After six painful years, vacancy is finally declining in the Orlando office market. Effects of the Great Recession on real estate markets have been thoroughly examined here before, but outside factors that have played such a prominent role in reshaping the office market are creating significant impact. These changes might appear to be negative, but they will ultimately prove positive. Quantum advances in communication and data storage, new attitudes regarding workplace culture, workspace sharing centers and virtual offices have stirred the submarkets that comprise the greater Orlando area. While they are affecting all sectors of commercial real estate, they are felt most acutely in the office markets, slowing employment growth and corporate expansion, which have always powered the rate of change in quarter-to-quarter vacancy declines. Cloud-based data storage and paperless transaction platforms have shrunk the size of private offices with file storage rooms. Text messaging, email and file sharing platforms such as Dropbox have reduced the need for face-to-face meetings and demand for conference rooms and private offices. Real estate closings that once involved several parties in a conference room are antiquated now. Over the past five years, staffed reception areas have given way to scaled down waiting salons with …
The Orange County retail market remains active due to declining vacancies and increasing job creation and housing starts. As a result, enthusiasm was evident at the recent ICSC Western Division Conference in San Diego, as industry colleagues discussed opportunities and challenges associated with the strength of the local market. There has been very little new development recently in Orange County, which has seen more than 3 million square feet of vacant space absorbed since 2011, according to CoStar. There continues to be an unbelievable demand for retail investment properties, while the Fed’s announcement to maintain existing interest rates will only increase competition in this limited market. A dynamic investment market offers both challenges and opportunities for retail leasing. Limited local new development is directly connected to continued instability among major grocery stores and big-box retailers. We might never see another ground-up traditional power center again because of post-recession downsizing and shakeouts among major retailers. While many of the major national retailers remain active, the focus has turned to expansion in smaller urban environments, which are limited in Orange County. Grocery-anchored daily needs centers remain a Class A asset type, though instability within the local grocery sector continues to challenge the …
The industrial market in Orlando has undoubtedly experienced robust leasing activity over the first half of 2015, especially among the smaller users ranging from 3,000 to 10,000 square feet. With an average industrial vacancy rate of 9.3 percent throughout Southeast / Southwest Orlando according to second quarter 2015 market reports, quality space for smaller tenants is becoming more and more scarce and available dock-high small space is virtually nonexistent. Industrial is Rebounding Two specific factors can be directly linked to the current industrial shifts in Central Florida: construction spending and theme park growth. The construction industry is booming, in particular within the single-family and multifamily sectors, allowing construction companies of all sizes market share due to high demand for services. Industrial parks are welcoming back smaller construction business owners that may have downsized and operated out of their homes during the downturn but are now looking for larger warehouses and mixed-use spaces for business. Secondly, theme park expansions, spurred by the record year of tourism in Orlando in 2014, have caused many businesses that were on the back lots of the parks to be pushed back out into the marketplace. Higher tourism rates represent a boost in consumer confidence and …
New York City’s multifamily market in the second quarter of 2015 was able to continue the momentum of 2015’s first quarter and generate an impressive $3.30 billion in gross consideration. The quarter also saw 364 properties trade over 225 transactions, which is a 33 percent increase in transaction volume compared to the same quarter last year. Boosting significant growth, both Brooklyn and Manhattan saw a number of institutional and portfolio deals again this quarter. Of the trades in Manhattan, the top 10 percent made up approximately 73 percent of Manhattans dollar volume and four of the five largest multifamily transactions to occur in NYC happened in Brooklyn, which contributed to both submarkets ending the quarter with dollar volumes above $1 billion for the second time in as many quarters. Pricing throughout the city continues to evolve by most measures. Gross rent multiples have increased by 1.4 year-over-year and the average price per square foot in Manhattan has eclipsed $900. Compared to last year, average capitalization rates were down 60 basis points in The Bronx, and are down in Brooklyn and Northern Manhattan. These are the signs of solid fundamentals in the market. Institutional caliber multifamily deals had a big second …
Orange County’s industrial market highly favors the seller and landlord for properties of all sizes and conditions due to a tight vacancy rate and lack of available product. Vacancy rates have been on the decline, ending the second quarter of this year at 3.9 percent. Average asking rents rose to $0.83 per square foot – an increase of 9.2 percent over the 12-month span of the second quarter of 2014 to the second of quarter of 2015. The county continues to hit new pricing highs as well, with many transactions receiving multiple offers. Full-price offers are oftentimes not enough anymore, as bidding wars have driven prices above the listing. Demand remains extremely strong for owner/user industrial buildings in North Orange County. Several recent smaller sales transactions in the 10,000-square-foot range have sold for around $170 per square foot. Most of these properties received multiple offers within days of going to market. Industrial buildings in this size range were trading for about $125 per square foot just three years ago. On the leasing side, rates are escalating as product is in limited supply. User demand a year ago wasn’t as strong as it is now. This will likely continue to grow …
Orlando’s multifamily market is in the midst of a golden era of sorts, as it sits squarely at the intersection of strong employment growth, an increasing population, a major demographic shift and a variation in lifestyle preferences. Together, these factors provide a tremendous tailwind for future strength in the local apartment market. While the national multifamily market continues to perform at a high level, Orlando is starting to show up on the radar of more institutional investors due to its recent outperformance and tremendous growth prospects. According to recent data from MPF Research, Orlando is on pace to see 5.6 percent rent growth in 2015, followed by 4.7 percent growth in 2016. The strong momentum in the MSA is being driven by a rapidly expanding and increasingly diversified job market. Going forward, the picture looks even brighter. MPF Research ranks Orlando as the No. 1 metro in the nation for job growth through 2020, with a growth rate (2.7 percent), more than twice the national average (1.1 percent). Unlike previous cycles, today’s growth is spread more evenly across employment industries, resulting in a more diverse, dynamic labor market. The highest growth sectors are forecast to be construction, healthcare/bio-tech, business services, …
Downtown Grand Rapids is booming with commercial real estate activity, and it’s coming from many directions. The combination of new residential units, restaurants, bars and a variety of entertainment options is leading people to not only live downtown, but also work and play downtown. Activity in the downtown office market — including office leases, new mixed-use construction and new retail — has increased over the last couple of years, and there is no sign of it slowing down. The overall office vacancy rate in the central business district (CBD) decreased from 9.4 percent in the first quarter to 8.25 percent in the second quarter. While Class A office space has performed well in recent quarters, there was a slight increase in the vacancy rate during the second quarter. As for Class B space, we observed a sizable decrease in the vacancy rate, from 10.1 percent in the first quarter to 8.5 percent in the second quarter. As a whole, the CBD office market experienced positive absorption of 74,293 square feet during the second quarter. Rental rates stabilized in the second quarter after increasing for the past several quarters. Meanwhile, some new construction and planned construction is hitting the market at …
The total retail inventory in the Rochester market amounts to 62.5 million square feet. Over the past year, the market has seen an overall decrease in the vacancy rate. The vacancy rate went from 8.0 percent in first quarter 2015 to 7.9 percent in the current quarter. Overall net absorption was positive 182,160 square feet. The general retail sector of the market, which includes all freestanding retail buildings except those contained within a center, reported a vacancy of 4.3 percent at the end of the second quarter 2015. The general retail space in Rochester is 34.3 million square feet. Average rental rates are currently at $12.26 per square foot. The shopping center sector — which consists of 19 million square feet and comprises community centers, neighborhood centers and strip centers — posted 10.9 percent total vacancy and average asking rates of $10.28 in second quarter 2015. Power center space is currently reported to be nearly 4 million square feet with a vacancy rate of 7.5 percent, and a slight decrease in rental rates to $13.46 per square foot. Malls in the Rochester market consist of lifestyle centers, regional malls and super-regional malls. The vacancy rate was 21.2 percent at the …
New York City is booming. The local economy is the strongest it has ever been, with total employment numbers reaching all-time highs totaling over 4.2 million jobs through May 2015. This has led to a strong office market performance during the first six months of 2015, as office-using employment continues to grow, up 2.5 percent over the past 12 months. Demand for space continues to keep availability below 10 percent, and at 9.6 percent, Manhattan availability is down 50 basis points from last year. Despite minimal increases in Manhattan overall asking rents, up only 2.9 percent year-over-year through June, some submarkets are exceeding previous record-high asking rents from 2008. The demand from creative and tech tenants looking for space in Midtown South over the past few years has pushed asking rents up 19.1 percent above all-time highs. Downtown overall average asking rents have reached historical highs this year as well, and at $57.78 per square foot, rents are 10.3 percent higher than the previous highs in 2008. Most of this increase can be attributed to new construction at the World Trade Center site. Despite this, Midtown overall asking rents are still 5.3 percent off historical highs from 2008. Throughout Midtown, …
Santa Monica is Los Angeles County’s most stable beachside apartment rental location. The prices this market commands as the year progresses continue to surprise our brokerage team. No longer the sleepy beach town of old, we are seeing capitalization rates below 3 percent on 30- to 40-plus-year-old product with stringent, and at times almost suffocating, rent control laws. There have been multiple record-breaking transactions that have taken place in Santa Monica this year, including one mind-blowing apartment deal at 537 San Vicente Blvd. that sold for $16.1 million this past March. It was then sold to another party three months later for $19 million. The old adage about location rings true for Santa Monica as buyers consider future returns in this beachside enclave. The question right now on everyone’s mind is: how long can this last? It has been our opinion that this upward trend in pricing cannot last forever. It is inevitable that the Federal Reserve will raise interest rates soon. However, as rates rise, we will see a minimal effect on Santa Monica multifamily investment, as this “real -estate safe haven” makes investment even more desirable as stability is attractive to owners seeking long-term returns. Even though some …