Strong gains in population and travel spending highlight Colorado as an increasingly popular place to work and visit, boosting demand for hotel rooms in the state. Leisure travel spending has climbed by 28.9 percent over the past five years, surpassing $22 billion in 2018. More than half of those funds were spent on commercial lodging. Business travel is also bolstered by companies either entering or expanding in the state. These demand factors translate to hotel occupancy and revenue metrics that have consistently exceeded the national average since 2014. Colorado’s November annual average occupancy rate rose 90 basis points year over year to 68.1 percent, compared with the national metric that held flat at about 66.2 percent. Colorado’s annual average RevPAR grew 3.8 percent over that same span, more than triple the U.S. pace, to $98.48. Robust gains in both occupancy and RevPAR demonstrate how demand for Colorado hotel rooms has outpaced numerous supply additions. The state’s inventory of hotel rooms has expanded by about 13 percent over the past five years, with 4,226 hotel rooms under construction. More than half of the keys underway will be delivered in Denver and Colorado Springs. Notable new projects in the Denver metro include …
Orange County continues to be a diverse marketplace for commercial real estate as we reflect back on 2019. Thanks to a growing and varied workforce made up of highly skilled and educated workers — with tech and life sciences at the forefront of transactions — the county’s economy remains strong. Looking ahead, Orange County’s local market is very resilient, despite the fact that economy leasing volume has slowed as tenants are focusing on space-efficient decisions. This market continues to remain stable thanks to a number of existing buildings that have been or are currently under renovation to meet the demand of companies that are branching out from traditional office space. A few of these repositioned properties include the Launch, the Met, 2722 Michelson Drive and the Press, which is currently under construction in Costa Mesa. Overall vacancy in the county has been 13.8 percent, while overall asking rental rates are $2.95 per square foot (full-service gross) with Class A rates sitting at $3.23 per square foot. Some submarkets are home to the majority of this activity, including the Airport area and South Orange County due to ideal geographic locations for businesses and new office development. Of course, fundamentals vary by …
Orange County’s multifamily housing market remained exceptionally strong throughout 2019. The average asking rent closed the quarter at $2,055 per unit, up 3.3 percent from the fourth quarter of 2018. This was the highest asking rent on record, up 34.5 percent from the prior peak reached in the third quarter of 2008. The Central submarket saw the largest year-over-year rental rate increase, with the asking rent there rising 3.8 percent to $1,920 per unit. This quarter, the Irvine submarket also saw its average asking rent adjust a bit, down 0.7 percent from the prior quarter to $2,446 per unit as existing inventory competed with new construction added to the market. However, the average rent in Irvine is up 3.2 percent from last year. Completed construction has pushed vacancy up. The total vacancy rate in Orange County this quarter registered 4.8 percent, up 30 basis points from the prior quarter, steady from the fourth quarter of 2018. Four significant projects totaling 2,567 units were completed this quarter. This includes Promenade at Irvine Spectrum with 1,781 units; SkyLoft, a 388-unit development in Irvine; the Charlie Orange County, a 228-unit complex in Santa Ana; and the Murphy, a 170-unit complex in Irvine. Annual …
Demand for Orange County industrial space remained healthy in 2019 as vacancy rates ended another year in record-low territory at 2.9 percent, fueled by a strong second-half net absorption. The movement in the second half of 2019 was largely a result of the Fed’s decision to keep interest rates low, which provided assurance for buyers that had been on the fence. The attractive interest rates have led to steady price increases, however, adaptation has been slow. The average time on the market has increased by roughly 30 to 60 days from 2018. Many buyers also struggled with post-close deferred maintenance. With the typical industrial building in Orange County being construction in 1985, buyers are often challenged with renovation costs adding to their bottom lines. Meanwhile, landlords in 2019 became more conservative in rent demands as average gains in asking full-service rents fell to 4.2 percent countywide, compared to 4.9 percent in 2018. Leasing activity remained steady with an average asking rate across Orange County of about $1 per square foot, triple net. A handful of notable new construction projects advanced in 2019. In the fourth quarter, 10 buildings totaling nearly 1.2 million square feet were completed in North Orange County, …
Retail transaction volume was strong in January as the shorter 2019 holiday season created a tight window for year-end closings, residual transactions pushed into the New Year and gave 2020 an early jump on what should be another great year. Total transactions in 2020 should continue to build from the big start. The massive transaction volume from the second half of 2019 — more specifically, a glut of fourth-quarter sellers — has produced a wave of investors needing to complete 1031 exchange purchases in the second and third quarters of 2020. By comparison, 2019 featured a slower than typical start due to a combination of elevated interest rates and residual investor hangover from the equity markets debacle of the fourth quarter of 2018. Our sense is that 2020 will benefit from enormous velocity, driven by private investor demand and seller willingness to meet market expectations in favor of quicker transactions as fears of the late cycle, election turmoil and international unrest grow. Further evidence of seller’s alignment with market expectations, trailing available data has shown the asking price to sale ratio narrowed from nearly 12 percent in first-quarter 2019 to 3 percent in fourth-quarter 2019. This brought the bid/ask more …
Stemming from the ashes of 2009 — a decade later and a decade wiser — Phoenix and the surrounding Maricopa County has exploded to outpace the national averages in both rent and job growth. In fact, the entire State of Arizona is booming in population growth and job production. The Census Bureau just released its American Community Survey “One-Year Estimates” in which Arizona was named the fastest-growing state in the nation with a year-over-year growth of 2.2 percent. The Phoenix MSA also experienced a 2.6 percent increase (as of October 2019) from the prior year ranking when it came to the largest job gains in the education and health services industries. The state also boasts a tax-friendly environment, pro-business governor, competitive workforce and one of the youngest median age populations in the country at 35.4. This has attracted a broad array of financial services, healthcare, manufacturing and tech companies that have been moving to Phoenix in droves, making Phoenix a diversified and balanced economy that is different than years’ past. What does all this mean? The need for housing is paramount and multifamily investors are reaping the benefits. Phoenix is able to absorb the roughly 7,500 new units developers are …
Ecommerce and generational shifts in spending patterns have spawned discussions regarding the health and future of retail. However, Phoenix has proven to be one of the most resilient and dynamic retail markets in the country. This resilience is a product of corporate and residential migration from gateway markets due to increasing regulation and costs of living. Maricopa County has been named the fastest-growing county in the country for three years straight by the U.S. Census Bureau, and is forecasted to add another 500,000 people by 2023. This population and income influx has the Phoenix retail market bucking national trends. Consumer sentiment remains at peak 2006 levels despite political uncertainty, without the artificial run-up in home values we experienced leading up to the financial crisis. Average vacancy rates have lingered in the high 6 percent range with active retail construction remaining tempered at around 1 million square feet. This is compared to more than 11 million square feet in 2006. Vacancy may fall into the mid- to high 5 percent range over the next two years — where it was in 2006 — barring any extreme economic events. Triple-net rents have averaged $16.30 per square foot in 2019 and have grown …
Phoenix’s industrial inventory is undergoing a period of growth due to the delivery of 2.2 million square feet of new product in the third quarter of 2019 and more than 4.7 million year to date (as of late November). In fact, the market has seen the highest amount of total industrial development year to date since 2007. While these deliveries have increased the industrial vacancy rate slightly, the overall vacancy rate for the area remains low at less than 7 percent. Absorption has been strong and is expected to remain so for the near future. Rental rates also continue to rise, though they are still at a considerable discount to many other West Coast markets. A high amount of development activity is still occurring, particularly in the southern portion of Phoenix. Much of this development is speculative rather than build-to-suit, which indicates developers are confident in the demand for industrial space in this market. Major factors for our growth have been significant job creation and in-migration of both residents and businesses, which have led to growth in industrial and construction jobs in the region. In fact, Greater Phoenix remains one of the top five metros for job creation in the …
Phoenix experienced 1.8 million square feet of absorption and an overall office vacancy rate dipping to 17 percent by the end of 2019. Now that the New Year is here, the city is poised to continue its positive progression as healthcare, science, technology and the professional office service sector continue to show steady employment growth. Arizona ranked third in the U.S. with 2.6 percent job creation, as of the third quarter of 2019. That’s 74,000 new jobs for the year, including 6,900 jobs in the science and technology sector and 14,000 new jobs in the recession-resistant healthcare sector. Companies are focused on finding cost-effective, business-friendly office environments and submarkets with access to top talent, and Phoenix checks all those boxes. Much of the state’s top talent is Millennials and Generation Z who are increasingly willing to move to lower cost of living cities that boast a high quality of life. Arizona ranked No. 1 in inbound state migration in 2018, with 273,714 inbound arrivals. We expect to see similar positive net migration numbers in 2019. The Census Bureau estimates that Phoenix will be the fourth most populous city in the U.S., with a population of 2.2 million, by the end …
The West Valley has a strong, talented workforce in the healthcare, finance, insurance and marketing industries, which has led to job growth increasing by 40 percent in the region, according to Westmarc. It’s no surprise that the West Valley City of Avondale, Ariz., located 15 minutes west of Downtown Phoenix, is experiencing pphenomenal growth. Much of this expansion is facilitated by Avondale’s location off two major freeways, including Interstate 10 and the Loop 101. The completion of the Fairway Drive interchange off I-10 in 2020 will only solidify the city’s growing reputation as a Southwest Valley hotspot. Avondale’s city council has also made economic development a top priority. The city’s economic development toolbox is filled with opportunities for developers who are looking to go West. Avondale boasts three Opportunity Zones, infill incentives, a Greater Maricopa Foreign Trade Zone and tax credits, among other economic development incentives. The city is working hard to make itself attractive to developers looking for a region with burgeoning growth and stable leadership. One such investor is the famous Chicago hot dog chain Portillo’s, which recently opened an 8,000-square-foot restaurant in Avondale. Other high-quality restaurants have been cropping up in the busy Gateway area around 99th …