Reports

HospitalityIllinoisMarket ReportsMidwestMidwest Market Reports

Is the Current Bull Run for Chicago’s Hotel Sector Nearing an End?

by Christina Cannon

The hotel industry has gained momentum over the last few years, with impressive increases in revenue per available room (RevPAR) and a continuing development boom in virtually all major markets across the Midwest and the nation. In the Chicago hotel market, RevPAR increased 7.2 percent in 2014 on a year-over-basis, according to STR Inc., and RevPAR was up 7.7 percent through the first 11 months of 2015. With consumer demand so strong and the development pipeline quite active, it might feel like the challenges of the last recession are long in the past. The reality, however, is that in a cyclical market the next downturn is never too far away. There are some indications that the ride may be slowing down and that the good times the region and the industry have enjoyed in recent years may be coming to an end. Oversupply Concerns While Chicago’s construction pipeline is smaller than a number of other metropolitan areas, it is the Windy City’s most robust development pipeline in recent memory. In aggregate, there will be a 20 percent increase in the room supply over three years. That could easily balloon to 25 percent with projects recently announced.  This is very likely …

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Market ReportsMidwestMidwest Market ReportsMissouriMultifamily

St. Louis Apartment Builders Play Catch-Up

by Christina Cannon

Strong renter demand in the metro St. Louis apartment market helped boost annual effective rent growth by 3.6 percent in 2015, 200 basis points above the market’s long-term average, according to Axiometrics. An estimated 1,012 apartment units were delivered to the St. Louis market for all of 2015 compared with 2,378 units of absorption during the same period, reports Axiometrics. But with numerous projects in the pipeline, that ratio is likely to change over the next few years, say real estate experts. “We expect supply levels to increase in 2017 and for absorption to begin to struggle to keep up due to slowing job growth,” says Sophie Zatterstrom Gore, analyst with Axiometrics. But 2016 is a different story, she points out. Robust job growth will help absorption outpace new supply by about 600 units in 2016: 1,587 units of absorption versus 990 units of new supply. Such strong demand is giving a strong lift to real estate fundamentals in the local apartment sector. The average effective rent in the third quarter of 2015 was $914, which Axiometrics projects will rise to $948 by the end of 2016. The average vacancy rate is projected to fall from 6.3 percent at the …

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Market ReportsMidwestMidwest Market ReportsMissouriRetail

IKEA Leads Retail Development in St. Louis

by Christina Cannon

Without question 2015 was a “great year” for the St. Louis retail market, says Adam Glosier, senior vice president with Colliers International. “New users entered the market and few vacated. The St. Louis retail landscape benefitted from the continued expansion of organic grocers, sporting goods operators, quick service restaurants and soft goods retailers.” At the end of the third quarter, the vacancy rate stood at 7.1 percent, unchanged from the prior quarter but down from 8.2 percent a year earlier, according to CoStar Group. Net absorption totaled 579,206 square feet during the third quarter, bringing the year-to-date total to just under 900,000 square feet. Six new retail buildings were delivered in the third quarter, which collectively brought 612,595 square feet to the market. The gross leasable area (GLA) of the 29 buildings under construction at the end of the third quarter totaled 915,751 square feet. “There was a lot of activity in 2015 in the freestanding and small retailer market, as well as activity from junior anchors,” says Christopher Zoellner, senior vice president of retail with Balke Brown Transwestern. “This has created strong activity and a good pipeline going into 2016.” IKEA Makes ‘Big Splash’ A few retailers opening new …

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Market ReportsMidwestMidwest Market ReportsOfficeUncategorizedWisconsin

Downtown Milwaukee Continues Its Hot Streak, but Will It Cool in 2016?

by Christina Cannon

The long-held perception of the Milwaukee office market is that it mostly trades tenants between buildings with one landlord winning at the other’s expense, while the overall pie remains the same size. However, with cranes dotting the horizon, large blocks of vacant space quickly leasing up, a number of major new developments waiting to break ground, and the inflow of outside dollars into Milwaukee, the market has recently experienced some amazing deal velocity. This activity is expected to continue as we head into 2016. However, the office market could slow down due to the completion of several projects currently under construction. The greater Milwaukee office vacancy rate stood at 15.5 percent in the third quarter, down slightly from 15.6 percent in the third quarter of 2014. The vacancy rate in the central business district (CBD) dropped from 16.2 percent to 14.9 percent during the same period. Meanwhile, rental rates have increased slightly in both the overall market and the CBD. Cranes in the skies Construction on the Northwestern Mutual Tower and Commons began in late 2014 in downtown Milwaukee and is scheduled for completion in late 2017. A 32-story office tower will adjoin a two-block-long, three-story space known as The Commons. The new development …

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IndianaMarket ReportsMidwestMidwest Market ReportsOfficeUncategorized

Office Development, Tenant Demand Heat Up in Northern Suburbs of Indianapolis

by Christina Cannon

The office sector in the northern suburbs of Indianapolis shows clear signs of solid growth and stability with new construction and deeper tenant demand for space, particularly in the Class A segment. A number of factors contribute to this trend, including job growth, availability of land for housing and favorable demographics. Decision-makers live in the northern suburbs along with families, empty nesters and educated workers. Nearly 90 percent of all suburban office space in greater Indianapolis is located north of 71st Street in five key submarkets: North/Carmel, Keystone, Northwest, the Fishers/I-69 Corridor and Northeast/Castleton. Five I-465 interchanges define these five northern suburban office submarkets of Indianapolis, providing workers efficient access to 17.5 million square feet of office space. Through the third quarter of this year, overall occupancy in these five suburban submarkets stood at nearly 85 percent. The occupancy rate for Class A space was considerably higher at 89 percent. There are only seven blocks of contiguous office space 100,000 square feet or greater available in the suburbs and downtown — four of which are located in the northern suburbs. These spaces include 133,000 square feet at Two Concourse, 10194 Crosspoint Blvd.; 113,000 square feet at the former Charles Schwab …

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Market ReportsMichiganMidwestMidwest Market ReportsUncategorized

Downtown Traverse City Leads Commercial Real Estate Growth Spurt

by Christina Cannon

Traverse City may be known as a small resort town on the shores of Lake Michigan, but each year it grows in popularity. And more commercial real estate players are taking notice. In the past year, Traverse City has been named one of the “Top 20 Best Small Towns in the U.S. to Visit” (Smithsonian); “One of the 50 Best Places to Live in America” (Men’s Journal); “One of the 10 Must See Cities in America” (Horizon Travel Magazine); “One of 10 U.S. Destinations on the Rise” (TripAdvisor); and “One of America’s 20 Most Romantic Towns” (Travel + Leisure). Tourism is on the rise as we become known as a region not only for cherries, but also for great restaurants, wineries, microbreweries, recreational trails for hiking and biking, skiing, festivals and a great place to live. With increasing notoriety comes pressure for development, and Traverse City is no exception. We have seen more development and projects in the pipeline in the past 12 months than we have seen since the height of the real estate boom 10 years ago. Tourists will be happy to note more hotel rooms in the downtown area as the new Hotel Indigo nears completion. The …

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Market ReportsMidwestMidwest Market ReportsMissouriOfficeUncategorized

Tight Office Conditions Lead to Much-Needed New Construction in St. Louis

by Christina Cannon

Improving real estate fundamentals in the St. Louis office market are opening the floodgates to new construction that is greatly needed as large occupiers are finding limited, if any, existing available options. Over the past few years, the gap between rent for existing office properties and new properties was too great to justify construction. Until now, that is. The St. Louis employment base is finally reaching a pre-recession level with continued growth in the healthcare, information technology and engineering industries. The centrally located and more affluent residential areas — the West County and Clayton submarkets in particular — are experiencing higher occupancies and increasing rental rates. Clayton historically has been the best-performing submarket in St. Louis and still is today, while West County is situated near mid- to upper-level income workers. Development has and will continue to follow these highly sought after submarkets as they offer the metro area’s best real estate fundamentals and returns. Add to all of those factors a lack of new product in the past several years — plus a Class A vacancy rate of 10 percent — and you have an ideal climate for new construction. Pivotal project is catalyst The announcement that St. Louis-based …

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Market ReportsMichiganMidwestMidwest Market ReportsOffice

Resurgence of Downtown Grand Rapids Is Occurring on Many Fronts

by Christina Cannon

Downtown Grand Rapids is booming with commercial real estate activity, and it’s coming from many directions. The combination of new residential units, restaurants, bars and a variety of entertainment options is leading people to not only live downtown, but also work and play downtown. Activity in the downtown office market — including office leases, new mixed-use construction and new retail — has increased over the last couple of years, and there is no sign of it slowing down. The overall office vacancy rate in the central business district (CBD) decreased from 9.4 percent in the first quarter to 8.25 percent in the second quarter. While Class A office space has performed well in recent quarters, there was a slight increase in the vacancy rate during the second quarter. As for Class B space, we observed a sizable decrease in the vacancy rate, from 10.1 percent in the first quarter to 8.5 percent in the second quarter. As a whole, the CBD office market experienced positive absorption of 74,293 square feet during the second quarter. Rental rates stabilized in the second quarter after increasing for the past several quarters. Meanwhile, some new construction and planned construction is hitting the market at …

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Market ReportsMidwestMidwest Market ReportsRetailWisconsin

Variety of Retail Construction Ramps Up Across Greater Milwaukee

by Christina Cannon

Milwaukee is in the midst of a new construction boom in the retail sector, with three major projects currently underway and a fourth that was delivered in 2014 for a total of more than 1.1 million square feet of new space in the market. The majority of this space is being delivered fully leased. In many cases, these retailers are brand new tenants to the Milwaukee area. In the second quarter, overall vacancy ticked up 10 basis points to 10.2 percent. However, this was mainly due to store closures and consolidation in the Milwaukee market by retailers such as Office Depot, OfficeMax, Pick ’n Save, Sears and Kmart. But don’t be rattled by the uptick in vacancies. In reality, the market is incredibly active with new tenants entering the region and several expanding. Retailers recognize that there is ample room to compete for market share in Milwaukee and the surrounding area. Many of these new retailers will come on line in large ground-up projects now underway. Here are some of the notable projects: • In Menomonee Falls, a new Costco will open this fall and anchor a 300,000-square-foot development known as White Stone Station from Cobalt Partners LLC. • The …

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IndianaIndustrialMarket ReportsMidwestMidwest Market Reports

Online Retail Sales Spur Growth in Central Indiana’s Industrial Market

by Christina Cannon

Consumers’ desire for shopping convenience and lower prices is driving online retail sales up, accounting for 7.2 percent of total U.S. retail sales so far in 2015, according to the U.S. Census Bureau. And that percentage is expected to double by 2020. It’s no wonder that the popularity of online shopping also is spurring growth in the industrial segment of commercial real estate, particularly in central Indiana. Over the past three years, the growth of e-commerce has accounted for 55 percent of total industrial net absorption in the United States. In 2015 alone, e-commerce has been responsible for 31 percent of industrial net absorption year to date. During the current expansion, the Indianapolis industrial market ranks eighth among all U.S. industrial markets in terms of total net absorption, according to Cushman & Wakefield. In the second quarter of this year, net absorption for modern bulk space totaled 1.6 million square feet, more than any other industrial segment in the market. Since 2013, nearly 15 percent of industrial square footage leased in metro Indianapolis has been related to e-commerce. The FedEx Factor With a compound annual growth rate of 14 percent since 2008, e-commerce has driven retailers to establish dedicated dot-com …

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