For tenants, this slower sector correction and still attractive rents will make for great opportunities in this area in 2012. The competitive rental rates are not expected to tick up by much, but will probably stabilize after hitting bottom in select submarkets. They will offer a wide choice of options for relocating tenants. Concessions will remain generous to secure the best tenants in the market. Over the short term, the Orange County office outlook will remain a tenant’s market. The average overall full-service gross (FSG) asking rent in Orange County during 2011 was $1.95, dropping from near $2 the previous year. The trend of Class B users jumping to attractively priced Class A product will continue in the first half of 2012. This effort to reduce expenses, while landing better operational locations, will still be very popular. Expect to see some tenants that were on the sidelines in 2011 now ready to make a move. These national and regional occupiers are sophisticated and will be looking for experts with the talent and expertise to focus on their specific needs and their unique corporate expansion requirements/considerations. However, even with slightly increased activity, the pace of demand will appear low by historical …
Western Market Reports
With 95 percent occupancy, the Orange County industrial market is shining through the clouds of what is still a semi-lethargic market in many areas. It’s well known that industrial real estate is a solid investment option that is safer than many other investment vehicles. Combine that with Orange County’s reputation as a place that people love to work and live, and it’s no surprise the county’s industrial market is successfully rebounding. Industrial buyers were not just cautious in 2008 and 2009, they were literally standing on the sidelines waiting for the game to resume. The trough of the market really hit in 2009, which was probably the lowest point anyone could have bought a building, but with values down 35 percent to 40 percent, deals just weren’t being made. Since mid-2010, however, the Orange County industrial market has seen a significant increase in activity as buyers put themselves back in the game. Sellers have become sellers again, and buyers are more realistic about getting deals done. orporate America recognized the trend early on and began making deals. From there, the competition has heated up on the Orange County industrial playing field, as numerous investors seek to acquire Class A and …
The Orange County hotel market held up extremely well during the economic recession. We are now seeing average daily rate (ADR) and occupancy levels at or above the 2007 peaks. The Smith Travel Research (STR) statistics through October 2011 show the county’s beach areas reporting a $164.41 ADR at 71.3 percent occupancy with a $117.25 revenue per available room (Rev PAR). The beach area’s Rev PAR is now just under 12 percent below the 2007 market peak. We forecast that we will back to or above the peak levels in 2012. In the Disneyland area, we see an ADR of $128.02 at 73.6 percent occupancy with a $94.22 Rev PAR. This Rev PAR is already 6.7 percent above the 2007 peak and climbing. There are a number of reasons why we’re seeing such strong performance numbers in Orange County. These include: (i) The increase in domestic travel, with many travelers choosing to stay in the United States instead of going abroad (ii) The increase in international travel due to the relative weakness of the U.S. dollar, making Orange County a prime destination (iii) The complete lack of new hotel development, which has created a growing demand that has helped fuel …
The multifamily market continues to be the strongest performing real estate market in Orange County. With the support of strong fundamentals and forecasts, investors are flocking to multifamily investments, especially properties located in core cities. As the for-sale residential market remains uncertain, much of the Orange County population is choosing to lease, which has been a big driver following the economic recession. The vacancy rate stands at 4.5 percent, which accounts for a 20 basis point drop from the previous quarter’s rate of 4.7 percent and a 140 basis point decline from the 5.9 percent recorded one year earlier. This was the third consecutive quarter that witnessed a decline in vacancy. These rates haven’t been this low since the second quarter of 2008. Although vacancy has dropped considerably since it peaked of 6.4 percent during the third quarter of 2009 through the second quarter of 2010, it remains higher than the low point of 3.2 percent, which occurred in the third quarter of 2007. Rental rates have also increased as vacancies have filled. The average effective monthly rent is $1,488, which represents a slight increase from the $1,478 recorded during the previous quarter and an even bigger increase from the …
Strong job growth characterized the Puget Sound economy throughout 2011, with the region closing the year with a 1.7 percent gain that equated to the addition of more than 28,000 positions. Home to Fortune 100 companies Costco, Microsoft, and Amazon.com, as well as large-scale operations of The Boeing Company, Seattle’s economic prospects are assured. The region will remain a leading employment generator over the next several years, with job growth trending up to 2.6 percent in 2012 and to more than 3 percent in 2013 as the metro area realizes the addition of 50,000 new jobs on average each year. For its part, Boeing now employs more than 81,000 Washington residents, having added nearly 8,000 local jobs in 2011 alone. The Seattle multifamily market deal activity has been good this year, and the market should expect to close more than $800 million in transitions. Current cap rates in the market are in the low 4 percent range and up to $500 per unit in core locations with secondary markets averaging 5.5 percent to 6 percent capitalization rates. One great thing about Seattle is that it has always skewed toward rental housing. In the three-county area alone, the population is 3.4 …
We saw plenty of activity in 2011 in both office leasing and the sale of office buildings in the Greater Seattle area, particularly in the Downtown core markets of Seattle and Bellevue. Amazon alone has leased 460,000 square feet at 1918 8th Ave.; 281,000 square feet at West 8th Avenue; and 106,000 square feet at the 1260 Mercer Building. KPMG has also leased 50,000 square feet at 1918 8th Ave. Other notable leases include Boeing’s 45,000 square feet at the Russell Investments Center; Allrecipes.com’s expansion to more than 55,000 square feet at the 5th & Pine Building; Facebook occupying 27,000 square feet at Met Park; Getty Images agreeing to nearly 60,000 square feet at 605 Union Station; and Brooks Sports inking a pre-lease agreement for 80,000 square feet for a yet-to-be-built office in the north Lake Union submarket. There have also been some major sales in the Greater Seattle market. These include the sale of 1918 8th Ave. and 818 Stewart by Schnitzer West to JPMorgan; Westlake Center Office Tower to TIAA by GGP; 505 1st Ave. and 83 King to Spear Street by Starbucks; Seattle Tower by LaeRoc Partners to the Teachers Retirement System of Illinois. As of December …
Our recent market activity spotlights the differential between the Haves and Have-Nots. Third quarter 2011 was exceptional for large, Class A facilities in Kent Valley. Thanks mostly to international corporations, direct vacancy rates dropped about 1 percent point and now hovers at 7.89 percent. We have also experienced net absorption of 348,358 square feet. This marks the fourth consecutive quarter of positive net absorption, bringing the annual total to 968,784 square feet. After experiencing record corporate earnings and large cash reserves, companies like Brooks Sports, Amazon, Sealed Air, Graybar, Electrolux, Bunzl, Pacer, International Paper, Sealy and more have expanded or looked to expand their presence in our market. Seeking state of the art, 30’ clearance, ESFR distribution facilities, these corporations have caused a shortage of Class ‘A’ space and a rent hike of 5 percent to 10 percent. However, regional and local companies are still struggling, while the mid-size market that services those spaces has not significantly recovered. On average, spaces available in that size range (over 66 spaces at press time) have been on the market for about 18 months. Unlike the otherWest Coast ports, container traffic in this Pacific Northwest region hasn’tt increased dramatically. To date, the Port …
Emboldened by renewed job growth and improving sales, retailers will push forward with new store openings in Puget Sound, which will ease the use of concessions. Leasing velocity in the Seattle-Tacoma retail market has built momentum through 2011, led by regional and national chains occupying vacant sites in high-traffic corridors. King County trade areas such as the Northgate/Central and Eastside/Bellevue submarkets have been the primary beneficiaries of resumed tenant expansions, but most suburban areas also recorded a modest upturn in leasing volume this year. The broadening recovery enabled landlords to hold the line on concessions. While the rate of recovery will remain strongest in King County heading into 2012—aided by move-ins from Ross Dress for Less, Big Lots and several grocery chains—tenant demand for established centers in Pierce and Snohomish counties will build. In addition to a collection of smaller lease transactions, nearly a dozen regional and independent retailers have secured junior-anchor and big-box sites this year, with many of the leases set to commence over the next nine months. Seattle retail developers completed about 695,000 square feet of space during the 12 months ending in the third quarter, an increase from the delivery of 250,000 square feet one year …
CBRE recently completed a comprehensive study on the state of big box vacancy in Orange County. It showed that while the county continues its struggle to replace large tenants lost during the recession, there is progress being made in this important sector of the retail market, particularly in Class A locations. There are currently 59 big box vacancies (20,000 square feet or larger) in 55 centers with a total of 2.3 million square feet within the county. In the past two years, approximately 1.6 million square feet of big box retail has been absorbed. The question now is, what’s left and when will it be absorbed? Since the downturn, retailers have had their pick of great real estate. Class A space that was near impossible to find in Orange County during the boom years became available for the first time. The most active retailers, including Wal-Mart, Kohls, grocers and gyms, moved quickly to take advantage of the opportunities. In many cases, these retailers even modified their prototypes in order to do so. With most of the Class A space quickly absorbed, our study found that 48 of the 59 boxes currently remaining, or 84 percent, are located in B or …
Business headlines over the past few months have been full of sunny reports from Seattle: Boeing, for example, is in full swing thanks to the production ramp up of the 787 and the backlog of orders for both the 787 and 737, representing a workload of more than 5 years. The tech sector is hopping here as well, with Google adding up to 840 jobs, Amazon doubling the positions available from a year ago to 1,900, and solid growth at Facebook. This all takes place, of course, in a market that happens to include big-name employers like Microsoft and the increasingly active Gates Foundation, and strong sectors such as Biotech and Pacific Rim trading. Given this strong and diverse economic base, then, it is perhaps no surprise that Seattle is robust compared with many other U.S. markets. This is not to say the recession had no effect — a year ago, rents in empty boxes were leasing at discounts of up to 40 percent of what had been paid by previous tenants. However, the market here has gradually stabilized, and those discounts have shrunk to 15 to 20 percent of previous rental rates. Today, in fact, retailers like HomeGoods, Sports …