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IndustrialMarket ReportsSoutheastSoutheast Market ReportsVirginia

Industrial Construction Activity Remains Robust in Greater Richmond Area

by Alex Tostado

At the mid-year mark, the greater Richmond area industrial market has continued to strengthen, closing with an overall occupancy rate of 91 percent in the categories being tracked (Class A, B, C vacant and investor-owned product with a minimum of 40,000 square feet total RBA). Class A occupancy increased slightly from 89 percent at the end of the first quarter to 91 percent at the end of the second quarter, and the majority of the Class A vacancy is attributed to a vacancy approaching 800,000 square feet in the former Ace Hardware facility in Prince George’s County. Ashley Capital purchased the property in early July for $21.7 million and will be offering the facility for lease. Class B occupancy has also experienced an increase to 92 percent, up from 89 percent at the end of the first quarter. CoStar Group reports overall industrial occupancy at 96 percent for product of all sizes, including investor-owned facilities, but excluding flex space (minimum 50 percent office). Richmond’s strategic Mid-Atlantic location along Interstate 95 provides access to 55 percent of the nation’s consumers within two days’ delivery by truck. In addition to being the northernmost right to work state on the Eastern Seaboard, Virginia …

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CaliforniaMarket ReportsMultifamilyWesternWestern Market Reports

All Signs Point to a Comeback for San Diego Apartment Investment Sales in 2019-2020

by Taylor Williams

While Proposition 10 — California’s proposal to strengthen rent control — was defeated last November, it somewhat stifled the multifamily investment sector in San Diego as investors worked to figure out the next wave of opportunity. But now that market is starting to bounce back. Total multifamily sales volume in 2018 was just under $2 billion. However, several signs pointed to a resilient San Diego market, including cap rates holding steady at 4.6 percent and an increase in pricing. The tides have begun to turn in the past few months, with numerous apartment deals on the market — more than we’ve seen at one time in the past few years. This is especially true in Downtown San Diego where a significant number of new merchant-built deals are expected to come to market, continuing throughout the year. These are luxury complexes, with some expected to fetch as much as $600,000 per unit. Six conventional multifamily sales (with at least 100 units) closed in the first half of this year, totaling $550 million. This is an increase over the four sales totaling $372.5 million in the first half of 2018. The median price per unit through mid-year was $258,200, although roughly one-quarter …

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CaliforniaIndustrialMarket ReportsWesternWestern Market Reports

Plenty of Sunshine Remains in San Diego’s Industrial Market

by Taylor Williams

The San Diego industrial market is still thriving under sunny skies. The 146-million-square-foot industrial base is more than 95 percent occupied. Businesses continue to gobble up space even though rents have grown 6 percent to 8 percent annually since 2015. Though industrial markets around the country continue to do well thanks to a rapidly expanding logistics sector, San Diego’s industrial growth is broader based. Major contributions come from the defense, tech, electronics, cross-border commerce and biotech sectors. San Diego has several large submarkets, each with its own set of opportunities and challenges. South County, which includes Otay Mesa, has seen the strongest rent growth during the current economic recovery. Since the beginning of 2018, more than 591,000 square feet of state-of-the-art distribution space has been completed, with all but 45,000 square feet fully leased up. Recent transactions in Otay include a 198,000-square-foot lease to Zucarmex and the 174,000-square-foot expansion of US Joiner Trident Marine. The vacancy rate for South County stands at 4.33 percent, slightly under the countywide rate. Vacancy in North County is running somewhat higher at 6.72 percent. This is mainly due to recent deliveries in Carlsbad. A little more than 2.2 million square feet of new space …

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IndustrialMarket ReportsTexasTexas Market Reports

Case Study: Dallas vs. Houston Industrial

by Taylor Williams

The Dallas-Fort Worth (DFW) and Houston metro areas have vastly different opportunities and challenges in terms of commercial real estate. Yet this year both have both landed in the top five in the nation for industrial development. Driven by strong population and job growth, DFW and Houston don’t expect their industrial expansions to slow down any time soon. At the end of the second quarter, DFW was No. 2 in the country in industrial development behind California’s Inland Empire, with 30.3 million square feet of space under construction, according to Cushman & Wakefield research. Houston ranked fourth with 18.1 million square feet. Record Construction in Dallas Dallas’ industrial market has enjoyed strong positive momentum throughout 2019, thanks in large part to a steady stream of new residents and job opportunities. DFW’s population grew by 128,500 people year-over-year, an average of 350 new residents every day. The metroplex also gained 97,000 jobs over the previous year. Moody’s Analytics reported that 25 percent of those new positions were in the industrial market. The leading indicators of industrial demand are trade, transportation and utilities jobs, which account for nearly 75 percent of all industrial jobs in DFW. Unemployment has edged downward to 3.4 …

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Market ReportsMidwestMidwest Market ReportsMinnesotaOffice

Strong Economy, Low Unemployment Drive Twin Cities Office Market Success

by Kristin Harlow

Our Twin Cities office market remains strong as the population of millennials and empty nesters continues to migrate to first- and second-ring areas, bringing revitalization and new investment into the city’s commerce and infrastructure. With vacancies remaining exceptionally low and fewer developments on the horizon, rents have shown consistent growth. We are seeing fewer new buildings under construction for single-tenant users. Most are geared toward multi-tenant, mixed-use concepts. Newly renovated buildings with many amenities are performing well in attracting and keeping tenants. With the metro’s unemployment right around 3 percent and employers with jobs to fill, tenants have the leverage. Offering modern and high-tech communal spaces with multiple amenities is key. Tenants and buyers are leveraging this trend, therefore spaces with the allure of contemporary and updated finishes are highly desired. It is imperative that landlords and owners renovate and update their buildings in order to stay relevant in today’s market. Many tenants are simply moving from one space to another nearby because it has been updated and improved upon. That is one of the bigger challenges — improvements that keep the space relevant. Space configurations Employers often offset higher rent costs by embracing space efficiency and flexible workspace strategies …

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IndustrialMarket ReportsNew JerseyNortheastNortheast Market Reports

Array of Industries Drives New Jersey Industrial Market’s Growth

by Taylor Williams

New Jersey’s industrial market continues to expand, driven by a plethora of industries, including retail, manufacturing, food companies, transportation and logistics. As the popularity of e-commerce shows no signs of abating, New Jersey has become a key location for distribution centers and last-mile delivery hubs to serve the entire Northeast region. E-retailers are scooping up available industrial space, taking advantage of New Jersey’s excellent air, freight, port, and rail infrastructure that links it to the rest of the region and the country. Increasing Demand After taking a slight breather during the first quarter of 2019, in part due to a lack of available high-quality space, total leasing activity has increased by 20 percent during the past three months, bolstered by more than 20 leases exceeding 100,000 square feet. Absorption was widespread, with occupancy level increases in 16 of 25 submarkets for both the quarter and year over year. In total, 2.4 million square feet of positive net absorption was recorded during the second quarter of 2019, the highest level since the third quarter of 2018. Moreover, occupancy levels increased by 8.6 million square feet during the past 12 months, the eighth consecutive quarter where more than 8 million square feet …

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Market ReportsTexasTexas Market Reports

For Clients’ Sake, Technology Must Be Used in Tandem With Critical, Creative Thinking

by Taylor Williams

There are now dozens of commercial real estate platforms and apps on the market today that are designed to assist brokers in their day-to-day activities, and many are quite good. However, any technology should primarily serve to enhance how brokers serve their clients and not direct how that service is provided. Too often, the process a technology lays down may actually become a stumbling block in the way of creating the most economical and beneficial transaction for a client. Overreliance on Tech By way of explanation, let’s start with a simple example. You’re at any checkout counter. The cashier rings up your order and the register shows that you owe $13.42. You hand over $20. Suddenly, for some unknown reason, the cash register screen goes blank. And then the cashier’s face goes blank, too. Making change the old-fashioned way is simply no longer taught, because technology has taken the place of thinking through the problem. A comparable scenario could happen if brokers rely solely on what a commercial real estate platform tells them to do. Wrapped up in completing the formula and following a detailed path, there may seem to be no room for creative thinking. But in fact, that …

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IndustrialMarket ReportsMarylandSoutheastSoutheast Market Reports

Land Scarcity in Baltimore Driving More ‘Smart Growth’ for Industrial Sector

by Alex Tostado

Continuing a trend that started approximately 10 years ago, the Central Maryland region remains an extremely attractive area for warehouse and industrial development with vacancy rates hovering in the 7 percent range, more than 3 million square feet currently underway and an additional 5 million square feet of space expected to break ground over the next 18 months. But new challenges are also starting to emerge in this marketplace, driven by barriers-to-entry such as land scarcity and increased government regulations. On the positive side, rental rates continue to inch upwards and end-user requirements in the 30,000- to 100,000-square-foot range, long the bread and butter of this region, have returned. Over the past decade, numerous local and national developers have been enjoying the high life in the Interstate 95 corridor spanning from Harford County north of Baltimore City, through Howard County and touching Prince George’s County, which is considered a suburb of Washington, D.C. A who’s who of retail royalty have signed substantial leases such as Amazon, Best Buy, FedEx, Floor & Décor, The Container Store, The Home Depot, Pier 1 Imports, Sephora Cosmetics, XPO Logistics and Under Armour. While many touched 1 million square feet of space, what previously was …

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CaliforniaMarket ReportsMultifamilyWesternWestern Market Reports

San Diego’s Multifamily Market Outpaces Its 2018 Performance

by Taylor Williams

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 …

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CaliforniaMarket ReportsOfficeWesternWestern Market Reports

San Francisco’s Office Market is More Boom than Bust

by Taylor Williams

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 …

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