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Market ReportsNortheastNortheast Market Reports

Deal Volume Will Resurge in 2021, Say Northeast Industry Professionals

by Taylor Williams

By Taylor Williams It shouldn’t come as a surprise that most commercial real estate professionals expect a year that follows a global pandemic to be an improvement from the previous one. But the anticipation of a drastically strong rebound across an entire region seems a bit unusual, especially given that mass vaccination and herd immunity are still months away, ensuring that much of 2021 will to some degree be marked by similar COVID-19 headwinds to property types like office, retail and hospitality. Yet in the true spirit of the commercial real estate industry, optimism is prevailing, at least according to the results of Northeast Real Estate Business’  annual forecast survey of brokers, developers/owners/managers, as well as lenders and financial intermediaries. The survey encompassed approximately 150 professionals throughout the region across these three groups. Based on majority responses, brokers expect leasing activity to pick back up to varying degrees across all asset classes. Owners see major opportunity to grow their portfolios, particularly with regard to distressed assets whose pricing levels have come down due to occupancy and cash flow concerns. Piggybacking on the elevated opportunity for more investment volume are greater opportunities for lenders to finance new developments and acquisitions — …

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Market ReportsMichiganMidwestMidwest Market ReportsOffice

Metro Detroit’s Office Market Outlook Varies for Different Submarkets

by Kristin Harlow

By Steve Eisenshtadt, Friedman Real Estate 2020 was a challenging year for the office market. The pandemic caused record-high unemployment earlier in the year. Offices were forced to close, and employees quickly learned to work remotely since March. The office market in metropolitan Detroit ended 2020 with an 18.4 percent direct vacancy rate and 19.5 percent when adding in available sublease spaces, which increased to over 1 million square feet throughout the metropolitan area. In 2021, we expect to see a continued increase in direct and sublease availability, as the pandemic will keep offices closed for at least the first half of this year. Post-pandemic, many office users will integrate remote work practices, better social distancing and healthy building environments into their office plans. On a positive note, office tenants that have shelved their plans for relocations or expansions are now finally in the market forging ahead with some of their decisions. While their ultimate office space configuration may look different than what was planned pre-pandemic, it’s encouraging to see more tenants active in the market taking steps to figuring out their game plans. Let’s take a closer look at four major office submarkets in metropolitan Detroit. Downtown Detroit (CBD …

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Austin-Skyline
Market ReportsNAITexasTexas Market Reports

Roundtable: Brokers From NAI Partners Discuss Austin’s 2020 Performance and 2021 Expectations

by Taylor Williams

As one of the fastest-growing markets of the past decade that continues to make headlines for high-profile developments and corporate relocations, Austin has had some economic and demographic cushion from the headwinds brought on by COVID-19 over the past year. While leasing and investment sales activity essentially froze at the onset of the pandemic, as it did in virtually every major U.S. market, Austin’s strong growth in office-using jobs, natural pace of in-migration and vibrant culture all contributed to a swift and stable rebound. With a full year of pandemic living now under the belt, it’s a good time for a by-the-numbers evaluation of the public health crisis’ impacts on various property types within the state capital. In addition, it’s an appropriate point at which to reflect on the degree to which pandemic-accelerated trends like online shopping and working from home are going to influence future deals and projects. These shifts in consumer behavior have major implications for all commercial asset classes. To that end, Texas Real Estate Business conducted a roundtable discussion with leasing and investment sales professionals representing multiple property types at the Austin office of NAI Partners. What follows are their edited responses: Tyler Jaynes: Industrial’s Staying …

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IndustrialMarket ReportsMassachusettsNortheastNortheast Market Reports

Strong Fundamentals Drive Capital into Boston Industrial Market

by Taylor Williams

By Brian Pinch, managing director, Newmark On a national level, the industrial market continues to perform well amidst the coronavirus-induced market correction that has impacted other asset classes. Industrial fundamentals ended 2020 on solid footing, with outsized demand, rising rents and a healthy supply pipeline. Despite the impacts of COVID-19, key logistics hubs like Los Angeles and the Inland Empire are doing well, as are smaller metros like Boston. The continued shift towards e-commerce and online shopping, as well as a greater emphasis on strong distribution networks and supply chains, are driving activity within tertiary markets as well. Combined with sustained cap rate compression, such positive fundamentals have led to increased investor interest in the industrial asset class. Capital that was previously allocated for other property types is now flowing into the industrial market, and low interest rates are giving buyers increased purchasing power. As a result, pricing for industrial product continues to climb across many metros, including greater Boston. In fact, greater Boston’s industrial market maintains one of the most dynamic investment landscapes in the country, as historically tight vacancies and rapidly rising rents attract record levels of capital. Though the metro-wide vacancy rate is below 6 percent — …

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Market ReportsRetailTexasTexas Market Reports

The Houston Retail Market: What’s Changed After A Year of the Pandemic

by Taylor Williams

By Shawn Ackerman, president of Houston retail, Henry S. Miller Brokerage COVID-19 is on everyone’s mind. From landlords to tenants, all are desperately trying to predict the future, because the past has destroyed many businesses. Retailers such as Luby’s, Chuck E. Cheese, Lane Bryant, 24 Hour Fitness, Gold’s Gym, Pier 1 Imports and Tuesday Morning all filed bankruptcy in 2020. Not only did numerous tenants file for bankruptcy, but many more are also barely holding on. What does the future hold for Houstonians? Only time will tell. Until the market stabilizes, we will continue to compare notes with others in the retail sector on how best to navigate. Of course, market uncertainty is not only a retail issue. The unemployment rate, while down considerably from the double-digit numbers seen at the onset of the pandemic, remains a cause for concern. Laid-off workers don’t have the disposable income they may have had while employed. Many people have thus curbed their shopping habits. Until the job market gains traction, retailers will have to be patient to see the long-term effects of this roller coaster ride. Mall Struggles Continue Heaviest hit in the retail section have been malls. With anchors like J.C. Penney, …

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IndustrialMarket ReportsSoutheastSoutheast Market ReportsTennessee

Nashville Shifts in Location, Size to Support its Red-Hot Industrial Market

by John Nelson

“When you’re hot, you’re hot.” These old lyrics from Jerry Reed ring loud and clear these days for industrial real estate in Nashville and Middle Tennessee. Over the past five years, Nashville has been on a tear with industrial activity. At the start of 2021, Nashville appears to be pushing the fast forward button, even with COVID-19. There is a growing list of buyers, developers and users looking to enter the Nashville industrial market at unprecedented levels. With that said, can the supply of industrial product and land keep up with the demand? Where will the product be built? And what will it look like? Historically, Nashville has never seen a large supply of speculative big boxes built in comparison to our neighbors such as Memphis and Atlanta. Unless a build-to-suit, larger buildings have had a longer lease-up time in comparison to our neighboring cities. Nashville is a meat and potato market with the vast majority of our deals in the 75,000- to 150,000-square-oot range. Sure, like any market today we have seen our large third-party logistics deals with the likes of Amazon, Geodis and FedEx leading the way. Typically, our market may see one or two of these larger …

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IndustrialMarket ReportsSelf-StorageTexasTexas Market Reports

Dallas Self-Storage Development Maintains Slow But Steady Construction Trajectory

by Taylor Williams

By Mirela Mohan of STORAGECafé The self-storage industry closed 2020 on an upward path, seeing stable or rising rental rates and elevated construction activity across the board after an uncertain year. According to our data, new construction stayed on a steady trajectory throughout the year, with 49.4 million square feet of new product added nationally — slightly less than the volume of new development in 2019. This came as a natural consequence of the high existing inventory which, combined with the shock of the pandemic, eventually led to the asking rate plunge in the first half of 2020. Rates Plunge, Then Revive The existing high inventories put downward pressure on asking rates in 2020, and the arrival of the pandemic only accentuated the existing trend. However, after rents bottomed out at $112 per month in May, street rates started picking up. By December 2020, national street rates had reached $118 per month, a 3.5 percent year-over-year increase. This slow but steady supply growth was mostly linked to consistent demand that emerged from both traditional sources such as moving and downsizing, as well as from new sources created by last year’s disruptive events. For example, college students began to need short-term …

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IndustrialMarket ReportsMichiganMidwestMidwest Market Reports

Gotown: Detroit’s Industrial Market Looks to Build off Momentum from 2020

by Kristin Harlow

By Doug Fura, Farbman Group With 2020 in the rearview mirror, hopes for a healthier and more prosperous 2021 seem likely to lead to economic and development surges in markets across the country. In Detroit, where the industrial market has been a clear bright spot in a pandemic-altered development landscape, industry professionals remain optimistic that development momentum won’t be slowing anytime soon. How realistic is that optimism, where does industrial stand right now and what’s in store for Detroit? No signs of slowing down The Detroit industrial real estate market is easily the tightest I’ve seen at any point in the last 40+ years. We are seeing speculative construction for the first time in over a decade. Even more impressive is the fact that, for the most part, that space is being leased up before the buildings are completed. While construction costs are at record highs, they are still dramatically lower than in many/most other large markets across the country. E-commerce influence Who and what is driving that demand? The 500-pound gorilla is Amazon, but the boom in e-commerce extends well beyond one company, no matter how influential. The market was already evolving prior to the pandemic, but COVID-19 has …

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ArizonaIndustrialMarket ReportsWesternWestern Market Reports

Phoenix’s Industrial Market Remains Busier than Ever

by Jeff Shaw

By Peter Batschelet, Principal, Lee & Associates In a year of unknowns, hypotheticals and uncertainties, the Phoenix metropolitan area and Maricopa County were the complete opposite. In fact, 2020 was a record-setting year in this region’s industrial market for several reasons. For starters, there was nearly 14 million square feet of new construction delivered. This is twice as high as any year in the past decade and roughly equivalent to the deliveries from the past two years. In addition, Phoenix set record absorption numbers to the tune of, ironically, 14 million square feet. Meanwhile, vacancy rates have decreased to roughly 7.7 percent and rents continue to see moderate growth.  There does not appear to be an end in sight to the impressive growth. There is an additional 15 million square feet currently under construction. This space is both speculative development and build-to-suit opportunities from household names like Merit Partners, Prologis, Trammell Crow Majestic Realty and others.   Ecommerce sales represent roughly 15 percent of the national retail industry, which means there is plenty of capacity for additional investment and capital into the Greater Phoenix area based on our population and anticipated growth. There remains plenty of upside for the bulk …

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Affordable HousingMarket ReportsMultifamilyNorth CarolinaSeniors HousingSoutheastSoutheast Market ReportsStudent Housing

Triangle’s Apartment Demand Pushes to the Region’s Suburban Markets

by John Nelson

The impacts of COVID-19 on the U.S. multifamily market vary significantly across metro areas. Not surprisingly, the nation’s denser gateway markets have been hardest hit, while secondary and tertiary markets have fared better. In a reversal of pre-pandemic trends, suburban locations have gained favor over urban submarkets from both renters and investors. As many employees continue to work from home, larger and more affordable units in suburban submarkets have become more appealing. Elevated construction costs are also a factor, driving garden-style development versus more costly podium construction. The Triangle’s suburban submarkets are experiencing the strongest construction activity, most notably in the North Cary/Morrisville submarket, where 1,784 units averaging over 1,000 square feet per unit are currently underway. As ongoing work-from-home arrangements prompt more tenants to consider living further from the Triangle’s primary employment centers, developers are increasingly willing to look at sites in outlying communities such as Wendell and Clayton. Demand is expected to return to the Triangle’s urban submarkets as employees return to the office and retailers and restaurants fully reopen, but the recovery in these areas is likely to be protracted. Solid footing The Triangle’s multifamily sector ended 2020 on relatively firm footing despite a tumultuous year. Both …

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