For those who were expecting some market relief by now, there is not a great deal of positive prognosis to provide. Despite the slow rise in the stock market since its fall, the market continues to suffer from mediocre progress with its continuous ups and downs. There is still much change needed in the global economy to sustain the stock market growth we need to realize a full and effective recovery of other markets, including commercial real estate. But I would like to say that we are now bouncing off the bottom with an ability to understand where market corrections have settled in terms of value, cap rates, absorption and development, which is all but non-existent. With historic high unemployment and the uncertainty of what new pothole we might hit while we are finding our way out, it may still be a rough year or more ahead of us. Much depends on how the commercial lending industry plays out the myriad transactions that still linger in their portfolios. The penalties for a defer-and-deny or an extend-and-pretend philosophy may not yet to been fully realized. On a positive note, if consumer confidence continues to eek up, while other economic indicators remain …
Midwest Market Reports
It’s no secret that the greater Detroit area suffered a double hit in the last 4 years, first from the well-publicized decline in auto sales and then from the 2008 crash and lengthy downturn.Despite the economic gyrations, however, there is a considerable upside and leasing momentum to talk about. Several new-to-the-market retailers, restaurants and fitness chains are landing in the region, including ULTA, which has done 10 deals in the last 7 months in mostly high-income areas. Discount grocer ALDI has opened 20 stores in the past 18 months, most often purchasing land to build 12,000-square-foot stores in high-density, middle-income areas. Other new retailers to the market are Five Below, Christmas Three Shops, buybuyBABY, Yankee Candle, clothier Citi Trends and a new concept by local furniture giant Art Van called Pure Sleep. Five Guys Burgers and Fries, Fat Burger and Chipotle have also moved into the market, as have Fitness 19, Planet Fitness and their much larger competitor LA Fitness. LA Fitness is opting for 50,000-square-foot locations, both stand-alone and retrofit, primarily in professionally oriented, mid-to-upper income areas. The chain has opened eight locations in the market, and in the past 2 years, it has built clubs in such high-traffic …
Greater Cleveland’s office market is showing some signs of recovery, and this is being fueled by the many development projects in the works. Planned developments include a casino to be located in the Tower City area opening sometime in 2013 and a proposed Medical Mart facility, which will be located next to Cleveland’s convention center in the heart of downtown. Another projected office development is the East Bank project by Scott Wolstein, which will house the national headquarters for Ernst & Young and law firm Tucker-Ellis. The project will be the first phase of a planned office, retail and residential development at the edge of Cleveland’s historic warehouse district. Eaton Corporation also is planning a new 400,000-square-foot campus in the Chagrin Highland’s 630-acre corporate community on Cleveland’s east side, which will leave Eaton’s current building at 12th Street and Superior, in the central business district, with more than 300,000 square feet available. Other major deals in the works are the relocation of Huntington Bank (approximately 100,000 square feet) from its namesake historic property at East 9th Street and Euclid to the former BP building, which is now 200 Public Square. The iconic bank building is home to several large firms …
Office development in the Minneapolis market is virtually at a standstill. Since the economy’s downturn, many projects have been shelved, and developers today are striving to locate aggressively priced, dispossessed buildings that can be repositioned and brought back to life for the next real estate cycle. The exceptions are highly visible build-to-suit projects. In September, Acosta, a sales and marketing company, plans to move into a new 65,000-square-foot building in the southwest suburb of Eden Prairie. Additionally, the law firm Hellmuth & Johnson is building 44,000 square feet of office space, topping three levels of covered parking at the intersection of Interstate 494 and Highway 169, also in Eden Prairie. Shadow space is an underlying issue affecting development in the Twin Cities. Until companies can absorb space they already lease but currently maintain as vacant, the development cycle will remain flat. Leasing activity is also quiet. Those businesses that are relocating are typically consolidating or otherwise downsizing. However, the U.S. General Services Administration is in the market for nearly 500,000 square feet of office space. Half of that is being spurred by a short-term need to relocate workers displaced by a $115 million federal stimulus funded renovation of the Bishop …
What a difference a year can make. At this time last year, the Detroit and Southeastern Michigan multifamily housing markets were experiencing some of their worst economic times since the early 1970s. But with recent announcements from Ford and General Motors concerning first quarter profits, there appears to be hope for the troubled region. Because the region has been so challenged during the past 18 months, there has been very little new development planned for 2010. But in 2011, nearly 2,800 apartment units are planned in the metro region, representing a potential 1.3 percent increase in the current inventory. One recent success story within the city is Garden View Estates, a mixed-use development with affordable housing, including rental units, senior co-ops and single-family homes. Bloomfield Hills, Michigan-based Windham Development is the principal in the residential portion of the project, which celebrated its grand opening in September 2009. These types of developments are going to play a key role in re-growth within the city because of joint efforts between private developers, the U.S. Department of Housing and Urban Development, the Detroit Housing Commission and the City of Detroit. We can anticipate new development in Ann Arbor and downtown Detroit. Ann Arbor …
The conservative nature of the Des Moines marketplace has been tested in the past 24 months yet cautious optimism prevails. Historically the high concentration of financial service and insurance companies translated into quick absorption of large blocks of space. However, the downturn in the economy and the move of companies such as Allied-Nationwide, Wellmark Blue Cross/Blue Shield and Aviva to new, owner-occupied buildings left behind significant blocks of space that have increased the office vacancy rate to almost 19 percent and will send it even higher. New construction and development has been divided between the central business district (CBD) and the west suburban markets. The 152,000-square-foot Davis-Brown Tower and the Wellmark’s 550,000-square-foot headquarters are significant additions to the CBD Gateway West corridor, while Aviva’s 360,000-square-foot, United States headquarters is situated in the ever-emerging Jordan Creek corridor. Although development of smaller office buildings has been slowed, there are some signs of positive growth. Delta Dental Iowa is nearing completion of its new 25,000-square-foot headquarters at Northpark Office Park in Urbandale. In addition, two significant lease transactions were signed in the west suburban market, including 25,000 square feet for Strategic America at 6600 Westown Parkway and 93,000 square feet for Sammons Financial …
At the end of 2009, the Southeastern Wisconsin retail market showed a vacancy rate of 11.6 percent, according to the CB Richard Ellis Fourth Quarter MarketView. In 2009, the market witnessed a dramatic increase in vacancy rates, compared with a 9.3 percent rate in the fourth quarter of 2008. Most of this change occurred in the first and second quarters, and we are now seeing the market bottom out, as the vacancy rate continues to climb at a much less dramatic pace. Average asking rents fell from approximately $19.50 per square foot triple net at the end of 2008 to approximately $16.50 per square foot triple net at the end of 2009. Several mid-box retailer bankruptcies led to this rapid increase in the vacancy rate. Other store closures also played a significant role in rising vacancy rates. One bright spot in 2009 was the activity that occurred in the grocery category. Active retailers in this category include Aldi, Piggly Wiggly, Woodman's and Roundy's dba Pick ‘n Save. Aldi opened stores in Brookfield, Grafton and Wauwatosa, Wisconsin. Piggly Wiggly announced plans to open additional locations by taking over three former grocery store boxes. These sites include a former Supersaver in Kenosha …
The retail market in Chicago, mirroring that of the nation, has been plagued with vacancies as a result of retailers suffering from lack of consumer demand. From 2003 to 2008, roughly 80 percent of the American GDP was comprised of spending. This means that the country’s output, or contribution to the world, has been focused on consumption. By contrast, from 1990 to 2006, the earnings of individual workers in the United States increased by less than 0.5 percent per year, while the GDP increased about 3.6 percent per year. This consumer psychology led to increased debt and home equity lines of credit given to many unqualified borrowers. The additional debt introduced to the American economy enabled people to spend money on items they were not, in reality, able to afford. How does this shift in consumption impact retail real estate in the third largest metropolitan statistical area in America? It moves the consumer to buy goods based on need and reduces the retail therapy or impulse buy. In the same way, business owners also make cuts in acquiring goods for luxury and begin focusing on the items needed for basic survival. Add to that a staggering 11 percent unemployment rate …
Lately, it has been quite challenging to pick up a newspaper, watch television or even view an online news source and not be inundated by sour economic events occurring throughout the world, as well as in the Greater Cleveland area. As we navigate our way through these uncertain times in the economy, and more specifically in the commercial real estate industry, owners and users of real estate will be faced with challenges as well as opportunities. The Cleveland industrial real estate market, which ranks as the ninth largest industrial market in the United States, remains healthy largely due to its conservative growth during the last decade. The Cleveland economy is comprised of a diverse range of businesses from many different sectors, making it less prone to volatile cycles common in other industrial-based regions. Our local industrial market, which consists of numerous submarkets, had a vacancy rate ranging from 8 to 10 percent throughout 2009. The average lease rate for industrial space was approximately $3.90 per square foot. Both of these indicators compare favorably to the U.S. average, which has slightly higher vacancy and lease rates. A major obstacle weighing on today’s real estate consumer in the Cleveland area is the …
Although retail developments and construction cooled during 2009, the Omaha retail sector is now experiencing an influx of completed projects, with most planned projects being set on the back burner. Retail projects in the final phases of construction include the 600,000-square-foot L Street Marketplace, located at the corner of 120th and L streets in Omaha; Midtown Crossing, a mixed-use project offering 200,000 square feet of retail space at 33rd and Dodge streets; and the forthcoming retail and entertainment component of Aksarben Village, which is located at 72nd and Center streets. The new projects are bringing Target, Best Buy, Sports Authority, Prairie Life Fitness Center, Marcus Theaters and Wohlner’s Grocery to the market. Neighboring retail developments in Council Bluffs, Iowa, include the JC Penney- and Shopko-anchored 24th Street Marketplace and Target-, Hobby Lobby- and Kohl’s-anchored Metro Crossing. A handful of new retailers and restaurants have entered the Omaha market, including Garden Ridge, Books A Million, Jump & Shout Play Center, Brix, Five Guys and Smashburger. Active developers include Cormac Company, Seldin Company, Noddle Company, Lerner Company and Magnum. Many developers are looking to infill sites for untapped development opportunities. Both the Midtown Crossing and Aksarben Village projects are helping to revitalize …