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 …
Market Reports
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 …
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 …
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 …