The Greater Salt Lake City multifamily market has continued to strengthen during 2012. Vacancy rates have steadily improved, dropping from 5.3 percent in January 2012 down to 4.2 percent in the third quarter of 2012. With the market vacancy tightening, average rent growth was 3.6 percent from mid-year 2011 to mid-year 2012. The average rent per unit is now at an all-time high of $802 per unit — eclipsing the average rental price of $771 per unit in early 2008. Many factors contributed to the positive rent growth and the contraction of vacancy rates, but the most significant were strong job growth and population growth. Utah’s job growth currently ranks fourth in the country at 2.6 percent, adding more than 32,000 jobs over the past 12 months. Utah’s job market is strengthening as the state’s unemployment rate dropped to 6 percent in June 2012, the lowest it has been since March 2009, according to the Utah Department of Workforce Services. The state also has the third fastest-growing population in the nation with nearly 2 percent annual growth. Utah also has the youngest median age in the country at 29.2 years, and the largest average house-hold size of 3.1 persons. These …
Western Market Reports
The Phoenix industrial market continues its convincing march toward recovery by reaching several milestones. As a more resilient sector during the recession, the industrial market was not plagued with as much bad debt and CMBS loan defaults as other sectors. Industry experts concluded the industrial sector would recover faster as favorable economic conditions such as durable goods orders and manufacturing output favored the industrial market early. The sector has posted 10 consecutive quarters of positive absorption dating back to 2010. Vacancy rates have returned to levels not seen since the third quarter of 2008. This positive direction reflects a rebound in U.S. exports, consumer spending and online purchasing, which has led to a high demand for large distribution space in which there are few options in Phoenix. Confidence in the industrial market – and in Phoenix in particular – has brought renewed interest in developing new projects. Most new construction is a combination of build-to-suit manufacturing space and several new speculative projects to meet the demand for distribution space of more than 100,000 square feet. Industrial investment sales transaction velocity remains quite strong even though it’s declined from last quarter’s significant level. However, price per square footage has increased once …
The San Francisco apartment market is exceptionally active. It features extremely low vacancies, rapidly rising rents and tremendous demand for a very limited inventory of assets. Fueling this demand is San Francisco’s thriving technology sector and young professionals, which will maintain the metro’s stature as one of the premier rental markets in the country well into 2013. While nearby Silicon Valley lures large software and information companies, San Francisco has become the incubator for tech start-ups. More than 94,000 people in the metro area have jobs pertaining to the tech industry, which is up 10 percent from last year. Small but influential firms such as Zynga, Dropbox and Airbnb are continuously hiring young professionals in the core of the metro. These high-paid individuals prefer renting, and are waiting longer to enter the single-family home market. Employment this year has been primarily driven by San Francisco’s technology industry. Major firms such as Facebook and Twitter continue to hire as their businesses evolve. By year’s end, employers will have hired a total of 29,000 workers, a 3 percent increase in total employment. Vacancies are currently some of the lowest on record, as the tech industry flourishes. In the last 12 months, the …
The San Diego retail market has posted five consecutive quarters of positive net absorption with strong activity in power centers and several vacant big box spaces coming off the market. Through the third quarter of 2012, year-to-date gross leasing activity totals more than 1.8 million square feet with about 330,000 square feet of positive net absorption. So far, we have already surpassed the 2011 gross leasing total of about 1.4 million square feet. The steady leasing activity and positive net absorption dropped the direct vacancy rate from 7.4 percent at the beginning of the first quarter 2012 to 6.9 percent at the end of the third quarter. The current overall vacancy rate, including sublease space, is 7.2 percent. Vacant big box spaces are attracting tenants from national credit retailers to specialty markets. Dick’s Sporting Goods recently opened a 46,019-square-foot location in a redevelopment of a former Mervyn’s site in the Sports Arena submarket. Meanwhile, Zion Market, a Korean-focused grocery and specialty store, subleased a vacant 94,000-square-foot Sears Essentials building in Kearny Mesa. In addition to tenants taking big box spaces, several high-end fashion retailers are entering the San Diego market or opening new stores. Kate Spade New York opened its …
Multifamily transaction activity has increased in San Diego during the fourth quarter, due partly to the typical end-of-year rush to close escrow, as well as uncertainty about tax reform in 2013. Agency debt is still a large driver, but relationship banking is picking up for well-heeled borrowers, and investors increasingly have multiple options. The multifamily rental market continues to benefit from the high down payment and credit requirements placed on average home buyers who still choose to rent in San Diego where the cost to rent is still below the cost to own. San Diego’s diverse economic base added 30,300 jobs over the past 12 months, and year-over-year employment gains in excess of 2 percent were reported in nearly all sectors. San Diego has seen a rise in tourism, which has positively impacted the service industries. While manufacturing has struggled to gain footing, growth within construction and finance has emerged. Unemployment has decreased 1.3 percent since August 2011 and is currently 1.4 percent below state levels. Home prices have increased about 5.2 percent in 2012 but remain 37.5 percent below the 2006 peak levels, with a median-priced home at $350,000 today. San Diego’s population has increased 5.1 percent since 2008. …
Though a balanced Los Angeles office market may be a year away, the situation is certainly looking more promising than a year ago. This is due to rising rents, positive (and continued) absorption and increased transaction volume. These trends are buoyed by falling unemployment rates, which declined to 11.1 percent in the second quarter, compared with 12.4 percent a year ago. Professional services companies led this charge, adding 16,500 jobs over the past 12 months. Entertainment and media also showed robust gains, adding 8,000 jobs over the same period. Government and manufacturing sectors represent the opposite end of the spectrum and still lag in the recovery. As expected, creative users within the respective fields of entertainment, social media and gaming companies continue to drive leasing activity. This is particularly true on the Westside where companies like Riot Games in Santa Monica, Google in Venice and YouTube in Playa Vista abound. DirecTV also recently signed a 205,202-square-foot renewal in El Segundo. Many Los Angeles companies are also once again thinking about recruitment and seeking out locations that appeal to their employee base. One example is law firm Morrison Forester, which is relocating from Downtown’s Bunker Hill to the amenity-rich Financial District. …
Economic conditions in Clark County and Las Vegas continue to improve with evidence of a slow and steady recovery finally emerging. Analysts from the UNLV Center for Business and Economic Research’s late summer survey noted respondents remained optimistic about general economic conditions in southern Nevada, with 82 percent expecting to see no change or improvement. Their Southern Nevada Business Confidence Index rose to its highest level in more than four years during the summer, echoing this positive sentiment. A couple of indicators highlight the emergence of a more favorable environment, with retail sales improving, McCarran Airport traffic on the rise and the gaming “take” on the rebound. Median existing home sale prices have jumped more than $12,000 compared to the same period a year ago. Furthermore, the labor market in Clark County has stabilized with more than 6,000 jobs added to non-farm payrolls since the spring. The overall county population has also increased to its highest level in five years, according to US Census estimates. In the multifamily market, the past two indicators carry the most weight for the region’s apartment market. A healthy apartment market requires significant population densities with a positive trend. This needs to be supported by …
Resilient apartment demand will continue to insulate the Los Angeles apartment market from the effects of the uneven recovery, though modest downside economic risks will persist. For example, the Eurozone crisis and economic slowdown in China – the Port of Los Angeles’ largest foreign trading partner – will limit imports and exports and moderate overall employment gains. Local manufacturers have already shed 5,000 jobs in 2012, and 2,400 transportation and utility positions were eliminated in the past two months. Nevertheless, metro-wide employment expanded by more than 40,000 jobs in the past six months, a growth of 1.1 percent compared to 0.6 percent nationally. Additionally, gains have been relatively broad-based. The professional and business services, as well as education and health services industries, have added 25,000 jobs since the start of 2012. Resurgent tourism has also boosted leisure and hospitality payrolls by more than 10,000 workers. Rehiring, combined with a still weak demand for single-family homes, has supported apartment leasing. Asking rents have particularly improved. In the first half of 2012, market-wide asking rents appreciated 5 percent to $1,730 per month, compared to a gain of 3 percent for all of last year. Rent increases have been particularly robust in the …
Despite little commercial real estate development with the lowest rental rates in a decade, Las Vegas’ office leasing market has inched up in the positive direction. There are also indicators that the area’s commercial real estate market will continue to struggle, with vacancy rates remaining as high as 25 percent until the end of 2012. Las Vegas remains one of the most challenging real estate markets in the country with some submarkets showing vacancies as high as 32 percent, while others report vacancies as low as 16 percent. Still, there have been some significant developments recently impacting the office market. Zappos.com will occupy the former Las Vegas City Hall building in Downtown Las Vegas, which will house about 2,000 employees. This signals continued revitalization for the Downtown area. Those 2,000 employees will need housing and, with a younger workforce, will probably spend disposable income on entertainment, particularly in the area close to their place of employment. Along with Zappos, government-related entities occupying commercial space is on the rise, and traditionally those entities prefer to be centrally located. While there is noticeable activity taking place in certain Las Vegas submarkets like Downtown, other areas of Las Vegas are also improving — …
Salt Lake City is progressing through a healthy apartment sector recovery as large developments near completion and major employers ramp up hiring efforts. The opening of the 700,000-square-foot City Creek Center in Downtown Salt Lake City brings upscale retailers such as Nordstrom, Tiffany & Co. and Brooks Brothers to the state, generating a number of retail jobs. More than 4,000 positions are expected to be added in 2012 in the trade, transportation and utilities sectors, which includes retail workers. With elevated gas prices, many of these employees will seek rental housing near work, including residences at the 125-unit Providence Place, which was completed in the central Salt Lake City submarket this year. In addition, more than 800 apartments and 775 condos are in the planning stages in this submarket. In outlying areas like West Jordan, which have received the bulk of new development over the past five years, slower construction activity is allowing demand to catch up. The fourth-quarter completion of the Adobe campus in Lehi should boost demand for apartments in the Orem area as the company is expected to employ 1,000 staffers at the site. Looking at fundamentals, the development pipeline in Salt Lake City is among the …