Market Reports

The pandemic has done a lot to the office sector, not the least of which is convince employees they don’t need to sit in a cubicle eight hours a day, five days a week. Turns out, unsurprisingly, many people appreciate the freedom and flexibility that comes with working from home.  The average U.S. office vacancy rate was 18.6 percent in the first quarter of 2023, according to Cushman & Wakefield. This was 5.9 percentage points higher than fourth-quarter 2019. Three California regions are also listed on the “Bottom 10 Performers of 2022” list (according to vacancy rate) put out by the National Association of Realtors. These include San Rafael (19.3 percent vacancy), San Francisco (16.4 percent) and Los Angeles (14.4 percent). Yet, leases are still getting signed, particularly at urban mixed-use projects throughout the state. Sean Slater, senior principal in RDC’s San Diego office, thinks this type of environment is a no-brainer for companies looking to bring employees back to the office.  “Office workers want choice, especially with the current work-from-anywhere trend,” he says. “For a long time, suburban office parks have lacked choice of food and beverage, a diverse population of tenants, and a meaningful connection to their community. …

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Atlanta has historically been a favorite metro for real estate investors to consider when it comes to a market that checks all the boxes. The Peach State Capital and its surrounding suburbs always have been a beneficial and desirable region for residents to live and work. Topping the list as the most popular city for apartment renters in 2022, Atlanta offers more benefits to its residents than just an affordable city to live.  Other benefits of living in and around the city include professional sports teams, a rich arts and entertainment scene and renowned restaurant and retail lineups, among others. Hartsfield-Jackson Atlanta International Airport also offers domestic and international flights to practically anywhere in the world, and it’s situated minutes from downtown.  Home to 17 Fortune 500 company headquarters, including prominent names such as The Home Depot, United Parcel Service (UPS), Coca-Cola and Delta Airlines, Atlanta’s job growth is outpacing the rest of the country. Coming out of the pandemic, Atlanta recorded a job growth rate of nearly 23 percent since April 2020, which outperforms the comparative U.S. metric of 11.7 percent in the same time period. Atlanta has also historically held an unemployment rate below the national average.  With …

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— By Tony Solomon, Senior Vice President, District Manager, Marcus & Millichap — Industrial continues to be one of the most sought-after asset classes across the Los Angeles County commercial real estate market. This year, the metro will maintain its position as one of the tightest industrial markets in the nation. It also ranks fifth in rent growth among major markets west of the Mississippi.  For the 17th time in the past 18 years, the Los Angeles metro’s industrial stock will increase by less than 1 percent, as 4.3 million square feet is slated for delivery. Supply additions will be concentrated in the South Bay and San Gabriel Valley, leaving less than 1 million square feet to come online in the rest of the county. While vacancy was below 2 percent in four of the metro’s biggest submarkets to start 2023, speculative completions and industrial users re-evaluating their space requirements will push vacancy to 3 percent by year end. This is a rate 80 basis points under the long-term mean. Rents are projected to grow by 7.6 percent as a result, bringing the average asking rate to $21 per square foot.  Part of this rise in vacancy can also be …

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The Atlanta industrial market needs very little validation when it comes to answering the question “Why Atlanta?” More than a dozen companies started or based in Atlanta have grown over the past decade to valuations above $1 billion. Metro Atlanta had the second highest rate of job growth in the nation among large metro areas (6.7 percent), according to the U.S. Bureau of Labor Statistics.  So rather than ask “Why Atlanta,” the better question is “Where in Atlanta?” As the Southeast’s population continues to grow, the metro Atlanta area continues in equal parts to add density to its thriving urban core as well as expand its suburban reach.  With limited geographic barriers to development, outlying towns are quickly becoming absorbed into the definition of the Atlanta area. This persistent growth is placing demand on industrial space at an all-time high, requiring a nuanced view of site selection within the Atlanta MSA. The four corners of the Atlanta market reach nearly 60 miles from the urban center in each direction along highways I-75 and I-85, with new speculative projects under construction as far out as Adairsville, Commerce, Locust Grove and La Grange. Its breadth now includes Bremen and Rutledge in either …

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— By Priscilla Nee, Executive Vice President, CBRE — The Los Angeles apartment market started showing signs of cooling as supply has risen to meet demand. Rents decreased marginally year over year as last year’s apartment demand decreased following pent-up pandemic demand. In response to decreased prices, renter demand for space has seen an increase in the first few months of 2023.  Across the market, vacancy is sitting just below 4.5 percent as of first-quarter 2023, which is up from all-time lows of around 3.7 percent one year prior. Concessions for new renters are present. They have been steady and increasing since the third quarter of 2022 as landlords work to attract great renters to new and existing projects.  Additional new supply is outpacing present demand, despite early upticks in demand for the year. That, paired with a strong development pipeline and an additional 27,000 units under construction, may continue to drive vacancy rates up should demand not increase in kind. This could lead to potential reductions in lease rates if a property sits vacant on the market long enough.  Most current development and construction is centered in Downtown LA, Koreatown and South LA. Markets like Inglewood are setting themselves …

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By Taylor Williams North Texas is attracting new and existing entertainment concepts at a frenetic pace as operators of these facilities seek to position themselves squarely in pathways of major growth and capitalize on any remaining pent-up demand from the pandemic. According to a 2022 report from the North Central Texas Council of Governments, the region’s population surpassed 8 million last year. In addition, more than 20 cities in North Texas — the area that includes and surrounds the Dallas-Fort Worth (DFW) metroplex — saw their populations swell by 10 percent or more on a year-over-year basis between mid-2021 and mid-2022. This growth inevitably encompasses key demographics that entertainment operators covet, including families with children and young working professionals. High-paying jobs continue to flow into DFW in the form of corporate relocations and consolidations. Developer KDC recently began construction on Wells Fargo’s 850,000-square-foot regional campus in Irving. New pieces of the PGA of America’s headquarters campus in Frisco are coming on line every quarter and sparking feverish development in surrounding neighborhoods. Global engineering consultant AECOM and construction machinery manufacturer Caterpillar are also in the process of relocating their headquarters from Los Angeles to Dallas, among others.  Checking the two boxes …

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Like most of the country, the metro Atlanta multifamily market has experienced a dramatic storyline over the past three years. While the continuing plot twists are difficult to predict, important cues suggest Atlanta’s multifamily market will reestablish a solid upward path quicker than many other cities in the country. Economic strength Atlanta’s economic fundamentals make it a favored market for investors, lenders, new residents, and business relocations. Today, metro Atlanta’s population stands at approximately 6 million, growing by 64,940 in 2022. Atlanta also added 126,400 new jobs in 2022.  Georgia’s unemployment rate of 3.1 percent is below the national average of 3.6 percent. These figures are a key part of Atlanta’s desirability as an investment market and an indicator of the region’s ability to rebound quickly from cyclical economic disruptions. Record volume Atlanta is a top 10 U.S. market for multifamily inventory and investment. As the nation experienced an 11-year economic expansion after the Global Financial Crisis (GFC), Atlanta’s multifamily sales volume averaged between $7 billion and $9 billion annually. When the pandemic hit in March 2020, most industry participants expected a major transaction pullback. The reality proved different. Sales volume dropped initially but rebounded sharply for a full-year 2020 …

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— By Sean Fulp, Vice Chair & Head of Office Capital Markets, U.S. Southwest, Colliers — Office sales, leasing and development activity are at historic lows for Los Angeles County. With interest rates rapidly increasing, few active developments, and office vacancy and availability at an all-time high, the office market is in discovery mode. One of the major trends in development is creative, state-of-the-art studio/office campuses. These developments have broken ground in West Hollywood, Burbank, Santa Monica and Culver City.  Developers in this space have the mindset of “if you build it, they will come.” Office sales activity is down more than 50 percent in the past year due to a high interest rate environment and a divide between buyer and seller pricing expectations. As loans become due, landlords will have decisions to make, and distress will occur in the market.  Office availability is at an all-time high in Los Angeles at nearly 30 percent — likely the new norm going forward. Companies have figured out that employees like to have the flexibility of where and even when they work. With that said, companies are downsizing their office space by 25 percent to 50 percent and, in some cases, by …

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By Ted Branson, Landmark Commercial Real Estate There continues to be strong demand and a resulting shortage of industrial buildings in Wichita from 1,000 to 100,000 square feet for lease or for sale, not dissimilar from the fierce competition for housing, with prospects paying well above market rates just to keep from losing out “again” on an available property.  With that, Wichita is seeing vacancies continue near 5 to 6 percent, an increase in average lease rates from $4 to $6 per square foot, and average sales prices increasing from $35 to $50 per square foot. New construction prices carry that considerably higher. That demand for space, and the increasing prices that prospects will pay, often leads to land sales and new construction. Many of the supply chain issues that caused construction to take up to two years have been improved or resolved, and several projects are underway. Developers have built several speculative warehouses, most notably in the new ICT21 Industrial Park, the former location of the Derby Oil refinery. Ron and Marty Cornejo did a masterful job of clearing the site of structural obstacles and rendering pollution issues innocuous, with Conco erecting three first-class, tilt-up concrete, high-bay warehouses, with …

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By Barry Hand, principal, Gensler In a recent tour of a name-brand corporate campus, the host carefully explained to our team that his company’s policy regarding working from home (WFH) and returning to the office (RTO) remained loose as they completed a “year of learning.”   This “learning” presumably involved listening to staff, observing who badges in when and where, experimenting with what works and what doesn’t and resolving the best way to get their arms around the most effective policies.  This explanation has surely been given repeatedly in recent years. It appears most companies prefer to bring their people back to the office, but they also want to adopt policies that will work best for employees and customers, as well as the future of their organizations.  While there are outliers that have instituted clear return-to-office directives, most firms are adopting change management strategies organized around attracting staff back to the office. They are doing this by leaning on experiences and amenities that demonstrate to employees the benefits of being present in the office. It seems the “experience” around which retail and food-and-beverage establishments are designed has now also reached into the corporate world. The Amenitized Workplace Increasing numbers of …

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