The government shutdown impacted local economies and real estate dynamics in many U.S. markets, but none moreso than the Washington, D.C., region. With anywhere from a quarter to over a third of metro D.C.’s privately owned office leasing tied to the federal government, the inability of the federal government to engage in long-term real estate planning has serious implications for the office sector. Non-federal tenants in the region are impacted as well in that a significant portion of the region’s occupiers are reliant, at least in part, on government contracts and spending. In fiscal 2012 alone, more than $72.6 billion of federal contracting dollars were procured in Washington, D.C., and its suburbs. Possible repercussions in the contracting arena from the shutdown and continued budgetary uncertainty from the federal sector could include contract cancellations, delays in payments and scope reductions. With ongoing questions about government funding and spending, these companies, like the government itself, cannot plan for the future and make decisions in areas that affect their businesses such as staffing, office and facility needs and support infrastructure. The inevitable uncertainty due to the current stop-gap fiscal environment creates questions about where funding for fit out, technology and equipment will come …
Southeast Market Reports
The tide is changing for subcontracting in the Washington, D.C., multifamily market. In the past year, while much of the country has been in recovery, Washington construction managers experienced a white-hot market in wood-frame, market-rate apartments. Along with multiple building opportunities, there was an abundance of qualified subcontractors offering extremely competitive pricing. Currently, new properties continue to be developed, but reductions in the subcontracting pool and changes in building codes are creating a climate of increased pressure for construction managers. Subcontractor Capacity Recently, our industry has seen unprecedented subcontractor failures, workforce leaving the area and some company owners leaving the business altogether because they are not willing to risk their livelihoods anymore. Profits and cash flow were just too tight. At the same time, more than 20,000 units will be added to the D.C. market during the next two years. Affordable and tax credit markets have come back strong as well, and rent increases in the new ground-up apartments have created a booming submarket in Class B renovations. For example, Snell Construction Corp. of Arlington, Va., is repositioning two major properties: Southern Towers, a 2,500-unit, 1960s era high-rise community in Alexandria, and Monticello Gardens, with 794 apartments in Falls Church, …
With the third quarter results in, all signs point to continued incremental improvement of the Charlotte office market. Vacancy rates have fallen to a four-year low and investment sales activity continues to strengthen as new capital sources enter the market. On the economic front, unemployment in Charlotte continues to lag behind some other North Carolina cities at 9.5 percent, but the city is experiencing positive economic movement in other measures, particularly single-family housing and retail sales. For some long-term perspective, the labor force in Charlotte has grown 22 percent during the past 10 years, nearly three times the national rate. Additionally, in August, the population of Mecklenburg County reached 1 million people. With a population of approximately 2.3 million, Charlotte maintains its position as the largest MSA in the Carolinas. Office Market Conditions With a reported 460,000 square feet of positive net absorption in the third quarter, the overall office vacancy rate has fallen to approximately 15.7 percent, the lowest rate since 2008. Correspondingly, rental rates have continued to increase, with overall average rates reaching $22.55 per square foot ($23.59 for Class A space), the highest rates in the past four years. While much of this tightening has occurred in …
The government shutdown impacted local economies and real estate dynamics in many U.S. markets, but none moreso than the Washington, D.C., region. With anywhere from a quarter to over a third of metro D.C.’s privately owned office leasing tied to the federal government, the inability of the federal government to engage in long-term real estate planning has serious implications for the office sector. Non-federal tenants in the region are impacted as well in that a significant portion of the region’s occupiers are reliant, at least in part, on government contracts and spending. In fiscal 2012 alone, more than $72.6 billion of federal contracting dollars were procured in Washington, D.C., and its suburbs. Possible repercussions in the contracting arena from the shutdown and continued budgetary uncertainty from the federal sector could include contract cancellations, delays in payments and scope reductions. With ongoing questions about government funding and spending, these companies, like the government itself, cannot plan for the future and make decisions in areas that affect their businesses such as staffing, office and facility needs and support infrastructure. The inevitable uncertainty due to the current stop-gap fiscal environment creates questions about where funding for fit out, technology and equipment will come …
In 2013, Washington’s office market has been characterized by tenant-favorable conditions, lower-than-average deal volume and absorption reliant on a handful of major transactions. The metropolitan area has recovered its pre-recession employment levels; however, with the federal government being the region’s major economic driver, there has been considerable impact on the office market from BRAC (Base Realignment and Closure), sequestration, the recent government shutdown and the failure of Congress and the President to permanently resolve budget and debt-ceiling issues. And while sequestration technically took effect in 2013, many major tenants, in anticipation of cutbacks, began right-sizing their occupancy well in advance. Obviously any tenant whose revenues depend on government contracts led the charge in this proactive right-sizing movement. At the same time, federal tenants face a mandated reduction in their utilization rate, and private-sector tenants are looking for more densely packed, open-workspace floor plans as demonstrated by tenants leasing less space as they relocate. Notwithstanding the apparent economic headwinds, it is a remarkable time for confident tenants to lock in favorable terms. Concession packages, which comprise improvement allowances and rent abatement periods, are at all-time market highs, and landlords have demonstrated a willingness to restructure leases considerably in advance of expirations. …
Hampton Roads, the grouping of cities clustered around the meeting of the Atlantic Ocean, the Chesapeake Bay and the Intracoastal Waterway, is long known for its huge and vital military installations, and its tremendous maritime/shipping industries. The Port of Virginia is one of the busiest ports on the Eastern Seaboard, and is about to become even busier. At the end of the second quarter of 2012, the port posted a 7.2 percent year-over-year increase in cargo. Furthermore, with the widening of the Panama Canal, there will be a new breed of container ships carrying vastly more cargo than conventional ships. Only a few ports will be able to handle those ships, and Hampton Roads is the first to be ready. This increase in container shipments through our 55-foot, ice-free harbor will be an economic boon for Hampton Roads. The military has had, and will continue to have, a major impact on the local economy. However, there has been a concerted effort among all the cities of Hampton Roads to diversify the economic base. Technology-driven industries, including healthcare, modeling and simulation and research and development are all growing industries in the region. Seven of the world’s 10 largest aerospace and defense …
Savannah has historically been known as an under-retailed market. Barriers to entry to the market have included expensive land acquisition and development costs, natural geographical barriers such as wetlands and rivers, oddly configured land parcels and stubborn sellers. Savannah is overcoming those barriers with authority as existing retailers expand within the market and previously nonexistent retailers enter. The unusual amount of retail development in an MSA of 360,000 people means Savannah is officially on the radar of quite a few retailers. Westside/Pooler Parkway The largest development within the area broke ground in early September and will be a big win for the entire Southeast. Ben Carter Enterprises commenced construction on The Outlet Mall of Georgia in nearby Pooler, comprising more than 560,000 square feet of retail and restaurant space. The outlet mall will house more than 170 retailers, of whom 70 percent are committed. The $200 million project will employ upwards of 2,000 employees, creating a boon for the local economy. A mix of luxury and traditional retailers is expected, of which 40 percent are reported to be new to the market. Also, 45 acres of adjacent land is being marketed for retail, restaurant and hotel site development. This project …
There is a buzz about New Orleans — no longer are only locals singing the virtues of this great American city. In fact, Forbes rated New Orleans the fastest-growing city since the recession in 2013, Bloomberg describes the Crescent City as “Boomtown,” CNN Money rated Louisiana as one of the most entrepreneurial states and Career Builder.com cited New Orleans as one of the fastest for wage growth in the United States. A spotlight has been shining on the dynamics of this market, and local, regional and national investors have taken notice. According to our most recent survey, rental rates in metro New Orleans range from a low of $0.80 per square foot to as high as $2.25 per square foot. Average monthly rent is $1.02 per square foot, and overall occupancy is at 93 percent. The geography of New Orleans is such that there are numerous barriers to entry, most notably the lack of available land to develop multifamily communities. As a result, the Downtown/ Warehouse District is experiencing a major renaissance whereby mid- and late-1920s office buildings are being converted to multifamily. Notable developments downtown that are under construction or soon to commence include The South Market, which will …
Lease renewals and, in some instances, expansions into larger layouts, are occurring in Atlanta as employers create new jobs. The metro has also landed some plum relocations recently. State Farm and General Motors have chosen the metro as the site for regional headquarters, and the firms will create thousands of jobs during the next several years. Many of the GM jobs are new information technology positions and they are coming here in response to the metro’s highly skilled and educated work force. As the region becomes an information technology hub in the Southeast, other employers are also adding workers. AT&T has expanded its presence by filling 600 IT positions and plans to hire an additional 1,000 employees throughout the state. Additionally, Airwatch, a mobile software firm, has already hired 200 Atlanta workers and expects to create 600 more positions by year end. Other companies, such as InfoSystems, ExactTarget, PulteGroup Inc. and Spanx, are also planning to expand operations in the metro. Scheduled expansions by these employers and recent additions to payrolls have helped to fill office space that has been vacant since the trough of the recession. The Atlanta office market will make strides by the end of this year, …
Demand for industrial space remains strong in Miami’s commercial real estate market as enhancements and improvements to the city’s airport and seaport — along with the expansion of the Panama Canal — promise to bring a boom in trade to the South Florida area. In July, Miami’s industrial real estate vacancy rate stood at 5.8 percent, nearly four percent below the national average of 9.4 percent, according to the National Association of Realtors (NAR). Experts agree that Miami’s industrial real estate vacancy rate will continue to shrink as local infrastructure enhancements and improvements near completion, leading many companies that already utilize industrial space to vie for a slice of the 220 million square feet of storage and warehouse space presently available in Miami-Dade County. The new tunnel, rail and the deep dredge at the port, along with terminal improvements at the airport, have increased demand for millions of additional square feet of industrial space from users and offshore investors from South America, Canada, Europe, and China, both to lease and purchase property. Investors and users realize Miami will experience an increase in trade and commerce once the Panama Canal expansion is finished and they want a stake in it. Once …