In the Detroit area and across Southeast Michigan, medical office continues to be a strong performer. With healthcare being one of the state’s largest and fastest-growing economic drivers, an aging population and a robust system of public, private and university hospitals across the region, a generally positive growth trend seems unlikely to change anytime soon. Farbman Group’s own portfolio of 4 million square feet is currently more than 95 percent occupied, and quality medical office space remains in high demand. There are, however, some noteworthy developments taking place both inside and outside the healthcare industry that are shaping its future. Medical office real estate trends locally and regionally are beginning to reflect those changes. Consolidation Wave Perhaps the healthcare trend with the most significant potential to alter the medical office and medical real estate marketplace in Southeast Michigan is that of consolidation — healthcare systems coming together via mergers, acquisitions and strategic partnerships. This trend is, in some respects, similar to what has occurred in the banking industry during the last decade. We are likely to see the same kind of phenomenon continue to pick up momentum in healthcare during the next five years or so. There are three primary …
Market Reports
The Houston industrial market ended 2012 on a positive growth trajectory and will continue to be one of the healthiest markets in the U.S. into 2013. 2012 ended with a fourth quarter vacancy rate of 5.2 percent and a positive net absorption totaling more than 1.7 million square feet of combined industrial space. A lack of available industrial inventory in the market is driving new development projects (2.5 million square feet) for both traditional warehouse/distribution space as well as freestanding, crane-ready manufacturing facilities that remain at a premium citywide. The lack of available inventory is pushing development outwards and driving rental rates and sales prices upward. This trend will continue to grow into 2013, but rental rates and sale prices will taper-off midway through 2013 as the market can only bear so much increase. Land prices have also seen a sharp uptick forcing users and developers to consider sites upwards of $4 per square foot when they have historically fought to stay under $3 per square foot. Additionally, there is a strong need for rail-served land sites or facilities. As the energy sector continues its growth and the Port of Houston takes on more capacity, the need for rail served …
The Atlanta metro has been named one of the top cities for job growth and the population is rising at one of the fastest paces in the country, creating high demand for rental housing that will persist. Last year, an average of 200 residents per day moved into the area, and nearly 21 percent of the entire metro population falls within the prime renter cohort, which includes people between 20 and 34 years old. Uncertainty in the housing market is driving up the age of the first-time homebuyer. As many young adults form rental households in lieu of ownership, they will likely choose to live in modern, luxury apartments near entertainment and business districts. Meanwhile, in the single-family market, permitting activity remains well below prerecession levels and sales of existing single-family homes are just 57 percent of peaks reached before the recession, confirming that many of these new residents are looking for rentals. Apartment construction is at an all-time low this year, and demand for units will outpace new supply by more than seven times. As a result, vacancy will fall to the lowest point in over a decade, allowing operators to boost rents and match prerecession peaks. Looking at …
Multifamily markets around the country are thriving and Connecticut is no exception, particularly with regard to Class B and Class C properties. The regional mortgage markets have opened up dramatically, approving deals that would have been snubbed a year ago as the market rebounded from the economic downturn. Today, the multifamily sector is alive and well in all classes and markets throughout Connecticut. When the rebound first began roughly 18 months ago, premium core properties were getting all the attention because of discretionary equity and debt. Lending agencies at the time showed a strong preference for garden-variety Class A suburban and high-rise assets. Terms like “value-add” were barely in their vocabulary then, but now closings labeled as such occur all the time. Outside of the New Haven, Fairfield and Stamford core markets, however, plenty of REO and distressed real estate is still working its way through the pipeline, from markets like urban Hartford to outlying suburban areas. Why the delay? For a long time, investors felt repercussions from the market crash, so we had a case of “a falling tide sinking all boats.” Now, while there’s still no urgency to invest in bank-owned real estate, these assets are slowly but …
The San Diego office market continues in the direction of a slow, but steady recovery as we move into 2013. With virtually no new construction of office inventory delivered in 2012, and no projects in the immediate pipeline, the overall occupancy in the county for all office product has risen to about 85 percent. The majority of the leasing activity and positive net absorption has occurred in the Class A market, particularly in the Central San Diego suburban markets. About 85 percent of the absorption over the past three years has been in the Central San Diego office markets, including UTC, Sorrento Mesa, Kearny Mesa and Del Mar Heights. Overall, the Central San Diego office market vacancy sits at 9 percent. As a result, building owners of Class A buildings in these select markets have been able to lower concession packages and hold tight on rents when compared to the previous few years. Lease rates have also stabilized and are poised to increase as the supply tightens for quality space. Class A asking rates had an overall average of $2.58 per square foot (full-service gross) at the end of 2012. This was unchanged from the previous two quarters while Class …
Building on the trends that began to emerge in the second half of 2010, the Toledo region’s industrial real estate market continues to improve. Demand for space in northwest Ohio and southeast Michigan is occurring at its typical slow, steady pace. The result has been positive net absorption of more than 400,000 square feet during the past year. The vacancy rate fell from 8.65 percent at the end of 2011 to 8.52 percent at the close of 2012. If the improvement in the vacancy rate slows during the next 12 months, it will more likely be due to the poorer quality and functionality of much of the residual stock of empty buildings than weakening demand. One can see this evidence with the spike in new construction driven by build-to-suit projects for several noteworthy users who could not find suitable space within the existing supply. Auto sector is big driver It would come as no surprise to anyone remotely familiar with Toledo’s history and economy that a considerable portion of the user activity has come from the automotive sector. Suppliers to primarily Chrysler Group and General Motors (GM) have been quite active and have accounted for several of the larger lease …
Population growth is a direct result of the lifestyle advantages we enjoy in the Triangle region, which include our mild climate as well as educational opportunities and future employment options. People continue to move to the area, with approximately 225,000 new citizens expected by 2015. These new citizens expect jobs and recent estimates indicated an increase of approximately 12,500 jobs in 2012. It’s not the high job growth of the late ’90s through mid-2000, but it was an improvement over the last three years. With so many new people coming to the Triangle, and many unable to sell their homes in depressed markets, the need for apartments has grown considerably. The Triangle apartment market has been on fire with the latest report indicating a vacancy rate of 5.5 percent. In addition almost 6,000 apartment units are currently under construction. The combination of population growth, housing demands and disposable income are key ingredients to our vibrant retail market. In 2011, there was an increase in retail construction of approximately 900,000 square feet, resulting in minimal absorption and continued vacancy at 6 percent. In 2012, construction dropped to just over 300,000 square feet and despite vacancies in strip centers, overall vacancy dropped …
The investment climate for the Phoenix office market is poised to provide compelling acquisition opportunities in 2013. Favorable job growth, improving market fundamentals and assets available at discounts to replacement costs are expected to enhance asset appreciation over the next several years. Phoenix has historically generated strong job growth after recessionary periods. Recent data supports this trend, as Metro Phoenix added 50,700 jobs over the past 12 months, according to the Bureau of Labor Statistics’ preliminary November 2012 figures. This job growth has lowered the unemployment rate to 6.9 percent as of October 2012, well below the national rate of 7.9 percent. The area is expected to continue adding 50,000 new jobs annually through 2015, driving vacancy rates downward and creating upward pressure on rental rates and property values. Employment growth in professional and business services, and in the financial sector, is of chief importance as a demand generator for office space. Phoenix has also benefited from strong population growth. Metro Phoenix is expected to grow at an average rate of 2.6 percent per year over the next 10 years, a pace that is more than twice that of the national average. Affordable housing, a business-friendly environment and a well-educated …
After a seemingly relentless economic recession, the retail atmosphere is changing in southeastern Michigan as more local and national tenants look to grow here. The positive momentum that began in 2011 in the retail industry has continued. Retail sales rose modestly in 2012, and retailers expect sales to continue to rise in 2013. The source of the optimism stems from the resurgent auto industry, which drives metro Detroit’s economy. Job growth is accelerating, leading to a drop in the unemployment rate. Absorption is positive in the Class A industrial and office markets. All of these factors are having a positive effect on Detroit’s retail market. Retailers eye downtown Downtown Detroit is bursting with an energy not seen since the 1950s. Dan Gilbert, owner of Quicken Loans, is responsible for much of the change. His recent real estate acquisitions, 15 buildings to be exact, and relocation of 7,000 employees to the central business district, have created a buzz that retailers are noticing. Olga’s, Bagger Dave’s, Buffalo Wild Wings and Moosejaw have all planted roots downtown. Whole Foods Market is scheduled to open this year in midtown near the Detroit Medical Center and Wayne State University. National retailers are lining up to …
San Antonio has been hard to ignore by national and international commercial and multifamily real estate investors on both the equity and debt side of capitalization. It has many of the positive ingredients that combine to score compelling marks in the various economic and investment models that are used to evaluate investment strategy. NorthMarq Capital works with national and international debt and equity real estate investors raising capital for commercial and multifamily properties every day in our role as an intermediary. Factors consistently standing out that make San Antonio attractive are its economic foundation based on financial services, healthcare, government and tourism and includes industries as diverse as medical, energy, biosciences, cyber security and aerospace. San Antonio is a top travel destination and has experienced very healthy population growth. It has an affordable and business friendly environment along with a unique geographic location and high quality of life. These factors translate into positive sustained demand for real estate. Several sources have given accolades validating the success the San Antonio economy in recent history. The Milken Institute named San Antonio as the No. 1 performing city in the country and emphasized the productivity and energy the city has had in recent …