Market Reports

Austin’s Office Market Goes Boomtown, San Antonio’s Continues Impressive Growth

by Taylor Williams September 28, 2018

Compared to Houston and Dallas, the office markets of Austin and San Antonio have a hard time competing on sheer size alone. However, these two central Texas cities are undergoing rapid changes that are leaving longtime residents amazed at the constantly morphing skylines. Both metros boast strong office markets that are growing with the entire Texas economy. But how do they match up in a head-to-head comparison? Basic Numbers At approximately 50 million square feet of office space, Austin holds a size advantage over San Antonio, which has about 30 million square feet. As of the second quarter 2018, annual full-service average office rents in Austin are also substantially higher at $36.54 per square foot compared to San Antonio’s $22.05 per square foot. Both markets have seen steady year-over-year increases in rates as the economy has recovered from the Great Recession. The familiar real estate mantra, “Location! Location! Location!” plays a big role in office rates and affordability in each market. Austin’s central business district (CBD) continues to draw major employers, including Google and Indeed, which combined occupy about 667,000 square feet of office space. This downtown migration has pushed vacancy in the CBD down to 10.1 percent, with rents …

September 28, 2018

Industrial Market Reports Midwest Midwest Market Reports Minnesota

Industrial Owners Find Success in Reinventing Flex and Showroom Spaces

by Kristin Harlow September 27, 2018

The most active commercial real estate category in the Twin Cities metro area over the last several years, in terms of leasing activity and new construction sales, has been industrial product. New construction has been trending toward office warehouse and bulk buildings with higher clear heights, as tenants are implementing new racking systems and growing upward to optimize their space. On the surface, this trend may sound like it will leave behind the lower-clear height flex and office showroom buildings. However, owners of flex and office showroom buildings in Minneapolis-St. Paul are finding new interest by providing creative amenities and repositioning assets that are attracting entirely new tenant prospect types and reinventing what an office showroom building can become. The ability to target a wider potential prospect pool including office users, retailers and non-traditional industrial users is reliant on proper vacancy preparation to be able to show the space as a true blank slate. Through white-boxing the space, owners show that the space has high ceilings with an industrial feel, an aesthetic that many office users are interested in, but at a significantly lower price point versus many office buildings. Another benefit of the office showroom product is that there …

September 27, 2018

Market Reports Nevada Office Western Western Market Reports

Office Trends Toward Creative, Collaborative in Las Vegas

by Taylor Williams September 25, 2018

Some of the larger companies with long-term growth forecasts are focusing on expansion and amenity-rich office environments for recruiting purposes. However, more people in less space continues to be the trend for companies with slower growth opportunities that are focused on efficiencies and overhead costs. The average standard amount of office space per employee dropped from 225 square feet per person to between 150 square feet and 175 square feet per person in the past couple years. That being said, occupancy cost is not always the main driver in choosing an office location. There seems to be much more emphasis now on quality, functionality and conveniences. In many cases, this is based more on how we work rather than just cost savings. Open work spaces, perks like on-site dining and retail, and providing collaborative environments that foster employee interaction have proven to increase employee productivity significantly. Design is a critical component of this type of work space. Companies are looking for workplace designs and furniture systems that offer flexibility and adaptability as technology evolves. Technological infrastructure enhances the culture and efficiency of a business and protects the security of a company’s trade information. It also saves resources like …

September 25, 2018

Market Reports Maryland Office Southeast Southeast Market Reports

Job Growth, Low Unemployment Keep Office Development Churning in Baltimore

by John Nelson September 24, 2018

Continued job growth, coupled with a 4.3 percent unemployment rate (down from nearly 9 percent in 2010) in the greater Baltimore metropolitan region are the primary reasons giving real estate development companies the conﬁdence to construct speculative commercial ofﬁce buildings in select submarkets throughout central Maryland. After delivering more than 1 million square feet of space in Baltimore City, another 1.6 million is presently rising in the downtown skyline. Industries including ﬁnancial services, medical and healthcare, education, cybersecurity and manufacturing continue to exhibit excellent health, and a location approximately 40 miles from the center of Washington, D.C., remains one of Baltimore’s most valuable assets. Below is a quick scan around the entire metro area: Canton Merritt Properties announced plans earlier this year to construct a 20-story, 200,000-square-foot speculative ofﬁce building along Boston Street. Previously announced, but yet to begin just several streets away, is Corporate Ofﬁce Properties Trust’s $1 billion project containing more than 1 million square feet of commercial ofﬁce and retail space. Since the opening of The Shops at Canton Crossing, a shopping center developed by 28 Walker Associates several years ago, this submarket has experienced a retail renaissance, although the inclusion of new commercial ofﬁce product is …

September 24, 2018

Market Reports Multifamily Texas Texas Market Reports

Value-Add Opens Doors For Multifamily Buyers

by Taylor Williams September 21, 2018

Capital sources of all types see opportunity in the apartment sectors of core Texas markets, which regularly lead the nation in employment and population gains. With so many investors trying to park money in this space, sales prices have risen, cap rates for multifamily properties in major markets have compressed and lenders are competing among themselves to finance acquisitions. When lenders compete, borrowers win. For multifamily lending in sizable markets, value-add borrowers are seeing tighter spreads on their loans, a factor of both more lenders entering the space and the Federal Reserve’s decision to raise short-term interest rates. But rising land and construction costs have also contributed to skyrocketing prices on newly built multifamily product, which has weeded out some potential investors. Rather than shun the market entirely, however, many of these buyers are targeting Class B and C assets for value-add plays that will attract residents who can afford higher rents. In Texas, these kinds of deals are being executed at record paces. “The transaction velocity for value-add multifamily deals has been at historical highs in this cycle,” says Warren Hitchcock, senior vice president in NorthMarq Capital’s Houston office. “The significant amount of capital flowing into the space, combined …

September 21, 2018

Market Reports Midwest Midwest Market Reports Minnesota Multifamily

Influx of Supply Begins to Impact Minneapolis Multifamily Market

by Kristin Harlow September 20, 2018

Like several other markets across the country, the Twin Cities is experiencing the peak of the post-recession construction cycle. However, the traditionally tight multifamily market is in one of the best positions to absorb new units. In fact, Minneapolis-St. Paul has consistently reported one of the lowest vacancy rates in the nation due to a strong economic base and pent up demand for new units. Metro Minneapolis is the second-largest economic center in the Midwest and the local economy has grown at an average of 3 percent over the past five years, a healthy rate in the Midwest. The 18 Fortune 500 companies headquartered in the area are a significant driver of job growth and rental demand, along with the hundreds of support firms. As a result, the unemployment rate is below 3 percent and among the lowest in the nation. Despite a lack of available talent, employers managed to create 30,600 jobs in the year-long period ending in the second quarter. Overall, payrolls expanded by 1.5 percent during that time. Employment growth is encouraging development across several sectors in the market. In South Minneapolis, construction along the Blue Line is taking shape as $300 million in projects are coming …

September 20, 2018

Market Reports Multifamily Nevada Western Western Market Reports

Labor, Population Growth Drives Las Vegas Multifamily Market

by Taylor Williams September 18, 2018

Las Vegas continues to benefit from a strong labor market, which is driving demand and strong fundamentals in the multifamily sector. Employment in Southern Nevada increased by 3.4 percent over the past year, reaching one million workers, while the total population in Southern Nevada increased 2.2 percent, surpassing more than 2.2 million people. With a well-documented shortage in housing, developers added more than 3,200 new apartment units during the year and still saw vacancies decrease 30 basis points to 5.2 percent. Part of what is driving the tremendous growth in Las Vegas is the billions of dollars in commercial developments. This includes several major resort renovations (Palms, Monte Carlo, Caesars), several new resort developments (Paradise Park, The Drew, Resorts World), and the $1 billion expansion of the Las Vegas Convention Center. There is also the $1.9 billion football stadium that is helping usher the city into a new era of professional sports. On the capital side, multifamily properties continue to be highly sought after by both private and institutional buyers. Although transaction volume slowed in the first quarter of 2018 compared to the same period a year ago, total volume was more than $350 million in the first quarter, marking …

September 18, 2018

Market Reports Maryland Retail Southeast Southeast Market Reports

Long-Awaited Retail Projects are Springing to Life All Around Baltimore

by John Nelson September 17, 2018

A number of high-proﬁle retail and mixed-use developments throughout the greater Baltimore metropolitan area have been stuck in neutral over the past few years, with issues rang-ing from changes to the local real estate environment, construction issues, leasing challenges related to store closings and consolidations, corporate reevaluations and the constantly shifting tastes and shopping habits of the Baltimore consumer. Successful retail projects must en-joy a string of positive outcomes (as well as luck), including support from retailers, the capital markets and the local community. Below is a rundown of local retail or mixed-use developments that have recently sprung to life, as well as some that still remain on the starting block. Mill Station in Owings Mills Owings Mills Mall opened to sig-niﬁcant fanfare in 1986 and stood face-to-face with a wrecking ball in 2016. Numerous ownership groups, design iterations and new retail projects emerging within close proximity kept pushing its reincarnation back further. Finally, the renderings of the “de-malled” project were unveiled to the public last fall, along with announcement of several leasing successes. This summer, construction remains in full bore leading up to an expected fall opening of Costco, followed by Lowe’s Home Improvement, Home-sense, Burlington and Five Below, …

September 17, 2018

Market Reports Multifamily Texas Texas Market Reports

Texas Summer Heat Is No Match for DFW Multifamily Market

by Taylor Williams September 14, 2018

To say the multifamily investment market in Dallas-Fort Worth (DFW) is healthy would be an understatement. With nearly 36,000 units across 183 properties sold in the first half of 2018, according to Real Capital Analytics, a more accurate assessment would be that the sector is — figuratively — on fire. Investor demand for workforce housing remains at an all-time high. With strong economic fundamentals, buyers remain bullish on the DFW multifamily market. Historically low interest rates have attributed to cap rate compression as buyers continue to search for value-add opportunities. While cap rates remain compressed, the yields are still very attractive when compared to alternative investment options. With listings averaging more than 125 confidentiality agreements, 20 tours and 15 offers, the competition has become intense. Winning a deal in today’s market takes more than a strong offer — it takes a good reputation, determination and aggression. Buyer Strategy Buyers can differentiate themselves and establish a competitive advantage by having the equity partner, lender, contractors and management company involved in the transaction prior to the initial offer. Sellers have grown accustomed to tight timelines, limited contingencies and significant non-refundable earnest money at contract execution. In this competitive of a market, sellers …

September 14, 2018

Market Reports Midwest Midwest Market Reports Missouri Retail

Grocery Stores, Restaurants Dominate Retail Development in Kansas City Market

by Kristin Harlow September 13, 2018

As most that pay attention to commercial real estate know, the retail real estate market is constantly evolving. That said, with change comes opportunity, and we are both recognizing and capitalizing on that opportunity in the Kansas City market. As has been the case for the last few years, we continue to see a significant amount of “right-sizing” from big box and junior box retailers. Although e-commerce remains a prevalent means of purchasing for consumers, retail closures are not as abundant as many have predicted. Rather, many retailers are tweaking their square footage needs in search of the perfect footprint to optimize in-store sales in conjunction with e-commerce. While e-commerce continues to gain market share, it still accounts for less than 10 percent of retail sales nationwide, as of last year. The need for brick-and-mortar stores remains imperative to the success of most retailers. In the Kansas City metro area, retail vacancy rates remain low at 5.6 percent as of the second quarter. While that is a slight increase over 5.5 percent in the first quarter, it is a significant improvement over last year’s second-quarter figure of 6.3 percent. A few major 2018 transactions contributing to the positive net absorption …

September 13, 2018

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