Cash is flowing in the greater Twin Cities real estate market in spite of slow, but positive, year-over-year absorption rates. Investment action was significant in the third quarter of this year. New multifamily housing projects are booming, private student housing developments serving the University of Minnesota continue to grow, and corporate build-to-suit projects add to the inventory in a down economy. The Twin Cities office market has remained stable with modest absorption through the past three years based upon existing inventory. And although there is significant construction in other product types, there is little significant multi-tenant office construction at present. ECONOMIC BACKDROP The 5.7 percent unemployment rate in the Twin Cities stood well below the national jobless rate of 7.8 percent in September. In fact, the unemployment rate for the state of Minnesota was 5.8 percent, again much better than the national average. The Twin Cities does not depend on any single industry and is home to a variety of Fortune 500 headquarters such as Ameriprise Financial, Best Buy, Ecolab, General Mills, Target, 3M, St. Jude Medical, Medtronic and UnitedHealth Group. The variety of services and industries helped buffer the local economy during the Great Recession, although the downturn adversely …
Market Reports
A slight decline in vacancy this year confirms that Washington, D.C.’s apartment sector is in a new phase, where a closer alignment in tenant demand and completions will maintain vacancy within a tight range. Solid rental absorption promises to persist as employers hire workers who create new households and homeownership remains out of reach for many who cannot qualify for mortgages. However, potential cuts in defense spending might dull future housing demand in Virginia. The difference in the multifamily market at mid-year 2012 and one year ago shows the revival of residential construction as developers have cranked up production of all types of housing. Multifamily starts have jumped and represent more than 40 percent of all residential groundbreakings over the past year, approximately two times the typical proportion. All sections of the market will receive new multifamily stock this year, with only modest growth expected in Maryland offset by significant completions in Virginia. Meanwhile, most of this year’s production in the district will come online in the second half of 2012, limiting the extent of vacancy declines in the third and fourth quarters. Positive job growth supported growth in D.C.’s multifamily sector. Employers added 25,200 workers in the first six …
Multifamily transaction activity has increased in San Diego during the fourth quarter, due partly to the typical end-of-year rush to close escrow, as well as uncertainty about tax reform in 2013. Agency debt is still a large driver, but relationship banking is picking up for well-heeled borrowers, and investors increasingly have multiple options. The multifamily rental market continues to benefit from the high down payment and credit requirements placed on average home buyers who still choose to rent in San Diego where the cost to rent is still below the cost to own. San Diego’s diverse economic base added 30,300 jobs over the past 12 months, and year-over-year employment gains in excess of 2 percent were reported in nearly all sectors. San Diego has seen a rise in tourism, which has positively impacted the service industries. While manufacturing has struggled to gain footing, growth within construction and finance has emerged. Unemployment has decreased 1.3 percent since August 2011 and is currently 1.4 percent below state levels. Home prices have increased about 5.2 percent in 2012 but remain 37.5 percent below the 2006 peak levels, with a median-priced home at $350,000 today. San Diego’s population has increased 5.1 percent since 2008. …
The Twin Cities retail market continues to steadily improve from the economic depths of 2008 and 2009. There has been 549,194 square feet of positive absorption since the first quarter of 2011. Another encouraging sign is the increased activity among landlords, tenants and developers. One example of the positive outlook is the investment that landlords are making at regional malls to upgrade and reposition them. The Mall of America in Bloomington seeks to add 550,000 square feet of retail, medical office and hotel space. Southdale Mall, Ridgedale Mall, and Maplewood Mall are also investing in their centers to better compete in this rising market. Another sign of increased activity can be seen among food tenants. Quick service restaurants are betting that Minneapolis-St. Paul residents have a large appetite for yogurt, sandwiches, and burgers and are actively seeking space. Burger and sandwich concepts include Smashburger, Which Wich, Firehouse Subs, and Freddy’s, which are growing in popularity along with Freeziac, Tutti Frutti, Menchies, and CherryBerry yogurt shops. Also active are Noodles, Chipotle, and Starbucks. These types of tenants have gobbled up smaller spaces and end-cap spaces vacated by tenants such as defunct Hollywood Video and Blockbuster. They are pursuing the same spaces …
Cheers and the clamor of new construction are among the dominant sounds wafting above the downtown Austin skyline of late, as the city welcomes a new wave of hotel construction and construction plans. Not a moment too soon. For several years, the hospitality industry has fretted that Austin’s growth as a destination city is outpacing the development of hotel accommodations, particularly in and around downtown. Voila! Hospitality’s proverbial “rooms available” signs are flickering brighter. By early 2013, no fewer than five major hotels will be under construction, delivering more than 2,000 rooms to Austin’s central business district. From all indications, more hotel developments are in the offing for later next year. That’s welcome news for those who promote Austin’s viability as a destination city and who roll out the red carpet for everything from conventions and corporate meetings to spring break activities and mega-events. In mid-November, Austin will debut as host city, through 2021, of the Formula One U.S. Grand Prix, accommodating Formula One racing’s return to the U.S. following a five-year absence. This high-profile race could attract some 300,000 fans. The South by Southwest Film Conference and Festival, Rodeo Austin, and the Austin City Limits Music Festival are just …
Washington, D.C.’s suburban industrial markets in Maryland and Northern Virginia have seen limited new development due to supply constraints for well-located and developable land. Currently, suburban Maryland’s industrial activity is centered around the redevelopment of inefficient but well-located properties to meet the needs of today’s warehouse users that require features such as ceilings with at least 24-foot clear heights, 120-foot truck loading courts, trailer-drop areas and flexible configurations with 50-foot on center column spacing. With its strong fundamentals, the industrial property investment sales market continues to be a focus for institutional investors and REITs. Despite overall economic sluggishness, both markets have strong upside potential. Suburban Maryland Exemplifying suburban Maryland’s redevelopment trends, Chesapeake Realty Group, Oakmont Industrial and Carlyle Group are renovating a 368,000-square-foot former special-purpose facility into a new, modern general- purpose distribution center along the eastern Capital Beltway network. A similar deal involves the renovation and Nash Finch’s subsequent 500,000-square-foot lease of a former Giant Food ’60s-era distribution center. This single transaction led to the vacancy rate falling to below 9 percent in the Landover submarket. Limited new development is occurring along the main transportation arteries feeding into D.C.’s CBD. Demand drivers include regional distributors and service companies catering …
Though a balanced Los Angeles office market may be a year away, the situation is certainly looking more promising than a year ago. This is due to rising rents, positive (and continued) absorption and increased transaction volume. These trends are buoyed by falling unemployment rates, which declined to 11.1 percent in the second quarter, compared with 12.4 percent a year ago. Professional services companies led this charge, adding 16,500 jobs over the past 12 months. Entertainment and media also showed robust gains, adding 8,000 jobs over the same period. Government and manufacturing sectors represent the opposite end of the spectrum and still lag in the recovery. As expected, creative users within the respective fields of entertainment, social media and gaming companies continue to drive leasing activity. This is particularly true on the Westside where companies like Riot Games in Santa Monica, Google in Venice and YouTube in Playa Vista abound. DirecTV also recently signed a 205,202-square-foot renewal in El Segundo. Many Los Angeles companies are also once again thinking about recruitment and seeking out locations that appeal to their employee base. One example is law firm Morrison Forester, which is relocating from Downtown’s Bunker Hill to the amenity-rich Financial District. …
Economic conditions in Clark County and Las Vegas continue to improve with evidence of a slow and steady recovery finally emerging. Analysts from the UNLV Center for Business and Economic Research’s late summer survey noted respondents remained optimistic about general economic conditions in southern Nevada, with 82 percent expecting to see no change or improvement. Their Southern Nevada Business Confidence Index rose to its highest level in more than four years during the summer, echoing this positive sentiment. A couple of indicators highlight the emergence of a more favorable environment, with retail sales improving, McCarran Airport traffic on the rise and the gaming “take” on the rebound. Median existing home sale prices have jumped more than $12,000 compared to the same period a year ago. Furthermore, the labor market in Clark County has stabilized with more than 6,000 jobs added to non-farm payrolls since the spring. The overall county population has also increased to its highest level in five years, according to US Census estimates. In the multifamily market, the past two indicators carry the most weight for the region’s apartment market. A healthy apartment market requires significant population densities with a positive trend. This needs to be supported by …
After five years of economic challenges, the Orlando industrial market — hit harder than any other industrial region in Florida — is rebounding. During the recession, central Florida experienced what amounted to a full stop in home construction, the failure of dozens of banks and almost no foreign investment. Vacancy rates for Orlando’s industrial warehouse market peaked in 2010 at nearly 15 percent and remained high until 2011. But now the economy is picking up. Payrolls expanded by 4,400 jobs year-over-year for the period ending in May and construction of multifamily residential has grown consistently. The improvements are part of a trend that could extend for years. Today, the industrial market that had the highest vacancy rates in the state is now experiencing the greatest absorption, with 1.1 million square feet leased in the second quarter of this year, for a six-month total of 2.4 million feet. That’s a 19.3 percent gain over the same period in 2011 and the third consecutive quarter of positive absorption. The overall vacancy rate has fallen to 10.7 percent, and that doesn’t tell the whole story. Outlying areas and Class C properties are lagging. In Class A and Class B properties in southwest Orlando …
The major headlines dominating the greater Baltimore region this summer involved the unexpected resurgence of our beloved professional baseball team following nearly two decades of performing at a level below .500, and the logistical challenges facing the organizers of the second annual Grand Prix racing event scheduled for the Labor Day weekend. Connecting this news to the regional retail environment, we see a tremendous amount of winning and successful projects emerging throughout the area, combined with a great deal of noise and fast-moving activity. Fasten your seatbelts for a quick lap around the Charm City marketplace. Downtown CBD As General Growth Properties slowly emerged from bankruptcy, the company renewed its focus on re-energizing its retail assets lining the retail magnet known as the Inner Harbor by attracting new merchants and restaurants and upgrading the physical plant. The arrival of Bubba Gump Shrimp Co. and Ripley’s Believe It or Not Museum were among the notable adds. There is still some work to do with regard to reinvigorating The Gallery at Harborplace, which has lost some luster due to the emergence of Harbor East, but the improvements have been noticeable and well received. In Baltimore, the waterfront rules. The Cordish Company rebounded …