The 2017 tax overhaul was supposed to spur $100 billion in investments across the country through the designation of more than 8,700 areas as Opportunity Zones. Investors could reduce or postpone taxes on profit from businesses, partnerships and stocks by reinvesting in the Opportunity Zones. They could also avoid future profits from those reinvestments, provided they make substantial improvements. To get the full benefit, investors would have to buy into eligible projects by the end of 2019. To fully shelter 2018 profits from hedge funds and other partnerships, the deadline was June 29. The land rush hasn’t started. In January, only half of real estate investors surveyed by research firm Preqin were considering investing in Opportunity Zones. More than 90 percent weren’t even involved in an Opportunity Zone project at the time of the survey. The biggest reason for the hesitation is that the rules to take advantage of Opportunity Zones have only begun to be clarified. The IRS and Treasury Department haven’t released the type of detailed guidance that investors need before they are confident enough to move forward. Final regulations on the zones were delayed by the government shutdown earlier this year and have yet to be made …
Debt and equity capital for placement in commercial real estate, particularly in the multifamily sector, have never been more plentiful in Texas. With the Federal Reserve recently abandoning and possibly getting set to reverse its interest rate hikes, even more investors and borrowers are coming off the sidelines. According to the Mortgage Bankers Association (MBA), the national level of commercial mortgage debt outstanding rose by $45.4 billion in the first quarter of 2019, a 1.3 percent increase from the fourth quarter of 2018. Multifamily mortgage debt alone increased by $17.9 billion to $1.4 trillion from the fourth quarter of 2018, also an increase of 1.3 percent. The uptick in lending is occurring in the face of an ongoing trade war with China and the elevation of the three-month Treasury yield (2.14 percent as of press time) above the two-year Treasury yield (1.74 percent). Economists often view the latter trend, known as an inverted yield curve, as an indicator of recession, a credible possibility given that the U.S. economy is close to a decades-long expansion. The perceived risk in the marketplace from these factors has steered more investors toward the 10-year Treasury, a traditionally low-risk vehicle for parking funds. This movement …
The apartment construction boom continues in Miami as rapid demographic and employment growth foster rental demand. Employers expanded staffs by 25,900 personnel year over year in February, roughly 6,900 more than in the preceding annual period, which has kept the unemployment rate below 4 percent for 12 consecutive months. Hiring during this period was led by the professional and business services sector, due in part to a growing tech sector. The relatively higher salaries in this segment helped boost the median household income 6.8 percent year-over-year in March, among the top five growth rates in the nation. Available employment is helping draw new residents and produce population growth above the national pace. Over the past 12 months, the metro has gained nearly 28,000 residents, generating a strong need for additional housing options, and many are opting to rent. These factors are contributing to robust apartment demand and maintaining minimal rental availability in several submarkets, including Downtown and North Central Miami, despite the increase in deliveries over the past few years. The rise in household income is providing demand for apartments with luxury amenities in walkable urban neighborhoods. During the first quarter of 2019, apartment deliveries remained above the five-year average …
Strong economic growth on the West Coast from the booming tech industry has benefited Portland’s economy. As a result, considerable employment and population growth, particularly from the Millennial generation, has elevated the industrial market significantly in recent years. According to CBRE, demographic growth and the national shift to online consumption have contributed to a steadily decreasing industrial vacancy rate since 2010, which reached 3.3 percent in early 2019. Demand for industrial space began to pick up speed about five years ago and has since boosted asking rents 45 percent. Build-to-suit construction projects were a growing trend in 2018, delivering more than 2.9 million square feet for existing tenants, the largest developments being the Troutdale Reynolds and Rivergate. To date, 2019 construction has been exclusively speculative with half a million square feet delivered thus far and 41 percent preleased. An additional 1.4 million square feet is under construction and expected to deliver by year-end 2020, none of which is pre-committed. At the same time, demand for industrial space of 100,000 square feet or greater accounts for 20 percent of users in the market. The speculative construction projects delivering during the next 18 months should provide some supply options for users of …
If industry professionals, particularly developers and landlords, don’t make educated attempts to understand the mindsets of their tenants, they have little hope of advancing the dialogue and ultimately furthering their understanding of tenant decision-making. Take the Houston office market, for example, and its inventory of approximately 330 million square feet, according to CoStar Group. This market has experienced rising vacancy and declining rents throughout the four-year oil slump, but continues to see strong tenant demand in the Class A space. To this end, CoStar reports that there are still nearly 3 million square feet of new office projects under construction throughout metro Houston, the vast majority of which is Class A product. The high proportion of Class A deliveries is partially attributable to rising land and construction costs that mandate heftier rent projections. But still, there’s no question that Houston’s growth in certain employment sectors — healthcare, technology, financial services — ensures that many of the jobs being created in the city need to be paired with high-quality office space. Understanding and explaining the actions of the thousands of companies that commit to millions of square feet of office space is a case-by-case endeavor. But as markets of this size …
Consistent investment trends, a steady demand for tenants, stable in-migration and several new additions to the skyline have provided Portland with a strong first half of 2019. With more than 100,000 square feet of positive net absorption this year, the Portland office market shook off any lingering negative sentiment from 2018 and started the year strong. Portland has built a reputation as a second outpost to cities like Seattle and the Bay Area. Companies tend to initially set up small offices before quickly realizing Portland is a viable alternative to other larger hubs. In-migration remains strong but the major growth the market has experienced recently has been from homegrown companies ramping up or expanding their operations. We’re continuing to see office rents grow at almost 12 percent year over year. Portland office rents average $32.12 per square foot, making them nearly 60 percent cheaper than San Francisco and 25 percent cheaper than Seattle. The city is also well situated to attract companies that are being priced out of primary markets but still need to be geographically close. When you layer on our cost of living and high quality of life, Portland becomes even more attractive, which also contributes to its …
In 2018, the Greater Cincinnati industrial market experienced record-breaking positive net absorption of 7 million square feet, the highest level of absorption in more than a decade. This was followed by only 201,000 square feet of direct net absorption in the first quarter of this year, which at first glance could be concerning. But the good news is that 8 million square feet is currently under construction across our market. Over the past five years, new construction deliveries have been a consistent source of growth and positive absorption in Greater Cincinnati. The industrial market typically does not experience a high absorption rate in the first quarter when compared with the rest of the year. The low absorption figure in the first quarter of 2019 is actually due to lack of available supply rather than a major market change. Leasing impact New-construction, pre-leased buildings were a major source of positive net absorption in 2018. Winter weather and construction schedules limited first-quarter completions to just 520,000 square feet. The largest delivered facility was the 308,000-square-foot West Chester Trade Center #1, a bulk distribution building in the Northwest submarket. TSC Apparel moved into 196,000 square feet at the facility, absorbing more than 60 …
Bolstered by strong growth in its millennial population and high-paying jobs, Boston’s urban core continues to boast one of the lowest retail vacancy rates in the country. But this trend has also led to a wave of new development that could temper that good news for Boston retail owners. According to data from Marcus & Millichap, metro Boston’s retail vacancy rate is expected to rise by 40 basis points from 3.2 percent to 3.6 percent in 2019, a year in which 1.3 million square feet of new projects are slated for completion. By comparison, the national vacancy rate stood at 10.2 percent at the end of the first quarter, reports Reis. Marcus & Millichap predicts that the uptick in metro Boston’s retail vacancy will slow the pace of annual rent growth to 3.3 percent. Population growth is fueling demand for housing, which in turn spurs demand for retail to serve those new residents. Metro Boston’s population has grown by more than 112,000 people over the last five years, according to Marcus & Millichap, and the area boasts a median household income in excess of $90,000. While the local rate of population growth mirrors that of the United States as a …
For many years, companies seeking to establish major distribution operations for the southwestern United States flocked to one market: Dallas-Fort Worth (DFW). Any deal that required a warehouse or logistics space of several hundred thousand square feet or more headed to the metroplex, and Houston received what was left — deals falling anywhere from 20,000 to 100,000 square feet. That began to change in 2010, when oil was consistently trading at close to $100 per barrel. Subsequent innovations in hydraulic fracturing that lowered the threshold at which offshore drilling companies could turn a profit, combined with escalated tensions among Middle Eastern producers, kept prices for American crude at high levels until December 2014. At the time of this writing, oil futures traded at about $58 per barrel, suggesting that any hopes of a recovery by mid-2019 had been premature. But between 2010 and 2014, when the party was in full swing, Houston experienced tremendous job growth that attracted tens of thousands of new residents to the city. More housing was built, and significant amounts of industrial absorption began to stem from the need to store and distribute consumer goods, from food to furniture to household appliances. Today, Houston’s population is …
Main Street is making a comeback, and this is not news by any means. This growing trend is not only affecting real estate in the greater Atlanta area, but also throughout the United States. Main Street’s demise began with the design of President Eisenhower’s interstate highway system. It allowed travelers to bypass once sustaining rural towns and divided urban cities in their hearts. In Atlanta, it’s easy to notice with the unconscionable prejudice that comes with the interstates that divide our city compounded by the inefficiency of MARTA. The fall of Main Street was further catalyzed by the rise of the service-based economy and exportation of U.S. manufacturing to low cost nations, allowing larger retailers to capitalize and increase their market share by selling low-cost goods. Increasing affordability, especially for consumer goods, is great for everyone -— no one wants to be digging out of their savings for daily necessities — especially in a time when almost half the country cannot afford a $400 medical bill. However, this increased our fascination with saving on discretionary spending and led to increased demand for the “big-box” store. Large retailers’ capitalization on this trend led to increased foot traffic to their centers. Developers’ …