Is suburban retail dead? The short answer is “of course not.” While the recession was especially hard on many suburbs, recent activity indicates that conditions have improved greatly. To better understand where we are, we need to examine where we have been. During the real estate boom leading up to 2007-08, retail developments were sprouting up everywhere. Many developers expanded farther and farther away from Chicago, while incurring an additional risk through overleverage and speculative projects. The economy started to crash about the same time that many real estate projects came to market. Developers and landlords quickly discovered that there was a lack of consumer demand necessary to drive retailers to lease space in the newest suburban centers. Many retailers were attracted to the suburbs due to high household income levels. However, population density was often overlooked. Even the most affluent suburbs experienced difficulties as too many retailers were chasing a limited amount of customers. Tale of Two Markets As the economy and overall real estate market started to recover, many retailers focused their energies on opening stores in Chicago’s core metro areas. Neighborhoods such as the West Loop, Streeterville, River North and Wicker Park were on fire. For many …
Midwest Market Reports
Manufacturing, beer and the Green Bay Packers are typically the three things that come to mind when one thinks of Wisconsin. Although we will always love beer and our Green Bay Packers, the real estate landscape is changing. During the past decade — and even more so over the past few years — Milwaukee has begun its transformation into a hip and vibrant city and is making its mark in progressive green technologies, water research and startups. As Steve Palec, managing principal of Cresa Milwaukee, pointed out in his May 2012 article for Heartland Real Estate Business, for the first time since 2001 we are finally going to see a new office development and a change in our skyline. With the exception of the world-renowned Calatrava Art Museum and Pier Wisconsin in 2001 and 2006, respectively, Milwaukee’s lakefront has remained relatively unchanged for decades. The recession is only partly to blame. A 1915 deal made by the city of Milwaukee divided the lakeshore into land reserved for public use and land eligible for private development. Although the city entered into this agreement for several reasons, it was partially to ensure that all, not just the elite, could utilize the shores …
There is no question that the technology sector is one of the principal drivers of our commercial real estate sector today. Downtowns nationally have seen an influx of new economy firms because of the presence of young knowledge workers in CBDs — and Chicago is one of its stars. More than $265 million flowed into Chicago-area digital tech companies during the third quarter of 2013. In addition to startups, this growth caused an exodus of firms out of suburban business parks into areas populated by millennials like the West Loop and River North. Developers are planning to build 8 million square feet of office space in downtown Chicago during the next 24 months. Arrivals and Departures Following Motorola Mobility’s move out of Schaumburg, Gogo Inc. signed a 230,000-square-foot lease to move its headquarters to 111 N. Canal St., shifting more than 500 workers from two buildings in Itasca. Meanwhile, OfficeMax Inc. is leaving behind 344,000 square feet in Naperville to consolidate in Boca Raton, Fla. Much of the media coverage has focused on these relocations as the only story worth telling about the Chicago office sector. But the reality is the suburbs aren’t throwing in the towel. Defying conventional wisdom, …
Optimism abounds in the Twin Cities apartment market, and for good reason. It’s a top performer in the Midwest, and ranks high in the nation overall. The key indicators are compelling: low vacancies with rental rates rising; steady apartment sales; robust new development, especially in core urban and first-tier markets; and flowing pipelines. Among 52 metropolitan areas showing the most economic momentum heading into 2014, Minneapolis/St. Paul ranked No. 14, according to the Praxis Strategy Group. Criteria included GDP growth, job growth, real median household income growth and current unemployment. Property owners, buyers, developers and funding sources are all benefiting from a strengthening apartment market, a trend that began in 2009. Although statistics vary by source, there is consensus on future apartment trends in the seven-county metro area. For apartment owners, a tight rental market means growing revenues, a far cry from the glut of vacant units that existed a few years ago. Last year, vacancy rates averaged 2.8 percent, compared to 7.9 percent in 2009, according to real estate research firm Reis. A boon for landlords, rising rents are forcing many lower-income renters out of the cities into the suburbs. Statistics show the average rent in the Twin Cities …
After years of trailing cities such as Dallas, Memphis and Indianapolis as major bulk distribution centers, Kansas City has emerged as a significant and large hub for the development of Class A industrial logistics centers whose development is backed by institutional money. The trend is transformational for our market and here to stay for three primary reasons: (1) Institutional money — namely life insurance companies — has always allocated a portion of its funds for real estate. That money has found Kansas City. (2) Local Kansas City developers, brokers and property managers are well-suited and eager to accommodate non-operating entities like life insurance companies to buy land, build projects on a speculative basis, lease up and manage the new developments, and sell them when the financial backers decide to cash in on their investments. Kansas City has traditionally been a family-owned real estate development community comprised of five or six major players. None of these families has sold its portfolios to industrial REITs. Thus, there is a niche for institutional-backed, Class A development that is financed with deep pockets and brought to market by local developers. (3) The biggest reason for large-scale Class A industrial development in Kansas City is …
Considering the city’s recent negative press, as well as the government loans that General Motors and Chrysler both required in order to manage their way through structured bankruptcies nearly five years ago, it is understandable why one would question the economic vibrancy of Detroit and the surrounding region. However, the much-maligned Motor City is actually a lot healthier than the view projected by the city’s high-profile bankruptcy status. The Michigan jobless rate is hovering near 9 percent. While still high compared to other states, the unemployment rate is the lowest it has been since mid-2008. Since March 2012, the state has gained more than 18,000 manufacturing jobs and over 20,000 jobs in other sectors. The U.S. energy boom is making it more cost effective for factories to operate, and Michigan’s manufacturing base is directly benefitting from lower energy costs. In addition to the automotive sector, Michigan industries that thrive include advanced manufacturing, defense, information technology, water technology, medical devices, food processing and logistics and supply-chain management. The rebound in manufacturing has cut metro Detroit’s overall industrial vacancy rate by 400 basis points since the peak of the recession, falling from approximately 14 percent in mid-2010 to 10 percent at the …
The apartment market in metro Kansas City is in an expansion phase, driven in large part by strong renter demand and an improving economy. Developers are building and opportunistic sellers are bringing properties to market. Meanwhile, the core, growth and value-add investors are gobbling up assets. Lenders are competitively financing both acquisitions and new developments in all classes of properties. Renters can feel the momentum as well, with more product to choose from and higher rents. Employment Summary It all starts with jobs. The Mid-America Regional Council, which serves the nine-county Kansas City metro area, estimates that the local economy added 12,300 jobs in 2013, correlating to annual GDP growth of 2.7 percent. This figure compares favorably with U.S. GDP growth of approximately 2 percent during the same period. The 12-month period from August 2012 to August 2013 provides a window into the rebound in the local employment market. The leisure and hospitality sector created 5,800 net new jobs during that stretch, while the professional and business services sector added 5,700 new jobs. Meanwhile, the mining, logging and construction industries added a total of 2,600 jobs in the metro area (mostly construction), including 1,900 in Kansas and 700 in Missouri. …
The strong performance of the Omaha apartment market is expected to continue in 2014 and beyond. According to MPF Research, Omaha’s apartment occupancy stood at 95.8 percent in the third quarter of 2013, up from 95.5 percent at the end of 2012 and in line with Omaha’s average occupancy rate of slightly under 96 percent since 2000. On the new construction front, developers continue to bring new projects to the market. During the first 10 months of 2013, multifamily building permits totaled 1,454 units in metro Omaha, which was 47 percent above the 986 multifamily housing units permitted during the same period in 2012 and 19 percent above the 1,225 units permitted during all of 2012. The figure was also slightly above the upper end of my range of expectations of 1,300 to 1,400 units for all of 2013. On a percentage basis, the addition of 1,454 units would increase the apartment housing stock by 1.6 percent based on an overall inventory of approximately 88,000 units. More Shovels in the Ground During 2014, I expect construction activity to continue to be strong. Indeed, we could see multifamily building permit issuance reach 1,300 to 1,400 units. Included in these new development …
After years of trailing cities such as Dallas, Memphis and Indianapolis as major bulk distribution centers, Kansas City has emerged as a significant and large hub for the development of Class A industrial logistics centers whose development is backed by institutional money. The trend is transformational for our market and here to stay for three primary reasons: (1) Institutional money — namely life insurance companies — has always allocated a portion of its funds for real estate. That money has found Kansas City. (2) Local Kansas City developers, brokers and property managers are well-suited and eager to accommodate non-operating entities like life insurance companies to buy land, build projects on a speculative basis, lease up and manage the new developments, and sell them when the financial backers decide to cash in on their investments. Kansas City has traditionally been a family-owned real estate development community comprised of five or six major players. None of these families has sold its portfolios to industrial REITs. Thus, there is a niche for institutional-backed, Class A development that is financed with deep pockets and brought to market by local developers. (3) The biggest reason for large-scale Class A industrial development in Kansas City is …
The famous Kansas City song — first recorded by Wilbert Harrison in 1959 — says, “I’m going to Kansas City, Kansas City here I come.” Well, in 2013, the retailers did come to Kansas City, which was beautiful music to the ears of developers and landlords throughout the area. Some of the most notable new additions to the Kansas City retail scene include IKEA, The Container Store, Academy Sports + Outdoors, Scheels Sporting Goods, REI, Fresh Market, Rock & Brews, Cinetopia, Eileen Fisher, Freebirds World Burrito, Chuy’s and Hallmark’s new store concept called “HMK.” Still other retail additions include Pinstripes, an upscale entertainment and dining venue featuring bocce and bowling, as well as Sprouts and Corner Bakery. Geographic proximity to other established markets for these retailers led to a natural migration pattern to Kansas City. However, the following factors created new inventory opportunities and supplied the key ingredients for an active retail climate in 2013 that should continue in 2014: • the metro’s declining unemployment rate to 6.3 percent from a recent high of 8.4 percent in 2010; • the buoyant housing market, with an estimated 5,960 new residential and apartment units added during 2013 versus 2,342 units in 2010; …