Market Reports

Roundtable: Brokers From NAI Partners Discuss Austin’s 2020 Performance and 2021 Expectations

by Taylor Williams March 17, 2021

As one of the fastest-growing markets of the past decade that continues to make headlines for high-profile developments and corporate relocations, Austin has had some economic and demographic cushion from the headwinds brought on by COVID-19 over the past year. While leasing and investment sales activity essentially froze at the onset of the pandemic, as it did in virtually every major U.S. market, Austin’s strong growth in office-using jobs, natural pace of in-migration and vibrant culture all contributed to a swift and stable rebound. With a full year of pandemic living now under the belt, it’s a good time for a by-the-numbers evaluation of the public health crisis’ impacts on various property types within the state capital. In addition, it’s an appropriate point at which to reflect on the degree to which pandemic-accelerated trends like online shopping and working from home are going to influence future deals and projects. These shifts in consumer behavior have major implications for all commercial asset classes. To that end, Texas Real Estate Business conducted a roundtable discussion with leasing and investment sales professionals representing multiple property types at the Austin office of NAI Partners. What follows are their edited responses: Tyler Jaynes: Industrial’s Staying …

March 17, 2021

Industrial Market Reports Massachusetts Northeast Northeast Market Reports

Strong Fundamentals Drive Capital into Boston Industrial Market

by Taylor Williams March 16, 2021

By Brian Pinch, managing director, Newmark On a national level, the industrial market continues to perform well amidst the coronavirus-induced market correction that has impacted other asset classes. Industrial fundamentals ended 2020 on solid footing, with outsized demand, rising rents and a healthy supply pipeline. Despite the impacts of COVID-19, key logistics hubs like Los Angeles and the Inland Empire are doing well, as are smaller metros like Boston. The continued shift towards e-commerce and online shopping, as well as a greater emphasis on strong distribution networks and supply chains, are driving activity within tertiary markets as well. Combined with sustained cap rate compression, such positive fundamentals have led to increased investor interest in the industrial asset class. Capital that was previously allocated for other property types is now flowing into the industrial market, and low interest rates are giving buyers increased purchasing power. As a result, pricing for industrial product continues to climb across many metros, including greater Boston. In fact, greater Boston’s industrial market maintains one of the most dynamic investment landscapes in the country, as historically tight vacancies and rapidly rising rents attract record levels of capital. Though the metro-wide vacancy rate is below 6 percent — …

March 16, 2021

Market Reports Retail Texas Texas Market Reports

The Houston Retail Market: What’s Changed After A Year of the Pandemic

by Taylor Williams March 15, 2021

By Shawn Ackerman, president of Houston retail, Henry S. Miller Brokerage COVID-19 is on everyone’s mind. From landlords to tenants, all are desperately trying to predict the future, because the past has destroyed many businesses. Retailers such as Luby’s, Chuck E. Cheese, Lane Bryant, 24 Hour Fitness, Gold’s Gym, Pier 1 Imports and Tuesday Morning all filed bankruptcy in 2020. Not only did numerous tenants file for bankruptcy, but many more are also barely holding on. What does the future hold for Houstonians? Only time will tell. Until the market stabilizes, we will continue to compare notes with others in the retail sector on how best to navigate. Of course, market uncertainty is not only a retail issue. The unemployment rate, while down considerably from the double-digit numbers seen at the onset of the pandemic, remains a cause for concern. Laid-off workers don’t have the disposable income they may have had while employed. Many people have thus curbed their shopping habits. Until the job market gains traction, retailers will have to be patient to see the long-term effects of this roller coaster ride. Mall Struggles Continue Heaviest hit in the retail section have been malls. With anchors like J.C. Penney, …

March 15, 2021

Industrial Market Reports Southeast Southeast Market Reports Tennessee

Nashville Shifts in Location, Size to Support its Red-Hot Industrial Market

by John Nelson March 15, 2021

“When you’re hot, you’re hot.” These old lyrics from Jerry Reed ring loud and clear these days for industrial real estate in Nashville and Middle Tennessee. Over the past five years, Nashville has been on a tear with industrial activity. At the start of 2021, Nashville appears to be pushing the fast forward button, even with COVID-19. There is a growing list of buyers, developers and users looking to enter the Nashville industrial market at unprecedented levels. With that said, can the supply of industrial product and land keep up with the demand? Where will the product be built? And what will it look like? Historically, Nashville has never seen a large supply of speculative big boxes built in comparison to our neighbors such as Memphis and Atlanta. Unless a build-to-suit, larger buildings have had a longer lease-up time in comparison to our neighboring cities. Nashville is a meat and potato market with the vast majority of our deals in the 75,000- to 150,000-square-oot range. Sure, like any market today we have seen our large third-party logistics deals with the likes of Amazon, Geodis and FedEx leading the way. Typically, our market may see one or two of these larger …

March 15, 2021

Industrial Market Reports Self-Storage Texas Texas Market Reports

Dallas Self-Storage Development Maintains Slow But Steady Construction Trajectory

by Taylor Williams March 12, 2021

By Mirela Mohan of STORAGECafé The self-storage industry closed 2020 on an upward path, seeing stable or rising rental rates and elevated construction activity across the board after an uncertain year. According to our data, new construction stayed on a steady trajectory throughout the year, with 49.4 million square feet of new product added nationally — slightly less than the volume of new development in 2019. This came as a natural consequence of the high existing inventory which, combined with the shock of the pandemic, eventually led to the asking rate plunge in the first half of 2020. Rates Plunge, Then Revive The existing high inventories put downward pressure on asking rates in 2020, and the arrival of the pandemic only accentuated the existing trend. However, after rents bottomed out at $112 per month in May, street rates started picking up. By December 2020, national street rates had reached $118 per month, a 3.5 percent year-over-year increase. This slow but steady supply growth was mostly linked to consistent demand that emerged from both traditional sources such as moving and downsizing, as well as from new sources created by last year’s disruptive events. For example, college students began to need short-term …

March 12, 2021

Industrial Market Reports Michigan Midwest Midwest Market Reports

Gotown: Detroit’s Industrial Market Looks to Build off Momentum from 2020

by Kristin Harlow March 11, 2021

By Doug Fura, Farbman Group With 2020 in the rearview mirror, hopes for a healthier and more prosperous 2021 seem likely to lead to economic and development surges in markets across the country. In Detroit, where the industrial market has been a clear bright spot in a pandemic-altered development landscape, industry professionals remain optimistic that development momentum won’t be slowing anytime soon. How realistic is that optimism, where does industrial stand right now and what’s in store for Detroit? No signs of slowing down The Detroit industrial real estate market is easily the tightest I’ve seen at any point in the last 40+ years. We are seeing speculative construction for the first time in over a decade. Even more impressive is the fact that, for the most part, that space is being leased up before the buildings are completed. While construction costs are at record highs, they are still dramatically lower than in many/most other large markets across the country. E-commerce influence Who and what is driving that demand? The 500-pound gorilla is Amazon, but the boom in e-commerce extends well beyond one company, no matter how influential. The market was already evolving prior to the pandemic, but COVID-19 has …

March 11, 2021

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Phoenix’s Industrial Market Remains Busier than Ever

by Jeff Shaw March 8, 2021

By Peter Batschelet, Principal, Lee & Associates In a year of unknowns, hypotheticals and uncertainties, the Phoenix metropolitan area and Maricopa County were the complete opposite. In fact, 2020 was a record-setting year in this region’s industrial market for several reasons. For starters, there was nearly 14 million square feet of new construction delivered. This is twice as high as any year in the past decade and roughly equivalent to the deliveries from the past two years. In addition, Phoenix set record absorption numbers to the tune of, ironically, 14 million square feet. Meanwhile, vacancy rates have decreased to roughly 7.7 percent and rents continue to see moderate growth. There does not appear to be an end in sight to the impressive growth. There is an additional 15 million square feet currently under construction. This space is both speculative development and build-to-suit opportunities from household names like Merit Partners, Prologis, Trammell Crow Majestic Realty and others. Ecommerce sales represent roughly 15 percent of the national retail industry, which means there is plenty of capacity for additional investment and capital into the Greater Phoenix area based on our population and anticipated growth. There remains plenty of upside for the bulk …

March 8, 2021

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Triangle’s Apartment Demand Pushes to the Region’s Suburban Markets

by John Nelson March 8, 2021

The impacts of COVID-19 on the U.S. multifamily market vary significantly across metro areas. Not surprisingly, the nation’s denser gateway markets have been hardest hit, while secondary and tertiary markets have fared better. In a reversal of pre-pandemic trends, suburban locations have gained favor over urban submarkets from both renters and investors. As many employees continue to work from home, larger and more affordable units in suburban submarkets have become more appealing. Elevated construction costs are also a factor, driving garden-style development versus more costly podium construction. The Triangle’s suburban submarkets are experiencing the strongest construction activity, most notably in the North Cary/Morrisville submarket, where 1,784 units averaging over 1,000 square feet per unit are currently underway. As ongoing work-from-home arrangements prompt more tenants to consider living further from the Triangle’s primary employment centers, developers are increasingly willing to look at sites in outlying communities such as Wendell and Clayton. Demand is expected to return to the Triangle’s urban submarkets as employees return to the office and retailers and restaurants fully reopen, but the recovery in these areas is likely to be protracted. Solid footing The Triangle’s multifamily sector ended 2020 on relatively firm footing despite a tumultuous year. Both …

March 8, 2021

Market Reports Michigan Midwest Midwest Market Reports Retail

Hardships Met With Innovation for Detroit’s Retail Market

by Kristin Harlow March 4, 2021

By Evan Lyons, Encore Real Estate Investment Services Call it what you will — Motown, the Motor City, the Comeback City — by any name, the city of Detroit has long been a place of possibilities. A smart student in the school of hard knocks, Detroit has teetered on failure, yet still managed to graduate with high marks. Best known as the birthplace of the automobile and home to Motown music’s Hitsville USA, Detroit went from being the driver of American capitalism to a city in ruin. It endured population decline in the ’50s, rioting in the ’60s, the collapse of the auto industry in the late ’70s and ’80s, and in 2013, the largest municipal bankruptcy in U.S. history, yet somehow emerged as a hot spot for high rollers and hipsters alike. As 2019 winded down, Detroit and the surrounding Southeast Michigan area boasted a healthy economy. The automotive industry, a key driver of the region, posted better than expected sales of cars and trucks in the fourth quarter of 2019, beating projections. Employment was on the uptick both in the city and across the state. Southeast Michigan appeared positioned for growth in 2020. The same held true for …

March 4, 2021

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Inland Empire Office Demand Stagnates, Medical Office Leasing Remains Strong

by Jeff Shaw March 1, 2021

By Drew Sanden, Senior Managing Director, Newmark The Inland Empire office market boasted very strong fundamentals heading into 2020. The vacancy rate across the 28.3 million-square-foot base was 9.5 percent, lease rates were reaching peak levels and developers were again exploring larger spec developments. Like many markets across the U.S., COVID-19 has greatly impacted the Inland Empire’s office market. Office usage, demand, absorption and leasing transactions are down year-over-year. Large back-office transaction volume has been the most impacted as companies struggle to manage the social distancing guidelines. With that said, the suburban nature of the Inland Empire has helped insulate the office market. The combination of affordable housing (relative to Southern California’s coastal communities) and remote work opportunities have strengthened the overall workforce. This pandemic has acted as an accelerator for the hub-and-spoke trend where companies have larger regional offices in CBDs like Los Angeles and Irvine, while maintaining smaller satellite offices in suburban markets. We’ve seen an influx of small satellite offices in Corona, Ontario, Rancho Cucamonga and Riverside. Demand for medical office building (MOB) leasing and sales has remained strong. This trend was highlighted with the pre-sale of two medical office buildings at the Rincon in Chino Hills, …

March 1, 2021

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