There is roughly 61 million square feet of office space in the Las Vegas Valley. About 22 percent of that is vacant. That being said, leasing activity is picking up. Tenants nearing the end of their leases are looking for better deals elsewhere – and they’re finding them. Then there are the new players in the market, who are are kicking the tires, too. The tenant’s market has been a mainstay for the past few years in Las Vegas. But over the past 12 to 18 months, banks have shifted their philosophies in regards to how they handle their office portfolios and it’s definitely making an impact on the market. Lenders today are no longer dumping foreclosed properties back on the market at fire sale prices. Instead, they are choosing to add value to their assets by leasing space in the hopes of a better future return for investors. In general, banks are very aggressive with their terms and generous with tenant improvement allowances. Private owners have needed to follow suit in order to stay competitive. Some tenants that have considered buying are frequently steered back into leases. This is because rates and terms are far too attractive. Leasing offers …
Western Market Reports
The retail market in Southern Nevada in mid-2013 continues to mirror the broader economy, with some bright spots and some declines in performance. There appears to be a belief (or maybe a hope) by many market observers that if there hasn’t been enough improvement in Las Vegas to date, then it has to be occurring in the near future. It seems the effects of the Great Recession are still lingering and the economy hasn’t yet built up a sustainable head of steam as measured by true objective metrics. A good measure of the local economic health is unemployment statistics. The unemployment rate in Las Vegas has dropped from 9.8 percent to 9.7 percent from February to July of this year, according to the Bureau of Labor Statistics. On another bright note, an additional 1.83 million square feet of retail space was under construction at the end of the second quarter of 2013. More than 70.1 percent of this total space was preleased. General Growth Properties’ The Shops at Summerlin comprises 1.5 million square feet of current construction. It is expected to open in late 2014 and is already more than 85 percent leased to tenants like Dillard’s and Nordstrom Rack. …
The Las Vegas market, one of the hardest hit by the recession in the nation, is showing continued signs of economic recovery. Visitor volume is exceeding peak levels, hotel occupancy rates are averaging ±90 percent, unemployment levels continue their decline (9.5 percent in June 2013) and numerous renovations and new resort development projects continue to be announced. As recently as a year ago, experts were predicting that there would not be another major resort project in Las Vegas for at least 10 years. Then came the announcement by Malaysia-based Genting Group of its plans to construct a $7-billion, 3,500-room, Chinese-themed resort project on the Strip, and suddenly that prediction was put to rest. In similar fashion, the industrial market, which currently contains 103 million square feet, continues to show consistent signs of recovery. More than 1.6 million square feet of positive net absorption was reported as of the second quarter of 2013. This is more than we’ve seen in the past five years combined. Vacancy rates stand at 14 percent, a 1 percent decrease from the second quarter of 2012. Average asking rates for warehouse distribution product across the MSA are $4.68 per square foot, down about 50 percent from …
The San Diego apartment market is doing unsustainably well. About 400 buildings will sell this year, which is the average volume of the past 30 years. Sellers are obtaining prices near peak levels, while buyers are capturing cash flow twice as good as the stock market — and with less risk. There are three sources of buyers: cash that was sitting on the sidelines; investors who bought houses and condos at half price and are now ready to move up; and 1031 buyers. Investors are tired of going broke safely. Hundreds have had cash in the bank that was paying a pittance while inflation and taxes slowly dissolve capital. Apartments deliver cash returns that are two to three times what stocks offer. Additionally, over the past few years there have been more than 30,000 homes and condos sold at distressed prices. Many of those owners have doubled their equity and are ready to re-leverage their equity and trade up. This is creating a significant number of 1031 buyers again. It is not quite a chain reaction, but the ripple is helpful. Apartment financing is easy and interest rates are cheaper than they have been for 48 of the past 50 …
Seattle is a top-10 market nationwide for apartment and condo construction, and retailers are following residential growth back into the Seattle core market. In the first half of the 2013, nine apartment projects added nearly 1,300 units to Downtown. As of June 2013, 30 more residential projects were under construction or permitted, representing about 5,400 units. Projects (mostly apartments) are breaking ground at a quickening pace, with total construction costs for those currently underway at about $2.8 billion — a level not experienced since 2008. Many of the projects are mixed-use developments that contain street-level retail components. Almost half are located near Downtown Seattle. In 2012, three major retail renovations were completed in Downtown. This overhauling of aging retail space has continued into 2013. Nordstrom Rack now has a new 42,500-square-foot space in the Metro level of Westlake Center, which is directly across from the Nordstrom flagship store. Pike Place Market completed several renovations that cost close to $70 million. These included upgrades to the Market’s infrastructure and features. Target acquired 95,000 square feet of space in the Newmark building (Pike Plaza) and remodeled the retail space across three floors. This urban-concept CityTarget is roughly two-thirds the size of a …
It is no secret hat recovery in this real estate cycle hinges on job creation. In Phoenix, this means all eyes are on the markets that can deliver not only space and amenities, but also that golden element: employees. The Southeast Valley emerged early as Phoenix’s premier labor play and most dynamic “big picture” winner with amenities like Arizona State University, Light Rail and a strong base of corporate users. As a result, markets like Tempe have surged ahead with year-to-date positive net absorption of 4.1 percent, 15.8 percent vacancy (compared to the metro Phoenix rate of 24.9 percent) and a host of new tenant announcements. In 2013 alone, Go Daddy added 150,000 square feet to its local footprint; Silicon Valley Bank inked an expansion at Hayden Ferry Lakeside; and State Farm rocked the industry with plans for a new $600-million, 2-million-square-foot office development. In March, GM announced it will invest $21 million and hire 1,000 employees for a new Information Technology Innovation Center in Chandler. This will boost Chandler’s already positive performance, which includes an auspicious 12.8 percent office vacancy and rents at $22.31 per square foot. This area has experienced a small but positive year-to-date absorption of 0.6 …
Each week seems to bring news of yet another record-selling price for a commercial property in Seattle, including assets ranging from office and retail to apartments and even development sites. Increasing occupancy rates for industrial and retail properties also suggest that property values are headed up. The King County assessor has undoubtedly tracked these price trends, too. In 2012, the assessor’s office reported overall increases in taxable values for major office buildings, major retail properties, hotels and apartments. As a result, many commercial property owners in the Puget Sound region saw increases on their 2012 assessed value notices. In March, King County’s chief economist projected that total assessed values in the county would reach nearly $327 billion in 2013 (for taxes payable in 2014), up nearly 4 percent from $315 billion in 2012. For many taxpayers, notices in 2013 will reflect assessment increases even greater than 4 percent. The general recovery in the Seattle market should not trigger increased assessments for all properties. For example, some suburban areas have missed out on the trend toward increasing property values. And there are always individual properties that do not experience the same increases as their neighbors. Accordingly, owners should be attentive to …
The Phoenix industrial market ended the second quarter of 2013 with vacancy rates at 12.4 percent, while net absorption totaled a positive 471,635 square feet. Asking rents are increasing and demand for larger facilities has been the catalyst in the recovery. Over the past 15 years, vacancy rates have averaged 10.3 percent, providing evidence that the current market is not far off from the average. Phoenix has historically seen significant cyclical swings. This past recession has been no exception to this. However, the positive net absorption the area’s industrial sector has experienced over the past two-plus years signals that the Valley is well on its way to recovery. The Phoenix market has absorbed 20.7 million square feet, and has built more than 7 million square feet of new space. Year-over-year, the total number of transactions has increased 24 percent, bringing excitement to the Valley once again. Big box industrial in Phoenix has absorbed about 15 million square feet of space on a net basis throughout 2011 and 2012. The vast majority of that net absorption has been big box product in the Southwest Valley. Rental rates also increased from the high $0.20 net range to a current low-mid $0.30 range …
Amazon, Zulily, Real Networks, Intel, eBay, Attachmate, PATH, Omeros, F5 Networks, Microsoft. Collectively, these technology companies have dominated Seattle’s office leasing landscape over the past 12 months. This period has seen an eye-popping absorption of more than 1.9 million square feet. That would be astonishing growth in nearly any city, but with a Class A and B base of 63 million square feet, this number is even more impressive. The vacancy rate has dropped and now stands at 11.5 percent, while correspondingly rental rates rose more than $4 per square foot, cresting above the $30 per square foot, full service, for the first time in more than a decade. In addition, both rental abatement and discretionary tenant improvement allowances have diminished. What’s noteworthy is that none of these companies made commitments in the Central Business District. Instead, each opted for an urban campus style as opposed to a traditional stacked, high-rise presence. These companies either backfilled Class A properties immediately south of Downtown in Pioneer Square or relocated into first-generation space just north of the core in the South Lake Union submarket. Despite this current trend, Seattle’s core is very healthy. It’s even listed as a top-three investment market on …
The multifamily market in the Phoenix metropolitan area remains, as it was in 2012, the most popular property sector for investment and new construction. Post-recession job creation, coupled with echo-boomers leaving the nest, has created a leveraged demand for multifamily product. Years of near-zero construction, followed by a rapid increase in demand, has created a landlord’s market throughout most of the valley. Vacancy across the Phoenix metro area is now less than 7 percent. It is expected to fall to less than 6 percent by the end of the year. Rental rates are up 3 percent to 5 percent valley-wide, with some submarkets fairing much better than others. Scottsdale, North Tempe and South Phoenix are some of the areas where rents are up significantly and vacancies are down. Concessions are waning in most regions, though a few remain in parts of the West Valley and Central Black Canyon. This surge in demand is spurring new apartment development catering to Generation Y (echo-boomer) tenants. Many in this demographic subset are choosing apartment living. They are doing so for two reasons: either to avoid the hurdles of qualifying for a home mortgage or to enjoy higher-end finishes and amenities that are found …