Market Reports

Orange County’s Retail Transaction Volume, Consistency Will Continue in 2020

by Taylor Williams January 24, 2020

Retail transaction volume was strong in January as the shorter 2019 holiday season created a tight window for year-end closings, residual transactions pushed into the New Year and gave 2020 an early jump on what should be another great year. Total transactions in 2020 should continue to build from the big start. The massive transaction volume from the second half of 2019 — more specifically, a glut of fourth-quarter sellers — has produced a wave of investors needing to complete 1031 exchange purchases in the second and third quarters of 2020. By comparison, 2019 featured a slower than typical start due to a combination of elevated interest rates and residual investor hangover from the equity markets debacle of the fourth quarter of 2018. Our sense is that 2020 will benefit from enormous velocity, driven by private investor demand and seller willingness to meet market expectations in favor of quicker transactions as fears of the late cycle, election turmoil and international unrest grow. Further evidence of seller’s alignment with market expectations, trailing available data has shown the asking price to sale ratio narrowed from nearly 12 percent in first-quarter 2019 to 3 percent in fourth-quarter 2019. This brought the bid/ask more …

January 24, 2020

Market Reports Midwest Midwest Market Reports Missouri Multifamily

Capital Continues to Flow to the City of Fountains

by Kristin Harlow January 23, 2020

Private capital delivered several new investors to Kansas City in 2019 and the new year will undoubtedly see plenty of competitive bidding and elevated pricing. Overall, the investment market continues to be supported by Kansas City’s diversified economy, with job growth weighted on the Kansas side at 2.7 percent over Missouri’s 1.1 percent (as of August 2019). Targeting talent Kansas City’s low cost of living, educated workforce and business-friendly environment attracted several coastal employers to the Heartland. This trend will likely continue in 2020. The U.S. Department of Agriculture announced the relocation of two research agencies from Washington, D.C., representing a landmark win with 525 total jobs. Other wins in 2019 included Honeywell’s centralization of its operational offices from Seattle to Kansas City; Niagara Bottling moving 50 jobs from California; Hostess Brands relocating a distribution center from Illinois; and CarMax announcing 300 jobs for its Customer Experience Center after completing a nationwide search. Annual employment growth (as of August 2019) delivered nearly 20,000 jobs with additions in healthcare, biotech and business services, substantiating the selling point of a diversified economy capable of weathering future storms. Employers have found their fit, but more importantly, their talent is seeing reasons they can …

January 23, 2020

Market Reports Massachusetts Multifamily Northeast Northeast Market Reports

Selling Affordability is Crucial in Metro Boston

by Taylor Williams January 22, 2020

With a pressing demand for new housing in the Boston area and communities struggling to provide affordable options to mitigate the effect of rising prices, the barriers to providing new affordable multifamily properties remain significant. Here in the Boston region, the scale of the problem is immense. Boston’s Metropolitan Area Planning Council recently declared a need for 185,000 new units of housing over next 10 or so years in the 15 cities and towns that comprise the inner core of the metro area — just to keep up with expected growth. Some of the integral variables and processes associated with multifamily development, like land acquisition and construction costs, can be tangibly quantified. But harder to define is the often unpredictable process of securing public approvals, wherein a development team must navigate the sometimes contentious ground between neighborhood groups and regulatory agencies. Locally Scaled Solutions In 2018, Related Beal completed The Beverly, a 239-unit, income-restricted project in downtown Boston, capturing headlines that heralded this significant model for addressing housing affordability in the region. Landmark projects like The Beverly represent great strides toward addressing the housing affordability crisis and have helped raise the awareness of efforts to develop real solutions to the …

January 22, 2020

Market Reports Retail Texas Texas Market Reports

Texas Malls Receive Facelifts, New Life

by Taylor Williams January 21, 2020

Virtually every American mall that is struggling owes its woes to some combination of e-commerce growth and millennials’ preference for experiential retail. But the simple fact remains that e-commerce still only accounts for about 10 percent of total retail sales, according to the U.S. Department of Commerce. And while store closures are still running rampant, new retailers are rapidly backfilling those shuttered spaces and introducing new concepts to maintain consumer appeal. To that end, projects that convert enclosed malls into open-air destinations that feature local or first-to-market retail concepts, more food and beverage options, open spaces for communal events and distinct entertainment (and other) uses represent paths to salvation. These projects offer developers and landlord opportunities to restore their malls as bastions of shopping, dining and entertainment — and to address unfulfilled needs within the local retail market. While every project is different in terms of how the tenant roster is revamped and how much construction is required, all mall redevelopments share the goal of returning to relevance within the community. In this piece, we highlight four Texas malls that have or are undergoing extensive redevelopments to boost occupancy, sales, foot traffic and prestige in the eyes of consumers. Park …

January 21, 2020

Market Reports North Carolina Office Southeast Southeast Market Reports

Triangle’s Office Vacancy is up Due to New Supply, but Job Growth is in a Good Spot

by Alex Tostado January 20, 2020

The Raleigh-Durham region’s strong job growth is fueling sustained demand from tenants, keeping the office market firmly in favor of landlords despite a notable increase in construction activity in recent months. According to the Bureau of Labor Statistics, the region added 24,200 nonfarm payroll jobs between October 2018 and October 2019 for a growth rate of 2.5 percent. Unemployment rose slightly from 3 percent to just 3.1 percent during this time as nearly 36,000 people entered the local labor force. Raleigh-Durham continued to witness economic development wins in 2019 as well. Major job announcements came from office-using tenants such as Xerox (600 jobs), Q2 Solutions (700 jobs), Parexel (260 jobs), AmeriHealth Caritas (300 jobs) and HZO (500 jobs). In its recently published Emerging Trends in Real Estate report, the Urban Land Institute and PricewaterhouseCoopers (PwC) named Raleigh-Durham as the No. 2 market in the United States to watch for overall real estate prospects in 2020. The region’s quality of life, robust population and job growth and highly educated workforce are supporting sustained business expansion and healthy leasing fundamentals across all asset classes. Raleigh-Durham’s office market continues to experience the most landlord-favorable conditions since the dot-com boom in the late 1990s. …

January 20, 2020

Arizona Market Reports Multifamily Western Western Market Reports

Phoenix’s Growth Keeps The Multifamily Sector Hot

by Taylor Williams January 18, 2020

Stemming from the ashes of 2009 — a decade later and a decade wiser — Phoenix and the surrounding Maricopa County has exploded to outpace the national averages in both rent and job growth. In fact, the entire State of Arizona is booming in population growth and job production. The Census Bureau just released its American Community Survey “One-Year Estimates” in which Arizona was named the fastest-growing state in the nation with a year-over-year growth of 2.2 percent. The Phoenix MSA also experienced a 2.6 percent increase (as of October 2019) from the prior year ranking when it came to the largest job gains in the education and health services industries. The state also boasts a tax-friendly environment, pro-business governor, competitive workforce and one of the youngest median age populations in the country at 35.4. This has attracted a broad array of financial services, healthcare, manufacturing and tech companies that have been moving to Phoenix in droves, making Phoenix a diversified and balanced economy that is different than years’ past. What does all this mean? The need for housing is paramount and multifamily investors are reaping the benefits. Phoenix is able to absorb the roughly 7,500 new units developers are …

January 18, 2020

Arizona Market Reports Retail Western Western Market Reports

Employment, E-Commerce, Experiences Drive Phoenix’s Retail Market

by Taylor Williams January 17, 2020

Ecommerce and generational shifts in spending patterns have spawned discussions regarding the health and future of retail. However, Phoenix has proven to be one of the most resilient and dynamic retail markets in the country. This resilience is a product of corporate and residential migration from gateway markets due to increasing regulation and costs of living. Maricopa County has been named the fastest-growing county in the country for three years straight by the U.S. Census Bureau, and is forecasted to add another 500,000 people by 2023. This population and income influx has the Phoenix retail market bucking national trends. Consumer sentiment remains at peak 2006 levels despite political uncertainty, without the artificial run-up in home values we experienced leading up to the financial crisis. Average vacancy rates have lingered in the high 6 percent range with active retail construction remaining tempered at around 1 million square feet. This is compared to more than 11 million square feet in 2006. Vacancy may fall into the mid- to high 5 percent range over the next two years — where it was in 2006 — barring any extreme economic events. Triple-net rents have averaged $16.30 per square foot in 2019 and have grown …

January 17, 2020

Affordable Housing Market Reports Multifamily Texas Texas Market Reports

Investor Demand for Texas Affordable Housing Intensifies

by Taylor Williams January 17, 2020

The declining affordability of housing has become a worsening problem in many areas throughout the country, and Texas is no exception. Despite talk of a cooling housing market, home prices in both North and Central Texas are hitting high-water marks, making the dream of homeownership less likely to become a reality for many people. According to the Austin Board of Realtors, median home prices in Austin hit an all-time high in May, topping $400,000. As for North Texas, a report from ATTOM Data reveals that as of the third quarter, the median home price in Dallas-Fort Worth (DFW) was 73 percent above the market’s pre-recession peak. As home prices skyrocket in the these markets, apartment rental rates are also experiencing upward pressure. The Austin Affordable Housing Corp., a nonprofit subsidiary of the Housing Authority of the City of Austin, reports that Austin is now the most expensive rental market in Texas. In addition, The Dallas Morning News reported in August that while Dallas-area apartment rents are growing at a slower rate than the national average, these figures rose 3 percent from a year earlier. Rising apartment rental rates in these markets are resulting in a greater percentage of cost-burdened renters …

January 17, 2020

Industrial Market Reports Midwest Midwest Market Reports Missouri

New Tenants, Developments Signal Strength of Kansas City Industrial Market

by Kristin Harlow January 16, 2020

The Kansas City industrial real estate market recorded very healthy maturation in 2019. When surveying the strength of our market, we typically consider how many new tenants or users entered the market with major investments and how many development deals were announced. Diving into the analytics, it is exciting to see some disciplined characteristics of a solid industrial market, including a slight slowdown in the pace of market expansion, a diverse group of business types demanding space, and the swift adjustment to appropriately balance supply and demand. Users entering the market The highlight reel of industrial deals in 2019 was impressive. Notable transactions include a new 420,000-square-foot water bottling plant for Niagara in South Kansas City, a 2 million-square-foot logistics hub expansion for Kubota Tractor Corp., and a 765,000-square-foot food distribution center for Hostess Brands. Additionally, Walmart just announced plans for a 1.8 million-square-foot distribution center to add to its existing three distribution centers in the area. A variety of new auto suppliers have absorbed over 1 million square feet of space to serve the Ford and General Motors automotive plants. I’m often asked what industries are moving to Kansas City and my response is all of them. The type …

January 16, 2020

Market Reports Northeast Northeast Market Reports Office

Office Landlords in Northeast Offer an Array of Amenities to Attract Tenants

by Taylor Williams January 15, 2020

In the largest office markets of the Northeast, landlords are competing to attract valuable corporate tenants by providing the highest quality work-life balance for the region’s talented workforce. The Boston, New York and Philadelphia office markets are among the most competitive in the country. While factors like salary, commute time and personal fulfilment remain important in deciding where to work, employees are now placing more emphasis on amenities and work-life balance in their final decisions. Consequently, employers are making a point to meet those demands by investing in properties with convenient access to those amenities, in particular fitness, dining and transit. According to Colliers International, Class A office asking rents in Boston rose 9.9 percent in the third quarter of 2019, commanding $100 per square foot in the city’s hottest markets. Lauren Vecchione, senior vice president in the Boston office of Colliers, says that landlords have to provide competitive amenities if they want to command and achieve the asking rents in submarkets with the strongest demand, including the Seaport, Financial District, Back Bay and Cambridge’s Kendall Square. “Larger and smaller tenants alike are focused on finding efficient spaces that allow them to build out a creative office experience for their …

January 15, 2020

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