Tenants and landlords forge into 2012 confronting many of the same challenges they had going into 2011. Atlanta’s office market still has a great deal of excess supply and demand remains below its pre-recession levels. The entire market has not pushed fully past concerns about properties with significant vacancy and looming debt obligations. Doubts about the broader economy also inhibit long-term strategic planning. The office market closed out 2011 largely unchanged from a year ago. The overall availability rate only fell by 1.1 pp from 26.5% to 25.4% over the course of the last four quarters. ““Vacancy rates remain high throughout the market and the vast majority of tenants have many options to choose from when negotiating leases,” says Andrew Lechter, executive vice president and branch manager of Studley Inc. The U.S. economy has shown signs of minimal gains in momentum and remains vulnerable to a sharp shock such as what has been called Europe’s “Lehman moment” or a spike in oil prices precipitated by a Mideast crisis. Some of the chronic problems that hampered U.S. growth – weak labor and housing markets – remain particularly acute in Atlanta and registered minimal improvement in 2011. Until employment and labor markets …
Southeast Market Reports
The watchwords for D.C. tenants in fourth quarter, and throughout 2011, were efficiency and flexibility. While many companies opted to renew leases and maintain existing footprints, others relocated and took the opportunity to streamline their operations. This “doing more with less” approach has proven particularly appealing in the face of political uncertainty and economic headwinds and firms are finding they’re able to save significantly on occupancy costs along the way. Writ large, these actions are contributing to an upward trend in availability and are likely to lower the aggregate demand for office space in D.C. for a long time to come. At the height of the economic downturn, companies were forced to reorganize their operations and create leaner organizations in an effort to reduce financial commitments. This heightened efficiency is now being implemented as a long-term cost-savings strategy and tenants are not eager to alter this new model. The real estate decisions made by law firms, in particular, have been demonstrative of this trend as recent leases have resulted in a net decrease in firms’ occupied space. This is especially telling since new leases typically account for both today’s space needs as well as room for expansion during the lease …
During the last 12 months, the Raleigh/Durham apartment market has continued to maintain a lofty appeal in the eyes of local, regional and institutional investors. The fundamentals of the region, including its growth projections, the diversity of employment and the driving force that is created by three major research universities, has continued to offer good reasons for investors to inject capital into the Raleigh/Durham apartment market. After a slow start in 2010, many developers have set their eyes on taking advantage of the reduced development pipeline that was a casualty of the recession. The institutions as well as local and regional developers with strong balance sheets were those that were in the best position to take advantage of being the first to break ground. After just a few developments started in 2010, the number of new construction starts and new developments in the planning stages during 2011 has exponentially increased. However, number of new apartment units added to the market in 2011 will be the lowest in recent memory. Part of the reason for this increase in development activity is that the investment sales market has been so strong in the Raleigh/Durham marketplace, arguably as strong or stronger than any …
The Raleigh/Durham retail market consists of approximately 41 million square feet and serves a population of about 1.75 million people. Raleigh, Durham and Chapel Hill comprise the “Research Triangle” metropolitan region, which is continuously ranked among the best areas in the nation to live and work. The retail market has an overall low vacancy rate and remains relatively healthy despite the lingering recession. A period of remarkable growth has slowed and only a handful of new developments opened in 2011. These include Park West Village, a 373,748 square feet power center located in Morrisville at Highway 54 and Cary Parkway, and the 57,511-square-foot Market at Colonnade, a shopping center anchored by Whole Foods and located on Six Forks Road in north Raleigh. Another notable project is the renovation of the 200,000-square-foot Waverly Place in Cary. Few new development opportunities are expected in the near future and positive absorption of vacancy for anchor and shop space has been encouraging, as centers have continued to strengthen albeit at lower rental rates. Job growth drivers are simply not there to support the rapid retail growth the area experienced prior to the recession. Trends in the marketplace include expansion of discount chains such as …
The Orlando office market has been recovering during the past 90 days in all aspects and classes. The vacancy rate has been improving. During the third quarter of 2011, it was between 16 percent and 18 percent, which is in line with the national average. According to REIS, the Sanford and Maitland submarkets have the lowest vacancy at 12 percent and 14 percent, respectively. Sales have been steady, especially bank-owned office buildings, which are trading around 20 to 30 percent below cost. One of the most noticeable sale transactions was $60.8 million sale of the 476,000-square-foot Bank of America Center in downtown Orlando, which Eola Capital sold to Parkway Properties Office Fund II LP in May of last year. Additionally, in October of 2011, Blackstone purchased Duke Realty’s office portfolio, totaling 10.1 million square feet for $1.08 billion. Included in that portfolio were a few assets in Orlando. There are also a few bank-owned office buildings that are under contract and expected close early next year. The Interstate 4 corridor from Disney to Sanford seems to be a hot spot for development as many companies are looking for more exposure and better access. Duke Realty is building the 133,000-square-foot Kirkman …
With low rental rates and available square footage, Atlanta’s industrial market remains a favorable environment for tenants and buyers interested in discounted real estate. Many are taking the opportunity to renegotiate leases on existing space or upgrade in terms of size, quality and location. With its close proximity to Hartsfield-Jackson Atlanta International Airport, CoStar Property reports South Atlanta’s Industrial Submarket is leading the metro area, with net absorption year-to-date in the third quarter of 2011 of 4.64 million square feet at an average quoted rental rate of $3.05 per square foot. The Northeast Atlanta submarket followed by posting year-to-date net absorption of 1.12 million square feet in the third quarter of 2011 at a higher quoted rental rates averaging $4.60 per square foot. Total year-to-date net absorption in the third quarter of 2011 for the metro area was 5.52 million square feet, with average quoted rental rates of $3.83 per square foot. This is in spite of the fact that flex space experienced negative net absorption, which accounts for approximately 10 percent of industrial inventory. The third quarter 2011 average vacancy rate of 13.3 percent has dropped relative to previous periods due in part to positive absorption and anemic new …
During the third quarter of this year, the Memphis multifamily market slowed down compared to the second quarter. Rent and construction were up, however, occupancy and sales fell during the third quarter. “We’re seeing continued improvement in our market,” says Tommy Bronson, III, vice president of the multi-housing group in CB Richard Ellis’ Memphis office. “Due to record low construction levels, we’re seeing positive rent growth, occupancy and concessions burning off.” The overall occupancy in the third quarter of 2011 was 91.6 percent, compared to 92.1 percent in the second quarter. The strongest submarkets are Germantown/Collierville, Downtown and Cordova, which all average in the low- to mid-90s for occupancy, Bronson says. “In those locations, we are often seeing no concessions now, which is a big deal in the Memphis market because we’ve been a concessionary market during the last few years,” he says. Bronson adds that Class A and B properties are pushing rents because concessions are burning off. Rents for new construction rose from $939 per unit in the second quarter of this year to $960 per unit in the third quarter of this year, an increase of 1.8 percent. Overall rents also increased slightly, from $733 in the …
I am pleased with this quarter’s findings, not ecstatic, but pleased. After adding more than 200,000 square feet of office space to the market in the last two quarters, I am happy to announce that we have absorbed nearly 60,000 square feet this quarter. This is the first decrease in the amount of office space since the fourth quarter of 2010. This was due in large part to the sale of the CH2M Hill building along Williston Road, which accounted for 31,000 square feet of the 60,000 square feet in this report. Nationally, we saw the largest absorption of office space since third quarter 2007 (12 million square feet). Office fundamentals have improved locally. Vacancies are decreasing, there are fewer concessions, rates are stable, and lease terms are increasing. Regarding concessions, for those being asked for by tenants, landlords are replying with a demand for longer-term leases. The good news is that tenants are agreeing to them, hopefully because they see a brighter future in their own business. In terms of vacancies, there is a notable difference in showing and lease activity, perhaps because there is less uncertainty in the business world. This is further evidenced by the longer-term deals …
Amid the current economic uncertainty, the office market continued to mark positive gains within the third quarter seeing 193,955 sq. ft. of positive absorption. Although well short of pre-recession levels, this quarter’s performance shows a steady increase in leasing velocity as the Orlando market has averaged only 119,881 sq. ft. of quarterly absorption over the past year. The Orlando economy has continued to stabilize. Monthly decreases in unemployment have become somewhat of a trend as the latest local unemployment statistics for August saw a year-over-year decrease from 11.7% to 10.3%. This sustained trend does wonders for local economic sentiment, especially among small business owners whose bottom line is highly dependent on the spending habits of other businesses within the local market. The Orlando CBD saw another quarter of positive absorption with Class B space leading the submarket to a total net gain of 26,352 sq. ft. Maitland Center is also beginning to show improvement with 31,289 sq. ft. of positive absorption. The majority of this quarter’s positive gains were seen in the Southwest submarket which absorbed 93,145 sq. ft. of space amid a mix of expansion and new tenants. Average rental rates rose slightly to $20.68 overall. Also noteworthy this …
Nashville’s economic growth has remained positive throughout 2011, strengthening Nashville’s position as one of the more resilient and dynamic metropolitan areas in the southern U.S. Through August of 2011, the metro has recovered more than half of the jobs lost during the recession, having added nearly 22,000 jobs since the beginning of 2010. Currently the unemployment rate in Nashville is hovering around 8.4 percent, compared with 9.1 percent at the national level. The area has become a prime relocation destination for major corporations, bringing well-paying jobs to the area. In 2009, Nissan relocated its headquarters from Los Angeles to Cool Springs, and now employs more than 1,300 people. Amazon recently announced two new major facilities that will bring more than 1,500 jobs to the area. GM plans on restarting assembly at its Spring Hill plant, creating 1,700 jobs as part of the new labor deal. The area has become more than just the country music capital. It is now a hub for higher education and healthcare, as the three largest employers are Vanderbilt, HCA and St. Thomas Health Services. Like many markets across the U.S., the Nashville multifamily market has now rebounded beyond pre-recession levels in terms of both occupancy …