Market Reports

Chicago CBD Office Market in the Groove, Even Property Taxes Unlikely to Bring It Down

by Kristin Harlow October 17, 2019

Despite recent concerns of an imminent market correction, the Chicago central business district (CBD) still has room to run. There are many signs of optimism in the market, including continued healthy fundamentals and a wealth of redevelopment projects injecting new life and vibrancy into various submarkets. In the second quarter, downtown Chicago wrapped up its busiest quarter for office leasing since 2016. Additionally, the downtown office vacancy rate of 11.6 percent was the lowest it had been since 2016. To top it off, Chicago is experiencing historically high annual levels of net absorption, which potentially could put upward pressure on rents, and sublease space is relatively scarce. It’s hard to find stronger evidence of a robust CBD office market. Redevelopment projects Market statistics aside, noteworthy redevelopments have Chicagoans genuinely excited as they look forward to a new crop of influential spaces that will drive the next iteration of the Chicago office market. The real estate fairy tale that has real estate aficionados entranced — not only in Chicago but nationally — is 601W Cos.’ Old Post Office project at 433 W. Van Buren. More than 1 million square feet has already been leased at the 2.8 million-square-foot space, largely thanks …

October 17, 2019

Industrial Market Reports New Jersey Northeast Northeast Market Reports

Demand Outpaces Development in New Jersey’s Industrial Market

by Taylor Williams October 16, 2019

Across the Northeast, the high level of demand from retailers, food companies and transportation/logistics firms is outpacing the level of development and redevelopment in the industrial market, causing a severe shortage of product and skyrocketing rents across the region. At the center of this trend is New Jersey, situated in the heart of the Northeast’s Boston-Washington, D.C. corridor between Philadelphia and New York City. The demand for industrial space in New Jersey is driven by its strategic location and sophisticated infrastructure including air, freight, port and rail options linking it to the rest of the country. Despite the near-record level of development in the industrial sector, the state faces a product deficit that even the nearly 5.3 million square feet of space currently under construction cannot satisfy. In fact, 93 percent of the more than 21 million square feet that was developed in 2017 and 2018 has already been leased. Demand has pushed the average asking rent across the state to $8.41 per square foot, an all-time high. Moreover, asking rents are often not listed in new buildings or those under construction, many of which have rents as high as the low teens. Not listing the asking rents demonstrates how …

October 16, 2019

Florida Market Reports Multifamily Southeast Southeast Market Reports

Orlando Apartment Market Shows Long Runway for Future Growth

by Alex Tostado October 16, 2019

The Orlando multifamily market may have an appearance of being oversupplied and on shaky ground, but it is actually thriving and has a long runway for growth ahead. The Orlando MSA has an inventory of approximately 165,000 rental units and about 10,000 units under construction. While that new supply approaches historical high-water marks, the lack of inventory of entry-level, single-family homes and the complexion of the household formation leads us to the conclusion that we are undersupplied in the multifamily space. That being said, within the overall numbers there is likely an oversupply of Class A inventory and an undersupply of workforce housing. Vacancies are hovering in the 6 percent range and rent growth has slowed to around 3 percent after having stronger years. The undersupply of workforce housing is being exacerbated by the value-add business model being employed on most of the Class B and C buyers over the last five years, catapulting the average rents and straining the ability of the working-class to keep rent as a percentage of income at a healthy level. Overall, single-family homebuilding is at a 10-year high, but still well below the pre-recession days. Permits are also soaring, but the makeup of the …

October 16, 2019

Florida Market Reports Retail Southeast Southeast Market Reports

Orlando’s Retail Market is Thriving Both in the Core and Suburban Submarkets

by Alex Tostado October 14, 2019

Orlando’s retail market happens to be a really good representation of the national market. By every metric, Orlando is doing well as both rental rates and occupancy rates have been increasing. Orlando is one of the fastest growing cities in America, adding roughly 1,000 new residents each week. Tourism numbers continue to climb with 75 million visitors in 2018, according to Visit Florida. Downtown is experiencing an economic resurgence with a new collegiate campus (more on this later). As a result of the city’s overall growth, Orlando is also experiencing suburban growth with noteworthy developments such as Lake Nona. However, it can be overwhelming in the sense that the industry and consumer demands continue to evolve. There are all kinds of new and different concepts so to be a player in today’s dynamic market, retailers have to be innovative. While there is news of retailers shrinking in size or filing bankruptcy, it is important to keep up with the evolving market and create retail concepts that are relevant to today’s consumer’s demands. One consumer demand is retail tourism, which is a hotspot for retail development, especially with Disney Springs, the I-Drive corridor and theme parks in the surrounding area. What …

October 14, 2019

Market Reports Multifamily Oregon Western Western Market Reports

Tides Change in Portland as a Rising Multifamily Market Begins to Normalize

by Taylor Williams October 12, 2019

As brokers, we are often asked our opinion on the local market. The topic seems to have garnered even more interest than normal as of late. There is a multitude of variables investors will point to as they attempt to define what is happening in the market. The new legislation coming down the pipeline has probably caused the biggest challenges to the local multifamily market. Nationally, there are a lot of people worried about a recession because of the inverted yield curve. However, a recession hasn’t occurred every time the curve has inverted. There is no crystal ball to look at and make our investment decisions, but I think the outlook for Portland is still rosy. What appears to be happening is we are going from a rising market to a more normalizing market. In a rising market, prices increase, buyer demand increases, velocity increases, yield spread narrows and inventory moves fast as investors speculate on the market. In a normalizing market, prices become more realistic for in-place yield, there are fewer buyers in the market, velocity drops and the buyer/seller gap widens, which causes assets to sit or not sell. This seems to be the case here in Portland …

October 12, 2019

Market Reports Office Oregon Western Western Market Reports

Spec Office Development Enters Portland as Demand Increases

by Taylor Williams October 11, 2019

Portland’s office market is experiencing strong growth as it continues to benefit from an influx of Bay Area and Seattle tenants moving into the city. This is due to the relatively affordable rental rates and positioning between the two booming tech hubs along the West Coast. The city is seeing an increase of large tech tenants making their home in Portland, starting with Intel, which is Portland’s largest employer. Other companies, such a Genentech, Google, Oracle, Salesforce and many others have also taken up tenancy in the Portland Metro area. Seattle-based Amazon recently leased 83,995 square feet in Portland’s newest Class A office building, Broadway Tower, while Amazon’s AWS Elemental division leased 101,000 square feet in the former Oregonian headquarters, which is adjacent to Broadway Tower. The office market continues to perform well with a vacancy rate of 7.3 percent, beating out the 10-year average of 8.65 percent. All of these new companies making their way to Portland are creating substantial job opportunities for Portland’s ever-growing population. Portland is home to several large industry-leading companies, such as Nike, Intel, Columbia Sportswear and Adidas, which attract workforce talent across the world. This has helped spur the growth of Portland’s economy, which …

October 11, 2019

Market Reports Multifamily Texas Texas Market Reports

DFW Multifamily Lenders Remain Disciplined

by Taylor Williams October 11, 2019

The joint effects of heavy supply additions, rising construction costs and the possibility of an looming recession have multifamily lenders in Dallas-Fort Worth (DFW) exercising caution and restraint on new construction financing, even as jobs and people continue to flow into the metroplex and fuel demand for housing. The sector’s fundamentals are very encouraging. According to data from CoStar Group, the metroplex has added approximately 23,000 new units over the past 12 months. At just over 25,000 units, absorption during that period has more than adequate. Vacancy currently sits at 7.5 percent. In addition to the market adding 80,000-plus jobs and 100,000-plus people for several consecutive years, strong demand for Class B properties with value-add potential has kept rent growth moving forward. Concessions have begun to sprout up in a handful of submarkets that have seen particularly concentrated levels of new supply, but the metroplex still posted overall rent growth of 2.9 percent over the last 12 months, according to CoStar. In addition, lenders are keenly aware of the construction industry’s ongoing challenge to add skilled labor. Labor stress is creating longer construction timelines and stabilization periods. “Two years ago, we had subcontractors walking off our job sites because they …

October 11, 2019

Illinois Market Reports Midwest Midwest Market Reports Multifamily

Investors Should Take a Second Look at Opportunities in Chicagoland Multifamily

by Kristin Harlow October 10, 2019

Chicago real estate has been the subject of considerable pessimism from local and national investors due to a variety of factors. Much of this can be blamed on our unfunded pension liability, which is expected to significantly increase real estate taxes across the area in the coming years. Many institutional multifamily investors claim that their data says to avoid Chicago. Instead, they seek multifamily properties at far lower returns and cap rates in places such as Nashville, Austin and Denver. While I believe those cities offer phenomenal investments, investors across the country are missing an amazing opportunity to invest in Chicago apartment properties. Real estate taxes Everyone seems to agree that real estate taxes will rise significantly in Chicago in the coming years. Who pays real estate taxes? Homeowners, commercial landlords and some businesses. Noticeably absent from this list are apartment renters who are generally unaffected by an increase in real estate taxes. In fact, a significant rise in residential real estate taxes should create even more demand for rental apartments in the Chicagoland area as would-be homeowners shift into the rental pool. Effect of high tax rates Do Chicagoans leave the city because of high tax rates? The data …

October 10, 2019

Market Reports Southeast Southeast Market Reports Virginia

Human, Financial Capital Transform Richmond, One of the Country’s Oldest Cities

by Alex Tostado October 9, 2019

Strategically located within a day’s drive of 50 percent of the U.S. population, the Richmond metropolitan area has experienced immense growth driven by increased millennial demand, arterial connectivity, a pro-business environment, low cost of living and overall high quality of life, cementing its position as one of the leading Southeastern U.S. markets for employment and capital investment alike. The Richmond market’s strong trajectory is attracting interest from new to the market capital sources, including Brookwood Capital, TPA Group and Ashley Capital, as well as significant corporate investment from the likes of Dominion Energy, Kinsale Insurances and Altria Group. The industrial market in particular has seen robust growth with reported user demand doubling year over year to nearly 6 million square feet as of July 2019 — an all-time high according to Colliers International research. The strength of user demand has resulted in the market’s high bay vacancy rate receding to 5.6 percent and significant speculative and build-to-suit development, including Panattoni’s recently completed Virginia’s I-95 Logistics facility that was 100 percent preleased during construction to Brother International and Amazon. With no shortage of user demand, Richmond’s industrial market is expected to remain a highly desirable market to invest as noted in …

October 9, 2019

Development Market Reports Multifamily Southeast Southeast Market Reports Virginia

Apartment Developments Have Reached a New Peak in Richmond

by Alex Tostado October 7, 2019

With easy access to the James River, hiking trails and a burgeoning culinary scene, the Richmond region has won numerous accolades for its quality of life. The city remains a top destination for college graduates and young professionals, as well as families and retirees. Apartment demand is fueled by both a growing millennial population and increasing number of empty-nesters who are downsizing. Renters continue to seek accessible apartment communities that are highly walkable with comfortable amenities. As a result, both urban and suburban markets are experiencing an influx of rental demand. The Richmond apartment market continues to experience rising rental rates and interest from out-of-town investors. Apartment rents in Richmond have increased every year since 2012 but remain relatively affordable. The average effective rent reached $1,113 per unit after increasing approximately 3.8 percent over the past 12 months. Accordingly, developers and investors have responded to the steady demand and continue to be bullish on the Richmond market, especially for apartments. There are currently more than 4,000 apartment units under construction, marking a post-recession peak for construction activity. Apartment sales have accounted for more than 50 percent of all commercial real estate transactions during the first half of 2019. Additionally, institutional …

October 7, 2019

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