The Denver office market remains strong. Vacancy continued to compress in 2019 as rental rates and sale prices forged ahead to the highest levels in history, allowing landlords and sellers to remain in control of the market. Class A office transactions accounted for $1.7 billion in office sales in Denver Metro over the past year, versus $1.2 billion of Class B office sales, with average market cap rates of 6.6 percent and 7 percent, respectively. Interestingly enough, vacancy rates are higher in Class A product at 11.7 percent versus 10.1 percent in Class B. Sale prices and rental rates continued to grow in both classes. However, there was a significant difference in rental rate and sale price numbers as Class B lagged by about 20 percent to 25 percent in both categories. With a potential downturn looming, it begs the question, is Class A or Class B office a better long-term value? Considering rental rates and income are a direct derivative of what investors will pay for office buildings, investors must ask themselves whether rental rates are sustainable. It is apparent that the “chase” for the cool, hip, new Class A office is real, but the question is whether Class …
Strong gains in population and travel spending highlight Colorado as an increasingly popular place to work and visit, boosting demand for hotel rooms in the state. Leisure travel spending has climbed by 28.9 percent over the past five years, surpassing $22 billion in 2018. More than half of those funds were spent on commercial lodging. Business travel is also bolstered by companies either entering or expanding in the state. These demand factors translate to hotel occupancy and revenue metrics that have consistently exceeded the national average since 2014. Colorado’s November annual average occupancy rate rose 90 basis points year over year to 68.1 percent, compared with the national metric that held flat at about 66.2 percent. Colorado’s annual average RevPAR grew 3.8 percent over that same span, more than triple the U.S. pace, to $98.48. Robust gains in both occupancy and RevPAR demonstrate how demand for Colorado hotel rooms has outpaced numerous supply additions. The state’s inventory of hotel rooms has expanded by about 13 percent over the past five years, with 4,226 hotel rooms under construction. More than half of the keys underway will be delivered in Denver and Colorado Springs. Notable new projects in the Denver metro include …
Retail landlords want to fill space, especially given that large gluts of it have been returned to market as store closures have accelerated, a move that has coincided with entertainment users that want to expand their footprints. But the logistics of bringing entertainment concepts into retail spaces — particularly vacated junior or big box spaces — are very complicated. This holds particularly true for entertainment concepts that involve movies and bowling. Ceiling heights and column spacing, for example, prevent many spaces from being repurposed cost-effectively for entertainment uses like bowling alleys and theaters. In addition, lease terms for these deals are often based on traditional retail metrics like sales per square foot. According to Howard Samuels, president of California-based advisory and brokerage firm Samuels & Co., there is a strong disconnect between entertainment uses and conventional retail real estate that has yet to fully integrate experiential uses or “location-based entertainment (LBE).” “Entertainment retail as a backfiller of boxes is a misnomer,” says Samuels, whose firm specializes in entertainment transactions. “Those users typically don’t want fixed walls and need higher ceiling heights. Most location-based entertainment concepts are very challenging to design, develop, open and operate. These concepts have very specific criteria …
The Indianapolis industrial market somehow heated up even more throughout 2019, setting several all-time records along the way and setting the table for another strong year in 2020. Landlords and tenants showed just how strong the market remained throughout 2019, with absorption across all industrial property types besting its previous record by nearly a third. A total of 11.4 million square feet was absorbed throughout the market in 2019. That blew away what was a record at the time — 8.9 million square feet absorbed in 2018. Tenants were active all throughout the market, with 17.3 million square feet of space leased over the course of the year. That’s up from just under 14 million square feet that had been leased in 2018. While all sectors of the market attracted plenty of attention, the southwest and northwest Indianapolis markets saw the most action, with 5.3 million square feet leased in the southwest, and another 5 million square feet leased in the northwest. The activity applied to both small and large tenants, with new projects all over the metro leasing up quickly. The city’s largest deal was a 933,000-square-foot lease to Energizer at Franklin Tech Park within a year of Sunbeam …
Manhattan has long been one of the most competitive retail markets in the country due to two characteristics of its population: an incredible density and high incomes among residents and workers. The Bureau of Labor Statistics reported that the average weekly wage of Manhattan’s private sector workforce was $3,153 in the first quarter of 2019, much higher than the national average of $1,184 per week. In addition to its residential base, tourism plays a strong role in Manhattan’s retail sales. Marketing agency NYC & Co. projects that New York City will host 67 million visitors this year, up from approximately 65 million in 2018. While these demographic factors have kept Manhattan’s brick-and-mortar retail market somewhat insulated from e-commerce and other factors affecting the industry, the borough has not been completely shielded from the woes affecting the retail industry. Pocket-sized technology offers immediate access to everything from groceries and apparel to cars and construction materials, forcing brick-and-mortar retailers to get creative with their shopping experiences in order to avoid closing stores. Manhattan remains a top-tier market that commands rents above the national average. But the net result of e-commerce and asking rents that don’t match operating costs is a shift in …
Much like the broader U.S. economy, the commercial real estate markets of Texas continue to display strong fundamentals that should fuel another year of robust demand for space, elevated valuations of commercial properties and disciplined, yet confident lending for new development. So say the majority of commercial brokers, developers and owners who responded to Texas Real Estate Business’ ninth annual forecast survey. These professionals did acknowledge that uncertainty during presidential election years — particularly when the current president is facing impeachment proceedings — can undoubtedly rattle markets. Ultimately, however, industry professionals believe that the dual drivers of job and population growth, coupled with record levels of capital seeking placement in Texas markets, are strong enough to overcome geopolitical concerns such as the United States-China trade dispute and a stark partisan divide in Washington, D.C. “Job and population growth are both indicators and driving forces for resiliency, and behind the job and population growth are systemic organizational re-allocations of capital, mission-critical operations and human resources into the Texas markets,” says Aaron Johnson, director of capital markets in JLL’s Dallas office. Johnson adds that in Dallas, the arrivals of corporate giants like Toyota, Liberty Mutual and McKesson Corp. illustrate these companies’ belief …
The surge of momentum happening in Miami’s office market is undeniable with the metro emerging as a new international hub for startups and regional companies alike. Fueled by a multilingual workforce and easy access to Latin America and the Caribbean, Miami’s status as an international gateway is drawing the attention of office landlords and investors from around the country, as well as a wide variety of office users. Investors like Starwood Capital, Appaloosa Management and Icahn Enterprises are leaving their traditional New York and New Jersey locations to come to Florida, one of just seven states that do not impose state income tax. Paired with favorable weather and a high quality of life, Miami is a desirable destination for businesses and its workforce. Entrepreneurial activity in the region is also helping to fuel the office market, as the number of foreign business owners who choose to relocate to Miami and set up shop continues to grow. Hot submarkets Miami’s Wynwood neighborhood has quickly earned the reputation as one of the city’s up-and-coming places to be. The district is poised to become the next 24/7 hotspot thanks to a healthy pipeline of residential development underway that will support office growth in …
Orange County continues to be a diverse marketplace for commercial real estate as we reflect back on 2019. Thanks to a growing and varied workforce made up of highly skilled and educated workers — with tech and life sciences at the forefront of transactions — the county’s economy remains strong. Looking ahead, Orange County’s local market is very resilient, despite the fact that economy leasing volume has slowed as tenants are focusing on space-efficient decisions. This market continues to remain stable thanks to a number of existing buildings that have been or are currently under renovation to meet the demand of companies that are branching out from traditional office space. A few of these repositioned properties include the Launch, the Met, 2722 Michelson Drive and the Press, which is currently under construction in Costa Mesa. Overall vacancy in the county has been 13.8 percent, while overall asking rental rates are $2.95 per square foot (full-service gross) with Class A rates sitting at $3.23 per square foot. Some submarkets are home to the majority of this activity, including the Airport area and South Orange County due to ideal geographic locations for businesses and new office development. Of course, fundamentals vary by …
Orange County’s multifamily housing market remained exceptionally strong throughout 2019. The average asking rent closed the quarter at $2,055 per unit, up 3.3 percent from the fourth quarter of 2018. This was the highest asking rent on record, up 34.5 percent from the prior peak reached in the third quarter of 2008. The Central submarket saw the largest year-over-year rental rate increase, with the asking rent there rising 3.8 percent to $1,920 per unit. This quarter, the Irvine submarket also saw its average asking rent adjust a bit, down 0.7 percent from the prior quarter to $2,446 per unit as existing inventory competed with new construction added to the market. However, the average rent in Irvine is up 3.2 percent from last year. Completed construction has pushed vacancy up. The total vacancy rate in Orange County this quarter registered 4.8 percent, up 30 basis points from the prior quarter, steady from the fourth quarter of 2018. Four significant projects totaling 2,567 units were completed this quarter. This includes Promenade at Irvine Spectrum with 1,781 units; SkyLoft, a 388-unit development in Irvine; the Charlie Orange County, a 228-unit complex in Santa Ana; and the Murphy, a 170-unit complex in Irvine. Annual …
Tony Schmitz, vice president and senior project manager at Dallas-based Hoefer Wysocki, has been leading the architecture and design firm’s sustainability initiatives across all sectors. With an academic foundation in environmental design, Schmitz has most recently taken his green building and design expertise to Collin College, in McKinney, Texas. Sustainability features of the up-and-coming campus include improvements in the areas of water conservation, design strategies and efficient technologies. At Collin College, Schmitz has made strides in the area of resource use reduction, primarily for water. As our most precious natural resource, water usage has recently come under scrutiny in the city of Dallas, where the city council unanimously passed the 2019 Water Conservation Plan. All of Schmitz’s projects have achieved or surpassed their goal of 40 percent water reduction for the last five years. This figure has become a standard for Schmitz, with a goal to increase to 50 percent water reduction and 100 percent for non-potable water reduction. Schmitz, spoke to Texas Real Estate Business about the process of integrating sustainability into all facets of the building industry, as well as the larger role design plays in the construction of highly adaptable and efficient facilities. His edited responses are …