Market Reports

Industrial Balance Prevails Near Port Houston

by Taylor Williams May 10, 2019

Businesses and industries whose supply chains are tied to Port Houston are dealing with tariffs on select imports, volatile energy markets and a one-two punch of rising rents and construction costs for any industrial space they want to lease or have developed for them. But based on the performance of Houston’s nearby Southeast industrial submarket, these larger geopolitical and economic forces are wreaking minimal havoc. An increasingly diverse mix of industrial users has landed in Houston over the past five or so years. These tenants include national retailers and third-party logistics (3PL) firms that see Houston as an emerging regional distribution hub, as well as suppliers of durable consumer goods and companies that service the petrochemicals industry. The port submarket is seeing heightened activity from all of the above. At the same time, the infrastructure within Port Houston has expanded. Ship channels are in the process of being deepened and widened. Special equipment has been introduced that allows overweight containers to safely and legally leave the port and hit the roadways. Demand for rail-served properties is growing, particularly on the north side of the Houston Ship Channel, leading to more of those projects. And Harris County has begun work on …

May 10, 2019

Market Reports Midwest Midwest Market Reports Multifamily Wisconsin

Construction Is Booming for Milwaukee Multifamily Market

by Kristin Harlow May 9, 2019

It is widely acknowledged among commercial real estate professionals in the Milwaukee market that we are in the midst of a renaissance of sorts — certainly the most exciting period in the past few decades to be actively involved in the industry. From the Harbor District to the Deer District (the newly branded area around Fiserv Forum), new neighborhoods and exciting destinations are sprouting up. This resurgence continues to attract residents and developers who are quickly creating the critical mass necessary to make Milwaukee a viable 18-hour city. On the multifamily front, new supply that has come online in the past few years is driving both average rental rates and overall vacancy higher. As of the first quarter of 2019, the average rental rate in the metro Milwaukee market increased 0.8 percent from the previous quarter to $1,075, continuing an upward trend that saw a 2.2 percent annual increase at year-end 2018, according to real estate data provider CoStar. The vacancy rate hovered around 5.9 percent during this same period, slightly higher than the year-end 2018 level of 5.6 percent, but lower than the recent high of 6.1 percent established in 2017. The average rental rate in the first quarter …

May 9, 2019

Market Reports New York Northeast Northeast Market Reports Office

New York City, There’s a Smarter Way to Do Glass Buildings

by Taylor Williams May 8, 2019

New York City recently passed the Climate Mobilization Act, the first real action by any city to require buildings’ greenhouse gas emissions to meet global climate targets. The new law requires owners of large buildings to meet carbon footprint standards or face millions of dollars in annual fines. The emission limits will begin in 2024 and become increasingly stringent from there. The legislation primarily applies to commercial office and market-rate multifamily buildings over 25,000 square feet. According to Urban Green, these buildings account for about 60 percent of the total building area in New York City — those that make up the Manhattan skyline. While skyscrapers will be forced to act first, significant levels of investment will also be needed for public buildings, affordable housing and non-profits. The Real Estate Board of New York (REBNY) estimates the total cost of the upgrades needed to comply with the new law is about $4 billion. Building owners can calculate the performance targets they’ll need to meet and the associated fines if they fail to meet them. While it may be possible to buy renewable energy credits to offset emissions, it is unclear how many will be available. Some buildings will need to …

May 8, 2019

Market Reports Southeast Southeast Market Reports Tennessee

Memphis Office Market Continues to Evolve with Strong Leasing, Sales Activity

by Alex Tostado May 6, 2019

Memphis is currently undergoing an evolution that has been experienced by many markets in the region: increasing activity among office tenants moving with more confidence. In Memphis, this is manifesting itself in a flight to quality among office-using companies. While East Memphis is considered the most attractive office submarket in the region, the Downtown submarket has experienced significant leasing over the past 24 months and is gaining momentum. This focus on urban office is another trend that is just now hitting the Memphis market. Memphis’ most significant win in 2018 was Indigo Ag’s announcement that it will relocate its North American headquarters for its commercial operations to downtown Memphis. Indigo Ag, a high-tech agriculture firm whose primary service includes coating seeds with protective microbes, will expand its current downtown Memphis office at Toyota Center. With the expansion, the firm intends to increase its workforce by 700 corporate employees and invest $6.6 million over the next three years. Upon its completion, Indigo Ag will occupy 103,500 square feet in the eight-story Toyota Center, which will be renamed “Indigo Plaza.” The move represents the most recent and significant corporate investment in the Downtown submarket, following the relocation of ServiceMaster and its 1,200 …

May 6, 2019

Market Reports Office Texas Texas Market Reports

Job Growth Trumps Office Market Fears

by Taylor Williams May 3, 2019

Despite the rise of the gig economy, the explosion of coworking concepts and the move toward greater density among office-using companies, America’s office market is maintaining steady growth and balance, thanks to the exceptional job growth of this cycle. According to Costar Group, the national office vacancy rate currently stands at a 9.8 percent. Developers delivered approximately 59.3 million square feet of new product over the last 12 months. National net absorption of 56.6 million square feet during that period suggests that the market is quite close to equilibrium. According to the most current available data from the Bureau of Labor Statistics (BLS) at the time of this writing, between December 2018 and January 2019, American nonfarm payrolls added about 525,000 new jobs. The BLS reported substantially lower job growth in February, with just 20,000 new positions added. However, most economists expect that figure to be revised upward as the effects of Mother Nature and the government shutdown wear off. While office properties only capture a portion of that activity, job growth expectations are still the main criteria by which office market health is evaluated. By that logic, the office markets of Texas’ four largest cities should all post strong …

May 3, 2019

Industrial Market Reports Texas Texas Market Reports

Manufacturing Activity in Juarez Fuels Industrial Absorption in El Paso

by Taylor Williams April 30, 2019

The current pace of development and absorption of manufacturing and warehousing space in El Paso reveals just how closely the local economy is linked to that of its sister city across the border, Ciudad Juárez. Mexico’s maquiladora system allows foreign companies to produce and export materials to that company’s home country, largely on a duty- and tariff-free basis. When the North American Free Trade Agreement (NAFTA) was passed in the mid-1990s, maquiladora activity saw its largest historical increase while still facing considerable competition from China for foreign investment. But when American manufacturers realized that outsourcing production to China didn’t translate to more efficient supply chains, they once again looked toward Mexico, which also boasted strong supplies of affordable labor. With the United States now locked in a trade dispute with China, the economic development initiatives offered by the current Mexican Presidential Administration and the threat of a drastically renegotiated NAFTA agreement having passed, American companies are beginning to return to Mexico. Ciudad Juárez is among the Mexican cities benefitting most from this activity, and it is translating to greater demand for storage and distribution space in El Paso. Many maquiladora companies count end users in southwestern U.S. markets as significant …

April 30, 2019

Market Reports Multifamily Southeast Southeast Market Reports Virginia

Hampton Roads Apartments a Gold Mine for Yield-Seeking Investors

by Alex Tostado April 29, 2019

Seeking higher yield, private capital multifamily investors are increasingly looking to the Norfolk-Virginia Beach-Chesapeake MSA. This region of seven cities and a population of more than 1.7 million people is known collectively as Hampton Roads. Strong fundamentals, a youthful population and an expanding economy offer more promising returns than most surrounding MSAs. Compressing cap rates Over the last 12 months, cap rates compressed nationwide. In Hampton Roads, Class A cap rates ranged between 5.25 and 5.50 percent. There is very little spread between Class A and going-in cap rates for well located, true value-add deals. Notable recent sales include the Waypoint Portfolio in Newport News, Trail Creek in Hampton and Brookfield and Woodshire in Virginia Beach. Collectively, cap rates for these transactions ranged from 5.50 to 5.75 percent. Transaction volume in 2018 exceeded $665 million. With deals in the MSA now trading as high as $70 million a piece, more private equity groups nationwide are seeking to invest in the market. Strong fundamentals Fundamentals in Hampton Roads continue to improve with steady year-over-year rent growth and occupancy near 95 percent. With numerous MSAs battling oversupply and concessionary pressures, Hampton Roads apartment owners benefit from a more modest development pipeline. CoStar …

April 29, 2019

Market Reports Office Texas Texas Market Reports

El Paso’s Office Market Announces Its Arrival Through WestStar Tower

by Taylor Williams April 26, 2019

It’s not often that a single project captures an office market’s growth and evolution over a 40-year period. But that is precisely what’s happening in El Paso. WestStar Tower, a 19-story, Class A building, is the first project of its kind to be built in El Paso in 40 years since the 415,000-square-foot Stanton Tower was constructed for El Paso Natural Gas. With co-developers Hunt Cos. and WestStar Bank beginning vertical construction of the 262,000-square-foot building last summer, El Paso’s skyline is set to change considerably upon its completion in late 2020. The symbolism of WestStar Tower to El Paso is not unlike the relationship between Frost Tower and San Antonio, another city that was starved of major Class A office development throughout the 1990s and 2000s. With both cities experiencing steady job growth from local expansions and new relocations, developers of quality office product are viewing these markets in new lights. El Paso is also getting younger. According to recent research from El Paso’s economic development department, roughly 40 percent of the city’s 838,000 residents are under the age of 40. The median age is 31 and the city ranks in the Top 10 in terms of its appeal …

April 26, 2019

Market Reports Midwest Midwest Market Reports Mixed-Use Nebraska

Omaha Undergoing ‘Remarkable’ Downtown Transformation

by Kristin Harlow April 25, 2019

Remarkable. It’s the word that continues to pop up in interviews and conversations relating to the present transformation occurring in Omaha’s downtown area. If you think you might be experiencing déjà vu, it’s likely because you are. After all, it wasn’t that long ago when the same word was being used to describe the transformation that took place in downtown Omaha 10 to 15 years ago. It was at that time that approximately $2.5 billion was invested in Omaha’s downtown through a combination of public and private developments. Omaha introduced a laundry list of new buildings and projects, including the city’s new arena and convention center (presently branded the CHI Health Center), TD Ameritrade Park (the home of College World Series), the 45-story First National Bank Tower, the National Park Service Building, Gallup Organization’s operational headquarters, Union Pacific’s 1.1 million-square-foot headquarters, The Holland Performing Arts Center, Roman L. Hruska Federal Courthouse and The Bob Kerrey Pedestrian Bridge. That was remarkable. What could be so “remarkable” about the current downtown Omaha transformation? The answer is a redevelopment of the Gene Leahy Pedestrian Mall as part of the $300 million Riverfront Revitalization project. You might be thinking $300 million doesn’t sound remarkable …

April 25, 2019

Market Reports New Jersey Northeast Northeast Market Reports Office

Strengthening Performance Signals Good Things to Come for Northern New Jersey Office Market

by Kristin Harlow April 24, 2019

Strengthening office performance in the northern New Jersey marketplace signals good things to come as 2019 unfolds. The market yielded approximately 292,000 square feet of net occupancy gains in 2018. This was fueled by three straight quarters of more than 1 million square feet in new leasing activity, with annual demand finishing 15.4 percent ahead of 2017. This progress runs parallel to improving employment numbers. At year-end, the Garden State unemployment rate registered at 4 percent, its lowest point since mid-2001. This marks a 70-basis-point decline year-over-year, with private-sector employment increasing by almost 62,000 jobs. Within this context, the diversity of New Jersey’s tenant mix is making itself apparent. No one sector is predominantly making waves. We are seeing healthy Class A leasing activity among life sciences, technology, financial, professional services and a range of other space users that comprise the state’s balanced occupier base. Last year was proof that both urban and suburban submarkets continue to thrive. Where one company prefers the Hudson Waterfront with immediate access to mass transit and ability to draw talent from New York City, another may seek a suburban campus that draws upon a labor force of commuters driving from the state’s western counties …

April 24, 2019

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