Market Reports

Downtown LA’s Industrial Supply Gives Way to Other Uses

by Camren Skelton February 7, 2017

When you visit Los Angeles, the sight of the cranes looming in the sky in all directions shows a city undergoing significant revitalization and redevelopment. Not so long ago, the Downtown area of Los Angeles went “dark.” This occurred after the hustle and bustle of the normal workday was done and the streets were mostly empty, businesses closed. Fortunately, Los Angeles has seen significant construction and redevelopment over the past few years. According to the Downtown Center Business Improvement District (DCBID), the population of Downtown Los Angeles was 18,000 people in 1999. Today, the population is estimated at 63,208, with a daytime population of 500,000. The residential inventory consists of 36,964 units with 11,868 under construction and 19,054 proposed for a total of 48,832 units as of the third quarter of 2016. There are 8,163 hotel rooms with 2,765 more under construction and 3,636 proposed for a total of 14,564. Retail has 2 million square feet under construction and an additional 1.5 million square feet proposed. Major industrial activity includes the announcement of Warner Music Group relocating from Burbank to the Arts District where it will occupy 257,000 square feet at the former Ford Factory, which was constructed in 1912. …

February 7, 2017

District of Columbia Industrial Market Reports Southeast Southeast Market Reports

In the Nation’s Capital, Retail Always Follows Where New Residential Rises

by John Nelson February 6, 2017

The building height restriction — enacted in Washington, D.C. to preserve picturesque views of the United States Capitol Building and the Washington Monument — helps provide clear and exceedingly stunning views of the multitude of construction cranes that currently dot the vertical landscape of the District of Columbia. The majority of these yellow-steeled economic generators are being used to develop new residential and mixed-use projects, ranging from the NoMa district to the southeast Waterfront area and weaving through the neighboring suburbs, including Loudoun, Va., and Bethesda, Md. And, where new residential goes, supporting retail always follows, including the trendiest grocery store chains and hottest fast-casual and dine-in restaurant concepts. In addition, the area’s ever-expanding transportation network that provides a daily lifeline to D.C. and suburban workers is also paving the way for new retail opportunities as our Nation’s Capital continues to retain its reputation as among the most prolific retail locations in the country. Downtown Core Residential-only or mixed-use projects currently underway in the District are too numerous to mention, but here is a glimpse into the frenetic activity as there appears to be a bottomless appetite for new housing, particularly among Millennials. MRP Realty is developing the 1,600-unit Rhode …

February 6, 2017

Market Reports Midwest Midwest Market Reports Ohio

Cincinnati, Dayton Closing the Gap: Why the Push to Merge the MSAs is a Winning Strategy

by Kristin Harlow February 2, 2017

The tale of two Ohio cities — Cincinnati and Dayton — is a story of growth. It takes less than an hour to travel between Cincinnati and Dayton. The two metros sit about 55 miles apart along Interstate 75, and that distance is slowly getting shorter. Since 2000, the cities have been growing together along the I-75 corridor, with significant growth over the past five years. The northern suburbs of Cincinnati have experienced exponential growth over the last 20 years stemming from the development of Union Centre Boulevard in 2000 in West Chester Township. Now, West Chester is the second largest community in the Cincinnati metropolitan statistical area (MSA). Only the City of Cincinnati is larger. Suburban growth is catalyst New developments continue to spur Cincinnati’s northern growth along I-75. In 2015, Liberty Center, a mixed-use retail, office and housing development, opened in Liberty Township north of the fast-expanding West Chester. The development is another example of a growing trend to bring urban-style amenities, such as live, work and play environments to the suburbs. Although much of the I-75 corridor is industrial, the growing suburbs led to the significant increase in the amount of office and retail space in the …

February 2, 2017

District of Columbia Industrial Market Reports Southeast Southeast Market Reports

Demand is Outpacing Supply in Metropolitan D.C.’s Industrial Market

by John Nelson January 30, 2017

The Washington, D.C., metropolitan industrial market, spreading from Frederick County, Maryland to the north, Prince William County, Virginia to the south and as far west as Loudoun County, Virginia is ideally situated between I-95 and I-81 — major transportation corridors that allow shipments to easily reach much of the country. The industrial market has improved more quickly than other sectors and fairly dramatically to the point where much of the region can be described as land-constrained and under-supplied. Certain industrial sub-segments, such as data centers, have impacted the availability of warehouse and distribution space in key locations for optimal supply chain design. As of the third quarter of 2016, the area’s industrial market totaled 190 million square feet (inclusive of flex space), divided almost equally between the markets of Suburban Maryland (90.6 million square feet) and Northern Virginia (90.2 million square feet). The District of Columbia comprised 9.2 million square feet, and 1.5 million square feet was under construction region-wide. Approximately 4.2 million square feet has been absorbed year-to-date, and vacancy was 7.9 percent — a 250-basis point decrease from 10.4 percent reported as recently as year-end 2013. In comparison, the office market has ranged from 14 to 14.9 percent …

January 30, 2017

Market Reports Midwest Midwest Market Reports Missouri Multifamily

Vibrant Economy Underpins Healthy Apartment Market in Kansas City

by Kristin Harlow January 26, 2017

Without a doubt, 2016 was a year to remember for the Kansas City apartment market. Employers, builders, operators and investors all had an eye on the flourishing metropolitan area and contributed to its ongoing strength, leading to a 20-year high for apartment occupancy. But in order to assess if 2017 will be as fruitful, a review of how each of these groups fared in 2016 and an analysis of the current economic climate should be taken into account. Employers A healthy economy underscored by an active employment market generates a cyclical effect whereby employers seek talent, talent seeks housing, and developers seek residents. According to Moody’s Analytics, total nonfarm payroll employment in the Kansas City metropolitan area in 2016 expanded by 1.5 percent following a 1.3 percent increase in 2015. Virgin Mobile USA, to name one active area employer, relocated its corporate headquarters from Warren, N.J., to downtown Kansas City as part of the company’s re-launch of its new brand under Sprint. The long-term location for the new headquarters is undetermined, but temporarily at least 50 new employees now work out of the One Kansas City Place building at 12th and Main streets. By year-end 2017, Berkadia Research projects total …

January 26, 2017

California Market Reports Multifamily Western Western Market Reports

Encouraging Multifamily Market Fundamentals Drive Investors to the Inland Empire

by Camren Skelton January 24, 2017

A steady supply of job opportunities and the growing population in the Inland Empire are supporting household formation, raising demand for housing and bolstering the performance of the area’s multifamily property market. Nearly 22,420 households were formed in the Inland Empire over the past four quarters that ended in September, while 48,500 individuals were added to the local population. By year’s end, area employers will have expanded the workforce by 2.2 percent with the addition of 30,000 positions. Hiring this year was driven by the government sector, which climbed 4 percent, or by more than 9,400 workers during the past 12 months that ended Sept. 30. The trade, transportation and utilities sectors also performed well, contributing 8,950 jobs over the same period. These strong hiring trends resulted in the unemployment rate falling 20 basis points to 6.2 percent — nearing the pre-recession five-year average of 5.7 percent — over the year-long period that ended in the third quarter of 2016. The Inland Empire’s growth and solid economic fundamentals are key factors behind the observable rise in construction activity we’ve witnessed this year. Apartment construction is booming, and builders are expected to more than double the units that were brought into …

January 24, 2017

Louisiana Market Reports Office Southeast Southeast Market Reports

Despite Challenges in Marketplace, New Orleans Office Activity Has Picked Up

by John Nelson January 23, 2017

New Orleans may be The Big Easy, but when it comes to understanding this unique Southern city’s commercial real estate marketplace, very little is easy or simple. The numbers, at least, are fairly straightforward. New Orleans currently has around 8.8 million square feet of Class A office space and 1.6 million square feet of Class B. Average rental rates are approximately $19.00 per square foot and $15.50 per square foot for Class A and Class B, respectively, with current occupancy rates at 89.5 percent for Class A and 71 percent for Class B. By way of comparison, the popular suburban Metairie market has around 2 million square feet of Class A and 1.5 million square feet of Class B office space, with occupancy rates at 93 percent and 88.2 percent, respectively (both down slightly from 2014 highs of 95 percent and 92 percent). Average rental rates are approximately $24.00 per square foot in Class A properties and $19.50 for Class B. The numbers in the suburban North Shore market are similarly healthy, with rates and occupancy numbers in the same general range as Metairie. Look beyond the surface numbers, however, and things get interesting, and a little more complicated. In …

January 23, 2017

Market Reports Midwest Midwest Market Reports Missouri Retail

Strong Retail Absorption Jump-Starts Development Activity in Metro Kansas City

by Kristin Harlow January 19, 2017

Nearly all of Kansas City is seeing a significant increase in retail and restaurant construction, with many new development projects now coming to fruition. Several of these new construction projects incorporate apartments and other types of entertainment, office or residential space above first-floor retail. Propelled by the recent opening of the streetcar and new apartment complexes across the city, retail in downtown Kansas City received a lot of leasing attention in 2016, according to CoStar Group. “More people are moving downtown for walkability and a taste of urban living, so retail positioned near the streetcar route or on the ground level of apartment buildings could see more demand,” wrote CoStar in its third-quarter overview of the Kansas City retail market. “In the area running from River Market down to Country Club Plaza, as much space leased in the first three quarters of 2016 as did in all of 2015.” Meanwhile, we are experiencing a number of projects where the traditional, older enclosed malls and retail strip centers are being torn down and redeveloped as mixed-use properties across the Kansas City retail market. Standout submarkets, corridors Annual deliveries in greater Kansas City averaged just over 1 million square feet per year …

January 19, 2017

California Industrial Market Reports Western Western Market Reports

Inland Empire: The Industrial Sector’s Well-Rounded Evolution

by Camren Skelton January 17, 2017

People are aware of the Inland Empire’s rapidly growing market and the fulfillment center trend that’s sweeping Southern California. Amazon, Walmart and many others continue to be pioneers in logistics and door-to-door fulfillment, but the side of the market people are missing is the smaller, more locally sourced user, the groups that service these large international companies. It’s a common theme that when the big guys grow into space there’s normally a contingent of smaller users behind them ready to take down the small- to mid-sized product. This trend has never been more true than it has over the past 12 months. As million-square-foot buildings continue to be leased out by these massive conglomerates, the smaller product has been flying off the shelves. There was a concern in early 2016 that this size range was going to be overbuilt, but due to 8.5 million square feet worth of gross absorption through the first three quarters in the 100,000- to 300,000-square-foot size range, that idea has become a misconception. We’re now sitting with a deficiency of product driving lease rates and sales numbers higher than ever. Lease rates in this size range have jumped about 8 percent over the past year …

January 17, 2017

Georgia Market Reports Office Southeast Southeast Market Reports

Atlanta’s Office Market Experiencing Positively Boring, Safe Growth

by John Nelson January 16, 2017

The Atlanta office market has continued down a path of steady recovery and absorption, although the pace remains somewhat muted from prior recovery cycles. As outside investors have warmed up to the city of Atlanta, they have been comforted by a safe and positively boring period of growth. For the last couple of years, investors have been committed strongly to value-add opportunities throughout metropolitan Atlanta, including areas that have historically been out of favor like Alpharetta and Peachtree Corners. The fundamental improvements in the market rents and occupancy continue to support bullish forecasts for office space in Atlanta with significantly low vacancy and steady rent growth. Atlanta’s office market sits at 12.1 percent vacancy, 6 percent rent growth and 3.6 million square feet of positive net absorption after several years of consistent absorption and falling vacancy. With value-add being a buzz word throughout the Southeast, many investment sales brokers have taken core assets and found ways to present them as opportunities for value-add in an effort to reach a larger pool of investors. Investor appetite continues to be measured and very focused on downside risk versus upside potential. This has inflated the return expectations for very solid real estate, making …

January 16, 2017

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