Western Market Reports

Progressive and Steady Growth Define the Industrial Market

by Camren Skelton December 27, 2016

The Reno industrial market continues to grow at a steady pace. Numerous developers are building new speculative warehouse/distribution facilities in many of the submarkets in Reno, Sparks and nearby outlying areas. With an industrial base of more than 80 million square feet and a vacancy rate of 8.2 percent (which continues to recede), the region is experiencing a healthy demand for space ranging from 50,000 square feet (divisibility) up to 150,000 square feet. Demand exceeds supply for product of this size. Current rental rates have steadily pushed upward over the past 18 months. Depending on the location of the business parks and its proximity to Interstate 80, the major east-west trucking artery, or I-580, the quoted asking rental rates range from about $4.20 per square foot, per year, up to $5.04 for the aforementioned divisibility ranges. New speculative Class A industrial product in the Reno market offers 32’ to 36’ clear height, as well as ESFR fire sprinkler technology, state-of-the-art LED high bay lighting, fiber optics communications, cross-dock configurations, ultra-wide column bay spacing and ample trailer parking onsite. Panattoni Development built Red Rock 200, which includes a 750,000-square-foot, built-to-suit fulfillment center for Petco, as well as a 200,000-square-foot speculative distribution …

December 27, 2016

California Market Reports Multifamily Western Western Market Reports

Demand Drives Multifamily Development

by Camren Skelton December 20, 2016

The Orange County apartment market is currently enjoying strong fundamentals that comes from several sources. These include robust renter demand, strong local economy and historic low interest rates, all of which make for a perfect storm. As more renters enter the market due to strong employment numbers, it gives way to new household formation. While home prices in the region escalate, more would-be homebuyers are being priced out of the market and forced to remain in the rental pool, further driving competition for suitable housing and pushing rents to new levels. Orange County developers are responding to a growing demand for new multifamily housing developments, many of which are Class A projects targeting high-end tenant bases and price points. Many older properties, such as Class C or C+ buildings, are enjoying the blow back from these new developments when tenants seek out lower rents when compared to top-tier projects, resulting in robust rent increases. Investors looking to place capital in today’s multifamily market are taking advantage of strong fundamentals and cheap debt. Transaction volume has increased more than 10 percent in the past 12 months, with notable sales volume in the northern end of Orange County. Confident that upward rent …

December 20, 2016

California Market Reports Office Western Western Market Reports

The Office Sector Continues to Perform

by Camren Skelton December 13, 2016

The Orange County office sector continues to see falling vacancy rates, positive net absorption and rising asking rates. Orange County has beaten the U.S. national average for office vacancy since the fourth quarter of 2014. Office vacancy fell to 8.9 percent in the third quarter, down from 9.4 percent in the second quarter and 9.9 percent in the first quarter of 2016. We continue to see positive net absorption to the tune of 626,900 square feet, but that number is down from 730,844 square feet in the second quarter, a difference of 15,044 square feet. Asking rates continue to trend upward from $27.61 per square foot to $27.73 per square foot annually. Class A buildings lead the way, with asking rates averaging $32.89 per square foot. Class B and C buildings come in at $26.28 per square foot and $21.57 per square foot, respectively. These are all good signs for the new development coming to market in 2017. One of the more notable projects to soon come to fruition is 400 Spectrum Center Drive in Irvine. This 466,696-square-foot, Class A office tower is expected to be complete in the third quarter of 2017. This will be the sister tower to …

December 13, 2016

Colorado Industrial Market Reports Western Western Market Reports

Job Growth Encourages Industrial Development

by Camren Skelton December 6, 2016

Denver’s economic growth, its reputation as a commercial hub in the Rockies and the growth in e-commerce sales are all factors contributing to the metro’s strong industrial property performance. Denver employers are on track to add 39,000 new workers to their headcounts by year end, expanding the local workforce by 2.8 percent, with the professional and business services and construction sectors driving employment gains. As household formation and retail spending has increased, demand for industrial space in Denver has followed suit. The city’s strategic position as a Western state commercial hub, along with the rapid rise in e-commerce sales, has attracted retailers and distributors, such as FedEx and Amazon, to the area. These large retailers and distributors are contributing to the high demand for industrial space, especially given the limited number of industrial property deliveries in 2015. The industrial construction pipeline is growing as a result of this demand. Spurred on by Denver’s positive economic performance, developers have expanded the industrial development pipeline, including higher levels of speculative development. About 3.7 million square feet of industrial space will have come online by the end of the year. About 1 million square feet of space was delivered in 2015. The breakneck …

December 6, 2016

California Market Reports Multifamily Western Western Market Reports

New Jobs Mean More Housing for San Francisco, San Mateo

by Camren Skelton November 22, 2016

San Francisco and San Mateo counties boast above average employment numbers and wages and have been strong all through the current business cycle. Over the past four quarters ending in June, organizations in these counties, along with Marin County, (henceforth referred to as “the metro,”) have created 30,750 new jobs. This expansion of the metro’s labor force by 2.9 percent far exceeds the national average over the same time period. Businesses are expected to create 40,000 new positions this year and employment growth will reach 3.7 percent. Hence, the metro’s economy has created substantial demand for housing and apartments are leading the way, as the high cost of single-family homes, rigorous regulation, and the infill nature within the metro has constrained deliveries during previous years in the cycle. There are multiple major projects that will boost the rate of completions significantly above previous years in the cycle. Builder activity will surge to a multi-decade high with 6,440 apartments slated for delivery, exceeding the 1,488 units brought to market in 2015. The majority of completions will target the South of Market (SoMA) and South San Mateo County submarkets. Vacancy rate in the metro will register a 110-basis-point increase in 2016, rising …

November 22, 2016

California Market Reports Multifamily Western Western Market Reports

The Bay’s Multifamily Market Experiences Some Transition

by Camren Skelton November 15, 2016

Financial markets worldwide have seen dramatic volatility in this past 12 months. The Bay Area economy and new hiring have cooled, while the San Francisco housing and condo markets have started to normalize after four feverishly overheated years. We are hearing about a big jump in apartment vacancy rates, with more apartments for rent than we’ve seen in many years just as rental rates begin to decline from recent all-time peaks. As would be expected, preliminary indicators show a transition to a cooler market when it comes to apartment building sales activity. However, as illustrated in the charts below, we haven’t seen any significant changes in the statistics. The second half of 2016 will undoubtedly provide more insight regarding the speed and scale of any market condition changes. San Francisco multifamily assets that contained more than five units experienced a plateau in cap rates year over year between 2015 and 2016. However, this same product experienced an increase in dollars per square foot, price per unit and average sale prices. The politics of new home development in San Francisco are not for the weak of heart. There are vocal disagreements between neighborhood and homeowner associations, developers, affordable housing advocates, tenant’s …

November 15, 2016

Market Reports Office Washington Western Western Market Reports

Seattle’s Office Market Remains Healthy

by Camren Skelton November 8, 2016

Seattle is on the rise, and companies are thriving in the downtown core and surrounding submarkets. Seattle’s office market is one of the healthiest in the country. Leasing continues to be led by a robust technology sector that’s fueled by both the expansion of homegrown companies and the addition of engineering offices from mostly California-based companies. These companies have established significant footprints in Seattle as they have been able to attract, hire and retain workers from a talented employee pool. Institutions like the University of Washington continue to produce additional engineering graduates from an expanding computer science program, and companies have had great success recruiting talent eager to move from across the country and internationally to the Puget Sound region. Traditional brick-and-mortar companies like Sears, Best Buy and Starbucks are all working in Seattle to monetize the use of electronic devices. Many new companies to the market like Snapchat, Airbnb and, most recently, Pinterest, have opened their first Seattle locations in co-working spaces. The collaborative nature of the co-working environment is also popular among startups. These companies are often created by former employees of some of the region’s longstanding heavyweights. Amazon has had a significant ripple effect on the region, …

November 8, 2016

Market Reports Retail Washington Western Western Market Reports

Seattle’s Retail Market Continues to Grow

by Camren Skelton November 1, 2016

The Puget Sound region may be home to the growing online retail giant of Amazon, but bricks and mortar retail development is in the best shape it’s been in since the beginning of the Great Recession. After five consecutive years of strong employment growth and resultant in-migration of highly paid tech workers, the Seattle market is continuing to enjoy gains in retail sales volumes, which are projected to grow 4.5 percent in 2016. Demand for retail space has pushed overall vacancy rates to 3.7 percent throughout the metro area. For the 12 months ending on June 30, 2016, there were only 500,000 square feet of new space built. This is in contrast to the recent annual absorption that has exceeded 1 million square feet. Overall vacancy rates reflect the demand for new space and asking rents have climbed correspondingly. The majority of new retail construction is occurring in mixed-use projects, such as ground-floor spaces at new residential developments. The largest chunk of retail space currently under construction, however, is within the $1.2 billion expansion of Kemper Freeman’s Bellevue Collection in Downtown Bellevue. In all, the project will add 375,000 square feet of new retail, which is 85 percent pre-leased. The …

November 1, 2016

Arizona Market Reports Office Western Western Market Reports

Tech Takes Hold in Phoenix

by Camren Skelton October 25, 2016

One of the newest trends in Phoenix office leasing is the spur in technology and creative space requirements, especially for tenants moving in from Northern and Southern California. These companies are searching for a more favorable market — one with lower labor costs and rental rates, more affordable housing, an educated workforce from which to draw, less traffic and an overall higher quality of life — and the Phoenix area fares well comparatively. I expect this trend to continue, especially in the downtown markets of Phoenix, Tempe and Scottsdale. Strong leasing activity throughout the Phoenix market this year resulted in robust absorption, with Class B product leading the way. There are numerous large tenants currently in the market seeking to lock up space, which will keep demand elevated throughout the remainder of the year. Healthcare and financial services industries are committing to the market, especially with larger-scale operations centers. Parking needs for these users are 6:1000 and greater. Tempe remains a hot spot for development, with two new high-profile speculative projects underway — the Grand at Papago Park Center (213,055 square feet) and 2100 Rio Salado (102,819 square feet). Two new buildings were completed this quarter at Tempe’s Marina Heights …

October 25, 2016

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Retail Occupancy Rises in Phoenix

by Camren Skelton October 18, 2016

As we approach the fourth quarter of 2016, the Phoenix retail market is experiencing its lowest vacancy rates since 2008. Vacancy has dropped to just under 9 percent, a slight improvement from the start of 2015, while rental rates have climbed 0.8 percent to $14.53 per square foot. Positive economic indicators such as population growth, a favorable job market, and new-home construction are all contributing toward a healthy retail market in Phoenix. Consumer confidence continues to rise and demand for retail space has become stronger than previous years. Vacant spaces in core locations are being absorbed by national, regional and local retailers as well. Anchor space activity continues to be geared around value-oriented retailers, fitness users, family entertainment concepts and alternative uses. Quick-serve restaurants are the most active tenants in the market. These concepts include Panera Bread, Starbucks, Café Rio, Pieology, MOD Pizza and Jimmy John’s. In addition, new health-conscious restaurants are starting to look at Phoenix for store openings in 2017, such as Ahi Poki, Eat Fit Go, Grabba Green and Nekter. Supermarkets are driving new development in core trade areas of Phoenix, as well as in high-growth markets. Fry’s Food & Drug has started construction on seven new …

October 18, 2016

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