Market Data

Market Trends

Industrial Markets Continue to Soar

U.S. industrial markets absorbed 74.9 msf in the third quarter of 2016, rising 29.1 percent compared to third quarter of 2015, according to Cushman & Wakefield. To date, the industrial sector has posted 26 consecutive quarters of net occupancy gains. “The indicators we monitor, such as containerized traffic, transportation indices, and consumer confidence, are still trending in a positive direction, which should continue to translate into robust industrial leasing activity,” says Kevin Thorpe, global chief economist at Cushman & Wakefield in Washington, D.C.

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“Within the next 10 years, the office could be unrecognizable, offering more agility, flexibility, and connectivity, which support new ways of working, playing, and living. Mobile apps and smart building technologies are catering to employee preferences for temperature, lighting, working, relaxing, and even coffee.”

 

- Maureen Ehrenberg, head of integrated facility management at JLL

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iPhones at Macy’s to Stem Sales Dip

 

To counter the trend for decreased demand and traffic flow, Macy’s launched an Apple shop within its New York City store in Herald Square. This partnership is part of Macy’s collaborations with other brands to create a mini-mall within its stores and to reverse six consecutive quarters of declining sales. 

 

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Institutional Investors Hedge Their Bets

 

Acquisition of commercial real estate is high on the list for institutional investors. They are expected to invest 10.3 percent in 2017 compared to 9.9 percent last year, according to Cornell University’s Baker Program in Real Estate and Hodes Weill. But many institutional investors have shifted toward investment in niche properties such as student housing, medical office, and senior housing, which perform well during economic downturns. 

Super-Sized Cycling

 

Cycling has become the fastest growing form  of transportation in the U.S. To accommodate  this trend, commercial real estate developers are  building more trails for bicycling, jogging, and  walking near high-rises in cities and suburbs,  according to the Urban Land Institute. 

Briefly Noted

 

Hospitality — Hotel deal volume rose 50 percent to $85 billion worldwide in 2015, fueled by a record proportion of cross-border capital and single asset transactions, according  to JLL. Through 2016, hotel values continue to rise with secondary markets, which are the focus of the majority of investors. RevPAR is projected to grow by  4 to 5 percent, with $37 billion in hotel deals in  the U.S., JLL says.

 

Industrial — Momentum in the red-hot industrial market declined slightly as demand eased during the third quarter of 2016, according to Reis. With this downshift, industrial is on par with the slowdowns in office and retail. The outlook on industrial, however, remains more favorable as the e-commerce industry continues to evolve. Amazon launched a new food store concept in December 2016, for instance, which will require more warehouse and distribution space.

 

Multifamily — Rents continue a steady decrease, falling an average of $3 in 123 markets during October 2016 — the biggest drop in three years — according  to Yardi Matrix. The two primary factors are outsize growth in the number of new rental units and the supply of high-end lifestyle apartments that coincides in some metro areas with a slowing rate of job growth. But the fundamentals remain strong. The markets where rent growth has dropped swiftly, such as San Francisco, Houston, and Denver, are experiencing issues such as  oversupply, affordability, and job growth.

 

Office — During 2016, the national vacancy rate in office has declined by 20 basis points compared to 40 basis points in 2015, according to Reis. Since 2015, average monthly job growth has slowed and GDP growth has been hesitant, while the fundamentals in the top 82 metros remain constant. About 56 markets showed positive net absorption, 48 posted occupancy improvements, and 72 markets reported increases in rents.

 

Retail — Just 2.5 msf of new shopping center space appeared in the third quarter of 2016 showing that brick-and-mortar retail space does not have demographic advantages of multifamily. The threat of e-commerce has shut out many new retail developments with the exception of mixed-use projects, according to Reis.

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