Market Reports

Office Vacancy Falls as San Bernardino Hopes to Return to Former Glory

by Jeff Shaw December 1, 2022

By Steve Roppel, Senior Vice President, Allied Commercial Real Estate Encompassing 62 square miles, San Bernardino is the governmental seat of San Bernardino County, the largest county in the world at more than 21,000 square miles. About 86,000 people alone work within the city, per the 2020 Census. The largest industries are retail (12,280 people), transportation and warehousing (11,164 people) and health (9,603 people). Of the six largest office buildings, only one is occupied by traditional multiple commercial tenants. The others are occupied by the county, city, courts, non-profits and the University of Loma Linda. The only large office building presently proposed is a county office building of 307,000 square feet. San Bernardino was historically a vibrant metropolitan whose image has become tarnished over the years. It is famous for its affiliation with Route 66, which runs through the city and allowed many people to emigrate to the Golden State. The first original McDonald’s restaurant – now a museum – was opened in San Bernardino in 1940. To restore the former luster and recognize the potential for San Bernardino, local governments have pulled together on several fronts. Multiple recent infrastructure improvements and redevelopments were completed and planned for San Bernardino, …

December 1, 2022

Market Reports Retail Texas Texas Market Reports

Texas Holiday Sales Outlook: Not Very Merry

by Taylor Williams November 29, 2022

By Jason Baker of Baker Katz It’s amazing how quickly things can change. Just a few short months ago, the commercial real estate outlook was generally positive. Both in Texas and nationally, retail sales were proving to be fairly resilient to the rising inflation and economic turbulence that have characterized most of 2022. Despite low consumer confidence, strong fundamentals and a retail sector riding the high of a post-pandemic boom provided plenty of reasons for optimism. That has all changed in the last 60 to 90 days. Prevailing positivity has recently given way to concern, and sentiment from within the industry has clearly shifted. High interest rates have made it virtually impossible to develop any type of commercial project, and persistent supply chain constraints and ongoing hikes in costs of construction materials have further exacerbated this challenge. With interest rate increases come higher cap rates, which complicates sellers’ efforts to move their assets while values are this fluid. To put the impact of rising rates into perspective, interest payments on commercial real estate have in some cases increased five-fold in just the last few months. The impact of this activity on retail real estate during the all-important holiday shopping season …

November 29, 2022

Louisiana Market Reports Retail Southeast Southeast Market Reports

Plenty of Opportunities Exist in New Orleans Retail Sector, Despite the Headwinds

by John Nelson November 28, 2022

New Orleans has seen significant, pent-up retail growth over the past 12 months as we emerge from the COVID-19 pandemic. More recently, however, external forces have provided some headwinds and caused tenants and investors to go back to their corners to reassess. Inflation, rising interest rates, insurance premium increases and elevated construction costs have all contributed to uncertainty in the Greater New Orleans retail landscape. Within the French Quarter and CBD, growing concerns from crime have forced some CEOs to look outside of the city core for their office headquarters. This issue, coupled with the current “work-from-home” environment, causes downtown retailers to rely even more on tourism and convention business. Thankfully, the hospitality sector has had success and is now exceeding pre-pandemic levels. Due to an active 2021 hurricane season that saw Hurricane Ida devastate South Louisiana, insurance rates have skyrocketed as carriers continue to leave the state. As a result, landlords have struggled with how to handle these unforeseen spikes in expenses. Should they pass those on to the tenant or eat them to remain competitive, or a combination of the two? 2022 has been a surprisingly quiet storm season, so with any luck these rates should begin to …

November 28, 2022

Affordable Housing Colorado Market Reports Multifamily Western Western Market Reports

Denver Leads on New Affordable Housing Requirements

by Jeff Shaw November 23, 2022

Like many communities across the West, affordable housing is a top issue in Denver. Monthly rent in Denver is now around $2,005, according to Zillow’s June 2022 data. This is up 20.4 percent since June 2019. The city is trying to do something about the lack of affordability. It approved the Expanding Housing Affordability Policy (EHA) this June, which overhauled Denver’s affordable housing requirements for new development. EHA was allowed after the 2021 passage of a Colorado statute, HB21-1117, which overturned a Colorado Supreme Court case commonly known as the Telluride decision. HB21-1117 expanded the ability of local Colorado governments to require inclusion of income-restricted units within new rental housing — something that had previously been prohibited in Colorado. While Denver has led within the state with EHA, other municipalities in Colorado, such as Littleton and Aspen, are beginning to consider new affordable housing policies in response to HB21-1117. In Denver, EHA primarily affects multifamily projects of 10 or more units. Those projects must proceed under EHA unless they submitted a concept site plan by June 30, 2022, and achieve final site development plan approval by Aug. 30, 2023. Non-residential projects and residential projects of nine or fewer units may …

November 23, 2022

Market Reports Office Texas Texas Market Reports

Houston Office Market Continues Forward Slog

by Taylor Williams November 22, 2022

By Chip Colvill, executive vice president, Cushman & Wakefield Like many U.S. cities in the post-pandemic world, Houston’s office sector faces a long road to recovery. Historically, office demand follows office job creation — and job growth has been a bright spot of the Houston economy in 2022. Unfortunately, the U.S. economy seems to be slowing, and the outlook remains highly uncertain. Odds of a recession have risen; inflation and wage pressures remain elevated, and higher interest rates are impacting various parts of the economy, including commercial real estate. Throughout the United States as well as in Houston, the correlation between job growth and office demand is tenuous, given that many businesses are still recalibrating workplace strategies to allow remote and hybrid work schedules. However, new jobs — even more flexible, hybrid jobs — will necessitate various types of workspaces, including demand for office and flexible office space. Newer office buildings across Houston have thrived despite the market’s elevated Class A vacancy rate of approximately 26 percent. Each new quarter of data continues to confirm the flight-to-quality trend and the existence of a bifurcated office sector between older and newer office product. Higher-quality and newer office space is dominating as …

November 22, 2022

Louisiana Market Reports Office Southeast Southeast Market Reports

See You at Work: New Orleans Employers Rethink the Office Environment

by John Nelson November 21, 2022

In the post-pandemic environment where employers are trying to navigate new work schedules, office tenants are focusing more on the finish and design of office space than they are the rents. In New Orleans, we are seeing office tenants rethink the concept of office space altogether, and their employees are thinking differently about their individual offices as well. There has been a shift from the traditional office space of years past where one spends eight hours a day in a large private office with the door closed. The office has evolved into more of a social place. Companies want their employees to come back to the office and not to be fully remote. Many employees want to get out of their pajamas and come back to the office. But, getting them all to come back has proven to be the challenge. Companies are now enticing their employees with redesigned spaces that are more aesthetically pleasing and rich with amenities that allow for more social interactions and collaboration. Employees who work remotely a few days a week are coming to the office because they want that engagement with their colleagues. Tenants are now less interested in refurbishing private offices and spend …

November 21, 2022

Market Reports Multifamily Washington Western Western Market Reports

Seattle Metro Multifamily Market — It’s a Supply Thing

by Jeff Shaw November 18, 2022

By Brian O’Connor, Executive Director, Valuation & Advisory, Cushman & Wakefield The Seattle Metro apartment market has been surprisingly resilient. The market quickly bounced back from the COVID downturn at a robust clip and has continued moving at a healthy pace. During the first six months of 2022, metro Seattle absorbed more than 12,600 units. That already surpasses a typical full year of demand by several thousand units. From January 2022 through June, the market absorbed 3,779 newly constructed units — a respectable level. If you also factor in the decline in existing units, then the market absorbed another 8,886 units. That tells us that the supply of new units was too low…or demand was much stronger than we expected. The market had rebounded to a metro-wide vacancy rate of only 1.33 percent at mid-year 2022, an astoundingly low level. From year-end 2021 to June 2022, overall apartment vacancies declined from 3 percent to 1.33 percent. We do, however, expect vacancies to begin increasing slightly. These rates typically see an uptick as we head into winter. Rent growth also slows during this time. We expect to see the metro-wide vacancy rate start to rise just a bit by year-end 2022, to …

November 18, 2022

Industrial Market Reports Midwest Midwest Market Reports Wisconsin

Tenants Turn to Third-Party Logistics in Milwaukee Market

by Kristin Harlow November 17, 2022

By David Hodge, NAI Greywolf The demand for commercial industrial real estate was exceedingly strong in the Milwaukee market leading up to the onset of COVID-19. The economy and labor markets were also strong and incentives for onshoring spurred on this growth. Post-pandemic commercial industrial product continues its upward trend. The catalyst for this, however, is international supply chain disruptions. The reaction to this unfortunate circumstance is the accumulation of higher inventories of raw material and finished goods. The resulting impact is high demand, especially for warehouses, in an extremely low vacancy rate environment. Demand beating inventory According to Catylist, in the second quarter of 2022, the Milwaukee market’s vacancy rates were 3.3 percent for all commercial industrial products. This is largely due to the continued lack of available inventory. High demand in part has spurred increases in rental rates to approximately $5.98 per square foot triple net. While this is good news for landlords who look to capitalize, it presents challenges for tenants who are expanding their operations. The other factor driving rental rates is the rapid increase in interest rates. The upcoming election may also affect the rates in the later part of the fourth quarter of …

November 17, 2022

Market Reports Northeast Northeast Market Reports Northmarq Restaurant Retail

Quick Service Restaurants Represent A Tasty Option for Northeast Investors

by Taylor Williams November 15, 2022

By Tom Georges, investment sales broker, Northmarq The U.S. economy reported annualized growth of 2.6 percent in gross domestic product (GDP) in the third quarter, thereby avoiding a third consecutive quarter of negative growth. This positive news can be easily tempered by the fact that the growth was greatly affected by trade and inventory numbers, which were skewed as a result of world events like the war in Ukraine. But the news of growth was welcomed in an economy that has been starved for something positive for most of the year. Compounding the economic caution in the absence of sustained economic growth, of course, is the strain that inflation has inflicted on all Americans. In response to 40-year inflationary highs, the Federal Reserve has been forced to react with its primary inflation-countering tool: increasing interest rates. In early November, the Fed raised short-term rates to their highest level since January 2008. Additional rate hikes are anticipated in December, although signals suggest we’ll see increases in smaller increments going forward. Still, amid all the turmoil and uncertainty, several quick service restaurant (QSR) operators continue to roll out expansion plans and report better-than-expected sales and earnings. Restaurant Brands International (NYSE: QSR) recently …

November 15, 2022

Colorado Market Reports Office Western Western Market Reports

The Work-From-Home Trend Continues to Plague Denver

by Jeff Shaw November 11, 2022

By David Gagliano, Senior Vice President and Principal, Fuller Real Estate Leasing trends in the metro Denver office market are continuing their slow progression downward. Inquiries from tenants looking to lease office product is down 10 percent from 2021. Concurrently, we have seen an uptick in smaller office users who are looking for space in lieu of their home office. Landlords have been quick to concede to tenants, incentivizing them with extensive quantifiable tenant improvements and lease rates lower than their competition. Anecdotally, it becomes obvious with nearly every prospective tenant that they are viewing multiple properties. Not only are they viewing several properties, but many have several options within the exact vicinity of the subject property. This trend makes it even more critical for landlords to have the best representation from their brokers. This market instability also speaks to the favor landlords are giving to current tenants upon lease renewal, as capturing occupancy prior to vacating becomes vital. With current and most likely future increases in interest rates, we will see a dip in activity in owner-user purchases that should lead to a rise in leasing activity. The suburban markets are still seeing a surge in migration from the downtown …

November 11, 2022

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