Market Reports

Jersey Mike’s Sandwich Chain Invests in Delivery, Pick-Up

by Taylor Williams August 18, 2020

By Alex Patton During the business lull caused by the outbreak of COVID-19, fast casual sandwich chain Jersey Mike’s made news by rolling out a $150 million nationwide retrofit project for its stores. The project will include aesthetic and comfortability upgrades for 1,700 franchise stores, as well as expanded functionality for delivery and pick-up services — all paid for by the company. “Paying for the retrofits ourselves is a tactical move on our part,” says Peter Cancro, CEO of Jersey Mike’s. “Whenever you put money in your business, it always comes back. It’s an investment into our people — every dollar we put into the project we’ll get back in loyalty and trust from our franchise owners and our customers.” The Manasquan, New Jersey-based company operates approximately 1,750 stores across 48 states and plans to expand to 2,000 by the end of 2021. Though the company is growing its store count quickly, it is still a relatively small player in the national sandwich game. By comparison, Jersey Mike’s two closest competitors, Subway and Jimmy John’s, operate 24,000 and 2,800 stores in the United States, respectively. Amid state-mandated temporary closures of retail stores and restaurants, Jersey Mike’s was able to continue …

August 18, 2020

Market Reports Office Southeast Southeast Market Reports Tennessee

Memphis Office Market Holds Steady Amid Recovery from Pandemic

by Alex Tostado August 17, 2020

Amid the uncertainty this year has brought, the Memphis office market’s fundamentals have continued to be stable through the end of the second quarter of 2020. Net absorption posted negative gains, recording 53,389 square feet of negative net absorption this quarter. While occupiers seeking rent relief was of minimal consequence, the steady demand allowed the total vacancy rate to decrease 80 basis points from the first quarter to 14.5 percent in the second quarter of 2020. Office tenants are continuing to pay rent on time, with less than 4 percent attrition on overall rent collection, which is no different than normal. In Memphis and the Southeast overall, leasing activity in this latest quarter was driven almost exclusively by near-term lease expirations. Similar to years past during various cycles of economic slowdowns, we are again seeing the overwhelming majority of new lease prospects limited to those companies who “have to” move, versus those companies that “want to” move. This is understandable, given the myriad of hardships caused by the pandemic and the limitation it has imposed on travel, group meetings and overall workplace usage. In fact, many companies have paused to assess their future space utilization, and whenever possible are delaying …

August 17, 2020

Market Reports Michigan Midwest Midwest Market Reports Office

Can America’s Comeback City Get off the Mat Again? Yes — But Uncertainty Reigns

by Kristin Harlow August 13, 2020

By Garrett Keais In my 25 years in commercial real estate, I’ve never seen the economy — and our industry — come to a standstill the way it did this spring after the coronavirus hit. With so much uncertainty in the market, Detroit’s office sales and leasing activity slowed considerably. But as the last decade has shown us, if ever there was a city that could take a punch and get back up swinging, it’s Detroit. Comeback before the virus Fueled by a strong economy and low unemployment, America’s “Comeback City” was posting first-quarter 2020 office vacancy rates as low as 7 percent in one central submarket, according to Cushman & Wakefield research, and seeing rising property values and rents before the coronavirus hit. It was a striking change from a decade earlier, when the Detroit area was struggling after the Great Recession. Unemployment was 3.7 percent in February 2020, compared with 17.2 percent in June 2010, according to the U.S. Bureau of Labor Statistics. The city’s GDP had climbed steadily over those years. Tech giants like Quicken, Google, Twitter, Microsoft and Amazon moved to the city’s central business district, boosting downtown office occupancy and helping to diversify the local …

August 13, 2020

Market Reports Multifamily Texas Texas Market Reports

Texas Lenders Express Optimism for Second Half

by Taylor Williams August 12, 2020

By Taylor Williams Decreased acquisition activity across virtually all asset classes is among the most visible impacts that COVID-19 has had on commercial real estate, but capital markets professionals say there’s reason to believe deal volume will rebound sharply toward the end of the year. According to data from Real Capital Analytics (RCA), the total sales volume of commercial properties in the country was approximately $44.7 billion during the second quarter. This figure represents a staggering year-over-year decrease of 68 percent and the lowest quarterly total in more than a decade. In terms of income streams, some asset classes are faring much better than others. Social distancing mandates and stay-at-home orders, while disastrous for retail and hotel properties, have elevated demand for e-commerce, as well as manufacturing of essential goods and services. The latter trend ensures that for many industrial owners, rent collection is not a major concern. But current and future economic uncertainty are causing investors across the board to pause new acquisitions. “We saw a significant decline in demand for acquisition financing when the pandemic began,” says Jeff Erxleben, executive vice president and regional managing director of NorthMarq’s Dallas office. “There were major unknown factors coming in all …

August 12, 2020

Market Reports Northeast Northeast Market Reports

Northeast Lenders Eye Fourth-Quarter Recovery

by Taylor Williams August 11, 2020

By Taylor Williams Decreased acquisition activity across virtually all asset classes is among the most visible impacts that COVID-19 has had on commercial real estate, but capital markets professionals say there’s reason to believe deal volume will rebound sharply toward the end of the year. For most property owners, the net result of the economic disruption and job losses has been a decrease in cash flows. With net incomes faltering or dissolving for property owners, many prospective investors have temporarily hit the pause button on new acquisitions. As the pandemic has unfolded, bureaucracies have taken action. The federal government appropriated hundreds of billions in small business loans and stimulus payments to taxpayers, and state coffers have been gutted by disbursements to the unemployed. While this activity was designed to stimulate consumer spending and help businesses stave off permanent closures, it has done little to fuel sales of commercial properties. Numbers Tell All Real Capital Analytics (RCA) tracks investment sales activity across the country, including in nine major markets in the Northeast region. The New York City-based research firm recently released its findings for the second quarter. Per RCA, the total volume of commercial sales during this period clocked in at …

August 11, 2020

Industrial Market Reports Mississippi Southeast Southeast Market Reports

Jackson’s Industrial Market Doesn’t Miss a Beat During COVID-19 Pandemic

by Alex Tostado August 10, 2020

Like most markets, regardless of sector, Jackson experienced a moment in time when deals were shelved due to the coronavirus pandemic. However, the industrial market in Jackson tells a different story in the early innings of COVID-19. While most deals were put on hold for several weeks in early April to mid-May, we saw activity pick up with users signing leases, contracting on vacant buildings and resuming due diligence timelines for land purchases, all without any repricing or discount. These trends, while hopefully permanent in nature, are all due to a lack of industrial supply and consistent demand in the Jackson market. If you have quality product in a good area, it will sell or lease, even during a pandemic. The Jackson industrial market spans around 40 million square feet if you include all specialty and manufacturing properties, as well as true warehouse and flex product. According to CoStar Group, the market’s vacancy rate is hovering around 7 percent, but it feels tighter since there’s a bulk of obsolescent product — either low ceiling heights or being in less desirable areas. Jackson is considered a minor industrial market and is well-suited for future growth. As Mississippi’s capital city, Jackson is …

August 10, 2020

Market Reports Massachusetts Northeast Northeast Market Reports Retail

Wanted: Essential, Durable Retailers in Boston

by Taylor Williams August 7, 2020

By Alex Patton Retail real estate investors in Boston are cautiously evaluating the risk profiles of tenants even as businesses reopen following temporary closures due to the COVID-19 pandemic. The emerging consensus is that until a vaccine is developed to safely treat the virus, the safest investments are tied to essential tenants with reliable incomes. That short list includes grocers, drugstores, home improvement businesses and liquor stores. Like the rest of the country, all nonessential retail businesses in Massachusetts were forced to close temporarily in early March, for what was originally expected to be a short period. After several weeks, the commonwealth’s government implemented a phased reopening system that allowed some retail businesses to resume operations. However, after months with significantly reduced income, a number of small retailers are declaring bankruptcy and permanently closing stores to save money. “The underlying question that permeates the retail investment industry, as an investor or a lender, is how much of the income is durable? In other words, which retailers are going to survive?” asks James Koury, senior managing director of investments at the Boston office of Institutional Property Advisors (IPA). “A vaccine would be a game-changer, but we can’t know if it will …

August 7, 2020

Illinois Industrial Market Reports Midwest Midwest Market Reports

Pandemic Shines Light on Lack of Cold Storage Space

by Kristin Harlow August 6, 2020

By Brian Niven As we begin to reopen most parts of our society following the COVID-19 pandemic that devastated our country and economy earlier this year, many in the commercial real estate industry are beginning to take stock of the massive shifts it may have put into motion. While the pandemic has decimated many sectors — shuttering retail shops, leaving offices empty and setting off an exodus of urban apartment dwellers — prospects for industrial properties have remained strong. Demand for warehouses of all kinds has been soaring in recent years, largely on the back of the growing e-commerce industry, and the sidelining of brick-and-mortar stores has only strengthened those tailwinds. However, that does not mean that the sector will not face challenges in the years to come. While most of the country’s core markets have a healthy pipeline of dry warehouse development that will help meet demand from users, the same cannot be said for an increasingly essential part of our supply chain — cold storage facilities. Vacancy for cold storage was already at or near zero across the country, but the pandemic has set off a chain of events that is likely to place significant stress on our …

August 6, 2020

California Market Reports Retail Western Western Market Reports

A Hollywood Ending for LA Retail?

by Jeff Shaw August 3, 2020

By Matthew M. May, President, May Realty Advisors A bird’s-eye look at the Los Angeles metro prior to the coronavirus outbreak reveals that the area was already beginning to soften as it worked its way through more than 1.26 million square feet of new retail space that was delivered to neighborhood and community shopping centers over the past five years. According to REIS, about 35 percent of that, or 443,000 square feet, came online in 2018. Vacancy rates increased every year for the past five years, while averaging about 7.3 percent for the metro area in 2019. Despite the increasing vacancy, we also had quarter-over-quarter and year-over-year growth in asking rents, primarily led by increases in the higher-end neighborhoods. At the street level, quarterly asking rents for neighborhood and community centers averaged about $33.03 for 2019, while increasing about $0.5 per square foot from 2018 to 2019. However, pre-leasing has been weakening over the past few quarters. Discussions in development circles were indicating fewer mixed-use projects in the planning stages with more builders favoring dedicated multifamily builds. Nevertheless, new retail inventory was in the pipeline for this year, with optimism surrounding the evolving retail landscape. All of this was, of …

August 3, 2020

Market Reports Michigan Midwest Midwest Market Reports

Despite Costs, Developers Pursue Rehab Opportunities for Detroit’s Historic Buildings

by Kristin Harlow July 30, 2020

By Steven Phillip Siegel Mies van der Rohe. Yamasaki. Kamper. Kahn. Portman. Gyllis. Some of the biggest architects in the world have a presence in Detroit. Motown’s exceptional confluence of architects and designers earned the city a UNESCO City of Design designation, the only city in the United States to receive the UN’s award for design excellence. However, beginning in the early 1970s, many of the city’s finest architectural works slowly sank under a weakening market amid tenant (and residential) flight to the suburbs. In the aftermath of the Great Recession, developers, led by Dan Gilbert’s Bedrock, began slowly redeveloping Detroit’s architectural gems. Historic properties like downtown’s David Stott Building or New Center’s Fisher Building saw massive capital investments in recent years. Yet, many city residents and tenants find it hard to comprehend why rents on these new projects are so much higher than the rest of the market. The narrative of Detroit’s architectural gems — and the financial Jenga it takes to make them succeed — tells the story of the city’s modern-day renaissance. “To us, it’s a passion project,” says Brett Yuhsaz, Bedrock’s director of construction, who has worked on some of the city’s most notable historic rehabs, …

July 30, 2020

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