San Diego continues to exhibit very strong fundamentals with a healthy and diversified economy, as well as a continued shortage of housing supply. The unemployment rate of 3.3 percent is below both the California and national unemployment rate. Tourism, biotech, healthcare, education, military/defense, drone manufacturing, business services, software and other high-tech industries have made San Diego a magnet for venture capital and other business investment, creating the jobs of the future. Amazon, Apple and several other high-profile technology companies have also announced expansions in San Diego. The region attracted $744 million in venture capital this past year alone. Local housing policies, which have been unfriendly to new development, have made it very expensive to build, thereby perpetuating the shortage of housing. This dynamic has continued to bode well for multifamily investment in the region. CBRE’s Apartment Market Report for the end of the second quarter illustrates the following year-on-year changes from 2018: • The vacancy rate moved 9 basis points to 3.6 percent • Rental rates increased by 2.9 percent • New construction deliveries dropped by 14 percent • Sales volume included 95 transactions with a total dollar volume of $476 million (compared to 32 sales transactions last year that …
San Francisco has been a boom-and-bust market since the Gold Rush. The current intense scrutiny of the yield curve, combined with the stock market’s recent erratic behavior, has sent warnings of the next looming recession. Just how will this affect the office market? Fortunately for the Bay Area, not much. Today, several key factors insulate San Francisco from a severe downturn, unlike past cycles. Among them are Proposition M and a concentration of venture capital, highly skilled talent and some of the world’s largest companies. Since 1986, Proposition M has limited the amount of office development the city will authorize in any given year. The program aims to guard against typical boom-and-bust cycles. The San Francisco office market only includes 85 million square feet, as opposed to Manhattan or Houston, for example, which comprise 400 million and 240 million square feet, respectively. Manhattan currently has 12.4 million square feet of office space under construction, while San Francisco has 3 million square feet in the pipeline. The entitlement limit under Prop M has been reached, meaning no additional new projects can be approved until October when another 950,000 square feet will be allocated for the next year. At first glance, these …
The St. Louis industrial market continues to rally after posting 22 straight quarters of positive absorption. Record leasing activity and historically low vacancy have put the region on pace to deliver another 6.5 million square feet of Class A industrial space in 2019. This is in a market that averages deliveries of approximately 2.5 million square feet annually. Current drivers engendering this industrial activity include the following. Discipline Developers in St. Louis have long been known for their disciplined approach to building. Vacancy in a stable market hovers near 7 percent for the region. The vacancy rate for industrial space leading into the third quarter was 5 percent, up slightly from the previous quarter, according to CoStar. Continued speculative development, particularly in the Metro East, added to the increase. This, coupled with a large vacancy left in Lakeview Commerce Center by World Wide Technologies as it shuffles into a new 2 million-square-foot facility in Gateway Commerce Center East, were the most evident culprits. Expect vacancy to uptick slightly again in the third quarter as speculative deliveries by NorthPoint Development at Gateway Tradeport along with Exeter in Gateway Commerce Center come online. E-commerce No discussion surrounding the industrial market would be …
Robust employment and population growth are fueling Philadelphia’s renaissance and propelling the region’s office sector to new heights. The lack of new office construction over the past decade has driven rents to record levels and is creating value-add acquisition opportunities throughout the region. With a tight labor market and talent acquisition at a premium, companies want to lease state-of-the-art workspaces that attract future employees. Key features of these spaces include access to public transit and surrounding retail and restaurant options. Limited availabilities within this product type are driving rents for quality space, as well as the development pipeline for new office buildings. However, after years of little construction, several proposed office buildings in both downtown and the suburbs are close to breaking ground and creating the next crop of new office inventory for the region. Record Rents In the second quarter of 2019, average asking rents for office properties in downtown Philadelphia hit a record $31.33 per square foot, a 20 percent increase over the past five years. This growth has been driven by out-of-town investors acquiring buildings and raising rents, as well as by growing demand for downtown office space, both from new in-bound demand and organic growth from …
A persistent need for a tenant mix that is resistant to e-commerce and which facilitates a unique, authentic experience is prompting owners of older retail centers and malls to assume high levels of risk and redevelop their properties. While there can be a plethora of non-tenant-related factors that spur redevelopment projects — the basic need to charge higher rents, the structural and aesthetic deterioration over time, a desire to restore a public perception of vibrancy — the ultimate success of almost every retail redevelopment project hinges on the tenancy. For shopping centers, this typically entails adding more restaurant users and other retail categories that offer a critical service or a unique shopping experience, as well as integrating open recreational spaces. For malls, adding entertainment uses is becoming increasingly important, particularly when an anchor space has been vacated or sold back to the owner. When paired with a telltale sign like sluggish sales and/or negative rent growth, any of the aforementioned factors can be the catalyst for pulling the trigger on a redevelopment project. But whatever the impetus for the project, without marketing to and leasing tenants that can afford market-rate rents, align with the surrounding demographics and drive foot traffic throughout …
The multifamily real estate landscape is booming across the Baltimore metro with exciting new development popping up throughout this burgeoning market. Luxury apartment developers have focused their attention on Baltimore City’s urban waterfront neighborhoods by creating a distinct live-work-play environment. At the same time, suburban developers have focused their efforts along the Interstate 95 corridor, drawn to affluent neighborhoods supported by top ranked school districts. While an increase in development has led to a rise in urban vacancy rates, the influx of tech startups, coupled with the city’s employment drivers — medical and educational institutions — has helped to stabilize these rates. TIF investment has also helped paint a bright future in Baltimore for mixed-use ventures like the East Baltimore Development project around Perkins Homes and the 250-acre Port Covington development in south Baltimore. Both projects are anticipated to support new multifamily housing in these areas. Development boom Vacancy rates have increased following a nearly 20,000-unit spike in new construction from 2014 to 2018. More than 3,900 new units were completed in 2018 alone, and another 6,400 units were underway at the start of 2019. The boom is expected to taper off in 2020 and has already caused a decrease …
Northern California’s multifamily market has a strong development pipeline right now, but after 2020, it drops off dramatically. There is an increasingly toxic political climate in California, with measures like AB 1482 and the revival of Prop 10, which will likely throw a wrench in any planned development beyond 2020. Some of the most notable projects currently underway include Brooklyn Basin’s Orion in Oakland. The first 241 units out of a planned 3,700 have been completed. Brooklyn Basin is a $1.5 billion project that is reshaping the Oakland waterfront and transforming the area into a new, vibrant neighborhood. In San Jose, the area around the proposed Google downtown campus is also on everyone’s radar. The majority of current Bay Area development is concentrated in Oakland and Santa Clara County, with the latter currently experiencing a 4.57 percent vacancy rate. Market fundamentals, including proximity to jobs and a more welcoming environment toward multifamily development have attracted developers and renters alike to these two places. Developers Carmel Partner, Hanover and Holland have been particularly active in Oakland, as of late. Current conditions in Northern California have produced a tenant’s market, with an abundance of new units coming online at once. We are …
Developers of self-storage properties in major Texas cities are consciously putting the brakes on new construction as they wait for excess supply to be absorbed and for positive rent growth to return to the market. The market has been moving in this direction for some time. While property owners have generally maintained occupancy rates that meet pro forma thresholds for profitability, rent growth has been and will likely remain stunted. Supply growth has led to competitors cannibalizing each other’s market shares. In addition, ever-rising construction costs and a dwindling inventory of buildable sites are also governing the pace of new self-storage development. While certain pockets of developable sites still exist here and there, lenders and equity providers have also taken note of the saturated landscape and are tightening their purse strings for self-storage projects. “With respect to major markets, there’s no question that the pipeline is thinning out, and for projects that haven’t yet started construction, probably half of those proposed won’t come to fruition during this cycle,” says Bill Brownfield, owner of Brownfield & Associates, the Houston-based branch of industry-tracking firm Argus Self-Storage. “Markets are largely stabilized in terms of occupancy. But rent concessions and discounts have not only …
Northern California’s retail real estate market is undergoing somewhat of a seismic shift. Traditional shopping centers, such as Serramonte Mall in Daly City and Hillsdale Mall in San Mateo, are seeing name-brand retailers like Payless Shoesource, Gymboree and Charlotte Russe closing stores. This has dictated a recalibration in leasing strategy. , These “prime” retail spaces are often successfully backfilled by business and lifestyle tenants like professional service firms, fitness centers, coffee shops, restaurants and entertainment centers — the sort of businesses that can regain foot traffic. This trend toward more lifestyle and entertainment tenants — often called experiential retail — can also be seen in the region’s vibrant market for new mixed-use developments. Multifamily communities in San Francisco, Cupertino, Santa Clara and Oakland will be delivered in the coming months. Many of these projects are urban infill, transit-oriented developments, which naturally offer strong street-level retail locations. In this setting, experiential retail works well for apartment residents and local foot traffic. Nearly 6 million square feet of new office has been proposed in downtown San Jose, which is driving strong retail interest from new restaurants and service retail. Vacancy rates for retail properties throughout the Bay Area have ticked up slightly, …
As a team, we work heavily in mixed-use leasing and development sourcing. Our team handles the commercial leasing on many mixed-use projects within the Twin Cities market, where we also source and find locations for mixed-use apartment developers. This article will give a current snapshot of the mixed-use retail and apartment market within the Twin Cities. What types of projects? There are many three- to six-story, podium-style apartment buildings popping up all over the urban areas of Minneapolis-St. Paul. This product type can also be found in the suburbs. The first floor, or the podium, is constructed out of concrete and allows for up to five additional floors. This is very prevalent in our market and we don’t see this changing soon. However, advanced timber construction is just starting to show itself in the Twin Cities. The mid-rise and high-rise multifamily buildings are mostly contained to the urban core areas. These projects are all concrete construction. It took up until the last five years or so to see major grocers occupy the first floor. We have observed many examples of this and have worked with some of the large nationals as well as larger, local grocers. Mixed-use does not appear …