Orange County's industrial marketplace doesn’t quite favor owners just yet, but it’s getting close. Our industrial inventories are at historic lows and, with a few exceptions, we have not seen any new construction since 2007. There are a couple new projects planned — and a few more are under construction — but they’ve mostly been large warehouses north of 100,000 square feet. The projected asking rents for these big boxes is $0.50 or more per square foot, triple net; a very expensive rent for a commodity. In general, as these big box rents approach or exceed $0.50 triple net, occupants tend to seek cheaper environs. In Orange County’s case, this usually means they migrate east of town in the Inland markets or beyond. Smaller, newer inventory (20,000 square feet to 50,000 square feet) that hits the market these days is gobbled up quickly, sometimes with multiple suitors. Incubator space (less than 10,000 square feet) has also rebounded nicely with absorption at a blistering pace. We haven’t seen a great deal of rent growth or price appreciation to date, although the latest round of transactions that are in escrow now should bring some evidence of upward change. During the depths of …
Market Reports
Like other markets throughout the region, Cincinnati’s retail market was slow to recover from the Great Recession. But it has now turned the corner and is in the midst of an upswing in both transaction velocity and leasing momentum. Overall, the recovering Cincinnati economy is drawing investors to the market and sales of retail assets will continue to gain traction. Single-tenant assets have never been more popular among private investors as evidenced by cap rates that have fallen to levels that would have amazed most industry watchers in 2007. Cap rates have compressed to the point that some long-term ground leases are trading in the mid-4 percent range, while best-of-class fee simple property yields begin 100 to 150 basis points higher. A number of investors are targeting single-tenant, net-leased assets with lower-credit tenants or leases that will expire in the near future with the potential to re-sign or re-tenant the property, trading at yields starting in the 6 percent range. In the multi-tenant segment, investors are scouring the market for grocery-anchored deals, though limited supply will hinder transactions. Value-add plays are popular with private buyers across the metro area, providing owners in low-profile submarkets the opportunity to cash out while …
Over the past decade, Baltimore City has seen a gradual shift in office market activity. Demand for office space has become increasingly focused on the waterfront properties of the Pratt Street Corridor and Harbor East. Many older buildings in the traditional Central Business District (CBD) with smaller footprints have become less attractive for office use. The CBD has also experienced a surge in both population and apartment demand that has pushed the residential supply to its occupancy limit. This balance between vacant office space and demand for residential space in the CBD has created a prime opportunity for redevelopment. The CBD has struggled to recover from the economic recession, when office vacancy rates spiked to almost 23 percent. It has, however, experienced small amounts of positive absorption over the past few years. Demand for space has been focused on Class A inventory as a “flight to quality” trend has emerged in the CBD. Net absorption for Class A inventory in the CBD has increased each year since 2008 and has been a primary factor in stabilizing the overall Baltimore City vacancy rate. Mid-year 2013 numbers suggest that this trend of increasing demand for Class A office space will continue for …
The Orange The Orange County apartment market continues to rebound. Operations have improved so far in 2013, with vacancy below equilibrium and asking rents nearly 10 percent above the low point during the recession. The healthy performance of the apartment market is a result of Orange County’s strategic location, population growth, low unemployment rate, high occupancy and shortage of available housing, which has greatly benefited multifamily investors. According to Hendricks-Berkadia Research, the county is one of the most densely populated areas in the United States. Orange County is 2.5 times denser than Contra Costa and Santa Clara counties, and five times denser than San Diego County, which has nearly the same population. The population in Orange County has grown consistently, and reached 3,055,800 residents at the end of 2012, up 26.7 percent from 1990. The unemployment rate for Orange County in the second quarter of 2013 averaged 5.6 percent, 130 basis point below what it was at the end of 2012. According to Moody’s Analytics, the local jobless rate is lower than state and U.S averages. This would be the lowest rate since 2008, indicative of the improving economy in Orange County. Employment growth in the county is also expected …
Most retail brokers in Des Moines are cautiously optimistic in their expectations for 2013. For the first time in years, I’m seeing a lot of site plans for new retail developments come across my desk. Several projects that had been on the back burner for the last few years have finally begun to take shape. Des Moines, like most markets, got hurt when the Great Recession hit. However, with its major industry based in insurance, it weathered the storm better than many other markets. At its high point, the unemployment rate was 6.8 percent, and the rate as of May was 4.3 percent. The Des Moines retail market didn’t get nearly as overbuilt as many of the other nearby larger markets. There wasn’t a ton of first-generation space that sat vacant on the retail market in Des Moines once the recession hit. Most of the retail developers here are conservative. Much of the first-generation space that sat vacant was the result of lenders taking back the properties and not wanting to invest any money in those assets. Lessons Learned The developers in today’s market have a more disciplined approach than many of their predecessors. There was a time when real …
Houston has long been characterized by its energy presence, earning titles such as “The Energy Capital of the World” and the “Petro Metro.” The American drilling renaissance has brought about significant changes on a national and international scale, and the boom is projected to be sustainable for decades. As a result, energy companies are shifting operations back to the U.S. Houston is at the heart of the American oil industry, and as companies grow and expand their footprint in the U.S., the Houston office market is positioned to experience significant growth. The economic impact of the shale boom has been felt throughout Texas. The Eagle Ford Shale, one of the most significant oil and gas plays in the country, spans 14 producing counties and had an economic impact of $46 billion in 2012. Surrounding cities, such as San Antonio and Corpus Christi, are experiencing growth in all product types to accommodate the population and employment gains in the region. Midland has become one of the most expensive places in Texas thanks to the Permian Basin, while the Dallas/Fort Worth metro area, with the Barnett Shale in its backyard, continuously tops various economic health indices. But Houston, home to 87,418 headquarters, …
While out national and local news outlets inundate us with what is going on in Washington, D.C., these days, word may not be on the street yet that the industrial real estate market just north of D.C. has begun to see significant improvement, something that has been slow in the making. This market has always been on the radar of the top real estate investors and remains a sought-after destination for industrial investment. The Baltimore-Washington (BW) Corridor industrial real estate market, historically one of the strongest in the country, received a gut punch in 2008 much like the rest of the real estate markets throughout the country. Defined as mostly Howard and Anne Arundel counties, this 46 million-square-foot market is essentially the area between the Baltimore Beltway and the Washington Beltway, a distance of 25 miles along Interstate 95. This market acts as the “last mile” of distribution to the affluent suburbs of the Capital Region. Prior to the fourth quarter of 2012, most leasing activity in this market consisted of tenants downsizing or shopping their renewals to anxious owners looking to fill recent holes in their portfolios. The results were lower rental rates, more concessions and generally lower investment …
As a global player, New York City enjoys top-shelf retail advantages that continue to support the market as they always have — by keeping one foot on the gas pedal and one eye on the rearview mirror, as the recessionary cycle fades further out of view. From an economic perspective, New York City is recovering by leaps and bounds, posting 1.5 percent year-over-year growth between February 2012 and February 2013, and a liberal 4.3 percent rise in the professional and businesses services sector that includes 35,000 new jobs. Add to that the overall uptick in the global economy (read: consumer confidence) and the market’s inherent strength as an international tourist destination, and all bets are on New York to remain one of the tightest retail markets in the country for the next few years. New York City boasted an enviable 2.2 percent vacancy rate for all types of retail at the end of first quarter 2013 — an impressive figure when compared to the average U.S. first quarter vacancy rate of 6.8 percent. Quoted rents in New York’s five boroughs also rebounded 12.7 percent year-over-year to $50.90 per square foot on average. This is about three times higher than the …
The Cincinnati office market recorded positive net absorption of 74,378 square feet during the first quarter of 2013 while the overall vacancy rate dipped slightly to about 23.2 percent. The forecast from Cassidy Turley is for Class A submarkets to become tighter as medical and service industries continue to drive absorption. However, the increasing success of the Class A sector has come at the expense of Class B space. First-quarter Class A direct vacancy in the metro Cincinnati office market stood at approximately 20 percent, while Class B direct vacancy was about 28 percent. That’s a stark contrast from 2004 and 2005, when Cincinnati’s office vacancy rate was 10 percent for Class A space and 17 to 18 percent for Class B space. “If you look back eight to nine years, that’s where [the vacancy rates] stayed during good times,” says Scott Abernethy, senior vice president and principal in Cassidy Turley’s Cincinnati office. When the market took a hit during the 2008 to 2010 period, large vacancies popped up, forcing landlords of Class A buildings to lower rental rates. That in turn created deal incentives for Class B tenants to move to newer facilities. “Class B tenants can move over …
As Houston As Houston continues to create jobs and power the economic engine of Texas, every segment of the multifamily sector continues to push higher. With more than 100,000 jobs added in the past year alone, the newly hired and the job-hungry are leasing up available space in Houston faster than units are being delivered to the market. Demographics demonstrate a growing shift toward rentals for the city in general. For the first time since 2005, Houston apartment occupancy is averaging more than 90 percent. As the energy, medical, service and construction industries continue to expand in Houston, demand will remain strong across the board for Class A, B and C product. New multifamily construction is heavily concentrated within the Inner Loop, Energy Corridor and the vicinity of The Woodlands. The development pipeline trends toward these job-ready markets as Houstonians dream of shorter work commutes and “live, work and play” scenarios. Multifamily options inch toward this dream, providing retail, dining and entertainment options on property or nearby. But living the dream does not come cheap. While convenience is desirable, these benefits can be packaged at a steep price. Houstonians, however, are more than willing to pay premium prices for premium …