When it comes to the metro Detroit area, perception may not equal reality. The once-and-future motor city is meeting the challenges of a downsizing auto industry and a national economic slow down head on. The changing dynamics have altered the names of expanding retailers, but this shift has managed to present an opportunity to many local entrepreneurs and market savvy retailers. Similar to the rest of the country, the metro Detroit retail sector has been impacted by consumer pull back, national big box closures and the reduction in new store openings. Store closures from Mervyns, Circuit City, Cost Plus, Linens N Things, La-Z-Boy and Office Depot have increased the overall vacancy rate to 9.9 percent, and left landlord’s seeking replacement retailers and/or new uses for empty space. Increasing vacancy is pressuring the market, slowing demand for new development in greenfield growth markets and creating better opportunities for new locations in dense, established markets. Aside from Taubman Center’s Mall at Partridge Creek, metro Detroit did not get caught up in the over development of lifestyle centers in recent years. Instead, Michigan developers focused on smaller, traditional grocery centers or Walmart, Meijer or Target-anchored endeavors. A number of these projects have recently …
Market Reports
Alex Zylberglait CCIM, SIOR and Ryan Shaw of Marcus & Millichap answer pressing questions on the state of the Miami office market. • What trends do you see presently in office development in your area? Office development is relatively slow at this time except for the projects that were already in the works prior to the market downturn, specifically projects in Downtown Miami as well as in Coral Gables and Doral. Given the current market conditions, it is unlikely that we will see any significant development for the next few years. In addition, most office assets today could be acquired at below replacement cost therefore stifling the development of new product. There are a few exceptions that include some medical office buildings and some buildings that are being built as “green” buildings, which is a trend likely to be around for a while as long as there is development. In fact, many government tenants are requiring that any space they lease be in a building that complies with the latest “green” standards. • Who are the active office developers in your area? Rilea Group is active in Downtown Miami as is MDM Development Group, which is working on Met2, and …
In Buffalo, New York, the office market is in the midst of a slow recovery from the lows experienced in the early 2000s. Even with the recent economic downturn, the statistics show that this market is still showing improvement. The inventory continues to grow at a slow, controlled pace and net absorption of space is positive. There is a growing preference for regionally based companies to invest in Buffalo. Two recent corporate relocations, HealthNow and New Era Cap, had a significant impact on the market by moving their headquarters operations into Buffalo’s Central Business District. HealthNow took 469,000 square feet of space and New Era Cap signed on for 130,000 square feet. The second trend has been the growth of governmental agencies and their policy of leasing privately owned facilities. Over the past 3 years, 600,000 square feet of government tenants have been moved to new, privately owned, Class A buildings. The best example of this is the relocation of 280,000 square feet of Federal GSA tenants from a government owned building to the new Federal Center at 150 S. Elmwood Avenue. The two largest tenants were the Veterans Administration, which leased 85,000 square feet, and the IRS, which took …
1. What trends do you see presently in industrial development in your area? There are no new developments breaking ground and few nearing completion. There has recently been drastic increases in industrial product vacancy rates which, inherently, has compressed lease rates. I do not expect to see any new projects breaking ground until the current vacancies are absorbed and lease rates stabilize. 2. What type of industrial product is doing well in your area? Large warehouse/distribution buildings with 24-foot+ clear height continue to outperform the market vacancy rates but are still subject to lease rate compression as business revenues continue to decline. 3. Who are the active industrial developers in your area? Prologis Butters Construction REMS Group 4. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? The 595 Park of Commerce, located directly off I-595 halfway between Downtown Fort Lauderdale and Weston, has recently completed its first of three phases. Upon completion, the 595 Park of Commerce will consist of 18 office, retail and warehouse buildings. The developers, REMS Group, have been able to adapt to the challenging conditions of today’s market by offering tenants an array of …
The Albany industrial market has become almost an incubation area for the nanotechnology industry, brining major tenants with large space needs to the area. Despite the recent downturn the industrial sector is still holding it own due to the growth and success of the technology industry. Cory M. Tyksinski, principal broker/manager of NAI Platform notes that there was an initial drop in business, but that is was more of a knee jerk reaction as the economy started to slow and then essentially skidded to a stop last year. The Upstate New York marketplace, and primarily Albany, is fairly insulated from the major downturns, and unfortunately, conversely the upswings in the marketplace,” notes Tyksinski. “That is primarily because we have the government seat here and we have a tremendous base in education, as well as in research and development and now technology.” Therefore, Tyksinski explains that once people got over the initial knee jerk reaction, the market picked back up again. “Actually, we have seen an upswing in the last 3 or 4 months,” he says. Overall the growth of the nanotechnology sector has been a real boon to the market. “We have seen a lot of what would be support …
As with the rest of the nation, Central Florida is adapting to drastic changes to our financial system. The local retail market has been adversely affected by the severe downturn in construction and housing-related industries — those segments were large components the local economy. Although the area currently ranks eighth nationally for foreclosures and the median home price has stabilized at the 2002 level of $130,000, residential sales volume increased 51 percent year over year. Unemployment for the region peaked in March at 10.1 percent, but is now down to 9.7 percent. Fortunately, Central Florida continues to make progress in diversifying its workforce with significant growth in the defense, high-tech and medical fields. Burnham Institute, University of Central Florida Medical School, Nemours Hospital and Florida Hospital are all growing. Additionally, government-funded projects in infrastructure and community venues in Orlando should build momentum in the recovery. As it is occurring nationally, we are witnessing a stratification of retailers locally as well – a separation between the Good, the Bad and the Ugly. The Good retailers are focusing on marketing, remerchandising, remodeling, expanding, recruiting and taking advantage of deflated costs and weakened competition. Some are seeing increases in sales of 25 percent. …
While a rapidly deteriorating local economy is weighing on apartment operations in Detroit, weakness is expected to be mitigated by residents remaining hesitant to transition away from rental units. The Detroit metro area has one of the most affordable housing markets in the country, as overbuilding and a declining population have resulted in a significant supply/demand imbalance. Nonetheless, many local inhabitants are exhibiting caution when considering a move into a home due to still-falling prices and the high-risk employment market. The weak national economy is limiting options for job seekers outside of the metro area, which could stem the tide of out-migration in the short term, boosting demand for area apartments. On the supply side, development activity is minimal again this year, as construction costs continue to outweigh attainable rents. Competition is emerging from fractured condominium projects, however, some of which are offering units for lease until demand rebounds. Early estimates indicate that employers decreased payrolls by 6.8 percent, or 130,700 jobs, in the year ending in the first quarter. As auto-related companies restructure, 102,000 area positions have been eliminated in the last 6 months. While vacancy does not fluctuate significantly in Detroit, mounting job losses will force some local …
Job cuts among financial and professional services firms will cause office fundamentals to weaken in Boston this year, but modest amounts of new construction will temper the supply and demand imbalance. With layoffs at State Street Bank, Bank of America, Merrill Lynch and Fidelity Investments projected to total in the thousands, a resulting decline in office space demand will drive up vacancy for the second consecutive year. In the CBD, negative net absorption of approximately 550,000 square feet will raise the average vacancy rate nearly 200 basis points to the high-11 percent range. While tenant demand across the metro will wane in the near term, tighter construction financing and lingering economic concerns have reined in development activity. Completions in 2009 will drop off from last year and will represent only a 0.6 percent expansion of metrowide inventory, helping to offset reduced employment-generated demand. Weakening fundamentals and an uncertain economic outlook will underpin conservative buyer expectations this year. As a result, deals will be underwritten assuming higher vacancy rates and rent declines, elevating cap rates metrowide. Currently, initial yields are averaging in the high-6 percent to mid-7 percent range, up about 25 basis points to 50 basis points over the past …
New York City was the last major office market in the country to feel the effects of the national economic slowdown and a number of indicators already point to the market’s quick rebound. While demand for office space throughout the city was lackluster, over the past 2 months there have been signs of increased activity. For many space users, New York City is the most important business center in the world and a key location for their corporate headquarters. Also, tenants that had the luxury of sitting on the sidelines with a wait-and-see attitude are finally staring to kick the tires once again looking for quality space. In general, companies are shedding their doldrums and doing business again. Many of them now see more space opportunities than 2 or 3 years ago. Today, tenants are in an enviable position where they can negotiate favorable terms for space that best meet their current as well as future real estate space requirements. The healthcare industry has been one of the most active in terms leasing and buying commercial space. This market sector has traditionally been a strong player, defying economic downturns since people always need healthcare providers. Although this industry is not …
Vacancy is rising and rents are falling in Orange County’s office market. To maintain occupancy, landlords are lowering their rent rates and reducing lease terms. The total amount of office space available in Orange County was 22.41 percent at the end of first quarter 2009, which is an increase of 3.72 percent from the vacancy rate at the end of first quarter 2008. Many tenants are either downsizing or consolidating due to the declining economy and shrinking job market. However, as demand drops off and lease rates decline, some companies are capitalizing on some of the opportunities arising in Orange County’s office market. Orange County’s popularity with businesses and its strong labor base has always made it a popular destination for companies to expand into, but its high rent rates prevented many from doing so. In the current economic climate, businesses such as loan modification companies and call centers have actually expanded and are moving to the area. Now that rents have fallen, these companies that would previously have been uninterested in office space within Orange County due to its high prices are opting to move to the area. While there are some great opportunities for tenants in the current …