Given the pace at which the Detroit commercial office space market is evolving, updates and projections are changing with extraordinary speed. The market can look very different in just a few short months, and it’s worth checking in to see where things stand relative to the beginning of the year. CBD occupancy is high While growth remains the headline story, the focus has changed somewhat from a high level of leasing activity across the metro area to more of adaptation and evolution as landlords, tenants and brokers all adapt to a downtown market that is reaching capacity. The vacancy rate in Detroit proper is the lowest it has ever been, and office space in Midtown and downtown is getting harder and harder to come by. Deals are still being executed across metro Detroit, but with rents continuing to rise and space at a premium, the incentives landscape looks nothing like it has in recent years. Parking rates have increased dramatically with a major shortage in parking in the central business district (CBD). The monthly cost of parking has increased to approximately $250 per space downtown. Creative solutions Incentives continue and have produced new opportunity for creativity, as owners and operators …
We’ve seen it time and again: Companies go through a painstaking process of identifying suitable locations for developing new projects. They settle on a location and make a deal with the developer that is initially met with much fanfare — only to have the project eventually scuttled as a result of community opposition or governmental roadblocks. One need look no further than Amazon’s announcement of plans to locate half its HQ2 in New York City, representing 25,000 jobs, only to find it necessary to withdraw those plans in the face of challenges posed by so-called “community leaders.” Situations like that arise repeatedly, not only with the Amazons of the world, but also with lesser-known companies working with development partners to build new facilities, whether they be for office, industrial or retail uses. In many jurisdictions, the public approval process can be challenging to navigate. There is often a cacophony of voices from community residents, community organizations and governmental entities with different — sometimes conflicting agendas — that may or may not be economically viable or even in the community’s best interests. Those voices carry weight and are often enough to ground an ambitious project. The lessons we’ve learned as a …
Commercial leases typically contain standard protections for landlords that may be potential pitfalls for tenants seeking to assign or transfer interests in a lease. A lease recapture provision permits a landlord to terminate a lease and “recapture” the leased premises when the tenant requests landlord’s consent to assign, sublease or transfer the lease. These recapture rights, which are frequently overlooked, can actually have shocking results for tenants. In order to assign a lease, the landlord’s consent is required. The Texas Property Code provides that leases, unlike certain other commercial contracts, are not assignable without a landlord’s prior written consent. Many leases enlarge the obligation to get consent by expressly preventing the tenant from selling or changing ownership interests in the tenant without landlord’s consent. These provisions can frustrate tenants in their efforts to expand, increase capital, perform corporate restructuring or to sell equity or assets of their companies. In some cases, the language is so broad that it could be construed to prevent certain collateral assignments that are ancillary to tenant financing. Negotiating Strategies Savvy commercial tenants carefully negotiate assignment and transfer language to include flexibility for future changes in the company. Brokers will often request that landlords consent to …
The industrial market in Atlanta continues to surge, benefitting not only from its role as a key regional distribution hub, but also from the rapid growth in the metropolitan area itself. Atlanta is the economic engine of the Southeast, which also happens to be the fastest growing region in the country. The Atlanta industrial market recorded just over 18 million square feet of net absorption in 2018, the second highest total on record following the 21 million square feet absorbed in 2017. The market has experienced 30 consecutive quarters of positive net absorption resulting in an all-time low vacancy rate of 5.7 percent, even though the market delivered more than 13.4 million square feet in 2018. The first quarter of 2019 recorded net absorption of slightly over 1 million square feet, not as impressive as prior quarters over the last several years. So has the market peaked or demand stopped in Atlanta? Not by a long shot. According to research from JLL, there are 5.7 million square feet of signed deals that have yet to commence and companies have yet to move into their new space. This absorption will be picked up throughout 2019. Further, JLL is tracking an additional …
The Los Angeles County industrial market continues to see record low vacancy rates, which are hovering in the 1 percent range with a conservative forecast calling for rents to increase by 7.5 percent in 2019. Ecommerce companies and third-party logistics providers (3PLs) — many of which support ecommerce operations — will continue to be dominant market players, according to NKF’s Los Angeles industrial market report for Q1 2019. In North Los Angeles, we are seeing multiple submarkets, including those in the San Fernando Valley, Ventura County, Conejo Valley, Kern County, and the Santa Clarita areas, becoming more connected than ever before. These areas and projects are now “connecting the dots” between all the submarkets as the opportunities for industrial space in Los Angeles’ core markets become increasingly more competitive and scarce. For example, occupiers that have been in the 130 million-square-foot San Fernando Valley industrial market for decades are now needing more space. However, the opportunities for larger, modern product are just not there. The majority of industrial product is less than 100,000 square feet with 16- to 24-foot clear heights. This can work for users like cosmetics, entertainment and aerospace, but others need more modern features to streamline operations. …
The City of Los Angeles checks all the boxes for an excellent apartment owner environment. This includes a booming economy, expensive housing, meaningful job growth, and an abundance of Millennials and professionals. Los Angeles enjoys an immense and fast-growing high-tech industry, especially within the media, tech, aerospace and advanced transportation industry with the likes of Netflix, Google, SpaceX and Northrop Grumman. Los Angeles County houses the nation’s largest international trade industry, the nation’s largest manufacturing base, and an increasing amount of venture capital investment startups. A growing economy is almost always paired with escalating housing costs, and Los Angeles is no exception. More than ever, residents are driven to rental housing as homeownership is prohibitively expensive and not conducive to job mobility and flexibility. Last year was a banner year for region’s apartment sector. The average market rent in the Los Angeles MSA has seen extremely impressive growth, increasing an average of 5.3 percent annually since the turn of the century, according to Axiometrics. This remarkable trajectory has been spurred by the extremely tight rental market, with annual occupancies averaging between 94 percent and 97 percent. Such indicators allow landlords to be extremely discerning when vetting tenants, which, in turn, …
After a brief increase in the overall vacancy rate in the Pittsburgh region in 2017, the market has rebounded nicely and is back in the 4 to 5 percent range. But what has been more eye-opening is the increased velocity in the acquisition market that has investors from outside of Pittsburgh more focused on the Western Pennsylvania market than ever before. Multifamily Sales Market Multifamily sales in the Pittsburgh region over the last 10 years have been rather anemic. Sales velocity was slow due to various factors, including the reluctance of long-time local ownership groups to sell a property in a market where few options existed for a 1031 tax-deferred exchange transaction. There was also very little new construction to attract outside capital. In general, not much attention was paid to the Pittsburgh metro. However, developers recently had an epiphany and noticed that there was much old multifamily product scattered throughout the region, and that the time was right to break ground on new projects. Now that a significant amount of new construction projects have been delivered over the last six or so years, Pittsburgh has become a target for many investment firms from outside Western Pennsylvania. Some of the …
Birmingham’s retail market continued to see positive growth in 2018, and it’s safe to argue this is largely due to a significant amount of retail space being backfilled with entertainment, discount, medical and first-to-market tenants that otherwise may not have been able to enter the market. Dave & Buster’s backfilling a Forever 21 space at the Riverchase Galleria, Urban Air leasing a former hhgregg box in Trussville, Ollie’s acquiring the former Toys ‘R’ Us box in Hoover and Floor & Décor backfilling the former Kmart in Homewood are just a few recent examples of this in Birmingham. Two additional noteworthy deals that have been recently announced include REI opening its first Birmingham location in a portion of the former Toys ‘R’ Us box at The Summit and the Dick’s Sporting Goods/Golf Galaxy combo store moving into the soon-to-be former Academy Sports + Outdoors space at Lee Branch. The new combo store will be Golf Galaxy’s first location in Alabama. These two deals alone all but confirm this backfilling trend is going to continue for some time. More often than not, you will find these new tenants are paying higher rents, driving larger traffic volumes and generating more sales tax income …
An overwhelming number of residents are moving to San Antonio rather than leaving. The metro experienced a net in-migration of nearly 21,000 households in 2016, according to Moody’s Analytics, the latest data available at the time of this writing. The metro primarily draws from Austin and Houston with a notable cohort of new residents coming from Washington, D.C. Many newcomers to San Antonio from the nation’s capital are drawn to the city’s military and defense industries. Basic Numbers Among these in-migrants to San Antonio is a large proportion of millennials. At 14.4 percent, San Antonio ranked No. 2 in terms of the fastest-growing areas for young adult growth from 2010 to 2015, according to a 2018 report from The Brookings Institution. San Antonio’s rate of millennial population growth during that period outranked that of peer and non-peer cities such as Austin, Denver, Houston, Orlando and Seattle, among others. As a result, the San Antonio market skews younger with approximately 25 percent millennials and 28 percent Gen Z. The median age in San Antonio is 34, four years lower than the national average among comparable cities. In turn, the metro’s job growth both reinforces and is fueled by this in-migration, accounting …
The term “mixed-use” appears to be all the rage, possibly a victim of its own success. A similar phenomenon occurred in the retail world with the introduction of the term “lifestyle center.” As a concept grows in popularity there is the natural inclination to capitalize on the movement, which can ultimately lead to watering down the concept. However, despite a trend toward reducing the term “mixed-use” to its lowest common denominator, namely having two different product types, Nebraska’s mixed-use developers have remained dedicated to a meaningful and synergistic combination of several product types: office, residential, retail and food and entertainment. Nebraskan’s zeal for creating sizable mixed-use projects has provided its residents a variety of developments possessing a genuine and meaningful sense of place and community. Although there’s more mixed-use projects in the making for the Husker State, for the purpose of this article we’ve chosen five projects that best represent the state’s mixed-use development. These developments not only create a desirable feel, but positively impact the larger community. Frankly, it’s one thing to have a successful mixed-use development where live, work and play isn’t just a marketing tag line. But, it’s a whole different matter when a project’s success spills …