Several factors have contributed to the softness in the St. Louis apartment market and are expected to continue to present operational challenges in the near term. A spike in construction has been met with the weak demand caused by the slumping labor market. In fact, demand for rental housing contracted 2.2 percent year-over-year in the third quarter — the largest decline in more than 20 years — and will likely fall until payrolls begin to expand. Owners have increased concessions to roughly 26 days of free rent. With vacancy on track to rise further this year, concessions will remain elevated, particularly in the Maryland Heights/Northwest County submarket. Area operators are currently offering renters nearly 40 days of free rent, the most of any submarket in the metro area. Nonetheless, many residents are opting to relocate out of the area and into St. Charles to capture lower rents or into Clayton to be near the metro’s healthiest employment corridors. As such, owners in the Clayton/Mid-County submarket have kept concessions relatively flat during the past 12 months. Turning to investment sales, transaction velocity has slowed in the St. Louis market due primarily to reduced pricing and increased buyer caution regarding weakened fundamentals. …
Market Reports
With little demand for new retail space and even less money to fund new development, developers and owners have been focused on improvements at existing properties, tenant retention and strategic redevelopment. Westfield has plans to relocate the food court at Great Northern Mall in North Olmsted, Ohio, to allow for a new anchor and restaurant space with exterior entrances, which continues with the trend of turning malls inside out. In Solon, Giant Eagle has won a rezoning effort to replace its store at Solar Shopping Center with a new 99,000-square-foot store and Getgo fuel station. The remainder of the center is slated to undergo a complete redevelopment as well. Giant Eagle has also replaced its stores at Southland Shopping Center in Middleburgh Heights and the Day Drive location in Parma with new larger prototypes. Coral Company has revised its development agreement with the city of South Euclid to allow for the Cedar Center North redevelopment project to be completed in phases; leasing for the all-retail first phase is currently under way. The largest retail development in the Cleveland market is Visconsi Companies’ Plaza at Southpark in Strongsville, which has just opened with Costco, Bed, Bath & Beyond and Best Buy …
Although much of the country may think Michigan’s economic outlook is bleak, Grand Rapids is still holding on strong through the economic downturn. The city is faring better than Southeast Michigan and currently is looking toward the future. With more than 1 billion square feet in proposed construction, the area is getting a head start on the rebound, especially in the medical office sector. Absorption in the traditional office market is slow, causing there to be less speculative development in the pipeline. That being said, Grand Rapids is experiencing an influx in medical office and healthcare development, especially in the central business district (CBD), where Michigan State is currently developing a new medical school. Even with medical office development proposed and under way, there is a perception that companies need to wait and see what everyone else decides to do before making any decisions for themselves. This pause is fueling a vicious cycle in the market that is making it difficult to get deals across the finish line. Like many markets across the nation, the leasing sector of Grand Rapids is seeing a great deal of concessions and incentives pass from landlords to tenants. Some owners are making bare-bone deals …
Boston has the third largest investment management center in the world, eclipsed only by New York and London. It’s the birthplace of the mutual fund and is now arguably the “mutual fund capital of the world,” with literally trillions of dollars invested in funds managed there. The Boston retail market has certainly had its share of woes along with the rest of the country, but high barriers to entry, its infill nature and the city's promising long-term results keep the retail market pretty strong. Boston, perhaps more than any other Northeast market, has been nearly impossible for developers to crack and has become a notoriously challenging market in which to build. Because of this, the demand for retail space has remained light, but the vacancy rate for the area is nominal, hovering around only 5 to 7 percent. Although the amount of retail space in the city has increased by 12 percent since 2003, it has failed to keep pace with demand, which has grown 19 percent during the same time frame. Facing stiff economic headwinds, several developers have announced they will scale back on projects proposed for Boston. Earlier this year, plans for a massive urban shopping center in …
Multifamily brokers in Orlando are breathing a little easier this quarter. Officials certainly aren’t carefree, but the market is starting to gain traction and generate some forward momentum, which is a positive leap toward a recovery. Property occupancy levels have risen, and brokers have witnessed concessions getting smaller. Subtle rent growth is a present factor in the current market, which is more than anyone could say 6 months ago. “We feel a little better telling our story these days than we did at the beginning of the year,” says Shelton Granade of CB Richard Ellis’ Orlando office. “Over the last 90 to 120 days … we’ve been seeing and feeling some modest improvement.” During the summer, properties Granade took to market started getting attention from multiple buyers, a stark contrast to the lack of enthusiasm felt during the depths of the downturn. Most of the minimal sale activity is fueled by the private equity investment market because these firms have cash to pony up in a tight financial landscape. There has also been a bit of foreign investment, especially from Canadian and South American companies. “More people are entering the game,” he says. Tenants are looking to lease space and …
Industrial developers in the Louisville area are struggling to remain busy at a time when construction starts are non-existent. The area usually attracts logistics companies and distribution firms that benefit from Louisville’s location and the city’s transportation routes. But today, tenants simply aren’t interested in building new properties, and developers can’t secure the financing needed to construct speculative developments. “Most developers are hurting right now,” says Michael Norris of Ray & Associates/TCN Worldwide. “A lot of developers are struggling to make their financial obligations.” New development has stopped, but tenants and buyers are still looking around, searching for good deals. In the past two quarters, Norris has seen a few 100,000-square-foot leases in Louisville; this isn’t much compared to pre-recession activity, but it means the market is still moving. According to CB Richard Ellis, more than 32 firms were looking for spaces of more than 100,000 square feet during the second quarter. Big leases in the second quarter include Motorcycle Superstore’s 126,000-square-foot lease and CAT Logistics 50,000-square-foot lease. In order to attract these deals, landlords are piling on the incentives. “Landlords are getting creative, either offering additional TI or offering several months of free rent. They have to offer the …
The abundance of completed units delivered to the market has had the biggest effect on the Dallas/Fort Worth multifamily sector. From September 2008 to September 2009, almost 15,000 units were completed in the Metroplex — nearly double the 7,600-unit annual average during the previous 5 years. Occupancy in the Dallas area dropped 0.2 percent to 89.8 percent during the third quarter of 2009, its lowest point since early 2005. However, occupancy for newer product held steady, while occupancy in older product tiers has suffered. The 1990s-era properties were the only product age category to achieve occupancy of more than 90 percent in the quarter, posting 92.4 percent occupancy. During the third quarter, 2000s-era product posted an 89.4 percent occupancy rate, and 1980s-era product posted an 89.8 percent occupancy rate. MPF Research forecasts that occupancy will drop 170 basis points to 88.1 percent in the next 12 months, given the huge stock of new deliveries expected to hit the market. New construction deliveries will also cause rents to drop further while rent concessions are expected to increase. One planned construction project is the redevelopment of the historic Continental Building downtown. The Dallas City Council approved $17 million in tax increment financing …
It seems like every commercial real estate move made in the Chattanooga office arena is directly related to the industrial market. Landlords, tenants and maybe even some office developers are anxiously waiting for three significant manufacturing facilities to make their mark on the area. The coming Volkswagen plant will spur office growth in a huge way, but a $300 million expansion by the power service provider Alstom and the addition of Munich, Germany-based Wacker Chemie AG’s property in Cleveland, Tennessee, will also jump start the Chattanooga office market. “There’s a lot of industrial activity that’s just starting to really catch its legs. The office is following,” says J. Bryan Rudisill of Chattanooga-based NAI Charter. “There’s going to be support that comes in — lawyers, accountants, engineers — but the office market won’t change over night because of these announcements.” Office transactions, even with a guaranteed influx of industrial facilities, will be slow to pick up, but office development will be even slower due to trouble in the financial markets. Life insurance companies are on the sidelines, and most bigger banks are reluctant to let developers borrow money. The best bet for financing is regional and local institutions, but these banks …
There's no doubt that the Mile High City has been reeling lately from the country’s current economic downturn. At a time when other cities have experienced a significant decline, Denver has held on to a majority of its retail due in large part to business sectors, such as renewable energy and governmental agencies, choosing Denver for their headquarters and the unemployment rate remaining at around 7 percent, which is below the national average. While vacancy rates also remain below national averages, hovering around 10 to 12 percent, supply for retail space remains higher than demand. Although construction projects are happening downtown and in areas with high residential populations, developments have slowed greatly. Most projects currently under construction started either before the downturn with tenants already committed or were put on hold. One such project in the final stage of completion is the redevelopment of SouthGlenn Mall in Centennial. The entire mall—except for anchor stores Sears and Macy’s—was demolished in 2006 and completely rebuilt as a mixed-use center called The Streets at SouthGlenn. With nearly 1 million square feet of retail space, 140,000 square feet of office space and 200 luxury residences, the first phase of The Streets at SouthGlenn opened …
With a population of 2.2 million, Portland is the 28th largest metropolitan area in the country, the fourth largest city on the West Coast and the largest city in Oregon. Sportswear and equipment businesses Nike, Adidas-America and Columbia Sportswear are all headquartered in Oregon. National publications often cite the Portland area for its coolness factor. In 2009, Men’s Journal named Portland the third “Best Beer Town in the U.S.,” the Wall Street Journal dubbed it the fourth best “Youth Magnet City” and it was third in the Forbes annual list of safest major cities. Unfortunately, it’s not all positive news for the area. Oregon has the fourth highest statewide unemployment rate in the country. During the past year, Oregon has lost 100,000 jobs, and the unemployment rate is now holding steady at 11.5 percent. However, for the real estate sector, the state had the foresight to have well thought out land-use planning laws, and this has benefited the region in these tough times. In the early 1970s, Governor Tom McCall commissioned a study on the future of the Willamette Valley, whose farms and forests were being threatened by a wave of new growth and poorly planned development. Knowing that Oregon’s …