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 …
Western Market Reports
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 …
The New Mexico office market has gained more traction and absorbed a healthy level of excess inventory this year. Vacancy fell to its lowest level in more than two years. This decline can be attributed to an absorption of vacant inventory and an increase in demand for medium-sized spaces. One of those purchases was carried out by the State of New Mexico, which acquired the 60,000-square-foot Plaza Maya, a vacant building that’s no longer competing for tenants. Downtown’s vacancy also declined when a 19,500-square-foot space was taken off the market by a new company that won the contract administering mental health services for the state. Some of the most popular office spaces seem to be in the size range of 4,000 to 25,000 square feet. The state has had more than 73,000 square feet of this kind of space absorbed recently. A new charter school in the Airport submarket accounted for about one-third of this inventory, with engineering, legal and healthcare administration service companies taking up the balance. Activity for smaller spaces of less than 4,000 square feet remained consistent with 2013 levels. This strong demand has led to larger Class A spaces being master leased by national executive suite …
Despite the continuing economic uncertainty, the Denver market is maintaining its status as a major thriving city with respect to all aspects of growth from commercial real estate sectors. This growth is clearly apparent by all the cranes in operation as you drive down Interstate 25—the main arterial highway that runs north and south bound through the entire state. Though 1.2 million square feet of retail was built in 2013 – and 197,000 square feet was delivered in the first quarter of 2014 – most of the current cranes are working on medical, office and multifamily developments. With all the national retailers setting their sights on the Denver market, there is a definite lack of A-grade retail centers that have availability. B-grade product is now being thoroughly analyzed as the next best option. Several of the national and regional tenants are in bidding wars against each other for the remaining A- and B-grade sites. The challenge of the development process is the growing cost of land and construction, which ultimately drives the rates up, thus limiting a huge pool of potential tenants. The Denver retail market in the first quarter of 2014 experienced a positive net absorption of 820,357 square …
The Las Vegas multifamily market is back with a vengeance. The market went into a meltdown in 2009 while the financial crisis was in full swing, delivering the biggest blow to the local economy in Vegas’ history. What had been low unemployment and a development boom to rival all past development cycles quickly turned into a downward spiral. Construction came to a standstill and workers fled the city in search of work elsewhere. Apartment fundamentals dropped to record lows. Asking rents dropped 19.25 percent between 2009 and the second quarter of 2012, while concessions stood at 8.5 percent. Even with all this in play, the Las Vegas market is known for reinventing itself. The market recovery was in full swing last year. Stalled projects were restarted with a whole new set of players, and employment was picking up speed. An exodus from California to Nevada is currently underway, with Penske Truck Rental citing Las Vegas as one of its top 10 places where new residents are moving. Unfortunately, unemployment is still above the national average, but that is changing fast. Fundamentals are improving with concession shrinking to 5.25 percent compared to a high of 8.5 percent in 2009. Asking rents …
Retail business continues to be solid in greater Salt Lake City. Total net absorption in all retail categories doubled, when compared to 2012. High-end retail in regional centers saw a 20 percent increase in rents to $24.50 per square foot. Retail inventory increased to a little more than 1 million square feet in 2013 as well. Significant growth areas include new retail in the eclectic Sugarhouse area, the southwest portion of Salt Lake County and the 5600 West corridor. New development also took place in the Central Business District of Salt Lake City. Shadow retail near the new City Creek Mall is fostering some of the Central Business District activity as well. Utah’s excellent light and commuter rails have spurred retail and commercial developments alongside their routes through four counties. Examples include a redevelopment project at Fairbourne Station in West Valley City and the expansion of Vista Station in Salt Lake County. Vista Station is a mixed-use development that is anchored by eBay. Many grocery tenants also have expansion plans for 2014 and 2015. WinCo, Harmon’s, WalMart Neighborhood Grocery, Whole Foods, Sprouts and others all either have plans or are underway with new projects. Large and mid-box retailers are very …