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CaliforniaMarket ReportsMultifamilyWesternWestern Market Reports

Dissecting Orange County’s Dynamic Multifamily Market

by Jeff Shaw

— By Cameron Irons, Executive Director, SVN Vanguard — The multifamily real estate market in Orange County continues to be one of the most attractive and profitable in the country. The area’s strong economy, affluent population and abundance of job opportunities have made it a popular destination for people looking for a place to live. As a result, the demand for housing in Orange County has remained high. Developers are responding by building new multifamily and mixed-use developments. There are several highly active companies developing new multifamily projects in Orange County. Projects such as Metropolis by the Irvine Company and Park and Paseo by Broadstone are nestled among large office/industrial parks and feature thousands of residential units, in addition to retail and commercial space. They are designed to be hubs for work, play and living, offering residents a wide range of amenities. Lennar Homes, KB Homes and Meritage Homes have similar projects in development in every city throughout the county. Despite the high prices of these properties, the Orange County multifamily market continues to thrive. The area has seen a surge in the number of renters in recent years, which has put pressure on the available housing supply. This has driven …

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IndustrialMarket ReportsMidwestMidwest Market ReportsOhio

Diverse User Demand Buoys Columbus in Uncertain Global Market

by Kristin Harlow

By Beau Taggart, Cushman & Wakefield Historically, Columbus was a steady-performing, secondary industrial market that saw minimal rent increases. Often, it was overshadowed by “big brother” cities such as Indianapolis and Chicago that were perceived as more appealing to institutional investors. After the great recession of 2008, though, Columbus began to mature economically, and the region began its meteoric rise as a leading big-box industrial market in the U.S. Located at the intersection of Interstates 70 and 71, within a day’s drive of 46 percent of the U.S. population and containing one of the only freight-only airports in the country, Rickenbacker Airport, Columbus began to attract more and more major retailers such as Zulily, Lululemon, Macy’s and Sam’s Club as well as e-commerce giant Amazon, which has opened several bulk facilities throughout the region. Additionally, three major intermodal terminals and major UPS and FedEx hubs strategically located throughout the area boosted Columbus from its secondary status to a primary inland hub on every major distributor’s radar.  Like many markets, 2021 was Columbus’s most prolific year. Interest rates were at an all-time low, and users were compensating for COVID-fueled consumer demand. Asking rates grew by 14 percent and vacancy shot down …

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ATX-130-Austin
IndustrialMarket ReportsTexasTexas Market Reports

Backed by Healthy Demand, Industrial Developers in Texas Can Pace New Projects

by Taylor Williams

By Taylor Williams The current industrial development landscape in Texas is a true testament to the awesome power of demand — and of interest rate hikes. From El Paso to Houston, industrial users of all sizes and across all industries continue to demand new or expanded spaces to accommodate their ever-growing warehousing, distribution and manufacturing needs. E-commerce, nearshoring, COVID-19 — name your impetus — they’ve all contributed to a feverish pace of industrial development and absorption in recent years.  According to fourth-quarter 2022 data from CBRE, Dallas-Fort Worth (DFW) saw an annual supply gain of about 36.1 million square feet in 2022 while posting positive net absorption of 36.5 million square feet. Third-party logistics users drove much of the new leasing activity, which contributed to a 4.6 percent vacancy rate at the end of the year. The market has now posted consecutive years of sub-5-percent vacancy. Fittingly, there remains more than 75 million square feet of product under construction throughout the metroplex. In Houston, developers delivered approximately 18.8 million square feet of new industrial space in 2022, per CBRE. Yet the market posted more than 30 million square feet of positive absorption over the course of last year, and the …

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AlabamaIndustrialMarket ReportsSoutheastSoutheast Market Reports

Spec Industrial Space Takes Over Birmingham Pipeline as Build-to-Suits Dry Up

by John Nelson

Before we look at the current happenings in the Birmingham industrial market, it is worth glancing into the rearview mirror of the last 24 months or so. 2021 and 2022 saw the delivery of 10 notable industrial build-to-suit projects. Some were announced in 2020 before pricing surges. The last delivery of these projects was completed in fourth-quarter 2022, an automotive project on the west side for Lear Automotive Seating oriented toward Mercedes-Benz.  This unprecedented streak of projects totaled 3.3 million square feet. In addition to Lear, tenants included: Lowes, Mercedes-Benz, Motion Industries, TSF Sportswear, Samuel, Son & Co., Amazon (two) and FedEx Ground. Interestingly, two of these facilities are now available for sublease and were never occupied by the tenant. And as of this writing, there is not a single industrial build-to-suit announced or under construction.  What did follow the noted build-to-suit wave were six speculative (or partial speculative) projects. The first one delivered — the first phase of Crossroads Commerce Center in the Central submarket — spanned 186,000 square feet, and the twin second phase was recently completed. The two phases are now 75 percent occupied, demonstrating market demand shown in other Southeastern markets in mid-2022 and prior.  In …

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CaliforniaMarket ReportsRetailWesternWestern Market Reports

Orange County’s Retail Vacancy is Tight, but Capital Markets Activity Will Be Sluggish this Year

by Jeff Shaw

— By Terrison Quinn, Managing Principal, SRS Real Estate Partners — The Orange County retail property market was very active last year for both leasing and capital markets. At 4 percent, Orange County’s retail vacancy was back down to pre-pandemic levels. There was an annual net positive absorption of 445,000 square feet with 191,000 square feet of new space delivered in 2022, per CoStar. Average rents increased 5 percent from an average market rent of $34.84 per square foot, per year to $36.58 — the highest rate of rent growth in 10 years. We don’t see rents coming down at all this year, especially as there’s only 170,000 square feet of new space currently under construction and we continue to experience favorable consumer demand.   From a capital markets perspective, investment activity remains to be seen. In line with national trends, many investors and lenders are putting capital deployment on pause as they analyze economic activity and adjust to a period of higher interest rates, higher inflation and, perhaps surprisingly, strong employment. Despite the angst that comes from uncertainty, there is a lot of positive sentiment toward economic corrections, creating investment opportunities over the coming years. This is certainly the …

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Market ReportsMidwestMidwest Market ReportsMinnesotaMultifamily

Pandemic-Fueled Trends Continue to Have Impact on Twin Cities CRE Market

by Kristin Harlow

By Jeff Budish, Northmarq Three years in, and the COVID-19 pandemic has immensely altered how multifamily and commercial properties are utilized, located and valued. Now with interest rate changes, all product types have seen a hit from the change in the cost of capital. While challenges are on the horizon, Midwest markets, including Minneapolis-St. Paul, should see less shake up than elsewhere. Despite rising interest rates, recession worries and nagging inflation, the Twin Cities multifamily sector is resilient. Vacancies remain low, demand is outpacing supply and rents are solid. Year over year, apartment rents in the Twin Cities area are up 5 percent. While COVID changed the dynamics of all product types, it explicitly impacted multifamily. The increase in remote work meant employees were not tethered to a physical office. Many people moved away from their workplaces in densely populated areas to the suburbs. However, Minneapolis and St. Paul proper generally saw net outbound demographic shifts. Valuations over the past two years therefore didn’t include additional inflated pricing based on speculation of continual inbound movement. There is also soaring demand for apartments due to an increase in the number of Americans living on their own, roommate-free. In an AvalonBay public …

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ConnecticutMarket ReportsNortheastNortheast Market Reports

Outsourcing of Property Tax Assessment, Collection Functions Raises Problems in Northeast

by Taylor Williams

By Elliott Pollack, Esq., Pullman & Comley LLC Although COVID-19 resulted in the pumping of significant dollars from the federal government into municipal and county budgets, generally speaking, property tax assessment offices remain understaffed and undertrained.  Many assessors recognize these realities and are successful in convincing local leaders to appropriate funds to retain independent contractors to perform various assessment and collection functions. The theory is that these expenditures are non-recurring and are preferable to staffing assessment offices on a full-time permanent basis. As an example, Connecticut assessors almost always contract with certified revaluation companies to perform statutorily required, community-wide revaluations every five years. They contract with these companies because they simply lack the personnel to do the work themselves. In addition, reliance on outside contractors can, to some degree, insulate municipal staff from angry property owners who are unhappy with their new assessments. Another perhaps unplanned benefit to retaining outside contractors is that unless communications with the contractors can be made promptly after new assessments are published, at least in Connecticut, property owners are compelled to resort to judicial remedies to challenge their values. Since court proceedings tend not to conclude for a year or even more, localities obtain the …

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AlabamaMarket ReportsOfficeSoutheastSoutheast Market Reports

Birmingham Remains a Healthy Market for Office Landlords, Tenants

by John Nelson

Birmingham’s office market is facing many of the same challenges our peer markets are encountering. Lingering economic uncertainties have created a very cautious environment. Most tenants and business owners I speak with are either cautiously pessimistic or cautiously optimistic about the economy.  Regardless of which side is right, economic projections for 2023 have caused a general slowdown in deal flow as decision makers have become more guarded with business decisions and commitment levels.  Is there cause for concern in Birmingham? Historically, Birmingham’s office market has remained stable during challenging times, dodging the extreme highs and lows as markets ebb and flow nationwide. Birmingham’s office market consists of approximately 19 million square feet of multi-tenant inventory across five submarkets, four of which have Class A inventory.  Fundamentals, subleases As of fourth-quarter 2022, the occupancy rate for Birmingham’s office market sits at 83.8 percent. For the same period over the last five years, the occupancy rate has only slightly fluctuated year-over-year, ranging from 86.1 percent in fourth-quarter 2018 to 83.8 percent in fourth-quarter 2020. The current rate is at 83.8 percent, illustrating consistency throughout a very problematic time for the office sector.  Birmingham’s office sublease inventory is rising, but again, not to …

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9701-Research-Dr-Irvine-CA
CaliforniaIndustrialMarket ReportsWesternWestern Market Reports

Orange County’s Industrial Sector Continues to Grow

by Jeff Shaw

— By Jace Gan, Executive Vice President, Colliers — Before 2020, Orange County’s industrial base shrank due to developers opting to redevelop multifamily and creative office spaces. Historically tight market conditions limit the number of new leases, and rising interest rates price out many businesses looking to purchase a building. However, we are seeing a significant increase in industrial development across Orange County for the first time in a while. Orange County industrial properties have seen a pullback from institutions that were putting capital out the door. About 2.4 million square feet of new industrial space was constructed in 2022 — a significant increase over the 660,000-square-foot, five-year average. Setting Pace Most activity occurs in North County, which makes up 45 percent of OC’s industrial base. Irvine has remained the hub for more specialized uses related to aerospace, medical, etc. Key developments across the region are dictating the speed of future activity. Goodman recently developed a 1.5-million-square-foot, four-building logistics center in Fullerton. The overall size is rare for the OC, and was 89 percent pre-leased before completion. Samsung took two buildings totaling 1 million square feet. Sprouts took 337,000 square feet in another building. Sares Regis Group is redeveloping an …

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IllinoisMarket ReportsMidwestMidwest Market ReportsOffice

Suburban Chicago Office Landlords Still Face Tough Times

by Kristin Harlow

By Mark Kolar, Cresa There’s been a lot of news recently about the financial pressures facing suburban Chicago commercial office landlords who have financed their office buildings via commercial mortgage-backed securities (CMBS) loans. While the financial challenges these buildings face continue to grab the headlines, there is a much less visible yet greater amount of privately funded commercial office landlords that could be facing dire financial changes over the next couple of years.  These privately funded loans that originated through major banks and insurance companies are seeing just as much, if not more, stress than their CMBS counterparts. Collectively we’re seeing significant systemic issues for all Chicago commercial office landlords with no clear path to a solution in sight. In suburban Chicago, about 13 percent of commercial office loans are financed by CMBS loans with the majority of loan debt financed through local financial institutions, private investment funds and insurance companies. While details on these loans is not as readily available as their CMBS counterparts, many office landlords are confronting similar challenges.  Both CMBS and privately funded commercial landlords and their lenders are facing a host of capital challenges that revolve around systemic changes in leasing activity, increasing costs of …

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