Market Reports

Driven by E-Commerce, Indy’s Industrial Bulk Market Continues Growth Spurt

by Kristin Harlow March 15, 2018

In 2017, newly signed bulk space deals in the greater Indianapolis industrial market totaled 10.2 million square feet. Of that total, over 50 percent had some affiliation with e-commerce. With 26 new buildings and another 5.7 million square feet under construction, the Indianapolis industrial market will clearly become increasingly linked to the performance of e-commerce as the total share of online retail sales remains in a significant growth mode. Projections by Cushman & Wakefield show that by 2020 nearly 12 percent of all retail sales will be associated with e-commerce — three times what it was 10 years ago. Stronger growth will be driven by the onset of e-grocery and e-pharma. Additionally, e-commerce will continue to be a driving force in these industrial deals because the online industry is getting better at what it does. Coming off the strongest holiday season since the Great Recession, companies are now focused on the cost of package returns and are re-examining the value of brick-and-mortar stores. When it comes to package returns, not only is the processing time significantly slower, but it is six times costlier to return a package using regular shipping methods. Returning items to physical store locations is the cheapest …

March 15, 2018

Market Reports Multifamily Southeast Southeast Market Reports Tennessee

Is Nashville’s Multifamily Market Overbuilt? Maybe, But Not for Long

by John Nelson March 12, 2018

Nashville has set several notable records in recent years for job growth, rent growth, population growth, tourism and tax revenue, among others. But for the multifamily industry, the most notable benchmarks lately have been related to the amount of inventory that has been delivered. However, the more interesting and less obvious data point is the record level of renter demand that Nashville is currently experiencing. As of third-quarter 2017, Nashville led the country in relative net absorption, with 4.9 percent of the existing inventory being absorbed. This equates to approximately 6,300 units. This demand is fueled by incredibly resilient job creation, as Nashville has increased its employed labor force by 20 percent over the last five years — more than 160,000 jobs. With that as the backdrop, the big question on everyone’s mind is the impact of new supply. In short, yes, there are pockets of oversupply, with approximately 8,500 units delivered in 2017 compared with net renter demand of roughly 6,300. However, with urban deliveries projected to drop off 40 percent in 2018, and 80 percent in 2019, and no slowdown in renter demand on the horizon, the current imbalance is likely to correct itself in relatively short order. …

March 12, 2018

Market Reports Office Texas Texas 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

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