The Twin Cities retail market continues to steadily improve from the economic depths of 2008 and 2009. There has been 549,194 square feet of positive absorption since the first quarter of 2011. Another encouraging sign is the increased activity among landlords, tenants and developers. One example of the positive outlook is the investment that landlords are making at regional malls to upgrade and reposition them. The Mall of America in Bloomington seeks to add 550,000 square feet of retail, medical office and hotel space. Southdale Mall, Ridgedale Mall, and Maplewood Mall are also investing in their centers to better compete in this rising market. Another sign of increased activity can be seen among food tenants. Quick service restaurants are betting that Minneapolis-St. Paul residents have a large appetite for yogurt, sandwiches, and burgers and are actively seeking space. Burger and sandwich concepts include Smashburger, Which Wich, Firehouse Subs, and Freddy’s, which are growing in popularity along with Freeziac, Tutti Frutti, Menchies, and CherryBerry yogurt shops. Also active are Noodles, Chipotle, and Starbucks. These types of tenants have gobbled up smaller spaces and end-cap spaces vacated by tenants such as defunct Hollywood Video and Blockbuster. They are pursuing the same spaces …
Midwest Market Reports
Activity is picking up in the Indianapolis retail market, buoyed by a strengthening economy that has intensified retail expansion. Positive job growth, escalating new home construction and rising retail sales are attracting new stores and have instigated other retailers to consider additional locations in selective pockets around the metro area. The northern submarkets within Hamilton County are particularly active, especially around Exit 10 of I-69 in Noblesville, where new housing construction has fostered retail growth. In Carmel, the renovation and re-tenanting of The Centre and The Corner are moving forward. The 82nd Street corridor is also lively as the nearly completed expansion of The Fashion Mall has attracted new retailers to the state such as West Elm and Free People. Nearby, last year’s repositioning of Rivers Edge is initiating smaller new developments with Dairy Queen, Wendy’s and Famous Dave’s among the recent openings. The 127,000-square foot project will include an Earth Fare grocery, Walgreens and Panera Bread. Large spaces are being filled across the metro area. Jo-Ann Fabrics is taking 28,000 square feet along Highway 36 and Brickhouse Fitness has penned a lease for 15,000 square feet along Lafayette Road. Although retail construction is at near historic lows, smaller buildings …
With tenant demand increasing and retailers looking to expand in Cleveland, positive net absorption and limited development have created a balanced retail market that will lead to improvement and growth in 2012, according to Marcus & Millichap. The construction levels are relatively low with only 260,000 square feet of shopping center space scheduled to be completed this year, more than doubling last year’s 121,000 square feet. By comparison, 2008 saw 1 million square feet in retail completions. “When you look at it and put it in perspective versus construction levels seen during the last 10 years, it’s significantly below the levels we saw at the height of the market,” says Scott Wiles, a director and vice president within Marcus and Millichap’s National Retail Group. “It was an expected trend that last year was the low point for construction levels in the submarket, and that stems from 2009 and 2010 being very inactive leasing markets,” Wiles says. This year’s limited construction will aid Cleveland’s retail growth, however, in light of an uptick in leasing. “The positive thing about Cleveland is that we never see the construction levels that some of the sexier markets see, so it doesn’t throw our supply and …
Retail operations have likely bottomed in Cincinnati and will show signs of modest improvement through the remainder of 2012. Encouraged by a more stable job market and restored savings accounts, consumers are beginning to spend more freely. National retailers, which stalled expansion plans during the recession, will capitalize on discounted rents to move into prime retail corridors in Hamilton County and Northern Kentucky. Anchored shopping centers will outperform due to their ability to draw steady shopper traffic, keeping vacancy at Class A properties tight. The revitalization of the CBD will attract young professionals, while the recent opening of The Banks project will boost visitor volume. Demand will pick up for inline space within the area as restaurants and boutiques look to capture the increase in foot traffic. Developers who built in outlying areas will struggle to backfill unanchored strip centers. Until single- family home sales pick up, lenders will be unwilling to provide start-up financing for local retailers, leading to a weak recovery in tertiary markets. By the Numbers Employment gains are driving modest improvement in the retail sector. Cincinnati employers created 10,400 jobs during the first quarter. On a year-over-year basis, 20,300 jobs were generated, an increase of 2.1 …
The office sector has enjoyed a renewal of leasing activity in suburban Johnson County and South Kansas City, while the remainder of the market continues to be sluggish. Large tenants — 50,000 square feet and above — have accounted for most of the activity, whereas the smaller tenants have remained stagnant. The majority of tenants continue to renew their leases unless there is a compelling reason to relocate, such as a business expansion or downsizing. The economic uncertainty continues to be the most significant factor affecting the overall office market. However, many large space users have chosen to jump across the state line to relocate to either Kansas or Missouri due to the attractive economic incentives either state is offering. That trend has helped boost the overall leasing activity. In 2011, Johnson County and South Kansas City recorded net absorption of 646,000 square feet, which is remarkable considering the average for the entire Kansas City metro area since the late 1990s has been 401,000 square feet annually. This trend has continued in the first half of 2012 as tenants absorb large blocks of contiguous space. For example, Netsmart Technologies has leased 64,000 square feet in Overland Park, Kansas. Netsmart is …
Recently employed residents are forming new rental households in metro Chicago, generating positive net absorption, a decline in vacancy and a rise in apartment rents. Additional payroll growth will stimulate new demand and reduce marketwide vacancy to its lowest annual level in 5 years by year’s end to about 4 percent in the city and suburbs. Over the longer term, the market’s stature as a primary destination for college graduates should sustain a vacancy rate of approximately 4 percent, though the delivery of new rentals may more significantly offset demand growth in the quarters ahead. The potential influx of college graduates, many of whom will occupy rentals and remain there for an extended period as they pay off student loans, has attracted developers. While the pipeline of planned projects in the suburbs is also expanding, the greatest potential effect of supply growth will register in the city, where completions will rise this year and additional projects wait to proceed. Steady hiring in the first quarter has sparked demand. Across the metro area, 8,000 jobs were added during the period, raising the number of positions created in the past 6 months to 14,400. The private sector continues to set the pace, …
Consumers are loosening their wallets in St. Louis, and the thaw in spending has given the local retail market a much-needed shot of adrenaline. The discount retailer is still king, but new concepts and developments are gaining ground. With positive absorption of space on the rise, investment sales are increasing. St. Louis is poised to see a major development in the central trade area at the former Hadley Township site. After several failed attempts at development in the past 10 years, Hadley seems destined for redevelopment at last. The 40-acre site is located on I-64 in the central suburb of Richmond Heights and will consist of an assemblage of 150-plus commercial and residential parcels. In the southern half of the development, Menards was selected by the city over Costco and will open one of its first St. Louis locations in early 2014. The site plan includes a 240,000-square-foot store with additional out parcels for retail and restaurant users. In the northern half, Pace Properties has received approval to develop a two-story, 400,000-square-foot, big-box store for an as yet unnamed retailer. This development will further enhance the desirability of the Richmond Heights/Brentwood area as a retail destination and will boost asking …
The Kansas City industrial market is healthier than most, largely because the market was not overbuilt during the last expansion phase. So, the overall vacancy never topped 10 percent. Currently, we are seeing major shortages in spaces ranging from 100,000 square feet and above, with only a 2.5 percent to 3 percent vacancy rate in that segment. That’s particularly true among buildings with 24-foot clear height ceilings. Because vacancies are on a steady decline in building sizes of about 75,000 square feet — specifically in quality, high-cube warehouse space — the need for speculative construction is overdue. Few developers have had the fortitude or the financing to undertake speculative development in recent years. A Sun Life Financial-owned facility, which spans 600,000 square feet in Olathe, Kansas, is now fully leased to Bushnell and FedEx. The facility was built in 2008. Kessinger/Hunter & Co. is developing a second building for Sun Life at I-35 Logistics Park. The state-of-the-art, 800,000-square-foot facility will be the largest building ever built on a speculative basis in the Kansas City area. On the northern side of the market, Horizons Business Park in Riverside, Missouri, has broken ground on a 155,000-square-foot distribution center and is contemplating additional …
There is almost a perfect storm gathering in the multifamily markets in Kansas City. Rents are rising, vacancy is decreasing, cap rates have compressed and valuations are up for sellers. Debt capital is cheap for buyers, and there’s plenty of pent-up demand for multifamily investment. Meanwhile, developers are coming out of hiding, and some great new projects are either under construction or on the drawing board. The fundamentals of the Kansas City multifamily market continued to show strength through the first quarter of 2012. At the end of 2011, the average rent was $727 and is forecast by credible sources to grow in excess of 4 percent in 2012. Kansas City’s vacancy has decreased by 50 basis points. Overall vacancy in the marketplace stood at 5.6 percent at the end of the first quarter, according to New York-based real estate research firm Reis. Net absorption totaled about 2,800 units in 2011, the highest annual absorption since 2000, according to Reis. Net absorption in the Kansas City apartment market was 592 units in the first quarter of 2012. At the end of the 2011, Class A apartments were selling at or above $100,000 per unit at cap rates consistently below 6 …
With the local economy recovering from the Great Recession, the commercial real estate industry in Cincinnati is heating up. Strong office leasing activity in recent quarters has driven down the vacancy rate. From a high of 21 percent in the first quarter of 2011, total vacancy has steadily dropped to its current rate of 19 percent, the result of approximately 700,000 square feet of positive absorption, according to Jones Lang LaSalle. The real estate services firm tracks Class A and B office properties greater than 20,000 square feet, excluding owner-occupied medical and government buildings. The growth of Cincinnati businesses has sparked increased demand for office space, leading to approximately 1 million square feet of product currently under construction or planned for the next year. Meanwhile, the lending climate has improved greatly since the depths of the recession. Cincinnati has welcomed corporate relocations and expansions during the past year. Following several years of short-term lease renewals and tenants giving space back, this is welcome news that is already improving market fundamentals. Driving the increase in office demand is job growth in the healthcare industry as well as the professional and business services sector. The three largest leases within the last year …