Southeast Market Reports

Despite Industrial Market Slowdown in Baltimore, Industry Pros Remain Optimistic

by John Nelson February 5, 2024

While there has been a discernible dip in the volume of industrial leasing activity occurring in the greater Baltimore metropolitan area this past year, optimism remains high among owners and investors of this asset class given the diminishing volume of new product under construction, the still low 7.4 percent overall vacancy rate, record high — yet stabilizing — average asking rents of $10.54 per square foot net and the fact that 10 million people are not likely to soon move away from the Baltimore-Washington, D.C. corridor, the fourth-largest combined metropolitan statistical area in the country. Oh yes, spirits remain high following the Baltimore Orioles’ underdog ride to the top of the American East standings this summer. Never underestimate the power of a professional sports franchise to energize an entire region. The metro Baltimore industrial market consists of more than 3,600 buildings, totaling more than 266 million square feet of space that includes flex and industrial Class A, B and C buildings. Year-to-date, the market has yielded negative absorption of approximately 1 million square feet of space, including nearly 300,000 square feet this past quarter. The bad news of GXO Logistics shuttering a 571,000-square-foot distribution center in Harford County and laying …

February 5, 2024

District of Columbia Market Reports Multifamily Southeast Southeast Market Reports

D.C. Multifamily Market Performs Well by Building on Rock-Solid Foundations

by John Nelson January 29, 2024

The Washington, D.C., metro area, known for its steady and stable economic foundation, stands at the forefront of a transformative period in the U.S. commercial real estate market. Amid the backdrop of an evolving macroeconomic market, it’s essential to recognize the adaptability and resilience of the metro D.C. area’s multifamily market. While recent capital market fluctuations continue to impact asset pricing across multiple sectors, the region’s fundamentals and property level performance have remained strong. According to Berkadia’s third-quarter multifamily market report, rent is up 3.6 percent in the District. Many properties are experiencing strong rent growth, which is anticipated to continue as there is a complete lack of future supply and the bulk of the apartment supply has delivered and is currently in lease-up. While some regions have headwinds that are cause for some investor caution, particularly regarding regulatory concerns, other areas like Northern Virginia are capturing significant interest from buyers and showcasing the region’s ability to still command buyer demand. This is, in many ways, the recurring narrative for the D.C. metro region: resilience supported by concrete fundamentals. Strong foundation In the D.C. metro area, the decline in supply is highly likely to continue to drive a noteworthy increase …

January 29, 2024

Georgia Industrial Market Reports Southeast Southeast Market Reports

Emerging Demand and User Trends Propel Atlanta as an Industrial Hotspot

by John Nelson January 22, 2024

Atlanta’s industrial sector and its historically strong performance have fortified the city as a strategic Southeast location and gateway market nationwide. Activity, which has decreased since peak demand during the COVID-19 pandemic, is now returning to normalized levels. The net new requirement pipeline remains robust primarily due to the influx of manufacturing, advanced manufacturing, life sciences, automotive, alternative energy and data center projects. How owners and tenants invest in industrial properties has also shifted. Owners are seeking properties with short weighted average lease terms and investments below replacement cost. Meanwhile, occupiers are making moves to crisis-proof their networks with onshoring and nearshoring of production that was previously conducted overseas, and they’re adjusting their overall supply chain and logistics strategies to diversify and avoid dependence on one region or vendor. Players in the market remain cautiously optimistic, which has subdued demand, but that is expected to be short-lived once macro-economic conditions stabilize. High inflation and rising interest rates over the past 12 to 18 months have significantly contributed to decreased demand in Atlanta. However, with continued population growth and Atlanta’s central location in the Southeast, the metro area’s compressed demand will be short-lived. With that said, Atlanta’s industrial market remains strong …

January 22, 2024

Georgia Market Reports Multifamily Southeast Southeast Market Reports

Following Years of Historic Growth, Atlanta’s Multifamily Market Begins to Cool

by John Nelson January 15, 2024

In recent years, Atlanta has become a top choice for corporate relocations, causing double-digit multifamily rental rate growth, an increase in pricing and a general benefit to the industry as a whole. In 2021, rental rates rose at an average of 11.7 percent and last year that number reached 16.8 percent. As a result, from 2021 through much of 2022 the metropolitan area experienced a record amount of investment activity, with $20.8 billion and $14.8 billion trading hands, respectively. During the first six months of 2023, however, transaction activity slowed and began returning to more typical levels, dropping approximately 82 percent year-over-year from those highs. Much of the decline in transaction activity experienced today can be accredited to the Federal Reserve’s sizable interest rate hikes over the past 18 months, resulting in a significant expansion in cap rates and a divide between buyer and seller pricing expectations. During the first half of 2023, approximately 54 transactions occurred, compared to 172 recorded for the same period last year for assets valued at $5 million or more. Much of this activity was driven by smaller deal sizes and private capital as institutional investors embrace a “wait and see” agenda in hopes of …

January 15, 2024

Industrial Louisiana Market Reports Southeast Southeast Market Reports

New Orleans Industrial Market Remains Subdued, But Two Projects Are Breaking the Ice

by John Nelson January 8, 2024

For the past decade, the inventory of industrial space in the Greater New Orleans market has not been large enough to meet demand. Comprising mostly older product that would be considered Class B or C in more populous markets, New Orleans-area warehouses have an overall vacancy rate of less than 2 percent. The demand has resulted in rising rental rates. Development of new product is warranted, but a combination of factors has prevented new projects from being built. Finally, in 2023, despite increased construction costs, high insurance costs and rising interest rates, projects are underway that will accommodate the demand in a market that is long overdue for new, modern warehouse product. Despite having all the ingredients to be a major industrial market, including one of the country’s largest port systems, warehouse infrastructure in New Orleans is dated, mostly due to a lack of suitable land for development. Institutional ownership and investment here is limited to select groups that, while chasing higher yields, took the time to learn the market’s dynamics and build local relationships. Historically, as brokers and tenants bemoaned a lack of product, national developers were reluctant to deploy capital to speculate in an unfamiliar and unproven locale. …

January 8, 2024

Louisiana Market Reports Restaurant Retail Southeast Southeast Market Reports

Retailers in New Orleans Leverage Unique Experiences, Both In-Town and Suburbs

by John Nelson December 18, 2023

The New Orleans retail market is in a state of flux like other markets across the country. The retail experience is changing for the end user, with an increase in online shopping, “try before you buy” customers and quicker walkthroughs. Retailers are left in an odd position, caught between experiential interactions with customers and trying to have them remember to purchase later at home. While the retail market is changing, the Greater New Orleans area is different due to the scarcity of space available for new construction and a stable flow of stores closing or relocating. Our market creates a streamlined experience where consumers have “retail corners” they can visit to shop — such as downtown New Orleans, especially the iconic streets of Canal and Magazine — but also the suburbs that include Metairie, Elmwood and the Westbank. With the concentrated shopping setup of the market, customers can shop more efficiently, and retail investors see the New Orleans market as a more demanding and creative place to build and open stores. Submarket by submarket The retail customer in New Orleans detests spending unneeded time in the car, so when customers can shop locally, get what they need and get it …

December 18, 2023

Louisiana Market Reports Office Southeast Southeast Market Reports

Shell’s Move Exemplifies Flight to Quality Trend for Office Users in New Orleans

by John Nelson December 11, 2023

Shell’s announcement in mid-September to relocate its home from the Central Business District (CBD) of New Orleans to the planned 50-plus acre River District rocked the office market. The oil and gas giant has been in the Hancock Whitney Center (formerly One Shell Square) since 1972, and will be rightsizing in a Class A mid-rise office building that will anchor the River District. The planned building will be approximately 142,000 square feet and home to 850 to 1,000 employees. What a huge win for the planned River District and city of New Orleans. However, the void left in Hancock Whitney Center raises the question, what will building ownership group do with all of the space that Shell vacates? If the current occupancy rate stands, Hancock Whitney Center will have over 500,000 square feet of vacant space. Elsewhere, Entergy is in the process of a major contraction in its building located at 639 Loyola Ave., and earlier this year, Freeport McMoRan vacated over 100,000 square feet of space at 1615 Poydras. Both buildings are also located in the CBD. A number of office towers have loans maturing within the next 24 months, and the logical assumption is that securing financing will …

December 11, 2023

Louisiana Market Reports Multifamily Southeast Southeast Market Reports

New Orleans Multifamily Market Contends With Inflation, Interest Rates, Insurance

by John Nelson December 4, 2023

The volatility in the capital markets over the past 12 to 18 months has wreaked havoc on many aspects of the economy, and real estate has not gone unscathed. Unlike the retail and office sectors whereby there is a fundamental shift in how people work and shop, housing is a basic need. The equilibrium between supply and demand in metro New Orleans’ multifamily market is still in sync. It would however be naïve to suggest there are no challenges that are affecting our real estate market. The “three dreaded Is” (i.e. inflation, interest rates, insurance) is not a Halloween mask but a euphemism that crystallizes the challenges multifamily owners are faced with both locally and nationally. Each of these factors singularly are powerful forces, yet the trifecta is playing a role in the current state of our metro market. However, despite these challenges, the regional multifamily market has stable occupancy with most submarkets reporting levels in the 92 to 94 percent range. Overall monthly rental rates average $1,263 with rents ranging from a low of $1,000 in Eastern New Orleans and Algiers to rents in the Downtown market as high as $3,000. Once again, the barriers to entry (lack of …

December 4, 2023

Georgia Industrial Market Reports Southeast Southeast Market Reports

Hyundai Plant, Port of Savannah Spur Demand for Industrial Activity in Savannah

by John Nelson November 27, 2023

Savannah’s industrial real estate market is experiencing exceptional growth and now totals 113.7 million square feet, of which 98.2 million square feet (86 percent) is dedicated to bulk distribution (tracking facilities sized 100,000 square feet or larger). Year-to-date net absorption as of the end of the second quarter was 6.3 million square feet, which suggests another solid year ahead. Additionally, the vacancy rate remains low at 4.6 percent, a historically favorable level. The development community has been quick to respond to robust demand, delivering 19 buildings totaling nearly 10 million square feet in the second quarter, with the majority of it already leased. The market is primed for additional growth, with a significant amount of new construction underway. More than 16 million square feet is currently under construction, not including the Hyundai plant that will span 17 million square feet itself, along with related supplier facilities covering an additional 1.9 million square feet as of this writing. The $5.5 billion Hyundai plant will employ 8,100 people and be the company’s first dedicated electric vehicle (EV) mass-production plant. It is expected to begin full production in early 2025 and will produce over 300,000 vehicles per year. The effects of Hyundai on …

November 27, 2023

Kentucky Market Reports Office Southeast Southeast Market Reports

Office Tenants Are Seeking Class A Spaces in Downtown Louisville, Suburbs

by John Nelson November 20, 2023

Like many regional peer cities, there is a clear bifurcation between office leasing activity in Louisville’s downtown and suburban office markets. Downtown Louisville has been slower to recover from the double gut-punch of the COVID-19 pandemic and local social unrest that kept workers away from the office in 2020, with overall vacancy stubbornly exceeding 20 percent for most of this year. Much of the vacancy has been driven by health insurer Humana, by far the largest office occupier in downtown Louisville, which has let several large Class B office leases expire as it continues to consolidate its workforce into properties the company owns. Year-to-date, downtown leasing activity totals 115,000 square feet, which is up 58 percent compared to this time last year, while overall absorption has swung sharply lower at negative 237,000 square feet. The relative oversupply of available office space has created a very “tenant-friendly” dynamic downtown, with landlords becoming increasingly aggressive to court leasing activity. More so than their suburban counterparts, downtown landlords are offering outsized incentive packages to tenants, including rental concessions, turnkey construction delivery of new tenant space, termination options and rental abatement periods that in some cases extend beyond one year. In exchange, downtown tenants …

November 20, 2023

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