By Brad Frisby, director of land acquisitions, Rhodes Enterprises Demand for housing of all types continues to outpace supply in the Rio Grande Valley (RGV), and developers’ best efforts to add much-needed product throughout the region appear to be reaching a crescendo. Like the rest of the country, residential development in the RGV has been stymied and exacerbated by global supply chain disruption over the last year. Nor have developers in the region been spared from the pricing volatility of key construction materials, from basic building blocks like lumber and steel to more precise pieces such as air conditioning units and kitchen appliances. These factors, along with rising labor costs generated by the reheating of the regional economy, have negatively impacted conventional multifamily construction timelines and budgets over the past 12 to 18 months. While traditional single-family projects have not been hit nearly as hard as their multifamily counterparts, the net result of all this activity has been a widening of the gap between housing supply and demand. Though the regional vacancy rate for multifamily product is up on a year-over-year basis — about 4.5 percent today versus 3.5 percent at the end of the first quarter of 2021 — …
Like much of the rest of the country, the Atlanta multifamily market has been white-hot with strong occupancies and rent growth that is contributing to outsized returns for owners, investors and developers. Recent increases in financing costs does not mean the music is stopping, but the tempo is slowing a bit. Atlanta’s multifamily fundamentals are still outstanding. Occupancies are holding strong and rents are continuing to rise. According to Northmarq’s fourth-quarter 2021 research, occupancy improved by 90 basis points while asking rents spiked by 15.9 percent at year-end. The compelling story fueling investor interest — growing demand and limited supply of housing options — remains firmly in place. In addition, there is plenty of investor appetite and capital available for multifamily assets for both debt and equity financing. The big change that has occurred over the past several weeks is the increasing cost of debt that will likely take some of the edge off what has been an ultra-aggressive investment sales market. The 10-year Treasury was 1.73 percent on March 1, 2022. At the end of April, it was 2.91 percent, a 118-basis-point increase in less than two months. Additionally, lender spreads have widened over this same period — 30 …
By Taylor Williams As the pandemic recedes from the minds and wallets of American consumers, the food and beverage (F&B) industry finds itself embroiled in a host of new financial problems, driven this time by pure economics rather than public health. Inflation and supply chain disruption are working both in tandem and within independent channels to bring new hardships to the sector, mainly in the form of elevated costs and delayed timelines for operating and expanding restaurants of all types. At the same time, F&B owners and operators finds themselves awash with pent-up demand to dine out, drink, socialize and enjoy entertainment attractions and activities. Meanwhile, across the Northeast, quality F&B spaces that went dark during the first 18 months of the pandemic have largely been reabsorbed. That confluence of circumstances encapsulates major incentives and opportunities for landlords to raise rents. Add in the fact that these property owners have in many cases been operating on deferred, reduced or restructured rent payment schedules for much or all of the last two years, and the move to push F&B rents is even more justifiable. For owners of traditional retail product — from power centers to neighborhood strip malls to single-tenant, net-leased …
It’s safe to say office space design has been transformed over the past two years in large part due to COVID-19 and the work-from-home experience. It has changed for now, the foreseeable future and maybe forever. Though many people are still working from home, others have returned to the office, even if only for a few days a week, and many of the office spaces are looking entirely different. While this may be happening in other markets, it is a trend we are seeing in the Milwaukee office market. The idea of the design and aesthetic of the office has changed. Current trends in office design are focusing on safety and comfort, while also creating a sense of home at the office. Tenants are being more thoughtful about their space layout and design. Instead of trying to fit as many people as possible into the space, tenants are occupying roughly the same size, or even slightly smaller spaces, but focusing on making those spaces more welcoming to help ease those workers coming back into the office, as well as recruiting new employees. Bring home into the office This design trend has the goal to provide comfort and safety at every …
By Randy Summers, vice president, CCIM, CPM, Davis Equity Realty “Y’all come” is the message being sent to developers, retailers, franchisees, quick-service restaurants, corporations and manufacturers from the Rio Grande Valley (RGV) region of Texas — and all these users seem to be heeding the call. The local economy seems to be hitting on all cylinders, albeit with constraints on labor and supplies, as well as rising costs. The four counties that statistically make up the RGV — Hidalgo, Cameron, Starr and Willacy — combine to produce a regional population of over 1.4 million and a workforce population of over 485,000. While COVID-19 continues to have lasting effects on labor, the Small Business Administration reported that the Lower Rio Grande Valley District, which serves 14 counties, had 44,471 Paycheck Protection Program (PPP) loans approved totaling $2.4 billion. Of that, 71 percent were loans for the RGV’s four counties representing 59 percent of the dollar amount, or $1.4 billion. That is a considerable amount of money that was pumped into the local economy and doesn’t include the $64.6 million in grants provided to restaurants through the Restaurant Revitalization Fund out of the American Rescue Plan Act. Year-to-date sales tax revenue provided …
By Jerry Holdner, Southern California Region Lead, Avison Young The Greater Los Angeles office sector is experiencing a fragmented and slow recovery post-pandemic as the fallout is being addressed in various ways by office tenants, investors and owners. The first quarter of 2022 ended with a 15.4 percent office vacancy rate, which was up from 15 percent at the end of 2021. It is also up from the previous high of 13.1 percent that was recorded in 2010. We started to see several companies require their employees to return to work at least in some capacity in the first quarter, which typically included a hybrid schedule. With gas prices soaring and an extremely competitive job market, hybrid situations have been significant bargaining chips for employers to attract and retain employees. That said, we don’t see leasing demand returning to pre-COVID levels for at least 12 to 24 months or longer. Office occupiers have and will continue to evaluate both their short- and long-term occupancy strategies. With all indicators pointing to hybrid work remaining indefinitely, office users are seeking to reduce their footprints. This typically involves a flight to quality as office rents are low and concessions are consistently on the table for new leases …
Atlanta continues its streak as a high-growth market for retail. Low vacancy rates have turned up the competition for quality spaces among tenants and rents have continued to climb. Competition and a landlord’s market have sparked new trends as developers further refine their approach to finding retailers that drive traffic and retailers search for fertile and readily available locations, including submarkets outside the intown submarkets. Northeastern and West Coast brands have followed the trend of people moving to the Southeast, landing locations in suburban and exurban submarkets often filled with high-income, educated populations. As cities like Newnan, Cumming, Roswell, Woodstock, Peachtree City and Alpharetta see population density continue to grow, retail and restaurants are following. Suburbs and exurbs are also attracting urban dwellers from Atlanta seeking a quieter, yet similarly amenitized lifestyle they may have experienced closer to attractions like the Atlanta BeltLine. During the pandemic, people also got used to staying close to home and are now reluctant to drive far to take care of day-to-day needs and enjoy amenities, giving a boost to Ga. Highway 400 corridor developments like Avalon and Halcyon, as well as Ashley Park in Newnan. Unique offerings Hot trends emerging in Atlanta are “eatertainment,” …
Like much of the country, the Milwaukee industrial market flourished over the last 12 to 24 months and has continued to shatter records across the board. Tenant demand far exceeded supply, driving vacancy rates down and rental rates up. Pent-up capital chased deals at record numbers, compressing cap rates further in this sector. And new construction continued its speedy pace, with over 8 million square feet on schedule to be delivered in 2022. But with inflation surpassing 8 percent and interest rates on the rise, the question now is how long will we continue this record-setting pace? Just-in-time to just-in-case As supply chain constraints emerged during the pandemic, businesses switched from the widely used just-in-time model to just-in-case, meaning drastic increases in inventory storage and logistic needs for many companies. Tenants scrambled to lease additional space to house what inventory they could get in stock. At the start of 2021, Class A industrial vacancy in Milwaukee was 9.68 percent. By the end of the year, that number had been slashed in half to just 4.39 percent as the flight to quality industrial product exceeded deliveries. In the fourth quarter of 2021, 1.65 million square feet of new industrial space …
Interviews by Taylor Williams The office markets of the major Texas cities have always been birds of different feathers, built to accommodate drastically different types of users and disproportionately subject to broader swings in occupancy and rent growth. Dallas-Fort Worth (DFW) remains the king of corporate relocations and regional consolidations, and the metroplex’s office market benefits from the highest degree of diversity among users, an attribute that has ushered it through the darkest days of the COVID-19 pandemic. Meanwhile, the Houston office market, hobbled for years by its reliance on energy users, may finally be poised to see some growth in occupancy as prices of these commodities head for the moon. In Austin, the non-California tech capital of the country, the supply of office space is still playing catch-up to demand, as evidenced by the healthy rents these buildings have achieved during the state capital’s ascendance to major-market status. And San Antonio? Like most commercial asset classes in the Alamo City, the performance of the office sector is steady, offering neither the glamorous appeal of trophy buildings with marquee users that attract institutional investors nor the profound cyclical dips that scare them away. Yet after two years of prolonged disruption …
By Kimberly Stepp, Principal, Stepp Commercial The strength of the Greater Los Angeles apartment market has exceeded expectations coming out of the pandemic. Despite reports of an exodus from California and population decline in the metro, apartment rental demand is seeing an all-time high, with net absorption of units running at its highest level in decades. As a result, vacancy is at a low 3.4 percent, lower than the pre-COVID level of 4.4 percent. Asking rents have seen a 7.7 percent growth over the past 12 months, while the national rate is 11.1 percent. Average monthly asking rents across LA County stand at $2,130, albeit still lower than the median monthly home payment of $2,659. Los Angeles multifamily market fundamentals remain favorable for investors. The area has one of the highest percentages of renters of any U.S. metro, comprising approximately half of all households. Already hefty housing prices in a highly competitive market have seen even greater increases over the past 20 months, resulting in a median home price of $795,000. This has left a significant part of the population priced out of homeownership. High construction costs, NIMBY sentiment and onerous permitting continue to plague the ability to deliver desperately needed housing units. …