By Jennifer Hopkins, MBA and Olivia Czyzynski, SVN Chicago Commercial The commercial real estate (CRE) industry has traditionally been relatively stable but can be impacted by the economy with normal ups and downs based on economic fluctuations. However, when COVID-19 hit, it was unprecedented and something the world had not seen in many years. The CRE industry started preparing for the changes that came along, including business shutdowns and many employees working from home. Although it was expected that the retail market would be the hardest hit sector, it turned out that the office market ended up being significantly impacted. The overall issues and pending work-from-home approach have had a major ripple effect on office markets across the nation. The Chicagoland market was impacted particularly hard, and this included the suburban Chicago markets. Chicagoland is broken out into several main commercial hubs: the city of Chicago, the East-West Corridor, the O’Hare market, the Northwest suburbs and the North suburbs. According to CoStar, office vacancy rates increased in all these markets. In 2020, the vacancy rates ranged from 7 to 20 percent, but currently stand at 18.8 percent, 17.3 percent, 16.9 percent, 23.2 percent and 11 percent, respectively. While no market …
By Ken Martin, JLL The Indianapolis industrial real estate market ended 2022 nearing a record high for a single year with more than 19.6 million square feet of absorption. Much of this was recorded in Hendricks, Johnson and Hancock counties with total year-end net absorption of 7.3, 6.4 and 3.2 million square feet, respectively. These submarkets continue to offer tenants excellent access to both interstate highways to transport goods across the country, as well as strong employment bases. Developers and tenants often cite employment bases as their No. 1 criteria in selecting an optimum site. With vacancy at an all-time low of sub 5 percent for the majority of 2022, developers and owners were able to push rents as demand outstripped supply. As recently as two to three years ago, rents were consistently in the high $3’s per square foot range and now we consistently see rents in the $5 per square foot range or higher. Year-end asking rents averaged $5.54 per square foot overall and $6.48 per square foot for mid-sized warehouse space. In some markets, however, rents for warehouse space were well above the average. In the central business district, for example, asking rates for warehouse …
By Steve LaMotte Jr., CBRE With 2021, a record year for asset appreciation and fundamentals, 2022 marked a turning point in the apartment space across the nation. Multifamily leasing velocity, rent growth and occupancy levels have seemingly reached their current peak levels and begun to cool. Instability in the capital markets throughout much of 2022 encouraged many on both the buy and sell sides to wait it out, looking for signs of stability. However, despite the turbulence and the pause, the multifamily sector has remained resilient and is expected to maintain its claim as the preferred asset classification in 2023. Further, metro Indianapolis has been a standout performer in every meaningful measurement. Now widely regarded as an emerging star of the Midwest, metro Indianapolis has earned its place as the nation’s rent growth leader in the back-to-back months of October and November of 2022, according to Yardi Matrix. The metro has outperformed many major markets while maintaining its characteristic affordability. According to research from CBRE Econometric Advisors, the average metro rent of $1,200 per unit ($1.30 per square foot) shows that metro Indianapolis will deliver outsized rent growth in times of distress while remaining one of the most affordable metro’s …
By Andy Gutman, Farbman Group It’s no secret that the last few years have been a turbulent time for the office market nationally. While Detroit has fared somewhat better than some other cities across the Midwest, the same pandemic (and now post-pandemic) pressures have led to a higher-than-usual degree of uncertainty and volatility. Here in the early part of 2023, it’s a good time to take a step back and look at how the Detroit office landscape is changing, how it’s not changing and what might be in store throughout the rest of the year — and beyond. This is a unique time because there’s still a tremendous amount of uncertainty to factor into the commercial real estate market in general, and into office specifically. There are a lot of brands and businesses who either have not made up their mind about their office structure and needs going forward, or are still in an experimental post-pandemic period where they are trying to figure out the balance that works for them in terms of remote or hybrid work options and brick-and-mortar configurations. Until more of that uncertainty is resolved, a clear picture of the medium- and long-term prospects for the office …
By Evan Lyons, Encore Real Estate Investment Services Looking back on 2022, it could be said that Detroit’s economic performance last year mirrored that of the city’s tenacious Detroit Lions’ football season. Both were mired in doubt, plagued by volatility and sustained by grit, yet beyond all expectation, when the clock ran down, both proved the naysayers wrong. Just as the Lions surprised doubters by finishing their season at 9-8 and beating their divisional rivals, the Green Bay Packers, Detroit surpassed expectations by outpacing the national jobs growth rate of 5.8 percent at mid-year 2022 with a rate of 8.6 percent year-over-year. Gains in employment and wages are expected to continue over the next few years, according to a University of Michigan study. The city bolstered its “offensive line” with new store openings and new construction throughout the urban core. Stadiums and parks were filled again, fueled by crowd-pleasing events and programing, including Belle Isle parks’ notorious, over-waxed giant slide, which went viral and gained infamy last year for catapulting riders who dared venture a ride. Detroit also scored points in visits to leisure and hospitality establishments during the past 12 months. Visits increased by 50 percent from June …
By Scott Dunwoody, Cushman & Wakefield It’s not too much of a stretch to say that St. Louis’ life sciences sector dates back to Lewis & Clark’s Corps of Discovery and all the scientific findings revealed upon their return to the city in 1806. More than two centuries later, St. Louis remains at the forefront of life sciences. The region is a center of plant science research and a cornerstone of global agriculture technology, with institutions such as Washington University in St. Louis (WashU) and St. Louis University playing critical roles in the biotech and medical fields. These factors translate into significant economic development benefits for the region and a positive impact on the area’s commercial real estate market. St. Louis is home to the largest concentration of plant scientist PhDs in the world. All that talent supports and drives more than 750 plant and medical science organizations across the region, including large employers such as Bayer (formerly Monsanto), Bunge, Benson Hill, IFF, Novus and Pfizer, and has led to significant investments throughout the region. What’s more, St. Louis ranks No. 14 nationally in National Institutes of Health funding, having secured more than $3.3 billion in the past five years. …
By Artie Kerckhoff and Joshua Allen, CBRE For businesses, the conversation around the return to office has shifted. Most companies find themselves considering how to entice workers back instead of when to call them back. It’s an interesting dynamic, born out of stopgap remote-working policies and catalyzed by an employee’s market. Where does this leave the St. Louis office market? The metro’s overall office vacancy rate remained steady at 12.9 percent at the end of the third quarter. Yet, leasing velocity has shown significant improvement with leases signed at newly constructed buildings like Forsyth Pointe & Commerce Tower in Clayton and Edge@West in Creve Coeur. In addition, a handful of tenants have signed new leases at existing prime Class A, amenity-rich buildings such as Centene Plaza C Building, The Plaza in Clayton and Shaw Park Plaza. The reason for this uptick is a trend that’s playing out in St. Louis and across the country: an overall flight to quality. Prime at a premium At the onset of the pandemic, office users signed short-term extensions and took a wait-and-see approach to get through the immediate crisis. Now, as those extensions expire, they’re migrating to prime Class A office space with collaborative, …
By John Hassler, Newmark Zimmer At the close of 2022, Kansas City’s industrial property market hit heights that would have been unimaginable only a decade prior. While Kansas City ranks as the 31st-largest MSA in the United States by population, it is the 16th-largest market nationally based on industrial square footage with nearly 315 million square feet of total inventory. Further, Kansas City ranks 10th nationally in the percentage of annual net absorption as compared with its market size and has added an impressive 62.5 million square feet of newly developed square footage over the last 10 years. Many factors have contributed to the market’s growth trajectory including the nation’s most geo-central location (a two-day truck drive to 85 percent of the continental U.S. population), the confluence of five Class-1 railroads (with four area intermodal centers), the intersection of four of the nation’s busiest interstates (including I-35 and I-70), an available and reasonably priced workforce, an abundance of industrial development sites in pro-development communities, and an experienced, well-capitalized concentration of developers headquartered in the area. Kansas City has leveraged those various logistical and strategic advantages at a perfect time to capitalize on an all-time high in industrial space demand with …
By David Hodge, NAI Greywolf The demand for commercial industrial real estate was exceedingly strong in the Milwaukee market leading up to the onset of COVID-19. The economy and labor markets were also strong and incentives for onshoring spurred on this growth. Post-pandemic commercial industrial product continues its upward trend. The catalyst for this, however, is international supply chain disruptions. The reaction to this unfortunate circumstance is the accumulation of higher inventories of raw material and finished goods. The resulting impact is high demand, especially for warehouses, in an extremely low vacancy rate environment. Demand beating inventory According to Catylist, in the second quarter of 2022, the Milwaukee market’s vacancy rates were 3.3 percent for all commercial industrial products. This is largely due to the continued lack of available inventory. High demand in part has spurred increases in rental rates to approximately $5.98 per square foot triple net. While this is good news for landlords who look to capitalize, it presents challenges for tenants who are expanding their operations. The other factor driving rental rates is the rapid increase in interest rates. The upcoming election may also affect the rates in the later part of the fourth quarter of …
By Jeff Karger, JLL There’s no doubt that the office market today is much different than what it was five years ago. Employers across the nation have had to adjust their work models, time and time again, to meet the needs of their employees — and those in Grand Rapids are no exception. As landlords, employers and employees adapt to these changes, it’s important to understand the direction of the office market. Below, check out five factors that are defining it. 1. A flight to quality Like many other cities across the nation, Grand Rapids is experiencing a resounding flight to quality. Employers are seeking Class A and trophy spaces to appeal to their employees and offer them an experience, rather than just a cubicle to work in. Some of these office features can include free fitness centers, onsite cafés, coffee shops and restaurants, outdoor terraces and more. Plus, according to JLL research, 59 percent of employees expect to work at a company that supports their health and well-being. Interestingly enough, employees prioritize this over salary — a key reason why companies and landlords alike are investing in amenitized spaces with up-to-date HVAC systems, exercise classes and healthy food options. …