Lee & Associates features

Lee & Associates’ First-Quarter 2022 Economic Rundown by Sector

by Sarah Daniels April 21, 2022

Lee & Associates’ newly released Q1 2022 North America Market Report scrutinizes first-quarter 2022 industrial, office, retail and multifamily outlooks throughout the United States. This class-by-class review of commercial real estate trends for the first quarter of the year focuses on how real estate is adjusting to long-term post-COVID attitudes. Lee & Associates has made the full market report available here (with further breakdowns of factors like vacancy rates, market rents, inventory square footage and cap rates by city), but the overviews offered below provide sweeping looks at the overall health and obstacles for four major commercial real estate sectors. Industrial: Rents Pushed on Strong Demand Strong demand for industrial space throughout North America continued in the first quarter as vacancies fell to record lows and rent growth hit double digits. First quarter net absorption in the United States totaled 92.8 million square feet, which was up 25 percent year over year but down 35 percent from the 143-million-square feet average of the last three quarters of 2021. Annualized rents rose 10.1 percent in the U.S. and the average vacancy rate fell to 4.1 percent. Part of this trend was due to a pause in new construction starts early in the pandemic. However, …

April 21, 2022

Lee & Associates Breaks Down Third-Quarter Economic Outlook by Sector

by Sarah Daniels November 1, 2021

The calculus for which asset classes are likeliest to demonstrate strong growth continues to shift as the pandemic appears to be receding. Patterns in labor shortages, supply chain issues and material costs have managed to solidify through the third quarter of 2021. Lee & Associates’ newly released Q3 2021 North America Market Report dissects third-quarter 2021 industrial, office, retail and multifamily findings, with a focus on where demand is moving and the challenges facing each asset class. Lee & Associates has made the full market report available at this link (with further breakdowns of factors like vacancy rates, market rents, inventory square footage and cap rates by city). Below is a bird’s-eye overview of four commercial real estate asset classes as general categories, broken down to frame each through the trends and complications they faced up to the fourth quarter, according to Lee & Associates’ research. Industrial: Q3 Posts More Record Demand Pandemic-fueled consumer spending drove up third-quarter demand for warehouse and distribution facilities that eclipsed previous records. And despite a nationwide surge in new construction, some metros can barely accommodate the pace of tenant expansion. Additionally, year-over-year rent growth is at a record 6.7 percent for the industrial property sector …

November 1, 2021

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Free Returns: How Reverse Logistics Impacts Industrial Real Estate

by Sarah Daniels April 2, 2020

The industrial sector has been the preferred asset class of commercial real estate in recent years. “The rate of return for industrial real estate has been higher than that of any other class for nearly half a decade,” says Jeff Rinkov, CEO of Lee & Associates. These rates of return are the result of permanent changes in consumer behavior and preferences — and recent events are driving more rapid changes in consumers’ e-commerce shopping. Though it remains to be seen how the economic impact of the coronavirus will influence various sectors of real estate, the pandemic has meant a sudden uptick in reliance upon industrial real estate as consumers turn to online shopping in the face of in-store shortages and shelter-at-home orders or social distancing practices. As brick-and-mortar stores close temporarily, retail companies and logistics professionals grapple with the increased volume of both online orders and e-commerce returns. What do facilities for e-commerce look like as customer expectations for e-commerce grow? How do companies process returns in an efficient and cost-effective manner, a critical element of success for e-commerce companies? Consumers increasingly prefer to shop online instead of going to brick and mortar stores. E-commerce sales accounted for more than …

April 2, 2020

Bob Yoshimura of Lee & Associates: I would characterize the industrial sector as the most sought-after asset class across all commercial property types.

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Robust Industrial Investment Shows No Signs of Slowing

by Jaime Lackey December 4, 2019

Real estate buyers spent a record-setting amount of cash in the sector in the third quarter and remain bullish on the properties amid healthy absorption and rent growth. The industrial real estate sector, traditionally known as the land of big, boring boxes, has become the darling of real estate amid the growth of e-commerce. Investors have poured hundreds of billions of dollars into industrial properties over the last five years alone, and not even the prospect of new construction potentially outpacing demand has tempered enthusiasm. “With online sales continuing to grow at a faster rate than general retail sales, there is no lack of continued tenant demand for industrial warehouses and flex and distribution space,” says Rebecca Wells, CCIM, senior vice president and principal of commercial real estate service provider Lee & Associates in Indianapolis. “We expect investment activity will continue at a red-hot rate through the end of this year and into 2020.” Industrial sales totaled $40.6 billion in the third quarter this year, the highest dollar volume ever recorded in a single quarter for the property type, according to Real Capital Analytics, a New York-based researcher that tracks commercial property deals of $2.5 million or more. An $18.7 …

December 4, 2019

Kenneth Salzman of Lee & Associates says Last-mile distribution centers are fetching rental rates of $35 to $50 a square foot in the New York metro area on a triple net-lease basis — generally double or more than typical warehouses.

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Last-Mile Access to Customers Drives Distribution Center Conversions

by Jaime Lackey August 20, 2019

E-commerce has been driving demand for industrial real estate for several years, but steadily increasing online sales coupled with growing consumer expectations for speedier delivery continues to put pressure on merchants to bridge the last mile to their customers. Considering that these projects are located in densely populated areas where land and available product are typically scarce, developers are increasingly converting obsolete warehouse and other properties into fulfillment centers. For space that matches their needs, tenants are less price-sensitive than they have been historically, says Kenneth Salzman, SIOR, executive managing director and principal for commercial real estate service provider Lee & Associates. But tenants are avoiding taking more space than they need just to have it available in the future, he adds. “It’s less a space race and more that businesses want to reach their customers more quickly,” explains Salzman, who is located in the company’s New York office. “And the demand is not just coming from Amazon and other online retailers — traditional companies want to be able to ship their products to their customers more quickly because they’re competing with online resources, as well.” Online retailers and shippers are typical tenants of the buildings — even the U.S. …

August 20, 2019