While economic uncertainty still abounds, the Los Angeles County retail market remains on the road to recovery. Several significant leases were signed during 2013, representing an expansion of both value retailers and luxury brands. Also contributing to positive market momentum was the lack of massive closures by big box retailers, such as Borders and Blockbuster, which were seen in previous years. Los Angeles also maintained its status as a primary market for investors. Cap rates trended in the low- to mid-5 percent range for core grocery/drugstore-anchored product and around the 6 percent range for power/promotional shopping centers. Investor demand was strong for high-profile and street-front retail in Hollywood and Beverly Hills, resulting in aggressive acquisition terms and cap rates falling into the four percent range and below. Los Angeles’ retail market overall experienced moderate leasing activity in 2013. CoStar reported a positive net absorption of 850,112 square feet in the third quarter. However, one submarket that saw significant activity—retail and otherwise—was Downtown LA with the FIGat7th open-air shopping center leading the renaissance. In addition to CityTarget, which opened here in 2012, FIGat7th recently signed a 27,000-square-foot lease with Spanish clothier Zara for a flagship location and a 32,000-square-foot lease with …
Market Reports
Looking back five years ago to the outset of 2009, new construction was the hot topic in the San Antonio office market. In 2008, 12 new office buildings were completed, adding approximately 1.5 million square feet to the market. That equated to a 6 percent increase in existing office inventory, with the new product concentrated in the key Northwest and North Central office submarkets.Of course, new development slowed considerably as the recession set in and wore on. Fast-forward to 2013, and as of press time the San Antonio office market only added 166,630 square feet of new product. The good news, though, is that San Antonio metro employment suffered much shorter and shallower losses than other metro areas as a result of the Great Recession. What’s more, the recovery from these losses has been sharp, with nearly 58,000 jobs added since local employment hit its lowest point in 2009, or approximately three new jobs for every one lost in the local downturn.One-third of these new jobs (or about 19,000) were created in office-using sectors such as finance, insurance and engineering. As a result, the office market is recovering, led by Class A space. The rapid decline in Class A vacancy …
The Raleigh industrial market dipped slightly in the third quarter of 2013 with negative net absorption, yet overall it improved from a year earlier, in part because of the general health of the North Carolina economy. Four factors are pushing the state’s economic recovery: a manufacturing revival, a construction surge, a boost of college graduates who are attracting knowledge-based industries and an influx of retirees, according to Dr. Michael L. Walden, a North Carolina State University professor and author of a report on the North Carolina economy that was published in the summer of 2013. The combination of factors led Dr. Walden to forecast that North Carolina’s Research Triangle, which includes Raleigh, would have an unemployment rate below 6 percent by the end of 2014. Ironically, some of the positive news for the state’s economy is putting pressure on the region’s industrial marketplace and driving these trends in Raleigh: • Net positive migration and population growth, year-after-year • The loss of industrial development opportunities to the homebuilding industry • Local pressure to prioritize live/work/play environments and de-emphasize industrial development • Constrained land supply • A lack of institutional grade space Consistently ranked by Forbes as one of the best places …
The Boston industrial real estate market is definitely looking up. There has been strong positive absorption of square footage over the last three years, especially in Boston where large industrial facilities are increasingly converted to housing units, and the absorption trend is now spreading further out from the city and expanding across business categories. In Massachusetts, growth is particularly apparent in three key sectors: medical, food and auto parts. Here is a breakdown of how it’s playing out: 1. Medical. The medical field has seen extensive growth over the last couple years, particularly with medical device manufacturing, and that is good news for the industrial market. Owens & Minor, a Fortune 500 company, is the leading distributor of medical and surgical supplies to the acute care market. It added to its presence in the state at 20 Freedom Way in Franklin with a 100,000-square-foot expansion. This is on top of its existing space at 135 Constitution Drive, which totals 227,000 square feet. Another example includes PSS World Medical, an American distributor of medical products, equipment, billing services and pharmaceutical-related products, which is expanding and consolidating two locations into 50,000 square feet at Walpole Park South, in a spec building that …
In its entirety, the Orange County industrial market showed positive net absorption at the closing of 2013. Neighboring markets like Los Angeles and the Inland Empire, however, displayed a more robust recovery when compared to the Orange County industrial market. This reflects a less aggressive, but steady decrease in vacancy at about 4.3 percent — a number that has not been seen since the third quarter of 2008. Most of the market’s leasing activity has been established by users in the less than 100,000 square feet range. A few notable large transactions that took place in 2013: • Cargill, Inc. moving into 184,438 square feet at Fullerton Crossroads • Obey Clothing moving into 170,466 square feet on Michelson Drive in Irvine • Cavotec Dabico US Inc. moving into 159,943 square feet at 5665 Corporate Ave. in Cypress Pointe Rental rates steadily increased in 2013. The average quoted asking rate for available industrial space was $8.49 per square foot, per year at the end of the third quarter of 2013. This represented a 1.3 percent increase in quoted rental rates from the end of the second quarter, as rents were reported at $8.38 per square foot. Although lease rates underwent one …
Considering the city’s recent negative press, as well as the government loans that General Motors and Chrysler both required in order to manage their way through structured bankruptcies nearly five years ago, it is understandable why one would question the economic vibrancy of Detroit and the surrounding region. However, the much-maligned Motor City is actually a lot healthier than the view projected by the city’s high-profile bankruptcy status. The Michigan jobless rate is hovering near 9 percent. While still high compared to other states, the unemployment rate is the lowest it has been since mid-2008. Since March 2012, the state has gained more than 18,000 manufacturing jobs and over 20,000 jobs in other sectors. The U.S. energy boom is making it more cost effective for factories to operate, and Michigan’s manufacturing base is directly benefitting from lower energy costs. In addition to the automotive sector, Michigan industries that thrive include advanced manufacturing, defense, information technology, water technology, medical devices, food processing and logistics and supply-chain management. The rebound in manufacturing has cut metro Detroit’s overall industrial vacancy rate by 400 basis points since the peak of the recession, falling from approximately 14 percent in mid-2010 to 10 percent at the …
The Corpus Christi regional economy has been pushed into overdrive with the South Texas oil boom, which is resulting mainly from the Eagle Ford Shale play. The main area of Eagle Ford is located about 90 miles to the north, but the impact to the Corpus Christi economy is tremendous. The Port of Corpus Christi is at the center of this growth, with billions of dollars foreign and domestic being spent on projects throughout the Port and the area. China-based Tianjin Pipe Corporation (TPCO) is under construction on their $1.3 billion plan that will manufacture oil and gas pipes. Switzerland-based Trafigura AG is spending around $500 million to build crude oil and natural gas storage docks, and Cheniere Energy is planning a $10 billion plant that liquefies natural gas to sell it abroad. All of the above and several other projects are bringing workers and money into our economy. The refineries (Valero, Citgo, Lyondell and more) are operating at capacity with continual upgrade projects on their board. Of course, with the industrial growth, you can expect retail growth, and 2013 was indeed been a strong year for Corpus Christi. To list just a few of the national and regional tenants …
The Raleigh-Durham-Chapel Hill market, known as the Triangle, has long been viewed as a market favorable for investors, due to very strong demand metrics. The state capital’s thriving economy and excellent demand drivers have made it a prime renter destination and the new darling for yield-chasing institutional investors. A skilled workforce, transitional student renter pool and national trend of millennials “de-nesting” have continued to keep the apartment market strong and attract institutional investors such as Redwood Capital Group, Guardian Life Insurance and Heitman. As one of the most active firms in the Carolinas, Cassidy Turley has witnessed the transition firsthand as the Triangle has transformed from a regional player into a national powerhouse that has attracted some of the world’s most savvy institutional groups. According to Reis, the apartment vacancy rate in the third quarter of 2013 stood at 3.9 percent, well below the greater South Atlantic region’s average of 4.9 percent. Furthermore, the vacancy rate has actually decreased 20 basis points since last quarter, demonstrating the strong momentum of the local market and the appeal to institutional investors. Contributing factors include: A 20 percent population growth in the Triangle over the last decade The area boasts a total student …
Located along the New Jersey Turnpike (I-95) in the geographic center of the Boston-Washington, D.C., corridor, the Exit 8A industrial market is situated 45 miles southwest of Manhattan and 60 miles northeast of Philadelphia. This location enables distributors to reach more than 130 million consumers, one-third of the northern American population, within a one-day drive. With currently 67.48 million square feet, it is the largest submarket in Northern New Jersey. The vacancy is currently dramatically down from the double digits of the recession to 8.4 percent. Asking rents are inching up to the mid-$4 range, NNN, due to the tightening of the market and a shortage of attractive development sites at 8A. National and international tenants are drawn to the submarket’s superior highway access and proximity to the New York/New Jersey ports and Newark Liberty International Airport. The Exit 8A submarket is home to national and international distributors, manufacturers, and logistics firms. Companies with a major presence at Exit 8A include The Home Depot, Pearson Education, ConAgra, Crate & Barrel, FedEx, Costco, William Sonoma, Staples, Iron Mountain, Kellogg’s, Petco, Volkswagen, Ford, LG Electronics, Wakefern, L’Oreal, and Raymour & Flanigan among many others. The 8A industrial market’s desirability is best illustrated …
Strong recent job growth in Orange County has led to a major pickup in demand for quality retail space. The county’s low development profile has resulted in correspondingly high long-term occupancy levels. Thus, the recent recession with its negative absorption drove the local community neighborhood shopping center rate no higher than the 7 percent peak it reached in the first quarter of 2010. Descent has been the trend ever since. The rate has dropped to 5.5 percent by the end of the second quarter, down 40 basis points year-over-year amid modest additions to supply. The second quarter National Community neighborhood sector rates, by comparison, were notably higher at 10.5 percent. Orange County power centers’ vacancy rates are also lower than the national rate. There have been no power center projects completed in the county since 2007. The vacancy rate for power centers in Orange County is 3.9 percent, compared to 5.7 percent nationally. Orange County’s typically strong economy, positive population growth and high levels of affluence bode well for local retailing and the local retail real estate market. All of Orange County’s cores will see new retail development delivered in 2014 and beyond. Some of the new development will be …