During the last 12 months, the Raleigh/Durham apartment market has continued to maintain a lofty appeal in the eyes of local, regional and institutional investors. The fundamentals of the region, including its growth projections, the diversity of employment and the driving force that is created by three major research universities, has continued to offer good reasons for investors to inject capital into the Raleigh/Durham apartment market. After a slow start in 2010, many developers have set their eyes on taking advantage of the reduced development pipeline that was a casualty of the recession. The institutions as well as local and regional developers with strong balance sheets were those that were in the best position to take advantage of being the first to break ground. After just a few developments started in 2010, the number of new construction starts and new developments in the planning stages during 2011 has exponentially increased. However, number of new apartment units added to the market in 2011 will be the lowest in recent memory. Part of the reason for this increase in development activity is that the investment sales market has been so strong in the Raleigh/Durham marketplace, arguably as strong or stronger than any …
Market Reports
The Boston apartment market is on fire. As a result there is a vast amount of equity, developer interest, and investor interest focused on the Greater Boston Market. What does this mean for the future of the Greater Boston Apartment market? First a matter of definition, the metro Boston market encompasses all towns within Interstate 495 (Boston’s second beltway) and inwards and, therefore, does not include Central and Western Massachusetts, New Hampshire nor Rhode Island. The overall vacancy was 4.2 percent in second quarter 2011 (REIS: Metro Boston submarket). Class A property has seen the greatest rent growth, 1.5 percent in Q2 2011, alone. However, Class B property has maintained a lower vacancy at 4.5 percent during Q2 2011, dropping from 5.9 percent. The city of Boston has exhibited the most rental growth of any submarket of all the Greater Boston submarkets. In the city, rent is up 6.5 percent over the first half of 2011 with rents exceeding $4 per square foot and an average rent of $4,400 per unit based on a recent ARA Class A Survey. These rents are attracting developers and capital. The most recent development start is the 187-unit Avalon Exeter Apartments at the Prudential …
Our recent market activity spotlights the differential between the Haves and Have-Nots. Third quarter 2011 was exceptional for large, Class A facilities in Kent Valley. Thanks mostly to international corporations, direct vacancy rates dropped about 1 percent point and now hovers at 7.89 percent. We have also experienced net absorption of 348,358 square feet. This marks the fourth consecutive quarter of positive net absorption, bringing the annual total to 968,784 square feet. After experiencing record corporate earnings and large cash reserves, companies like Brooks Sports, Amazon, Sealed Air, Graybar, Electrolux, Bunzl, Pacer, International Paper, Sealy and more have expanded or looked to expand their presence in our market. Seeking state of the art, 30’ clearance, ESFR distribution facilities, these corporations have caused a shortage of Class ‘A’ space and a rent hike of 5 percent to 10 percent. However, regional and local companies are still struggling, while the mid-size market that services those spaces has not significantly recovered. On average, spaces available in that size range (over 66 spaces at press time) have been on the market for about 18 months. Unlike the otherWest Coast ports, container traffic in this Pacific Northwest region hasn’tt increased dramatically. To date, the Port …
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 …
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 …