Western Market Reports

Los Angeles Retail Evolves as Tenants Reign Supreme

by Jeff Shaw August 29, 2023

— By Gabe Kadosh, Vice President at Colliers in Los Angeles — Retail leasing activity in Los Angeles is robust. Demand is particularly strong in the home/furniture industries. The quick-service restaurant segment is another one that continues to grow, with a large uptick in demand for drive-thru accommodations. Now, for the good news — or bad news, depending on whether you’re a landlord or tenant. Los Angeles remains a tenant market. There is currently too much available retail space. Oftentimes, retail tenants can simply go across the street if they find a particular landlord’s rent — or lease terms — unfavorable. The current vacancy rate for retail in Greater Los Angeles stands at about 6 percent. Significant concessions and incentives are being offered in various regions of Los Angeles. Downtown Los Angeles is seeing the largest number of concessions. That’s because the office market has been shuttered so dramatically, thanks to the pandemic and the work-from-home trend that just won’t go away. This has caused some Downtown mixed-use office and retail landlords to offer base CAM or even no rent just to keep the doors open. In other cases, some retail tenants only pay a percentage of sales with no …

August 29, 2023

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Industrial Market Reports Oregon Western Western Market Reports

Portland’s Industrial Market Maintains the Balance

by Jeff Shaw August 25, 2023

— By Kenny Houser and Mike Hale, Principals, Capacity Commercial — The industrial real estate sector has experienced a noticeable deceleration with a decline in leasing and sales activities. This trend is particularly evident in Portland where commercial property sales transactions have been steadily decreasing. There was a quarter-over-quarter decline of almost 29 percent in the second quarter of 2023, resulting in a sales volume of $3.4 billion, the lowest recorded since late 2014. The Federal Reserve’s decision to pause its rate hike campaign in response to inflation concerns has impacted the market. With borrowing costs fluctuating, the disparity between buyer and seller expectations has created challenges in determining agreeable property valuations. Simultaneously, leasing activity has also slowed, indicating a return to normalcy in Portland’s industrial market. Total deal volume in the first quarter of this year reached about 1.7 million square feet, a 35 percent decrease compared to the average of 2.6 million square feet per quarter over the previous two years. Despite the slowdown in leasing, the limited amount of industrial space under construction in Portland is expected to maintain a balance between supply and demand. The current construction activity accounts for 1.1 percent of the total inventory, …

August 25, 2023

California Industrial Market Reports Western Western Market Reports

Orange County Market Adjusts, but Remains Resilient

by Jeff Shaw August 22, 2023

— By Christopher J. Destino, Principal, Lee & Associates — The geographic area along the border of Los Angeles and Orange County is locally known as the Mid Counties market. This region currently boasts about 130 million square feet of industrial real estate, thanks to its prime location. This is a location that’s only 25 miles from the ports of Long Beach and Los Angeles, and 20 miles from Los Angeles International Airport (LAX). Like many other parts of the U.S., Mid Counties has begun to see the effects of continued economic uncertainty and a rising interest rate environment. It faces challenges like land scarcity and limited newly constructed buildings to accommodate the growing demand. Thankfully, this area still typically delivers 200,000 to 500,000 square feet of new construction annually (2018 was abnormally high with about 2 million square feet added). One recent deal worth noting is the 94,000-square-foot, Class A industrial distribution building in Santa Fe Springs from Panattoni that leased to BeBella Cosmetics for $2.05 per square foot net per month with an option to purchase at $577 per square foot. Another new development example is the 146,617-square-foot building that Duke Realty developed and leased to Weee!, a …

August 22, 2023

Market Reports Office Oregon Western Western Market Reports

Portland Office Market Looks to Reclaim its Vibrancy

by Jeff Shaw August 18, 2023

— By Samuel Hatcher, Field Research Manager, CBRE — Portland’s historically vibrant office market finds itself at a crossroads, striving to regain its footing in the wake of economic headwinds. The city’s unique blend of natural beauty, progressive culture and thriving tech scene has been a magnet for young professionals seeking an exceptional quality of life. However, recent shifting market dynamics have cast a shadow of uncertainty, compelling stakeholders to navigate a path to recovery with adaptability and resilience. Portland’s overall office market vacancy is currently 22 percent across the metro area. Downtown vacancy — which includes the Central Eastside, Northwest Close-in and Lloyd District — is at about 28 percent. Of that vacant space, 3.3 million square feet is Class A. Moreover, sublease availability across the overall office market is up 67 percent year over year and investment remains paused. Capital is waiting on the sidelines due to elevated interest rates and generally tighter financial conditions. Despite these stats, the market is showing some bright spots. The rate at which newly available sublease space is being put on the market has slowed compared to when this narrative was dominating headlines. There’s even a chance of a slight quarter-over-quarter decrease …

August 18, 2023

California Market Reports Retail Western Western Market Reports

Investor Demand Continues for Orange County Retail

by Jeff Shaw August 15, 2023

— By Gleb Lvovich, Managing Director, and Daniel Tyner, Senior Director, JLL Capital Markets — The commercial real estate market across all asset classes has seen a slowdown in transaction activity in 2023 compared to 2022 and 2021 largely due to the rapid increase in borrowing costs for investors. This might have impacted the commercial real estate sector as a whole, but shopping centers in Orange County are still buzzing with consumers as occupancy remains robust. Orange County has continuously proved to be one of the most sought-after markets to invest in retail due to its strong demographics, population growth and overall fundamentals. Investor Demand Shopping center performance in Orange County has been excellent over the past few years, and investors see this trend continuing for the foreseeable future. Low vacancy and strong tenant demand has allowed investors to experience significant rent growth at their properties. Orange County has experienced particularly strong grocer performance and expansion. Historically, shopping center transactions have been very limited in Orange County. This has further driven investor demand due to the lack of available investment opportunities. The few listings that exist generate significant interest. Recent examples include the sale of Ralph’s- and Rite Aid-anchored Brea …

August 15, 2023

Industrial Market Reports Oregon Western Western Market Reports

Portland Industrial Poised for Growth, Despite Rising Subleases

by Jeff Shaw August 11, 2023

— By Keegan Clay, Executive Director, Cushman & Wakefield — The Portland metro industrial market is well poised for investment and rent growth into 2024, despite an increase in sublease space coming to market. Portland has experienced many great trends, particularly in the past few years, including year-over-year double-digit rent growth, compressed cap rates, positive net absorption (occupancy growth), strong tenant demand, all-time low vacancy at 2.5 percent and land prices tripling in a short timespan. Such movement has led to increased competition and investment in the Portland region. We have seen an increase in sublease space hitting the market over the past five months to the tune of more than 2 million square feet. The majority of this relinquished space has stemmed from just a few users. Many of these subleases are a result of acquisitions with companies looking to increase efficiencies by eliminating redundancies. Some industrial users have consolidated out of market, including a major home goods business (648,000 square feet), while others have grown their real estate position in Portland. This includes a leading B2B electrical and industrial distribution company (293,000 square feet). Year to date, we have yet to see any of the larger …

August 11, 2023

California Market Reports Office Western Western Market Reports

Orange County’s Office Market Sees Stabilization Signs

by Jeff Shaw August 8, 2023

— By Brian C. Childs, Executive Managing Director, NAI Capital Commercial — Orange County office has historically been last in and first out of any recession or economic setback. That trend continues as an office recovery is in sight in this post-COVID marketplace. The challenge of encouraging workers to return to the office post-pandemic has slowed considerably. The rate of space being vacated in Orange County’s office market slowed to less than a 1 percent increase quarter over quarter in vacant space in the second quarter of 2023. This is compared to the 17 percent year-over-year rise, resulting in a total of 20.9 million square feet of vacant office space. Similarly, the growth rate of available sublease space also experienced a slower pace of 0.2 percent quarter over quarter, compared to a 23.4 percent year-over-year increase, reaching 4.6 million square feet. The second-quarter office vacancy rate sits at 13.3 percent, versus 13.2 percent in the first quarter. Overall office vacancy was at 11.5 percent a year ago. As the availability of office space has begun to stabilize, the average asking rent remained unchanged compared to the previous quarter. There was a minor decline of …

August 8, 2023

Market Reports Multifamily Oregon Western Western Market Reports

Portland’s Housing Rollercoaster: The Impact of Protests, Pandemic and Population Loss

by Jeff Shaw August 4, 2023

— By Daniel Natsch, Senior Managing Director and Partner, Ethos Commercial Advisors — Portland made it onto the national scene even before the last economic cycle. It’s a charming and relatively inexpensive West Coast market that boasts a great culinary scene, never-ending outdoor activities and its own sense of weirdness. It’s no wonder that Portland’s ticket to the “big time” came by way of population growth throughout the 2010s, spurred by young, highly educated professionals. Alongside that growth came the need for more housing. Institutional capital took note and began targeting Portland for investment. The development boom of the 2010s eventually began to slow. Portland’s multifamily industry took another blow when Inclusionary Zoning legislation was passed. To beat affordable requirements, developers grandfathered as many projects as possible, creating a huge wave of entitled properties. Many of these projects would see their way through permitting, and the pre-inclusionary housing moniker became more valuable to investors. At the time, it appeared that significant in-migration would offset the significant deliveries stacking up in the pipeline. Then came 2020. Downtown Portland became a ghost town as employees stayed home amid the pandemic. It was quiet until large crowds took to the streets to speak …

August 4, 2023

Market Reports Multifamily New Mexico Western Western Market Reports

Multifamily Demand Continues in New Mexico

by Jeff Shaw August 1, 2023

— By Robert Gallegos, Senior Vice President, The Mogharebi Group — New Mexico is rapidly becoming an important multifamily market for both investors and developers as the state experiences explosive job and population growth, which is expected to continue on an upward trajectory over the next five to 10 years. While Albuquerque remains the most targeted multifamily market in the state, it is worth noting that the tertiary market of Santa Teresa — near El Paso and the Mexico border — is becoming a hotbed for multifamily investment. Santa Teresa is a key inland port serving as a strategic focal point for intermodal shipments in the Southwestern U.S., with more than 6 million square feet of industrial space in use and nearly 1 million square feet under construction. As more jobs flood into New Mexico, the demand for quality rental housing will continue to far outstrip supply. With a population of more than half a million people and counting, it is no wonder Albuquerque is seeing the bulk of investment activity. The city has drawn an influx of new residents thanks to its diverse economy, relatively affordable cost of living and quality of life. According to Numbeo, one of the largest cost-of-living …

August 1, 2023

California Market Reports Office Western Western Market Reports

San Diego’s Office Sector Experiences Elevated Sublease Levels

by Jeff Shaw July 28, 2023

— By Jerry Holdner, Avison Young — Southern California Region Lead, Innovation & Insight, AVANT — The San Diego office market is starting to show signs of weakness. Unemployment remains low, but it is important to highlight that job creation has been uneven. The bright spot is that high-value-added jobs in a broad range of sectors, such as scientific research, medical products and pharmaceutical development continue to grow, which bodes well for San Diego. We are still uncertain about a recession. It could be short and shallow like many are predicting, or we could be in for a period of monumental headwinds. Investment sales have retreated as interest rates increased, and office workers have been reluctant to return to the office. This has created an uncertain picture of our office market going forward. The rise and future uncertainty of the pace of inflation has caused many to take a “pencils down” approach. This has caused many to slow, pause or even halt their dealmaking, growth, capital investment and development efforts as the ability to borrow funds has become difficult. San Diego’s office vacancy currently stands at 12.3 percent, and 18.9 percent of the total office market is available (including sublease …

July 28, 2023

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