Kirk D. Olson and Drew Kristol are senior associates in Marcus & Millichap’s Miami office. What area is your expertise? • Miami-Dade County retail properties. What trends do you see presently in retail development in your area? • The only major retail developments in the area are those that were started prior to the market correction that occurred in fall 2008. There is an increase in vacancy rates — anywhere from 5 percent to 15 percent — in Miami-Dade County. Many shopping centers that have not had vacancy issues in the past 5 years are now experiencing vacancies for the first time. Owners are lowering their rents to keep current tenants and are not generating much interest from leasing signs and advertisements. What type of retail product is doing well in your area? • Centers in prime locations remain relatively well occupied compared to areas that have been harder hit by the softening economy. Even though the spending power of shoppers is less due to the economic downturn, Miami-Dade County is very dense and there are too many people shopping for there to be mass vacancies. Dollar stores are still in expansion mode, as are some restaurant chains, Applebee’s and …
Market Reports
Douglas K. Mandel is associate vice president investments director, National Office and Industrial Properties Group, in Marcus & Millichap’s Fort Lauderdale, Florida office. What area is your expertise? • South Florida (Miami, Fort Lauderdale, West Palm Beach) office properties What trends do you see presently in office development in your area? • The development pipeline for new office development has slowed dramatically, largely attributed to the lack of debt for new construction. There is demand for LEED-certified office development and some projects are underway or are about to be under construction. Who are the active office developers in your area? • Stiles Corporation, Proccaci Development Company and Butters Construction & Development are three active office developers in South Florida. Please name one or two significant office developments in your area. • A joint venture between Related Companies and Croker Partners has just completed CityPlace Tower, an 18-story Class A office building in downtown West Palm Beach. The building, which includes 300,000 square feet of office is located at the south entrance to CityPlace, a 72-acre mixed-use complex with retail, restaurants and entertainment venues. Stiles Corporation has just completed 200 Las Olas Circle, a 17-story Class A office building in downtown …
Greg Zeifman is a senior associate in Marcus & Millichap’s Miami office. What area is your expertise? • Miami-Dade County Industrial Properties What trends do you see presently in industrial development in your area? • I do not foresee any new starts in the Miami-Dade industrial market. Although developers will finish projects that have already begun, there will be no new significant development. The recent addition of institutional, big-box product in the northwest Miami-Dade Medley submarket will lease-up its vacant space. What type of industrial product is doing well in your area? • Newer, Class A and B product continues to do well. However, owners must keep rents stable or lower them. Small to mid-range tenants who previously occupied Class C or functionally obsolete properties now have renegotiating power and are able to move to nicer locations. Properties in close proximity to the airport will enjoy higher occupancy rates; whereas, properties in the east Miami-Dade market, such as Hialeah, where product tends to be functionally obsolete, will experience the highest vacancies. Who are the active industrial developers in your area? • Flagler Development Group is an active developer in the Dade market. Please name one or two significant industrial developments …
While St. Louis has a diversified economy, it has not been immune from the forces reshaping the retail landscape. As the economy contracts and consumer confidence continues to dip, retailers are reeling from the impact. Circuit City was the latest fatality when its 567 stores went dark in early March, including seven sites in the St. Louis area. Colliers Turley Martin Tucker expects that 2009 will best be remembered as a year of significant closures and consolidations among retailers. Despite the current uncertainty in the marketplace, there were several retail developments completed last year, all of which were primarily committed to well before the economy began taking its toll. St. Louis ended 2008 with more than 1.5 million square feet of new retail space. The majority of these new developments are anchored by retailers selling necessity or discount items such as Costco, Wal-Mart, grocery stores and drug stores. Such a tenant base, combined with consumers now taking a more cost-conscious approach to spending, should allow these developments to do well despite the current economic turmoil. Among these new developments is the new 260,000-square-foot Meadows at Lake Saint Louis in Lake St. Louis, Missouri. Billed as the first lifestyle center in …
The Indianapolis industrial market posted a strong showing last year despite the economic challenges impacting the nation. More than 4.3 million square feet of space was absorbed in 2008, and the region’s industrial vacancy rate closed at 7.4 percent, a decrease of 1.1 percent from the start of the year. Several factors contributed to the area’s ability to move forward, not the least of which is the area’s long-standing stature as the Midwest’s crossroads for distribution. Construction continued, but on a more restrained level. Approximately 1.9 million square feet of new industrial space was completed last year, which is only a quarter of the volume — 8.8 million square feet — of new space added in 2007. A significant component of this new inventory was build-to-suit or expansions by existing owners or users. Additionally, rental rates for industrial space remained level; rents have not moved in either direction since 2007. The rates have remained low compared to other Midwest cities, which has attracted new regional and national players while encouraging local businesses to maintain and renew their existing leases. As in past years, modern bulk distribution space has led the charge of new activity. Approximately 4.3 million square feet of …
Odds are that Las Vegas developers, landlords and brokers did not mind putting 2008 in the rear-view mirror. Unfortunately, odds are also good that 2009 will be even more challenging. Commercial real estate certainly finds itself in unprecedented times. At the end of 2008, the Las Vegas office market had about 5.5 million square feet of vacant space, with the vacancy rate rising to 17.24 percent. This number doesn’t include the increasing amount of sublease space on the market or what is even harder to track, shadow space — unused space not being marketed. Even with the amount of vacant space on the market, there is roughly 2.2 million square feet under construction, most of which will hit the market in 2009. Based on historical absorption averages, the estimated supply of existing vacant space now would take about 5 years to absorb. The average asking lease rate ended 2008 at $2.40 per square foot, but is expected to decrease during first quarter 2009. Landlords have tried to maintain their face rates, but will generally bend significantly to make a deal. Available shell space on the market has more leasing challenges than second-generation space. With the cost of construction exceeding the …
Industrial properties in the Upstate region of South Carolina continued to perform at a steady if unspectacular rate through 2008, and this trend is expected to continue through 2009. The market will continue to see good activity on the leasing side of the business. This activity, while driven by the confusion of the credit market, has still reflected the desirability of the area as a place for new businesses and the continued growth of key industries. The current expansion of BMW’s facilities has heightened the likelihood of both secondary and tertiary suppliers opening or expanding locally in anticipation of the plant’s growth. This is further intensified as the International Center for Automotive Research complex continues to grow. The recent opening of the Carroll A. Campbell Jr. Graduate Engineering Center will further improve local research and development capabilities. This strategic investment was cited as one of the reasons the Upstate area was chosen for a multi million-dollar titanium manufacturing facility. Equally impressive has been the announcement that Fitesa, a Brazilian manufacturing company, also plans to establish a presence in the region. Another source of growth has been from foreign-owned corporations that view this as a good time to expand in the …
Apartment conditions in St. Louis will soften this year due to job losses and localized oversupply; however, some submarkets in the metro area will record a relatively strong performance. The local labor market is projected to be weighed down by the manufacturing sector and the trade, transportation and utilities segment, resulting in approximately 12,000 job cuts in 2009, which will ease apartment demand. Vacancy is projected to climb 100 basis points this year to 8.6 percent, the highest rate since early 2006. As a result, owners will reduce rents in an effort to maintain occupancy levels. The average asking rent is forecast to end the year at $722 per month, a contraction of 1 percent, following a 1.7 percent advance in 2008. In the near term, fundamentals will firm in the Airport/Interstate 70 and Clayton/Mid-County submarkets, as their proximity to arterial routes will continue to generate healthy tenant demand. As such, vacancy is forecast to retreat approximately 60 basis points to 9.5 percent this year in the Airport/I-70 submarket, while vacancy in the Clayton/Mid-County area is expected to fall roughly 30 basis points to 7 percent. Class A properties near interstates 270 and 170 are projected to outperform as a …
Howard Bissell of The Bissell Cos. sums his take on the Charlotte office market by echoing a concern voiced by developers all across the country. In nearly every major market and in a vast array of property types, developers are hurting because of rampant economic uncertainty. Tenants and investors simply don’t know what’s next, so they aren’t making any moves. “There’s a lot of concern over the unknown,” Bissell says. “Depending on where you are in the Charlotte market, you can point to slow downs in the velocity of leasing. What we started seeing last year has just accelerated into 2009.” For developers like Bissell, the main concern in Charlotte isn’t that the office market has slowed, but that it’s taken a rapid course downward, a quick pace that nobody quite anticipated. Tenants are on the sidelines looking in. Bissell has had to put two of his developments on hold due to the recession. “We’re out there trying to capture every deal that we can, so long as it makes sense,” he says, noting that he foresees pursuing deals more aggressively in the next year. At the Charlotte Chamber of Commerce, Jeff Edge takes a brighter point of view toward …
Las Vegas’ retail market is now clearly showing the strain of the recession. Decreased consumer spending has directly impacted local retailers, as unemployment climbs and shoppers find themselves with less discretionary income. Holiday season revenues were the weakest on record, and luxury stores, apparel chains and department stores all reported declining sales. Meanwhile, developers continue to experience difficulties securing financing for planned projects. As a result, several planned projects are on hold, and few of the currently planned and under construction projects should open in 2009 and 2010. Underperformance, the liquidity crunch and tighter credit terms with vendors, combined with the recession, made it impossible for many large box retailers to remain in business, thus bringing on the vast amount of power center vacancies. Small local retailers relied on SBA loans and equity from residential properties and saw both of these sources vanish, thus preventing many from opening new stores and leaving many strip centers with higher vacancies. Retailers that are performing well are very cautious regarding expansion. With already close to 3 million square feet of vacant large box retail space in the Las Vegas market, expect to see vacancies continue to rise this year. However, increased vacancies provide …