While many cities in the Boston area rely on their proximity to the city to ensure economic development, outlying towns have proven equally resilient. Despite the current economic downturn, Westfield, Massachusetts, continues to secure new business due to a combination of financial incentives and its desirable location. The city has utilized these local and statewide incentives to encourage investment, including the Economic Development Incentive Program, a tax incentive program designed to stimulate business and create jobs in Massachusetts. This month, construction began on an estimated $25 million, 657,000-square-foot rapid deployment distribution center for The Home Depot. A tax incentive helped finalize plans for the new center. Westfield’s City Council and Mayor Michael R. Boulanger devised an incentive for the company that calls for a 50 percent cut in property taxes for the first 10 years of operation. The new distribution center is expected to create as many as 150 jobs. The city has also shown a willingness to go beyond tax incentives to attract business. In March, Target Corporation purchased land for the construction of a 1 million-square-foot distribution center at an estimated cost of $100 million. Before the purchase was complete, the city council passed a $10 million bond …
Market Reports
The Kansas City apartment market continues to hold its own despite economic challenges and uncertainties. While occupancy and rental rates have remained steady, development has been tempered by a tight lending environment. The pace of planned construction has slowed dramatically as a result of market fundamentals. The first half of 2009 showed the lowest level of permits, a mere 78, in the past 20 years. The lack of liquidity and tougher underwriting standards are halting development. The uncertainty in asset values plays a part in this as well as lenders underwriting deals more conservatively. As a result, banks are requiring developers to contribute a greater amount of equity, thus decreasing project risk for both parties Market fundamentals have remained steady. Rents are averaging $0.79 per square foot, unchanged from the start of the year. Rates vary widely from $1.14 per square foot at the Country Club Plaza, which has 95 percent occupancy, to as low as $0.64 per square foot for Class C apartments in the Northland submarket. These rates, though, are offset by concessions. At the end of June, nearly three-fourths of the area’s multifamily properties offered concessions, up noticeably from the 56 percent that used concessions to attract …
The key indicator in the retail market in Reno/Sparks is that vacancy rates have increased and are expected to continue increasing for the remainder of 2009. Vacancy rates have reached nearly 15 percent at the mid-point of 2009 and net absorption continues to be negative. The amount of space available continues to increase due to unemployment, bankruptcies, relocations and acquisitions. Area home prices continue a downtrend with the majority of sales coming from distressed properties. The good news is that unit sales are up year over year, and home affordability has never been better. Retail lease rates continue to decrease as an estimated 2.4 million square feet of space is currently available in Reno/Sparks. Cap rates have increased steadily since a low in 2007, but the increase appears to have slowed down. The Legends at Sparks Marina held a grand opening in June 2009 and will be one of the major retail locations in the Reno/Sparks metropolitan area when it is completed. Developed by RED Development, the 2 million-square-foot shopping and entertainment destination is located on 147 acres in Sparks fronting Interstate 80 and will be highly visible to out-of-state travelers passing through the area. Because the project is estimated …
In the stifling heat of August, the Charlotte office market seemed stagnant and weak. According to Jones Lang LaSalle, Charlotte lost nearly 13,000 jobs in the first two quarters of this year, pushing the unemployment rate to 12 percent. Year-over-year, second quarter office leasing activity fell 32 percent. To further paint a grim picture, Jones Lang LaSalle predicts that downtown Charlotte is in for a double-digit vacancy rate, due to the 2.5 million square feet of office space that will see completion in the next 18 to 24 months. In reality, the future of the Charlotte office market is much brighter than it looks on paper. “At the street level, a lot of brokers remain pretty busy. There are still deals being done; they’re just taking longer,” says Tim Bahr of Charlotte-based NAI Southern Real Estate. It’s also happens to be the tail end of vacation season, and everything, commercial real estate included, is a bit more sluggish during the twilight of summer than during the rest of the year. “This time of year is typically slow, and with the economy, it just seems like that’s amplified things a bit,” he says. The office spaces that are frequently being occupied …
While the San Antonio office market has not been as directly impacted by the national economic slowdown as other markets, it is being impacted by excess deliveries and slower absorption overall. This has led to slightly lower effective rents and a rise in vacancy rates. Previously stable markets, in general, are holding level occupancies; however, there are several pockets where the vacancy rate exceeds 20 to 30 percent. This is primarily a result of newly constructed space that is not being absorbed, rather than tenants moving out of existing office space. Many would anticipate a larger reduction in rents with the current vacancy levels, but rents have not declined to the extent one would expect in a down market, as newer buildings continue to market their space at higher rents and existing stable building owners have declined to reduce rates to any significant degree. Two transactions in particular have impacted the San Antonio market in a very positive fashion. The sale of the 150,000-square-foot 300 Concord Plaza, Tesoro’s old headquarters, to Whataburger, which is relocating its home office to San Antonio from Corpus Christi, is worth noting. This transaction subdued concerns of the impact this vacancy would have had on …
Buoyed by its proximity to Washington, D.C., and the resulting presence of multiple government installations — as well being the East Coast’s farthest inland sea port — Baltimore enjoys a marginal insulation from the global economic slowdown. The Social Security Administration, the Health Care Financing Administration, the National Security Agency, Ft. Meade and Aberdeen Proving Ground are all federal government outfits in the area that employ Marylanders at well above average salaries. These agencies require significant private contractor support which, in turn, supplies even more well paying jobs. Baltimore, however, is not immune to the credit crunch. At approximately 190 million square feet of space, Baltimore’s industrial market has seen some recovery at the end of the second quarter. Leasing is up half a percent from last quarter, settling at an overall vacancy rate of 10 percent. With asking rates hovering just shy of the $5 triple-net mark, developers have sharpened their pencils a bit after sitting on recently-delivered product in a market that was flooded with new construction for most of 2008. Asking rates were previously based on construction costs and projections that were developed during the boom times of 2006 and 2007. The tenant has become king, with …
Although many believe that the economy is starting to pick up, the “wait and see attitude” of many investors and companies still persists in the commercial real estate marketplace. Many are simply waiting for things to get better or waiting to see if, instead, things get much worse. Frank Gunsberg of First Service Williams says, “The economy is showing signs of picking up, although there have been fits and starts. I'm hopeful that we'll see a rebound by the end of the year and into 2010.” The seemingly perpetual wait and see attitude is having its way with the New Jersey office market as well. Gunsberg notes that many office tenants are asking for short-term lease renewals and extensions. Whereas, under typical market conditions office leases ranged from 5 to 10 years, tenants are asking for 1 or 2 years. “They just are not sure what is going to be happening with the economy,” he explains. “People are reluctant to do things even though this is probably one of the best times to jump. Landlords are willing to make concessions they would not normally make. If you have a good balance sheet, you are an extremely desirable tenant.” Although landlords …
Cincinnati-area multifamily developers are watching expenses, right-sizing and, if they have a management arm, expanding their third-party management operations to increase potential income streams. Buyers are seeking short sales and loan assumptions, allowing buyers to put very little money down to invest and continue to leverage their cash for future purchases. Of course, cash is still king. There are many new buyers in the market, but developers have been extremely quiet, as they shore up their portfolios by trimming overhead, cut costs, and become more lean and efficient. Also, developers have a limited supply of cash that may be needed elsewhere to shore up the company, which prevents them from pouring any money into new endeavors. Their resources are stretched, which limits their ability or desire to purchase land holdings for future development. As the recession recedes and demand grows, the downtown, north (Union Center and Liberty Township) and northeast (Mason and South Lebanon) submarkets will be in need of further multifamily development. In Northern Kentucky, outlying markets in close proximity to downtown that feature good access to the Interstate 75 or Interstate 275 corridors, will continue to need multifamily development. The central Cincinnati submarket, an area north of downtown …
San Diego has historically been a strong retail market with low vacancy and barriers to entry that restrict the supply of new centers. However, the market has not been immune to these difficult times. Rising unemployment and decreased home values have made consumers more cautious, leading to lower sales volumes for many retailers and restaurants creating slightly more vacancy throughout the area. Expo Design Center, Linens ‘N Things, Circuit City and Mervyns are just a few of the big boxes that sit empty along with several former gas stations, Starbucks Coffee, Banner Mattresses, Baja Fresh and La Salsa locations. However, these vacancies created opportunities for Wal-Mart, Kohls, Best Buy, yogurt shops, taco shops and others to enter projects or trade areas that had proven difficult to enter. Many of these former restaurant locations still include the furniture, fixtures and equipment and have created excellent opportunities for new tenants to reopen with little upfront investment. This is particularly true in South County as many experienced restaurateurs and other business owners from Mexico are crossing the border to open businesses. Tenants such as Autozone, Chase Bank, CVS/pharmacy, Gamestop, 7-Eleven and Five Guys are now taking advantage of the lower rents and increased …
While the national economy and commercial real estate in general look to have a tough year ahead of them, Houston and multifamily real estate have a little more room for comfort, although not enough for complacency. Houston is projected by some to have the strongest job growth in the United States for 2009, and multifamily is the only commercial property class to maintain some semblance of normalcy. Houston benefits from the diversity of its economy. Houston has also greatly benefited by one sector in particular, oil and gas, which saw its greatest rally in history just as the financial sector saw its darkest days. Houston continues to maintain an unemployment rate almost 3 percent below the national average and is ranked 18 of 392 U.S. MSAs by Moody’s Economy.com for employment growth between now and 2013. Unlike other commercial real estate (CRE) asset classes, multifamily has been more successful fighting off the financial crisis that shut down the CMBS market and essentially froze CRE transactions across the country. Steve Duplantis, senior managing director of CBRE in Houston, is only aware of one investment grade retail transaction and one investment grade office transaction in the past year. So far this year …