Hawaii is one of – if not the – top-performing industrial market in the country. The city and county of Honolulu, which contains Hawaii’s main shipping port, had a low vacancy rate of 2.05 percent at the end of the first quarter. This vacancy rate peaked at 4.8 percent in 2009. Significant gains have been made since then. The direct weighted average asking net rental rate for industrial users in Honolulu was $13.80 per square foot (NNN) at the end of the first quarter, while operating expenses ran an additional $5.16 per square foot, per year on top of that. Having bottomed out after the downturn in 2009 at $11.20 per square foot, the Honolulu market has gained almost 24 percent since then. Land values have also followed suit. Hawaii is definitely not Chicago or Los Angeles. In fact, both of those markets have individual industrial parks greater in size than the entire Hawaii marketplace, at 39 million square feet. Having said this, Hawaii is in the midst of a construction and tourism boom, with billions of dollars being allocated to urban core renewal projects, light rail, resort renovations and new residential developments. Up until recently, this renewal had occurred …
Western Market Reports
The industrial market in Los Angeles County is extremely tight and shows no signs of letting up as the trend for conversion of industrial property to creative office space by tech and media industries is very prevalent. Many industrial property owners either sell their assets and realize major equity gains with the new buyer planning a conversion, or choose to convert it to creative office themselves, garnering two to four times the rental rate for creative space. The vacancy rate of 3.2 percent in the first quarter of 2015 was parallel to that of the last quarter of 2014. To give some perspective, the downward trend of industrial vacancy has continued since the second quarter of 2013 when vacancy posted at a 5 percent rate. Additionally, the majority of larger industrial development in the region is build-to-suit product, which has virtually no impact on vacancy. The Downtown Los Angeles industrial market continues this trend of industrial property conversion to creative office. The Arts District is ground zero for this. While the rejuvenation and gentrification of Downtown is a welcome sight, the industrial users are now having to relocate, seeking other spaces throughout the LA basin. Many of these users are …
With all the recent froth in the multifamily markets, knowledgeable observers are expressing concern regarding all of the cranes that are sprouting around Seattle. To assess the apartment market, we have compiled data recently published in the “March 2015 Apartment Development Report” by Dupre + Scott Apartment Advisors. The Seattle Metro area is in the midst of an apartment development boom, with an estimated 17,400 units under construction, 12,000 units to be completed and ready for occupancy in 2015 and 11,000 units to be delivered in 2016. There is an additional 25,000 additional units in various stages of planning for delivery over the next five years. This new construction is in response to low vacancy rates (3.5 percent in the Seattle MSA, excluding vacancies for properties in initial lease-up), job expansion and related in-migration to the area. These trends have resulted in rising rents for new projects, up more than 7.4 percent in the region in the past 12 months (skewed by rents in newly opened projects). The new units under construction or proposed are heavily weighted to the close-in neighborhoods surrounding the Seattle CBD (Belltown, Downtown Seattle, South Lake Union) and close-in neighborhoods north of Lake Union (Ballard, Greenlake/Wallingford, …
Improvement in apartment fundamentals has remained strong and is expected to continue over the next two quarters. The unemployment rate in Los Angeles County was 7.6 percent in March 2015, which represents a 100 basis point decrease from the same period last year. Supported by steady job growth, more than 108,000 new jobs are forecast for Los Angeles County in 2015, representing a 2.6 percent improvement over last year’s performance. A significant amount of units are currently under development and more are expected to come on line later this year. Issuance for about 7,446 multifamily units is forecast for 2015, and issuance is expected to rise to more than 17,000 units in 2016 and 2017 with the anticipated absorption of about 11,800 units over that same period. That said, developers are likely to relax their efforts to obtain new permits into the latter half of 2015 based on an expected modest uptick in vacancy. Currently standing at 3.2 percent, the overall vacancy rate will likely increase to 3.5 percent by year-end. The average year-over-year rent increased about 2.5 percent depending on the individual submarket. The greatest level of appreciation was represented in the South Glendale/Highland Park submarket where asking rents …
The Seattle office market has been a shining example of strength and solidity. Compared to the U.S. job rate, which expanded by 2.4 percent over the past year to drop the unemployment rate to just 5.5 percent, the Seattle-Tacoma-Bellevue Metropolitan Statistical Area is looking good. Seattle added jobs at a rate of 3.1 percent in the first quarter of 2015. It also saw employment gains in every category. The unemployment rate remained in line with the U.S. rate at 5.5 percent. Construction led all job sectors with 12.6 percent growth, followed by professional and business services at 4.2 percent. The Seattle Central Business District office market showed continued improvement as the overall vacancy rate declined by 2.8 percentage points on a year-over-year basis. Asking rents continued to climb in all submarkets with an overall increase of 4 percent, while Class A rents increased by 5.6 percent. Making tech giants feel at home is nothing new to the Seattle area. The largest lease of the past quarter was Facebook’s 274,000-square-foot deal at Dexter Station. With a planned delivery of May 2015, Dexter Station will be a 10-story, 345,992-square foot office building located in the flourishing Lower Queen Anne/Lake Union submarket. Facebook …
A booming Denver economy has strengthened the local real estate market, creating strong demand across all property sectors, including multifamily, housing, office and retail. The wealth effect stemming from robust employment and rising home values will specifically drive retail sales in the Denver metro this year. A thriving retail market will attract new tenants to the metro, and facilitate healthy rent growth. Employers will continue to expand in the metro, pushing total employment to a new high and drawing additional residents to the metro. Hiring will expand 3.3 percent this year as employers are expected to add 45,000 total workers to payrolls. Metro Denver has also attracted high-wage earners. For instance, Lockheed unveiled plans to add 850 high-paying jobs at its Jefferson County facility over the next few years. Meanwhile, rising housing demand has lifted the median price of an existing home nearly 60 percent over the past six years. This has caused Denver to become one of the most expensive non-coastal housing markets in the nation. High home values will positively affect how homeowners feel about their financial situation, encouraging retail spending. Retail construction will slow this year as many developers focus on redevelopment projects like the Southwest Plaza …
Multifamily housing is coming of age in New Mexico, and the Millennial generation is spurring the growth. The old adage of “location, location, location” is ever present as the placement of a property in relation to cultural, educational, entertainment and natural amenities becomes a major factor in the value of the property. The ability to walk and bike to social amenities like restaurants, theaters and schools is, and will continue to be, very high on the list of importance for members of this generation in New Mexico. There is not only a distinguishable difference in occupancy rates for units scoring high on Millennial’s wish lists, but the income for these units is between 20 percent and 24 percent higher than those with lower scores. While newly constructed and refurbished multi-housing units often appeal to Millennials, all of New Mexico is experiencing high occupancy rates throughout the multifamily market. This push on availability is fueling an environment that will continue to encourage increasing rents and new construction. Though the sale of multifamily properties was deeply affected by the recession, a market shift in 2013 has allowed the multifamily market to regain its footing with a two- to three-times increase in sales …
The industrial market had a notable year in 2014. Vacancy declined 270 basis points from the first quarter of 2014 where nearly 1 million square feet of space was absorbed. It has been more than seven years since absorption has registered similar figures. The primary factor driving last year’s success was a handful of large deals with more than 50,000 square feet. The supply of larger, quality spaces was steadily leased up throughout the year. These accounted for 54 percent, or 522,000 square feet, of absorbed space. Market velocity slowed down during the fourth quarter, driven by a lack of quality inventory. Absorption registered a positive 103,000 square feet, and was the lowest quarterly level of 2014. The centrally located North I-25 submarket outshined all other submarkets. In the biggest deal of the quarter, Flagship Foods occupied nearly 79,000 square feet of space in the North I-25 submarket. There were also nine other spaces occupied in this submarket that contributed another 60,000 square feet of absorption. A developing concern for 2015 is the significant amount of new available space being brought to market. Although still occupied, a total of 244,000 square feet of new space was added to the inventory …
The Colorado Springs industrial real estate market continues to rebound with a decrease in vacancy to 8.1 percent, an increase in the average asking rate to $6.19 per square foot (NNN) and a net positive absorption of 199,101 square feet. Along with these improvements, there has been a healthy number of owner/user acquisitions in the industrial market that has created a more competitive market for both tenants and owner/user buyers over the past year. Colorado Springs will also soon benefit from Sierra Nevada Corporation’s recent decision to construct its new $88-million hangar facility at the Colorado Springs Airport, a development that will significantly aid the city’s struggling southeast submarket. Designed as a 90,000-square-foot facility, construction is slated to begin in early 2016. The company estimates it will create about 2,100 new jobs. The city will further benefit from the formation of a new 225,200-square-foot FedEx distribution facility currently scheduled to open in 2016 These new developments reflect the abundance of opportunities and land options near the airport in the southeast submarkets, with available sites ranging from small sites of less than an acre to sites larger than 50 acres. The southeast area also offers a wide range of office/warehouse flex …
The New Mexico retail market is continuing to change in a positive manner, which bodes well for property owners and businesses. There are new national, regional and local tenants looking at this market, moving in and around the shopping centers of New Mexico. New shopping centers are being built, while existing shopping centers are being redeveloped and traded. Some of the most significant transactions include Columbus Pacific acquiring Sierra Vista Shopping Center in Albuquerque and moving Stein Mart and Hobby Lobby into a former K-Mart space. Pete Daskalos Properties has also purchased Four Hills Village Shopping Center on Central and Tramway in the Southeast Heights submarket. The center now has a new movie cinema, among other changes to its anchors and tenant roster. A K-Mart building at Rio Rancho at Hilltop Plaza Shopping Center was also sold after the store vacated. The new landlord is looking to re-anchor that space as well. These big box vacancies have created redevelopment opportunities for existing shopping centers located in established trade centers while rents are increasing as the larger spaces are subdivided and leased to other tenants. This has created momentum in the market and upward pressure on asking lease rates. Other retailers …