We've all said time and again that the key to recovery in office real estate is continued and significant increase in employment rates. Like much of the rest of the country, Memphis has begun to see an uptick in employment in the professional and business sector. In the Memphis MSA, employment in this all-important sector for office real estate jumped from 73,400 to 87,100 during 2011, approaching pre-recession highs of 88,800. Additionally, on May 3, the U.S. Bureau of Labor Statistics reported that productivity in the U.S. fell at an annual rate of 0.5 percent for the first 3 months of 2012, after steady growth during 2011. This is the first sign that corporations have achieved the efficiency they desired and needed to weather the latest economic storm. As demand increases, corporations will be forced to hire to fill the gap between demand and capacity, so the good news for the market is that employment rates, the most fundamental drivers of office real estate, should continue to improve. There are a couple of black swan events, the outcomes of which will shape the immediate future of the office market in Memphis, and specifically the Central Business District. The first is …
Southeast Market Reports
Trends in multifamily development and demand mirror both changing mentalities in a post-recession era and dynamic population shifts. There are an estimated 80 million echo boomers (Americans born between 1980 and 1995) that are beginning to move out of their family homes or college dorm rooms and into a very challenging job market. Most rent because they are either unable to buy or they consider owning a home low on the list of their financial goals at this stage in their lives. Even those older than the echo boomers have changed their ideology as it relates to homeownership after suffering through a collapsed housing market. The result of these shifts has kept the demand for multifamily housing high on both local and national levels. Current apartment developments are also responding to the demand for affordable luxuries. They now offer green efficiencies that will reduce utility bills and access to transit nodes that cut down on gas costs. Amenities such as fitness centers, coffee shops and pools with outdoor areas that allow residents to socialize on-site have become commonplace. In the Greenville market, the downtown apartment activity is bustling. Hughes Investments recently delivered the Riverwalk at Riverplace, a mixed-use development that …
The dust seems to be settling in northeast Florida’s industrial market after the recession. Sales are still down and asking prices continue to decline for traditional industrial properties, but institutional investors throughout the state seem to be in acquisition mode. While investors are looking, there are not many properties for sale. Despite the fact that Jacksonville is the third largest industrial market in Florida, not many institutional-quality industrial properties come onto the market frequently. Rental rates seem to have stabilized for quality properties and landlords are beginning to reduce the value of concessions offered to tenants. The current overall industrial vacancy rate for northeast Florida is about 9.6 percent compared to 9.7 percent this time last year. Although this is still on the high side for our market, it is still much more favorable than Savannah, Georgia, where the reported vacancy rate is close to 16 percent. Savannah is one of the more competitive markets with Jacksonville, due to its vibrant port traffic. Recent transactions that have helped northeast Florida maintain single- digit vacancy rates include Saddle Creek Corp.’s 213,000-square-foot lease in the former General Motors parts distribution center, which is owned by Cabot Properties and located in the Flagler …
The Upstate area of South Carolina finished 2011 with quite a bit of retail activity and good news on the retail front has continued into 2012. Greenville, Spartanburg and Anderson saw positive retail absorption of 233,144 square feet in the fourth quarter of 2011, according to CoStar, and vacancy rates declined to 6.4 percent in the fourth quarter of 2011 from 6.6 percent the previous quarter. The housing market seems to have stabilized and is showing positive trends, which is good news for retailers. And the Upstate has had a number of new economic development announcements including BMW’s facility expansion and Amazon’s new 1 million-square-foot distribution center, which is under construction in Spartanburg. The Upstate Alliance reported that 2011 brought the creation of more than 5,000 new jobs and capital investment of more than $805 million in investment and expansions. The Upstate South Carolina region has already announced more than $1 billion in capital investment thus far in 2012. The newest announcement is in Union for Belk Inc.’s new distribution center, which brings $4.5 million in capital investment and more than 120 jobs to the area. The Upstate has had success backfilling some big box vacancies. buybuyBABY took over the …
The Greenville-Spartanburg office market includes more than 10 million square feet of leasable office space located along Interstate 85 between Charlotte, North Carolina, and Atlanta. The market is expected to enjoy increasing absorption levels with a modest drop in vacancy, which currently stands at just over 16 percent. The biggest news on the construction front is Hughes Development’s ONE building in the Greenville CBD. The property will deliver 370,000 square feet of Class A office space to the market in its two phases. Phase I is expected to be completed by the end of 2012. Phase II is expected to be completed by third quarter 2013. Anchor tenants for the property include CertusBank, Haynesworth Sinkler Boyd and Clemson University, which is relocating its Master’s of Business Administration program to the project. Banking is one sector that stands to be a high-growth industry in the local market through the end of 2013. In addition to rapidly growing CertusBank in the new ONE building, TD Bank recently announced its intention to permanently occupy the Interstate 85 campus the company acquired with the purchase of a regional bank, The South Financial Group. This removed 150,000 square feet of vacant Class A space from …
The industrial warehouse locomotive is back on track in Upstate South Carolina. We experienced tremendous positive absorption in warehouse space in 2011 — around 1.7 million square feet — and vacancy is down to pre-recession levels at 9 percent. Vacancy has been dropping steadily from 10.8 percent since the fourth quarter of 2009, and experienced a dramatic drop in 2011. This recovery is a result of the recent surge of announcements of new and expanding operations by manufacturing companies in the Greenville/Spartanburg area. Corporations such as Michelin, Bosch Rexroth Corp., Scio Diamond Technology, Honeywell International, PRETTL Electronics, Griffin Thermal Products and BMW will invest more than $277 million combined in our area and create 3,714 new jobs. There are 4,014 industrial properties currently in the Greenville/Spartanburg market. Sixteen leases and four sales for industrial warehouses were reported in the first few weeks of 2012. Rental rates for warehouses range from 32 cents per square foot to $13.12 per square foot, a wide range that depends on size, location and condition. Overall, the average rental rate is $2.92 per square foot. With vacancy dropping continually and no new developments underway or on the horizon, inventory is being depleted, which is creating …
The Memphis metro is an interesting industrial market. Like many other markets, we’ve begun to see positive signs in the numbers. 2011 ended with positive absorption of more than 1.6 million square feet. Because nearly all of the space added in 2011 was build-to-suit, vacancy rates have begun to decline a bit. IDI has just announced plans to build two buildings totaling 1.1 million square feet in Olive Branch, Mississippi, which will be the first new speculative development since 2008. But it’s hard to look strictly at the numbers and really get a sense of our market. That’s because, when compared to behemoths like Chicago and Dallas, we are a relatively small industrial market, with approximately 210 million square feet, depending on how you count the space. This creates significant volatility in the numbers when a major lease is won or lost. So it is the fundamentals that paint a better and more realistic picture of the Memphis market. Though relatively small in size, we’re a giant in terms of the infrastructure that makes us attractive to major players. A few of the major leases during the last 12 months help illustrate that: Trane’s 626,00-square-foot lease, California-based online retailer Newegg …
South Florida, the densely packed grid squeezed between the Atlantic Ocean and the Everglades, is back on the priority list of retailers that, until recently, were content to hang out on the beach and wait for more inviting waters, so to speak. Over the past few months, the list of the most active newcomers has included Toys “R” Us, Babies “R” Us, Ross Dress for Less, Sports Authority and Dick’s Sporting Goods, just to name a few. And while the region is still a long way from the blistering pace of activity that was evident during the housing boom, there are other positive signs of life. A year and a half ago, similar to most major cities across the U.S., shopping center landlords in Miami and South Florida were fending off an overabundance of aggressive rent requests from retailers. All too often, in an effort to grasp some security for the future, many had to give in to retailers’ insistent demands for relief. In fact, many chains managed to lock into long-term leases at low- to mid-double-digit rent amounts in class “A” centers that used to command $25- or even $30-per-square-foot. During the past few months, however, the flood of …
Like most cities, Miami’s class A office market suffered during the depth of the recession: vacancy rates doubled, tenants gave back space, and many landlords offered significant incentives to close leases. Interestingly, the market bounced back sooner than many projected with leasing activity accelerating. New to market tenants began filling and backfilling space, foreign investment dollars began pouring in, and the market has benefitted from a flight to quality. There has been a real gravitation toward urban submarkets. Business hubs with residential and retail amenities such as Coral Gables, Doral and the Brickell Financial District have fared well despite the arrival of new product. We’re seeing an overall shift from suburban markets back to urban ones, which is consistent with what’s happening in cities across the U.S. The downtown Miami/Brickell market in particular is seeing high demand as the area comes to life as a 24/7 urban district with lively retail, available housing product at all points of the price spectrum, and many of Miami’s cultural and entertainment amenities. Planned upgrades to the nearby Port of Miami will stimulate further activity. 1450 Brickell office tower is now 80 percent leased just 18 months after delivery. The building has attracted many …
As 2012 begins the Louisville retail market continues to positively move forward. The energy and optimism in the national markets is well reflected in the city with new tenants entering the area for the first time and a variety of locals, regional and national players looking to expand. The greatest challenge currently in the market is the scarce availability of quality space which is hindering some retailers’ entry into the market today and could seriously affect future growth. Fall 2011 saw Guitar Center, Nike Factory Store and Trader Joe’s all opened in Shelbyville Road Plaza in the city’s main retail core, St. Matthews. While the influx of new tenants is positive, the ownership still must re-tenant vacant boxes left by Circuit City, Wild Oats and Border’s Books. Most recently, Anthropologie announced that it would join Macy’s, Sear’s and Von Maur at Oxmoor Mall further solidifying Oxmoor as the city’s premier upscale shopping destination. Mall St. Matthews continues to be well occupied while appealing to a slightly younger clientele. Other new additions to St. Matthews trade area include Mellow Mushroom Pizza, Tin Roof and Bruegger’s Bagels. The biggest news in the northeast segment of the trade area was the $78 million …