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 …
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 …
An influx of new workers and residents is expected in the Clayton submarket of St. Louis thanks to more than $630 million in office, residential and mixed-use development that is in the planning stages or currently under way. Health insurer Centene Corp. has announced that it will build a new 16-acre, $450 million campus expansion on the east edge of downtown Clayton at Hanley Road, Forsyth Boulevard and Carondelet Plaza. The project, set to break ground early this year, stands to effectively shift the center of Clayton while adding a mixed-use, Class A office-anchored business and lifestyle development to the submarket. Delivery of the 500,000-square-foot Phase I tower is set for late 2019. At the opposite end of the submarket, Koman Group expects to break ground on its proposed 330,000-square-foot, 14-story office and retail project, situated at the corner of Forsyth and Brentwood boulevards. Just across the street is another $68 million, 233,000-square-foot office project likely to begin in 2018. Proposed by Jared Novelly and Apogee Associates, the project would bring the total proposed office development to a robust 1 million square feet of new Class A space in downtown Clayton. As the premier office submarket in St. Louis, Clayton …
There are two trends that describe the current state of retail development in Southern Nevada: restaurants are expanding and some junior boxes are closing. Ecommerce competition and the consolidation of retailers nationally has caused junior box tenants to continue to struggle. It is odd to see a new development like the 1.6-million-square-foot Downtown Summerlin open on the affluent west side of the Valley in October 2014, only to see two junior boxes close since then. The Sports Authority shuttered its doors earlier this year, while Golfsmith just announced it would cease operations by the end of 2016. Other retailers in the development are doing very well, but it is an unfortunate sign of the times to see junior anchors close in good retail developments. When analyzing ecommerce vs. bricks and mortar, retailers are paying more attention to the facts listed in the table below. The example compares Amazon to Walmart — both great businesses but differing models. The reason is clear why it is difficult to compete when Amazon is able to produce 165 percent more per employee. This analysis does not include the difference in fixed assets, which only further exaggerates the advantage for Amazon when considering what a …
To understand the state of retail in Atlanta in 2005, you first looked at where and what developers were building, then to where retailers were locating and lastly to how consumers were shopping. Simply put, if a developer built it and a retailer occupied it, the consumer was sure to shop there, but that’s no longer the case. To understand the state of retail in Atlanta today, you need to start with the Atlanta consumer. Go Big or Go Home From 2000 to 2010, the Atlanta Regional Commission reports metro Atlanta added over 1 million residents with an additional 2.5 million people projected to be added between 2015 and 2040. Further, according to a study by the University of Georgia, half the state’s population growth is concentrated in just three Atlanta metro counties — Fulton, Gwinnett and Forsyth. A big driver for the growth is jobs, especially those in high-paying sectors like information, professional services, science and technology. EMSI reports that two of the counties making up Atlanta’s metropolitan area, Forsyth and Coweta, are in the top eight of large counties for skilled job growth. Additionally, Forbes claims Atlanta is now growing its business service sector faster than New York, …
The St. Louis industrial market is in the midst of historic development and deal making. As witnessed in many markets, “big bombers” — industrial facilities 500,000 square feet and larger — are coming out of the ground at a record pace. Better still, they are being leased and pre-leased at a record pace. By all accounts, the driver here is the new e-commerce phenomenon with major players like Amazon taking nearly 1.5 million square feet in the Metro East submarket. The two major developments in this submarket are Gateway Commerce Center, developed by TriStar, and the adjacent Lakeview Commerce Center, developed by Panattoni. In addition to Amazon, Gateway Commerce Center boosts a host of big box users such as P&G, Unilever and Saddle Creek Corp, the latter of which took 673,137 square feet last year at the Center. Tri-Star is in the process of completing two additional buildings in the Center: Gateway East 520 containing 520,000 square feet, and Gateway East 624 containing 624,000 square feet. In neighboring Lakeview Commerce Center, Amazon occupies additional space along with World Wide Technologies, occupying 769,500 square feet in the Center. Analyzing the data Let’s drill down further and let the numbers speak for …
Though there was a slight decline in Las Vegas’ overall industrial market activity in the first half of 2016, the remainder of the year will finish strong as the region continues to see significant expansion. Despite aggressive market conditions, demand continued to outpace new supply during the third quarter of this year, while asking rates rose and large distribution centers dominated market activity. Demand for industrial space in the Las Vegas market increased during the third quarter, with 787,582 square feet of net absorption, bringing the total net absorption year-to-date to more than 2 million square feet. New completions totaled 642,571 square feet and vacancy rates decreased to 4.4 percent, the lowest since the first quarter of 2007. The average asking triple-net lease rate climbed to $0.62 per square foot, per month, the highest since the fourth quarter of 2009. There are currently nine industrial projects under construction throughout the Las Vegas Valley, totaling nearly 4.8 million square feet. New construction activity has been well above the long-term average since 2015, and will continue to outpace historical levels through 2017. The increase in construction activity has largely been fueled by a combination of a lack of available large bulk distribution …
The Reno industrial market continues to grow at a steady pace. Numerous developers are building new speculative warehouse/distribution facilities in many of the submarkets in Reno, Sparks and nearby outlying areas. With an industrial base of more than 80 million square feet and a vacancy rate of 8.2 percent (which continues to recede), the region is experiencing a healthy demand for space ranging from 50,000 square feet (divisibility) up to 150,000 square feet. Demand exceeds supply for product of this size. Current rental rates have steadily pushed upward over the past 18 months. Depending on the location of the business parks and its proximity to Interstate 80, the major east-west trucking artery, or I-580, the quoted asking rental rates range from about $4.20 per square foot, per year, up to $5.04 for the aforementioned divisibility ranges. New speculative Class A industrial product in the Reno market offers 32’ to 36’ clear height, as well as ESFR fire sprinkler technology, state-of-the-art LED high bay lighting, fiber optics communications, cross-dock configurations, ultra-wide column bay spacing and ample trailer parking onsite. Panattoni Development built Red Rock 200, which includes a 750,000-square-foot, built-to-suit fulfillment center for Petco, as well as a 200,000-square-foot speculative distribution …
Kansas City’s central business district (CBD) has received a great deal of media attention over the past two years for good reason. With over 3,000 new residential units delivered, the new KC Streetcar and the national trend of Millennials moving to urban areas, there has been plenty of momentum for the area and much discussion of the “live-work-play” environment. After a long period of decline, the urban core of Kansas City is experiencing a powerful revitalization. In all the excitement surrounding the CBD, however, another trend may be getting overlooked. Through the first three quarters of 2016, absorption in the CBD (the Downtown, Crossroads and Crown Center submarkets) was more or less flat after accounting for the conversion of office space to residential use and a unique listing in the Crown Center complex. Meanwhile, the suburban office market posted 580,000 square feet of positive absorption during the same period. Yes, Kansas City is in the process of rediscovering and reinventing the CBD, but the performance of the suburban market remains strong. Construction Boom The first indicator that tenants are still attracted to key suburban submarkets is the number of recent construction projects. Earlier this year, Burns & McDonnell completed a …
The Orange County apartment market is currently enjoying strong fundamentals that comes from several sources. These include robust renter demand, strong local economy and historic low interest rates, all of which make for a perfect storm. As more renters enter the market due to strong employment numbers, it gives way to new household formation. While home prices in the region escalate, more would-be homebuyers are being priced out of the market and forced to remain in the rental pool, further driving competition for suitable housing and pushing rents to new levels. Orange County developers are responding to a growing demand for new multifamily housing developments, many of which are Class A projects targeting high-end tenant bases and price points. Many older properties, such as Class C or C+ buildings, are enjoying the blow back from these new developments when tenants seek out lower rents when compared to top-tier projects, resulting in robust rent increases. Investors looking to place capital in today’s multifamily market are taking advantage of strong fundamentals and cheap debt. Transaction volume has increased more than 10 percent in the past 12 months, with notable sales volume in the northern end of Orange County. Confident that upward rent …