There is no question that the technology sector is one of the principal drivers of our commercial real estate sector today. Downtowns nationally have seen an influx of new economy firms because of the presence of young knowledge workers in CBDs — and Chicago is one of its stars. More than $265 million flowed into Chicago-area digital tech companies during the third quarter of 2013. In addition to startups, this growth caused an exodus of firms out of suburban business parks into areas populated by millennials like the West Loop and River North. Developers are planning to build 8 million square feet of office space in downtown Chicago during the next 24 months. Arrivals and Departures Following Motorola Mobility’s move out of Schaumburg, Gogo Inc. signed a 230,000-square-foot lease to move its headquarters to 111 N. Canal St., shifting more than 500 workers from two buildings in Itasca. Meanwhile, OfficeMax Inc. is leaving behind 344,000 square feet in Naperville to consolidate in Boca Raton, Fla. Much of the media coverage has focused on these relocations as the only story worth telling about the Chicago office sector. But the reality is the suburbs aren’t throwing in the towel. Defying conventional wisdom, …
Market Reports
The answer to that question is both yes and no. For some institutional investors and developers, perception is all that matters. And their perception of the metro Phoenix office market is “we’ll pass – for now.” Driving this perception is the 23 percent office vacancy rate reported by major brokerage firms in their recent quarterly market reports. But perception and reality are not always the same. Drilling down into the data reveals that certain submarkets have vacancy rates in the low single digits, and the size of available vacant space differs from what users in the market want. What cannot be determined from quarterly market reports is just how much space suffers from functional obsolescence. Numerous buildings sit vacant – even during good economic conditions – due to poor location, not enough parking, inadequate power, deferred maintenance and numerous other deficiencies. Most office brokers believe that at least 5 percent to 7 percent of vacant space is in obsolete buildings. Assuming that is true, why are good, quality buildings still 16 percent to 18 percent vacant? The majority of office vacancy is composed of smaller, non-contiguous, spaces. Due to lingering uncertainty in the overall economy, most small- to medium-size businesses …
E-commerce and the automotive industry drove a resurgent Nashville industrial market in 2013, and we predict another strong, steady year for absorption and investor demand this year. Perhaps the biggest question mark, though, revolves around backfilling second-generation space as its former occupiers move into new build-to-suits. This factor is indicative of robust build-to-suit activity, and while it may increase vacancy early in the year and stall speculative development, the market’s overall health and forward momentum is unquestionable. Nashville’s 200 million-square-foot industrial market closed 2013 with vacancy at 7.9 percent, down from 8.7 percent at the end of 2012, on positive absorption of 3.4 million square feet. The 55 million-square-foot Southeast submarket proved to be the region’s most active, with 1.7 million square feet of net absorption for the year and a vacancy rate of 10.1 percent, followed closely by the East, with 1.6 million square feet of net absorption and a 13.9 percent vacancy rate. Clearly, build-to-suit activity was and is king in Nashville, as it is in many markets. Four build-to-suit projects are currently underway, including distribution centers for Dex Imaging, Allied Modular, Hogebuilt and Panattoni Development Co.’s 240,000-square-foot building for medical products firm Hollister. Panattoni also delivered a …
Amarillo’s market rarely experiences periods of rapid growth or rapid deceleration. The market cycle sustains solid performance. This stability is due to a well-rounded economy that has benefitted from strong commodity prices and job growth. Like many markets around the country, the last couple years have been fairly flat, but we did see some areas of economic strength. Retail sales were much higher in 2013 compared to the lower levels of 2012. The leasing of previously empty big box space, significant centers changing hands and the construction of new projects point to a promising 2014. According to the Amarillo Economic Forecast for 2014 published by Amarillo National Bank, 2013 saw retail sales up 8 percent from the previous year. While such aspects as gains in the stock market have been a factor, a hail storm and the subsequent claims contributed to the increase as well. After a lull, national and regional tenants are making their way back to Amarillo. The leasing of two previously vacant big box spaces are indications of this reality: A 40,000-square-foot space at The Summit Shopping Center was leased by Sears Outlet, and a 33,000-square-foot vacancy at the Shops on Soncy, previously occupied by Circuit City, …
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 …
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. …