Market Reports

Industrial Developers are Building for the Long Term in Charlotte

by John Nelson August 6, 2018

As demand for e-commerce and corporate distribution space continues to drive supply chain expansion in the Southeast, many developers are designing facilities to accommodate the truck-dependent, labor-driven operations present today and for the near-term. While robotics and automated vehicles are exciting to dream about, the reality is that these innovations are not expected to impact industrial building design any time soon in the Southeast. Modern industrial buildings that can support heavier than average employee parking needs while also providing abundant trailer storage are the standard for new projects. At the same time, these buildings need to support advanced technology, automation and extensive stacking and sorting operations. By building with an eye toward long-term tenant needs, developers are working to differentiate themselves in this highly competitive environment. These trends are particularly apparent in the Charlotte market, where developers have added 4.5 million square feet of industrial space over the past year. With a 5.3 percent vacancy rate in the first quarter of 2018, the market is well positioned to absorb the additional 4.7 million square feet of projects in the pipeline. Of that total, 62 percent is either preleased or set to be owner-occupied. Modern Design Demands At the core of …

August 6, 2018

Market Reports Office Texas Texas Market Reports

Energy Users Become Developers, Buyers in Midland Office Market

by Taylor Williams August 3, 2018

In early 2017, real estate professionals in West Texas began to see a noticeable boost in demand for industrial properties across the Permian Basin. In keeping with economic tradition, demand for space in the Midland office market is now catching up to the industrial sector after a 12- to 18-month lag period. The beginning of 2018 is when Midland’s office market really began to gain steam, riding not only a surge in oil prices but also a 2.4 percent unemployment rate, which is more than a full percentage point below both the state and national averages. Several larger users entered the market at this time while some existing tenants, including Cimarex and Southwest Royalties, began looking for larger spaces. As of May 2018, the office occupancy rate had reached approximately 92 percent after wavering between 80 and 85 percent for much of the oil downturn. Average rents for office space are currently standing at about $22 per square foot for Class A space and $19 per square foot for Class B space. With approximately 6 million square feet of product, Midland’s office market is the unquestionable hub of the downstream side of the West Texas energy business. Any company with …

August 3, 2018

Connecticut Market Reports Northeast Northeast Market Reports

In Fairfield County, New Challenges Call for New Retail Strategies

by David Cohen August 1, 2018

America’s $3.5 trillion retail sector is going through tough times. E-commerce has cut into the conventional brick-and-mortar market by roughly 12 percent, an impact that has decreased rents, increased retail vacan- cies and left landlords increasingly anxious. But even in this period of widespread adjustment, the number of store openings nationwide has outpaced closings. We see this in Fairfield County, Connecticut, with first-quarter vacancy rates in 2018 totaling 3.7 percent, 30 basis points lower than one year ago, according to CoStar Group. The retailers that aren’t surviving are those that aren’t adapting to con- temporary market dynamics. Techno- logical and social disintermediation create the chaotic decision-making process of adapt or perish. Still, amid today’s anxieties, here are three examples of adaptation that offer promise. Selling an Experience Stores that are succeeding today are often the ones that have realized that retail is now less about selling goods and more about selling an experience. Below we offer two examples in Fairfield County, both designed to add a stimulating overlay of experience into typically more tepid retail settings. The first illustration of a retail experience is the indoor adventure ropes course located within furniture and mattress retailer Jordan’s 150,000-square-foot showroom along New Haven’s Long Wharf. Touted …

August 1, 2018

Colorado Industrial Market Reports Western Western Market Reports

Industrial Investors, Developers Turn Up the Heat in Denver

by Taylor Williams July 31, 2018

Denver industrial assets are achieving record pricing as cap rates compress well below 5 percent for Class A product. As this is happening, developers are taking on hefty projects, signaling that Denver’s industrial real estate cycle is stretching its legs instead of winding down. Among the headlines: • Denver’s single largest investment transaction on record occurred in the first quarter of 2018. The Pauls Corporation sold 14 Class A, highly functional assets totaling 1.9 million square feet to Clarion Partners in the Airport submarket. • The largest speculative build of 701,900 square feet is underway by Majestic Realty. Prologis is building more than 500,000 square feet in the Central submarket, while Hyde Development kicked off the 1.8-million-square-foot 76 Commerce Center project in the “less than proven” I-76 Corridor. • Industrial land pricing has doubled in recent years to now double-digit pricing as triple-net asking lease rates approach $8 per square foot. Despite these impressive headlines, here are three reasons we expect further expansion in Denver’s industrial sector into 2019. Investor Preferences Align CBRE’s 2018 Americas Investor Intentions Survey revealed a dramatic increase in the popularity of industrial investments compared to years prior. Half of investors in the Americas are seeking …

July 31, 2018

Market Reports Multifamily Texas Texas Market Reports

An Investor’s Guide to Financing Multifamily Assets in Lubbock, West Texas

by Taylor Williams July 27, 2018

Growing up in Lubbock in the 1990s, cotton fields were everywhere. No growth existed in the southwest part of town, and few new apartments were built. Today those same cotton fields are housing developments; the southwest part of town is filled with high-quality retail and more than 2,000 apartment units have been delivered since 2015. Lubbock is thriving behind its sub-3 percent unemployment rate, strong agricultural sector, university with 40,000 students and a very strong healthcare sector. Available capital and financing options are plentiful. Many have taken notice, however, which has affected rent growth and vacancy in the market. Economic Overview One of the biggest misconceptions of the Lubbock economy involves the role of the oil and gas industry. A myriad of investors often incorrectly tie Lubbock with Midland/Odessa in this regard, ascribing to Lubbock the historical swings of an energy-based economy. But the comparison is pure apples to oranges. Although energy does have an impact, Lubbock boasts more economic diversity than many of its West Texas neighbors. A direct result of Lubbock’s diversity is the unemployment rate, which is one of the lowest in the state at 2.7 percent. This strong performance in the job market stems from an …

July 27, 2018

Healthcare Market Reports Midwest Midwest Market Reports Wisconsin

Milwaukee Health Systems Expand, Focus on Off-Campus Settings

by Kristin Harlow July 26, 2018

Healthcare properties present a tremendous opportunity for real estate developers in the Milwaukee market and the upper Midwest. The national and regional healthcare real estate sectors remain on solid footing, according to the 2018 Healthcare Marketplace Report from Colliers International. The sector remains attractive in terms of both stability and diversification. There will always be a demand for healthcare services as the U.S. population continues to age at an unprecedented rate. A growing number of Milwaukee-based health systems have announced plans to expand in bids to gain or maintain market share. The merger of Aurora Healthcare with Advocate Health Care Network to create a single health system known as Advocate Aurora Health is a recent example. There’s been a significant expansion of and increased focus on the outpatient ambulatory environment. Health systems face significant capital expenditures in order to maintain aging hospitals. Alternative developments such as specialty outpatient facilities and micro hospitals have gained momentum and allow for expansion to remain competitive while efficient. With the emerging trend toward population health management, hospitals and health systems take on the financial risk of providing care for a certain population across a certain geography. Having to take on the additional risk of …

July 26, 2018

Connecticut Market Reports Multifamily Northeast Northeast Market Reports

Rent Growth, Higher Demand Lead to Improved Outlook for Connecticut Multifamily Market

by David Cohen July 25, 2018

More apartments are being rented in Southern Connecticut, which is benefiting multifamily properties in the Fairfield County/New Haven region in several important ways. For New Haven, this means the return of rent growth. In Fairfield County, the added demand for rentals continues to support new development. An improved outlook for both markets has also positively influenced investment activity. In 2017, multifamily operators in the New Haven metropolitan area had one of their best years since the recession, thanks to improvements on multiple fronts. Appeal for apartments has generated the second-highest net absorption level so far this decade. Demand increased in the city itself, where Yale University and Yale New Haven Hospital offer numerous employment opportunities, as well as in the surrounding greater New Haven suburbs. Absorption of rental units surpassed that of deliveries by a multiple of three, facilitating a major drop in vacancy. The metro’s overall vacancy rate at the end of the first quarter was 4.7 percent, 270 basis points below where it was just two years ago. Equally important, healthier demand has also aided rent values. Monthly effective rates started to rise in 2017 after retreating in 2015 and 2016, with rent growth nearing 6 percent year over …

July 25, 2018

Colorado Market Reports Multifamily Western Western Market Reports

Denver’s Multifamily Market Tests Its Limits

by Taylor Williams July 24, 2018

An interesting metric was reached in the Denver multifamily market during the first quarter of 2018 — and that’s record absorption. The city already boasts accolades for quality of life, talks of strong in-migration and speculation of becoming the location for the second Amazon headquarters. After these, the most common topic of conversation for multifamily professionals is the unprecedented construction pipeline and just when will we hit an inflection point where the market won’t accept any more Class A, market-rate apartments. It seems we’re still not there. As of the first quarter of 2018, the trailing 12-month absorption was more than 10,000 units. That’s more units than what was completed in 2017 and the highest absorption on record. The result was metro-wide vacancy dipping year-over-year to 5.79 percent, limited concessions and metro-wide annual rent growth at 3.8 percent. Denver’s average rent now stands at $1,405 per unit and $1.62 per square foot. The Central Business District (CBD) experienced the most absorption this quarter, accounting for nearly 25 percent of total metro absorption. Annual rents also grew by 2.7 percent, leading the CBD to regain its title for most expensive rental submarket in Denver with rents per-unit averaging $1,835. But development …

July 24, 2018

Market Reports Mississippi Property Type Retail Southeast Southeast Market Reports

Jackson’s Retail Market on Cruise Control as It Drives Into Expansion Phase

by John Nelson July 23, 2018

It’s safe to say that the Jackson MSA, as a whole, responds slower to national trends than the vast majority of markets in the United States. In regards to the economic recovery, Jackson is about two years behind the national economy post-recession. The retail market is just now moving from the recovery phase and into the expansion phase of its growth cycle, which is evidenced by decreasing vacancy rates and stabilizing lease rates. A limited amount of new construction has been a main driver for absorption in this area. There is approximately 35 million square feet of retail inventory in the Jackson MSA, with a moderate amount of new construction scheduled to deliver in the next 12 months. The first phase of expansion for the retail market is beginning to occur and is expected to gain in strength over the next 12 to 18 months. From an investment sales standpoint, Jackson has seen continued interest and stable transaction velocity from local and national retail investors in the last 12 to 24 months. As cap rates have compressed nationally, investors have continued to look to tertiary markets like Jackson in search of higher yields. The current going-in cap rate for acquisitions …

July 23, 2018

Market Reports Retail Texas Texas Market Reports

Rising Oil Prices Seep Into Midland-Odessa Retail Development, Sales

by Taylor Williams July 20, 2018

The Midland-Odessa retail market continues to get stronger due to the rise in oil prices over the last year. West Texas intermediate crude oil prices have risen from around $46 per barrel in June 2017 to more than $72 per barrel as of June 27, 2018. According to a recent survey from the Dallas branch of the Federal Reserve, new technology is allowing energy companies to break even at $25 per barrel. In addition, the Midland Development Corp. (MDC) notes that the combined Midland-Odessa unemployment rate is down to 2.8 percent, which is the lowest on record. The rise in prices, combined with this scaling of the oil-driven economy, is contributing to local consumers having more disposable income. In turn, spending at restaurants, hotels and retail stores in the Midland-Odessa area is up across the board. Housing Connects The Dots Due to the rise in oil prices and strong economic growth, demand for more housing developments in the Midland-Odessa market is strong and getting stronger. And wherever there’s a boom in housing, a new wave of retail development is likely to follow. According to the MDC, roughly 500 single-family building permits had been issued as of March, the highest first-quarter …

July 20, 2018

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