Market Reports

New Breed of Millennials, Adaptive Reuse Drive San Antonio’s Office Market

by Taylor Williams March 9, 2018

Would you believe that San Antonio is the second most sought-after city for millennials? According to local media pundits and reports from Forbes, San Antonio is attracting the greatest number of millennials of any city in Texas, even beating out Austin, the original yuppie capital of the state. San Antonio, which had taken a back seat to Austin in terms of creating tech jobs and drawing millennial workers, has surged ahead in recent years. The metro has begun to appeal to a different breed of people born between 1980 and 1999. We refer to members of this group as the “logical millennials.” While entrepreneurial in spirit, the San Antonio millennial differs from the standard millennial through his or her understanding of the need for affordable housing and a lower cost of living. The influx of this sub-type of millennials has created growth in urban areas, most notably the Pearl District, which is situated adjacent to the downtown area. The popularity of this mixed-use shopping and community destination has spurred the development of a number of new urban lifestyle projects. Frost Tower, Rising Rents Another indicator of San Antonio’s success at attracting a younger demographic is embodied in the most significant …

March 9, 2018

Illinois Market Reports Midwest Midwest Market Reports Office

For Some Office Tenants in Chicago, Being Out of the Loop Is In

by Kristin Harlow March 8, 2018

Office developers in Chicago are thinking outside the box — and outside the central business district — in order to cater to tenants in search of creative office space. While there will always be companies that want the cachet that a business address in the Loop offers, others realize the strategic advantages of urban, non-CBD locations as a recruiting tool. Live/work/play neighborhoods like River North and the West Loop are growing because high-profile employers want to attract a younger workforce that is drawn to the loft-style offices these neighborhoods can provide. This can be achieved either through ground-up development projects like McDonald’s soon-to-open headquarters at 1035 W. Randolph St., or adaptive reuse projects such as 1K Fulton, a former cold-storage facility that now counts Google among its tenants. Yet as rents in these submarkets continue to climb, office users are starting to ask whether they can get the same space for less money in equally desirable locations. For many, the answer is a resounding “yes.” New opportunities While neighborhoods near the CBD such as River West and Pilsen have benefitted from this office “ripple effect,” Chicago’s recently rezoned North Branch Industrial Corridor is perhaps the most alluring and uncharted territory …

March 8, 2018

Market Reports Massachusetts Northeast Northeast Market Reports Office

The Boston Office Market Keeps On Marching

by Taylor Williams March 7, 2018

Simply put, Boston is — and will continue to be — a top destination for tenants and capital alike. With strong market fundamentals and key drivers (education, finance, healthcare, life sciences and technology), 2018 is likely to be another terrific year for the commercial real estate sector. Market Metrics Boston’s urban core comprises four major submarkets: Downtown, Back Bay, Seaport and Cambridge. Together, these submarkets total more than 96.1 million square feet of office and lab space. This sector of the market features a vacancy rate of approximately 8.8 percent, positive net absorption of more than 300,000 square feet in 2017, and rental rates that are on the rise. Boston’s urban office market is largely driven by the region’s high concentration of educational institutions, financial and professional services, healthcare, life sciences and, perhaps most important, technology. These industries excel in the Boston area due to its high concentration of knowledge workers and its spirit of innovation and entrepreneurship. Tenant In-Migration The biggest trend impacting Boston recently has been the large-scale relocations of tenants into the urban core — both from within and outside of the market. This is a trend that shows little signs of slowing down. • GE — …

March 7, 2018

Industrial Market Reports Southeast Southeast Market Reports Tennessee

Nashville’s Growing Industrial Pipeline Limits Available Sites, Labor

by John Nelson March 5, 2018

Everyone is familiar with the expression “Rome wasn’t built in a day.” However, what most people do not know is that the second half of that phrase is, “but they were laying bricks every hour.” Bricklayers in Nashville are busy people these days, accommodating the demand for new commercial development. That’s not just a metaphor for the developers of record — the utility contractors, dirt movers, pavers, framers and roofers are all busy trying to keep up with the constant stream of construction. With record levels of construction comes the high demand for a skilled workforce to complete the necessary work. We constantly hear that approximately 30,000 people are moving to Nashville per year. However, a large amount of this new workforce via this in-migration are millennials looking to work in the IT or healthcare fields rather than skilled labor. If you were to ask any “bricklayer” what concerns them the most, almost assuredly the recruitment and retention of qualified labor will be at the forefront of the conversation. With the younger generation less likely to enter the blue collar workforce, why in 2017 did we see 6 million square feet of industrial warehouse space delivered? Make no mistake, that …

March 5, 2018

Market Reports Retail Texas Texas Market Reports

Three Major Consumer-Driven Changes in Austin’s Retail Landscape

by Taylor Williams March 2, 2018

Among professionals in the major sectors of commercial real estate, retailers are often the first to spot, understand and respond to emerging trends in human behavior. Those trends have shifted dramatically the past few years, and retail real estate in Austin has certainly felt the ripple effects, from downtown to the suburbs and across the emerging “nodes” in between. For some time now, American consumers in general have been clearly indicating their preference for more “experiential” ways to shop or receive services. That said, smart developers know that the experience begins well before shoppers enter a retailer’s doors. And understanding how to best cater to emerging demands helps breed success, not only for tenants, but also for the project as a whole. The following three trends represent key ways in which consumer demand is driving change in Austin’s retail landscape and illustrate how the market is responding. Seamless Integration Consumers want retail options located within close proximity to where they work and live — all the better if the property housing these needs can be one and the same. Just as Austin has grown regionally, so has demand for retail space, giving rise to mixed-use projects throughout the city. In …

March 2, 2018

Market Reports Massachusetts Northeast Northeast Market Reports Retail

Evolution of Seaport District as a Retail Hotspot, Other Trends to Watch

by Taylor Williams February 28, 2018

From new mixed-use developments popping up in the skyline to the increase of small-format stores, 2017 saw robust growth in downtown Boston’s retail landscape. Specifically, stabilizing rental rates have led to an uptick in retail leasing activity, showing the strength of both traditional retail destinations such as Newbury Street, as well as new mixed-use developments like One Seaport Square. While the downtown retail market is poised to remain stable, 2018 will welcome new trends fueled by e-commerce and omnichannel retailers, new leasing models, shifting consumer shopping behaviors and the ongoing challenge to accommodate millennials’ evolving preferences and expectations. The Seaport’s Emergence as a Retail Destination Historically, Back Bay has served as Boston’s premier neighborhood for retail with Newbury Street as its crown jewel and nearby Prudential Center, Copley Place and Boylston, all within a few minutes’ walking radius from the famous street. While Back Bay will continue to be a hotspot in 2018, Boston’s Seaport neighborhood is breaking out as a retail destination to watch as it transitions into one of Boston’s premier work-live-play destinations. Most recently, retailers Bluemercury, Mr. Sid, TravisMathew, Filson, L.L. Bean, and Lululemon are finding the value in meeting Boston’s young professionals where they work, live and …

February 28, 2018

Market Reports Multifamily North Carolina Southeast Southeast Market Reports

Investment Activity for Class B, C Multifamily on the Rise in Triangle

by John Nelson February 26, 2018

Solid fundamentals in tandem with soaring population growth in the Triangle market continues to drive rents and occupancy to record highs. Raleigh is repeatedly recognized as one of the nation’s best places to live, work and start a business. As a result, the market has a projected population growth of over 73 percent through the year 2044, outpacing cities such as Boston, Atlanta, Nashville and San Francisco, creating a snowball effect of investment and interest. Investors are finding the greatest opportunities in the value-add space in Raleigh for B and C-class product. Significant shortage of single-family home availability in the Triangle region has forced young and new families to turn to multifamily properties as a housing solution. Due to the demand for mid-size accommodation within middle-class budgets, and very few neighborhoods in that criteria, Class B and C apartments have seen a surge in interest, and in turn, attraction of investor attention. Of the 84 multifamily properties sold through Dec. 1 in 2017, 75 were considered Class B or C and totaled over $1.3 billion, or 76 percent of total Raleigh-Durham multifamily market investment in that time frame. Developers have slightly overbuilt Class A property downtown, resulting in a softening …

February 26, 2018

Industrial Market Reports Texas Texas Market Reports

Tenant Demands Changing in Austin Industrial Market

by Taylor Williams February 23, 2018

The story of industrial real estate today, at least in terms of national media coverage, centers around compressing cap rates and the steady stream of capital flowing into the sector. But in Austin — the kid brother of two major industrial markets, Dallas and Houston — the story over the past 12 months has been the large increase in the volume of industrial construction. Austin delivered 3.1 million square feet of industrial product in 2017, a 55 percent increase over the total space delivered during the previous year. Throughout the past year, the metro also trailed the national average in industrial vacancy, net absorption and percent change in rental rates from 2016 to 2017. Many developers that broke ground during one of the healthiest periods in Austin’s industrial history are now delivering space at a time when the Austin economy is starting to cool. Employers have found themselves in a more competitive environment, with annual job growth slowing to sub-3 percent levels and the unemployment rate reaching numbers not seen since the dot-com boom. Market Evolution Austin’s recent industrial performance should not be seen as cause for alarm, but rather as an opportunity to understand the changing mindset of the …

February 23, 2018

Industrial Market Reports Midwest Midwest Market Reports Missouri

Tight Industrial Market Encourages Large-Scale Construction in St. Louis

by Kristin Harlow February 22, 2018

With what appears to be a never-ending stream of construction, the biggest source for excitement coming into 2018 for the St. Louis industrial market is new, speculative development. According to research from Colliers International, construction completions exceeded 4 million square feet in 2017. This is the second-highest year of recorded construction volume for the market due to last year’s Goliath delivery of 6 million square feet. Currently, over 2 million square feet is under construction, with more slated for groundbreaking in 2018. One of the larger projects recently announced is NorthPoint Development’s proposed 300-acre industrial park in Hazelwood, situated in North St. Louis County. According to the St. Louis Post-Dispatch, NorthPoint plans to develop over 3 million square feet focused on logistics and light industrial warehouse space. The big question, it seems, is how long can developers continue to find new tenants for their large, modern bulk developments in St. Louis? Even with high, positive absorption in both 2016 and 2017, expectations for continued growth may be tempered as we move forward in 2018. Looking back at 2017, we see the industrial vacancy rate for metro St. Louis dropped to 6.7 percent at the end of the year. This rate …

February 22, 2018

Delaware Market Reports Northeast Northeast Market Reports Office

Increase in Tech Employment Drives Growth in Wilmington, Del. Office Market

by Taylor Williams February 21, 2018

In Delaware’s largest city, Wilmington, it is a tenant’s market when it comes to office leasing. There is much activity and redevelopment to attract new tenants downtown. Rental rates hover around $18 to $21 per square foot for Class B office space and $23-plus for Class A office space. Vacancy for Wilmington and its suburbs combined has decreased to around 13 percent. In the past year, nearly vacant office buildings have garnered activity from new investors looking to purchase at lower price points, freeing up excess capital for renovations or redevelopment. Some office buildings are being redeveloped into residential apartments due to the demand of millennials and professionals who desire a “live-work-play” lifestyle in downtown Wilmington, and who wish to reside near the city’s Amtrak station to take advantage of the easy access to larger cities like Philadelphia, New York, and Baltimore. The Buccini/Pollin Group has been putting hundreds of millions into the construction or redevelopment of residential, office, and hotel, as well as sports and entertainment properties on Market Street and in the Riverfront area. The company recently acquired a 13-story building comprising the former DuPont headquarters and the Hotel DuPont, which will be converted into a mixed-use complex …

February 21, 2018

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