Midwest Market Reports

Central Ohio’s Office Market Shifts to Accommodate Changing Tenant Demands

by Kristin Harlow April 13, 2023

By Aaron Duncan, CBRE Describing Central Ohio’s current office market conditions is like a kid making the “little bit of everything” drink at the self-serve soda fountain: a lot of ingredients go in and the result is, surprisingly, okay. The office market is filled with polarizing headlines — from the growth and success of suburban Class A+ product versus newly vacated assets, to sublease space swarming the stat line, and everything in between. Moreover, the sector continues to provide pools of negative and positive market conditions. One’s perspective on the market largely depends on which way they’re standing in that month but overall, much like that childhood concoction, it’s okay. The good and the bad For nearly three years, tenants leaned on ownership groups to let them put temporary solutions in place while they fully vetted their return-to-work strategies. Today, the good news is that tenants have finally figured it out and are confident about what their current and future footprints will look like. A strong indicator of this is the volume of headquarters transactions in the market, five of which were completed by our team: • Vertiv: 75,000-square-foot, suburban headquarters lease at 505 N. Cleveland Ave. • Surge Staffing: …

April 13, 2023

Industrial Market Reports Midwest Midwest Market Reports Ohio

Diverse User Demand Buoys Columbus in Uncertain Global Market

by Kristin Harlow April 6, 2023

By Beau Taggart, Cushman & Wakefield Historically, Columbus was a steady-performing, secondary industrial market that saw minimal rent increases. Often, it was overshadowed by “big brother” cities such as Indianapolis and Chicago that were perceived as more appealing to institutional investors. After the great recession of 2008, though, Columbus began to mature economically, and the region began its meteoric rise as a leading big-box industrial market in the U.S. Located at the intersection of Interstates 70 and 71, within a day’s drive of 46 percent of the U.S. population and containing one of the only freight-only airports in the country, Rickenbacker Airport, Columbus began to attract more and more major retailers such as Zulily, Lululemon, Macy’s and Sam’s Club as well as e-commerce giant Amazon, which has opened several bulk facilities throughout the region. Additionally, three major intermodal terminals and major UPS and FedEx hubs strategically located throughout the area boosted Columbus from its secondary status to a primary inland hub on every major distributor’s radar. Like many markets, 2021 was Columbus’s most prolific year. Interest rates were at an all-time low, and users were compensating for COVID-fueled consumer demand. Asking rates grew by 14 percent and vacancy shot down …

April 6, 2023

Market Reports Midwest Midwest Market Reports Minnesota Multifamily

Pandemic-Fueled Trends Continue to Have Impact on Twin Cities CRE Market

by Kristin Harlow March 30, 2023

By Jeff Budish, Northmarq Three years in, and the COVID-19 pandemic has immensely altered how multifamily and commercial properties are utilized, located and valued. Now with interest rate changes, all product types have seen a hit from the change in the cost of capital. While challenges are on the horizon, Midwest markets, including Minneapolis-St. Paul, should see less shake up than elsewhere. Despite rising interest rates, recession worries and nagging inflation, the Twin Cities multifamily sector is resilient. Vacancies remain low, demand is outpacing supply and rents are solid. Year over year, apartment rents in the Twin Cities area are up 5 percent. While COVID changed the dynamics of all product types, it explicitly impacted multifamily. The increase in remote work meant employees were not tethered to a physical office. Many people moved away from their workplaces in densely populated areas to the suburbs. However, Minneapolis and St. Paul proper generally saw net outbound demographic shifts. Valuations over the past two years therefore didn’t include additional inflated pricing based on speculation of continual inbound movement. There is also soaring demand for apartments due to an increase in the number of Americans living on their own, roommate-free. In an AvalonBay public …

March 30, 2023

Illinois Market Reports Midwest Midwest Market Reports Office

Suburban Chicago Office Landlords Still Face Tough Times

by Kristin Harlow March 23, 2023

By Mark Kolar, Cresa There’s been a lot of news recently about the financial pressures facing suburban Chicago commercial office landlords who have financed their office buildings via commercial mortgage-backed securities (CMBS) loans. While the financial challenges these buildings face continue to grab the headlines, there is a much less visible yet greater amount of privately funded commercial office landlords that could be facing dire financial changes over the next couple of years. These privately funded loans that originated through major banks and insurance companies are seeing just as much, if not more, stress than their CMBS counterparts. Collectively we’re seeing significant systemic issues for all Chicago commercial office landlords with no clear path to a solution in sight. In suburban Chicago, about 13 percent of commercial office loans are financed by CMBS loans with the majority of loan debt financed through local financial institutions, private investment funds and insurance companies. While details on these loans is not as readily available as their CMBS counterparts, many office landlords are confronting similar challenges. Both CMBS and privately funded commercial landlords and their lenders are facing a host of capital challenges that revolve around systemic changes in leasing activity, increasing costs of …

March 23, 2023

Illinois Industrial Market Reports Midwest Midwest Market Reports

Finding Liquidity in an Illiquid Market — Where Deals Are Getting Done in Chicagoland

by Kristin Harlow March 16, 2023

By Tyler Ziebel, Colliers Following one of the most active and aggressive periods in Chicago’s industrial capital markets history, 2022 ended as a year most market participants would rather forget. As the buying community returned to their desks and fastened their seatbelts for another year of fun in 2023, industrial sales brokers across the country are starting the year posed with a question from investors that hasn’t been asked in some time: “What are we going to be able to buy this year?” It’s easy to assume that investors will remain content to sit out of the turbulent market, but the answer to where we are, and aren’t, seeing liquidity requires a nuanced answer. In order to do that, we must take a quick look at 2022 and what set this uncertain market in motion. After several record-setting years for industrial leasing and sales in 2020 and 2021, accelerated by the COVID pandemic and a historically low interest rate environment, 2022 opened with the same frenzied pace and enthusiasm of 2021. But as the Federal Reserve pivoted its focus from keeping the economy stable to taming the resulting inflation, rapidly rising interest rates grounded institutional industrial transactions and development deals …

March 16, 2023

Illinois Market Reports Midwest Midwest Market Reports Office

Driving Factors Reshaping the Suburban Chicago Office Market

by Kristin Harlow March 9, 2023

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 …

March 9, 2023

Indiana Industrial Market Reports Midwest Midwest Market Reports

Slowdown in Construction Starts Helps Balance Indianapolis Industrial Market

by Kristin Harlow February 23, 2023

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 …

February 23, 2023

Indiana Market Reports Midwest Midwest Market Reports Multifamily

Indianapolis Is Emerging Star of Midwest Region

by Kristin Harlow February 16, 2023

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 …

February 16, 2023

Market Reports Michigan Midwest Midwest Market Reports Office

Is the Motor City Office Market Idling or Roaring?

by Kristin Harlow February 9, 2023

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 …

February 9, 2023

Market Reports Michigan Midwest Midwest Market Reports Retail

Like Football Team, Detroit Retail Sector Roars Back

by Kristin Harlow February 2, 2023

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 …

February 2, 2023

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