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, …
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 …
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 …
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 …
The Phoenix industrial market is thriving, despite more than 5.6 million square feet of new construction set to deliver this year. There is enough demand in this market to keep the average vacancy rate at a near eight-year low of 9.7 percent, while absorption is on pace to exceed 6 million square feet for the third year in a row. Tenants have more choices than ever thanks to all this new inventory. Many are making a flight to quality, upgrading to next-generation space featuring wide column spacing and clear heights of up to 36 feet. This is particularly valuable in the West Valley, where large, efficiency-focused, third-party logistics firms and e-commerce companies must maximize how they manage vast amounts of product. Some of these needs are so specific that corporations have opted to custom build, as is the case with the recently completed 400,000-square-foot REI distribution center and the 384,377-square-foot IRIS USA facility, both situated in Surprise. These projects rank as the Valley’s two largest owner-builder completions of the year and have propelled the Northwest submarket — the third smallest industrial submarket in metro Phoenix — into the “hot” category. Meanwhile, owners and builders have gotten more creative in centralized …
The Greater Phoenix multifamily market continues to thrive in a high-demand environment, driven by strong tenant volume and investor interest. As the local economy expands, employers are adding workers at a steady pace while demand for housing is on the rise. Apartments remain the preferred choice for many, pushing multifamily vacancy rates low even as new units are added to inventory. We fully anticipate these conditions to continue in the year ahead. Multifamily vacancy in the Greater Phoenix market ended the second quarter of 2016 at 5.9 percent, 20 basis points lower than one year earlier. Vacancy typically ticks higher in the second quarter, as some part-time residents escape the summer heat wave. This trend occurred again this year. Despite the recent seasonal rise, vacancy has been below 6 percent for the past four quarters, and the rate will undoubtedly tick lower in the second half of this year. The low-vacancy conditions are fueling robust rent growth. Asking rents have spiked by more than 8 percent in the past year, while the pace of gains is accelerating. Asking rents rose more than 5 percent in the first half of 2016, with additional increases anticipated in the months ahead. More than …
Things have been steadily moving forward in the Inland Empire office market. Consistently the fastest-growing, non-farm job market in Southern California, the region’s exceptional growth in professional and business service positions provides a compelling reason for investors to view this office market as opportunistic. There is a high demand for Class A and B property investments. We are also seeing overseas buyers, mostly from China, showing interest in the region. Unlike Los Angeles and Orange County, which have been popular with foreign investment for the past several years, this is a new trend for the Inland Empire. It also suggests global investors are looking to the region as an attractive alternative to some of the pricier Southern California markets. The Inland Empire is now on the map. The good news is there is still room to add value by leasing up vacant space and realizing future rent growth. We have recently seen many investors buying risk-oriented projects, anxious to secure some of these affordable assets before rates and pricing rise. Some of the strongest submarkets for leasing and investment are the CBDs of Corona, Riverside, Rancho Cucamonga and Temecula, as well as the Ontario Airport area. There is a high …
Developers are doing everything they can to make their projects attractive to corporations and their brokers as competition in Seattle continues to increase for high-growth tech tenants. And they’re doing it with good reason: Seattle was recently ranked the No. 1 city in the country for technology jobs. Seattle’s tech industry has grown by 12 percent over the past two years, according to Forbes, outpacing Silicon Valley, Boston and other tech markets. Experts point to a diverse local economy – Microsoft, Amazon and Boeing – and more-affordable housing that, together, enabled Seattle to fare better than other technology hubs. With tech business booming, Seattle’s real estate market is simply trying to keep up. Projects are starting every week, it seems, by developers looking to capture the unprecedented supply of tech businesses. Some are trying to attract anchor tenants with equity, naming rights or aggressive TI allowances. No matter the approach, smart owners realize their buildings must be created in a way that enables tenants to gain a competitive advantage in attracting top industry talent. Surveys show culture is by far the biggest draw when it comes to recruiting and retaining tech workers. How a company’s owners and employees think, feel …
The underlying forces bolstering the strength of the Seattle metro multifamily marketplace are robust job growth, new development projects and the short supply of single-family houses. While these factors also slightly impact vacancy levels, property prices and sales activity are expected to continue to rise. New and expanding companies, particularly in the tech sector, have sustained job growth in the Seattle-Tacoma region over the past five years. They have put more than 115,000 people to work since the pre-recession peak. This influx of workers, strong housing demand and a number of new development projects contributed to the construction sector posting the region’s strongest 12-month job gain of 14,600 new jobs. Company expansions are anticipated to generate an additional 65,000 jobs this year alone. Construction of both single-family and multifamily housing projects is expected to continue at an accelerated pace over the next several years. Limited inventory and affordability issues associated with single-family houses are preventing many people from transitioning to homeownership, thus fostering intense demand for apartment rentals. Roughly 12,000 rentals are expected to come online this year – with about 2,600 apartments delivered in the second quarter of 2015 alone. This represents the second-largest quarterly gain in more than …
Fueled by record-setting employment, the San Francisco Bay Area multifamily market is performing at its highest level in recent years in terms of low vacancy rates, strong rental growth, and new apartment communities coming online, under construction and planned. The San Francisco metropolitan area – which accounts for half of the San Francisco Peninsula, San Francisco, Marin and Oakland – added about 4,100 jobs during September, according to Beacon Economics. This number is on par for most of the year. Sources from the City of San Jose reported the Bay Area added more than 40,000 new jobs during the 12-month period from October 2014 through September 2015. A further report from the Association of Bay Area Governments stated that “by spring of 2013, the region had regained all of the jobs lost in the 2007 to 2009 recession, while estimates indicate that the jobs lost since the higher peak in 2000 were finally regained by the end of 2014. This rebound has spread unevenly throughout the region, with counties as diverse as San Francisco and Napa each having passed the two previous peaks in employment.” Unemployment is running as low as 3.7 percent in the San Jose/Sunnyvale-Santa Clara MSA. It …