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 …
Market Reports
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 …
The Houston retail market experienced modest improvement in 2011 as the area economy began to shake off the effects of the national recession with strong local job growth and reasonably steady, if not particularly noteworthy, housing starts. Positive retail space absorption of 2.8 million square feet combined with only 1.2 million square feet of new construction resulted in a decline in the overall retail vacancy rate from 7.1 percent in the first quarter of 2011 to 6.7 percent at year-end. However, average quoted rental rates edged down slightly from $14.51 per square foot in the first quarter to $14.35 per square foot in the fourth quarter. Although the retail statistics for the past year aren’t terribly compelling on their own, they are more encouraging in the context of the regional economy in the sense that retail leasing and development activity generally lags the overall economy. The national recession hit Houston in full force in September 2008. The area lost 152,800 jobs through January 2010. In February 2010, Houston began to create new jobs again, and by October 2011, Houston had regained all the jobs lost during the recession. The Greater Houston Partnership projects that the Houston metro area will add …
Raleigh salutes 2011 as a year of improvement and we welcome 2012 with great optimism. In September of last year, Raleigh received Bloomberg Businessweek’s “No. 1 American City” accolade, which is a measure of the “all-around excellence” of a region. The NCSU Index of North Carolina Leading Economic Indicators, a forecast of the economy’s direction four to six months ahead, rose in October, the first gain in the Index since June. All of the North Carolina-based components of the Index improved, with the leader being a 31 percent jump in building permits, according to Michael Walden, distinguished professor of economics at North Carolina State University in Raleigh. As the economy continues to improve and jobs increase, absorption will take additional existing vacant space. The cities of Raleigh, Cary, Chapel Hill and Durham make up 98 percent of the 76 million square feet of office inventory in the Triangle area. With 461,119 square feet of absorption year-to-date in the third quarter of 2011, the market remains positive. Owner-occupant companies had a major effect on positive absorption. In the third quarter, nine of the 12 submarkets showed positive absorption and decreased vacancy rate over the previous quarter. Wachovia contributed to the negative …
Pittsburgh has been incredibly lucky in that the area has avoided the havoc wreaked on the national economy during the last couple of years. The education and medical sectors bolstered the area during the recession, and the region is fast-becoming the ‘Energy Capital’ of the Northeast, with Pittsburgh as its epicenter. These factors have allowed the region to maintain its traditional path of steady growth, which has bucked the national trend and provided a safe haven for the local industrial real estate investment community. The market continues to operate in a supply-demand imbalance with weight tipping towards demand for industrial product. This has supported irrational pricing, with a number of recent sales of industrial facilities trading higher than traditional prices. The Pittsburgh industrial real estate market comprises less than 170 million square feet. With limited new construction and virtually no impact from loan defaults, the prices for industrial assets have held value. On the flipside, the market does not provide cash-rich buyers with many opportunities to purchase assets at bargain prices. The region’s overall industrial vacancy rate is hovering at 7.5 percent, falling by 0.4 percent from the fourth quarter of 2010. This is 2.2 percent below the overall U.S. …
The multifamily market continues to be the strongest performing real estate market in Orange County. With the support of strong fundamentals and forecasts, investors are flocking to multifamily investments, especially properties located in core cities. As the for-sale residential market remains uncertain, much of the Orange County population is choosing to lease, which has been a big driver following the economic recession. The vacancy rate stands at 4.5 percent, which accounts for a 20 basis point drop from the previous quarter’s rate of 4.7 percent and a 140 basis point decline from the 5.9 percent recorded one year earlier. This was the third consecutive quarter that witnessed a decline in vacancy. These rates haven’t been this low since the second quarter of 2008. Although vacancy has dropped considerably since it peaked of 6.4 percent during the third quarter of 2009 through the second quarter of 2010, it remains higher than the low point of 3.2 percent, which occurred in the third quarter of 2007. Rental rates have also increased as vacancies have filled. The average effective monthly rent is $1,488, which represents a slight increase from the $1,478 recorded during the previous quarter and an even bigger increase from the …
The Houston retail market experienced modest improvement in 2011 as the area economy began to shake off the effects of the national recession with strong local job growth and reasonably steady, if not particularly noteworthy, housing starts. Positive retail space absorption of 2.8 million square feet combined with only 1.2 million square feet of new construction resulted in a decline in the overall retail vacancy rate from 7.1 percent in the first quarter of 2011 to 6.7 percent at year-end. However, average quoted rental rates edged down slightly from $14.51 per square foot in the first quarter to $14.35 per square foot in the fourth quarter. Although the retail statistics for the past year aren’t terribly compelling on their own, they are more encouraging in the context of the regional economy in the sense that retail leasing and development activity generally lags the overall economy. The national recession hit Houston in full force in September 2008. The area lost 152,800 jobs through January 2010. In February 2010, Houston began to create new jobs again, and by October 2011, Houston had regained all the jobs lost during the recession. The Greater Houston Partnership projects that the Houston metro area will add …
Most Tampa Bay-area businesses look forward to 2012 with more cause for optimism than they had heading into 2011. In prior quarters, the positive direction of the market was largely anecdotal. Over the last few months, though, tangible signs of broad-based improvement have emerged, suggesting that the obstacles to a stronger recovery may be weakening. Hiring activity has spread from a narrow set of countercyclical sectors such as healthcare and education to a broader group of industries such as hospitality and tourism, as well as professional/business services. Housing sales have started to pick up and hotel occupancy rates have increased as business travel and tourism rebound. The rate of growth still falls well short of its heady pace during the 1990s and the post-dot.com years between 2003 and 2007, yet 2011 brought clear signs of forward movement. The resurgence of cost-driven relocations of major businesses to Tampa Bay, combined with significant expansions by locally based firms, has been particularly encouraging. The headlines have been dominated not only by news of firms that are deciding to move to Tampa Bay from other cities, but also of existing companies that weathered the storm of the Great Recession and are moving forward with …
Upstate New York is currently in a renaissance period as the major initiative of the high technology industry creates momentum for local communities. Centered at the University at Albany, the College of Nanoscale Science and Engineering has been a leader in developing more than $6 billion of infrastructure and research and development focused around the semi-conductor industry, and most recently the solar energy industry. The relocation of Sematech International’s world headquarters from Austin, Texas, to the edge of the University’s campus in Albany, New York, has established a partnership program focusing the world’s leading semi-conductor makers and related industries in a collaborative effort to develop and manufacture the next generation of chips that power our lives. The College’s most recent announcement of a partnership involving IBM, Intel, Samsung, Global Foundries and TSMC focused on a $4.8 billion deal that is largely funded privately, will result in substantial job growth in categories not previously significant in numbers. This most recent announcement in September 2011 also spreads the benefits throughout the state in Buffalo, Rochester, Utica, and into the Hudson Valley as new jobs are created in these communities that result from supporting and related industries. The office sector should begin to …