As 2015 begins, the Raleigh-Durham market continues to see heavy investment and development interest in the multifamily sector. Strong fundamentals, including an influx of young professionals lured by healthy job growth, an emergent live-work-play atmosphere and an economy that has continued to outpace its national counterpart, justify the area’s reign as one of the most attractive non-gateway markets in the country. The healthy, long-term fundamentals are challenged by an apartment construction pipeline that is among the nation’s most active, but so far the market is performing remarkably well. Construction starts in the area have exploded during the last two years, and there are now 8,835 units under construction throughout the Triangle area, with an additional 4,919 units proposed, according to Real Data. Whether demand can keep up with supply has been a widely debated topic among real estate analysts. The high number of units delivered represents an increase in supply of 9.3 percent over the past 24 months. Strong demand has shielded the region from notable occupancy declines. In the first half of 2014, 2,453 units were absorbed and 2,642 new units were completed, providing a differential of only 189 units, according to Real Data. Average vacancy ticked up to …
Everyone is buzzing about the significant amount of speculative construction all over Texas. For the first time since 2008, San Antonio’s office construction is picking up the pace with 928,395 square feet of speculative development underway. Local developers with conservative land positions are taking the lead on all of these developments as they respond to an increasing need for relevant office building options for corporate firms—something San Antonio has not had since 2009, when Concord Park II, Overlook at the Rim, Plaza Las Campanas and others were delivered. Both the Far North Central and Northwest submarkets have witnessed the bulk of recent absorption activity, offering newer, more efficient office options near the more modern residential subdivisions and retail developments. The Northwest submarket also accounts for one-third of San Antonio’s total rentable building area for office space. As of Q4 2014, the Northwest submarket absorbed 342,927 square feet, while the North Central submarket absorbed 312,856 square feet. Two great examples of success in these submarkets are WestRidge One at La Cantera (completed in Q4 2014) and Éilan Buildings I and II (completed in Q1 2011). These two projects are responsible for 253,976 square feet of absorption in the past two years …
The Phoenix retail market ended 2014 on a promising note, with vacancy rates dipping below 10 percent for the first time since the Great Recession ended. It also experienced net absorption of more than 2 million square feet of retail space. Expectations for 2015 are positive, and continued improvement is anticipated, albeit slower than we might have hoped. While many segments of the market have improved, lackluster job growth and housing sales have slowed the recovery. However, both areas show signs of improvement for the coming year. Forecasts estimate Phoenix will add about 70,000 jobs in 2015, bringing the total number close to the pre-recession total. The demand for single-family housing should improve with the continuance of low interest rates, job growth and investor interest. The market is finally showing signs it is on the upward path to recovery. Leasing activity for Class A space remains strong, while rental rates are on the rise. We have seen marked improvement in some areas like Scottsdale where rates for Class A space in centers like The Marketplace at Lincoln & Scottsdale and Hilton Village are approaching or surpassing $40 per square foot, and where vacancy rates are below 6 percent. In contrast, …
In a city known for its fast-shifting real estate cycles and ever-changing demographics, it’s becoming clear that change is the only real constant in Miami. Examples are everywhere — from the construction cranes dotting the skyline and trendy neighborhoods emerging throughout the region, to a fresh crop of international investors and the launch of entirely new industries. The makeup of our people is also evolving. A report by the Miami Downtown Development Authority (DDA) found that the city’s urban core has experienced 100 percent population growth since 2000 as its population becomes younger and more educated. Residents ages 25 to 44 make up 46 percent of the population and 58 percent of residents over the age of 25 have a college degree. It’s easy to overlook the impact these trends are having on commercial real estate in favor of Miami’s headline-grabbing residential market, but the demographic shifts taking place are also impacting the office market as employers cultivate a workforce increasingly dominated by Millennials drawn to growth-oriented jobs. This change has been in the making for years as Miami’s public and private sectors invest in creating new business opportunities for young professionals across industries less prone to economic swings, such …
The Amarillo Economic Development Corp. (EDC) is celebrating its 25th anniversary this year and it’s amazing to compare the state of our local economy in 1989 to today. Back then, Amarillo’s unemployment rate was higher than the national average and consumer activity was in a state of decline. What job opportunities did exist in Amarillo in the late 1980s were in a limited number of industry sectors. We were in a state of economic inertia. I joined the Amarillo EDC twenty years ago and thus have been able to witness and participate in the transformation that has followed. Legislation allowing the establishment of a local economic development sales tax, enacted in Texas in 1989, was overwhelmingly adopted by Amarillo voters that fall. Early on, that economic development sales tax revenue stream brought us about $6 million per year. Next year we expect those revenues will approach $18 million. That statistic alone is testament to the extent Amarillo’s economy has grown in 25 years. As Texans, we’ve been fortunate to have the nation’s strongest economy for several years and Amarillo has definitely contributed, having engaged in projects with companies like Tyson, AIG, Blue Cross Blue Shield and Atmos Energy. One of …
After a recession-induced lull, speculative construction is back in full swing in the St. Louis industrial sector. Record-setting absorption in 2014 drove vacancy rates to near record lows, and spurred speculative construction on both the Missouri and Illinois side of the Mississippi River. With activity on both fronts, it’s clear that the St. Louis industrial market is well past recovery mode and into growth mode. The St. Louis industrial market posted net absorption of 5.2 million square feet in 2014, passing the all-time record for annual absorption set back in 2005 by more than 20 percent. This is more than double the square feet absorbed in 2013, which itself was a banner year. The positive absorption figure has significantly affected the market’s overall industrial vacancy rate, dropping it to 6.3 percent — the lowest rate since 2005. The Class A vacancy dropped to an impressive 4.1 percent and modern bulk vacancy rate stands at 4.6 percent. Just as in 2006-2007 when nearly 5 million square feet of new construction was delivered, St. Louis is seeing a surge of new construction with these historic vacancy rates. The lack of available industrial space has drastically changed the landscape for tenants during the …
How long will the scorching hot multifamily market hold up? The transactional markets continue to be bolstered by low interest rates, as well as an insatiable appetite from both private and institutional equity. I don’t believe the multifamily market will cool off in 2015. Our HFF multifamily team in Philadelphia will soon be shattering price per unit records in both the suburbs and in Center City Philadelphia. Interestingly enough, half of our transactions will be purchased by new buyers, meaning buyers new to our market, new start-up companies, or established funds that are new to the multifamily arena. As is typically the case, attractive debt and abundant equity are fueling the fire. With respect to multifamily debt, it has been encouraging to see some true competition back in the market. We enter 2015 with an extremely robust debt environment wherein the agencies are being forced to compete with regional banks, life companies and CMBS options. Back in October, HFF brokered the sale of Yardley Crossing in Bucks County. This 196-unit, Class B asset, built in the early 1970s, was priced slightly below a 6 percent cap rate and roughly $170,000 per unit, but still commanded 25 tours and 15 offers. …
The San Diego multi-housing market is poised for significant growth in 2015. The third quarter of last year recorded 4.5 percent annual rent growth countywide, the highest rent growth numbers seen in more than a decade, according to CBRE Econometric Advisors (CBRE EA). Vacancy, meanthile, remained at 2.7 percent, the lowest level seen since 2007. Countywide average rents are at $1,548, an 8 percent premium over the 2008 peak levels. CBRE EA found that UTC/La Jolla remains the top rental market in the county, with overall rents averaging $1,958. UTC also witnessed the second-highest rent growth in the county last year, at 7.3 percent. UTC/La Jolla solidifies its position as the county’s top rental market due to strong resident demographics, planned infrastructure improvements and the trolley addition, Westfield’s expansion, and the presence of several major employers, as well as the University of San Diego and the biotech cluster of Torrey Pines. Downtown has emerged as San Diego’s hottest development market, with Class A projects now commanding rents of $2,652, or $2.98 per square foot. There were 929 units in four projects added last year, bringing the total inventory in Downtown to 4,840 units in 23 buildings (100-plus+ units, market-rate only). …
The Raleigh-Durham-Chapel Hill (Research Triangle) region has entered a period of vibrant market expansion. Overall Class A vacancy has fallen below 10 percent for the first time since the building boom of 2001, with rates as low as 2.2 percent in some of the region’s most desirable submarkets, where severe shortages have absorption extending into long-stagnant Class B product. Despite this auspicious environment for new construction, developers are still exercising substantial caution, underscoring the depth of the last downturn and its long-lasting impact on both the development and lending communities. However, recent successful Class A deliveries by REITs like Raleigh-based Highwoods Properties and Indianapolis-based Duke Realty signal a shift toward a more pronounced supply cycle, with lower pre-lease thresholds, and a Class A market that is clearly transitioning from a recovery cycle to a period of low supply. As the market picks up steam, here are three trends that we see emerging in the Raleigh-Durham office market, and the implications for the MSA going forward. The Rise of Live-Work-Play In the last decade, no trend has had a greater impact than the rise of the live-work-play model, a phrase that encapsulates many meanings, but always embodies the high value placed …
It’s safe to say that the recent drastic drop in oil prices is a hot topic everywhere, and it certainly dominates the discussion in Houston real estate. As we read market predictions of how long it will take for the price of oil to rebound and the impact it will have on the economy, we must try to predict on a micro level what the consequence will be to tenants and landlords. With the price of oil below $50 per barrel and still declining, it is understandable why the uncertainty of the market is causing many tenants to put their space requirements on hold or reconsider their occupancy plans altogether. Despite the Greater Houston Partnership’s projection for 63,000 new jobs to be added in Houston in 2015 and the countless construction cranes that can be seen all over the city, the daily announcements of layoffs, reduced capital expenditure plans and mergers leave considerable room for doubt and uncertainty about the market. Although the Houston economy is more diverse today than it was 30 years ago, a strong correlation between the price of oil and office rental rates remains. The Houston employment and real estate market will, however, benefit from its …