The Boston apartment market will remain in favor of landlords in the coming quarters as new developments surface and rents reach peak levels, although residents may seek more affordable living options. The improving employment picture and a severe shortage of supply within Route 128 have tightened vacancy below 3 percent. By year end, asking rents will reach new record highs, which has already ignited a building frenzy throughout Boston. Nearly 1,500 units are under way in Suffolk County. These units will come online by 2014 and may ease rent growth. Meanwhile, demand in outlying areas is gaining steam as young professionals are being priced out of the core. Families and empty nesters alike are also migrating to the suburbs, where newer developments offer a sense of connection to the community similar to urban settings at more affordable rates. Developers are capitalizing on this trend and transforming areas near major transit stations into densely packed, master-planned communities. The redevelopment of the South Weymouth Naval Air Station, known as Southfield, is one example of this trend. The first phase of the mixed-use project in Norfolk County was recently completed and added 225 apartments, townhomes and top-notch amenities to the area. By the …
Market Reports
The Phoenix industrial market continues its convincing march toward recovery by reaching several milestones. As a more resilient sector during the recession, the industrial market was not plagued with as much bad debt and CMBS loan defaults as other sectors. Industry experts concluded the industrial sector would recover faster as favorable economic conditions such as durable goods orders and manufacturing output favored the industrial market early. The sector has posted 10 consecutive quarters of positive absorption dating back to 2010. Vacancy rates have returned to levels not seen since the third quarter of 2008. This positive direction reflects a rebound in U.S. exports, consumer spending and online purchasing, which has led to a high demand for large distribution space in which there are few options in Phoenix. Confidence in the industrial market – and in Phoenix in particular – has brought renewed interest in developing new projects. Most new construction is a combination of build-to-suit manufacturing space and several new speculative projects to meet the demand for distribution space of more than 100,000 square feet. Industrial investment sales transaction velocity remains quite strong even though it’s declined from last quarter’s significant level. However, price per square footage has increased once …
A rise in office-using employment and corporate profits has benefited underutilized Milwaukee space and spurred some companies in the metro area to expand their space needs. Several leases above 30,000 square feet were finalized in the first half of 2012. The accounting firm Baker Tilly Virchow Krause LLP took 68,000 square feet. Healthcare information systems provider Connecture Inc. inked a deal for 32,200 square feet. Marshall & Swift/Boeckh, a provider of building cost data and estimating technology to the property insurance industry, leased 38,200 square feet. Leasing activity helped push absorption into positive territory during the first two quarters, although rent growth remains minimal. It will take a few quarters of strong absorption before any significant upward trend in rents is realized. The limited construction pipeline has helped stabilize vacancy. The few competitive projects to break ground must have major leases in place before building activity gets under way. A rise in owner-occupied and government construction, however, could affect short-term vacancy in targeted areas, if leased space is vacated. About 30,000 square feet of office space came on line in the second quarter upon the completion of the refurbished Clock Shadow Building on Bruce Street in Milwaukee. The mixed-use building …
Washington, D.C. continues to grow and thrive but in a very different manner than it did in the past. While the national debt surpassed $16 trillion, the local economy has benefited from the government spending — which has resulted in the metro area having the lowest unemployment rate in the country. Additionally, D.C. continues to reap the benefits of having seven out of the top 10 wealthiest counties in the United States located within the metropolitan trade area. Furthermore, Generations X and Y are changing the real estate landscape by rejecting the baby boomer suburban ideology and opting to migrate to the city for non-committal rental housing, public transit, and a closer proximity to work and shopping. As many retailers will attest, if you are not growing, you are dying. The District has always been a vital market for retailer expansion. Today, with a floundering American economy and fewer opportunities for growth in the middle of the country, Washington has become a focal point for retailer expansion. For example, YO! Sushi, the British conveyor belt sushi concept, elected to open its first North American unit at D.C.’s Union Station. In addition, Walmart spent significant time and money creating unique store …
With all the construction vehicles on retail sites as you circle metro Boston, we can now quantify the retail slowdown attributable to the recession as a three-year window. Never has the local retail market been healthier than it is today. WS Development is under construction with its Whole Foods-anchored Meadowbrook Walk in Lynnfield. The Nordblom Company has begun 3rd Avenue, a Wegmans-anchored lifestyle project in Burlington. Market Basket is well under way at the former Polaroid site in Waltham. New England Development is building its Wegmans project in Chestnut Hill while WS redevelops the former Macy’s further east on Route 9. Also moving forward, though at a slightly earlier stage, is NED’s long-awaited Westwood project. A total of almost 3 million square feet of new high-profile — even iconic — retail space along Boston’s inner ring beltway is now upon us, exactly three years later than originally anticipated. Notably, grocery is driving all of these larger projects. While traditional market leader Stop & Shop makes only narrowly strategic moves and Shaw’s languishes, grocery chains of a wide range of sizes targeting distinct demographics have inspired development at both the local and regional level. Wegmans, Market Basket, Whole Foods, Price Rite …
The San Francisco apartment market is exceptionally active. It features extremely low vacancies, rapidly rising rents and tremendous demand for a very limited inventory of assets. Fueling this demand is San Francisco’s thriving technology sector and young professionals, which will maintain the metro’s stature as one of the premier rental markets in the country well into 2013. While nearby Silicon Valley lures large software and information companies, San Francisco has become the incubator for tech start-ups. More than 94,000 people in the metro area have jobs pertaining to the tech industry, which is up 10 percent from last year. Small but influential firms such as Zynga, Dropbox and Airbnb are continuously hiring young professionals in the core of the metro. These high-paid individuals prefer renting, and are waiting longer to enter the single-family home market. Employment this year has been primarily driven by San Francisco’s technology industry. Major firms such as Facebook and Twitter continue to hire as their businesses evolve. By year’s end, employers will have hired a total of 29,000 workers, a 3 percent increase in total employment. Vacancies are currently some of the lowest on record, as the tech industry flourishes. In the last 12 months, the …
The St. Louis industrial market continues a slow and steady march toward recovery. The Midwest is often looked to for stability and consistency, and with the vacancy rate and lease rates changing little over the past two years, the description is holding true. In fact, the overall average lease rates for warehouse space have only dipped slightly after holding steady, while vacancy has been a consistent 8.7 percent for warehouse product. While the lease rates have been stable, we have begun to see sale prices drop, especially for vacant product. As these pricing changes begin to hit the market, the sense that we are at the bottom is prevalent, and the opportunities are there for anyone who can buy buildings with cash. Changing of the Guard While the real estate fundamentals may have remained the same for two years, the property ownership picture has changed quite a bit. The exit from the St. Louis market by TA Associates in January resulted in the entry of Cobalt Capital, which purchased the 13-building portfolio. Beverly Hills, Calif.-based Blue Real Estate has seen its flex portfolio of 850,000 square feet go back to the lender, opening the door for another player to get …
The uncertainty created by the nation’s current economic and fiscal conditions continues to dampen confidence for both government and private sector tenants resulting in increasing vacancy rates and declining net absorption in the D.C. market. In anticipation of the looming possibility that the government will fail to resolve its budget impasse, and so enforce mandated federal budget cuts (i.e., “sequestration”), companies that rely on federal spending are consolidating operations, discarding excess space and deferring leasing decisions. As a result, the Washington, D.C., vacancy rate, which has been in the mid-single digits for at least the last decade, has steadily increased since 2010 to over 12.5 percent as of the second quarter of 2012. The D.C. market’s leasing activity has been dominated by lease renewals, totaling 87 percent of all leasing activity in 2011 and 70 percent for the first half of 2012. Despite the economic uncertainty, the D.C. market continues to see new development activity, with nearly 2 million square feet currently under construction, and more than 70 percent of this space pre-leased. The 10-acre, mixed-use CityCenterDC project on the former Convention Center site has approximately 500,000 square feet of office space currently under construction, 77 percent of which has …
Like many metro areas across the U.S., Boston’s 494 million-square-foot industrial market slowed as we approached elections and the end of 2012. Despite mixed signals, the situation isn’t entirely dour, and there are signs of optimism in terms of demand and activity, evidenced by a slight decrease in vacancy and 475,000 square feet of net absorption in the first half of 2012, according to CoStar Group. At a more macro level, the Boston area’s thriving technology sector has led to job growth and declining unemployment, which ultimately increases consumer demand and benefits the industrial property market. The Boston industrial market has been flat for more than three years now, but that’s created opportunities for end users to lease higher-quality properties than they previously inhabited while reducing occupancy costs, which is the prevalent trend both in Boston and nationwide. Tenants seek to improve efficiency by consolidating warehouse and distribution into more modern properties with higher clear-height ceilings and other features. While users demand more efficient and flexible industrial space, they also demand more flexible — and generally shorter — lease terms. If tenants can achieve both operational efficiency and lower costs through outsourcing to third-party logistics providers (3PLs), even better. End …
The San Diego retail market has posted five consecutive quarters of positive net absorption with strong activity in power centers and several vacant big box spaces coming off the market. Through the third quarter of 2012, year-to-date gross leasing activity totals more than 1.8 million square feet with about 330,000 square feet of positive net absorption. So far, we have already surpassed the 2011 gross leasing total of about 1.4 million square feet. The steady leasing activity and positive net absorption dropped the direct vacancy rate from 7.4 percent at the beginning of the first quarter 2012 to 6.9 percent at the end of the third quarter. The current overall vacancy rate, including sublease space, is 7.2 percent. Vacant big box spaces are attracting tenants from national credit retailers to specialty markets. Dick’s Sporting Goods recently opened a 46,019-square-foot location in a redevelopment of a former Mervyn’s site in the Sports Arena submarket. Meanwhile, Zion Market, a Korean-focused grocery and specialty store, subleased a vacant 94,000-square-foot Sears Essentials building in Kearny Mesa. In addition to tenants taking big box spaces, several high-end fashion retailers are entering the San Diego market or opening new stores. Kate Spade New York opened its …