“Ride out the storm,” may be the refrain of industrial developers, landlords and tenants, as the recession and the resulting uncertainties have all players in the Twin Cities commercial real estate industry watching carefully and exploring their options. For starters, development has ground to a halt. This may be the silver lining, however, since it will enable the market to more easily absorb existing product and sublease space, thus allowing the market to recover more quickly when the economy begins to turn the corner. There is a small amount of spec product on the market, but this represents such a small amount that it has little to no impact. Fortunately, the restrained development has allowed the industrial market to catch its breath. During the first quarter, absorption fell in positive territory, with nearly 197,000 square feet absorbed, leading to a slight decline in vacancy from 10.1 percent to start the year to 9.9 percent by the first quarter’s end. The modest absorption has largely been driven by smaller deals. Another side effect has been the collapse of the land market. Land prices have come down as much as 50 percent from their highs during a flurry of activity some 12 …
Market Reports
Retail properties in Miami-Dade County recorded negative net absorption in the first quarter as accumulating job losses stymied retail spending and forced merchants to vacate the market. Additional increases in vacancy are expected through the end of 2009 as more tenants close and others reduce planned store openings. Higher vacancy will induce a further decline in rents, which dropped for the second successive quarter in the first 3 months of this year, and a slowdown in new store openings will undermine support for marketwide rent growth in the months ahead. In addition, tenants seem to be gaining the upper hand in negotiations on lease extensions or renewals. As a result, concessions will rise over the remainder of the year as owners attempt to retain traffic-generating merchants. While the demand side is decidedly weaker than it has been recently, a decrease in construction will mitigate the extent of the projected rise in vacancy and set the stage for a steady recovery in property fundamentals. A look at the numbers indicates that employment in Dade County will decrease by 43,000 jobs (4.2 percent) in 2009, compared with a loss of 36,400 positions last year. Due to the decline in employment, retail spending …
The Dallas Fort Worth (D/FW) office market has gone through another successful quarter. First quarter 2009 ended with a positive net absorption of 1.2 million square feet and a vacancy rate of 16 percent. Fortunately, the first decline in D/FW job growth was not felt until January 2009. These two major trends have set D/FW up for the “last in first out” model of recovery. This is a much different trend than experienced during the last two major recessions, and this time D/FW is the right market to be in to ride out the recession. One of the major factors that has put D/FW in this positive light, as compared to the rest of the other major office markets across the country, is the preleasing of 241,500 square feet of the 965,387 square feet of new construction that came online in the first quarter. The D/FW office market as a whole has experienced positive net absorption for the last 6 years. The following are a few of the large deals that contributed to this. Torch Mark Corporation took 150,000 square feet at Stonebridge Ranch, AIG leased 138,010 square feet at South Tower, Texas Capital Bancshares. Inc signed on for 94,940 …
These haven’t been the easiest times to maintain optimism or even a somewhat sunny outlook, which is a crucial characteristic for those of us who lease office properties in Atlanta or anywhere else in the United States. Everywhere we turn, we’re constantly pounded with negative economic news as the pillars of American industry teeter and equity markets gyrate. But unlike the frozen credit markets, at least the reeling equity markets aren’t completely stagnant. We’re starting to see signs of life, and the main question on everybody’s mind is have we hit bottom? Let’s hope so. There are a few early indicators pointing up, and long-term prospects suggest that metro Atlanta can maintain the growth that transformed the city during the past 30 years. First, Jones Lang LaSalle research has found that metro Atlanta’s office markets, including sublease space, absorbed 182,432 square feet in the first quarter of this year. That would’ve been a bad quarter in 2006, but coming off a year where the office market had negative net absorption of more than 850,000 square feet, we’ll take it. Unfortunately, the urban markets — Buckhead, Midtown and Downtown — posted negative net absorption of 47,640 square feet in the first …
For Doug Malone, a retail brokerage and leasing associate with Wichita, Kansas-based J.P. Wiegand & Sons, “The good news about Wichita is that we have been a little pocket of prosperity for a number of years, and we didn’t get hit until just recently with the economic problems that the rest of the country had.” While retail in larger markets struggles, the smaller Wichita market has remained steady. This is due partly to the conservative nature of real estate professionals in the market and partly due to the fact that overbuilding tends to happen less in secondary markets. But the recession is starting to be seen here. “Wichita has a tendency to feel those impacts last and to come out them last as well, but we don’t have the real ups and downs of a lot of other markets” Malone says. “Although, what we’re seeing now, in terms of a slowdown in retail activity, we probably haven’t seen this kind of slowdown since post-9/11.” This slowdown has many retailers taking a wait-and-see approach when it comes to doing deals. Since most major new projects in the market are done by local developers — who know the market and can withstand …
The prominent trend in retail development thus far in 2009 has been its absence. Developers are either completing projects already underway or remodeling existing properties to maximize marketability. Only 15 new buildings were delivered in first quarter, totaling approximately 156,000 square feet (another 856,000 is slated for delivery later in the year). The overall vacancy rate for retail space in the first quarter was 9.2 percent, with negative net absorption of nearly 850,000 square feet. Rental rates climbed to $21.06 per square foot per year (approximately $1.75 per monthly). That represents a 1.9 percent increase in rental rates in the current quarter, and a 6.13 percent decrease from first quarter 2008. Asking rents do not reflect market activity, which is being affected by tenants demanding and owners making major concessions in order to close transactions. As for hot spots, everyone is watching Sacramento’s K Street redevelopment with a hopeful eye toward an emerging downtown entertainment district. The city has redevelopment funds to draw the attention of potential tenants and it could be successful, even if it means buying the tenants. Newly delivered retail projects include 5065 Quinn Rd., a 37,914-square-foot general freestanding building occupied by Camping World; a 20,000-square-foot building …
In general, the economy has created an atmosphere of cautiousness as companies rethink expansions and settle for the status quo. Many companies, such as those engaged in the auto industry, are experiencing a reduction in orders and are reducing their production, inventory and workforce to adjust to this trend. On the bright side, Foxconn’s industrial park south of Santa Teresa, New Mexico, will provide thousands of new jobs to the region. Suppliers and logistic companies that service Foxconn will locate on both sides of the border, affecting Santa Teresa as well as west El Paso, as the companies compete for a piece of the pie. Fort Bliss has substantially benefited from the BRAC realignment (See “A Strong Pulse” on the cover). With additional brigades being located at Fort Bliss, the further development of the base infrastructure, housing and tactical facilities are in full swing. With the influx of the more than 60,000 people (which include military personnel and their families), the El Paso region will require additional city/county governmental services, educational facilities, off-base housing and vendors to accommodate this growth in the community. The benefit to the El Paso community will be affected exponentially. Overall, the market is not in …
While the meltdown of the housing market originally benefited the multifamily sector — as more homeowners transitioned to renters — the current recession and its rising unemployment has started to affect activity. “Right now, it is all about the economy,” says Kevin Wolfgang, president of New Castle-based Evergreen Realty and recently elected president of the Delaware Apartment Association. “Our industry is directly affected by the job market, so the increased amount of unemployment has created significant operation challenges.” Multifamily owners in Delaware are weathering the storm by focusing on the operation of the properties — trying to find ways to make them as efficient as possible. This has slowed down sales considerably. Owners who are still receiving a steady cash flow are seeing no reason to sell for less money. “Most investors are very cautious right now,” Wolfgang says. “No one is chasing deals, and there is nothing that I have seen as having a major impact on the market right now.” Evergreen Realty’s main activity has been its purchase and upcoming redevelopment of Hampston Walk Apartments, a 370-unit community located in New Castle. The company purchased the blighted property in mid-2008 and is repositioning it with renovations to unit …
At close of the first quarter of the year, the Southeastern Wisconsin retail vacancy rate totaled 10.4 percent, up 1.4 percent from a year ago. The growth in the greater Milwaukee retail vacancy rate was primarily driven by the closings of several large-format retailers over the last 6 months. Changes in the retail environment have caused a shift in the Southeastern Wisconsin retail real estate market. More retailers are looking to existing developments or vacant boxes to expand as the tide of new development wanes. There are several major retailers looking to retrofit existing stores rather than build new boxes. Despite the negative news and stores closures, the Southeastern Wisconsin market is still experiencing some significant retail activity: • Wal-Mart is expanding and/or remodeling several area stores to include more grocery items. These stores include Southgate, East Capitol Drive, Midtown, Brown Deer Road, Franklin and Delafield. The retail giant is also moving forward with plans for new stores in Muskego and Waukesha. A new Wal-Mart Supercenter and a Sam’s Club will open at Somers Market Center this summer in Somers, which is located in Kenosha County along Highway 31. • Target has opened two new stores at Prairie Ridge in …
Last year brought rapid change to the Inland Empire industrial market, which finished 2008 with increased vacancy rates, rising cap rates, negative absorption and negative rent growth. Throw in the region’s unemployment rate of 10 percent — one of the highest in the country — and it’s no surprise that the Inland Empire industrial sector will continue to have its challenges in 2009. That said, this market is viewed by most as having strong long-term fundamentals, which will continue to attract institutional capital and drive tenant demand. Industrial leasing is expected to remain soft this year with landlords going to great lengths to secure and retain occupancy. Vacancy rates, currently at 22 percent in the east and 12 percent in the west, will continue to trend upward as leases expire and companies continue to downsize. Effective rental rates have dropped 20 to 25 percent in the last 9 months, with flat to negative rent growth expected for 2009. As retailers continue to downsize and outsource their distribution function, third-party logistics providers will pick up the slack. Southern California is home to more than 21 million people, who may be buying fewer jet skis and flat-screen TVs, but will still need …