Market Reports

Lee & Associates’ First-Quarter 2022 Economic Rundown by Sector

by Sarah Daniels April 21, 2022

Lee & Associates’ newly released Q1 2022 North America Market Report scrutinizes first-quarter 2022 industrial, office, retail and multifamily outlooks throughout the United States. This class-by-class review of commercial real estate trends for the first quarter of the year focuses on how real estate is adjusting to long-term post-COVID attitudes. Lee & Associates has made the full market report available here (with further breakdowns of factors like vacancy rates, market rents, inventory square footage and cap rates by city), but the overviews offered below provide sweeping looks at the overall health and obstacles for four major commercial real estate sectors. Industrial: Rents Pushed on Strong Demand Strong demand for industrial space throughout North America continued in the first quarter as vacancies fell to record lows and rent growth hit double digits. First quarter net absorption in the United States totaled 92.8 million square feet, which was up 25 percent year over year but down 35 percent from the 143-million-square feet average of the last three quarters of 2021. Annualized rents rose 10.1 percent in the U.S. and the average vacancy rate fell to 4.1 percent. Part of this trend was due to a pause in new construction starts early in the pandemic. However, …

April 21, 2022

Market Reports Midwest Midwest Market Reports Nebraska Office

Omaha, Nebraska’s Office Market Holds Steady

by Kristin Harlow April 21, 2022

Omaha’s office market saw more total lease transactions in 2021 for more total space than in any year since our firm has tracked it — 281 transactions for nearly 1.8 million square feet. In a typical year, Omaha usually sees approximately 200 transactions for 1 million square feet. In addition to leasing activity, net absorption was positive at 310,391 square feet, and Omaha’s overall vacancy rate contracted slightly over the year. In turn, year-over-year market rent growth reached its highest point since pre-COVID-19. “Though slow-moving compared with other major U.S. metros, Omaha’s office market is showing early signs of a recovery thanks to its diversified employment base,” states CoStar. It seems fair to describe the market as stable as we are not seeing large swings in space availability and pricing, but it feels tenuous, just as corporate office space decision-makers are dealing with uncertainty. We continue to see office users choosing to wait and see on decisions affecting demands for office space. Most of the numbers are trending the right way, albeit slowly, but Omaha’s vacancy rate is more than 300 basis points higher than seen in many years before the pandemic, and we finished 2021 with 324,398 square feet …

April 21, 2022

Industrial Market Reports Texas Texas Market Reports

El Paso Industrial Market: The Birth of The ‘Borderplex’

by Taylor Williams April 20, 2022

By Josh Meredith, director of development, VanTrust Real Estate Sharing a 2,000-mile border, Mexico and the United States trade over $500 billion worth of goods and services each year, representing our country’s second-largest trade partnership. Impressively, over 20 percent of this exchange travels through the El Paso, Texas, port of entry, according to the Texas Comptroller of Public Accounts. This movement has deemed the El Paso/Ciudad Juarez (Mexico) region as one of the most important industrial centers in North America for years. Although the El Paso/Juarez market has a history of extensive commercial activity, with more than 1,100 manufacturing operations alone, the region has remained under the radar, experiencing traditional, steady industrial growth for the past decade. However, with undeniable strategic advantages and 300-plus Fortune 1000 companies in the El Paso/Juarez region, the past couple of years have attracted an increasing number of developers looking to capitalize on the market’s industrial and distribution needs. Now, with record net absorption and a remarkably low vacancy rate, the “borderplex” is the market to watch, building a reputation as not only a competitive industrial center, but also as a driver of some of the most important global manufacturing trends. Competitive Edge With more …

April 20, 2022

Industrial Market Reports New Jersey Northeast Northeast Market Reports Pennsylvania

Rents, Costs Move at Record Paces Throughout Mid-Atlantic Industrial Market

by Taylor Williams April 19, 2022

By Taylor Williams Industrial brokers and developers throughout New Jersey and Eastern Pennsylvania are flush with tenant demand, but the frenetic pace and frequency at which revenues and costs change in this market has introduced a whole new set of operating challenges. In terms of the supply side of the market, developers of industrial product, like those of every other property type, have been squeezed by supply chain disruption. Prices and lead times for ordering key materials change radically and often without warning. Developers who try to circumvent these obstacles by ordering way earlier than normal in the process now run an increased risk of having to take delivery of supplies without having all permits and sources of construction financing in place. Such a misfire in timing can create lags in delivery, potentially alienating tenants needing turnkey space and generating additional short-term costs via storage of the materials before construction begins. In addition, misaligning these timelines can spook potential investors that want the certainty of knowing that a project is moving forward. “We’re buying supplies a year in advance and trying to sync up deliveries of those materials with when we expect to have full project approval,” says Peter Polt, …

April 19, 2022

Alabama Market Reports Multifamily Southeast Southeast Market Reports

Birmingham’s Multifamily Market is Making a Splash as In-Migration Soars

by John Nelson April 18, 2022

The Sun Belt is experiencing unprecedented growth with in-migration trends setting the stage for further expansion and bolstering in-place multifamily product. This includes Birmingham, which has weathered COVID-19 well not only from an employment perspective, but from a rent growth perspective too. The latter is not sustainable without the former, and local capital investments point to more tailwinds. Birmingham has been on the move, adding 60,000 jobs since April 2020 and becoming the primary driver of economic growth in Alabama. With the influx of new jobs, the city has surpassed its pre-pandemic peak and as a result, the city’s rent growth has outperformed the national average for several years. There was a short period where downtown rents and velocity fell off during the pandemic, but it came back fast and strong. Riding the tailwinds One notable example of in-migration, both investment and population wise, was when Landing announced it would be relocating its headquarters from San Francisco to Birmingham. Landing is a tech startup that provides access to a network of fully furnished apartments, and its move to the city is expected to create more than 800 direct, full-time jobs. The announcement was exciting locally as Birmingham presumably wouldn’t have …

April 18, 2022

California Industrial Market Reports Western Western Market Reports

Los Angeles Industrial Market Reaches New Heights

by Jeff Shaw April 15, 2022

By Elizabeth Capati, Associate, Colliers Greater Los Angeles A new trend has emerged across Greater Los Angeles’ industrial market that has developers waiting for under-construction projects to capture the highest possible rent near the final development stages or closer to their target completion dates. With rents increasing at historical rates, a certain hesitancy exists, and companies are less likely to sign a lease during earlier development stages. In some instances, landlords ask listing agents to place certain buildings or projects on the market months in advance to build momentum and pique interest. Still, those landlords elect not to review offers until a month or two before their target completion date. Los Angeles is a land-constrained market where all new developments come from knocking down older, functionally obsolete buildings or conversions from other property types. The more contemporary, state-of-the-art facilities with the tallest warehouses and functional loading set the high water mark for new lease rates. With a 0.6 percent vacancy across an 862-million-square-foot market, tenants will continue to aggressively bid for any new big box space that comes to market. The South Bay and San Gabriel Valley markets are the only areas with more than 1 million square feet of development activity. Activity and Incentives …

April 15, 2022

Industrial Market Reports Midwest Midwest Market Reports Ohio

Another Bright Year Anticipated for Columbus Industrial Market

by Kristin Harlow April 14, 2022

With low vacancy, positive absorption and robust leasing and investment activity, the Columbus industrial sector is positioned to experience a substantial amount of demand to continue throughout 2022 after a record-breaking year in 2021. Last year set the tone for historic construction and absorption and the market is poised to continue its strong momentum. It is easy to look at the map and see why Columbus is such a great logistics hub given its prime location within a 10-hour drive within 47 percent of the U.S. population, fairly flat topography and direct access to major freeways. There is one big piece of the pie that doesn’t always get noticed, which is the economic development powers that are putting Columbus on the map. Jobs Ohio and OneColumbus have done an incredible job attracting businesses to the state of Ohio. The biggest investment in the history of Ohio was announced this January when Intel revealed plans on building a new chip factory in New Albany. This $20 billion investment really put all eyes on the Northeast part of Columbus. As it gets tougher to get entitlements and zoning in other industrial submarkets, New Albany seems to be carrying a significant amount …

April 14, 2022

Market Reports Nevada Retail Western Western Market Reports

Reno Retail Sets Record Highs, Lows

by Jeff Shaw April 12, 2022

By Bret Nicholson, Retail Specialist, Marcus & Millichap Reno’s retail sector is setting records as of February 2022. Vacancies are hovering near an all-time low of 4.9 percent, and asking rents have risen to new heights, averaging $1.72 per square foot on a monthly basis. Sellers are achieving cap rates comparable to those seen in core markets, resulting in sale prices that many would not have thought possible only a few years ago. A number of factors have contributed to the continued absorption of retail vacancies in Reno. On a local level, Reno now has roughly 150 percent more six-figure jobs compared to 2015. This allows for more discretionary retail spending. In addition, very high construction costs and development delays have forced businesses to consider repurposing existing retail space. For example, a 24 Hour Fitness shuttered at 6155 Neil Road, leaving behind a vacant 24,000-square-foot special-use building. Not long after the health club’s exit, the Coral Academy of Science began renovating the space and is now an operational elementary school. Despite many vacancies having been repurposed and filled since 2020, demand for retail space in Reno continues. About 265,000 square feet of new construction is expected to be completed in 2022, which will be …

April 12, 2022

Industrial Market Reports Southeast Southeast Market Reports Tennessee

Nashville’s Robust Industrial Market is Growing Toward the South and East

by John Nelson April 11, 2022

After several years in the top 10, Nashville was named the No. 1 “market to watch” in overall commercial real estate prospects, according to Urban Land Institute and PwC’s 2022 Emerging Trends in Real Estate report. Nashville surpassed its supernova competitors (markets with a population between 1 million and 2 million people) such as Raleigh-Durham, Phoenix, Austin and Charlotte. The report credits Nashville’s robust and sustained job and population growth, above-average levels of economic diversity and investment/development opportunities. In short, Nashville’s economy fared relatively well during the pandemic-induced recession, and its industrial market never slowed down. Nashville has been a top location for relocating and expanding industrial-using companies, as its location is unmatched for distribution. Fifty percent of the nation’s population lives within 650 miles of Middle Tennessee, with 24 states falling within that radius. This translates to a one- or two-day truck delivery time to more than 75 percent of all U.S. markets. Additionally, it is one of only six U.S. cities with three major intersecting interstate highways. Nashville’s economy is extremely resilient due to its diversified economy. However, Nashville is not immune to national trends that have affected multiple industrial markets. The cost of construction continues to increase, …

April 11, 2022

Industrial Market Reports Midwest Midwest Market Reports NAI Office Ohio

The Secret Is Out About Investment in Columbus, Ohio

by Kristin Harlow April 7, 2022

There was a time when an investment in the Columbus, Ohio commercial real estate market had to be justified to outsiders and required a higher return to attract investors. After all, it sits squarely in “fly-over country” in the heart of the rust belt. With the exception of getting a superior return, why would an investor choose Columbus, over say, New York or Chicago? But that’s all changed. Cap rates are now as low as, or lower than, other major markets. Investors have been driven to those markets, despite having a lower cap rate, because they knew rent growth was continuous and the sales price would appreciate over time. For decades, Columbus’ sales prices had remained stagnant due to a lack of increase in lease rates. However, over the past two years, lease rates have been rapidly increasing in the industrial market, and projections expect that trend to continue. The Columbus office market hasn’t seen the same rental appreciation — yet. But projections indicate that there will be rental appreciation in office as well, mostly due to increased demand and lack of speculative development over the past two years, but also due to rising land and construction costs. Because of …

April 7, 2022

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