Market Reports

LA Office Market Struggles, but Tenants, Investors See Opportunity

by Jeff Shaw May 17, 2022

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 …

May 17, 2022

Georgia Market Reports Retail Southeast Southeast Market Reports

Atlanta Retail Market Stays Hot With Unique, Experiential Offerings Around Town

by John Nelson May 16, 2022

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,” …

May 16, 2022

Industrial Market Reports Midwest Midwest Market Reports Wisconsin

Industrial Cap Rate Spread Narrows in Milwaukee as Demand Continues to Surge

by Kristin Harlow May 12, 2022

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 …

May 12, 2022

Market Reports Office Texas Texas Market Reports

Major Texas Office Markets Rebound in Varying Degrees, Exhibit Flight to Quality

by Taylor Williams May 11, 2022

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 …

May 11, 2022

California Market Reports Multifamily Western Western Market Reports

LA Apartment Market Stays Tight, Values Soar

by Jeff Shaw May 10, 2022

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. …

May 10, 2022

Georgia Market Reports Office Southeast Southeast Market Reports

Atlanta Lands Big Office Deals, but Overall Tenant Demand Remains Uncertain

by John Nelson May 9, 2022

In many ways, metro Atlanta is a tale of two office markets. Google, Microsoft, Papa John’s, Visa and FanDuel are just some of the heavy hitters that have signed major deals over the last year and a half, fueling leasing activity that is getting closer to pre-pandemic norms. Much of that action has been centered in the Central Business District (CBD), which registered a 68 percent year-over-year increase in leasing volume compared to first-quarter 2021. According to research from CoStar Group, leasing volume for the entire market totaled 3.2 million square feet in the first quarter, which is on par with the 10-year quarterly average. Midtown, where more than 2 million square feet of new product is under construction and the majority of corporate heavyweights have planted their flag, led all submarkets in leasing activity, with Cushman & Wakefield reporting nearly 314,000 square feet of new leases signed in the first quarter. Midtown’s overall walkability, abundance of high-rise residential units, new office buildings and access to talent from local universities and mass transit have enabled it to become a talent magnet for major employers and one of the nation’s premier submarkets. However, the vast majority of office tenants in metro …

May 9, 2022

Market Reports Midwest Midwest Market Reports Retail Wisconsin

Milwaukee Retail: Adaptation, Creativity and Competition

by Kristin Harlow May 5, 2022

Milwaukee is a city known for beer, motorcycles, basketball and blue-collar workers. However, Milwaukee should also be known for having a strong retail marketplace as well. With ever-changing markets and trends, retailers are finding many ways to get creative and adapt with the trends. Due to the adaptation, the competition for prime outlots is at an all-time high and does not appear to be changing any time soon. Outlot wars It’s with absolute certainly that the Milwaukee retail market has seen a massive influx for prime outlots. So much so that the phrase “outlot wars” is regularly used when describing retail outlot developments and redevelopments. In an already saturated segment of retail real estate, we have seen many new concepts/categories pushing to secure premium outlot sites in the market. Quick-service restaurants (QSRs) and fast-casual restaurants, auto and financial institutions are the biggest participants to date. Since the beginning of the COVID pandemic in 2020, we have seen a pretty significant shift in the food category from QSR and fast-casual concepts alike. Milwaukee has seen many existing concepts continue to expand or reposition within a market, but we have also seen new concepts making a push to enter the market as …

May 5, 2022

Market Reports Retail Texas Texas Market Reports

Developers Find Creative Ways to Meet Demand in Thriving El Paso Retail Market

by Taylor Williams May 4, 2022

By Andy Moreno, director of operations, MIMCO; and McGee Sauls, senior vice president, MIMCO Historically, the El Paso market has often been overlooked, primarily due to its distance from other major Texas markets. However, that sentiment is shifting rapidly due to strong economic and population growth. While an accurate figure is difficult to pin down, the number of new entries and expanding franchises within the market has exploded in recent years. “As recently as 2015, national and regional operators were only beginning to recognize the sales potential of the El Paso market and just how underserved the growing population had become,” states Scott Walker, president of MIMCO. “Competition was limited, which led to advantages for existing operators. The landscape shifted dramatically due to the pandemic; since the second quarter of 2020, new retail categories have become active,” he continues. “Marketing quality sites generally leads to multiple offers from competing operators including car washes, lube shops, coffee shops and quick-service restaurants. We love to see this variety move into our market and drive competition for the next great location.” Market competition is advantageous and a key driver of innovation. Retailers use competition to discover and adopt the most efficient processes that …

May 4, 2022

Alabama Market Reports Office Southeast Southeast Market Reports

Birmingham Landlords Prepare as Workforce Transitions Back to the Office

by John Nelson May 2, 2022

While the Birmingham market never fluctuates too heavily in either direction, it typically remains relatively stable compared to national trends. Such has been the case with the effects of COVID-19. Birmingham is well-positioned for a return to the office, thanks in large part to our economy’s heavy makeup of local and regional businesses. Most smaller businesses have been in the office for some time, while large national enterprises still wrestle with what normal operations will look like moving forward. General market information Birmingham saw some positive absorption in 2021, with the occupancy rate holding steady at 81 percent, around the historical average. Birmingham comprises approximately 20 million square feet of office space with five main submarkets. Midtown, comprising mostly mid-size, Class A office buildings, remains the strongest submarket with an occupancy rate over 92 percent and rental rates in the mid to high $20s per square foot ($24.12 per square foot average). The Central Business District has seen companies leave for suburban submarkets like Midtown and Highway 280/Interstate 459, however the occupancy rate of 78 percent has remained relatively stable over the past couple of years, with rents in the low to mid $20s per square foot ($21.07 per square …

May 2, 2022

Industrial Market Reports Midwest Midwest Market Reports Multifamily NAI Nebraska Office Retail

Analyzing the Potential of Lincoln’s Commercial Real Estate Market

by Kristin Harlow April 28, 2022

What does the Lincoln, Nebraska commercial real estate market have to offer? Quite simply it has land, room to grow, affordability and a centralized location. Pair these attractive and unique features with an educated workforce in a culturally diverse community and the answer becomes clear. Lincoln’s commercial real estate market has a lot of potential. Despite Lincoln’s small size of approximately 300,000 people, it is experiencing the same challenges and triumphs as the bigger metropolitan areas. Warehouse space One of the biggest challenges in the Lincoln market is the low supply of industrial space in a high-demand environment. The industrial vacancy rate as of year-end 2021 was 1.6 percent. Any new product that comes on market is leased quickly and the per-square-foot selling price is trending up with a 31 percent increase in just three years. Unfortunately, in the Lincoln market, the value of new industrial construction building permits has been trending down over the last five years. The rising cost of construction makes this trend even more significant; many developers are unwilling to invest in speculative product without the certainty that tenants will pay the rental rate necessary to provide an adequate rate of return. One local developer, Las …

April 28, 2022

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