Market Reports

Cleveland Office Market Sees String of New Projects

by Kristin Harlow August 17, 2017

Cleveland’s central business district (CBD) continues to make headlines as events like the Republican National Convention, the 2016 and 2017 NBA Championships and the 2016 World Series earned national attention. Within the office market, trends such as “flight to quality” and office-to-residential conversions, which are driven by a hot apartment market, have reduced surplus supply and lowered vacancies. This has shaped metrics positively, and has put Cleveland in a position of strength for the upcoming years. The news of the year has been the purchase of Key Tower by Millennia Cos., a local real estate developer known mostly for multifamily. The company moved its headquarters from a property in Valley View to two entire floors spanning approximately 40,000 square feet in Cleveland’s signature office tower. Almost immediately after, Forest City announced its headquarters move from the historic Terminal Tower to the Key Tower, backfilling almost 150,000 square feet of space that KeyCorp gave back in a downsizing strategy. By the first quarter of 2018, Key Tower will benefit from lobby and building amenity upgrades, and should see a vacancy rate of less than 10 percent. Another story on the horizon is the potential move of Medical Mutual of Ohio, now …

August 17, 2017

Hawaii Market Reports Office Western Western Market Reports

Competition Increases for Hawaii’s Office Space

by Camren Skelton August 15, 2017

Hawaii’s office market is dominated by Honolulu, which is home to 70 percent of the state’s population and commerce. More than 90 percent of the state’s 12 million square feet of multi-tenant Class A and B office space is located in Honolulu, with nearly 80 percent of Honolulu’s inventory situated in the four-mile stretch between the Central Business District and Waikiki. Hawaii’s office tenants are primarily in industries that support tourism, military, construction and government – Hawaii’s economic drivers. These include FIRE (Finance, Insurance, Real Estate), plus legal, CPAs, architects, engineers and contractors. Hawaii also has a small but growing innovation economy that has spawned several co-working centers, incubators and impact investment firms backed by the University of Hawaii. These names include Lauren Powell Jobs (widow of Steve Jobs), Pierre Omidyar (founder of eBay) and Henk Rogers (Tetris). Larry Ellison purchased 97 percent of the Island of Lanai in 2012 for $300 million and could join the list of tech billionaires interested in supporting Hawaii’s innovation economy. Hawaii has seen slow but steady job growth in office-using businesses, but the drive to reduce square feet per office worker and the related cost savings has resulted in a net loss of …

August 15, 2017

Florida Market Reports Multifamily Southeast Southeast Market Reports

Miami Multifamily Market Remains Strong, But Where are the Deals?

by John Nelson August 14, 2017

The multifamily market in South Florida is gaining strength but not sales velocity due to converging market and demographic forces. Sales topped $400 million for the third year in a row in 2016, largely because the average price per unit jumped 13 percent to $185,300 per unit. The vacancy rate fell below 4 percent at the end of last year, and rents climbed almost 4 percent on all types of units to an effective rate of $1,351 per month. It’s clear the current upcycle will continue beyond the usual period as immense demand from investors is causing an incredible scarcity of Class A product, and the lifestyle preferences of millennials are intersecting with the luxury condo boom. Opportunities, Challenges In 2005 and 2006, adequate inventory kept the multifamily market in balance. Today, buyers are plentiful, capital is available and interest rates are affordable. What we don’t have is product, a phenomenon not exclusive to Miami and Fort Lauderdale. Why? Sellers have few options. They’re thinking, “If I sell at a premium and I want to stay in a similar market, I’m going to pay a premium. So, what’s the point of selling?” Therefore, owners are putting properties on the market …

August 14, 2017

Market Reports Office Texas Texas Market Reports

Houston’s Office Market Rides Out Oil Downturn, Poised For Stability

by Taylor Williams August 11, 2017

Over the past few years, Houston’s diverse economy has proven resilient. This diversity helped the city weather a major drop in oil and gas prices that, during previous downturns, severely affected the office market. While Houston has taken its share of recent hits, it appears poised to move forward into a period of stability and steady growth. While most of Houston seems to be in recovery mode, the local office market historically trails the oil and gas industry and usually takes additional time to reflect the current economic recovery. Houston’s office market was hit hard by the downturn when oil prices plummeted at the end of 2014. Submarkets like the Central Business District and the Energy Corridor — where roughly half of the workforce belongs to the energy sector — were hardest hit. Firms in these submarkets suffered big layoffs and created large swaths of available sublease and direct office space. However, according to CoStar, tenants still spent more than $7 billion (larger than the GDP of 55 sovereign nations) on office space during the past year. What does this all mean for the office market? At the end of the first quarter of 2017, Houston’s direct vacancy rate was …

August 11, 2017

Iowa Market Reports Midwest Midwest Market Reports

Increased Development Activity in Cedar Rapids Flows Across Property Types

by Kristin Harlow August 10, 2017

These are momentous times for the Cedar Rapids economy. On the jobs front, the unemployment rate for the Cedar Rapids area stood at 3.2 percent in May, even tighter than the national unemployment rate of 4.3 percent for the same period. Meanwhile, the housing market recorded its lowest inventory of housing on the market in two years with 1,482 active listings in June 2017, 540 less than June 2015. On average, the number of days that houses were on the market dropped from 87 to 62 in the last year-and-a-half, while the median house price increased to $166,646. The city has seen dramatic housing, commercial and industrial growth in the last several years. Municipal and business leaders are addressing several issues, including: • affordable housing for entry-level workers and those earning 30 to 50 percent of the area median income; • recruitment of workers to fill an abundance of job openings; • more recreational, retail and cultural opportunities to attract Millennials to the city to fill the job openings; • completion of the flood protection system to reinforce the confidence of developers in creating projects along the Cedar River. What follows is an update on the performance of the major …

August 10, 2017

Connecticut Market Reports Northeast Northeast Market Reports Office

Despite Challenges, Connecticut’s Fairfield County Office Market Shows Improvement Potential

by Taylor Williams August 9, 2017

With employment representing one of the most critical factors in the health of the office sector, people naturally look to the unemployment rate as a key metric to quickly assess a given market. By this standard, Fairfield County should be thriving, with the unemployment rate at 4.4 percent in April 2017 — just under the 4.8 percent rate reached just prior to the recession. And yet, the availability rate in Connecticut’s largest office market stood at 24.5 percent at the end of the first quarter of 2017 — a far cry from the 15.2 percent rate seen at year-end 2007. There are two reasons for the discrepancy. First, it is far more accurate to look at office-using employment (information, financial, professional services and other industries) versus overall employment as a barometer. While office-using employment has rebounded approximately 4.0 percent since the depths of the latest recession, today’s count is still 8.4 percent lower than the latest peak. Second, a marked shift in the desired style of office and an upswing in remote working opportunities have led to reduced utilization rates in terms of square feet per employee. Today’s employers want to be in buildings that make their employees happy and …

August 9, 2017

California Market Reports Office Western Western Market Reports

OC Spec Office Development Signals Post Recession Recovery

by Camren Skelton August 8, 2017

Orange County’s innovative office economy continues to be supported by healthy underlying demand drivers. Tech, financial and business services companies continue to provide a strong employment base that was not readily present during the last cycle. Major colleges and universities such as Chapman and UC Irvine provide a steady pool of job-seeking professionals. The climate, lifestyle and general quality of life also continues to attract top employment talent from across the country. Office vacancy is trending downward with rental rates increasing beyond pre-recession levels. As the health of the office market solidifies, notable developers like the Irvine Company, Trammell Crow Co. and Lincoln Property have recently commenced or completed construction on formidable office projects. These new office projects are noteworthy in that they were started on a speculative basis. This is a new trend in the market that would have been unheard of less than three years ago. This is a strong indication of the increased confidence by lenders, equity sources and developers in the Orange County office market’s recovery. Irvine Company has become the dominant source of speculative development due to considerable new development. This company was ahead of the spec curve when it built the first sizeable inventory …

August 8, 2017

Florida Market Reports Office Southeast Southeast Market Reports

Miami Office Market Thrives Due to Young Workers Seeking South Florida Lifestyle

by John Nelson August 7, 2017

Looking ahead to the rest of 2017, we can expect to see continued improvement of Miami’s office market based on strong market fundamentals and employment growth. Key trends to watch in 2017 that will help drive and shape the market, include: • Steady, modest growth in office rents • Declining available office supply • New transit-oriented mixed-use developments that include office space in both Miami’s downtown urban core and other connected walkable neighborhoods such as Coconut Grove, Coral Gables and Wynwood • Tenants adopting new office design standards • Increased moves between submarkets and new-to-market companies positively impacting net absorption Office demand will continue to be fueled by vibrant population growth of young professionals and Miami’s appeal as a growing, global and entrepreneurial city. Miami-Dade County’s population has grown 8 percent in the past five years, making it the seventh-largest county in the United States. In 2016, more than 20,000 jobs were added in the county, predominately in the construction, real estate, professional services and financial services industries. This economic growth has fueled expansion activity in the office market and should hold steady in 2017. Miami’s focus on cultivating innovation and entrepreneurship has also positively impacted the office market. In …

August 7, 2017

Market Reports Multifamily Texas Texas Market Reports

Ample Capital Drives Growth in Manufactured Housing Throughout Texas

by Taylor Williams August 4, 2017

As we turn the page on another successful Manufactured Housing Institute National Congress and Expo, several themes are emerging. From the amount of capital in the market to the changes in the government agencies to continued reforms in financing for chattel, or homes, the industry of manufactured housing heads into the second half of 2017 with substantial momentum, thanks in part to a number of new entrants in the market. A few statistics shared at the conference reveal the interest in the manufactured housing industry as a whole. First, this conference saw the most attendees for a National Congress and Expo since 2007. Second, the first quarter of this year has already seen a 23 percent increase in housing shipments over last year, with year-over-year increases of around 17 percent. There are likely a few reasons for this increase. But above all else, capital is plentiful, fueled by heightened interest in the industry in the private equity and REIT space, as well as low interest rates. With so much capital comes more interest. This interest has led to less ownership by traditional “mom-and-pop” entities and more competition, thus lower cap rates. In some regions, parks trading with sub-5 percent cap …

August 4, 2017

Market Reports New York Northeast Northeast Market Reports Retail

High-End, Specialty Retailers See More Promise in Western New York

by Taylor Williams August 2, 2017

A trend in retail activity in Western New York and the Finger Lakes Region over the past six to 12 months has been the announcement or arrival of a number of high-end or specialty retailers and restaurants. Although traditionally these retailers are more selective about the markets they enter, as they continue to grow nationally they have to expand the list of potential markets they will consider. Some of them find that the Buffalo and Rochester metropolitan areas are markets in which high-end or specialty retailers or restaurants can thrive, particularly when Upstate New York’s lower occupancy costs and lighter competition are sufficient to offset potentially lower unit volumes. Whole Foods’ much-anticipated Western New York debut will be this summer in the Northtown redevelopment project by W.S. Development in Amherst. Whole Foods has also signed a lease in Brighton, a suburb of Rochester, for a 50,000-square-foot store at Palazzo Plaza, a proposed 90,000-square-foot shopping center on Monroe Avenue at Interstate 590. The project, being developed by the Daniele Family Companies, is currently making its way through the entitlement process. In a sign of the renaissance in progress in both Downtown Buffalo and Downtown Rochester, the first-ever national brand polished steakhouse …

August 2, 2017

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