Market Reports

Will Social Distancing Lower Demand for Office Space in Northeast?

by Alex Patton June 9, 2020

The outbreak of the COVID-19 virus has led to an economic crisis that is forcing office users across the region to make tough choices to continue their operations. While New York has been the epicenter of the virus, reporting nearly a third of the more than 1 million confirmed cases in the entire country, companies across the region have been forced to furlough employees and reassess their short-term needs for space. The nature of traditional office work was already changing before the virus, as mobile technology has allowed more flexible collaboration from home and co-working offices. Lessons learned from the virus, including the need for social distancing, will carry into whatever market conditions follow. Some companies may desire larger office spaces to allow wider distances between employees, while other may forgo physical space in favor of the mobile model. As a result of the health crisis, office brokers are working to help their landlord and tenant clients find common ground as they tentatively move forward with leasing agreements. Northeast Real Estate Business recently caught up with three veteran brokers to gain their insights into how the virus has impacted their office markets. Below are edited responses from Joshua Levering, senior …

June 9, 2020

Market Reports Multifamily Nevada Western Western Market Reports

Reno’s Economic Expansion, Population Surge Keep Multifamily Developers Active

by Jeff Shaw June 8, 2020

By Kenneth Blomsterberg, Senior Managing Director of Investments, Marcus & Millichap Reno recorded robust job creation last year. This was bolstered by corporate growth at the Tahoe-Reno Industrial Center in Sparks, which houses Tesla’s Gigafactory, Apple and Switch data centers, in addition to a collection of fulfillment and distribution centers. The standout pace of employment growth supported the strongest rates of net migration and household formation this cycle, increasing local housing demand. With an average mortgage payment for a single-family home hovering around $2,100 per month throughout last year, leasing was the preferred choice among new residents despite rapidly rising rents across all apartment classes. In response, developers finalized 1,350 units in 2019, building on the 1,400 rentals delivered in 2018. Completions during the two-year span were concentrated in southern Reno neighborhoods and Sparks. These are areas where new supply has been well received, evidenced by the submarkets’ low 4 and mid-4 percent Class A vacancy rates as we entered 2020. Investors were also active during the past 12 months, motivated by solid economic growth and historically tight Class C vacancy. Significant demand was registered from outside value-add investors, with California-based buyers accounting for roughly half of total deal flow. …

June 8, 2020

Market Reports Retail Texas Texas Market Reports

Amid COVID-19, Texas Retail Owners Have Tenants’ Backs

by Taylor Williams June 2, 2020

As COVID-19 disrupts the American economy, healthcare system and way of life, retailers and restaurants — the commercial real estate users whose very profitability and essence thrive on social congregation — have already been pegged as immediate casualties of war. According to data from the U.S. Department of Commerce, total U.S. retail sales fell by 16.4 percent between April and March, well above the projected drop of 12.3 percent. And specifically within the Lone Star State, the Texas Restaurant Association issued a statement in mid-April warning that as much as 40 percent of the state’s restaurants could remain permanently closed as a result of the pandemic. The month of May has seen Texas emerge as a national trendsetter for reopening retail and restaurant businesses. Texas Gov. Greg Abbott granted restaurants and malls permission to begin reopening on May 1, followed by gyms, bars and bowling alleys during the week of May 18 to 22. All establishments were required to reopen at limited occupancies. But even prior to the pandemic, landlord and tenants in brick-and-mortar retail were already engaged in a vicious battle against e-commerce. The introduction of COVID-19 has not changed physical retailers’ need to be aggressive, but it has …

June 2, 2020

Market Reports Northeast Northeast Market Reports Retail

Retailers, Landlords Adjust to Pandemic

by Alex Patton June 2, 2020

The impact of COVID-19 has forced retailers, restaurants and service providers in the Northeast to improve their digital channels and adapt social distancing policies to continue serving customers. With retailers struggling to pay rent, landlords could find mutual benefit in reaching a compromise with existing tenants before temporary closures become permanent. Unfortunately, for many small businesses the virus has activated a Darwinian battle of the fittest among retailers with primarily physical channels. Meanwhile, e-commerce giants like Amazon are thriving in market conditions tailored to their already digital-focused business plans. Grocery stores and pharmacies have also found themselves to be arguably the most essential of services during the outbreak, as many have struggled to keep fresh food, toilet paper and other supplies on their shelves. But even after medical professionals and politicians give the “all clear” to reopen the economy completely, it is still unclear when consumers will feel comfortable returning to their favorite stores and restaurants. Northeast Real Estate Business recently caught up with three real estate professionals to gain their insights into how the virus has impacted their local markets. Below are edited responses from Ronald Dickerman, president and founder of Madison International Realty, which provides equity capital to …

June 2, 2020

Industrial Market Reports Midwest Midwest Market Reports Ohio

Low Vacancy Rate in Toledo Industrial Market Prompts Call for More Spec Space

by Kristin Harlow May 28, 2020

By Lynette Reichle, Reichle Klein Group On March 12, Ohio’s governor declared a state-wide order closing schools and gatherings of over 100 people. On March 15, he ordered all bars and restaurants to close dining rooms (but could maintain carryout and delivery) with further closings on almost a daily basis. Finally, the stay-at-home order came on the 22nd. As of the writing of this article, it is difficult to estimate the full effects of the COVID-19 pandemic and what the moves our government has taken to protect us will have on our real estate markets. Prior to the spread of the coronavirus, Toledo’s industrial real estate market had been running at unprecedented high levels in both leasing activity and new development for the past several years. While the beginning of this year was decidedly quiet compared with the fourth quarter of 2019, we had every reason to expect strong demand for industrial properties through the remainder of 2020. In fact, the Toledo market still suffers from an inventory problem; virtually every project that was built last year was a build-to-suit. Local and regional developers have yet to develop enough of an appetite to build speculatively. Further, no one in the …

May 28, 2020

Fourth-Street-Distribution-Center-Rancho-Cucamonga-CA

California Industrial Market Reports Western Western Market Reports

Inland Empire Continues to Be an Industrial Market Leader

by Jeff Shaw May 26, 2020

By David Burback, Senior Vice President and Managing Director, Kidder Mathews A 1.4-million-square-foot distribution center in Rancho Cucamonga that was formerly owned by Big Lots, recently sold for $48 per square foot on the land value. The new owner plans to replace the existing building with a new state-of-the-art distribution center. By every metric, the Inland Empire continues to be the national leader in the industrial real estate sector. The area enjoys the advantage of being just 40 minutes from the two largest and most active ports in the country. Driven by the strategic expansion of supply chains and the rapid emergence of ecommerce, the Inland Empire remains the most robust industrial market in the country. Annual new construction is approaching 25 million square feet, and the absorption of space is in equal proportion. Rents have increased by 65 percent, sales prices have increased by 80 percent and land prices have more than doubled over the past five years, according to our research. There seems to be some moderation from these double-digit, year-over-year increases as we move into 2020. Yet, the market remains active on all fronts – user, developer and investor alike. The most active sector of the industrial …

May 26, 2020

Kansas Market Reports Midwest Midwest Market Reports Mixed-Use

Building Momentum: How Public-Private Partnership Revitalized Downtown Topeka, Kansas

by Kristin Harlow May 21, 2020

The city of Topeka has built significant momentum in the five years since its downtown revitalization. Capital investment and strategic planning at the city’s center had a reverberating effect across town, from the expansion of vocational-technical training to the growth of Kanza Fire Commerce Park. Public-private partnership The year 2015 was pivotal with a $9.4 million public-private investment in infrastructure and amenities along Kansas Avenue, the main downtown thoroughfare. The city invested $5.8 million in roadway, sewer and streetscape infrastructure. Meanwhile, private businesses sponsored pocket parks with statues, benches and fountains. The Downtown Topeka Foundation brought another $4 million in private funding to the effort through its “Imagine Downtown” capital campaign. Since that day, local investors like AIM Strategies LLC have purchased more than 25 buildings on the avenue for gradual restoration into thriving businesses like Iron Rail Brewing, Cyrus Hotel and The Pennant restaurant, bowling alley and vintage arcade. Popular annual festivals and parades expect to see even more traffic after the unveiling of the next phase of major downtown investment. Evergy Plaza With 30-foot digital screens and the 50-foot CapFed On 7th Stage, Evergy Plaza was developed as a hub for community and a catalyst for business. The …

May 21, 2020

Market Reports Office Texas Texas Market Reports

For Texas Office Owners, Understanding Best Operating Practices Is Critical Post-COVID-19

by Taylor Williams May 19, 2020

By Cody Payne, senior vice president, Colliers International. As strong job growth over the past decade has brought more and more investors to Texas, many of these buyers have looked to office product due to the appealing going-in returns that the property type offers. In addition, many cross-product owners look at office investing to make higher returns outside of their current portfolios. As buyers look toward the office market, there are many factors that need to be considered before making an informed decision. Along with these basic considerations, the impacts of COVID-19 on real estate investing are also important to understand when looking at an office deal. The Dallas-Fort Worth (DFW) market in particular has experienced an influx of cross-product buyers from other asset types such as retail, multifamily and self-storage during this cycle. The higher rate of return is the primary catalyst behind their motivation to purchase office investments. All asset classes are different and so are their opportunities, whether immediate or long-term. Understanding what sets office apart from other types of commercial investments is key to a successful operating strategy. Hidden Costs of Ownership One important factor to consider when buying office properties is that there are many …

May 19, 2020

Market Reports Nevada Office Western Western Market Reports

Reno Office Market Capitalizes on Relocations from Places Like California

by Jeff Shaw May 18, 2020

By Scott Shanks, principal, Dickson Commercial Group The Reno/Sparks office market is in a unique position: caught in the throes of a rapidly expanding commercial marketplace and aided by an ever-increasing population base. The most vibrant commercial real estate sectors in our area are industrial and multifamily, and they have been for decades. The office market is also seeing new companies, new developers and new buildings. For the first time in many years, we will see a true speculative office development begin construction this summer. McKenzie Properties will be going vertical with its Skypointe development. Tolles Development Company is in the middle of completing its Rancharrah project, which contains 64,000 square feet of retail space and 36,000 square feet of office space. Last, but certainly not least, Reno Land Inc. and its partner Lyon Living have started the first phase of their Park Lane development, a 46-acre, master-planned development that will include office, retail and multifamily. This new development shows the Reno/Sparks area is on the move, and fast. The area provides for a quality of life that is difficult to find when combining Lake Tahoe, the Sierra Nevada mountains and the Truckee River, which bifurcates the city. In comparison …

May 18, 2020

Florida Industrial Market Reports Southeast Southeast Market Reports

Miami-Dade County’s Industrial Market Sees Healthy Activity Amid COVID-19 Headwinds

by John Nelson May 18, 2020

The Miami-Dade industrial market saw a prolific year in 2019, followed by a healthy, yet slower first quarter in 2020. PortMiami’s record-shattering fiscal year 2019, with cargo operations posting 1.1 million twenty-foot equivalent units (TEUs) and cruise passengers totaling a world’s best 6.8 million passenger total, correlated with the robust warehouse and distribution demand the market experienced throughout 2019. There was a 9 percent uptick in South Florida industrial investment sales, and developers delivered 5.6 million square feet of product to Miami-Dade County. Industrial completions in 2019 exceeded the all-time high set in 2018, and the local inventory expanded by nearly 3 percent. In first-quarter 2020, as the coronavirus pandemic began to unfold and cause widespread global challenges, the flow of cargo continued to meet essential needs from medical supplies to food, while all cruise lines voluntarily ceased sailings. In addition, after a strong start to the year, COVID-19 caused construction to pause and dimmed demand from space users that service hard-hit industries such as tourism and brick-and-mortar retail. The unprecedented boost in e-commerce, grocery, and medical supply distribution currently drives the industrial sector. Leasing remains solid despite roadblocks Overall industrial vacancy in Miami-Dade is at 4.33 percent, up from …

May 18, 2020

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