Western Market Reports

Investment Strategies Evolve in the West’s Industrial Market

by Jeff Shaw October 10, 2023

— By Nellie Day — Everyone is tired of hearing about the challenging lending climate — no one more so than investors and developers who would like to keep the gravy train moving. “I think the glory days of the last four to five years are now tempered with the increased interest rates,” says Jordan Schnitzer, president of Portland, Ore.-headquartered Schnitzer Properties. “I also believe the hyper growth of big box industrial developments over 500,000 square feet is grinding to a slower halt. A significant amount of that growth has been from Walmart, Amazon and other large retailers that now may have enough space for the next several years before they enter a growth phase again.” So, what’s an industrial player to do when interest rates are high and the industry darlings that have been so active for so long now say their needs have been met? You pivot. “While it’s easier to collect a single check from a 500,000-square-foot tenant, we would rather roll up our sleeves and work harder to get 50 tenants from a 500,000-square-foot building,” Schnitzer continues. New Strategies For A New Era Schnitzer notes that his firm began to see cap rate compression on Western-based industrial …

October 10, 2023

Market Reports Retail Washington Western Western Market Reports

Suburbs Serve as Main Retail Growth Driver in Seattle

by Jeff Shaw October 6, 2023

— Jennifer Seversen, Vice President, CBRE — Suburban retail is emerging as the main driver of retail growth in Seattle. In the height of the pandemic, many consumers stayed close to home, rediscovered their neighborhoods and began shopping primarily in their communities. These habits have continued and, as a result, retailers on once-heavily trafficked commute paths have experienced declining sales revenue. Retailers are taking notes, particularly those in city office districts that rely heavily on daytime foot traffic. The white-hot activity in suburban retail has led to vacancy rates under 2 percent, healthy rent growth and record-breaking absorption within new developments. Rents in suburban markets like Totem Lake, Bothell and Woodinville are outpacing downtown Seattle by 50 percent, something that would not have been conceivable three years ago. Well-located mixed-use retail projects and neighborhood centers have led the way in pushing rent growth, while grocery-anchored developments have been attractive assets to investors. Restaurants have proven to be a major driver of retail activity, with Seattle having a 7 percent increase in diners year over year through the second quarter, the fifth highest increase in the U.S., according to OpenTable. An example of the rise in suburban retail demand is Harvest, …

October 6, 2023

California Market Reports Western Western Market Reports

San Francisco Rolls with the Punches as the Market Demonstrates Signs of Recovery

by Jeff Shaw October 3, 2023

— By Dina Gouveia and Louis Thibault — The San Francisco market ended the second quarter of 2023 with a 27.2 percent vacancy rate for the office sector, according to Avison Young’s market report. As companies scaled back operations and experienced slower growth, vacancy rates continued to increase. As of late, we are seeing many tenants in a wait-and-see mode when it comes to leasing decisions. This is despite a majority of companies desiring to have employees back in the office. Below are a few key trends and observations when it comes to the office market, as well as some green shoots where we see opportunities for an accelerated recovery. Return to the Office The slow return to office (RTO) largely comes down to overall economic conditions and who has the upper hand in the job market. The trend that we’ve seen in the San Francisco region is that larger tech companies like Apple and Google have led the RTO efforts with CEOs like OpenAI’s Sam Altman opining that remote work is essentially detrimental to collaboration and creativity. It appears there is a widespread appetite to bring employees back into the office full-time. As the job market continues to soften, …

October 3, 2023

Idaho Market Reports Western Western Market Reports

Post-Pandemic Boise Tries to Keep Up with Explosive Population Growth

by Jeff Shaw September 22, 2023

— By Nellie Day — Boise was a hotspot of activity as the pandemic hit in 2020, with many people desiring more space, more access to the outdoors and, in some cases, a cheaper cost of living. Mike Erkmann, principal at NAI Select, fills WREB in on what the city and its commercial real estate landscape has been like since 2020. What are the notable trends occurring in Boise? The most notable trend occurring in Boise continues to be the expansive population growth. Boise was the fifth fastest-growing city in the U.S. in 2022 and 2023. We are expected to see 37 percent population growth between 2022 and 2050, with a predicted total MSA population of 1.1 million people. On average, we are adding about 15,000 people annually, which will continue to rank Boise at the top for fastest-growing cities in the U.S. What challenges is this market facing? Aside from the obvious challenges we are facing in the market, including higher interest rates and tougher lending requirements, we here in Idaho are facing a shortage of labor with the dramatic increases in the cost of living. Median sales prices in Boise have increased 78 percent over the past five years …

September 22, 2023

California Industrial Market Reports Western Western Market Reports

Commercial Real Estate Goes Hollywood as Investors Buy Studios, Soundstages

by Jeff Shaw September 19, 2023

— By Nellie Day — Santa Monica, Calif.-based BLT Enterprises has been an owner, investor, developer and manager of commercial properties since 1984. The firm has seen a lot of changes over that time, which means adaptability remains key to its strategy — and long-term survival. One of the ways the firm is adapting to current market conditions is through the acquisition and operation of production studios and soundstages. The most recent data on usage and demand for these product types is from the year 2020. At this time, CBRE noted there was 11 million square feet of soundstage space in North America, with half of it being in Los Angeles. Speaking of 2020, the pandemic was also responsible for a 74 percent year-over-year increase in streaming video demand. FilmLA’s 2020 Sound Stage Production Report also noted the industry maintained an average occupancy of 94 percent that year, with the report further showing television production increased 10 percent in 2020. For comparison, studio occupancy averaged 70 percent in 2017. Though the world isn’t locked down the way it was in 2020, digital content demand shows no signs of slowing down. Consumers will spend an estimated $151 billion on technology services, …

September 19, 2023

Idaho Market Reports Office Western Western Market Reports

Companies Are Attracted to the Boise Office Market

by Jeff Shaw September 15, 2023

— By Karena Gilbert, Office and Investment Associate, Colliers — Idaho experienced significant population growth in recent years, and the commercial real estate market reflected that trend. The pace of growth has begun to slow, although overall growth is expected to increase over the next decade. The growth brought both business and talent to the state as the Boise MSA continues to maintain a healthy office market. Second-quarter vacancy sits at 7 percent, up from 6.1 percent in the first quarter and outperforming the national vacancy rate, which stands at 16.4 percent. The Boise MSA has experienced an 18.5 percent job growth over a five-year period compared to the national growth level of 3.4 percent. Despite these promising stats, Idaho is not immune to the economic turbulence being felt on a national level. With interest rates rising and market uncertainty, some buyers have become more cautious while others still actively seek opportunity. Cap rates have increased from 5.1 percent in the second quarter of 2022 to between 5.5 percent and 6.5 percent in the second quarter of 2023. Office lease absorption is down, though we’re still seeing a lot of interest in Boise. Micron, a $66 billion semiconductor company founded …

September 15, 2023

California Healthcare Market Reports Office Western Western Market Reports

Orange County’s Medical Office Market Stays on Solid Ground

by Jeff Shaw September 12, 2023

— By John Wadsworth and Aaron Phillip, Colliers — The Orange County medical office building (MOB) market continues to show resilience post-pandemic despite headwinds of the new interest rate environment. The overall Orange County MOB market consists of 10 million square feet with a current vacancy of 8.5 percent, down 100 basis points from the end of 2022. The average rental rate is $3.48 per square foot, per month, full-service growth, with an increase of 9.3 percent from mid-year 2022. The lack of significant MOB construction completions, coupled with much of the existing vacancy found in older, functionally obsolete buildings, has kept supply largely in line with demand. The velocity of MOB leasing activity has softened compared to pre-pandemic transaction volume, with healthcare providers still digging out of the financial “COVID hole.” Among other market pressures, labor costs and retention across healthcare employment significantly contribute to continued narrow margins on provider balance sheets. From larger health systems to smaller independent practices, all have been impacted, slowing the pace of expansion projects and mandating shorter, more flexible transactions until more permanent real estate solutions can be implemented. Despite the market challenges posed by the pandemic, MOB absorption has remained positive countywide, …

September 12, 2023

Idaho Market Reports Retail Western Western Market Reports

Many Retailers See Boise as the Next Expansion Hotspot

by Jeff Shaw September 8, 2023

— By Andrea Nilson, Executive Director of Retail and Capital Markets, Cushman & Wakefield — National attention has been focused on the business growth, expansion and innovation in the Mountain West region in recent years — and Boise continues to be the region’s bright spot. Recognized as one of the best places to live and work due to its educated population and outdoor lifestyle, the area remains at to top of retailers’ site selection lists. Boise has also become a city of choice for restaurants, which has pushed the market to a new level of maturity and refinement. A strong blend of national chains, as well as regional and local restauranteurs, are anchoring several of the large, high-density apartment developments downtown, making this core truly unique and vibrant. The retail market remains on an upward trajectory based on key indicators. Low levels of speculative construction and strong demand will likely contribute to lower vacancy and higher rents for the remainder of 2023. Demand has outpaced supply by 30 percent over the previous 15 months. Boise was ranked No. 3 in annual population growth nationwide at 2.2 percent. It is projected to increase further, while its economy expanded at a rate of 3.4 …

September 8, 2023

Idaho Industrial Market Reports Western Western Market Reports

Healthy Leasing Activity Keeps Massive Industrial Projects on the Rise

by Jeff Shaw September 6, 2023

— By Dan Minnaert, Partner and Industrial Specialist, TOK Commercial Real Estate — Industrial leasing activity has slowed year over year in Southern Idaho markets with total transactions down 9 percent. However, all markets saw transactions increase or remain flat from the first quarter to the second quarter. Net absorption has also remained positive in all markets throughout the first half of 2023. Activity is strongest in the Boise MSA with nearly 900,000 square feet of net absorption recording so far this year. Top deals for the year include Ferguson Enterprises leasing 164,600 square feet of new construction in Nampa, and Hensel Phelps Construction leasing 92,900 square feet at 535 Gowen in South Boise. Demand remains strongest for spaces in the 1,000- to 5,000-square-foot range, accounting for 51 percent of deals over the past 12 months. However, absorbed spaces above 15,000 square feet have increased 15 percent year over year. In addition, organic growth is the top driver for leasing activity considering 30 percent of deals over the past year were attributed to tenants opening additional locations or expanding. Additional new industrial tenants are expected to enter Southern Idaho, most notably in the Boise MSA as new projects such …

September 6, 2023

Idaho Market Reports Multifamily Western Western Market Reports

The Flourishing Idaho Multifamily Market Touts Growth, Shifting Dynamics, Resilience

by Jeff Shaw September 1, 2023

— By Colton Yasinski, Investment Sales Advsor, Capstone Cos. — The multifamily market in Idaho and, specifically, Boise, has experienced an impressive surge over the past five years. This has largely been fueled by the impact of COVID and the attractiveness of Idaho living. The result has been an unprecedented demand for multifamily housing, triggering a development boom that has reshaped the market landscape. In the past year alone, Boise has seen the delivery of 4,000 multifamily units with numerous ongoing construction projects. The city’s rapid population growth and robust housing demand has attracted institutional capital, leading to tighter cap rates similar to larger metropolitan areas. Pioneering developers have recognized the potential in Idaho’s market and entered the scene alongside local development groups. Among them are prominent names like Lincoln Property Company, Alliance Residential Company, Woodside Homes, Morgan Stonehill, American Homes 4 Rent and others shaping the multifamily landscape. However, amidst this growth, market dynamics have started to shift. Over the past year, multifamily sales in Boise have declined by more than 70 percent, accompanied by rising cap rates due to fluctuations in the capital markets. The surge in new units has transitioned the market from favoring landlords to becoming …

September 1, 2023

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