While the national economy remains sluggish, the energy-fueled Houston economy continues to power a resurgent local apartment market. The Houston multifamily market is the strongest it has been in years, with robust performance across classes and in virtually every submarket. Construction has rebounded from the depressed levels of the past few years, but demand continues to exceed supply, forcing rents ever higher. The statistics say that vacancy is at its lowest level in nearly eight years, and rents are at their highest rate on record. I am seeing that borne out, as virtually every deal that crosses my desk shows that income is on an upward trend. Houston was the first market nationally to recover all of the jobs lost during the recession, and since, the pace of job growth has accelerated. Projects that were shelved four or five years ago are now under construction throughout the region, including OliverMcMillan beginning work on its River Oaks District, Wulfe going vertical at BLVD Place and GID building on the site of the old Allen House. In addition, new developments continue to be announced. This construction activity, both residential and commercial, has created lots of good jobs for skilled and semi-skilled laborers …
Market Reports
The government shutdown impacted local economies and real estate dynamics in many U.S. markets, but none moreso than the Washington, D.C., region. With anywhere from a quarter to over a third of metro D.C.’s privately owned office leasing tied to the federal government, the inability of the federal government to engage in long-term real estate planning has serious implications for the office sector. Non-federal tenants in the region are impacted as well in that a significant portion of the region’s occupiers are reliant, at least in part, on government contracts and spending. In fiscal 2012 alone, more than $72.6 billion of federal contracting dollars were procured in Washington, D.C., and its suburbs. Possible repercussions in the contracting arena from the shutdown and continued budgetary uncertainty from the federal sector could include contract cancellations, delays in payments and scope reductions. With ongoing questions about government funding and spending, these companies, like the government itself, cannot plan for the future and make decisions in areas that affect their businesses such as staffing, office and facility needs and support infrastructure. The inevitable uncertainty due to the current stop-gap fiscal environment creates questions about where funding for fit out, technology and equipment will come …
There is roughly 61 million square feet of office space in the Las Vegas Valley. About 22 percent of that is vacant. That being said, leasing activity is picking up. Tenants nearing the end of their leases are looking for better deals elsewhere – and they’re finding them. Then there are the new players in the market, who are are kicking the tires, too. The tenant’s market has been a mainstay for the past few years in Las Vegas. But over the past 12 to 18 months, banks have shifted their philosophies in regards to how they handle their office portfolios and it’s definitely making an impact on the market. Lenders today are no longer dumping foreclosed properties back on the market at fire sale prices. Instead, they are choosing to add value to their assets by leasing space in the hopes of a better future return for investors. In general, banks are very aggressive with their terms and generous with tenant improvement allowances. Private owners have needed to follow suit in order to stay competitive. Some tenants that have considered buying are frequently steered back into leases. This is because rates and terms are far too attractive. Leasing offers …
If the recession is truly over in Cincinnati and the nation, we are thankful. Still, the pace of deal and development activity is exceedingly slow. Projects started before the Great Recession are proceeding at a cautious speed. Retail leasing, which has always had a long deal cycle, now seems to take forever. But there are some bright spots in Cincinnati. The downtown market is thriving. Steiner + Associates and Bucksbaum Retail Properties recently announced that they will soon break ground on Liberty Center, a 1.1 million-square-foot, $325 million mixed-use development on 64 acres in West Chester, located about 18 miles north of downtown. And in an interesting twist on new development, college campus mixed-use projects are one of the few ways developers can develop in this risky environment. The Banks Hits A Home Run Our retail update begins on Cincinnati’s riverfront. Located on the Ohio River between Great American Ballpark and Paul Brown Stadium, the 18-acre mixed-use development known as The Banks continues to add new housing, offices, dining and entertainment. A few more restaurants opened this past year including The Yard House, The Wine Guy Bistro, Ruth’s Chris Steakhouse and Tin Roof, which serves up lunch, dinner and music. …
The tide is changing for subcontracting in the Washington, D.C., multifamily market. In the past year, while much of the country has been in recovery, Washington construction managers experienced a white-hot market in wood-frame, market-rate apartments. Along with multiple building opportunities, there was an abundance of qualified subcontractors offering extremely competitive pricing. Currently, new properties continue to be developed, but reductions in the subcontracting pool and changes in building codes are creating a climate of increased pressure for construction managers. Subcontractor Capacity Recently, our industry has seen unprecedented subcontractor failures, workforce leaving the area and some company owners leaving the business altogether because they are not willing to risk their livelihoods anymore. Profits and cash flow were just too tight. At the same time, more than 20,000 units will be added to the D.C. market during the next two years. Affordable and tax credit markets have come back strong as well, and rent increases in the new ground-up apartments have created a booming submarket in Class B renovations. For example, Snell Construction Corp. of Arlington, Va., is repositioning two major properties: Southern Towers, a 2,500-unit, 1960s era high-rise community in Alexandria, and Monticello Gardens, with 794 apartments in Falls Church, …
The retail market in Southern Nevada in mid-2013 continues to mirror the broader economy, with some bright spots and some declines in performance. There appears to be a belief (or maybe a hope) by many market observers that if there hasn’t been enough improvement in Las Vegas to date, then it has to be occurring in the near future. It seems the effects of the Great Recession are still lingering and the economy hasn’t yet built up a sustainable head of steam as measured by true objective metrics. A good measure of the local economic health is unemployment statistics. The unemployment rate in Las Vegas has dropped from 9.8 percent to 9.7 percent from February to July of this year, according to the Bureau of Labor Statistics. On another bright note, an additional 1.83 million square feet of retail space was under construction at the end of the second quarter of 2013. More than 70.1 percent of this total space was preleased. General Growth Properties’ The Shops at Summerlin comprises 1.5 million square feet of current construction. It is expected to open in late 2014 and is already more than 85 percent leased to tenants like Dillard’s and Nordstrom Rack. …
The Columbus industrial real estate market has continued down a path of decreased vacancy and increased build-to-suit activity. Many developers and tenants are trying to determine if this space tightening is going to continue or diminish in the coming months. Industrial real estate experts who had their pulse on the market accurately predicted a year ago that absorption would be taking place at a healthy clip at the end of 2012 heading into 2013. This change in the market has resulted in limited options for tenants seeking space above 100,000 square feet. Meanwhile, developers are considering the possibility of building warehouses on a speculative basis and tenants are seeing a change in economics and concessions from previous years. Pendulum Swings The current 7.6 percent industrial vacancy rate in the Columbus market is at an all-time low. You have to go back to the late 1990s and early 2000s to find a period when the vacancy rate was nearly as low as it is today. The recent lack of space availability is starting to impact tenant choices. A tenant that used to have six or seven options for a 400,000-square-foot warehouse space is now finding that it only has two to …
Strong job and household growth across the San Antonio metro will boost demand for apartments this year, tightening vacancy and pushing rents higher. Apartment developers are preparing to build more units in the upcoming quarters thanks to the formation of new households throughout the metro. However, the development of new rental housing will not jeopardize the operations of existing properties and will keep the investors very active in the coming months. Job creation in the metro is supported by the Eagle Ford Shale, the primary driver of a booming oil industry in South Texas. Exploration and extraction are creating thousands of jobs and bringing billions of dollars to Bexar County. Overall, the economic impact of the Eagle Ford Shale will continue to increase as Kinder Morgan expands its crude and condensate pipeline 31 miles into Karnes County. In addition, plans call for a 400-acre rail park in the South submarket to meet heightened demand for rail-based logistics and warehousing related to Eagle Ford Shale oil production. As employment opportunities grow, the metro’s population will grow 2 percent by the end of 2013, two times the U.S. population growth rate. Of the roughly 46,000 new residents projected this year, approximately one-quarter …
With the third quarter results in, all signs point to continued incremental improvement of the Charlotte office market. Vacancy rates have fallen to a four-year low and investment sales activity continues to strengthen as new capital sources enter the market. On the economic front, unemployment in Charlotte continues to lag behind some other North Carolina cities at 9.5 percent, but the city is experiencing positive economic movement in other measures, particularly single-family housing and retail sales. For some long-term perspective, the labor force in Charlotte has grown 22 percent during the past 10 years, nearly three times the national rate. Additionally, in August, the population of Mecklenburg County reached 1 million people. With a population of approximately 2.3 million, Charlotte maintains its position as the largest MSA in the Carolinas. Office Market Conditions With a reported 460,000 square feet of positive net absorption in the third quarter, the overall office vacancy rate has fallen to approximately 15.7 percent, the lowest rate since 2008. Correspondingly, rental rates have continued to increase, with overall average rates reaching $22.55 per square foot ($23.59 for Class A space), the highest rates in the past four years. While much of this tightening has occurred in …
The retail industry has piggybacked onto the high tech world by recognizing the impact that the high tech industry is having on the demographics and income levels of the entire Upstate New York region. Recent announcements of the return of Lord & Taylor to Crossgates Mall in Albany, and the positioning of UNIQLO at the Palisades Mall in Nyack, N.Y., are proving that the impact of the high-tech industry is now being felt throughout the entire upstate region. The addition of both of these retailers to the mix in the Tech Valley corridor of Upstate New York (from Nyack to Saratoga Springs, N.Y.) bodes well for the region, and shows the world that the growth rate of young, tech-savvy professionals will become one of the strong foundations for retailers well into the future. The recent addition of these two dynamic retailers into the Hudson Valley/Tech Valley regions is evidence of their understanding of the impact of the high technology industries located here. The higher paying, clean-tech employment base, focused on a younger work force, points directly to these two retailers’ “sweet spot.” UNIQLO’s format is very fashion forward with a very high level of quality at their specific price point. …