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 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. With the economy, it just seems like that’s amplified things a bit,” he says. The office spaces that are frequently being occupied in …
Southeast Market Reports
While the recession has impacted NOIs in the Washington area, the local apartment market has weathered the economic downturn better than in most metros. The 60 basis point year-to-date rise in vacancy to 6 percent is the most glaring effect of the recession. Although rents remain resilient, asking rents inched up 0.4 percent in the most recent 3-month period, while effective rents declined for only the second quarter since 2004. Job losses have weighed the most on Class A asking rents, particularly in areas where rent gains were sizable recently, such as Pentagon City/Crystal City, the Connecticut Avenue Corridor and Rockville. The district’s Dupont Circle, Logan Circle and Columbia Heights neighborhoods, however, are notable exceptions to this trend, as these areas remain desirable to renters. Lower-tier asking rents have managed to push higher in many locations, although softer rents and vacancy rents have been recorded in the Anacostia/Northeast D.C. and Stafford County submarkets. Development completions are accelerating this year, and the construction pipeline is expected to remain relatively full through 2010, posing a further threat of concession increases. A metro-leading 9,000 units are under consideration in Virginia, while there are 6,600 units planned in the district and 3,900 units proposed …
It’s been one long, uncomfortable summer for the Orlando hospitality industry. Unfortunately, there seems to be no relief in sight for hoteliers anytime soon. At the beginning of 2009, the Orlando market had 438 hotels totaling approximately 111,700 rooms, a number that is second only to Las Vegas. Orlando will have added another 3,775 hotel rooms by the end of this year; during 2010, the area will introduce another 1,000 rooms. While some existing hotels are being closed permanently and others are just shut temporarily for renovation, it is hard not to believe that the Orlando market will be playing catch-up for many months in an effort to absorb this new supply. The slide started late last year when occupancies stopped advancing after a 5-year climb. For year-end 2008, the Orlando market overall was down 3 percent in occupancy but up 3 percent in average daily rate (ADR), leaving revenue per available room (RevPAR) essentially unchanged during 2007. However, by the end of the first quarter of 2009, both occupancy and RevPAR dropped to their lowest levels since 2002. Occupancy was actually 2.8 percent below 2002 levels, and ADR was off almost 7 percent from the same period, making the …
Sonny Culp of Birmingham-based Graham & Co. looks at the Birmingham industrial market through an optimist’s glasses. While the recession has slowed activity significantly — Culp estimates that the bulk distribution vacancy rate is somewhere around 20 percent — transactions are still taking place. And on the bright side, at least the current development standstill means Birmingham won’t have tons of warehouse space sitting empty for the next few months. “The economy has slowed construction, so that when the market rebounds, those projects that need to get filled first most likely will,” Culp says. Birmingham, by location and size, is a secondary market. The city’s industrial market is closely tied to the health of corporate America; when corporations do well, space gets occupied, but in the current stagnant financial situation, it’s harder to find firms hungry for a transaction. “Historically, Birmingham has always been two or three deals shy of a shortage,” Culp says. “Today, you might say that two or three figure is eight or nine.” Sales are now the territory of mom-and-pop companies, and the leasing arena mostly consists of renewals and small leases for short terms. This is the broker’s new reality. “Any transaction person is finding …
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 …
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 …