The greater Baltimore metropolitan region achieved positive absorption of more than 6 million square feet of warehouse and industrial space in 2017, smashing the previous record by several million square feet and triggering yet another wave of speculative development activity. While on the surface there seems to be no end in sight to this unprecedented level of activity as we cross the midway point of 2018, there does exist several warning signs that are worth monitoring. But, who wants to dwell on anything remotely negative, when experiencing a seemingly end-less supply of 600,000-square-foot requirements? A Major Industrial Market The Baltimore-Washington, D.C. region is considered the fourth largest MSA in the country with more than 10 million people in the Combined Statistical Area. Several major seaports are within close proximity, approximately one-third of all consumers residing in the United States can be accessed within a one-day truck drive and developable land is still avail-able, although an increasing number of projects involve the demolition of unusable product to make way for the modern variety. Local fundamentals mirror conditions found in “white-hot” sections of the country, including the Inland Empire in Southern California, Northern New Jersey and sections in Pennsylvania where Interstates 81 …
Continued job growth, coupled with a 4.3 percent unemployment rate (down from nearly 9 percent in 2010) in the greater Baltimore metropolitan region are the primary reasons giving real estate development companies the confidence to construct speculative commercial office buildings in select submarkets throughout central Maryland. After delivering more than 1 million square feet of space in Baltimore City, another 1.6 million is presently rising in the downtown skyline. Industries including financial services, medical and healthcare, education, cybersecurity and manufacturing continue to exhibit excellent health, and a location approximately 40 miles from the center of Washington, D.C., remains one of Baltimore’s most valuable assets. Below is a quick scan around the entire metro area: Canton Merritt Properties announced plans earlier this year to construct a 20-story, 200,000-square-foot speculative office building along Boston Street. Previously announced, but yet to begin just several streets away, is Corporate Office Properties Trust’s $1 billion project containing more than 1 million square feet of commercial office and retail space. Since the opening of The Shops at Canton Crossing, a shopping center developed by 28 Walker Associates several years ago, this submarket has experienced a retail renaissance, although the inclusion of new commercial office product is …
A number of high-profile retail and mixed-use developments throughout the greater Baltimore metropolitan area have been stuck in neutral over the past few years, with issues rang-ing from changes to the local real estate environment, construction issues, leasing challenges related to store closings and consolidations, corporate reevaluations and the constantly shifting tastes and shopping habits of the Baltimore consumer. Successful retail projects must en-joy a string of positive outcomes (as well as luck), including support from retailers, the capital markets and the local community. Below is a rundown of local retail or mixed-use developments that have recently sprung to life, as well as some that still remain on the starting block. Mill Station in Owings Mills Owings Mills Mall opened to sig-nificant fanfare in 1986 and stood face-to-face with a wrecking ball in 2016. Numerous ownership groups, design iterations and new retail projects emerging within close proximity kept pushing its reincarnation back further. Finally, the renderings of the “de-malled” project were unveiled to the public last fall, along with announcement of several leasing successes. This summer, construction remains in full bore leading up to an expected fall opening of Costco, followed by Lowe’s Home Improvement, Home-sense, Burlington and Five Below, …
For years, others have considered Baltimore a second-tier market on the Interstate 95 Corridor, lacking the excitement that cities like Philadelphia and Washington, D.C., offer. Not so any more. Baltimore has evolved into a top-tier housing market that is nationally recognized by the investment community. No longer a collection of relics from the “rust belt” banking town that it was decades ago, Baltimore is now a mosaic of adaptive reuses and a hot-bed for tech jobs. The Charm City is an incubator for creativity and entrepreneurship that sprouts from the world-renowned medical and educational institutions such as Johns Hop-kins and the University of Maryland Baltimore. As a result, net absorption for new multifamily units in 2017 surpassed city records and continues to grow at unprecedented rates. There are many factors that contribute to strong levels of demand in a market, such as job growth, affordability and developers creating attractive space targeting all demographics. Baltimore’s evolving job market continues its rapid expansion, driven primarily by “eds and meds.” The sector experienced 19 percent growth over the 10-year average and expand-ed 2.5 percent in 2017. Residents specifically target areas where they can live, work and play, and with an expanding job market, …
The 195 million-square-foot Washington, D.C., metropolitan industrial market features various sectors and centers of demand across the region. The overall market has been extremely healthy, with unique forces impacting the area’s primary regions of Northern Virginia, Suburban Maryland and Washington, D.C. The overall metro market expanded between first-quarter 2017 and first-quarter 2018. Net absorption in the period was 1.7 million square feet, albeit a significant slowdown from the previous 12-month cycle (4.2 million square feet). After falling significantly during the past five years, vacancy remained relatively flat in first-quarter 2018 and settled at 6.8 percent, a 10-basis-point drop year-over-year. A lack of available space limited opportunities for occupancy gains but allowed owners to increase asking rents. The average asking rent rose sharply to $10.04 per square foot, up from $9.58 per square foot one year earlier. Of the 1.9 million square feet of new supply under construction, 1.3 million square feet was in Northern Virginia’s less constrained but in-demand Loudoun County. Overall new supply was 55 percent preleased at the end of the first quarter. The Washington metro industrial market inside the Interstate 495 Beltway contrasts in many ways to the market outside the Beltway. The most significant difference is …
Companies looking to attract and retain talent are now offering top amenities, a modern office space and a healthy work environment with a sense of community. Employees are a company’s most vital asset, and firms are willing to pay a higher rate for office space if it provides a place that employees want to work. One of the trends this year in commercial office space is enhancing the work environment. According to a recent Pew Research Center analysis, millennials have become the largest generation in the U.S. workforce. To attract today’s workers, office users must offer an overabundance of amenities. Companies are now providing gaming lounges that include video games, foosball, air hockey and darts. They are also offering napping rooms, coffee shops with baristas and even onsite bars with wine and craft beer on tap. This type of atmosphere enhances employee interaction and provides the employee a place to relax while at work. Technology allows employees to be more efficient, but it will never replace the connection that happens with face-to-face conversations. Companies are looking to create an atmosphere where employees can collaborate throughout the workday, which in turn has a positive effect on worker productivity. The key to …
Several Carolinas markets continue to top national lists for job and population growth, particularly Charlotte and the Triangle. The quality of living and strong fundamentals draw both millennial renters and empty nesters, with no slowdown in demand in sight. In turn, capital continues to pour into the region’s multifamily sector as investors chase higher yields and lower supply pressure while cap rates linger near historical lows. Multifamily Momentum With the record-setting pace of single-family pricing in these markets, renting remains a more attractive option. Developers are responding accordingly and now build product squarely aimed at specific renter demographics. Specifically, developers have raised the level of quality and amenities in the suburban product similar to that of the urban infill movement earlier in the cycle. Strong demographics in these locations produce a renter accustomed to a high level of quality in the unit interiors while also placing value on the convenience and quality of onsite amenities. That’s because empty-nesters are challenging a singular focus on millennials. To many developers’ surprise, the active-adult demographic has shown up to rent much of the luxury product in both the urban core and suburban locations. Steady Inventory Most data providers that track new supply do …
As demand for e-commerce and corporate distribution space continues to drive supply chain expansion in the Southeast, many developers are designing facilities to accommodate the truck-dependent, labor-driven operations present today and for the near-term. While robotics and automated vehicles are exciting to dream about, the reality is that these innovations are not expected to impact industrial building design any time soon in the Southeast. Modern industrial buildings that can support heavier than average employee parking needs while also providing abundant trailer storage are the standard for new projects. At the same time, these buildings need to support advanced technology, automation and extensive stacking and sorting operations. By building with an eye toward long-term tenant needs, developers are working to differentiate themselves in this highly competitive environment. These trends are particularly apparent in the Charlotte market, where developers have added 4.5 million square feet of industrial space over the past year. With a 5.3 percent vacancy rate in the first quarter of 2018, the market is well positioned to absorb the additional 4.7 million square feet of projects in the pipeline. Of that total, 62 percent is either preleased or set to be owner-occupied. Modern Design Demands At the core of …
It’s safe to say that the Jackson MSA, as a whole, responds slower to national trends than the vast majority of markets in the United States. In regards to the economic recovery, Jackson is about two years behind the national economy post-recession. The retail market is just now moving from the recovery phase and into the expansion phase of its growth cycle, which is evidenced by decreasing vacancy rates and stabilizing lease rates. A limited amount of new construction has been a main driver for absorption in this area. There is approximately 35 million square feet of retail inventory in the Jackson MSA, with a moderate amount of new construction scheduled to deliver in the next 12 months. The first phase of expansion for the retail market is beginning to occur and is expected to gain in strength over the next 12 to 18 months. From an investment sales standpoint, Jackson has seen continued interest and stable transaction velocity from local and national retail investors in the last 12 to 24 months. As cap rates have compressed nationally, investors have continued to look to tertiary markets like Jackson in search of higher yields. The current going-in cap rate for acquisitions …
“How long will Atlanta’s retail boom last?” That is the multibillion-dollar question everyone in the market is asking themselves. Nobody knows for sure, although there are many valid reasons to think that Atlanta will sustain its growth through 2018 and beyond. The state of Georgia has placed a strong emphasis on drawing technology companies to the state, and Atlanta’s tech boom has catapulted the city to the front of the race for Amazon’s $5 billion HQ2 project. The city already boasts the world’s busiest airport, which makes it easy for any company to relocate here because they can directly connect to anywhere in the world. Most recently, Facebook announced it will build a sprawling data center campus at Stanton Springs, about 40 miles east of Atlanta, and NCR Corp. recently opened its new headquarters campus in Midtown. The emerging tech community includes startup hubs such as Atlanta Tech Village, Switchyards Downtown Club, the upcoming Coda project at Tech Square and Advanced Technology Development Center, an affiliate of Georgia Tech. With elite local colleges like Georgia Tech, Emory University and the state’s flagship school, the University of Georgia, about 60 miles east in Athens rapidly producing new graduates, the city is …