Las Vegas’ retail market is now clearly showing the strain of the recession. Decreased consumer spending has directly impacted local retailers, as unemployment climbs and shoppers find themselves with less discretionary income. Holiday season revenues were the weakest on record, and luxury stores, apparel chains and department stores all reported declining sales. Meanwhile, developers continue to experience difficulties securing financing for planned projects. As a result, several planned projects are on hold, and few of the currently planned and under construction projects should open in 2009 and 2010. Underperformance, the liquidity crunch and tighter credit terms with vendors, combined with the recession, made it impossible for many large box retailers to remain in business, thus bringing on the vast amount of power center vacancies. Small local retailers relied on SBA loans and equity from residential properties and saw both of these sources vanish, thus preventing many from opening new stores and leaving many strip centers with higher vacancies. Retailers that are performing well are very cautious regarding expansion. With already close to 3 million square feet of vacant large box retail space in the Las Vegas market, expect to see vacancies continue to rise this year. However, increased vacancies provide …
Western Market Reports
The northern Nevada office market remained weak in 2008 with all four quarters recording increased vacancy and negative net absorption, a continuation of a trend that began in 2007 when three out of four quarters finished with negative net absorption. Last year finished with negative 116,000 square feet of leased office space and vacancy exceeding 20 percent. Directly related to the drastic downturn in the residential real estate market, Reno’s office performance had been fueled by the national homebuilders, mortgage companies and title companies, who saw their requirements for office space drop as quickly as the demand for their products and services. The area’s office sector quickly changed from growth and high demand to nearly non-existent demand and increasing vacancy, thus leaving investors and developers scrambling for tenants. With rising vacancy and demand declining, many office property owners are willing to slash effective lease rates to secure tenants. The average asking rate for Class A properties at year-end 2008 was $22.08 per square foot, a $1.56 less than a year earlier, and Class B was down to $16.68 per square foot. During the highs of late 2006, the effective rates for class A product exceeded $27 per square foot. With …
The traditionally strong retail leasing market on the west side of Los Angeles mirrors the trends experienced throughout the rest of the county. The last part of third quarter 2008 saw a rise in retail vacancies, which is emblematic of the ever-worsening economy as seen in the rise in bankruptcy fillings, many retail closings and shelved expansion plans. Rental rates throughout the west side have been falling by as much as 20 percent while vacancy rates have risen from 3 to 4 percent in second quarter 2008 to 5 to 7 percent. However, unlike many national landlords, there have been few reports of west side landlords aggressively seeking to renew tenants earlier than normal. Even the glamorous Beverly Hills submarket has seen this vacancy increase with properties staying on the market longer and asking rental rates slipping 10 to 15 percent. Yet it should be noted that asking rates on the famed Rodeo Drive have been between $45 and $60 per square foot per month, and even far less traveled Brighton Way has seen landlords getting more than $20 per square foot per month. The Golden Triangle should get a boost from the November 24, 2008, opening of the five-star …
The Phoenix retail market expansion has slowed down considerably as it experiences the continued effects of the economic downturn. A decline in consumer spending, negative job growth and a housing market still struggling to recover will keep development to a minimum while vacancies increase in existing centers. At the end of 2008, the valley’s vacancy was 10 percent and should rise above 11 percent during 2009. A return to record vacancy rates seen during the 1980s is unlikely because of the slowdown in construction. In 2008, there was roughly 6.5 million square feet of new retail space delivered, but in 2009 planned projects will be put on hold. One reason is there is no pre-leasing being done, and in many cases banks require guaranteed tenants before they will consider construction loans. In response, developers are changing their focus from new ground-up development to infill and redevelopment properties. Expect more national, regional and local retailers to close during 2009. The list of major store closures in 2008 included national retailers Mervyn’s, Linens ‘n Things and Circuit City. There is still a short list of national retailers looking for space in the valley, including Wal-Mart, Fresh & Easy, Fry’s and Dunkin Donuts. …
The trend toward more workforce and low-income housing will be a very big part of Los Angeles’ future. Additionally, new and existing housing located near major transportation corridors will be in high demand amongst investors. The City of Los Angeles has proposed a 5-year housing plan with a $5 billion price tag to help provide more housing for those two market segments. Los Angeles apartment fundamentals are expected to have softened mildly coming into 2009, though vacancy will still be one of the lowest rates in the nation. Predictions are that the vacancy rate will have risen slightly to 4.5 percent by year-end 2008, then remain unchanged this year. The era of vacancy in the vicinity of 3 percent is not expected to return. Rent gains are decelerating from the invigorating pace of the past decade. This year, Los Angeles’ average asking rate is predicted to rise only slightly, approximately 0.7 percent, to $1,469 per month. In November, the 40,544-unit Beverly Hills submarket had an average asking rent of $1,909 per month; the Santa Monica submarket was at $2,404 per month; the 43,645-unit Wilshire/Westlake submarket at $1,308 per month; the 50,936-unit Hollywood/Silver Lake submarket at $1,468 per month; the Sherman …
What area is your expertise? Multifamily Investments — Greater Seattle Area What trends do you see presently in multifamily development in your area? With vacancy rates below 5 percent in the greater Seattle area, we see continued rental rate growth, and continued demand for apartment rental units. In general, the number of apartment units is down, and more units in development for 2009 – 2011 will increase the unit count in the downtown areas. Who are the active multifamily developers in your area? Avalon, Lorig, SRM Development and SP Real Estate are some of the active multifamily developers with new projects underway. Please name one or two significant multifamily developments in your area. What impact will these projects have on the market? Avalon’s new Avalon at Meydenbauer recently opened in downtown Bellevue adding over 350 units within walking distance to Bellevue Square and the new Lincoln Center. SRM Development is underway with 130 units being developed in Seattle in South Lake Union nearby Vulcan’s new developments, Amazon’s new Headquarters and the new Bill and Melinda Gates Foundation. Where is the majority of development taking place? Why is this area doing well? The majority of new development is occurring in and …
What area is your expertise? I specialize in the sale and lease of industrial buildings and land in the Denver Metropolitan area. What trends do you see presently in industrial development in your area? Speculative construction is still ongoing in the industrial sector. The demand for functional office/warehouse, distribution and condominium warehouse buildings remains stable which has prompted several local and national developers to bring new product to the market this year. YTD deliveries and anticipated third quarter completion of speculative construction include: East I-7-/Montbello industrial submarket Whirlpool Building — 410,000 square feet (Panattoni Development Co.) Mile High Business Center — with a 337,000-square-foot building and a 90,000-square-foot building (Panattoni Development Co.) Airways Business Center — with an 83,225-square-foot building, a 79,650-square-foot building and a 57,630-square-foot building Majestic Commerce Center — with a 215,000-square-foot building (Majestic Realty Co.) Enterprise Park at Stapleton — with a 153,035-square-foot, a 148,90-square-foot, and 139,695-square-foot building (Etkin Johnson) Northeast industrial submarket OmniCenter — with two 38,240-square-foot buildings (Landmark Properties Group) Southeast industrial submarket Compark Commerce Center — with a 62,000-square-foot building (Urban Construction, Inc.) Corporate Park at Stonegate — with a 44,700-square-foot and a 37,580-square-foot building (Ascendant Development) Twenty Mile Commerce Center — with a …
What area is your expertise? Reno/Sparks, Nevada What trends do you see presently in retail development in your area? We are seeing an increase in vacancy rates in both anchor spaces and in-line shops, as some existing tenants are vacating. What type of retail product is doing well in your area? As in most areas, Costco, Sam’s, Wal-Marts, and Dollar Stores are seeing increased sales. Sales have shifted to retailers with perceived value. Subway’s has also reported increased sales with their $5 sub sandwich promotion. What retailers are new to your area? Dillard’s, Cabella’s, Scheel’s and RC Willey. Who are the active retail developers in your area? Lewis Operating, Red Development and Bayer Properties. Please name one or two significant retail developments in your area. What impact will these projects have on the market? Damonte Ranch Town Center developed by Lewis Operating. The center is anchored by The Home Depot, Office Depot and RC Willey. The center has additional anchor space available. It is located in south Reno east of U.S. 395 at Steamboat and Damonte Ranch Parkway. This center is located in the middle of a master-planned community that will have over 15,000 homes in the immediate area when …
What area is your expertise? Phoenix Metropolitan Area What trends do you see presently in multifamily development in your area? As construction on the first phase of the Phoenix light rail system wraps up, we’re seeing a major trend towards mixed-use projects with multifamily housing with commercial space along the line’s route from Central Phoenix to Tempe and Mesa. Developers are also targeting the renters-by-choice market by building upscale apartments that offer high-end amenities and finishes. Who are the active multifamily developers in your area? Alliance Residential, Embrey, Fairfield Residential, Trammell Crow Residential, Gray Development, Mark-Taylor, Greystone, Trillium Residential, and the Zaremba Group. Please name one or two significant multifamily developments in your area. What impact will these projects have on the market? CityScape — RED Development and CDK Partners are building this $900 million, 2.5 million-square-foot project in downtown Phoenix. CityScape will feature 1,200 multifamily units, along with a 600,000-square-foot office tower, shops, restaurants, and a 250-room hotel operated by San Francisco-based Kimpton Hotels & Restaurants. Office tenants already committed to the project include Wachovia (regional headquarters) and Squire, Sanders & Dempsey LLP (global law firm). This project is currently supporting more than 3,000 construction jobs, and on-site employment …
What area is your expertise? Our team’s expertise is the industrial real estate market primarily in Western Washington along the Interstate 5 corridor. We also work nationally for clients who are expanding into other areas either for site/space acquisitions or investment opportunities. What trends do you see presently in industrial development in your area? Currently there is no speculative development occurring in our area. Sites of interest would be infill sites in mature markets and rail-served sites. Risk is being priced back into the market with a significant pricing spread being evident between Class A and Class B properties — something we did not see during the high point of this past real state cycle. What type of industrial product is doing well in your area? Business parks accommodating the smaller to medium size users are doing relatively well. In addition, properties located near or in Seattle are doing well. The Kent Valley, due to its close proximity to Seattle and being composed or primarily business parks, is experiencing a decline in vacancy rates. In addition, rail served sites are a desirable commodity. Who are the active industrial developers in your area? Active national developers include: Panattoni, First Industrial, Opus, …