The Inland Empire multifamily market will retain its solid foundation of positivity this year as the economy again provides a healthy supply of new jobs and freshly formed households seek apartments to rent. The number of new multifamily units scheduled for delivery is a fraction of what it was last year, and this will place downward pressure on vacancy. Tightening vacancy will support another year of above-trend rent growth. Strong job growth in wholesale trade, government and transportation and warehousing positions has drawn many new employees to the Inland Empire in recent years. The number of 20- to 34-year-olds, who typically favor rental housing, has steadily increased. Growth in wholesale trade, government and warehousing will continue to attract Millennials in 2017, and the region’s employers are expected to add 27,500 new jobs overall. The Inland Empire’s employment boom has led to an increase in household formation, which has stimulated new multifamily construction. Developers fruitfully delivered 2,600 new units to the market in 2016. This exuberance, however, may well have been the peak for the current real estate cycle. This year, the projected number of apartment completions is just 500. This much more measured level of development will be quickly absorbed …
In many ways, Portland’s industrial market has experienced a dramatic shift over the past five years, emerging as a market to be reckoned with. Demand has exceeded supply for the past six years, pushing vacancy to a 25-year low and rents up 18 percent year-over-year. Industrial users have grown in size, and large users have grown in number. Developments are bigger and migrating further from the traditional industrial submarkets. Investors are keen on Portland assets and are willing to pay a premium for quality product with a solid tenant roster. Portland’s population grew by 8 percent from 2010 to 2015, ranking it among the top 20 of the 50 largest U.S. cities. This growth in metro-area population has propelled strong demand from large e-commerce and distribution companies as they expand into new locations to service our growing consumer base. In 2010, we saw 11 users lease or build spaces of 100,000 square feet or more, and our average size lease was 24,854 square feet. By 2016, our average-sized industrial lease had grown to 39,218 square feet, an increase of 57.8 percent. We also saw 18 users build or lease space greater than 100,000 square feet. Portland’s industrial market users are …
Last year was a relatively flat year for the Northern Nevada office market. Reno/Sparks had negative absorption in the first and third quarters of 2016, and positive absorption in the second and fourth quarters. The year ended up at 10,153 square feet of net absorption, according to the DCG internal database, essentially nullifying any real gains or losses. However, the Reno office market is much healthier at a 12 percent vacancy rate as compared to the nearly 20 percent recession highs. Each quarter also recognized more gross absorption than the previous quarter in 2016. Class A office continued to be in demand with rents increasing to north of $2 per square foot, per month, full service. Large spaces ideal for company relocations are difficult to find. Reno currently has a small supply of vacant, Class A spaces with more than 10,000 square feet available. However, we should see our first speculative construction take place in the Meadowood submarket as Mckenzie Properties plans a 40,000-square-foot building in Mountain View Corporate Center. New corporate relocations for office tenants were relatively quiet in 2016. In comparison to 2015, we saw large tenants relocate to our region, including Grand Rounds in South Meadows and …
Local market conditions are always related in some way to what’s happening on the national stage, so let’s first acknowledge our new leadership. Trump has continued talking like the businessman he is and in very much the same style that got him elected. In reaction, equities markets have continued to boil over into record-setting heights as the business sector embraces the potential for more business-friendly stances that will sooner or later emerge from Washington. Business resurgences always impact Northern Nevada, thanks to both its strategic location advantage in distributing to the 11 Western states and its highly business-friendly state climate. As for Tesla, 2016 showcased increasingly tangible direct and indirect effects from the expanding Gigafactory. Tesla leased a large warehouse in the Tahoe Reno Industrial Center near the Gigafactory to receive product for several years. Panasonic, Tesla’s quieter partner in the Gigafactory, also leased a large warehouse in the same park that is close to the plant. Another Tesla vendor, Daehan Solutions America, an international company supplying the automotive industry and headquartered in South Korea, leased a large space in the vacant ex-Amazon space in Fernley. These three transactions alone comprise a large portion of the market’s total quarterly absorption. …
Increased activity and record amounts of positive net absorption created a new commercial landscape across the Wasatch Front. The majority of 2016 leasing activity was a result of tenants occupying new space that was pre-leased during 2015. While sublease availability increased over each quarter, overall market indicators like local population growth and continued economic development will remain strong into 2017. The Salt Lake County office market grew by an additional 1.7 million square feet in 2016, primarily in the South submarket. More than 1.5 million square feet of space was under construction at the close of 2016. This product will be introduced to the market by mid-year 2017. Vacancy rates increased slightly from 8.6 percent in 2015 to 8.74 percent at the end of 2016. Notable Salt Lake office projects completed in 2016 include 111 South Main (440,000 square feet); Vista Stations 4 through 8 (655,000 square feet); The Pointe I (77,703 square feet); the Overstock Peace Coliseum (231,000 square feet); and Town Ridge Center I & II (250,000 square feet), to name a few. An additional 1.5 million square feet of space was under construction at the end of the year. Buildings like 53rd Center 1 (200,000 square feet); …
With nearly 3 million square feet of industrial space under construction, and climbing lease rates averaging $5.64 per square foot, it is safe to say the industrial market along Utah’s Wasatch Front is alive and well. The primary Salt Lake County market reports an overall industrial vacancy level of 5.08 percent. In the fast-growing Utah County submarket that’s just south of Salt Lake City, the vacancy rate is 3.44 percent. This is in line with the pre-recession levels experienced in the mid-2000s. The most noticeable difference in today’s environment is the scale of buildings being built on spec, as well as who is carrying out these projects. We continue to see construction starts and announcements on buildings larger than 300,000 square feet — many of which are speculative — by out-of-state development or investment groups. This includes companies like Clarion Partners, Exeter Property Group and Seefried Industrial Properties. This represents a new resurgence of interest by many of the “brand name,” major-market players who want to be part of the dynamic growth occurring in Utah. This is a growing trend nationally as well, which is interesting to see in the relatively smaller, 170-million-square-foot Wasatch Front market.Activity from the local players …
Market Moves There is so much fascinating discussion happening around the Las Vegas office market: what is the future of the suburban office? How does layout truly affect the culture of a company? Is parking a dying amenity? For the Las Vegas office market, it is just as easy to be captivated by imagining the possibilities of tomorrow. The post-recession recovery has seen office as the last product type to get healthy. The resort corridor led the way with a few new developments, like the T-Mobile Arena and Lucky Dragon Hotel, but there were many significant rehabs and upgrades as well. Multifamily and industrial followed closely behind, not surprisingly. What is interesting is that multifamily developers, as well as industrial, have been delivering product classes the valley has not experienced in any previous cycles. These include integrated apartment communities with over-the-top lifestyle amenities, and big bomber industrial buildings with the latest fixings of the day. Office development completions, however, have been limited to niche plays like the 140,000-square-foot Federal Justice Tower, and relic projects like Downtown’s 200,000-square-foot One Summerlin. Some of these projects were carried out by new owners, some with a lower basis. These buildings filled up and are …
After finishing 2016 with a bang, 2017 is shaping up to be another great year for retail real estate in Las Vegas. Tourism, construction, population growth, infrastructure improvements and business growth are all cause for excitement. The Strip is once again predicted to dazzle retailers. There are currently more than $9 billion in construction projects underway or scheduled through 2019. The development lineup is dominated by Resort World, Steve Wynn’s Paradise Park and a hopeful sale of Fontainebleau. Alon is another exciting project that is looking to replace a major funding source so it can begin construction. Several other important, but smaller projects are scheduled to come on line later this year and into 2018. These include infrastructure, retail expansion and additional hotel room projects. New retail and food arrivals to the Strip include Skechers, Walburgers, Morimoto, Sugarcane Raw Bar Grill, Giordano’s and John Rich’s Red Neck Riviera. Around 42 million visitors from the U.S. and around the world enjoyed Las Vegas in 2016, and we are anticipating even more in 2017. Las Vegas population growth also continues. The city was ranked the 28th largest in the U.S. in 2016, while housing sales and construction continue to have healthy growth. …
With commercial construction activity up by double digits in 2016 and projected to increase another 5 percent in 2017, the industry continues to keep a keen eye on labor shortages and construction costs. This rings even more true in the face of today’s increasingly stringent financing requirements — a critical project element that can push construction schedules out by months and, in the process, create challenges with accurate pro forma data, true labor schedules and pricing. The balance between schedule shifts and a backlog of work has proven particularly challenging for the entire industry, and presumably shows no sign of relief. For optimal success, teams must diligently focus on cross-functional communication, design-build principles and early strategic planning to protect from the pitfalls of 2017’s momentum. Focusing on this early planning gives clients two of the greatest advantages available in our current building climate: a forum for unearthing issues proactively and time to plan for solutions. In cases where design-build isn’t possible, teams can still capture the benefits of this concept by getting the right knowledge leaders at the table early on, providing significant results to project cost savings, resource management and logistics planning. The Labor Issue While the industry jockeys …
There was a big shake-up in the big box world with long-time sporting goods staples Sports Chalet and Sports Authority shuttering stores across the county. Macy’s in Mission Valley is also closing, while Nordstrom is shutting down in downtown. Interestingly, Hobby Lobby and the large pet stores seem to be buffered by the big box epidemic. In Chula Vista, two long-time vacant big boxes were finally chopped up into four spaces to accommodate the mid-sized box users. The good news is that big, “boring” boxes are being replaced by big “experiences.” Experiences, whether in a larger property or within a specific business, continue to be important for retailers and restaurants. Landlords across the county are making large investments to create experiences that will attract consumers. At the top end of the spectrum we have seen Westfield finally pulling the trigger on a massive remodel of the UTC mall, which will include more than 100 new stores and restaurants. Rouse purchased the Carlsbad mall from Westfield and has seemed to follow a similar business plan with its revamp, adding an exciting lineup of restaurants along the outside of the property. Liberty Station in Point Loma is coming into its prime with, …