Southeast Market Reports

Retailers, Restaurant Groups Zero In On Louisville to Meet City’s Robust Demand

by John Nelson October 11, 2023

As the nation’s 28th-largest city, Louisville is home to a dynamic, diversified economy. The Greater Louisville region draws workers from a 26-county area in Kentucky and southern Indiana, providing an ample and reliable source of educated and skilled employees. The geography of Louisville, specifically its accessibility to the Ohio River, central location nationally and mild climate, have contributed to its ability to grow and evolve. Additionally, reducing the income tax rate in Kentucky is a goal of the current Republican majority State Representatives to further economic development, and the Democratic governor (Gov. Andy Beshear) is also supporting this reduction as a way to help ease the burden of inflation for residents. Legislation passed in 2022 dropped the individual tax rate from 5 percent to 4.5 percent for tax year 2023, and a bill signed earlier this year by Gov. Beshear drops it again for 2024 to 4 percent. The goal is to ultimately get income tax rates down to zero, or very close to zero, in 50-basis-point steps as certain budget metrics are hit. These measures seem to be working for growth in the Commonwealth. One of the more notable capital investment projects is the Ford partnership BlueOval SK Battery …

October 11, 2023

Market Reports Office Southeast Southeast Market Reports Virginia

Richmond’s Office Market Is Stable and Active on the Leasing Front

by John Nelson October 9, 2023

In the second quarter of 2023, the Richmond office market posted more than 670,000 square feet of leasing volume, the highest total volume in more than four years. As transactions commence in future quarters, absorption will be impacted from occupancy shifts later in the year. Despite increased leasing activity, however, the market softened slightly as absorption has started to plateau. The second quarter represented the fourth consecutive quarter of negative net absorption as Richmond’s office market observed occupancy losses dipping to 21,489 square feet. Vacancy rates rose and settled at 12.6 percent, an 8-basis-point increase quarter-over-quarter. Pre-pandemic, overall asking rents saw stable upward rent growth. Since 2020, rental rates have continued to increase though at a leaner rate. Class A rents have flattened over the past 12 months, while Class B rents continued to rise. The Manchester and Scott’s Addition submarkets remain the hot spots for office development. Though there are currently no major office buildings underway at this time, most major office projects under construction in the last five years have either been build-to-suits or conversions. The only notable exception to this was The Current, a 70,000-square-foot spec office building that delivered in Manchester at the end of 2021. …

October 9, 2023

Florida Industrial Market Reports Southeast Southeast Market Reports

Increasing Rental Rates, Record Construction Define Orlando’s Industrial Market

by John Nelson October 2, 2023

Orlando’s industrial market continues to maintain strong market fundamentals. Despite leasing activity temporarily softening at the midway point of 2023 compared to the end of second-quarter 2022, exceptionally low vacancy rates persist, putting upward pressure on asking rental rates and further strengthening developer confidence in the market. With its strategic locational advantages and diverse tenant mix, the sector is well-positioned for future growth. According to Florida Commerce, Orlando’s unemployment rate is 2.6 percent, well below the national rate of 3.6 percent. Labor shortages remain, as jobs increased by 5,300 in the industrial-using sector and 6,200 in trade, transportation, and utilities. At the same time, Central Florida’s population growth — along with the state’s business-friendly conditions, from no state income tax to relative affordability — consistently spurs demand for e-commerce logistics and warehousing throughout the region. Asking rates surge Year-to-date industrial leasing volume in Orlando has been 4.4 million square feet, 2.4 million square feet of which was in the second quarter. Total vacancy stood at 3.5 percent in the second quarter, significantly lower than the national vacancy rate of 5.4 percent. The average asking rate for industrial properties in Orlando was $10.77 triple-net per square foot, reflecting a 5.4 percent …

October 2, 2023

Florida Market Reports Retail Southeast Southeast Market Reports

Supply-Demand for Central Florida’s Retail Market Is Well-Balanced

by John Nelson September 25, 2023

The demand for retail space throughout Central Florida has been extremely high as new concepts are moving into the marketplace due to the mass exoduses from New York City and California. With the major population shift, we are running into the issue of limited supply to lease. Vacancy rates are currently projected at 3.8 percent, which is approximately 100 basis points below the 10-year historical average. Vacancy rates are projected to meet the mid-4 percent range by the end of 2023 due to the expected completion of more than 700,000 square feet of retail space during the fourth quarter, according to research from CoStar Group. Some developers are backing out of ground-up development deals due to the heightened labor and construction costs that every firm is experiencing. However, there are still some notable developments occurring in certain trade areas such as Minneola, Lake Nona, Apopka (Kelly Park) and Davenport, which are just some of the areas with projects expected to deliver in the fourth quarter of this year. These new ground-up projects require lessees to pay a higher rent to make these deals pencil out. The current average asking rate in Orlando is $27.77 per square foot, well ahead of …

September 25, 2023

Florida Market Reports Office Southeast Southeast Market Reports

Orlando Tenants Are Attracted to Quality Office Space as Rental Rates Rise

by John Nelson September 18, 2023

The Orlando office market saw improved office activity in the second quarter after a somewhat slow start to the year. Quarter-over-quarter, the average deal size rose by 11.2 percent with Downtown, South Orlando and East Orlando as the three submarkets benefitting from an increase in office leasing activity. The majority of institutional landlords in downtown Orlando are some of the early adopters of flight-to-quality phenomenon, and as a result, tenants from other submarkets have shifted their focus to the city’s Central Business District (CBD). On the other hand, South Orlando enjoys a built-in advantage of having perhaps the greatest number of restaurant options in the greater Orlando area, with easy access to both Sand Lake Road and Millenia Mall areas offering various food options. The need to be co-located with some of the military branches located in Central Florida Research Park drives many simulation and military/defense sector tenants to seek office space in East Orlando, also providing nearby access to the University of Central Florida. Aside from geographical location, more and more tenants are seeking out higher-quality office space while rightsizing their footprint. This is predominantly fueled by flex/remote office schedules combined with the need for employers to provide an …

September 18, 2023

Florida Market Reports Multifamily Southeast Southeast Market Reports

Orlando Finds Strength as One of Nation’s Top Multifamily Markets

by John Nelson September 11, 2023

Orlando remains one of the strongest multifamily markets nationally despite the slowdown being experienced in commercial real estate at large. Its strength is largely defined by growth in rent, supply, upcoming development opportunities, employment and the local economy, which have all contributed to healthy fundamentals. Being a top U.S. tourism destination has also helped with more than 74 million visitors coming to Orlando in 2022. Local tourism has created 212,000 jobs as of year-end 2021, and the city is home to nine world-renowned theme parks that are frequented by tourists. Orlando has also proven to be a very attractive and viable place to live long-term. The city is the fourth-largest in Florida, with an estimated population of more than 312,200 in 2023 and over 2 million within the metropolitan statistical area (MSA). The area’s population growth has supported multifamily growth opportunities, ensuring there is a vast renter pool and demand for the inventory that continues to be delivered. That has propelled rent growth up with submarkets like Colonial Town and Florida Center North, which are still posting year-over-year increases between 10 and 16 percent, significantly higher than the national average. Overall supply has also held up well with 6,103 units …

September 11, 2023

Industrial Market Reports Southeast Southeast Market Reports Tennessee

Memphis Industrial Market Begins to Normalize After Years of Robust Growth

by John Nelson September 4, 2023

In January of 2023, the Memphis industrial market was coming off multiple years of record-breaking growth. However, mid-year we seem to be trending back to a somewhat normal growth pattern. The Memphis industrial market, which was fueled by the pandemic like many other markets, is finally beginning to normalize. Economic factors also influence the market as well. First and foremost is the uncertainty: uncertainty in interest rates, uncertainty in construction costs and uncertainty in when will we see some signs of stabilization. Many say we need to survive until 2025. Yet, the Memphis industrial market seems to have all the tools to handle this moment, and move forward. Memphis, located on the borders of Tennessee, Arkansas and Mississippi, is known as “America’s Distribution Center” — boasting unparalleled expertise in distribution and logistics. With a central location, Memphis’ transportation infrastructure comprises the four Rs: runway, rail, river and road. Memphis International Airport houses the largest cargo airport in the world with the FedEx worldwide hub. Memphis is one of only three cities in the country that has five of the seven Class I railroads: Union Pacific/Southern Pacific, Burlington Northern Santa Fe (BNSF), CSX Corporation, Norfolk Southern and Canadian National Railroad (CN). …

September 4, 2023

Market Reports Office Southeast Southeast Market Reports Tennessee

Memphis Office Market Remains Steady Despite Sector-Wide Challenges

by John Nelson August 28, 2023

The Memphis office market posted 271,828 square feet of positive absorption in 2022, and that momentum has carried into the first half of 2023. Like most markets, Class A properties accounted for the majority of positive absorption, at 218,851 square feet. This trend has already carried into 2023, as Class A properties lead net absorption totals to begin the year. As a result of a strong year, the vacancy rate has fallen to 12.4 percent market-wide, an 840-basis-point decrease from the height of the pandemic. Additionally, sublease availabilities are less prevalent in Memphis than other comparable office markets. Currently there is 257,681 square feet of sublease space available in the Memphis market, which has a total net rentable area of 21.7 million square feet. The average among similarly sized Southeast markets is 422,624 square feet. There haven’t been substantial space additions to outweigh the below-average leasing activity thus far in 2023. The Memphis unemployment rate continues to trend downward to 3.2 percent in April, slightly lower than Tennessee’s 3.3 percent unemployment rate and the national rate of 3.7 percent. The tight labor market has increased demand in East Memphis, as tenants demand high-quality, highly amenitized buildings to attract and retain …

August 28, 2023

Market Reports Multifamily Southeast Southeast Market Reports Tennessee

Memphis Multifamily Outlook: Prepare Your War Chest

by John Nelson August 21, 2023

It’s no secret: The multifamily real estate market in Memphis has experienced a significant decline in investment sales volume and total transactions over the past year. But with signs of life coming quickly on the horizon, how can you be ready to capitalize? According to CoStar Analytics, the 58.7 percent sales volume decline in Memphis is in line with the national average, but we have seen a larger dip in total transactions. The steep and rapid decline is directly correlated to the Federal Reserve’s ongoing battle of taming inflation. The Fed has increased the benchmark federal funds rate at 10 consecutive meetings. And while there was a pause at the June meeting, more rate hikes are expected this year. What does this mean for investors and operators? The cream will rise to the top. Some investors may default on loans due to floating-rate debt and the rapid rate increases, while others may struggle to refinance or sell without incurring losses as their cheaper rate caps expire. However, those that have executed their business plans effectively and added value to their apartment complexes by raising rents can expect some cushion. Another interesting factor to examine is the vacancy rate, which has …

August 21, 2023

Market Reports Restaurant Retail Southeast Southeast Market Reports Tennessee

Memphis Retail Market Shows Grit With Several Developments in the Works

by John Nelson August 14, 2023

The term “grit” has become synonymous with Memphis. The commercial real estate landscape continues to receive headwinds from interest rates, high inflation, construction prices and geopolitical tensions, but Memphis continues to show grit in the face of these obstacles. Memphis presents a compelling opportunity for retailers seeking expansion. With a low vacancy rate of just 3.5 percent and strong occupancy levels, the city’s retail market is flourishing. The annual rent growth of 3.7 percent aligns with the national average, indicating a stable and promising environment for businesses. Moreover, Memphis offers competitive pricing for retail spaces, with affordable rates and attractive cap rates that surpass those of neighboring markets. This appealing pricing structure, coupled with a surge in transaction activity, has revitalized the market, providing increased liquidity and investment opportunities. The Regional Megasite of West Tennessee is witnessing a remarkable undertaking from Ford Motor Co. in its newly forged partnership with South Korean battery company SK Innovation. The ambitious Blue Oval City project is well underway. Currently valued at $5.6 billion and sprawling across 3,600 acres, the project is expected to generate nearly 6,000 job opportunities with another 30,000 ancillary jobs in the surrounding communities. Anticipated spillover effects from this venture …

August 14, 2023

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