Due to its unique location and an economy pretty well recovered from the recession, Honolulu has experienced explosive growth in high-rise condo developments. These are exciting times for investors and developers of multifamily properties on the islands. Hawaii’s economy is finally on a positive growth trend for 2014. This is expected to continue into 2015 and beyond. The state’s economy relies heavily on conditions in the U.S. economy and key international economies, particularly Japan, which has experienced slow growth. Tourism in Hawaii is the No. 1 industry. Last year, it grew 4.8 percent, which resulted in more than eight million annual visitors. This is expected to taper to 3 percent in 2014. U.S real GDP is expected to increase by 2.4 percent in 2014 and 3 percent in 2015. In comparison, Hawaii’s economy is projected to show a 2.4 percent increase in 2014 and 2.2 percent in 2015. Hawaii’s unemployment rate is projected to be 4.2 percent in 2014, 4 percent in 2015 and 3.5 percent in 2017. The Honolulu Consumer Price index is expected to increase to 2.1 percent in 2014 and 2.5 percent in 2015. These are all positive signs. However, Hawaii suffers from a critical shortage of …
Western Market Reports
Southern California has one of today’s strongest retail markets in the nation. Orange County has fared particularly well recently, showing resilience to the tough economic period of the past six to seven years. According to CBRE research, the average per capita income in Orange County is 20 percent above the national average, while its unemployment rate stands at 5.8 percent. This is well below the State of California’s rate at 8 percent, and below the nation’s rate of 6.7 percent. The overall retail vacancy rate of 4.9 percent has reduced 50 basis points since the first quarter of 2013 and has shown three consecutive quarters of positive net absorption. While the overall retail numbers in Orange County are improving, certain fundamental changes in the personality of the market are evolving after the recession: E-commerce: Bricks-and-mortar stores in Orange County are responding to unprecedented levels of online sales. According to CBRE research, national online sales are up 185 percent over the past 10 years. They’re projected to grow between 10 percent and 14 percent annually through 2017. Many of the region’s retailers are actively enhancing their customer’s in-store shopping experience to create an environment that e-commerce is unable to offer. Customer …
Hawaii has been immersed in an economic recovery over the past two years. This recovery has exceeded the overall U.S. performance in regards to total employment growth and total personal income growth. These figures have grown in Hawaii by 2.2 percent and 3.4 percent, respectively. Such economic growth has spurred strong performance from retail centers, while healthy spending from domestic and international shoppers has advanced the retail recovery in Hawaii. According to the Hawaii Tourism Authority, total visitor expenditures for 2013 were a record high of $14.5 billion, a 2 percent increase over 2012. The total visitor arrivals increased 2.6 percent, to 8.2 million, exceeding the previous record of eight million in 2012. International tourism is a strong factor in Hawaii’s economy as well. According to the Office of Travel and Tourism, Honolulu ranks as the fourth-largest port for total overseas arrivals. Honolulu received almost two million non-domestic arrivals in 2012, not including those from Canada and Mexico. Not only is the level of overseas visitor arrivals placing Hawaii close to the top of the pack, but its growth has exceeded the U.S. (on a year-over-year growth basis) every quarter since 2011. International tourism arrivals to Hawaii have grown an …
The Downtown Seattle office leasing market continues to be led by growing tech firms, especially Amazon.com. Amazon recently signed leases for 5th & Bell (125,000 square feet), 635 Elliott (180,000 square feet) and Blanchard Plaza (125,000 square feet with the possibility to take down the entire 250,000-square-foot property). The online retailer is also moving forward with the development of three high-rise buildings totaling 3.3 million square feet. Amazon owns additional lots for more projects in the future as needed. Other tech firms, including Zulily, Twitter, Tableau Software, Nuance Communications, Avalara, Acucela and Simply Measured, are either opening new offices or expanding rapidly. Developers are responding to this demand by moving fast to bring new projects to market. These projects include Dexter Station, 400 Fairview, Hill7 and Troy Block, which are all under construction. Trammell Crow recently announced its 1007 Stewart project, while Holland Partners is developing buildings sites one through three at Westlake Steps, and Schnitzer’s ready to begin construction on its Urban Union development. These development sites are all located in the South Lake Union area in and around the Amazon projects. This addresses the demand seen from other tech firms that want to be near Amazon and the …
The Seattle close-in industrial market consists of those areas within the city limits north and south of Downtown. This is a very dense market composed of about 1,995 individual buildings that amount to 46,520,000 square feet. This is the place where the first Pacific NW industries were established. The submarkets of Ballard, Interbay, SODO, Georgetown and South Park are home to old and new manufacturing-based businesses, suppliers and distributors. They are also home to behemoths like Boeing, the Port of Seattle and a majority of the Alaskan fishing fleet. In addition to decades-old industries like aerospace, ship building, custom metals fabrication, contractor suppliers and wholesale food distribution, we have newer industries emerging as well. These include craft beer, wine and spirits makers, specialty food production, software engineering, computer hardware design, new automotive sale sites, coffee roasters, digital printing, recreational equipment design and manufacturing and now even marijuana production, to name a few. This market is an amazing microcosm of the evolution of American industry. The continual growth of newer and more diverse manufacturing and distribution companies is still percolating steadily despite the setbacks of the Great Recession. This stubborn growth, coupled with the slow conversion of older industrial buildings to …
The Los Angeles/Southern California industrial real estate market ended the first quarter of 2014 with the lowest vacancy since early 2008, at an average rate of 3.8 percent. This latest positive trend in activity signifies a full recovery by the end of the year. Asking rents have climbed dramatically over the past 36 months. The Los Angeles industrial market rents have increased by as much as 20 percent to $.55 triple net, from a low mark of $.44 triple net in the first quarter of 2011. They are predicted to grow another 5 percent by year end. This rental increase is due to the robust economic recovery in Southern California, in addition to major tenants’ pent-up demand and a lack of supply for Class A distribution space. To enhance this recovery, the region’s unemployment has dropped to a low of 7.5 percent, or 50 basis points lower than the first quarter of 2013. Los Angeles/Southern California has the largest industrial base in the nation, with more than 1.6 billion square feet of product in all classes. Coupled with the lowest vacancy rate nationally at 3.8 percent – not to mention 18 consecutive quarters of positive net absorption – and this …
Construction of apartment buildings is leading the Denver metro area’s building boom, with more than 19,000 units starting construction in 2012 and 2013 that are expected to be delivered this year. This is the most apartments this market has added in such a short period of time in more than 40 years. This construction boom follows a stretch where we saw little multifamily development, which created a short-term need to catch up with current population growth demands. Some perceive this level of development as overbuilding, though recent population growth statistics may indicate otherwise. The Downtown Denver area is particularly hot for apartment developers, with about 4,000 units under construction. The majority of this work is being done around the Denver Union Station transit station. The activity is being fueled by the region’s population growth, which averaged 1.7 percent per year between 2007 and 2012, maintaining a stable expansion rate through most of the recent recession and recovery, according to the Metro Denver Economic Development Corp. The organization projects population growth — mostly attributed to strong net migration — will moderate slightly to 1.6 percent this year, which is more robust than the projected U.S. growth rate of less than 1 …
New multifamily development in Seattle was robust through 2013. That trend is continuing into this year, as demand remains strong and interest rates stay favorable. Healthy job growth, specifically those with higher wages, has particularly benefitted the Seattle market, leading to declining vacancies and increased rental rates. Vacancy rates continue to remain low at just 3.9 percent, compared to the five-year average of 5.2 percent, according to CoStar. Decreasing vacancy, combined with newer product, has pushed rental rates higher. The current average rent for a one-bedroom unit in the Seattle area is $1,078, up $93 compared to the five-year average. In addition to higher rents, concessions are currently at 1.5 percent, compared to the five-year average of 3.2 percent. Absorption remains strong and is keeping pace with new construction. So far, 3,300 units have been absorbed year-to-date. New construction in 2013 and 2014 has been at one of its highest levels ever. This development is largely concentrated in the Seattle urban core. Job growth remains strong, which has kept this additional supply in check with new demand. A total of 6,171 new apartment units were added over the prior 12-month period. As further evidence of a strengthening market, even condo …
Southern New Mexico’s industrial market, specifically Dona Ana County, remained stable throughout 2013. We project solid growth in this arena for 2014. We have not seen much growth in the first quarter of 2014, though the industrial market has remained stable. Rents have also remained about the same. They have decreased in some instances as landlords compete for the few new tenants entering the market. Fortunately, Southern New Mexico has experienced an uptick as a few companies entered the market from different states, which is obviously a positive sign. A food processing company just signed a lease/purchase agreement for 40,000 square feet. This company will create 150 to 200 jobs, a significant amount for Dona Ana, which has a population of about 225,000 people. A majority of the growth has occurred in the Santa Teresa area. Union Pacific is wrapping up its 2,200-acre facility, where it has invested $500 million to create the largest intermodal inland port in the United States. Union Pacific’s Intermodal ramp, refueling and crew change station was fully operational in early April. This facility has the lift capacity to facilitate 220,000 intermodal containers annually. It will provide rail access from Mexico’s interior and Pacific Ports to …
A healthy retail market in California’s Inland Empire is expected in 2014. The region will gain measureable momentum as the return of homeowners is reviving tax revenue and retail sales in once-inactive neighborhoods. Retail builders are responding by restarting previously delayed projects in the area, including a few developments that have been involved in litigation for years. The Village at Mission Lakes was completed in 2013 after six years of stagnancy. After enduring several delays, Kendall Plaza in San Bernardino will come online in 2014. The value-add sector of the Inland Empire’s multi-tenant investment arena will move forward this year as buyers pursue opportunities ahead of a stronger improvement in operations. Local players and investors discouraged with a shortage of listings in Orange and Los Angeles counties will move farther east to find properties with potential upside. The influx of capital moving into the market will result in a greater number of repositioning plays, particularly in areas west of Interstate 15, where minimal construction has come online in recent years. Investors who acquire properties on highly trafficked corners should be able to leverage the tenant mix and collect higher rents. Once completed, these properties can be divested at cap rates …