For tenants, this slower sector correction and still attractive rents will make for great opportunities in this area in 2012. The competitive rental rates are not expected to tick up by much, but will probably stabilize after hitting bottom in select submarkets. They will offer a wide choice of options for relocating tenants. Concessions will remain generous to secure the best tenants in the market. Over the short term, the Orange County office outlook will remain a tenant’s market. The average overall full-service gross (FSG) asking rent in Orange County during 2011 was $1.95, dropping from near $2 the previous year. The trend of Class B users jumping to attractively priced Class A product will continue in the first half of 2012. This effort to reduce expenses, while landing better operational locations, will still be very popular. Expect to see some tenants that were on the sidelines in 2011 now ready to make a move. These national and regional occupiers are sophisticated and will be looking for experts with the talent and expertise to focus on their specific needs and their unique corporate expansion requirements/considerations. However, even with slightly increased activity, the pace of demand will appear low by historical …
Market Reports
The land market in Austin, like the rest of the country, is driven by future expectations throughout the real estate product types from new home construction and apartments to office, retail and industrial development. Therefore, the same underlying fundamentals driving demand for new construction will also drive the demand for land development. Fortunately, Austin, like much of Texas, continues to outperform the nation economically. While the recovery has been sluggish elsewhere, Austin continues to gain economic momentum. Most metro areas throughout the country have yet to recover the employment losses sustained through the Great Recession. Austin with a net job growth of 16,300 in 2011 has now surpassed its pre-recession employment peak of 770,000 in August 2008. Current estimated employment is more than 787,000, according to the Bureau of Labor Statistics. Austin remains attractive to a variety of employers because of its educational infrastructure, young educated workforce, IT infrastructure and concentration of technology industries. While not the lowest cost of living or the lowest cost of doing business it is far and away more affordable than other tech centers such as San Jose, California, Boston and northern Virginia. Consistently ranked high by top economic development, relocation and business consultants, Austin …
As 2012 begins the Louisville retail market continues to positively move forward. The energy and optimism in the national markets is well reflected in the city with new tenants entering the area for the first time and a variety of locals, regional and national players looking to expand. The greatest challenge currently in the market is the scarce availability of quality space which is hindering some retailers’ entry into the market today and could seriously affect future growth. Fall 2011 saw Guitar Center, Nike Factory Store and Trader Joe’s all opened in Shelbyville Road Plaza in the city’s main retail core, St. Matthews. While the influx of new tenants is positive, the ownership still must re-tenant vacant boxes left by Circuit City, Wild Oats and Border’s Books. Most recently, Anthropologie announced that it would join Macy’s, Sear’s and Von Maur at Oxmoor Mall further solidifying Oxmoor as the city’s premier upscale shopping destination. Mall St. Matthews continues to be well occupied while appealing to a slightly younger clientele. Other new additions to St. Matthews trade area include Mellow Mushroom Pizza, Tin Roof and Bruegger’s Bagels. The biggest news in the northeast segment of the trade area was the $78 million …
Memphis, home of the Blues and Elvis Presley’s “Graceland”, is the largest city in the state of Tennessee with a population of 676,646. Tourists are drawn to the downtown Memphis entertainment district, anchored by the world famous Beale Street, NBA basketball with the Memphis Grizzlies, and AAA baseball’s finest ballpark, home of the Memphis Redbirds, the St Louis Cardinals farm team. Coming soon is Bass Pro Shop’s gaming retail store and museum, which will attract outdoors enthusiasts. With more than 50,000 people working in the medical industry, Memphis is internationally recognized for its contribution to the medical field. Located in the Medical District, is St. Jude Children’s Hospital, ranked the No. 3 children’s cancer hospital in the country by U.S. News, Le Bonheur Children’s Hospital nationally ranked in many different specialties, the Regional Medical Center of Memphis, one of the top trauma centers in the country and the University of Tennessee Center for Health Science. With its centralized location in the middle of the country, Memphis is the home of many distribution facilities and hubs, most notably FedEx as well as other Fortune 500 companies. The Memphis Chamber of Commerce expects to add more than 7,000 new jobs in 2012. …
In the Greater Boston area, retail real estate seems to have a hopeful outlook for 2012 and beyond. Market conditions in the general Boston retail real estate realm improved slightly with the overall retail vacancy rate decreasing from 4.8 percent in the second quarter of 2011 to 4.6 percent in the third quarter — down significantly from the 5 percent fourth quarter 2010 (Costar Q3 2011 Boston Retail Market Retail Report). Boston’s retail net absorption increased dramatically to a positive 1.09 million square feet in third quarter 2011 — up from a positive 822,957 square feet in the previous quarter. Average quoted asking rental rates however were still low at $15.27 per square foot in third quarter 2011. In addition to improvements in vacancy rates and net absorption, the Boston retail market had several major retail lease signings in 2011, including a 60,000-square-foot Stop & Shop relocation in North Reading, Massachusetts, and a 45,000-square-foot Whole Foods Market signing in Lynnfield, Massachusetts. Also notable was the development of the 600,000-square-foot Northborough Crossing project anchored by Wegmans. The Boston area retail real estate scene should continue to show signs of recovery and positive motion, as the local economy slowly pushes upward toward …
What was previously considered a “soft patch” in the U.S. economy is now indicative of a long-term economic realignment, as previously reported in the past quarter. A reversal of economic indicators, the downgrading of the U.S. credit rating, the debt ceiling debate, the European debt crisis, and market uncertainty are the cause of a decrease in consumer and business confidence across the board, both nationally and in New Jersey. The result is a continued slow recovery in the job market as corporations continue to build cash reserves, further delaying hiring, equipment purchases and real estate expansions. The situation in New Jersey mirrors that of the national picture. The overall real estate market in New Jersey remains weak, although there was a significant shift to direct leasing of Class A space versus the previous subleasing activity. However, the reductions in labor and space needs have led subleases to play an important role in the local market — tenants are leveraging their subleased spaces to negotiate better financial terms when renewing their leases. Vacancy Rates Vacancy rates continued to climb, with Class A office space coming in at 16.4 percent, a 0.2 percent increase from the second quarter. The Class B office …
With 95 percent occupancy, the Orange County industrial market is shining through the clouds of what is still a semi-lethargic market in many areas. It’s well known that industrial real estate is a solid investment option that is safer than many other investment vehicles. Combine that with Orange County’s reputation as a place that people love to work and live, and it’s no surprise the county’s industrial market is successfully rebounding. Industrial buyers were not just cautious in 2008 and 2009, they were literally standing on the sidelines waiting for the game to resume. The trough of the market really hit in 2009, which was probably the lowest point anyone could have bought a building, but with values down 35 percent to 40 percent, deals just weren’t being made. Since mid-2010, however, the Orange County industrial market has seen a significant increase in activity as buyers put themselves back in the game. Sellers have become sellers again, and buyers are more realistic about getting deals done. orporate America recognized the trend early on and began making deals. From there, the competition has heated up on the Orange County industrial playing field, as numerous investors seek to acquire Class A and …
The Raleigh/Durham industrial market finished 2011 with substantially increased activity within the warehouse sector. Capital markets activity continues to be particularly strong for Class A institutional grade product, and leasing velocity seems to be finding its legs. The increased volume of deal flow is likely to set the stage for continued improvement through 2012. Investment sales activity has been particularly robust during the past 18 months with more than 3.1 million square feet of institutional grade industrial space trading hands for more than $209 million in value. Cap rates for institutional grade product in the Raleigh-Durham market have fallen significantly since the credit crisis in 2008, but have begun to level off in the low 7 percent range. Duke Realty has been the most active buyer of industrial product in the region. Since September of last year, it has acquired nearly 1 million square feet in three transactions totaling $61.4 million, and is now the largest owner of institutional industrial space in the market. Most notable was its acquisition of the Greenfield North portfolio in Garner, North Carolina, for $31 million. Through this acquisition, Duke has virtually cornered the fast growing East Wake market for Class A warehouse space. Leasing …
Despite an economic recovery that is characterized on a national level as listless and lacking vitality, a rising national unemployment rate and apparent challenges in distancing ourselves from the debt crisis, the commercial real estate market in Massachusetts has begun to pick up steam. Market indicators for the Greater Boston market continue to improve, albeit slowly, especially in the high growth sectors such as the pharmaceutical and biotechnology industries. Employment in the Boston Metropolitan Statistical Area (MSA) grew by 2.1 percent in the 12 months from August 2010 to August 2011. New jobs dropped unemployment to 6.4 percent from 7.5 percent a year earlier, compared with Massachusetts’ unemployment of 7 percent and the national unemployment of 9.1 percent as of August 2011. The leading non-farm payroll jobs in the Boston MSA are education and health services, trade transportation and utilities and professional and business services, according to the U.S. Department of Labor’s Bureau of Labor Statistics. The overall Boston industrial market ended mid-year 2011 with a vacancy rate of 11.2 percent. The vacancy rate was down from earlier in the year with net absorption equating to positive 1.72 million square feet in the quarter. From mid-2010 to mid-2011, net absorption …
The Orange County hotel market held up extremely well during the economic recession. We are now seeing average daily rate (ADR) and occupancy levels at or above the 2007 peaks. The Smith Travel Research (STR) statistics through October 2011 show the county’s beach areas reporting a $164.41 ADR at 71.3 percent occupancy with a $117.25 revenue per available room (Rev PAR). The beach area’s Rev PAR is now just under 12 percent below the 2007 market peak. We forecast that we will back to or above the peak levels in 2012. In the Disneyland area, we see an ADR of $128.02 at 73.6 percent occupancy with a $94.22 Rev PAR. This Rev PAR is already 6.7 percent above the 2007 peak and climbing. There are a number of reasons why we’re seeing such strong performance numbers in Orange County. These include: (i) The increase in domestic travel, with many travelers choosing to stay in the United States instead of going abroad (ii) The increase in international travel due to the relative weakness of the U.S. dollar, making Orange County a prime destination (iii) The complete lack of new hotel development, which has created a growing demand that has helped fuel …