Boston’s Slow Start
Boston’s 2Q08 office market was characterized by slowing deal velocity and stabilizing metrics, with fewer tenants needing space because of the shaky economy, according to CB Richard Ellis. Vacancy in 2Q08 rose to 6.4 percent up from 5.8 percent in 1Q08, illustrating a slightly softening market. Additionally, class B space became more attractive to tenants despite rents slightly increasing. And while some developments are at a standstill due to lack of financing, projects such as Fan Pier and 2 Financial are making progress. For the overall market, the slow start eventually will make way for long-term gains, and the stalling of new development will prolong supply constraints for the future, returning the market to strong fundamentals and positive rent growth by 4Q09.NATIONAL STATS
Secondary Market Retail Forecast
Vacancy (Year-End Forecast, %)
Asking Rent (Forecast $ PSF, NNN)
Completions (SF in millions)
Source: Marcus & Millichapsouth
Dallas' Uptown Makeover
The 23-story Tower Residences at the Ritz-Carlton is the second phase of high-rise residences opening within uptown Dallas’ prestigious Ritz-Carlton neighborhood. The luxury property is scheduled to open in 2009 and already is 67 percent sold.
Markets to Watch
Chicago — In 2Q08, supply outpaced demand for retail space in the central business district, and vacancy increased 30 basis points to 5.2 percent. By year-end, vacancy rates are expected to rise to 5.5 percent. Asking rents will increase 3.4 percent to $24.09 psf. Tight market conditions will allow retailers to keep concessions close to their current levels, with effective rents forecast to advance 3.2 percent to $22.01 psf. Overall, the long-term outlook for Chicago’s retail market is based on two healthy fundamentals: strong population gains and high household income, reports Marcus & Millichap.
Washington, D.C. — The metropolitan office market experienced a positive 2Q08 net absorption rate of 217,900 sf, a significant drop from the 978,111 sf reported in 1Q08, according to Cassidy & Pinkard Colliers. Overall vacancy rates increased 60 basis points from 10.1 percent to 10.7 percent with asking rents in the metro area rising to $35.15, up $1.04 from 2Q07. The region absorbed only 1.2 million sf as of June 30, but more than 19 million sf of office space is scheduled to come on line by 2010 in D.C., Virginia, and Maryland with only one-quarter already pre-leased.
Northwestern New Jersey — As a choice location for industrial companies seeking flex space, this area is thriving despite the country’s economic uncertainty, says Colliers Houston & Co. Encompassing five counties, the region’s industrial market currently totals 121.5 million sf of both industrial and flex space. The 2Q08 availability rate dropped from 6.2 percent to 6.0 percent with some submarkets showing marked improvement. However, average asking rates dropped from $7.14 psf in 4Q07 to $6.96 psf in 2Q08. Overall, vacancy rates should rise slightly by year-end with average asking rates declining as fundamentals help to moderate the impact of a possible recession.
New York City — The city’s overall office vacancy rate climbed 70 basis points from 1Q08 to 5.6 percent in 2Q08, making it the largest quarterly vacancy increase since 4Q01, reports Grubb & Ellis. Average asking rents for both class A and B space declined from 1Q08 and asking rents are expected to remain flat by year-end. In addition, the number of large blocks of space increased — 60 in excess of 100,000 sf exist, double the amount available a year ago. Tenants also placed more than 1.5 million sf of sublease space on the market since the start of 2008.
Orlando, Fla. — As national retailers such as Starbucks, Applebee’s, and Bennigan’s close up shop in central Florida, education-related tenants, other national retailers, and discount stores still are leasing space in the Sunshine State, Cushman & Wakefield reports. Education-related tenants catering mainly to high school students are looking for strip center space from 10,000 sf and up with ample parking while online colleges are leasing 2,000 sf in multiple locations. Discount stores typically look for locations of 8,000 sf or more with national retailers finding space in mixed-use developments where they can capitalize on foot traffic from residents and workers.
Massive Multifamily Deal
Apartment Realty Advisors recently arranged Salt Lake City’s record-breaking sale of four multifamily properties for more than $12 million, Multi-Housing News reports. The properties include the 450-unit Foothill Apartments, the 135-unit Park Capitol Apartments, the 440-unit Southwillow Apartments (pictured), and the 486-unit Somerset Village. In the last few years, Salt Lake City has been one of the strongest overall growth markets in the nation.WEST
Orange County, Calif., 2Q08 Office Overview
Total Iinventory in Millions (sf)
Net Absorption YTD (sf)
Source: Colliers International
Baltimore Bulks Up
Office space asking rents in Greater Baltimore grew by 3 percent in June compared to the same month last year, according to the Baltimore Business Journal. And for now, industrial rental rates still are increasing. Overall, 3.9 million sf of office space is under construction in the city and the average vacancy rate is 12.55 percent. While 62 percent of Baltimore real estate investors were able to increase their commercial portfolios this year, 42 percent felt the economy was too weak to invest.
San Antonio Spurs Robust Retail
Development for San Antonio’s retail market was projected at 3.7 million sf for 2Q08, according to Marcus & Millichap. Most of the new construction will come on line in the newly developed northern submarkets. For the entire market, vacancy rates increased 180 basis points due to the heightened construction activity. Asking rents should finish the year at $15.10 psf, with effective rents climbing to $13.34 psf, gains of 1.8 percent and 1.0 percent, respectively.
Miami’s Top Office Transactions, 2Q08
|Banco Santander Center
Source: Cushman & Wakefield
Seattle Is the Place to Be
With major employers such as Boeing, Microsoft, Amazon, and Google, Seattle is enjoying the most diverse economy in the city’s history, reports Multi-Housing News. In the multifamily market, Seattle’s metropolitan statistical area had a 2Q08 occupancy rate of 95.9 percent, down 1 percent from 1Q07. Rent growth also has been strong but slightly subsiding. Seattle saw rents rise 8 percent in the last year, while generally the rent growth is in the double digits. So far this year, 7,400 apartments are under construction with 9,000 more in the pipeline. Currently, there is demand for apartment properties in core growth areas such as downtown/Capitol Hill, Queen Anne, and Belltown as well as the northern submarkets.
U.S. Industrial Markets Snapshot, 2Q08
Highest Availability Rates (%)
Lowest Availability Rates (%)
||Salt Lake City
||Long Island, NY
Source: CB Richard EllisWEST
Las Vegas Retail Year-Over-Year Comparison
|Retail inventory (sf)
|Average asking rates ($ psf)
|Quarterly absorption (sf)
|Midyear absorption (sf)
|Under construction (sf)
Source: Applied FernINTERNATIONAL BEAT
Vietnam’s Hospitality Is Thriving
With the number of three- to five-star hotels and resorts increasing by almost half and the number of rooms more than doubling since 2005, it’s no wonder Vietnam’s hotel sector is booming, says Reuters FX Hub. In the last three years, the number of high-end hotels in the country rose 147 percent with the number of rooms increasing 210 percent. Ho Chi Minh City, the country’s business hub, has the highest occupancy rates, averaging almost 80 percent last year, while Hanoi, the capital, had the most expensive rates, according to a 2008 hotel survey conducted by Grant Thornton. The survey included 37 hotels with more than 5,200 rooms across the country.MIDWEST
Relocating? Try Cincinnati
Ranked at No. 10 out of 50 metropolitan markets, Cincinnati has been named one of the “2008 Best Cities for Relocating Families” in a study compiled by Worldwide ERC and Primary Relocation, according to Grubb & Ellis/West Shell Commercial. For families considering a future move, they are in luck. Miller-Valentine Group, Steiner and Associates, Hutsenpiller Contractors, and Bailey Capital Partners have entered into a joint venture for a new mixed-used development in Liberty Township, Ohio, beginning in 2009. The $250 million project calls for more than 2 million sf of office, retail, and residential space to be constructed on a 110-acre site.