The Twin Cities retail market is still on the road to recovery, with 231,913 square feet of absorption since the beginning of the year. With steady positive absorption, the former tenant-favorable market is beginning to even out, especially with regard to the urban core or first-ring suburbs. Lease negotiations have started to tip in favor of landlords. Developers, tenants, landlords and brokers are all expressing increased confidence in the strength of the market. Among the tenants contributing to the healthy absorption of space have been Whole Foods, Walmart, and LA Fitness, all of which are opening stores throughout the suburbs. The overall vacancy rate in the third quarter stood at 5.7 percent, down from 6.2 percent the prior quarter, according to data compiled by the Welsh Cos. Vacancy at regional malls is 2.1 percent. The retail vacancy in the trade areas surrounding these regional centers follows suit with premier areas of demand among growing retailers. Chick-fil-A has also entered the Twin Cities market, opening stores in Apple Valley, Bloomington, Coon Rapids and Maple Grove. This continues the trend of new food tenants seeking more space in the Twin Cities, including Smashburger, Which Wich Superior Sandwiches and Freddy’s Frozen Custard & …
Midwest Market Reports
If the recession is truly over in Cincinnati and the nation, we are thankful. Still, the pace of deal and development activity is exceedingly slow. Projects started before the Great Recession are proceeding at a cautious speed. Retail leasing, which has always had a long deal cycle, now seems to take forever. But there are some bright spots in Cincinnati. The downtown market is thriving. Steiner + Associates and Bucksbaum Retail Properties recently announced that they will soon break ground on Liberty Center, a 1.1 million-square-foot, $325 million mixed-use development on 64 acres in West Chester, located about 18 miles north of downtown. And in an interesting twist on new development, college campus mixed-use projects are one of the few ways developers can develop in this risky environment. The Banks Hits A Home Run Our retail update begins on Cincinnati’s riverfront. Located on the Ohio River between Great American Ballpark and Paul Brown Stadium, the 18-acre mixed-use development known as The Banks continues to add new housing, offices, dining and entertainment. A few more restaurants opened this past year including The Yard House, The Wine Guy Bistro, Ruth’s Chris Steakhouse and Tin Roof, which serves up lunch, dinner and music. …
The Columbus industrial real estate market has continued down a path of decreased vacancy and increased build-to-suit activity. Many developers and tenants are trying to determine if this space tightening is going to continue or diminish in the coming months. Industrial real estate experts who had their pulse on the market accurately predicted a year ago that absorption would be taking place at a healthy clip at the end of 2012 heading into 2013. This change in the market has resulted in limited options for tenants seeking space above 100,000 square feet. Meanwhile, developers are considering the possibility of building warehouses on a speculative basis and tenants are seeing a change in economics and concessions from previous years. Pendulum Swings The current 7.6 percent industrial vacancy rate in the Columbus market is at an all-time low. You have to go back to the late 1990s and early 2000s to find a period when the vacancy rate was nearly as low as it is today. The recent lack of space availability is starting to impact tenant choices. A tenant that used to have six or seven options for a 400,000-square-foot warehouse space is now finding that it only has two to …
Modest economic growth in the Chicago metro area will support further improvements in apartment vacancy and rents this year. Staffing levels grew in the first half of 2013, though the pace of hiring eased from prior periods. Vacancy will remain lower than normal in the near term, though temporary imbalances between supply and demand will occur over the next two years. This trend is especially likely in the city, where the number of new luxury units aimed at upwardly mobile young households and affluent older households is increasing. New sources of demand, however, will also emerge, including echo boomer and new immigrant households. Properties listed for sale typically elicit multiple offers, placing upward pressure on prices and compressing cap rates. Northside neighborhoods remain a targeted area, and the best assets in those submarkets can trade at cap rates from 5 to 6 percent. Investors continue to look for underperforming assets and are giving greater consideration to eventual exit strategies. Interest in Class C and Class D assets in blue-collar neighborhoods on the west side and south side is also gaining traction. Recent transactions have established $30,000 per unit to $35,000 per unit as the strike point to execute deals, and …
Revitalization efforts in Detroit are underway and drawing residents and businesses back to the city. These measures aim to improve downtown Detroit’s streets and parks, enhance outdoor activities to increase foot traffic and attract new retailers, jobs and residents. In addition, construction will begin later this year on 3.3 miles of the M-1 light rail line, which will run mainly down Detroit’s Woodward Avenue between downtown and the New Center neighborhood, attracting redevelopment along the route. These efforts, coupled with a growing desire of many young professionals and downsizing baby boomers to live in an urban setting, have led to tightening vacancy rates in the downtown core. Although there is no hard data collected on apartment vacancies in the downtown market, developers claim vacancy in some pockets is below 4 percent. The vacancy rate across the metro area currently stands at 4.4 percent. As a result, some vacant buildings such as the former Broderick Tower, Detroit Savings Bank and the David Whitney office building are being put to new use as apartments. Older apartments are also being renovated, some of which are being converted to luxury units, such as the Griswold Apartments. As renters in these properties are relocated, occupancy …
Another positive quarter in the Cleveland industrial market has developers asking themselves, “If you build it, will they come?” Due to a frenzy of leasing activity and positive net absorption in the second quarter, Cleveland’s industrial vacancy rate fell to 8.2 percent, with sub-7 percent vacancy rates in the Class A, high-bay warehouse submarkets. The turnaround has been dramatic. Saturated with more than 1 million square feet of vacant speculative space three years ago, the Cleveland industrial real estate market today is unable to support the continued growth of companies without some new construction. Space commitments from Newell Rubbermaid (650,000 square feet), ShurTech Brands (182,000 square feet) and National Business Furniture (100,000 square feet) indicate that although Columbus continues to supply the demand for e-commerce, Cleveland will once again be home to value-add manufacturing, assembly and local distribution companies. GOJO Industries (205,000 square feet) and Glazer’s (200,000 square feet) not only expanded, but also absorbed the last available big-box space in Cuyahoga County. Summit County will be the new focus of companies looking to expand or shift into more efficient space following the recent vacancies left behind by Suarez Corp. (350,000 square feet) and Mid-America Packaging (300,000 square feet), both …
Speculative construction in Kansas City’s industrial market has exceeded the height of the last boom for a couple of reasons. On a macro level, the economy is improving, so it’s only natural that the local market would follow suit, especially given its logistical advantages. The development of intermodal facilities, the aging stock of existing product combined with no new construction in the past four years — plus a thriving automotive sector — are pushing this new wave of development locally. During the first half of this year, the Kansas City industrial market has absorbed more than 2 million square feet of space, driving down the vacancy rate to 7.5 percent, slightly lower than the historical average of 7.6 percent and down from the peak of 8.4 percent in 2011. We’re likely to experience an increase in vacancy during the next 18 months, however, as six properties totaling slightly more than 2 million square feet deliver. In fact, 2013 will post the most speculative development of the past decade, exceeding 2008’s total of 753,000 square feet. New Logistics, New Product One of the key demand drivers for the latest boom involves the more sophisticated approach to logistics on the part of …
Things are happening downtown. A number of public and private initiatives are transforming downtown Des Moines from a place to work to a place where you can truly live, work and play. Wellmark Blue Cross and Blue Shield recently moved into its new 600,000-square-foot LEED Platinum-certified office building fronting the John and Mary Pappajohn Sculpture Park, and Principal Financial announced a $250 million renovation of its existing downtown campus. In addition, EMC Insurance Cos. recently added to its downtown footprint by purchasing the Hub Tower and Kaleidoscope at the Hub, the centerpiece of the new Walnut Street transformation. Finally, Nationwide Insurance is firmly entrenched in its 1 million-square-foot campus building. New Home For YMCA Adding to the momentum is a three-way sale and trade fueled by a public/private partnership spearheaded by Des Moines real estate leader William C. Knapp, chairman emeritus of Knapp Properties. Included is an approximate $30 million project for a downtown Wellmark YMCA to be located in the former Polk County Convention Complex. According to The Des Moines Register, construction is expected to begin by year’s end on the YMCA’s new downtown home, which will include expanded recreational offices and a 50-meter, Olympic-sized swimming pool. YMCA supporters …
Strong and steady is an apt description of the current course of the commercial real estate market in the greater Grand Traverse Area of Northwest Lower Michigan. Traverse City’s unemployment rate registered 7.5 percent in June, virtually unchanged from a year ago but down dramatically from 14.3 percent in March 2010. In 2012, the commercial real estate market rebounded with a total of 400,000 square feet sold, up from approximately 300,000 square feet in 2011. Last year’s rebound was fueled largely by increased investment in the industrial warehouse and light manufacturing market. More than half of the square footage absorbed last year was in this particular sector. Only 139,000 square feet of commercial real estate space has been absorbed year-to-date through July. This is considerably less than the 300,000 square feet absorbed during the first seven months of 2012. The reduction in absorption activity is due to a shortage in the available inventory of quality light manufacturing and industrial warehouse buildings. To put that statement into context, consider that a total of 22 industrial and manufacturing buildings ranging in all sizes traded hands in 2012. Currently, we have only six buildings 20,000 square feet or larger on the market for …
In what might be the twilight of the Fannie Mae and Freddie Mac years, investors in Kansas City’s apartment market have fully capitalized on the continued availability of cheap debt and a slowly improving economy. As reminders of the 2008–2010 economic downturn, bank-owned properties are still being sold, but the bulk of REO sales have already occurred. Additionally, local job creation surged in the past three months, buoying investors’ confidence. As a result, sales of Class B and C properties will continue to rise and approach historic levels. The sales velocity of top-quality apartment product is also normalizing, albeit on a downward trajectory. All Classes Normalizing So far this year, transaction volume and average sales price per unit have both been strong. Nevertheless, the data suggests the market is stabilizing below the levels of 2011 and 2012, which represented after the pent-up demand from 2008 through 2010. Annualizing the year-to-date sales data from Hendricks-Berkadia suggests there will be 36 transactions of Class A, B and C properties with 40 or more units this year. An end-of-year boost in sales is expected, but we still anticipate fewer than the 55 and 54 transactions completed in 2011 and 2012, respectively. Total sales …