With all the recent froth in the multifamily markets, knowledgeable observers are expressing concern regarding all of the cranes that are sprouting around Seattle. To assess the apartment market, we have compiled data recently published in the “March 2015 Apartment Development Report” by Dupre + Scott Apartment Advisors. The Seattle Metro area is in the midst of an apartment development boom, with an estimated 17,400 units under construction, 12,000 units to be completed and ready for occupancy in 2015 and 11,000 units to be delivered in 2016. There is an additional 25,000 additional units in various stages of planning for delivery over the next five years. This new construction is in response to low vacancy rates (3.5 percent in the Seattle MSA, excluding vacancies for properties in initial lease-up), job expansion and related in-migration to the area. These trends have resulted in rising rents for new projects, up more than 7.4 percent in the region in the past 12 months (skewed by rents in newly opened projects). The new units under construction or proposed are heavily weighted to the close-in neighborhoods surrounding the Seattle CBD (Belltown, Downtown Seattle, South Lake Union) and close-in neighborhoods north of Lake Union (Ballard, Greenlake/Wallingford, …
You can hardly open the local paper lately without reading that “Downtown is hot right now; urban living is great.” Yes, downtown is booming. The suburbs are also riding the wave of new mixed-use development and could see more success. It may surprise some, but office vacancy rates and rental rates along I-394 and I-494 rival, and sometimes trump, downtown Minneapolis. The message is clear: convenience has value. The idea of a mixed-use neighborhood where people are living, working, shopping and having fun in one place is a relatively new concept to the Twin Cities. Minneapolis no longer turns into a ghost town after 6 p.m., but many people don’t want to live downtown. They find it too congested and far from work, with little green space and few parking options. If only there was a way to have the vitality of a mixed-use neighborhood without the drawbacks of the concrete jungle, right? Today that question is answered all around the metro area. West End’s Advantages In particular, the West End region of the Twin Cities shares that same long-term vision. With a strong office market long in place, Duke Realty’s addition in 2009 of The Shops at West End, …
For the first time in a long time in Central and Northern New Jersey, we can stop talking about the light at the end of the tunnel. The market has emerged into full sunshine, and the lingering aftereffects of the recession are now fully in the rearview mirror. The current strength of the market and robust activity in terms of new commercial development is something we have not seen for some time. Not only are there more opportunities for developers to get financing, but with rates at low ebb as well, developers are moving to take advantage. At the same time, banks and financial institutions are motivated and aggressively looking to make deals. The result is a perfect storm of sorts: the money is there, developers are willing and ready, and retailers are looking for quality space. That dynamic is good news not only for Central and Northern New Jersey, but also for all of the metropolitan New York City market. It is noteworthy that very few of the big box retail spaces that became available in the wake of high-profile closings and bankruptcies from brands like Linens ’N Things and Borders are still available. Slowly but surely, the inventory …
Improvement in apartment fundamentals has remained strong and is expected to continue over the next two quarters. The unemployment rate in Los Angeles County was 7.6 percent in March 2015, which represents a 100 basis point decrease from the same period last year. Supported by steady job growth, more than 108,000 new jobs are forecast for Los Angeles County in 2015, representing a 2.6 percent improvement over last year’s performance. A significant amount of units are currently under development and more are expected to come on line later this year. Issuance for about 7,446 multifamily units is forecast for 2015, and issuance is expected to rise to more than 17,000 units in 2016 and 2017 with the anticipated absorption of about 11,800 units over that same period. That said, developers are likely to relax their efforts to obtain new permits into the latter half of 2015 based on an expected modest uptick in vacancy. Currently standing at 3.2 percent, the overall vacancy rate will likely increase to 3.5 percent by year-end. The average year-over-year rent increased about 2.5 percent depending on the individual submarket. The greatest level of appreciation was represented in the South Glendale/Highland Park submarket where asking rents …
Atlanta’s healthy multifamily market exhibits strong fundamentals, such as rising rental rates, and continued job creation. Last year alone, the city added more than 100,000 jobs and 2015 seems to be on track to surpass 2014 based on weekly announcements of companies moving to Atlanta. A decent amount of multifamily inventory hit the for-sale market in the first quarter of 2015, and those deals are now in the process of closing. We are seeing a lull in the number of listings across the market early in the second quarter. As owners attempt to capitalize on top-line collection, an increase in listings is expected in the latter portion of the second quarter in conjunction with the spring leasing months coming to an end. As most know, commercial real estate has peaks and valleys, with our last peak in 2007 and the valley landing somewhere in 2010. From 2010 to early 2015, investors were presented with a great opportunity to capitalize quickly from the rising rental rates even without implementing any value-add platforms. This quick rise in rental rates coupled with historically low interest rates has been the catalyst for the surge in trades. That said, as the REO bucket has all …
The South Dallas industrial submarket has emerged and is here to stay. As one of the hottest up-and-coming industrial submarkets, South Dallas has all the components to continue to thrive for the foreseeable future. For the last five years, South Dallas has been a basin for major industrial development. Located south of downtown, the well-positioned submarket provides several key logistical advantages. The convergence of several major arteries makes South Dallas an ideal distribution market, and the ability to import, store and export goods, particularly from Mexico, California and the Port of Houston, greatly benefits the area. Supply can easily move along I-20 or I-35 while avoiding some of the worst congestion of the DFW Metroplex. This infrastructure, coupled with intermodal access, allows for a faster and more efficient transport of goods. Additionally, unlike the other major industrial submarkets, South Dallas contains an abundance of land at favorable pricing. Since early 2010, South Dallas has dominated the market in terms of new construction. It has been the fastest growing submarket, accounting for over 25 percent of the total delivered construction in the entire Metroplex in the last five years. Historically, South Dallas has been considered a big box market. The latest …
Chicago’s 1.2 billion-square-foot industrial market has weathered the Great Recession and is now showing strong growth through expansion of the region’s traditional boundaries and by way of redevelopment in land-locked areas. At the center of this trend is O’Hare International Airport — sixth in the nation and 17th in the world in air cargo tonnage. All totaled, the O’Hare industrial submarket contains 103 million square foot of product. Since the vacancy rate peaked at approximately 13 percent in 2010, the O’Hare industrial submarket has rebounded in a big way. In fact, the submarket has recorded positive absorption every year since 2011. The vacancy rate fell to 7 percent in 2014 due to an improving economy and the aggressive deal making of the larger industrial owners such as Prologis, KTR and Hamilton Partners. Development Ramps Up Shrinking vacancy rates and a lack of available Class A logistics facilities led to the delivery of multiple speculative developments in 2014. These projects were the first built since 2007. Panattoni completed 208,000 square feet at 1925 Busse Road in Elk Grove Village and leased the entire facility to CEVA Logistics. The project was subsequently sold to AEW Capital Management at a record-setting cap rate …
The Seattle office market has been a shining example of strength and solidity. Compared to the U.S. job rate, which expanded by 2.4 percent over the past year to drop the unemployment rate to just 5.5 percent, the Seattle-Tacoma-Bellevue Metropolitan Statistical Area is looking good. Seattle added jobs at a rate of 3.1 percent in the first quarter of 2015. It also saw employment gains in every category. The unemployment rate remained in line with the U.S. rate at 5.5 percent. Construction led all job sectors with 12.6 percent growth, followed by professional and business services at 4.2 percent. The Seattle Central Business District office market showed continued improvement as the overall vacancy rate declined by 2.8 percentage points on a year-over-year basis. Asking rents continued to climb in all submarkets with an overall increase of 4 percent, while Class A rents increased by 5.6 percent. Making tech giants feel at home is nothing new to the Seattle area. The largest lease of the past quarter was Facebook’s 274,000-square-foot deal at Dexter Station. With a planned delivery of May 2015, Dexter Station will be a 10-story, 345,992-square foot office building located in the flourishing Lower Queen Anne/Lake Union submarket. Facebook …
The Atlanta industrial market is in the beginning stages of its third growth cycle since 1990. Vacancy has declined over the past 18 quarters, and asking rates have seen a positive trend over the same time period, increasing by 14.9 percent. These improving metrics should come as no surprise to those familiar with the history of Atlanta’s industrial market. Although the Atlanta metro is the nation’s ninth-largest metropolitan area, its industrial market represents the fourth-largest by volume. Total vacant space in the market has fallen to a 13-year low 8.7 percent, meaning the metro is once again poised for industrial expansion. Cycles One, Two and Three Atlanta’s growth cycle in the 1990s lasted just under 8 years, from 1994 until 2002, where 135 million square feet of new product was added to the market. That constitutes almost a quarter of the total 549 million square feet in the metro today. Total vacancy had fallen to 9.2 percent in the middle of 1994 and asking rates hit what was then an all-time high of $3.26 per square foot. These factors triggered a 40 percent rise in construction volume. As this cycle closed in 2001, vacancy rose back above 10 percent in …
Momentum in Northern New Jersey’s multifamily market continues unabated, with investors aggressively pursuing opportunities, and developers actively launching projects along the Hudson River Gold Coast and west along transit lines. Heading into the heart of 2015, we are seeing demand drive up sales volume and values, and push cap rates down to historically low levels. Current investment velocity follows a strong 2014 capital markets performance. Last year, $1.3 billion in multifamily sales (including transactions of $10 million or more) marked the highest volume since 2007, and compares to approximately $900 million annually in both 2012 and 2013. For context, the market saw only $169 million in annual trades during the depth of the recession in 2009. The “buy” side today is dominated by institutional advisors, particularly for Class A apartment communities. Additionally, we are seeing privately held firms and raised funds making big splashes with value-add and Class B product. Northern New Jersey’s active sellers include developers and private owners looking to take advantage of valuations that have appreciated to historically high levels, as well as institutions that are cycling assets at the end of their traditionally long-term investment horizons. Additionally, multifamily cap rates have dropped consistently in Northern New …