In Buffalo, New York, the office market is in the midst of a slow recovery from the lows experienced in the early 2000s. Even with the recent economic downturn, the statistics show that this market is still showing improvement. The inventory continues to grow at a slow, controlled pace and net absorption of space is positive. There is a growing preference for regionally based companies to invest in Buffalo. Two recent corporate relocations, HealthNow and New Era Cap, had a significant impact on the market by moving their headquarters operations into Buffalo’s Central Business District. HealthNow took 469,000 square feet of space and New Era Cap signed on for 130,000 square feet. The second trend has been the growth of governmental agencies and their policy of leasing privately owned facilities. Over the past 3 years, 600,000 square feet of government tenants have been moved to new, privately owned, Class A buildings. The best example of this is the relocation of 280,000 square feet of Federal GSA tenants from a government owned building to the new Federal Center at 150 S. Elmwood Avenue. The two largest tenants were the Veterans Administration, which leased 85,000 square feet, and the IRS, which took …
Northeast Market Reports
The Albany industrial market has become almost an incubation area for the nanotechnology industry, brining major tenants with large space needs to the area. Despite the recent downturn the industrial sector is still holding it own due to the growth and success of the technology industry. Cory M. Tyksinski, principal broker/manager of NAI Platform notes that there was an initial drop in business, but that is was more of a knee jerk reaction as the economy started to slow and then essentially skidded to a stop last year. The Upstate New York marketplace, and primarily Albany, is fairly insulated from the major downturns, and unfortunately, conversely the upswings in the marketplace,” notes Tyksinski. “That is primarily because we have the government seat here and we have a tremendous base in education, as well as in research and development and now technology.” Therefore, Tyksinski explains that once people got over the initial knee jerk reaction, the market picked back up again. “Actually, we have seen an upswing in the last 3 or 4 months,” he says. Overall the growth of the nanotechnology sector has been a real boon to the market. “We have seen a lot of what would be support …
Job cuts among financial and professional services firms will cause office fundamentals to weaken in Boston this year, but modest amounts of new construction will temper the supply and demand imbalance. With layoffs at State Street Bank, Bank of America, Merrill Lynch and Fidelity Investments projected to total in the thousands, a resulting decline in office space demand will drive up vacancy for the second consecutive year. In the CBD, negative net absorption of approximately 550,000 square feet will raise the average vacancy rate nearly 200 basis points to the high-11 percent range. While tenant demand across the metro will wane in the near term, tighter construction financing and lingering economic concerns have reined in development activity. Completions in 2009 will drop off from last year and will represent only a 0.6 percent expansion of metrowide inventory, helping to offset reduced employment-generated demand. Weakening fundamentals and an uncertain economic outlook will underpin conservative buyer expectations this year. As a result, deals will be underwritten assuming higher vacancy rates and rent declines, elevating cap rates metrowide. Currently, initial yields are averaging in the high-6 percent to mid-7 percent range, up about 25 basis points to 50 basis points over the past …
New York City was the last major office market in the country to feel the effects of the national economic slowdown and a number of indicators already point to the market’s quick rebound. While demand for office space throughout the city was lackluster, over the past 2 months there have been signs of increased activity. For many space users, New York City is the most important business center in the world and a key location for their corporate headquarters. Also, tenants that had the luxury of sitting on the sidelines with a wait-and-see attitude are finally staring to kick the tires once again looking for quality space. In general, companies are shedding their doldrums and doing business again. Many of them now see more space opportunities than 2 or 3 years ago. Today, tenants are in an enviable position where they can negotiate favorable terms for space that best meet their current as well as future real estate space requirements. The healthcare industry has been one of the most active in terms leasing and buying commercial space. This market sector has traditionally been a strong player, defying economic downturns since people always need healthcare providers. Although this industry is not …
While the meltdown of the housing market originally benefited the multifamily sector — as more homeowners transitioned to renters — the current recession and its rising unemployment has started to affect activity. “Right now, it is all about the economy,” says Kevin Wolfgang, president of New Castle-based Evergreen Realty and recently elected president of the Delaware Apartment Association. “Our industry is directly affected by the job market, so the increased amount of unemployment has created significant operation challenges.” Multifamily owners in Delaware are weathering the storm by focusing on the operation of the properties — trying to find ways to make them as efficient as possible. This has slowed down sales considerably. Owners who are still receiving a steady cash flow are seeing no reason to sell for less money. “Most investors are very cautious right now,” Wolfgang says. “No one is chasing deals, and there is nothing that I have seen as having a major impact on the market right now.” Evergreen Realty’s main activity has been its purchase and upcoming redevelopment of Hampston Walk Apartments, a 370-unit community located in New Castle. The company purchased the blighted property in mid-2008 and is repositioning it with renovations to unit …
Multifamily investment activity in Connecticut is expected to gain some additional momentum this year after a reasonably strong 2008. Last year, investors’ fears of the added risks associated with lower-tier assets limited transactions to mostly Class A and B+ properties in the state’s urban areas. While reduced investor demand for properties in secondary and tertiary locations will continue, buyers are expected to target Class B/C apartments in stable CBD markets. Buyers will likely target lower-tier properties in the New Haven and Hartford core, Hamden and the Fairfield/Bridgeport/Trumbull Triangle, where students drive demand for properties. Fewer Class A transactions and the presence of low-leverage opportunistic buyer funds will likely result in a shift in pricing trends, causing cap rates to increase to the mid-7 to 9 percent range. Apartment properties are trading and being financed in the region, thanks largely to agency lenders and still-active local and regional commercial banks. With the fall of the CMBS market, a financing void has emerged in the local and national markets. In 2006 and 2007 CMBS originations nationwide totaled more than $400 billion. Our research suggests that more than $80 billion in CMBS loans will come due in 2009-2010 and recapitalizing those loans will …
Clearly, the demand for office space has significantly diminished since the end of last year. Office leasing is directly related to jobs and the expectation of future employment and, therefore, over-reliant on Wall Street. However, it does lag behind the stock market somewhat. Having said that, it is important to look at the Manhattan office space market with a broader perspective. The unique advantages of New York City include the diversity of businesses residing here and the transportation infrastructure that makes it easy for people to get to work. Other cities such as London, Seattle and Silicon Valley, California, are far more reliant on specific industries and their market tends to suffer more dramatically when those industries are in decline. Although the financial services and banking industry represents a large portion of the overall inventory of office space in Manhattan, industries such as healthcare, legal (with strong bankruptcy and litigation departments) and accounting have shown resilience — and in some cases growth — of their businesses. The subleasing of excess office space, although predominantly in the financial services sector, also includes retailers, law firms and pharmaceutical companies. Recent major leases include: Deutsche Bank, which renewed 150,000 square feet at 345 …
We expect 2009 to continue to be a tough year for commercial/investment real estate, but multifamily is certainly the preferred product type for institutional and private investors delivering stable, solid returns, particularly in the supply-constrained New England markets. Transaction velocity was actually fairly strong through EOY 2008 although cap rates and IRR have increased by 100 to 150-plus basis points from a year ago, and currently we are pricing properties using cash-on-cash returns based on true, twelve month trailing operating data. Fortunately, the greatest demand from institutional investors is for well-constructed Class “B+” to “A” properties in the region. While we don’t have the problem of shadow inventory that we do in Florida, Arizona and other markets, we have noticed an increase in vacancy for Class A and B properties in the region. Occupancy in a number of properties we analyze for our monthly same-store rent comp survey has dipped, but we’re still ahead of most other national markets. We are generally seeing an increase in vacancy in New Haven, Fairfield, Middlesex, New London and Hartford County properties from 100 to 400 basis points but we expect strengthening later this year. After 30-plus years in this business, my honest opinion …
As we continue to track changes and trends in the industrial sector on Long Island, two things remain constant: Go East and Go Up. The east offers land availability and height is playing a more significant role than ever in space utilization. It’s always been about cost effectiveness. When land was plentiful and less costly, it was more economical to build out, rather than up. With the shortage of land, the price has escalated such that, to achieve the same cubic feet of space, it is necessary to build or raise the ceiling heights for better economic functionality. This, coupled with better material handling equipment, makes it practical and necessary to accommodate growth and maintain profitability. A prime example of this is the pending sale of the Stimpson Company property in Bayport — a low-ceiling, 200,000-square-foot building set on 22 acres. An old line regional company is buying this property because it has an oversized plot, and while they were planning to raise the ceiling from 15 to 40 feet clear, plans were only recently abated as a result of the current economic environment. As mentioned, the towns of Islip and Brookhaven have been aggressively seeking industrial growth through their …
Despite being just south of Philadelphia, Delaware continues to maintain its presence in the New England market and its own identity. After a very active period from 2005 to 2007, office development in Wilmington’s central business district (CBD) is now taking a breather. The last project finished, the Renaissance Center at 4th and King streets, still has significant vacancies. The suburban market has also slowed, and new developers are taking a wait-and-see approach before speculatively breaking ground on new projects. This current slowdown in market activity is attributable partly to the market and partly to the usual summer slump. The slowdown has brought overall vacancy rates to 17.1 percent for Class A and B office product, including sublease space. The Wilmington CBD comes in with the highest rate at 20.5 percent (Class A and B, including subleases), while western New Castle County posts a rate of 6.2 percent, an anomaly compared to the other submarkets that lean more towards the CBD’s rate. Currently, rents for Class A space in the CBD can run from the low $20s to low $30s per square foot. Suburban rents for Class A space are equivalent, ranging from the low to high $20s. Leasing may …