The boom times of retail development in Metro Phoenix, which started in the mid-‘90s, have long been considered the “good ol’days.” The market peak of 2007, when 11.2 million square feet of new retail was delivered, was followed by development plummet. Between 2010 and 2012, the region averaged less than 1 million square feet per year. Phoenix’s retail recovery began in 2011, and has experienced a steadily increasing demand for existing space. Though few are singing “Happy Days are Here Again,” times are looking up. Retail and restaurant sales are increasing in Phoenix. This, combined with an availability of quality retail locations at attractive rents, has inspired national and regional retailers and restaurants to increasingly think about Phoenix when they’re looking to expand. Much of the demand for new retail and restaurant space has occurred in mature areas since the start of the recovery. As reports of new home sales increase in the outlying areas, however, some of the troubled retail centers that were built between 2006 and 2008 are experiencing an increase of activity. Retail vacancy rates dropped in the past nine months by almost 1 percent, settling at 10.5 percent for the third quarter of this year. The …
Western Market Reports
Optimism is returning to the Inland Empire office market. With an overall vacancy rate of 18.3 percent at the end of the third quarter, the office sector is slowly improving. It’s down from a 19.4 percent vacancy rate, which was recorded in the second quarter of 2013. The declining vacancy number shows activity is increasing throughout the Inland Empire as tenants feel now is the time to take advantage of below-market rental rates for Class A and B properties. Landlords are also competing to lower their vacancy levels. They’re negotiating rental rates, tenant improvements and free rent concessions. Nevertheless, it’s a tenants’ market. There is an absence of new construction throughout the region and, as occupancies continue to improve, renewal negotiations will become tougher for tenants as the market is expected to gradually favor landlords as fundamentals continue their positive momentum. With that said, tenant urgency is returning to the market as absorption levels increase and options for quality product diminish. In fact, we’re starting to see rent growth in certain sectors of the market. The average overall asking lease rate ended the quarter at $1.73 per square foot, increasing by 1 cent from the previous quarter. CBRE forecasts that …
The metro Phoenix office market is finally starting to make a comeback. Metro Phoenix ranked third in the nation in terms of net absorption for the third quarter, posting a positive 1,008,933 square feet. Demand has been steadily increasing for the office sector, especially for buildings that can accommodate large corporate users. Phoenix’s office market is still recovering from a large oversupply. The office vacancy rate more than doubled from the beginning of 2007 to the second quarter of 2011, increasing from 12.2 percent to 24.5 percent. Since then, a gradual increase in demand and a lack of new construction has brought the vacancy rate down to 21.2 percent. Right-sizing by office users through the consolidation of space, and by using more efficient floor plates, has slowed the overall decline in vacancy. To draw a parallel to the 2001 recession, demand for office space in Metro Phoenix was weak in the first three years of recovery, averaging 1.7 million square feet of annual net absorption. The office sector took off in 2005, 2006 and 2007, averaging 2.8 million square feet of annual net absorption. Due to the recent increase in demand, build-to-suit and speculative construction announcements made the news in …
The Inland Empire’s commercial real estate market is seeing large big box industrial buildings of 300,000 square feet or more being built on a speculative basis — and they are being absorbed by a healthy market. There is nearly 10.4 million square feet of industrial space currently under construction in this region. Once completed, this new space will increase the total inventory of industrial properties by 2 percent, or from 509 million square feet to 520 million square feet. At the same time, unemployment is above 7 percent for the nation and almost 9 percent in California, with many questioning the strength of the economy. If it seems like a big gamble for developers of these big projects to be building in such uncertain times, think again. This money will likely fare better than it would in the bank. These large projects are being leased and sold. Since 1982 — when only 3.5 million square feet was constructed for the year — the Inland Empire has seen average construction levels of about 13 million square feet annually. Some years it seemed like construction could not keep up with demand. This was the case in 1989, when 34.3 million square feet …
Southern New Mexico's industrial market, particularly Dona Ana County, has remained stable through 2013. We project solid growth in this arena for 2014. A majority of the growth will be in the Santa Teresa area where Union Pacific is in the middle of a massive investment that will create the largest intermodal inland port in the United States. This project has already brought jobs and more than $40 million to New Mexico contractors so far. It is expected to create more than 600 permanent jobs in mechanical, electrical, architectural, utilities, track and civil engineering. Santa Teresa’s intermodal station has started to generate significant conversations with major companies for distribution and warehouse properties. Growth in Santa Teresa is further fueled by the proximity to the Mexican border where many of these same companies operate maquiladora plants on the Mexican side. We continue to struggle to meet demands for large-box users in Santa Teresa due to the limited availability of space in the area. This problem is compounded by the tight lending market, where little equity is available to developers looking to bring new speculative space on line. Additionally, many of the users looking in the Santa Teresa area typically do not …
International trade is a driving force behind one of the most vibrant industrial markets in the nation. There are more than 1.7 billion square feet of industrial space in Los Angeles County, Orange County and the Inland Empire, with 18.2 million square feet of additional space under construction at the end of the third quarter. The South Bay and Central Los Angeles markets are leading the way in new development in Los Angeles County. The LA Basin’s occupancy gains of 12.7 million square feet during the first nine months of the year dropped its overall vacancy rate to 4.9 percent, from 5 percent last quarter and 5.3 percent a year ago. As the logistics hub of Southern California and the big-box capital of the U.S., international trade is especially critical to the Inland Empire’s industrial market. As a result of increased demand for modern warehouse facilities, warehouse construction in the Inland Empire more than doubled from a year ago to 16.4 million square feet. It was the most active in the nation. Increased demand for industrial space in the Inland Empire lowered the overall vacancy rate to 6.2 percent in the third quarter. This was 60 basis points lower than …
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 …
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 …