New multifamily developments are springing up throughout San Diego County. Strengthening apartment market fundamentals and rising demand are among the many reasons why investors view this as the perfect time to capitalize on development. There are currently more than 1,500 multifamily units under construction and slated for completion by the end of this year in the county — more than triple the amount of new units delivered in 2011, according to RealFacts. Developers are finding a more cost-effective approach to investing in this market by purchasing land for development as opposed to buying existing apartments and refurbishing. However, finding suitable land for development remains a challenge. Locations throughout the county attracting the highest developer interest and already witnessing new construction activity are centrally located, mixed-use urban areas. This is no surprise as walkability and easy access to transportation is highly sought after by the younger generation of renters. This population is currently estimated to be more than 959,000 strong — larger than that of the Baby Boomer population, according to SANDAG. A number of projects have broken ground in the Downtown market, primarily in Little Italy and East Village, as developers take advantage of the area’s unique characteristics. Two notable …
Western Market Reports
The Idaho retail market is showing signs of growth. Boise and Twin Falls are experiencing new developments breaking ground and national retailers are expanding or moving into the area. Much of this new development is coming in from California, Utah, Colorado and Arizona. Tenants are making deals again. Anchor tenants in second-generation space are looking in that $8-per-square-foot to $11-per-square-foot range for larger spaces. Shop spaces in A+ locations are still demanding high $20 per square foot lease rates and even into the low $30 per square foot for the higher-end projects like Meridian Town Center and the Whole Foods/Walgreens developments in Boise. Local and regional retailers are making a strong push to secure prime space as they are seeing lease rates start to rise. Many tenants are more willing to lock into longer lease terms if they can keep a lower rate. Landlords are beginning to provide tenant improvement allowances so long as the lessees can prove financial stability. Idaho is also experiencing retail market trends that are similar to the rest of the country. Larger healthcare facilities are driving the expansion of surrounding retail developments in Nampa and Twin Falls. Additionally, a few of the big box retailers …
It is important to understand that the mid-2000s did not reflect a sustainable level of industrial leasing activity. Real estate in general — and Phoenix in particular — has always been subject to cycles. The past few years have seen a flight to quality with tenants moving from older buildings to newer, more modern facilities. They were able to lease new space at bargain rates that were at or below what they were paying for their older facilities. The initial signs of an improving economy have already manifested themselves in an industrial demand increase. This trend is expected to continue and gradually gain momentum, albeit not along the same steep trajectory of recent growth patterns. At the end of the first quarter of 2012, the national industrial market consisted of 289,117,054 square feet. It currently has 39,089,600 square feet of vacant space. At the beginning of 2011, the industrial vacancy rate stood at 15.5 percent. With 6,993,112 square feet of positive net absorption in 2011 and 302,468 square feet in the first quarter of 2012, the vacancy rate now registers at 13.5 percent. Despite positive absorption, the overall average rental rates have seen little improvement over 2011 with the exception …
San Diego’s retail market has remained relatively level for the past year in regards to leasing and sales of shopping centers. Last year the vacancy rate for San Diego hovered around 5.2 percent and currently is positioned at 5.1 percent. This will probably remain the same throughout the remainder of this year as we continue to see very few additional centers being built. A steady flow of tenants are also closing their doors as new tenants and entrepreneurs venture into new careers. Sales activity from the beginning of this year has been slightly slower but slightly better on a per-square-foot number than the same period one year ago. Year-to-date, we have seen 15 sales of centers that are larger than 10,000 square feet, with an average price per square foot of $193.50 and an average cap rate of 7.24 percent. This is compared to the same period last year which produced 22 sales at an average price per square foot of $170.39 and an average cap rate of 7.6 percent. As far as credit-tenant, triple-net investments in San Diego go, there is still a very strong demand for any product that comes on the market and typically results in multiple …
Employment and population growth is spurring apartment demand in Phoenix, encouraging developers to ramp up construction. Although Class A rents are above mortgage payments on a median-priced home, many potential homebuyers will be unable to compete against investors that purchase bank-owned houses to operate as rentals. The metro is a target for these well-capitalized buyers, as home prices have dropped nearly 60 percent since the peak, while the local economy is gaining traction. By the close of this year, more than 80,000 positions will have been recouped in Phoenix, marking three consecutive years of job gains. The rental pool is poised to grow as many lower-priced homes are purchased by cash buyers and residents contend with qualifying hurdles due to short employment histories. As a result, strong apartment demand will enable most operators to boost rents to all-time highs, pushing residents down the quality ladder. Distant headwinds are starting to form, however, as builders recently broke ground on multiple projects that will add thousands of inventory units over the next few years. This, combined with competition from houses employed as rentals, could mean apartment owners may face significant competition as early as 2013. A sharp rise in leasing activity during …
The end of last year ushered in an increase of activity, a higher absorption of existing space and lower overall vacancy rates for Boise’s office market. In 2008, the economy went into a tailspin. It led to an increased supply of vacant commercial space in Boise as companies retrenched and downsized. Jobs and customers were also lost throughout the region. Unfortunately, there were a few submarkets that were dramatically affected. In fact, the Boise CBD (central business district), or downtown core, was the only local market that didn't experience a significant increase in vacancies or a huge drop in rents. Other areas listed below were negatively affected: The area near the intersection Cloverdale and Chinden, adjacent to the Boise HP campus that is known as the Boise Research Center, was hit particularly hard. HP downsized, re-trenched it operations and its sub-contract suppliers cut back. This created a vacancy rate of almost 30 percent. The Boise Research Center region was also hit by the bankruptcy of DBSI, a large real estate investment firm that put about 75,000 vacant square feet back into the local market. The area known as Eagle River, between the new Eagle bypass and the Boise River, experienced …
After emerging from the downturn, Denver’s industrial market is well and truly back on its feet. As options for large, Class A industrial users of more than 200,000 square feet dwindle, build-to-suit projects are popping up at levels last seen in 2006 and 2007. This is a great sign for the overall health and recovery of the state’s industrial real estate market. Polystrand has almost completed a 120,000-square-foot manufacturing facility in southeast Denver; Interline Distribution is underway with a more than 200,000-square-foot warehouse project along the I-70 corridor scheduled for delivery in August 2012; and U.S. Foods recently purchased land in Eastgate Park where it plans to build a 400,000- to 500,000-square-foot building. There are several other users that have either made similar land purchases or are in the market for large portions of land. In fact, there is a healthy inventory of well-located development sites available, which can be purchased at prices that make sense for users choosing the build-to-suit route. Although large blocks of quality Class A space are sparse in the Denver region, rental rates have not yet risen to a level that would compel developers to start speculative development. Also, there is little guarantee that their …
The Denver office market ended the first quarter of 2012 with an overall vacancy rate that fell to 13.1 percent. According to CoStar, the vacancy rate was down from the previous quarter of 13.2 percent. Net absorption was more than 1.6 million square feet, which included 900,000 square feet in the central business district (CBD), and 700,000 square feet in the suburban markets. Sublease vacancies also declined from 950,000 square feet to 900,000 square feet. Overall rental rates averaged $19.98 per square foot for full-service buildings. Class A properties averaged $23.81 per square foot for full service, while Class B averaged $17.73 per square foot. Both these rental rates were both up slightly, while Class C buildings remained flat at $13.50 per square foot. Leasing activity will continue to improve in 2012, with net absorption remaining positive throughout the entire market. The majority of submarkets are slowly shifting from markets that favor tenants to neutral markets with rental rate stability and decreased tenant concessions, including less free rent. As you can see, the outlook continues to be positive. There are several major indicators that market fundamentals are strengthening activity with limited new supply on the horizon. Additions/development projects that are …
Retail leasing in the Inland Empire is slowly meandering its way back to a healthy stride. The gamut of activity is still centered around the best opportunities and the strongest centers, but occupancy levels are stabilizing and overall there is a sense of cautious optimism. The retail vacancy rate has remained flat for the past two quarters of 2011 at 8.8 percent. This is a positive trend, however, compared to rates of 11 percent and higher over the past few years. We have also seen new tenants expanding within this market, taking advantage of a lenient leasing climate and landlords anxious to fill their centers. Tenants like Family Dollar, Dollar General, Fallas Paredes, Chase, America’s Tire, O’Reilly, Autozone, Pep Boys, $99 Cents Only, Planet Fitness and Crunch Fitness are actively pursuing junior anchor and pad buildings in shopping centers. Meanwhile, Forever 21, T.J. Maxx, Steinmart, Hobby Lobby and even Kaiser Permanente have absorbed some of the largest vacancies in this market over the past year. Wal-Mart has broken ground on sites in the Victorville trade area and more are on the way, including a few Neighborhood Market locations that Wal-Mart has secured over the past year. While this is positive …
The southern New Mexico industrial sector remained strong in 2011 and we expect 2012 to be a year of continued expansion and growth. The largest concentration of growth in the industrial arena has taken place in Santa Teresa and the immediate surrounding area. The industrial market in this trade area has benefited greatly from its proximity to the border with Mexico and work done by Gov. Susana Martinez in attracting industrial tenants to the area. We have also seen an influx of manufacturing companies that moved their operations to Asia who are now looking to relocate back in North America, specifically to those trade areas that benefit from a geographic link to Mexico. Large box property owners gained the most in 2011 with the recent expansion of companies and businesses locating in the area. In 2011 Alaska Structures leased about 350,000 square feet of industrial space on the west mesa in Las Cruces. The company occupied one of the last remaining big boxes in the market, leaving little available big box space in the greater Las Cruces market. While 2011 was a good year for large boxes, landlords for mid-size and smaller boxes felt the pinch as tenants were able …