The Omaha apartment market remains a strong performer. According to MPF Research, Omaha’s apartment occupancy stood at 95.5 percent at the end of 2012, up a modest 80 basis points from the end of 2011 and in line with Omaha’s average occupancy rate of 95.9 percent since 2000. Coupling the strong occupancy rate with a continued favorable financing environment, it is no surprise that developers are eager to bring new units on line and move quickly to lock in permanent financing. As a result, 2012 saw 1,225 multifamily housing building permits issued, which was very much in line with my predicted total of 1,300 permits for the year, and up 25 percent when compared to 2011. The addition of 1,225 units will increase the apartment housing stock in Omaha by 1.4 percent on an overall inventory of approximately 88,000 units. My expectation is that permit activity will again be around 1,200 units for all of 2013, with a small chance that it could possibly increase to as many as 1,400 units. There are a number of local and regional developers who are actively seeking multifamily land, and the lack of top sites is likely to be the biggest development constraint …
Midwest Market Reports
The Omaha industrial market, which contains a total inventory of roughly 67.5 million square feet, posted a tight vacancy rate of 5.1 percent at the end of 2012, according to commercial real estate research firm Xceligent Inc. For the year, about 652,000 square feet of space was absorbed, or about 1 percent of the market. Overall, 2012 was a strong year with an estimated 142 new leasing transactions completed. Unlike 2011, however, in which eight major deals in excess of 100,000 square feet dominated the industrial market reports, none of the deals in 2012 were blockbuster. In fact, only three transactions were in excess of 50,000 square feet. What does this mean? A lot of mid-sized deals occurred. For the first time in a while, those vacant spaces ranging from 2,000 to 10,000 square feet have accounted for a glut of excess space in recent years are getting leased. More significantly, the mid-sized deals indicate growth of both new and local businesses expanding their presence in the Omaha industrial market. Meanwhile, speculative or new construction is at a standstill. Almost all of the new construction in the market has either taken the form of build-to-suit or owner-occupied space, or is …
The big story in the Indianapolis office market is not the latest change in the occupancy rate or rents, but rather the desire by landlords and tenants to create a sense of place. Connectivity and collaboration, amenities and perks, as well as talent recruitment and retention have taken on a heightened importance. Interestingly, these buzzwords are used just as frequently when assessing corporate real estate as they are in the human resources department. Employees today look for their work experience to offer something more than a desktop. They look for connectivity to diverse and conveniently located amenities within walking distance. They want easy access to biking and walking trails and fitness facilities. They seek open collaborative workstations, game rooms, huddle rooms, bike storage, as well as showers and lockers. Their desires are influencing real estate development and the locations employers ultimately select. There is ample evidence of these trends in Indianapolis. Thanks to the wisdom of the city’s early founders and more recently key city officials, Indianapolis enjoys a condensed city core. Its downtown already has the framework to offer up an easy-to-connect experience, recently enhanced with a world-class urban bike and pedestrian path connecting neighborhoods, cultural districts and other …
A relatively strong 2012 Columbus office market left us with a few questions that will be answered as we move through 2013 and into 2014. Will rental rates continue to increase incrementally while vacancy and tenant improvement allowances continue to fall? Will we see speculative office development for the first time in five years? There are other compelling questions, which should keep things interesting for the next 12 to 18 months. Will the handful of prospects for large blocks of office space opt for longer lease terms versus recent trends favoring short-term deals? Will Canadian investors continue to perceive Central Ohio as a great place to shop for bargains as the Canadian dollar maintains its strength against the U.S. dollar? Development Picks Up Of course, new construction is currently the big story. Last year, the development community broke ground on more than 1 million square feet of new office space, including two downtown projects near Nationwide Arena. The projects include a 286,000-square-foot building, of which Columbia Gas has pre-leased 208,000 square feet, and a 214,000-square-foot Nationwide Insurance build-to-suit. In the Northeast office submarket, nearly 200,000 square feet of new development is under construction, including a headquarters facility for Bob Evans …
The Indianapolis industrial market has experienced a significant amount of absorption during the past several quarters, driving down the multi-tenant vacancy rate to 3.3 percent and leading to a new round of speculative development, according to brokerage firm Cassidy Turley. The key engines driving growth are technology, housing, auto suppliers, and distribution centers related to Internet sales. Some 3.2 million square feet of speculative industrial space is under construction in the Indianapolis area. The city currently has 240.5 million square feet of inventory. When completed, the speculative product in the development pipeline is expected to result in the multi-tenant vacancy rate rising closer to the historical norm of approximately 4 percent. Michael Weishaar, senior vice president and principal at Cassidy Turley’s Indianapolis office, says the low industrial vacancy rate is partly the result of proper planning. “Our developers are intelligent about oversupply,” says Weishaar. “They saw a rough economy and thought we needed to re-look at our supply chain.” With so much speculative development under way, is there enough demand to absorb it all? Although vacancy rates will rise closer to their historical average in the short term when space comes available, in the long run this amount of space …
In the Detroit area and across Southeast Michigan, medical office continues to be a strong performer. With healthcare being one of the state’s largest and fastest-growing economic drivers, an aging population and a robust system of public, private and university hospitals across the region, a generally positive growth trend seems unlikely to change anytime soon. Farbman Group’s own portfolio of 4 million square feet is currently more than 95 percent occupied, and quality medical office space remains in high demand. There are, however, some noteworthy developments taking place both inside and outside the healthcare industry that are shaping its future. Medical office real estate trends locally and regionally are beginning to reflect those changes. Consolidation Wave Perhaps the healthcare trend with the most significant potential to alter the medical office and medical real estate marketplace in Southeast Michigan is that of consolidation — healthcare systems coming together via mergers, acquisitions and strategic partnerships. This trend is, in some respects, similar to what has occurred in the banking industry during the last decade. We are likely to see the same kind of phenomenon continue to pick up momentum in healthcare during the next five years or so. There are three primary …
Building on the trends that began to emerge in the second half of 2010, the Toledo region’s industrial real estate market continues to improve. Demand for space in northwest Ohio and southeast Michigan is occurring at its typical slow, steady pace. The result has been positive net absorption of more than 400,000 square feet during the past year. The vacancy rate fell from 8.65 percent at the end of 2011 to 8.52 percent at the close of 2012. If the improvement in the vacancy rate slows during the next 12 months, it will more likely be due to the poorer quality and functionality of much of the residual stock of empty buildings than weakening demand. One can see this evidence with the spike in new construction driven by build-to-suit projects for several noteworthy users who could not find suitable space within the existing supply. Auto sector is big driver It would come as no surprise to anyone remotely familiar with Toledo’s history and economy that a considerable portion of the user activity has come from the automotive sector. Suppliers to primarily Chrysler Group and General Motors (GM) have been quite active and have accounted for several of the larger lease …
After a seemingly relentless economic recession, the retail atmosphere is changing in southeastern Michigan as more local and national tenants look to grow here. The positive momentum that began in 2011 in the retail industry has continued. Retail sales rose modestly in 2012, and retailers expect sales to continue to rise in 2013. The source of the optimism stems from the resurgent auto industry, which drives metro Detroit’s economy. Job growth is accelerating, leading to a drop in the unemployment rate. Absorption is positive in the Class A industrial and office markets. All of these factors are having a positive effect on Detroit’s retail market. Retailers eye downtown Downtown Detroit is bursting with an energy not seen since the 1950s. Dan Gilbert, owner of Quicken Loans, is responsible for much of the change. His recent real estate acquisitions, 15 buildings to be exact, and relocation of 7,000 employees to the central business district, have created a buzz that retailers are noticing. Olga’s, Bagger Dave’s, Buffalo Wild Wings and Moosejaw have all planted roots downtown. Whole Foods Market is scheduled to open this year in midtown near the Detroit Medical Center and Wayne State University. National retailers are lining up to …
Downtown Cleveland is in the midst of a redevelopment boom. During the last 12 months, the city has seen a new $350 million casino and a new $33 million aquarium open. And over the next 24 months, it will see a new $465 million convention center complex, a new $275 million multi-tenant office building and hotel and a $180 million redevelopment that will include a new 220,000-square-foot office tower as a part of consolidation efforts for the Cuyahoga County government. However, one of the most impactful and long-lasting components is the development of more than 1,100 new residential housing units that have either been announced or are under construction. If all come to fruition, it will increase downtown’s residential inventory by over 20 percent. Market Drivers Although there are numerous factors contributing to this residential building boom, the following stand out as key components. • Build it and they will come? They are already here. As of January 2012, the downtown area had just under 4,200 residential units. Of this, approximately 25 percent were developed in the past five years. However, this delivery schedule was much lower as compared to the blossoming demand. The source of this demand has come …
Although apartment construction has heated up in Minneapolis, renter demand remains healthy as many renters are wary of homeownership. As a result, vacancy is still below market equilibrium. Many renters in the market are young professionals who, before the housing market collapse, would have been looking to purchase a condominium. To appeal to renters, new apartment developments are adding higher-end finishes and features such as a concierge service, pub or cafe, outdoor gathering space, rooftop decks, dog runs and pet-care areas. In the process, builders have established a new rent ceiling and redefined the Class A segment. Supply-Demand Balance As a wave of new high-end projects are injected into the market, owners with existing top-tier properties could be at a disadvantage and will need to increase concessions to maintain occupancy levels. Approximately 131 apartment units came on line in the second quarter, for a total of 405 units finalized in the first half of 2012, expanding overall inventory by 0.3 percent. In the first six months of last year, 175 units were added. Development activity is expected to continue at a heightened pace. Some 2,450 units are under construction with completions scheduled through 2013. Also, there are more than 9,300 …