San Francisco’s Big Deal
Investment activity is still booming in San Francisco, with more than 1.8 million square feet of office space transacted for over $1.38 billion in volume during the 3Q 2016, according to Kidder Mathews. The average price per square feet rose to $840.33 — the highest price ever recorded there. The Blackstone Group scored the biggest deal in San Francisco in 3Q 2016 with $510 million purchase of the two-tower Market Center buildings from John Hancock Real Estate. Assisted by low interest rates, the city outperformed most of the country in job creation, with about 26,000 jobs added in year ending August 2016, reducing overall unemployment to 3.4 percent.
Different Parking Paradigm
Uber and Lyft are already trimming the use of paid parking garages in big cities like Chicago. While the major shift is years ahead, the gains from ride sharing and driverless cars will affect all commercial real estate sectors, from apartment towers to shopping malls. According to a report by Green Street Advisors, a drop in car ownership could cut U.S. parking needs by 50 percent in 30 years. That translates into 75 bsf of parking space, which is more than the space for all multifamily, office, shopping mall, retail strip centers, and warehouse buildings in the U.S. combined.
Nashville Hotel Prices Rock
Spurred by its record-setting tourist industry, Nashville, Tenn., has ratcheted up its average hotel rate to $261 per night, outpacing Boston at $257 and Washington, D.C., at $192. The Nashville market has more than new 11,000 hotel rooms in various degrees of construction or planning.
The Upside of Low Oil Prices
In the U.S., every one cent decrease in gas prices translates into increased consumer spending of $1 billion during the year. In turn, this jump in spending leads to stronger business profits, which creates more jobs and increases the need for office space, according to a new report on oil by Cushman & Wakefield. While Houston is one of four major global cities hit by lower oil prices, it has shown much better resilience than Moscow. Houston’s local economy has diversified since the 1980s into education, healthcare, retail, and professional services, which helped its residents and businesses buffer the losses from oil.
Chicago Construction Is Booming
Construction in Chicago is up 19 percent from 2015 for an estimated $14.3 billion in residential and commercial projects, according to Dodge Data & Analytics. Multifamily is the big winner with a 67-percent increase compared to 2015, and developers are on track to complete 8,800 apartments in downtown Chicago and with another 3,800 planned for 2018, according to Appraisal Research Counselors.
Boston's Warehouses Drive Vibrant Industrial Market
Vacancy dipped .5% to 9.6%, its lowest ever on 529,000 sf of positive absorption
16-quarter streak of positive absorption
6.5 msf absorbed over four years
Lease rates dropped from $6.04 psf to $5.94 psf
Source: Transwestern RBJ
“The Twin Cities multi-tenant market fundamentals continued to improve throughout the first half of 2016. Every sector reported positive results, and except for a few pockets of softness, every sector should see continued improvement throughout the balance of the year.” - Mike Ohmes, Transaction and Advisory Services, Cushman & Wakefield