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 …
Midwest Market Reports
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 …
Kansas City is best known for its beer, barbecue and jazz, and an economy inextricably linked to railroads and cattle. It’s not unusual for an Easterner flying over Kansas City on his way to Los Angeles to remark, “I hear I can get a great steak down there.” You can indeed find a great steak down here, but most importantly the economy is more about the steak than the sizzle. The truth is that the local economy is so broad-based that it is difficult to define. Kansas City’s economic growth today is driven by life sciences, architecture and engineering, information technology as well as financial services. All of these industries feature homegrown companies and institutions that began with entrepreneurial roots such as telecommunications giant Sprint, a company that traces its roots to a small utility company west of Kansas City. The world’s power plants and sports stadiums are designed in Kansas City, and a cure for cancer is ongoing driven by The Stowers Institute for Medical Research and the University of Kansas in conjunction with the Kansas City Area Life Sciences Institute. Cerner, the second largest health care technology company in the world with more than 8,000 employees, announced in …
When Clint Eastwood’s “Halftime in America” ad aired during the 2012 Super Bowl, the much-discussed spot displayed a kind of gritty optimism about Detroit’s economic prospects. Lines like the “Motor City is fighting again” and “Detroit’s showing us it can be done” resonated not just with Southeast Michigan residents, but a nation hungry for optimism in the wake of an extended recessionary cycle. Despite the recent announcement that Detroit has become the largest U.S. city to file for bankruptcy, a closer look at the broader trends within the Detroit retail market reveals a development landscape that is generally moving in a positive direction. While the bankruptcy filing will affect certain aspects of Detroit’s immediate recovery, the overall theme is one of renewal and revitalization. Motown Momentum Across the Detroit marketplace, retailers are reviewing their existing inventory as leases mature, with a general focus on infill or relocations. There seems to be a widespread understanding that Southeast Michigan has historically been a solid retail market, and that the region’s economic turnaround is opening up new opportunities. The list of positive developments across metro Detroit continues to grow. As Wayne State University continues to transition from a commuter campus to a more …
Consumer spending in St. Louis is up, according to the latest Federal Reserve Beige Book. Likewise, the Fed reports that residential real estate activity is increasing at a moderate to strong pace with escalating home sales and prices. All around, there is a sense of optimism that has jump-started retail activity. The vital signs are just starting to reflect this surge in activity and are expected to continue improving for the foreseeable future. Asking rates, averaged across all retail sectors, have remained near $12 per square foot triple net over the last three quarters, while vacancy rates have fallen from 9 percent to 8.5 percent during that same period. Net absorption has seen positive gains over the last three quarters with the delivery of a few new fully occupied projects. These positive changes in absorption and vacancy rates should result in higher asking rates going forward. Competitive Landscape An example of a successful project is in Chesterfield Valley, where two outlet mall developers have created more than 660,000 square feet of new retail space within a two-mile radius. The two projects, headed by Taubman Prestige Outlets and Simon Property Group, will open this month in time for back-to-school shopping. The …
In June 2008, Cedar Rapids experienced what at the time was the fifth worst disaster in U.S. history. A historic flood covered 10 square miles in the four core neighborhoods and the entire downtown, damaging more than 5,000 homes, over 1,000 businesses, and numerous public, cultural and religious facilities. Since that time, 1,088 residences have been demolished and 2,356 residential properties repaired or rehabilitated. Some 82 percent of the damaged businesses have reopened compared to a national average of 55 percent in previous major disasters. The scope of the recovery in just five years is remarkable. The numbers speak for themselves: • 1,311 new housing units completed since 2008; • 118 new multifamily units recently funded by state recovery grants; • 16 major city of Cedar Rapids facilities built or under construction with all to be finished by 2014; • building permits in 2012 totaled 11,000 with 1,300 commercial and 9,700 residential, which set a record of more than $400 million (63 percent from the private sector); • population growth of 4.6 percent in the last decade despite the June 2008 flood; • unemployment rate currently at 4.9 percent; • AAA bond rating by Moody’s for 41 consecutive years. The …