“Ride out the storm,” may be the refrain of industrial developers, landlords and tenants, as the recession and the resulting uncertainties have all players in the Twin Cities commercial real estate industry watching carefully and exploring their options. For starters, development has ground to a halt. This may be the silver lining, however, since it will enable the market to more easily absorb existing product and sublease space, thus allowing the market to recover more quickly when the economy begins to turn the corner. There is a small amount of spec product on the market, but this represents such a small amount that it has little to no impact. Fortunately, the restrained development has allowed the industrial market to catch its breath. During the first quarter, absorption fell in positive territory, with nearly 197,000 square feet absorbed, leading to a slight decline in vacancy from 10.1 percent to start the year to 9.9 percent by the first quarter’s end. The modest absorption has largely been driven by smaller deals. Another side effect has been the collapse of the land market. Land prices have come down as much as 50 percent from their highs during a flurry of activity some 12 …
Midwest Market Reports
For Doug Malone, a retail brokerage and leasing associate with Wichita, Kansas-based J.P. Wiegand & Sons, “The good news about Wichita is that we have been a little pocket of prosperity for a number of years, and we didn’t get hit until just recently with the economic problems that the rest of the country had.” While retail in larger markets struggles, the smaller Wichita market has remained steady. This is due partly to the conservative nature of real estate professionals in the market and partly due to the fact that overbuilding tends to happen less in secondary markets. But the recession is starting to be seen here. “Wichita has a tendency to feel those impacts last and to come out them last as well, but we don’t have the real ups and downs of a lot of other markets” Malone says. “Although, what we’re seeing now, in terms of a slowdown in retail activity, we probably haven’t seen this kind of slowdown since post-9/11.” This slowdown has many retailers taking a wait-and-see approach when it comes to doing deals. Since most major new projects in the market are done by local developers — who know the market and can withstand …
At close of the first quarter of the year, the Southeastern Wisconsin retail vacancy rate totaled 10.4 percent, up 1.4 percent from a year ago. The growth in the greater Milwaukee retail vacancy rate was primarily driven by the closings of several large-format retailers over the last 6 months. Changes in the retail environment have caused a shift in the Southeastern Wisconsin retail real estate market. More retailers are looking to existing developments or vacant boxes to expand as the tide of new development wanes. There are several major retailers looking to retrofit existing stores rather than build new boxes. Despite the negative news and stores closures, the Southeastern Wisconsin market is still experiencing some significant retail activity: • Wal-Mart is expanding and/or remodeling several area stores to include more grocery items. These stores include Southgate, East Capitol Drive, Midtown, Brown Deer Road, Franklin and Delafield. The retail giant is also moving forward with plans for new stores in Muskego and Waukesha. A new Wal-Mart Supercenter and a Sam’s Club will open at Somers Market Center this summer in Somers, which is located in Kenosha County along Highway 31. • Target has opened two new stores at Prairie Ridge in …
In the wake of rising office vacancies and sublease space, tenant opportunities are at their most pronounced for companies seeking office space throughout the Chicago Metro market, which includes both the CBD and the suburbs, in 2009. In Chicago and across the U.S., credit-worthy tenants continue to be in a position to strike deals at a fraction of previous rents. Landlords are beginning to offer increased concessions such as tenant improvement funds, rent abatement, and greater lease flexibility. Nationally, such offerings have escalated nearly 20 percent over the last 24 months, while rents have been driven down some 10 percent in the last 3 months alone. Chicago’s sublease space climbed to 7 million square feet, including 2.67 million square feet in the CBD plus the suburbs in the first quarter of 2009, according to Jones Lang LaSalle research. Sublease space will jump further in the coming months as corporate America's more recent job cuts trickle down to commercial real estate. The overall vacancy rate, including subleases, in Chicago’s CBD is 18,140,000 square feet, or 13.6 percent, and is 22,900,000 square feet or 23.9 percent for suburban Chicago in the first quarter of 2009. The absorption rate is at -0.8 percent …
While national multi-housing trends have begun to show recessionary weakness, Indianapolis area market fundamentals have held up well over the past 12 months. Indianapolis has long been one of the more affordable single-family markets in the country and until recently had been well-supplied with several very efficient large single-family developers. The deterioration of this industry is the single largest factor responsible for the city’s stable and improving multi-housing performance. The Indianapolis multi-housing market consists of 130,000 units in 683 communities (larger than 20 units). The average community size is 191 units. Market wide occupancies in Indianapolis bottomed out in 2003 at 87.1 percent and have been steadily climbing since to 90.9 percent in 2008. During this same period concessions have declined and 2008 rent growth was 2.2 percent, placing rents at $659 ($.75 per square foot). The city’s top 50 communities, once threatened to a greater degree by single-family housing, have faired well over the past several quarters. As with most seasonal markets, the Indianapolis market shows a very predictable bell shaped occupancy curve with fourth and first quarter occupancy lows and peaks in the second and third quarters. Until first quarter 2009, the impact of the current recessionary environment …
While St. Louis has a diversified economy, it has not been immune from the forces reshaping the retail landscape. As the economy contracts and consumer confidence continues to dip, retailers are reeling from the impact. Circuit City was the latest fatality when its 567 stores went dark in early March, including seven sites in the St. Louis area. Colliers Turley Martin Tucker expects that 2009 will best be remembered as a year of significant closures and consolidations among retailers. Despite the current uncertainty in the marketplace, there were several retail developments completed last year, all of which were primarily committed to well before the economy began taking its toll. St. Louis ended 2008 with more than 1.5 million square feet of new retail space. The majority of these new developments are anchored by retailers selling necessity or discount items such as Costco, Wal-Mart, grocery stores and drug stores. Such a tenant base, combined with consumers now taking a more cost-conscious approach to spending, should allow these developments to do well despite the current economic turmoil. Among these new developments is the new 260,000-square-foot Meadows at Lake Saint Louis in Lake St. Louis, Missouri. Billed as the first lifestyle center in …
The Indianapolis industrial market posted a strong showing last year despite the economic challenges impacting the nation. More than 4.3 million square feet of space was absorbed in 2008, and the region’s industrial vacancy rate closed at 7.4 percent, a decrease of 1.1 percent from the start of the year. Several factors contributed to the area’s ability to move forward, not the least of which is the area’s long-standing stature as the Midwest’s crossroads for distribution. Construction continued, but on a more restrained level. Approximately 1.9 million square feet of new industrial space was completed last year, which is only a quarter of the volume — 8.8 million square feet — of new space added in 2007. A significant component of this new inventory was build-to-suit or expansions by existing owners or users. Additionally, rental rates for industrial space remained level; rents have not moved in either direction since 2007. The rates have remained low compared to other Midwest cities, which has attracted new regional and national players while encouraging local businesses to maintain and renew their existing leases. As in past years, modern bulk distribution space has led the charge of new activity. Approximately 4.3 million square feet of …
Apartment conditions in St. Louis will soften this year due to job losses and localized oversupply; however, some submarkets in the metro area will record a relatively strong performance. The local labor market is projected to be weighed down by the manufacturing sector and the trade, transportation and utilities segment, resulting in approximately 12,000 job cuts in 2009, which will ease apartment demand. Vacancy is projected to climb 100 basis points this year to 8.6 percent, the highest rate since early 2006. As a result, owners will reduce rents in an effort to maintain occupancy levels. The average asking rent is forecast to end the year at $722 per month, a contraction of 1 percent, following a 1.7 percent advance in 2008. In the near term, fundamentals will firm in the Airport/Interstate 70 and Clayton/Mid-County submarkets, as their proximity to arterial routes will continue to generate healthy tenant demand. As such, vacancy is forecast to retreat approximately 60 basis points to 9.5 percent this year in the Airport/I-70 submarket, while vacancy in the Clayton/Mid-County area is expected to fall roughly 30 basis points to 7 percent. Class A properties near interstates 270 and 170 are projected to outperform as a …
The struggles in the capital markets that began to take hold during the second half of 2008 have put the brakes on much of the investment sales activity across all asset classes, but multifamily sales in Indianapolis have weathered the financial storm better than any other sector. Investment sales of multifamily housing in Indianapolis fared reasonably well when compared to other major Midwest cities. Last year, 19 major properties were sold in the Indianapolis area for just less than $200 million and at an average cap rate of 7.98 percent, according to Real Capital Analytics and Colliers Turley Martin Tucker. While the average U.S. cap rate for multifamily sales stood at 6.2 percent during the first three quarters of 2008, Indianapolis posted an average cap rate of 7.4 percent. The 12-month average price per unit for higher quality assets in Indianapolis is $61,022, compared to $100,792 for similar sales throughout the United States. Sales of properties categorized as Class B to non-performing assets have pushed the average unit price down and cap rates up into the 8.5-to-10 percent range. Multifamily properties that needed a total repositioning were trading in the 10-to-12 percent range based on pro-forma. In 2007, two major …
What area is your expertise? West Michigan — Traverse City to Benton Harbor. What type of retail product is doing well in your area? Grocery and gas. What retailers are new to your area? Sonic and Johnny’s Lunch. Who are the active retail developers in your area? Several wish they were active, however, the lack of retailers coupled with the lack of financing has prevented several deals from moving forward. Please name one or two significant retail developments in your area. What impact will these projects have on the market? The Corner Shops, southeast corner of East Beltline and 28th Street SE, Jared’s and other inline retailers. Minimal impact on the market in general. Evergreen Properties proposed Lifestyle Center at the NE corner of Knapp and East Beltline avenues. They’ve secured D&W Grocery Store and have tentative agreements with several other retailers. It will be interesting to see what happens with the Aikens proposed development, which is less than one mile north of this site. Acquisition of the former Rogers Department store by Israel’s fine furniture on 28th Street SE will clearly have a dramatic impact on the southwest section of 28th Street. Where is the majority of development taking …