The Jackson office market remains strong, with occupancy rates of 81 percent and average rental rates of $19 per square foot. As the state capital, government is the driving force for local real estate, and recently, the public sector has been working with private developers to establish partnerships. With more than $600 million in private and public development during the last couple of years in the CBD, companies are intrigued by downtown’s revitalization. The King Edward restoration by HRI Properties, Watkins Partners and Deuce McAllister is an example of where local government property was transformed into a new 186-room Hilton Garden Inn combined with 64 newly leased apartments. Fondren Place is another public/private partnership where Peters Real Estate and The Mattiace Company partnered with Jackson Public Schools to convert a former school to boutique shops, restaurant space and a new 37,500-square-foot office building with retail space. The construction of the Jackson Convention Complex has spurred hotel development to support Jackson’s first convention center with the nearly completed Sleep Inn and the newly renovated Clarion Hotel Roberts Walthall. Eley Guild Hardy Architects fell in love with a Neo-Classical Revival-style former bank and is transforming it into a LEED-certified building for its …
Office
To take measure of the recession’s effect on office transactions in the Washington market, simply watch the city’s tenant base. In a town where the market-wide vacancy rate is 10.8 percent, lessees are being very careful about any real estate moves they make. Tenants who are active are obtaining short-term deals, hoping a brighter day is in the immediate future. “Getting decisions made takes considerably more time than in years past,” says Wendy Feldman Block of Studley’s Washington office. “Although some people feel that tenants are showing less hesitancy recently than they were 6 months ago, it’s very painful getting decisions made.” Hesitancy among landlords also is contributing to the city’s transactional slump. These owners are in financial trouble, but tenants are requiring massive tenant improvement packages and free rent before leases are signed. This culture leaves landlords in a bind; they want to get space leased up, but they also have to make money. If tenants were more prevalent, finding other interested parties wouldn’t be a problem, but the tenant pool has become smaller and smaller. “There are too few tenants for too much space — particularly for those who have requirements that are under 50,000 square feet,” she …
Although much of the country may think Michigan’s economic outlook is bleak, Grand Rapids is still holding on strong through the economic downturn. The city is faring better than Southeast Michigan and currently is looking toward the future. With more than 1 billion square feet in proposed construction, the area is getting a head start on the rebound, especially in the medical office sector. Absorption in the traditional office market is slow, causing there to be less speculative development in the pipeline. That being said, Grand Rapids is experiencing an influx in medical office and healthcare development, especially in the central business district (CBD), where Michigan State is currently developing a new medical school. Even with medical office development proposed and under way, there is a perception that companies need to wait and see what everyone else decides to do before making any decisions for themselves. This pause is fueling a vicious cycle in the market that is making it difficult to get deals across the finish line. Like many markets across the nation, the leasing sector of Grand Rapids is seeing a great deal of concessions and incentives pass from landlords to tenants. Some owners are making bare-bone deals …
It seems like every commercial real estate move made in the Chattanooga office arena is directly related to the industrial market. Landlords, tenants and maybe even some office developers are anxiously waiting for three significant manufacturing facilities to make their mark on the area. The coming Volkswagen plant will spur office growth in a huge way, but a $300 million expansion by the power service provider Alstom and the addition of Munich, Germany-based Wacker Chemie AG’s property in Cleveland, Tennessee, will also jump start the Chattanooga office market. “There’s a lot of industrial activity that’s just starting to really catch its legs. The office is following,” says J. Bryan Rudisill of Chattanooga-based NAI Charter. “There’s going to be support that comes in — lawyers, accountants, engineers — but the office market won’t change over night because of these announcements.” Office transactions, even with a guaranteed influx of industrial facilities, will be slow to pick up, but office development will be even slower due to trouble in the financial markets. Life insurance companies are on the sidelines, and most bigger banks are reluctant to let developers borrow money. The best bet for financing is regional and local institutions, but these banks …
The secret to success in any market is diversity. When a city’s economy isn’t wedded to a single industry, there’s more chance that area can survive a downturn. Crews Johnston of Colliers Turley Martin Tucker says Nashville is such a place. The city has a significant healthcare presence and a number of automakers, but Johnston says none of these industries have suffered an outright collapse akin to the downfall of the big financial firms. “Everybody talks about a diversified economy; we actually have one,” he says. This array of companies has left Nashville office brokers with a better outlook on the current crisis than their contemporaries in similar markets. Unemployment is sitting steady, and office vacancy has topped out at around 13 percent, with most of the empty space situated in the downtown and airport markets. The Interstate 65 corridor, which includes the Cool Springs and Brentwood submarkets, is actually doing relatively well. In fact, national tenants looking to move into Nashville often find the market is tight. According to Johnston, four or five national firms are currently circling the city, looking for available space. On the flip side, very little is happening in the sales arena. Sellers are reluctant …
Chicago’s downtown and suburban office markets continue their dynamic path through an unpredictable and unprecedented economic environment. Although no one can predict the future, it is difficult to argue with the opportunities of a tenant in the current market. New supply in Chicagoland has increased by 3.9 million square feet in the past 2 years. Historically, new space is absorbed quickly; however, 2009 met this new supply with a different embrace than before. Space demand has not been as robust, and positive absorption enjoyed in the years past has decreased. This excess space, coupled with added sublease space, is contributing to Chicago’s pain. Given the tumultuous economy, the sublease market (both CBD and suburban) soared to 6.5 million square feet in second quarter 2009. The sublease market has become such a force in volume and quality that it competes with direct space, resulting in a downward push of overall effective rates. While tenants stand to reap the benefits of the subleases available, current market dynamics reveal the risks associated with leasing and subleasing space. A tenant’s credit has never been scrutinized more closely. Furthermore, the credit of the landlord/sub-landlord and tenant/sub-tenant is a major concern. A Subordination Non-Disturbance & Attornment …
In the stifling heat of August, the Charlotte office market seemed stagnant and weak. According to Jones Lang LaSalle, Charlotte lost nearly 13,000 jobs in the first two quarters of this year, pushing the unemployment rate to 12 percent. Year-over-year, second quarter office leasing activity fell 32 percent. To further paint a grim picture, Jones Lang LaSalle predicts that downtown Charlotte is in for a double-digit vacancy rate, due to the 2.5 million square feet of office space that will see completion in the next 18 to 24 months. In reality, the future of the Charlotte office market is much brighter than it looks on paper. “At the street level, a lot of brokers remain pretty busy. There are still deals being done; they’re just taking longer,” says Tim Bahr of Charlotte-based NAI Southern Real Estate. It also happens to be the tail end of vacation season, and everything, commercial real estate included, is a bit more sluggish during the twilight of summer than during the rest of the year. “This time of year is typically slow. With the economy, it just seems like that’s amplified things a bit,” he says. The office spaces that are frequently being occupied in …
Following trends in the domestic and global economy, conditions in the Los Angeles office market continued to deteriorate this summer. Los Angeles County’s unemployment rate reached 11.9 percent in July, up from 7.7 percent 1 year earlier, and the Bureau of Labor Statistics estimated that 172,100 non-farm jobs were lost between July 2008 and July 2009. Area companies have conceded to a difficult business environment and lower revenue forecasts by shedding employees in record numbers and, in turn, reducing their need for office space. At mid-year, total vacancy was 14.7 percent, up from 12.5 percent at the end of last year. The market experienced negative net absorption of 3.3 million square feet through the first half of the year, and preliminary third quarter data indicates that vacancy continues to rise, albeit at a slower pace than has been witnessed during the past 18 months. While previous real estate downturns in Los Angeles were triggered by excessive speculative office construction, the current rise in vacancy has stemmed from a collapse in demand. Construction has been relatively limited in the current cycle; however, a handful of large projects have been delivered this year, most notably The Pointe (480,000 square feet) and 2300 …
Few parts of the country have been harder hit than Detroit in the current recession. While it appears at first glance that the industrial sector has had it worse, the office sector has felt the pinch as well. Vacancies and downsizing are seen at the office buildings occupied by third-party vendors, advertisers, lawyers and accountants related to the auto industry. “There is a large trickle-down effect in just about every segment of the office market,” says Fred Klugman, president of Detroit-based Klugman Commercial. Office vacancies continue to creep up in the Detroit office market, but new leases are hard to come by. “There just have not been that many tenants in the market to fill up all the vacant space that is available,” Klugman says. “What’s happening is there are not many new tenants in the market, and most of the existing tenants’ landlords are able to retain them by offering aggressive deals. So, you’re not seeing a bunch of movement.” Landlords have not given up, though. As a way to persuade tenants to sign at their properties, many landlords are offering bigger and bigger concessions in the form of lower rental rates and increasing amounts of free rent. This …
Since the beginning of 2009, six new office projects containing 254,000 square feet of space have been delivered. As of the second quarter, these projects were 53 percent occupied. This strong absorption came primarily from one tenant, Fidelity Investments, which moved into a 112,000-square-foot build-to-suit project designed to handle the firm’s human resources outsourcing work. This project was developed by Forest City Covington in Mesa Del Sol, a master-planned, mixed-use community located just south of the airport on a mesa overlooking the Rio Grande Valley. In a rare occurrence, no multi-tenant office projects were under construction during the second quarter. This is good news for these recently completed office projects. New speculative projects are likely to remain on the drawing board as developers face financing challenges with high pre-leasing requirements. The excess amount of unsold office condominiums on the market (approximately 300,000 square feet) may aggressively compete for tenants by offering lease-to-purchase options. The Albuquerque metro area is poised for growth during the next few years. It has earned some high rankings by national media, placing it among the top metro areas. The bottom line is the Albuquerque metro area is being discovered for its excellent climate, strong workforce and …