Western Market Reports

The Future of Office Space Out West

by Jeff Shaw October 24, 2023

— By Scott Romick — The Western region is going through a lot of changes when it comes to the office market. Downtown San Francisco, in particular, was a large tech hub with so much infrastructure prior to the pandemic, but it’s currently become more of a ghost town. Because hybrid and remote work is common now, many of the workers who are back to the office have moved to local submarkets that offer faster commutes, more efficiency, affordability and other key factors. Southern California, on the other hand, is a growth market. Suburban areas like the San Fernando Valley’s Sherman Oaks — which has become more active than the West Valley — continues to expand its population. This helps the office market as well as existing and new retailers. Even pockets like Encino, Studio City and Burbank have become more populous, attracting a young workforce given their proximity to local restaurants, coffee shops and parks. Unfortunately, Downtown Los Angeles is still struggling to recover as a central business district, Century City is rebounding slowly and Santa Monica is shifting in its downtown area, given the nature of office structures and their footprints. Hybrid & Regionalized Real Estate The hybrid work …

October 24, 2023

Market Reports Office Washington Western Western Market Reports

Seattle, Eastside Office Shows Upbeat Trends Amid Market Challenges

by Jeff Shaw October 20, 2023

— By Lisa Stewart, Senior Managing Director, JLL; and Nick Menghini, Puget Sound Research Manager, JLL — Real estate market participants are maintaining cautious optimism for improved conditions across the Puget Sound as signs of vitality are emerging despite persistently challenging economic forces. Viewed through the lens of prior real estate cycles, it’s clear the Seattle area has a greater critical mass of highly skilled talent and a broader, more resilient economic base than previous slowdowns. Among the promising indicators are the Puget Sound’s rebound of population in-migration, from net outflows during the pandemic to more than 53,000 new residents moving here in the first half of the year. Seattle now lays claim to being the fastest growing of the top 50 U.S. cities, according to Census data. Several leading employers are also growing again. This includes Boeing, which has more hiring underway than in years’ past. Rising star Blue Origin has had about half as many open positions as Boeing over the past 12 months. The life sciences sector is further expanding as Big Pharma firms like Pfizer, Moderna and Novartis join homegrown startups with significant Puget Sound presences. Overall, companies encouraging a return-to-office (RTO) have brought more daytime foot traffic to employment …

October 20, 2023

CapRock-Global-Logistics-Moreno-Valley-CA

California Industrial Market Reports Western Western Market Reports

Southern California’s Logistics-Based Real Estate Market Stabilizes

by Jeff Shaw October 17, 2023

— By Ted Evans — The white hot, logistic-based real estate market in Southern California has cooled off. This is due to a combination of factors, including the end of COVID-based buying. Labor disputes, interest rate hikes and slower absorption rates are pushing business back to normal in a Western market segment supported by strong fundamentals. Returning to Normal As the crazed days of pandemic-induced buying slip into the past, we are seeing vacancy levels returning to pre-pandemic conditions. This may not be what some real estate investors want to hear, but the supply chain is certainly not as constricted as it was two years ago. The days of ordering products that were unavailable for weeks or months are over. The numbers we’re seeing back up our on-the-ground assessments. According to Savills, the warehouse vacancy rate in the logistics-heavy Inland Empire jumped to 3.8 percent in the second quarter. This was compared to 1.2 percent a year earlier, which was largely driven by reduced tenant demand over this period. The national vacancy rate for the sector clocks in at 4.7 percent, proving that the logistic sun is still shining in California. However, the increased vacancy rate is also …

October 17, 2023

Industrial Market Reports Western 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

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