Market Data

Regional Outlook(5)

Markets to Watch

  • Northern-Central New Jersey — 1Q08 industrial investment sales activity represents 60 percent of 2007 totals for this active market. Out of about 5.1 million sf of industrial product sold, 3.5 million sf sold to investors, according to Cushman & Wakefield of New Jersey. Industrial leasing activity also was stronger than expected with 6 million sf leased, on par with last year’s 1Q performance.
  • Washington, D.C. — In April, an Irish investor set a new record for office space, paying $867 psf, or $172.5 million, for an I. M. Pei-designed trophy property at 2099 Pennsylvania Ave, N.W. He outbid interested investors from four continents. In 2007, foreign investors bought nearly 10 times more of the district’s office space than they did in 2006, according to the .
  • Texas — Job-wise, this energy-rich state is faring much better than the rest of the nation, according to the PPR Newsletter. In 1Q08, Houston and Dallas-Fort Worth had the highest U.S. absolute job gains with 97,300 and 84,400 jobs created, a growth rate of 3.9% and 2.9% respectively. Austin and San Antonio came in with 4.1% and 3.0% growth, adding 30,800 and 24,600 jobs respectively.
International BeaT

Industrial Markets Slow Worldwide

A global economic slowdown dampens expectations for the world’s industrial real estate market, according to a Colliers International report. As first-world countries look at lower economic output, the movement and storage of goods will slow, decreasing demand for warehouse and other industrial product. However, most Canadian, European, and Middle Eastern markets should weather the downturn without too much trouble. Weakening fundamentals may cause price declines in France and the United Kingdom, but western Canadian regions, especially those tied to the energy and agriculture markets, should remain strong. Asian-Pacific markets will continue to lead the world’s economic output, although many of these countries depend on the U.S. economy for exports, so that could affect industrial demand in these otherwise healthy markets.

EaST


Photo credit: Timothy Hursley

Philadelphia’s NoLi Housing, designed by Erdy McHenry Architecture, won one of eight American Institute of Architects multifamily housing awards given this year. Located on a section of a former Schmidt’s Brewery site in the revitalized Northern Liberties neighborhood, the project contains apartments, office, retail, and public space. It is being developed by Tower Investments.

South

Florida Investment Picture Mixed

“Surprising stability and resiliency in contrast to the [media’s] picture of Florida real estate” is what the University of Florida’s Bergstrom Center for Real Estate Studies found in its 1Q08 survey of professional real estate analysts and investors. While apartment capitalization rates rose 1 percent during the last half of 2007, other property cap rates have changed little since 1Q06, survey respondents say, despite expectations of higher rates. Required yields have increased for all apartments targeted for conversion, but otherwise, they remain unchanged for other property sectors. But despite this stability, the numbers show that Florida’s investment market is still trending downward.

Sector Investor Outlook Survey Forecast
Apartments Positive, slightly improved from 4Q07 Occupancy outlook up but rental growth negative
Industrial Mixed to positive Occupancy and rental
growth to decline
Office Mixed to slightly positive Occupancy declining, rental rates sharply down
Retail Mixed Occupancy declines for all
retail, rental growth down
except for large centers

WEST

Dole Sells Land

Dole Food Co. sold 2,000 acres of its 28,000 acres of land in Oahu, Hawaii, for $39 million. The company also is considering selling land and a flower unit in California estimated to be worth about $76 million. Smacked by doubling banana tariffs and rising shipping costs, the privately held company is looking for a way to avoid default on $350 million in bonds.

East


Photo credit:Cassidy & Pinkard Colliers

The 1.6 million-sf mixed-use Constitution Square broke ground in Washington, D.C.’s NoMa submarket. The two-phase project will contain 340,000 sf of speculative office space, 521,000 sf of office space leased to the General Services Administration, 440 apartments, a 50,000-sf grocery store, an additional 30,000 sf of retail space, and a Hilton Garden Inn. The first phase is scheduled to open in 2010.

west

MOB Sells Big

A 63,276-sf medical office building in Beverly Hills, Calif., sold to New York-based LeFrak Organization for $55 million. Local real estate watchers believe the $869 psf paid is a record price for a Los Angeles office building. The four-story property is fully leased to high-profile plastic surgeons. With MOB vacancy rates below 1 percent in the Los Angeles Westside market, the building’s $3.75 to $4.50 psf per month rents were raised to $6.25 psf per month. Two other MOBs in the area sold for $833 psf and $843 psf, according to the Los Angeles Times.

National Stats

Highest Suburban Office Vacancies

Market Vacancy Rate
1Q08 (%)
Vacancy Rate
4Q07 (%)
Santa Rosa, Calif. 26.4 25.8
Cincinnati 19.9 21.6
Chicago 19.6 19.0
Indianapolis 19.4 18.6
Hartford, Conn. 18.9 16.9
U.S. Average 13.8 13.2

Source: Colliers International

west

Multifamily Sales Stats

State 2007 Cap Rate (%) 2007 Price Per Unit ($) 2006 Cap
Rate (%)
2006 Price
Per Unit ($)
Arizona 5.8 93,025 5.9 79,223
California 5.3 181,161 5.1 177,043
Colorado 5.0 92,605 4.9 90,587
Nevada 5.3 123,987 6.0 123,386
Oregon 5.0 102,440 5.8 87,500
Utah 6.2 89,394 7.0 50,436
Washington 6.0 122,720 5.2 110,528

Source: RealFacts

Midwest

Chattanooga Is Rolling in Retail

National retailers have discovered Chattanooga, Tenn., the center of a metropolitan statistical area that numbers about 500,000 located on the state’s southern border. “A Target-anchored power center just opened on the north end of town. Other tenants include Circuit City, Bed, Bath & Beyond, Kohl’s, and Ross,” says Garry Rodgers, CCIM, principal of Rodgers Group in nearby Cleveland, Tenn. Rodgers’ company is working to finalize an agreement to bring Sam’s Club to the city to anchor another power center. In addition, developments near downtown have added about 73,000 sf of retail space, according to Southeast Real Estate Business. The influx of new development is hard on some of the older, smaller strip centers, Rodgers says. “We’re watching a bit of the ‘flock mentality’ where tenants are moving to the newer, larger retail centers.”

National Stats

Chain Store Sales Down

March 2008 posted the weakest comparable sales in 13 years.

Comparable Store Sales by Category March 2008 YOY Percent Change Fiscal Year 2007 Average Monthly Percent Change
Apparel -11.2 -2.0
Department -8.2 0.2
Luxury -5.3 6.3
Drug 4.0 4.9
All stores -0.5 2.1

Source: International Council of Shopping Centers

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