With an increasing number of tenants seeking to relocate to New Jersey from parts of New York City, including Brooklyn and the Bronx, the Garden State’s industrial market is at its healthiest since first-quarter 2008. The amount of vacant space has now reached pre-recession levels, decreasing from 7.5 percent to 7.2 percent during the third quarter of 2015. Moreover, the vacancy rate experienced its best year-over-year improvement since the first quarter of 2014. Strong markets include central New Jersey submarkets Exit 8A, Exit 9/Brunswick, and Route 287 West, while the Meadowlands area remains the strongest submarket in northern New Jersey, followed by Exit 14/Newark near the port, and the Route 46/23/3 submarket. While transactions by large tenants, such as Amazon, dominated activity during the first half of the year, industrial buildings were filled up by smaller and mid-sized tenants during the third quarter of 2015. Retailers/wholesalers led the way, which is not surprising considering the continually growing e-commerce sector and recent increases in consumer spending. Supporting the recent economic resurgence of the sector, tenants in the manufacturing industry were also very active during the quarter, though many of their leases were small in size. Transportation companies also took space, enhancing …
Northeast Market Reports
Despite the clichés and naysayers, Boston’s apartment fundamentals continue to trend at the top of U.S. cities’ forecasts. For developers, investors and borrowers, Boston truly is that city on a hill. Clichés heard often in the commercial real estate community: Interest rates have no place to go but up. Who is going to pay $4.50-per-square-foot rents? Wait until the next wave of units is delivered. Valuation and yield don’t make sense. The facts: Economists have been predicting interest rate increases for the past five years. Market vacancy has been sub-5 percent for more than five years. Every major apartment player owns or is currently building in Boston, averaging $1.2 billion in product for past three years. Boston is a premier gateway city and buyers want in. The Investor Outlook Simplified When cap rates for the most desired real estate class — in a gateway city, in the safest country for investment in the world — average 4.25 percent, it’s a great time to invest. The 2006 cap rates were just 100 basis points above the 10-year risk-free rate. Today they are 2.0 to 2.25 percent. Half of the deals are cash transactions. Locals can only shake their heads at the …
In what was the most dynamic quarter since the dot-com boom in 2000, tenants in Greater Boston absorbed 2 million square feet of office space in the second quarter of 2015. The activity was driven by a number of high-profile construction completions throughout both the urban and suburban areas of the market. The Boston CBD experienced its ninth straight strong quarter with 861,000 square feet absorbed. Notably the activity occurred mostly outside of the boundaries of the “Big 3” Boston submarkets of Back Bay, Seaport District and Financial District (though the latter did absorb 290,000 square feet in its own right). North Station saw a major bump in occupancy with the completion of Converse’s 230,000-square-foot headquarters, causing the submarket’s largest quarterly absorption number on record. Move-ins by Sonos and Safari Books Online added 200,000 square feet of absorption in Midtown, where vacancy has dropped to nearly half of what it was a year ago after State Street’s departure. And development continues at Boston Landing, where the 245,000-square-foot second phase is currently under construction and is already partially pre-leased to the Boston Bruins. Space continues to be scarce in Cambridge, where vacancy is just 5.8 percent and availability is at an …
In the Capital Region, an industrial/warehouse market with a little over 63 million square feet of space (spread over a 10-county area), vacancy rates have returned to pre-recession levels. It has been a long and steady climb out of a deep recessionary market, which hit this sector of the market the hardest during 2009. During that time, vacancy rates were hovering around the 11 percent mark. In the second quarter of this year, the regional vacancy rate stood at 7.3 percent. Compare this figure to the fourth quarter of 2014, when the vacancy rate was 8.9 percent. As a region, we are again enjoying the absorption of industrial space, as some regional operators expand and some new faces enter the market. We are constantly examining and reviewing the market to understand the current activity, and to anticipate and prepare for the coming trends and changes. So what has lead to the Capital District’s industrial/warehouse market recovery? Several factors are responsible. First and foremost, the overall recovery of both the national and local economies has played a significant role in our industrial recovery. According to the Bureau of Labor Statistics, the unemployment rate in the United States stood at 5.3 percent …
All of the property sectors in the Boston area are thriving, thanks to one of the strongest economies in the nation. As of April this year, the unemployment rate in Massachusetts was 4.7 percent and in Boston, it was 3.7 percent, according to the U.S. Bureau of Labor Statistics. Economists generally consider employment to be essentially “full” when unemployment rates dip below 5 percent. By comparison, the unemployment rates in neighboring states were 6.3 percent for Connecticut, 3.8 percent for New Hampshire and 6.1 percent for Rhode Island. The U.S. unemployment rate in April was 5.4 percent. Boston’s overall industrial vacancy rate at the close of the second quarter was 8.1 percent, according to CoStar, and includes warehouse/distribution space, flex space and R&D facilities. It was the fourth consecutive quarter that the vacancy rate has remained in the low 8 percent range. Overall net absorption has been negative this year: -82,364 square feet in the second quarter and -41,089 square feet in the first quarter this year. This compares with positive net absorption of more than 3.1 million square feet in the third and fourth quarters of 2014. However, we believe that the first half of this year is a …
While demand for all types of retail product has been strong over the past few years, investors continue to have a strong appetite for Boston area grocery-anchored shopping centers in 2015 despite meaningful changes to the food distribution industry. The competitive landscape for traditional supermarkets is evolving as value-oriented grocers such as Market Basket, Walmart, Trader Joe’s, Aldi, and Save-A-Lot lure away price-conscious customers, while service-oriented formats such as Wegmans, Whole Foods and Roche Brothers are expanding and gaining market share with more affluent customers. These chains achieve success by targeting the low- and high-end niches of the market. According to IBISWorld, the online grocery sales industry is projected to increase approximately 9.5 percent annually to become a $9.4 billion industry by 2017. Companies such as Amazon and Walmart are increasing their capabilities for selling food and beverages online, and Ahold’s Peapod service continues to expand in an effort to maintain its position as the leading Internet grocer. The food distribution industry has been further saturated by big-box retailers and national pharmacy chains offering a growing selection of packaged goods and dairy products. These non-traditional grocers and e-commerce providers derive much of their profits from non-food items, allowing them to …
Philadelphia’s apartment market remains bright as increasing employment fosters stable economic growth, which in turn is bolstering apartment operations. Employers in the metro, which is known as the center of economic activity in Pennsylvania, will increase hiring 1.2 percent this year, adding 35,000 jobs. In 2014, new jobs increased 1.6 percent and the unemployment rate decreased 130 basis points. Total employment is on the upswing, recovering nearly all of the jobs lost during the recession. The favorable employment conditions are supporting demand for apartments and swiftly improving performance throughout the metro, prompting developers to start new multifamily projects. Builders in Philadelphia are focusing their attention in Center City, which includes the central business district and central neighborhoods of Philadelphia, where nearly 25 percent of this year’s deliveries will be placed into service. Developers are on track to complete 3,600 units in 2015, increasing total apartment inventory 1.4 percent. Last year 2,400 rentals were delivered. Part of the reason that demand is especially strong in Philadelphia can be attributed to the increasing popularity of living in the urban core among young professionals and baby boomers. The lack of developable in-fill locations in the area is prompting developers to convert office buildings …
New York City’s multifamily market in the second quarter of 2015 was able to continue the momentum of 2015’s first quarter and generate an impressive $3.30 billion in gross consideration. The quarter also saw 364 properties trade over 225 transactions, which is a 33 percent increase in transaction volume compared to the same quarter last year. Boosting significant growth, both Brooklyn and Manhattan saw a number of institutional and portfolio deals again this quarter. Of the trades in Manhattan, the top 10 percent made up approximately 73 percent of Manhattans dollar volume and four of the five largest multifamily transactions to occur in NYC happened in Brooklyn, which contributed to both submarkets ending the quarter with dollar volumes above $1 billion for the second time in as many quarters. Pricing throughout the city continues to evolve by most measures. Gross rent multiples have increased by 1.4 year-over-year and the average price per square foot in Manhattan has eclipsed $900. Compared to last year, average capitalization rates were down 60 basis points in The Bronx, and are down in Brooklyn and Northern Manhattan. These are the signs of solid fundamentals in the market. Institutional caliber multifamily deals had a big second …
The total retail inventory in the Rochester market amounts to 62.5 million square feet. Over the past year, the market has seen an overall decrease in the vacancy rate. The vacancy rate went from 8.0 percent in first quarter 2015 to 7.9 percent in the current quarter. Overall net absorption was positive 182,160 square feet. The general retail sector of the market, which includes all freestanding retail buildings except those contained within a center, reported a vacancy of 4.3 percent at the end of the second quarter 2015. The general retail space in Rochester is 34.3 million square feet. Average rental rates are currently at $12.26 per square foot. The shopping center sector — which consists of 19 million square feet and comprises community centers, neighborhood centers and strip centers — posted 10.9 percent total vacancy and average asking rates of $10.28 in second quarter 2015. Power center space is currently reported to be nearly 4 million square feet with a vacancy rate of 7.5 percent, and a slight decrease in rental rates to $13.46 per square foot. Malls in the Rochester market consist of lifestyle centers, regional malls and super-regional malls. The vacancy rate was 21.2 percent at the …
New York City is booming. The local economy is the strongest it has ever been, with total employment numbers reaching all-time highs totaling over 4.2 million jobs through May 2015. This has led to a strong office market performance during the first six months of 2015, as office-using employment continues to grow, up 2.5 percent over the past 12 months. Demand for space continues to keep availability below 10 percent, and at 9.6 percent, Manhattan availability is down 50 basis points from last year. Despite minimal increases in Manhattan overall asking rents, up only 2.9 percent year-over-year through June, some submarkets are exceeding previous record-high asking rents from 2008. The demand from creative and tech tenants looking for space in Midtown South over the past few years has pushed asking rents up 19.1 percent above all-time highs. Downtown overall average asking rents have reached historical highs this year as well, and at $57.78 per square foot, rents are 10.3 percent higher than the previous highs in 2008. Most of this increase can be attributed to new construction at the World Trade Center site. Despite this, Midtown overall asking rents are still 5.3 percent off historical highs from 2008. Throughout Midtown, …