The office segment of Omaha’s commercial real estate market is currently in a transitional phase. Companies that have been in the market for office space during the past two to three years have realized that discounted rent and/or the ability to relocate into higher-quality properties are feasible options. In order to retain and attract tenants, landlords are now required to lower rents and renovate properties to the extent they can. This pressure on property owners has been the leading force behind this current state of transition, and the ripple effects are felt through all classes of buildings. Tenants in Class C properties are now able to climb the property ladder and obtain favorable lease rates in a Class B property. Owners of Class C properties are forced to renovate, or redevelop, to avoid obsolescence. The Lund Co. refers to this evolution as “Real Estate Darwinism.” FACELIFT PAYS OFF A perfect example of the evolution of a property is the 450 Regency building. Originally constructed as a single-tenant, build-to-suit for IBM in 1983, the property became stale and was a non-factor in the overall office inventory in Omaha. The building sat vacant for many years after its second tenant, Commercial Federal/Bank …
Market Reports
The Raleigh/Durham retail market consists of approximately 41 million square feet and serves a population of about 1.75 million people. Raleigh, Durham and Chapel Hill comprise the “Research Triangle” metropolitan region, which is continuously ranked among the best areas in the nation to live and work. The retail market has an overall low vacancy rate and remains relatively healthy despite the lingering recession. A period of remarkable growth has slowed and only a handful of new developments opened in 2011. These include Park West Village, a 373,748 square feet power center located in Morrisville at Highway 54 and Cary Parkway, and the 57,511-square-foot Market at Colonnade, a shopping center anchored by Whole Foods and located on Six Forks Road in north Raleigh. Another notable project is the renovation of the 200,000-square-foot Waverly Place in Cary. Few new development opportunities are expected in the near future and positive absorption of vacancy for anchor and shop space has been encouraging, as centers have continued to strengthen albeit at lower rental rates. Job growth drivers are simply not there to support the rapid retail growth the area experienced prior to the recession. Trends in the marketplace include expansion of discount chains such as …
Proving its historic resilience once again, a hale and hearty multifamily investment market continues to outpace other commercial real estate sectors in the wake of the latest economic dip. Thanks to an ailing housing market that doesn’t seem to have a tangible cure in the foreseeable future, the “new normal” in residential living is apartment rentals. Strong leasing fundamentals; 1950s-era, bank-friendly interest rates; and the lack of other risk-averse investment options have contributed toward a dramatic increase in sales velocity along the highly sought-after South/Central/Northern New Jersey corridor. Demand is unrelenting. Just 18 to 24 months ago, many investors were sitting on the sidelines waiting for multifamily properties to follow in the footsteps of other hard-hit commercial real estate assets, including office, non- grocery-anchored retail and industrial, where vacancies skyrocketed and lending came to a virtual standstill. These fears had little-to-no impact on multifamily properties, which possess certain inherent “recession-proof” characteristics. Rental living provides a viable, affordable alternative to people who are concerned about their long-term employment outlook, cannot qualify for a single-family residential home loan or are displaced due to rising foreclosures or natural disaster, such as flooding in the aftermath of Hurricane Irene. As the economic recovery continues …
Emboldened by renewed job growth and improving sales, retailers will push forward with new store openings in Puget Sound, which will ease the use of concessions. Leasing velocity in the Seattle-Tacoma retail market has built momentum through 2011, led by regional and national chains occupying vacant sites in high-traffic corridors. King County trade areas such as the Northgate/Central and Eastside/Bellevue submarkets have been the primary beneficiaries of resumed tenant expansions, but most suburban areas also recorded a modest upturn in leasing volume this year. The broadening recovery enabled landlords to hold the line on concessions. While the rate of recovery will remain strongest in King County heading into 2012—aided by move-ins from Ross Dress for Less, Big Lots and several grocery chains—tenant demand for established centers in Pierce and Snohomish counties will build. In addition to a collection of smaller lease transactions, nearly a dozen regional and independent retailers have secured junior-anchor and big-box sites this year, with many of the leases set to commence over the next nine months. Seattle retail developers completed about 695,000 square feet of space during the 12 months ending in the third quarter, an increase from the delivery of 250,000 square feet one year …
Like a baby boomer adapting to the new realities of social media and the digital age, the St. Louis industrial market has had to learn to reinvent itself during the down market we entered in 2008. Legacy industries that employed generations of St. Louisans and drove significant demand for space from suppliers and vendors have exited the market, leaving challenges and opportunities throughout the industrial real estate landscape here. Prior to the downturn, St. Louis enjoyed the presence of automotive plants for all of the “Big Three,” with Chrysler, Ford and General Motors all producing vehicles here. Chrysler, in fact, had committed to invest more than $1 billion in its plants in the Fenton submarket until the global economic crisis sent the company into forced bankruptcy. After acquiring locally based McDonnell Douglas in 1997, Boeing continued to be a major production force here. Several smaller companies across the business spectrum operated manufacturing and production facilities in St. Louis, providing opportunities for a highly skilled workforce. The plot twist that followed isn’t unique to St. Louis, the Midwest or the United States, as so many are acutely aware. The closure of the Chrysler plants in Fenton (in favor of Canadian and …
The Orlando office market has been recovering during the past 90 days in all aspects and classes. The vacancy rate has been improving. During the third quarter of 2011, it was between 16 percent and 18 percent, which is in line with the national average. According to REIS, the Sanford and Maitland submarkets have the lowest vacancy at 12 percent and 14 percent, respectively. Sales have been steady, especially bank-owned office buildings, which are trading around 20 to 30 percent below cost. One of the most noticeable sale transactions was $60.8 million sale of the 476,000-square-foot Bank of America Center in downtown Orlando, which Eola Capital sold to Parkway Properties Office Fund II LP in May of last year. Additionally, in October of 2011, Blackstone purchased Duke Realty’s office portfolio, totaling 10.1 million square feet for $1.08 billion. Included in that portfolio were a few assets in Orlando. There are also a few bank-owned office buildings that are under contract and expected close early next year. The Interstate 4 corridor from Disney to Sanford seems to be a hot spot for development as many companies are looking for more exposure and better access. Duke Realty is building the 133,000-square-foot Kirkman …
In 2011, the Boston commercial real estate market has shown some signs of life, with most movement attributed to small and medium-sized companies. 2012 appears to promise much of the same, with the greatest demand coming from the 5,000- to 25,000-square-foot users who are growing. Meanwhile, larger tenants are still active in the market but taking less space, effectively offsetting what smaller companies are growing into. The largest users in the Financial District are law offices and financial services firms, and the downsizing in these industries has resulted in increased vacancies. In addition, major businesses have become more efficient users of office space (fewer administrative employees per attorney, more “hoteling,” equal sized offices for all, etc.) and more conservative in growth projections, resulting in less space demand for companies when they do grow. Over the last 12 to 18 months, Boston’s top commercial real estate markets have shifted. The Back Bay area has started to run away from the Financial District as the preferred submarket in Boston. Its appeal is shared between employers and employees alike, with a “24/7” neighborhood feel, new retail shops and restaurants and easy access from the Pike for commuters. These qualities have helped the Back …
CBRE recently completed a comprehensive study on the state of big box vacancy in Orange County. It showed that while the county continues its struggle to replace large tenants lost during the recession, there is progress being made in this important sector of the retail market, particularly in Class A locations. There are currently 59 big box vacancies (20,000 square feet or larger) in 55 centers with a total of 2.3 million square feet within the county. In the past two years, approximately 1.6 million square feet of big box retail has been absorbed. The question now is, what’s left and when will it be absorbed? Since the downturn, retailers have had their pick of great real estate. Class A space that was near impossible to find in Orange County during the boom years became available for the first time. The most active retailers, including Wal-Mart, Kohls, grocers and gyms, moved quickly to take advantage of the opportunities. In many cases, these retailers even modified their prototypes in order to do so. With most of the Class A space quickly absorbed, our study found that 48 of the 59 boxes currently remaining, or 84 percent, are located in B or …
Redevelopment initiatives in Cleveland’s urban core will attract rental households to the area, while healthy job growth and a lackluster single-family housing market will uphold modest demand in the suburbs. Among ongoing projects in the urban core, the $2 billion redevelopment of University Circle, which includes the expansion of the VA Medical Center, Cleveland Clinic and University Hospitals, has created more than 4,000 jobs since construction started in 2005. The renovations are expected to be complete by 2015 and will support over 36,000 jobs in the area. Surrounding neighborhoods such as Beachwood, Shaker Heights and Cleveland Heights will benefit most as roughly 30 percent of the employees live in these areas. Many of these young professionals occupy apartments and will delay purchasing single-family homes, a trend that will sustain demand throughout the metro area. As a result, most submarkets will post vacancy decreases this year, providing many owners with enough leverage to ease concessions and lift rents. Construction pipeline Development slowed significantly during the last year, as only one apartment complex came on line. The 38-unit University Lofts was delivered in the Cleveland Heights/Shaker Heights area in the first half of 2011. The first phase of the Uptown project will …
With low rental rates and available square footage, Atlanta’s industrial market remains a favorable environment for tenants and buyers interested in discounted real estate. Many are taking the opportunity to renegotiate leases on existing space or upgrade in terms of size, quality and location. With its close proximity to Hartsfield-Jackson Atlanta International Airport, CoStar Property reports South Atlanta’s Industrial Submarket is leading the metro area, with net absorption year-to-date in the third quarter of 2011 of 4.64 million square feet at an average quoted rental rate of $3.05 per square foot. The Northeast Atlanta submarket followed by posting year-to-date net absorption of 1.12 million square feet in the third quarter of 2011 at a higher quoted rental rates averaging $4.60 per square foot. Total year-to-date net absorption in the third quarter of 2011 for the metro area was 5.52 million square feet, with average quoted rental rates of $3.83 per square foot. This is in spite of the fact that flex space experienced negative net absorption, which accounts for approximately 10 percent of industrial inventory. The third quarter 2011 average vacancy rate of 13.3 percent has dropped relative to previous periods due in part to positive absorption and anemic new …