Metropolitan Boston continues to enjoy robust economic expansion and exceptionally strong real estate fundamentals. Strength in local housing prices, wages and consumer confidence demonstrated during 2013, coupled with low inflation and increases in consumer spending, will enable the economy’s growth to continue well into 2014 and beyond. With an unemployment rate among the strongest in the U.S. (7.1 percent as of November 2013), Massachusetts continues to thrive due to the presence of world-class educational, medical and research institutions. State GDP grew an estimated 3.5 percent in the third quarter of 2013, according to MassBenchmarks, following a revised 1.7 percent increase in the second quarter of the year. The publication forecasts 3.4 percent growth in state GDP from October through March. Commercial real estate saw falling vacancies, rising rents and new construction across most property types. In 2013, 5.5 million square feet of new inventory was delivered, including 3.1 million square feet of multifamily residential and 1.9 million square feet of office. More than 16 million square feet is under construction — three times greater than the previous five-year average in metro Boston — including 7 million square feet of multifamily residential, 6.9 million square feet of office and 2.2 million …
Market Reports
The rapid evolution of e-commerce — including the relationships between the companies that manufacture product and the e-tailers that distribute and sell that product — is arguably the most significant factor impacting the Philadelphia-area and larger regional industrial real estate market today. And for those of us following this phenomenon closely, it feels like we may just be in the second inning of a nine-inning game at Citizens Bank Park. Simply put, e-commerce is creating strong industrial demand. A number of new companies are popping up on the radar, particularly along Pennsylvania’s I-81/I-78 distribution corridor. In the fourth quarter, Walmart’s 1.2 million-square-foot lease at a Liberty Property Trust asset in Bethlehem announced a new neighbor — Walmart again! Adjacent to Liberty’s building will be an additional 1 million square feet to be occupied by Walmart and the space is being developed by Majestic specifically for e-commerce. Earlier in 2013, One Kings Lane leased 500,000 square feet from DCT Industrial in Kutztown. Amazon now has a 4.8 million-square-foot footprint in Pennsylvania with constant threats of additional growth. The list goes on. These sizable transactions drove leasing volume up to nearly 9.7 million square feet at the end of the third quarter …
If you had to summarize Orange County’s multifamily market in one word, it would be “robust.” Generally speaking, the apartment sector has thrived across the nation in recent years, but few markets have performed better than this booming, affluent slice of Southern California. Soaring occupancy rates, rent growth, compressing cap rates, strong investor demand — these are the characteristics of today’s Orange County multifamily market. Thankfully, they should be the trends of the future as well. Underpinning the multifamily sector’s health is the recovering Orange County economy. Over the past year, payrolls have increased by 2.3 percent, according to research by Jones Lang LaSalle (JLL). Although all the major employment sectors have experienced expansion, the largest gains have occurred in construction, financial activities and leisure/hospitality. These were the three industries hit hardest during the Great Recession. Overall, half of the jobs lost during the recession have been regained. The county’s unemployment rate in October was 5.8 percent, significantly lower than both the California and national rates, which were 8.7 percent and 7.3 percent, respectively. Looking ahead, the economic indicators are positive: both job and population growth should average 2 percent annually until 2017. A growing Millennial population and expensive for-sale …
Optimism abounds in the Twin Cities apartment market, and for good reason. It’s a top performer in the Midwest, and ranks high in the nation overall. The key indicators are compelling: low vacancies with rental rates rising; steady apartment sales; robust new development, especially in core urban and first-tier markets; and flowing pipelines. Among 52 metropolitan areas showing the most economic momentum heading into 2014, Minneapolis/St. Paul ranked No. 14, according to the Praxis Strategy Group. Criteria included GDP growth, job growth, real median household income growth and current unemployment. Property owners, buyers, developers and funding sources are all benefiting from a strengthening apartment market, a trend that began in 2009. Although statistics vary by source, there is consensus on future apartment trends in the seven-county metro area. For apartment owners, a tight rental market means growing revenues, a far cry from the glut of vacant units that existed a few years ago. Last year, vacancy rates averaged 2.8 percent, compared to 7.9 percent in 2009, according to real estate research firm Reis. A boon for landlords, rising rents are forcing many lower-income renters out of the cities into the suburbs. Statistics show the average rent in the Twin Cities …
The year 2013 marked a turning point for the Triangle office market. While overall vacancy remains stubbornly high, ending the third quarter at 17.2 percent, Class A vacancy is rapidly approaching equilibrium, spurring increased investment and development activity in the region. A lack of new construction in recent years has led to a shortage of large blocks of prime office space. Class A vacancy ended the third quarter at 13.7 percent, down by 260 basis points year-over-year. As a result, owners of select properties are finding themselves with more leverage, and tenants are increasingly turning to their second and third choices when securing space. This lack of quality options kept a lid on absorption through most of 2013. Annual absorption stood at just 107,306 square feet through the third quarter, well below historical norms for a recovering market. This figure, however, is not a true reflection of leasing activity. Faced with limited choices, some growing and new-to-market tenants turned to developers, preleasing 700,000 square feet and driving a wave of new construction activity in the second half of the year. Duke Realty broke ground on two new office buildings in the I-40/RTP submarket. Perimeter Two and Perimeter Three will total …
New paradigms in tenant demand and workplace trends have dramatically altered Los Angeles’ office market in the past three years. Internet, creative and entertainment (ICE) tenants have primarily pushed demand and new trends in adaptive reuse, while finance, insurance and real estate (FIRE) end users — along with their law firm counterparts — have contracted. This is often due to lower spatial requirements per employee, coupled with the rising trend of collaborative space. The segments of LA with repurposed and renovated office properties are white hot. This is especially true in Santa Monica’s Silicon Beach area where rents average $50 but can get as high as $70 per square foot. This new coastal, high-rent district benefits its surrounding areas, as well as the city’s CBD and Downtown, where tenants are seeking lower-cost space. Despite an overall market vacancy of about 18 percent, Downtown rents are holding steady due to a concentration of Class-A owners holding firm or even slightly escalating rates. Considering the real estate fundamentals — relatively high vacancy and 9.5 percent unemployment — there may be a disconnect in the investment market. Los Angeles office investment is generally still a bargain compared to other global gateway markets, however. …
After years of trailing cities such as Dallas, Memphis and Indianapolis as major bulk distribution centers, Kansas City has emerged as a significant and large hub for the development of Class A industrial logistics centers whose development is backed by institutional money. The trend is transformational for our market and here to stay for three primary reasons: (1) Institutional money — namely life insurance companies — has always allocated a portion of its funds for real estate. That money has found Kansas City. (2) Local Kansas City developers, brokers and property managers are well-suited and eager to accommodate non-operating entities like life insurance companies to buy land, build projects on a speculative basis, lease up and manage the new developments, and sell them when the financial backers decide to cash in on their investments. Kansas City has traditionally been a family-owned real estate development community comprised of five or six major players. None of these families has sold its portfolios to industrial REITs. Thus, there is a niche for institutional-backed, Class A development that is financed with deep pockets and brought to market by local developers. (3) The biggest reason for large-scale Class A industrial development in Kansas City is …
The Dallas/Fort Worth industrial market is one of the healthiest in the country and dodged the recession unscathed. Texas leads the nation in job growth and has now enjoyed six years of economic growth, and the cold hard facts underpin our high-performance industrial marketplace. Some 548,000 jobs have been added to the state of Texas since 2008, and Dallas/Fort Worth ranks third among metro areas in the state for job growth, according to the U.S. Bureau of Labor Statistics. Approximately 1.2 million new residents were added to the Dallas/Fort Worth area from 2000 to 2010. Business Facilities magazine ranks Dallas as the No. 3 center in the U.S. for logistics and distribution, while Fort Worth is ranked No. 5 for aerospace and manufacturing. We know about Houston’s oil and gas-fueled economy, San Antonio’s growing entertainment and defense sector and Austin’s phenomenal growth backed by tech companies and anchored by state government. But what’s up with North Texas and the Dallas/Fort Worth economic drivers? For readers in the developer camp, they will be pleased to know that DFW was on track to have a record year of absorption in 2013 by the time we went to press with this article in …
With an economy that’s normalizing with improving fundamentals, the Atlanta retail market is on the right track for sustained growth. Throughout 2013, Atlanta experienced a drop in vacancy rates along with the unemployment rate. In addition, retail sales rose nearly 3.5 percent over last year, provoking a rise in consumer confidence. The unemployment rate in Georgia fell from 9 percent in 2012 to 8.3 percent in 2013. This is still a full point below the national average. For 2014, the unemployment rate in Georgia is expected to reach well under 8 percent. During the last 12 months, Atlanta has experienced job growth of 2.5 percent. Retail payrolls are also expected to continue improving in 2014, pushing a near 3 percent gain as a result of both increasing existing stores sales as well as modest new store opening growth. Vacancy Rates, Rent Growth Since the beginning of the year, overall metro retail vacancy rates have dropped below 11 percent, which is a 50 basis point decrease over last year. Neighborhood and community retail centers still maintain the highest vacancy of just under 15 percent. Power centers have experienced a strong year-over-year recovery, averaging a 7.5 percent vacancy across the region. Tenant …
Boston is at the beginning of an unprecedented demographic shift and the strongest fundamentals we have seen in over a decade. With just under 4,000 units a year scheduled to deliver through 2016 and more than 7,000 renter households being created annually over that same time period, we are not building enough units to meet this wave of demand. Boston is the Place to Be The Boston multifamily market remains ones of the best-performing markets in the country. As a result, institutional investors view Boston as one of the top three most desirable markets, alongside New York and San Francisco. Their eagerness to deploy capital into Boston multifamily has resulted in unprecedented asset pricing and has stimulated new development throughout the region. Institutional developers such as Hines, Jefferson Apartment Group, Mill Creek and Gerding Edlen have started their first projects in Metro Boston. Additionally, historically prolific developers in the area such as AvalonBay, Hanover, Criterion, National Development and Wood Partners have continued to build on their success. Solid Fundamentals Relative to most cities, Boston’s employment remained insulated through the downturn thanks in large part to a heavy concentration of jobs in healthcare, high-tech and life sciences. These sectors weathered the …