As the first quarter of 2014 comes to a close, the biggest question mark facing the Charlotte market is whether or not it can handle the historically high supply levels. Despite nearly 3,500 units delivered over the past 12 months, vacancy has held steady, and rents have continued to grow by 2 to 3 percent. But with another 10,000 units under construction, Charlotte is at a critical juncture. With the pipeline at an all-time high and new projects being announced seemingly every week, will there be enough continued demand to absorb the next wave of deliveries? The ability to absorb the pending supply is largely based on the area’s favorable demographic trends and potential job growth. Between 2000 and 2010, Mecklenburg County’s population grew by 32 percent, over three times the national average, and that trend has continued with more than 7 percent growth since 2010, including the second-highest growth rate in the state from 2012 to 2013. Moreover, since 2010, Mecklenburg and Wake (Raleigh/Durham) counties have accounted for nearly half of the state’s overall population increase. That pattern mirrors a national trend of a growing desire to live in an urban environment. That paradigm shift is largely based on …
Market Reports
Development in urban Cincinnati is rejuvenating the economy, increasing employment opportunities and creating new demand for apartments. The Banks, an 18-acre, mixed use-development project along the Ohio River between the Great American Ball Park, home of the Cincinnati Reds and new Paul Brown Stadium, home of the Cincinnati Bengals, is transforming downtown Cincinnati and supporting economic growth. Atlanta-based Carter and the Harold A. Dawson Co. are developers of The Banks. Phase I, which opened in 2011, created 3,600 permanent jobs and included the Current at The Banks project, a 300-unit apartment building with 96,000 square feet of street-level retail space. The apartments are currently fully leased, and the retail space is approximately 92 percent occupied. The popularity of Current at The Banks has been so great that there is a waiting list for apartments. Work recently began on Phase II of The Banks, which will add more apartments on the western half of the site. Infrastructure is Key Constuction continues on Cincinnati’s new multi-faceted transportation system that will cover nearly four miles around downtown and connect major employment centers. Upon completion, The Banks will be the southern terminus of the light rail system linking Uptown, Over-the-Rhine and Downtown to the …
The Los Angeles/Southern California industrial real estate market ended the first quarter of 2014 with the lowest vacancy since early 2008, at an average rate of 3.8 percent. This latest positive trend in activity signifies a full recovery by the end of the year. Asking rents have climbed dramatically over the past 36 months. The Los Angeles industrial market rents have increased by as much as 20 percent to $.55 triple net, from a low mark of $.44 triple net in the first quarter of 2011. They are predicted to grow another 5 percent by year end. This rental increase is due to the robust economic recovery in Southern California, in addition to major tenants’ pent-up demand and a lack of supply for Class A distribution space. To enhance this recovery, the region’s unemployment has dropped to a low of 7.5 percent, or 50 basis points lower than the first quarter of 2013. Los Angeles/Southern California has the largest industrial base in the nation, with more than 1.6 billion square feet of product in all classes. Coupled with the lowest vacancy rate nationally at 3.8 percent – not to mention 18 consecutive quarters of positive net absorption – and this …
The Charlotte market is emerging from the sluggish economy of the last several years and is booming with economic and commercial activity. In fact, Forbes recently recognized Charlotte as the fourth fastest growing city since the recession. The retail market is no exception and is continuing to improve with tenant activity increasing and vacancy rates dropping. From desirable South Charlotte to Independence Boulevard, new projects are coming out of the ground in an effort to meet the needs of the tenants in the market that are struggling to find locations. The suburban markets are seeing increased growth as people continue to move to Charlotte. South Charlotte continues to be the most desirable market for tenants, but limited availability has been a problem. The new Waverly project, a joint venture between Crosland Southeast and Childress Klein, will help to provide some options for tenants looking to expand into South Charlotte. Waverly will be located at the intersection of Providence Road and I-485 and is a 90-acre, master-planned development anchored by Whole Foods. The project will deliver in 2016 and consists of more than 230,000 square feet of retail space in addition to 330,000 square feet of office and medical space, a …
Austin is maturing as a commercial real estate market. Over the past few years, the city has witnessed an increase in institutional and foreign capital attracted to Class A office assets in the metro area. Most of the new investors in Austin are capitalizing on continued rental rate growth in the office sector, but is this growth sustainable? Austin’s overall office occupancy rate and rental rates have traditionally been a series of steep peaks and valleys, but will future growth be dictated by these historical trends? Tech Bubble Bursts Leading up to the burst of “tech bubble” in 2001, office leasing in Austin was in full swing, with an occupancy rate of 93 percent. Dun & Bradstreet ranked Austin as the top city for high-tech startups in 1999, and Angelou Economic Advisors estimates that more than 200 new companies were added to Austin’s roster of technology firms in that year. Austin companies secured an estimated $740 million in venture financing in the first three quarters of 1999, more than triple the funding placed in all of 1998. The absorption witnessed leading up to this bubble was phenomenal, but the growth was inflated by the source of the rental payments. These …
Dotted with construction cranes, Minneapolis’ skyline tells the story of economic growth the likes of which hasn’t been seen in almost a decade. Record-shattering investments in office space and in employee satisfaction speak to the confidence companies have in the accelerating Twin Cities market. This renewed corporate confidence is buoyed by the lowest unemployment rate of any U.S. metro area with a population greater than 700,000, and is evident by the increasing number of long-term lease commitments (seven-plus years) to the Twin Cities market. The office sector began picking up — first with local investors and now with national investors — soon after the opening of a new baseball stadium for the Minnesota Twins in 2010, which kick-started a rash of high-end, urban multifamily developments. The current multifamily boom in the Twin Cities is expected to bring nearly 10,000 units to the residential market in the coming years. Increasingly, people want to live, work and play downtown. Multifamily, retail and office developers are ramping up the quantity and quality of supply. An additional sign of growth is the $1 billion currently being invested in a new football stadium for the Minnesota Vikings. Renovation Ramps Up Class C office buildings accounted …
Construction of apartment buildings is leading the Denver metro area’s building boom, with more than 19,000 units starting construction in 2012 and 2013 that are expected to be delivered this year. This is the most apartments this market has added in such a short period of time in more than 40 years. This construction boom follows a stretch where we saw little multifamily development, which created a short-term need to catch up with current population growth demands. Some perceive this level of development as overbuilding, though recent population growth statistics may indicate otherwise. The Downtown Denver area is particularly hot for apartment developers, with about 4,000 units under construction. The majority of this work is being done around the Denver Union Station transit station. The activity is being fueled by the region’s population growth, which averaged 1.7 percent per year between 2007 and 2012, maintaining a stable expansion rate through most of the recent recession and recovery, according to the Metro Denver Economic Development Corp. The organization projects population growth — mostly attributed to strong net migration — will moderate slightly to 1.6 percent this year, which is more robust than the projected U.S. growth rate of less than 1 …
The U.S. hotel market continues to gain strength following the Great Recession, where in 2009, revenue per available room (RevPAR) fell by 17 percent making it the single-worst performing year in the history of the hotel industry. Atlanta, which is one of the top 25 hotel markets in the U.S., as defined by Smith Travel Research (STR), the hotel industry’s leading performance data provider, experienced a similar decline with RevPAR falling by 18 percent in 2009. Since that time, across the country RevPAR has grown at a compounded average growth rate (CAGR) of 6.4 percent. Atlanta’s RevPAR CAGR during this time period has been 6.1 percent. The main reason Atlanta’s recovery has trailed the nation is related to its average daily rate (ADR). Atlanta’s ADR CAGR has been just 1.3 percent since 2009 as compared to 3 percent for the U.S. Put simply, hotels in Atlanta have not been able to grow their average rate as much as the U.S. average coming out of the recession. The Atlanta hotel market, like other segments of the Atlanta real estate market, has historically tended to get overbuilt when times are good. While hotels often do not represent the “highest and best use” …
Is the Dallas/Fort Worth multifamily market headed back to the same level of intensity we experienced from 2005 to 2007? Most of the signs suggest that we are on track to not only meet this same amount of demand, but also outperform the market of the mid-2000s. So what are the drivers that are leading this investor demand? First, as a whole (not only Dallas/Fort Worth), Texas is flourishing right now. The state leads the nation in job growth, gaining nearly 300,000 new jobs in 2013, with one-third of those being considered high-paying jobs. Second, Texas leads the nation in population growth. These new residents benefit from the affordability of Texas versus that of other states. Here, we enjoy no income taxes and a lower price of living. In turn, this provides a better quality of life. Performance Needless to say, such growth and business-friendly conditions have a large impact on the multifamily sector of commercial real estate. Occupancies are the highest they’ve been in more than a decade. The current overall vacancy of 5.4 percent is a full 100 basis points below the level we saw 12 months ago, and effective rents have increased by 3.3 percent in the …
Over the last few years, tight conditions in Pittsburgh’s multifamily market have allowed operators to aggressively push rents among all class levels. This year, a surge in multifamily completions will put elevated pressure on vacancies, but more jobs and new households will keep across the board operations in positive motion, supporting another year of rent growth. Developers are expected to build more than 1,600 multifamily units in 2014, the largest expansion of supply in over ten years. Most new multifamily projects in Pittsburgh are located north and south of the central business district where construction costs are lower. For example, in Cranberry Township in the north many units are strategically situated around the newly announced $72 million UPMC Lemieux Sports Complex. In southern Pittsburgh, added drilling activity in the Marcellus Shale and energy-related company expansions encouraged demand for rentals, spurring construction of several multifamily and residential communities. A minor overstock of brand-new rentals and single-family homes will move vacancy up somewhat in select submarkets, slowing down the previous year’s persevering rent growth. An improving economy in Pittsburgh and further rent gains will sustain strong buyer demand throughout 2014. Employers will add 24,600 jobs in 2014 to expand employment in Pittsburgh …