Montgomery’s commercial real estate industry is repaving the rocky road of the recession. The small capital city is fairing well, fueled by the state government, the Maxwell-Gunter Air Force Base and the car manufacturer Hyundai. Montgomery’s transportation options also make the area attractive; two major highways intersect in the city, and the Alabama River provides a shipping alternative for sea-fairing businesses. According to Jerome Moore of Montgomery-based Moore Company Realty, manufacturing helps fuel local commercial real estate because industrial activity boosts the multifamily and retail markets. The tight financial markets have affected the resiliency of the industrial market, however, and warehouse vacancy is now a little more common that it was before. The office market remains strong on the heels of government expansion. The one dark area hovering around the industry concerns the financial meltdown and the ever-changing banking landscape. “All the shakeup there, with the merger of Regents and AmSouth [banks] and Colonial’s present troubles, will create significant vacancy in the market from an office standpoint,” he says. Many office buildings were developed with significant vacant space. If a landlord purchased a building that was vacant, he’s having a hard time filling the property, but the recession hasn’t created …
Southeast Market Reports
During the past 12 months, the Louisville retail real estate market has proven itself to be full of opportunities as well as challenges. An almost equal amount of developments were completed since the beginning of last year as were put on hold. Likewise, as many stores have opened as have closed, and as many submarkets have thrived as have struggled. In spite of these inconsistencies, the Louisville market finds itself uniquely well-positioned for resumed retail growth as the national economy rebounds. The northeast and east retail submarkets remain extremely stable. Within these markets there are more than 2 million square feet of retail space including some of the city’s premier shopping destinations. The Summit, the city’s only lifestyle center, is more than 98 percent leased with a tenancy that boasts some of the most recognizable names in lifestyle retail and fast casual dining. Likewise, Springhurst Towne Center is more than 90 percent leased with the anchor tenants Target, Meijer, TJ Maxx, Liquor Barn and Dick’s Sporting Goods. The landscape will continue to evolve with the completions of Phase I of Chamberlain Pointe, a mixed-use center, and North Commons, a town center development. St. Matthews continues to be widely considered the …
In the stifling heat of August, the Charlotte office market seemed stagnant and weak. According to Jones Lang LaSalle, Charlotte lost nearly 13,000 jobs in the first two quarters of this year, pushing the unemployment rate to 12 percent. Year-over-year, second quarter office leasing activity fell 32 percent. To further paint a grim picture, Jones Lang LaSalle predicts that downtown Charlotte is in for a double-digit vacancy rate, due to the 2.5 million square feet of office space that will see completion in the next 18 to 24 months. In reality, the future of the Charlotte office market is much brighter than it looks on paper. “At the street level, a lot of brokers remain pretty busy. There are still deals being done; they’re just taking longer,” says Tim Bahr of Charlotte-based NAI Southern Real Estate. It’s also happens to be the tail end of vacation season, and everything, commercial real estate included, is a bit more sluggish during the twilight of summer than during the rest of the year. “This time of year is typically slow, and with the economy, it just seems like that’s amplified things a bit,” he says. The office spaces that are frequently being occupied …
Buoyed by its proximity to Washington, D.C., and the resulting presence of multiple government installations — as well being the East Coast’s farthest inland sea port — Baltimore enjoys a marginal insulation from the global economic slowdown. The Social Security Administration, the Health Care Financing Administration, the National Security Agency, Ft. Meade and Aberdeen Proving Ground are all federal government outfits in the area that employ Marylanders at well above average salaries. These agencies require significant private contractor support which, in turn, supplies even more well paying jobs. Baltimore, however, is not immune to the credit crunch. At approximately 190 million square feet of space, Baltimore’s industrial market has seen some recovery at the end of the second quarter. Leasing is up half a percent from last quarter, settling at an overall vacancy rate of 10 percent. With asking rates hovering just shy of the $5 triple-net mark, developers have sharpened their pencils a bit after sitting on recently-delivered product in a market that was flooded with new construction for most of 2008. Asking rates were previously based on construction costs and projections that were developed during the boom times of 2006 and 2007. The tenant has become king, with …
Demosthenes G. Mekras of Marcus & Millichap gives his take on the multifamily market in Miami-Dade County. • What trends do you see presently in multifamily development in your area? Multifamily development for rental projects has been limited to non-existent. Builders are expected to complete 380 units in 2009. This is a drop in the bucket in terms of supply, so one would expect for the fundamentals to be advancing on that metric alone. Unfortunately, continued local job loss and the shadow market have depressed rents and increased vacancies across the board. No class of building or size of project has escaped this downturn, and that is true for every submarket in Miami-Dade County. • Who are the active multifamily developers in your area? Affordable housing developers, such as Pinnacle Housing Group, have clearly been the most active, but they are not entirely sheltered from the turn in the market. In the market-rate arena, the most notable developer has been J. Milton & Associates, a local multifamily developer, owner and operator that is arguably the largest private owner in Miami-Dade County. They have a 97-unit tower under construction in the Fontainebleau submarket west of Miami International Airport, which is slated …
Barry Wolfe and Michael Zimmerman of Marcus & Millichap sit down with REBusinessOnline.com to give their take on the South Florida retail sector. • What trends do you see presently in retail development in your area? While a recovery in the retail property sector may not start for several more quarters, the slowing in construction will help to set the stage for an eventual rebound in occupancy and rent growth. There is little to no construction currently beginning in South Florida; therefore, completions in 2009 will fall considerably less than the average posted over the past 5 years. • What type of retail product is doing well in your area? Retailers holding up well during the on-going recession are necessity-based retailers such as grocery, drug stores and gas stations. Retailers offering lower price points on their goods and services, such as Dollar General and Family Dollar, are also doing well. • What retailers are new to your area? Kohl’s continues to open stores throughout South Florida. Anthony’s Coal Fire Pizza is also expanding. Otherwise, we are seeing minimal retail expansion and development in the current market environment. • Please name one or two significant retail developments in your area. What …
Alex Zylberglait CCIM, SIOR and Ryan Shaw of Marcus & Millichap answer pressing questions on the state of the Miami office market. • What trends do you see presently in office development in your area? Office development is relatively slow at this time except for the projects that were already in the works prior to the market downturn, specifically projects in Downtown Miami as well as in Coral Gables and Doral. Given the current market conditions, it is unlikely that we will see any significant development for the next few years. In addition, most office assets today could be acquired at below replacement cost therefore stifling the development of new product. There are a few exceptions that include some medical office buildings and some buildings that are being built as “green” buildings, which is a trend likely to be around for a while as long as there is development. In fact, many government tenants are requiring that any space they lease be in a building that complies with the latest “green” standards. • Who are the active office developers in your area? Rilea Group is active in Downtown Miami as is MDM Development Group, which is working on Met2, and …
1. What trends do you see presently in industrial development in your area? There are no new developments breaking ground and few nearing completion. There has recently been drastic increases in industrial product vacancy rates which, inherently, has compressed lease rates. I do not expect to see any new projects breaking ground until the current vacancies are absorbed and lease rates stabilize. 2. What type of industrial product is doing well in your area? Large warehouse/distribution buildings with 24-foot+ clear height continue to outperform the market vacancy rates but are still subject to lease rate compression as business revenues continue to decline. 3. Who are the active industrial developers in your area? Prologis Butters Construction REMS Group 4. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? The 595 Park of Commerce, located directly off I-595 halfway between Downtown Fort Lauderdale and Weston, has recently completed its first of three phases. Upon completion, the 595 Park of Commerce will consist of 18 office, retail and warehouse buildings. The developers, REMS Group, have been able to adapt to the challenging conditions of today’s market by offering tenants an array of …
As with the rest of the nation, Central Florida is adapting to drastic changes to our financial system. The local retail market has been adversely affected by the severe downturn in construction and housing-related industries — those segments were large components the local economy. Although the area currently ranks eighth nationally for foreclosures and the median home price has stabilized at the 2002 level of $130,000, residential sales volume increased 51 percent year over year. Unemployment for the region peaked in March at 10.1 percent, but is now down to 9.7 percent. Fortunately, Central Florida continues to make progress in diversifying its workforce with significant growth in the defense, high-tech and medical fields. Burnham Institute, University of Central Florida Medical School, Nemours Hospital and Florida Hospital are all growing. Additionally, government-funded projects in infrastructure and community venues in Orlando should build momentum in the recovery. As it is occurring nationally, we are witnessing a stratification of retailers locally as well – a separation between the Good, the Bad and the Ugly. The Good retailers are focusing on marketing, remerchandising, remodeling, expanding, recruiting and taking advantage of deflated costs and weakened competition. Some are seeing increases in sales of 25 percent. …
Retail properties in Miami-Dade County recorded negative net absorption in the first quarter as accumulating job losses stymied retail spending and forced merchants to vacate the market. Additional increases in vacancy are expected through the end of 2009 as more tenants close and others reduce planned store openings. Higher vacancy will induce a further decline in rents, which dropped for the second successive quarter in the first 3 months of this year, and a slowdown in new store openings will undermine support for marketwide rent growth in the months ahead. In addition, tenants seem to be gaining the upper hand in negotiations on lease extensions or renewals. As a result, concessions will rise over the remainder of the year as owners attempt to retain traffic-generating merchants. While the demand side is decidedly weaker than it has been recently, a decrease in construction will mitigate the extent of the projected rise in vacancy and set the stage for a steady recovery in property fundamentals. A look at the numbers indicates that employment in Dade County will decrease by 43,000 jobs (4.2 percent) in 2009, compared with a loss of 36,400 positions last year. Due to the decline in employment, retail spending …