It's been quite a turbulent ride; however, recovery is underway. Although retail inventory in Eastern Massachusetts/Greater Boston showed only slight gains, the decline in vacancy more than made up for it. At year-end 2012, total retail inventory totaled 189.5 million square feet. The amount of retail space in the region has increased 13.1 percent during the past 10 years. However, the recession took a toll on new development, and we’ve seen only a slight gain of 0.1 percent in the past 24 months. This slowdown has benefited the retail environment by increasing the demand for existing space. Approximately 2 million square feet of unoccupied space was filled during the year, which brought the vacancy rate to 7.8 percent from 8.9 percent a year ago — the largest drop in more than a decade. As a result, the year ended with net absorption totaling 2.05 million square feet. There wasn’t much movement among the ten largest communities in terms of retail space, although Braintree replaced Leominster at number 10. Boston has the largest amount of retail space, of course, followed by Cambridge. Natick, Brockton, and Danvers complete the list of the top five communities in terms of total retail square footage. …
Northeast Market Reports
Boston's waterfront redevelopment is generating thousands of jobs and facilitating growth across several employment sectors. The construction industry, in particular, has benefited as workers build thousands of residential units along the waterfront. Pier 4, a mixed-use project located in the Seaport District, is underway and will consist of three buildings to contain apartments, ground-level retail, condos, and a hotel or office space. Additionally, developers are moving forward with plans to build two 22-story towers in the Seaport Square mixed-use development, adding 800 apartments and 300,000 square feet of retail and entertainment space. This would be the first major project at the 23-acre site, considered the key to connecting the surrounding Fort Point, Fan Pier, Pier 4 and Waterside Place developments into a 24/7 urban environment. The developments are successfully transforming the area from sizable parking lots to a center that will draw employers and young professionals seeking a live-work-play lifestyle. In addition, many builders are acquiring older assets in prime areas of Boston and deploying capital in order to increase rents or convert to condos as empty-nesters and young adults seek more affordable ownership opportunities in affluent neighborhoods. Developers in search of conversion opportunities are targeting larger units with nice …
Anecdotally, by activity and by the numbers, the suburban Boston industrial market has definitely strengthened. If positive net absorption trends continue through the balance of the year, 2013 could end in territory that we have not seen since before the Great Recession. The momentum in the market has changed significantly in two years. For example, two years ago our firm was hired to sell a 53,000-square-foot single-story industrial building in Woburn for a third-generation plastics manufacturing company that was growing and wanted to buy a larger facility in the region. The company concurrently asked us to look for a larger building for them to buy. However, before putting an alternative building under contract, they would need to sell their Woburn property. In 2011, we did not have much activity from prospective buyers interested in our client’s property yet there were a number of viable purchase options available to them. Fast forward to the present, and we have multiple, highly qualified companies interested in buying their Woburn building — but now there is nothing to buy that meets our client’s criteria for size, quality and location. As a result, we have been forced to switch our acquisition strategy to buying land …
New York City continues to make economic progress. The city’s workforce grew by 78,900 jobs over the 12 months ending April 2013. As a consequence, the unemployment rate declined to 7.7 percent in April compared to 8.8 percent a year ago. Reflecting continued employment growth, the office market was quite active across Manhattan, as a wide range of tenants signed leases during the first quarter. Tenant volume exceeded the previous quarter activity by 38 percent and was more than twice that of a year ago. Availability rates, however, remained relatively unchanged in Midtown North and Downtown and increased in Midtown South. Overall asking rents declined in Midtown North, but rose in Midtown South and Downtown. A number of tenants are viewing their space needs differently than in the past. Collaborative working spaces and “green” are de rigueur; oversized workspaces are not. The recent slow absorption is the result of a combination of tenants frequently relocating or renewing at the same or reduced size and the return of numerous large blocks of space to the market. Manhattan is blessed with the ability to continually reinvent itself. A wide range of exciting changes are in various stages of development that will alter …
As a global player, New York City enjoys top-shelf retail advantages that continue to support the market as they always have — by keeping one foot on the gas pedal and one eye on the rearview mirror, as the recessionary cycle fades further out of view. From an economic perspective, New York City is recovering by leaps and bounds, posting 1.5 percent year-over-year growth between February 2012 and February 2013, and a liberal 4.3 percent rise in the professional and businesses services sector that includes 35,000 new jobs. Add to that the overall uptick in the global economy (read: consumer confidence) and the market’s inherent strength as an international tourist destination, and all bets are on New York to remain one of the tightest retail markets in the country for the next few years. New York City boasted an enviable 2.2 percent vacancy rate for all types of retail at the end of first quarter 2013 — an impressive figure when compared to the average U.S. first quarter vacancy rate of 6.8 percent. Quoted rents in New York’s five boroughs also rebounded 12.7 percent year-over-year to $50.90 per square foot on average. This is about three times higher than the …
In Providence, R.I., the the Class A office market has stabilized. GTECH Center has been successful in leasing up just about all of its available space to four or five tenants. Consequently, The GTECH Building sold for more than $50 million prior to the end of 2012. In addition, the new Blue Cross tower was successful in leasing 10,000 square feet of available space with plenty of continued interest for additional floors from prospects. Also, Bank of America’s move from its former headquarters at 111 Westminster into space located in 100 Westminster and One Financial Plaza has further helped push vacancy rates down for Class A office space. The current vacancy rate for this product is less than 9 percent in the Capital City. Consequently, this activity has pushed rental rates for Class A space back over the $30 per square foot mark on new deals. High Rock Development, which owns 111 Westminster (the former Bank of America building), is currently lobbying the state for tax credits to redevelop the building into apartments. It will be interesting to see, since the 38 Studios collapse, how far the state and city are willing to get involved — or if the building …
Improvement in the city's employment picture is adding fuel to the fire of an already heated multifamily market. As we enter the summer, the vital signs of continued improvement in apartment operations — rising market rents and lower vacancy — are in place. Investors’ attraction to the relative stability of this market is growing. This is evident as overseas capital and a greater number of private investors join apartment REITs and private equity players, increasing the competition for market listings and compressing cap rates in their wake. On the employment side, the financial sector has yet to rebuild headcounts to the pre-recession level. The loss of this traditional payroll leader during economic expansion has been replaced with the technology and business services’ broad job growth throughout the metro. These sectors have emerged as the new employment leaders, and the expansions of Google, Microsoft, Facebook and others are having a positive impact not only for the apartment market but also for allied employment sectors generating additional renter demand. Additionally, New York City’s emergence as a venture capital powerhouse, closely trailing Silicon Valley and now ahead of Boston, supports additional demand throughout the market. With sound apartment operations in place, investor competition …
Positive demographic trends, low interest rates and Boston’s stable economy inspired a surge of investments in the New England multifamily market. Last year, multifamily transaction volume neared $1.2 billion across the region, roughly 70 percent of the $1.6 billion peak we experienced in 2007. Transaction volume has increased every year since 2008, fueling competition for product and driving down cap rates. Investors pursuing deals in Greater Boston’s inner ring are accustomed to cap rates in the low 4s and sometimes below. While low cap rates have been great for sellers, they are causing some investors to widen their investment parameters. Many groups are finding Boston’s economic momentum resonates beyond the 128 beltway, allowing for rental increases and limited vacancies previously unrealized. ARA has tracked sales from Rhode Island to New Hampshire and has seen an influx of foreign equity, mainly from Asia, the Middle East and Australia. This trend represents a change from the last cycle when Europeans, mostly Germany and Ireland, were the largest foreign capital source in the region. In recent years, the majority of investments targeted by these foreign players have been in the city of Boston and the immediate suburbs; however, ARA has tracked recent sales …
The last quarter of 2012 indicated signs of overall market improvement including increased activity in the office sector, according to most New Castle County owners and leasing brokers. Most professionals anticipated a good start to 2013 based on this performance. Although there are a few bright spots, early reports for 2013 are not yet meeting the expectations that stemmed from the continuing improvement seen last year. It seems most activity so far this year represents smaller deals, which are not resulting in positive absorption. Most tenants are moving to take advantage of the opportunity to upgrade or resize their space. One favorable aspect of the market has been demand for medical office space. A new four-building medical office project that was started last year at Becks Woods on Route 40 in Bear, Del., is nearly fully leased or sold with the last building coming out of ground a few weeks ago. Additional medical projects are planned on Churchman’s Road near Christiana Hospital and on Lancaster Pike at Little Falls although groundbreaking has not yet occurred on either site. Christiana Hospital is nearing completion of its new Emergency Center at Route 1 in Middletown, Del., and we expect there will be …
From a macro perspective, the Northern New Jersey office market has remained stagnant and continues to tread water. In 2012, corporations with capital stayed on the sidelines. The overall availability rate hovered around 21 percent with an average asking rent of $24.29 per square foot at the close of the fourth quarter, and those numbers were not expected to change much in the first quarter of this year. The few recent significant leasing transactions were not enough to move the occupancy needle. The biggest deals were Biomet Bone & Spine Healing Technologies’ lease of 102,224 square feet at 399 Jefferson Road in Parsippany; EMC Corp.’s lease of 81,700 square feet at 184 Liberty Corner Road in Warren; and Tower Insurance Co.’s 76,892-square-foot lease at Harborside Financial Center II in the Jersey City Hudson Waterfront project. The Tower Insurance lease was a boost to the Hudson Waterfront market. For a long time, the waterfront was one of the few bright spots in the state with even a brief period of rent growth. However, in 2012 a large amount of shadow space came on the market and led to roughly 500,000 square feet of negative absorption. With the election year over, it …