The financial impact the COVID-19 economic shutdown is having on tenants and landlords is a difficult mix of immediate drastic reduction (or elimination) of revenue, along with little or no ability to forecast when the end will come. This combination of severity and unclear duration makes finding potential win-win compromises a real challenge for tenants and landlords in the metro Atlanta area. While deal pipelines across the industry have ground to a halt, companies, teams and individuals are using this sudden influx of time as an opportunity to take up important tasks that, while not producing revenue, will set up future opportunities. They are catching up on conversations, expanding their networks, engaging with social media, doing industry research, continuing their professional educations and learning new skills. Landlords, on the other hand, are having to take this challenge head on and are testing the waters with solutions like pause agreements, rent deferrals (in many cases, equivalent term is added at the end of these leases) and other creative ways to provide relief to their tenants while not endangering their own interests or those of their lenders. There’s no certainty that these issues won’t have to be addressed again, periodically, as the …
The Birmingham multifamily market demonstrated its evolving strength last year. Continued job growth and limited apartment inventory led to the area reporting its highest occupancy rate in 10 years (94.8 percent) and monthly effective rent advancing 1.8 percent annually to $984 by year-end. In the early months of 2020, we did not see any slowdown in terms of deal volume. Due to rising concerns around market volatility and ongoing impacts of the COVID-19 crisis, we are faced with uncertainty in terms of how the local Birmingham area, along with the rest of the country, will perform in the year ahead. It is difficult to predict market activity, but Birmingham has demonstrated positive trends worth noting. Catching investors’ eyes In recent years, the area’s employment growth and strong fundamentals have piqued investor interest. Out-of-state groups are increasingly venturing into Birmingham. This trend has led local developers to emphasize merchant-builds, actively constructing and redeveloping properties to fill this competitive demand. Off-market transactions have recently seen an increase in frequency as investors are able to be more aggressive on pricing, which is enhanced by this unprecedented interest rate environment. Across all asset classes, the Birmingham market has enticed investors with a variety of …
What a time to write an article on the state of the retail real estate market in Birmingham. A few short weeks ago this would have been a much easier task. The fundamentals of the Birmingham retail market are healthy and exciting despite the current health crisis and the fact that we have experienced very little population growth. I travel across the country regularly, and there is a national undercurrent about Birmingham that is exciting. Birmingham is spoken about nationally as a city with great food and quality of life, which are the types of things always said about a city prior to it hitting a tipping point. We expect that consumer behavior is going to be different coming out of the pandemic, and that the way retail and restaurant businesses operate will continue to adapt to that consumer behavior. Traditional developments Traditional shopping centers continue to be strong regional draws, with tenant mixes focusing on local and national brands. Lee Branch is one of the most successful in Birmingham. The Dick’s Sporting Goods and Golf Galaxy side-by-side concept opened in February at Lee Branch and is the first of its kind in the state. Discount retail, although not new, …
In 2019, the Greenville-Spartanburg industrial market added an unprecedented 33 buildings encompassing 10 million square feet of inventory, bringing the total market size to approximately 211 million square feet. Despite record-breaking new deliveries, absorption has kept pace at 9.6 million square feet the same year. This market is preparing for future growth with delivery of available buildings and land sites, as well as investment in infrastructure and the overall workforce. With the increased supply of Class A speculative space, the market has seen numerous company expansions and relocations away from its Class B product type. New, modern space provides the efficiencies and amenities companies desire (i.e. above 32-foot clear heights). In order to service customers’ consumption preferences, companies are making capital investments into automated processes that allow them to stay competitive in a rapidly changing supply chain. One of the earliest signs of momentum in 2020 was the announcement of South Greenville Enterprise Park and its first user investment, Vermeer. South Greenville Enterprise Park is the first industrial park to deliver to the Greenville market in 10 years. Primary investment has been focused on the S.C. Highway 101 and S.C. Highway 290 corridors due to demand drivers such as BMW …
It’s gearing up to be another solid year for Baltimore’s retail industry. Thus far, the first quarter has shown few surprises and has largely been a continuation of the success the sector saw in fourth-quarter 2019. Rent has remained relatively flat the past two years, outside of a few developments that have delivered, and we’re expecting more of the same this year. After a small bump in the road five years ago, the market has stabilized and retail vacancy in the Baltimore metro region remains tight. With limited new supply coming to market, landlords are focused on backfilling existing space. Class A and B properties continue to show healthy leasing trends, while Class C properties continue to be the value options for mostly local retailers. Baltimore metro’s primary retail corridors — York Road, Reisterstown Road, the core of downtown Baltimore, Columbia, White Marsh and Annapolis — continue to thrive. We’re also seeing strong growth along Ritchie Highway from Pasadena to Glen Burnie, buoyed by a string of new store openings at the Pasadena Crossroads Shopping Center, which is anchored by Sprouts Farmers Market, Ulta Beauty, T.J. Maxx, DSW, LA Fitness, Party City, Hobby Lobby, HomeGoods and Gardiner Wolf Furniture. In …
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Underappreciated Multifamily Markets: Maryland Edition
Although attractive multifamily investment opportunities may still be available in gateway cities, investors increasingly are sourcing deals in secondary markets where land and asset prices are lower, cap rates a bit more generous and an unpicked gem of value-add fruit can still be found on the vine by intrepid late-cycle buyers. Parties looking to replicate past successes may not have to look too far afield as Maryland markets — overshadowed of late by Washington and Philadelphia — offer much of what they seek with perhaps a lower degree of risk. In the last decade and particularly the last three years, the catalyst for economic growth in the Capital Area has shifted from government to high-tech services. As the tide turned, the focus of commercial real estate activity moved south toward Washington’s central core and Northern Virginia. In the process, the Maryland suburbs lost some of their star power. The diminished status of Montgomery and Prince George’s counties wasn’t entirely a matter of perception. Suburban Maryland apartment performance materially underperformed national averages in 2017 and 2018, and the spread widened between cap rates applied to Maryland properties on one hand and District and Northern Virginia assets on the other. Same-store property …
Industrial leasing activity in the greater Baltimore metropolitan region last year began with a whimper thanks to the federal government shutdown in January and February, but quickly gathered steam and never looked back, even in the final days to close out the year. In fact, the pace was record-breaking and historic by any measurement, with more than 9.5 million square feet of space absorbed. This figure was approximately 40 percent higher than 2018, which was also a tremendous year. There is more good news locally for companies that make their living developing warehouse and industrial space, brokers who match end-users for the available spaces and related professionals. Central to this activity is that fact that lots of people live in the Combined Statistic Area of Baltimore-Washington, D.C. region, which is the fourth largest MSA in the country and is still growing. A certain Seattle-based online retail company is establishing its second headquarters just down the road in Northern Virginia and its positive impact is being felt throughout the region. The central Maryland marketplace boasts an enviable transportation network led by major north-south axis Interstate 95, is within close proximity to several major seaports (Baltimore, Wilmington and Philadelphia) and one-third of …
As real estate becomes more operational, a trend has emerged of major investors migrating away from big metros into secondary and tertiary markets. Occasionally, those markets move out of the shadows of their larger neighbors and acquire their own identity. Enter Columbia, Maryland, which initially attained national attention and acclaim as one of the first master-planned communities in the United States. Columbia is now in the midst of a major transformation. Built from the ground up in then-bucolic Howard County, Columbia was founded by developer James Rouse in 1967. Strategically located between Baltimore and Washington, D.C., the now 53-year-old community is blossoming with its own talent creators, talent attractors and 14 million square feet of new live-work-play development in a downtown transformed by The Howard Hughes Corp., a successor to The Rouse Co. The beginnings of Downtown Columbia’s emergence include the Merriweather District, which opens this spring. The first of three neighborhoods planned for downtown Columbia, the Merriweather District is being developed as a regional hub of culture and commerce. Talent creators The Howard County market is already home to cybersecurity incubators and cyber-focused venture capitalists like DataTribe and AllegisCyber. These companies consistently house and fund entrepreneurs developing innovative approaches …
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Washington’s Tech Boom Changes the Multifamily Investment Calculus
Washington and Northern Virginia are among the nation’s most expensive places to rent an apartment, which in part explains the billions of dollars being spent on apartment construction there. But Capital Area asset returns in the post-recession era haven’t clearly supported these decisions. From 2013 to 2018, rents in Washington and NoVA increased at respective compound annual rates of 3.2 percent and 2.6 percent, tabulating Reis data, materially slower than the 4.7 percent average growth recorded by the 50 largest U.S. apartment markets. Likewise, occupancy trends were no better than average, muted by heavy supply, suggesting that Washington NOI growth in most cases was measurably slower than in alternative markets. But everything changed last year. Although Washington has been a technology player for decades, the region’s strengths fell primarily in telecom and defense, markets in which proximity to government was a competitive advantage. But the region’s growing prowess in private applications of digital technology reached critical mass in 2019 with Amazon’s decision to site its East Coast headquarters in Northern Virginia, specifically with a view toward tapping its deep reservoir of high-tech talent. The impact on economic growth in the capital is only beginning and seems likely to fundamentally alter …
The Charlotte industrial market continues to see strong construction activity, as developers look to tap into demand for modern space. Approximately 12.7 million square feet has been delivered in the last two years, most notably in the Cabarrus County, Stateline and Airport/West submarkets. Overall construction in the pipeline jumped by 32 percent from third-quarter 2019 to fourth-quarter 2019, reaching 7.2 million square feet. As the first quarter of 2020 takes shape, this development expansion should continue, with an expected 7 million square feet of additional deliveries by year-end. Overall leasing activity in Cabarrus County was strong in 2019, with vacancy declining from 15 percent to 11 percent, which is notable given the 4 million square feet of construction seen in that submarket in the past two years. The Cabarrus County vacancy rate is set to decline significantly when two large deals, totaling more than 800,000 square feet, are factored into the statistics. Once Pactiv (441,000 square feet) and Reynolds (360,000 square feet) are incorporated into the research, the rate will decline to 5.7 percent, as we expected going into year-end. This activity will quickly tighten up the submarket and will open the door for new development. The recent high vacancy …