Market Reports

Consider Constitutionality in Property Taxation

by Kristin Harlow December 6, 2023

By Cecilia Hyun, Esq. Taxpayers usually appeal property tax assessments by proving a market value different from the assessor’s finding, but they should not overlook constitutional guarantees of uniform and equal taxation. As an ad valorem tax, real property taxes are charged on the value of the underlying real estate, usually measured as fair market value. In many states, taxpayers can demonstrate their property’s market value with a recent, arm’s-length sale price or by independent appraisal evidence. Two potential concerns emerge for taxpayers in an assessment appeal centered on market value: the declining reliability of data in volatile and rapidly changing markets, and the trailing nature of market data used by assessors. Those data issues can skew the mass appraisal techniques tax assessors often use, including comparisons to sales of similar properties, when assessing real property. Volatility, rapid change Commercial property data can lose relevancy with surprising speed in a volatile market. For example, office properties continue to bear the consequences of increased remote work and occupants’ shrinking footprints since the pandemic. Many office properties with mortgages maturing in 2023 have lost half or more of their previously underwritten asset values. Badge swipes tracked by Kastle Systems show an average …

December 6, 2023

New Orleans Multifamily Market Contends With Inflation, Interest Rates, Insurance

by John Nelson December 4, 2023

The volatility in the capital markets over the past 12 to 18 months has wreaked havoc on many aspects of the economy, and real estate has not gone unscathed. Unlike the retail and office sectors whereby there is a fundamental shift in how people work and shop, housing is a basic need. The equilibrium between supply and demand in metro New Orleans’ multifamily market is still in sync. It would however be naïve to suggest there are no challenges that are affecting our real estate market. The “three dreaded Is” (i.e. inflation, interest rates, insurance) is not a Halloween mask but a euphemism that crystallizes the challenges multifamily owners are faced with both locally and nationally. Each of these factors singularly are powerful forces, yet the trifecta is playing a role in the current state of our metro market. However, despite these challenges, the regional multifamily market has stable occupancy with most submarkets reporting levels in the 92 to 94 percent range. Overall monthly rental rates average $1,263 with rents ranging from a low of $1,000 in Eastern New Orleans and Algiers to rents in the Downtown market as high as $3,000. Once again, the barriers to entry (lack of …

December 4, 2023

Industrial Market Reports Nevada Western Western Market Reports

Tourism to Operations: Reno’s Robust Industrial Market

by Jeff Shaw December 1, 2023

— By Justin Basie President of Real Estate, Mark IV Capital — While the Reno-Sparks Metropolitan Statistical Area (MSA) is best known for its gaming-tourism industry, its location in Northern Nevada also appeals to fans of the outdoors. In addition, Reno’s diversified economy readily attracts Fortune 500 companies that are targeting the area for their manufacturing and distribution efforts. This, in turn, drives the massive growth of Northern Nevada’s industrial sector, generating overwhelming demand for warehouse, logistics and manufacturing space in the region. The following fundamentals have positioned Northern Nevada and the Reno-Sparks MSA as ideal destinations for logistics, manufacturing and other industrial activities: • Population Proximity The MSA is conveniently located within a one-day trip of major West Coast cities like Los Angeles, San Francisco and Portland, Ore. Thanks to an efficient infrastructure network that includes major highways, two railways and the Reno-Tahoe International Airport, companies can reach a vast 80 percent of the Western U.S. population in less than 24 hours. • Business-Friendly Climate Nevada is consistently ranked as a top 10 state for conducting business because of its pro-business regulatory environment, low-cost start-up fees, and streamlined licensing and approval processes. Nevada also offers a favorable tax environment for …

December 1, 2023

Market Reports Retail Texas Texas Market Reports

InterFace Panel: Interest Rate Movement Raises New Questions for Retail Investment Strategies

by Taylor Williams November 30, 2023

By Taylor Williams Retail owners are facing critical questions about whether to sell or hold their properties in the current environment, which is still defined by uncertainty about whether interest rate hikes have truly peaked and investment sales prices have actually bottomed out. Investment sales decisions frequently hinge on analysis of cap rates, defined as a property’s net operating income divided by its sales price. Generally speaking, higher cap rates indicate lower sales prices and are therefore sought by buyers, whereas lower cap rates reflect higher prices and are preferred by sellers. Cap rates are fluid and tend to move linearly with interest rates. Thus, the Federal Reserve’s campaign of 11 interest rate hikes totaling 500 basis points over the last 20 months has caused cap rates in all asset classes to rise, or as industry folks say, to decompress. The extent to which this cap rate movement influences an investor’s sell-or-hold dilemma varies from deal to deal, but the common denominator is that it complicates all such decisions. At the inaugural InterFace Houston Retail conference, a panel of capital markets professionals delved into the numerical analysis and anecdotal evidence that investment sales brokers are relying on to guide clients …

November 30, 2023

Market Reports New York Northeast Northeast Market Reports

New York’s Small Business Lodging Crackdown — Another Ripple from a Big Wave

by Taylor Williams November 29, 2023

By Pam Knudsen, senior director of tax compliance services, Avalara While the dust has scarcely settled from a landmark ruling in New York City resulting in a massive crackdown on short-term rentals (STRs), the full extent of the fallout from the decision has yet to be fully grasped by many — and perhaps even by the city itself. Under the terms of Local Law 18, a resolution that passed earlier this year, hosts and owners of short-term rentals, including Airbnb, are now subject to tighter and stricter regulations. These include limits on numbers of guests, requirements to register with the city and obligations to more closely monitor guest behavior, among other regulations. The effective ban on short-term rentals will have considerable consequences on local economies, and more than anyone, it’s small lodging businesses that stand to be impacted by the resulting wave. But to fully understand the major impact this ban has on small businesses, we must first acknowledge that STRs should rightly be considered small businesses themselves. Much like any other small business, STRs are required by most communities to be licensed, registered and compliant with tax collection and remittance. Furthermore, the hosts and managers behind STRs operate in …

November 29, 2023

Georgia Industrial Market Reports Southeast Southeast Market Reports

Hyundai Plant, Port of Savannah Spur Demand for Industrial Activity in Savannah

by John Nelson November 27, 2023

Savannah’s industrial real estate market is experiencing exceptional growth and now totals 113.7 million square feet, of which 98.2 million square feet (86 percent) is dedicated to bulk distribution (tracking facilities sized 100,000 square feet or larger). Year-to-date net absorption as of the end of the second quarter was 6.3 million square feet, which suggests another solid year ahead. Additionally, the vacancy rate remains low at 4.6 percent, a historically favorable level. The development community has been quick to respond to robust demand, delivering 19 buildings totaling nearly 10 million square feet in the second quarter, with the majority of it already leased. The market is primed for additional growth, with a significant amount of new construction underway. More than 16 million square feet is currently under construction, not including the Hyundai plant that will span 17 million square feet itself, along with related supplier facilities covering an additional 1.9 million square feet as of this writing. The $5.5 billion Hyundai plant will employ 8,100 people and be the company’s first dedicated electric vehicle (EV) mass-production plant. It is expected to begin full production in early 2025 and will produce over 300,000 vehicles per year. The effects of Hyundai on …

November 27, 2023

Market Reports Texas Texas Market Reports

Amid Capital Markets Freeze, Investors Still Love Central Texas

by Taylor Williams November 21, 2023

By Taylor Williams The growth story of Central Texas is compelling enough that commercial developers and investors are still aggressively targeting the region, even as costs of doing business hit the roof. In fact, both cities recently cracked the Top 10 on Urban Land Institute’s list of markets to watch in the organization’s Emerging Trends report for 2024. To dispense with the bad and obvious, the region — loosely defined as the swath of land bookended by the Austin and San Antonio metro areas — is not exempt from wide-ranging industry headwinds. Newer trends like working from home, as well as entrenched issues like a shortage of affordable housing and crushing interest rates, impact deals and projects in high-growth markets perhaps even more harshly than their smaller counterparts. This is simply due to the principles of supply and demand. Further, the region faces homegrown challenges stemming from a decade-plus of hyper-accelerated expansion, namely a skyrocketing cost of living and insufficient infrastructure to support demand from tenants and residents. But the fundamentals of job and population growth remain so robust in Central Texas that buyers and builders, particularly within the industrial and multifamily spaces, can still invest and develop in this …

November 21, 2023

Kentucky Market Reports Office Southeast Southeast Market Reports

Office Tenants Are Seeking Class A Spaces in Downtown Louisville, Suburbs

by John Nelson November 20, 2023

Like many regional peer cities, there is a clear bifurcation between office leasing activity in Louisville’s downtown and suburban office markets. Downtown Louisville has been slower to recover from the double gut-punch of the COVID-19 pandemic and local social unrest that kept workers away from the office in 2020, with overall vacancy stubbornly exceeding 20 percent for most of this year. Much of the vacancy has been driven by health insurer Humana, by far the largest office occupier in downtown Louisville, which has let several large Class B office leases expire as it continues to consolidate its workforce into properties the company owns. Year-to-date, downtown leasing activity totals 115,000 square feet, which is up 58 percent compared to this time last year, while overall absorption has swung sharply lower at negative 237,000 square feet. The relative oversupply of available office space has created a very “tenant-friendly” dynamic downtown, with landlords becoming increasingly aggressive to court leasing activity. More so than their suburban counterparts, downtown landlords are offering outsized incentive packages to tenants, including rental concessions, turnkey construction delivery of new tenant space, termination options and rental abatement periods that in some cases extend beyond one year. In exchange, downtown tenants …

November 20, 2023

Industrial Market Reports Nevada Western Western Market Reports

Reno-Sparks Industrial Market is Stable, Despite 2023 Headwinds

by Jeff Shaw November 17, 2023

— By Nick Knecht, Vice President, DCG Industrial — The industrial real estate market in Northern Nevada demonstrated stability over the first three quarters of 2023. Sales performance year to date through the third quarter was steady, with industrial sales volume reaching $116 million. This represents a 42 percent increase compared to the same period in 2022. This should keep the market on track for a decent year, despite falling slightly short of its historical averages. Notably, the shift in buyer dynamics caused by the rise in interest rates, which have soared as high as 8 percent, has investors sticking to a more conservative approach to their underwriting. Owner-users have emerged as the primary drivers of sale activity, and were the buyers of all four closed sales in September. Prices are beginning to soften, and price reductions are occurring more frequently, which is expected to improve buying opportunities for investors over the next 12 to 18 months. Leasing activity has been concentrated in the 10,000- to 50,000-square-foot range, which captured 44 percent of the third quarter’s lease transactions, and similarly 38 percent in the 5,000- to 10,000-square-foot range. Lease rates have remained relatively stable since the first quarter, with Class A …

November 17, 2023

Market Reports Midwest Midwest Market Reports Office Wisconsin

How Milwaukee’s Hottest Downtown Buildings Continue to Drive Leasing Activity

by Kristin Harlow November 16, 2023

By David Pudlosky and Patrick Savoie, JLL Milwaukee remains a strong office market with leasing activity showing no sign of slowing. Post-pandemic, companies took a fresh look at their workplace strategies to adjust to hybrid working environments, and many rightsized their overall square footage while adding significant amenities and attractions that provide a rewarding office experience for returning workers. Despite a smaller footprint, tenants are seeking updated, highly amenitized spaces in Class A buildings. While amenities have always been a focus for landlords, the buildings that stand out today are the ones that focus on quality amenities over quantity. For example, today’s tenant will likely not be as interested in a building lounge unless it has comfortable seating, a café, strong Wi-Fi and more. To be relevant to tenants, amenities must be high end and culture focused. We’ve seen companies like Milwaukee Tool, Fiserv, Komatsu Mining Corp. and Northwestern Mutual invest in their downtown office spaces and make commitments to bring more employees downtown, and we expect this trend to continue. Building owners can learn from what Class A building landlords are doing to drive leasing activity, and learn how investing in quality, amenity-driven spaces will likely bring in new …

November 16, 2023

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