Market Data

Market Trends in Commercial Real Estate

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Debt Rises With Banks Holding the Most

Outstanding commercial/multifamily mortgage debt rose $45.4 billion - 1.3 percent - to $3.46 trillion in 1Q2019. The largest holders of commercial/multifamily mortgages are:

   Percentage  Amount
 Commercial Banks  39.0% $1.4 trillion 
 Agency/GSE Portfolios and MBS  19.9%  $687 billion
 Life Insurance Companies  15.4%  $532 billion
 CMBS, CDO, Other ABS Issues  13.5%  $466 billion


Source: Mortgage Bankers Association  


Amenities in Industrial Facilities

 

As the demand for labor in industrial facilities increases, companies are looking for ways to make them more appealing to workers. The top industrial amenities to attract and retain labor are:

  1. Temperature control (cooling and heating).
  2. Access to public transportation.
  3. On-site food options, such as a cafeteria, food trucks, or nearby restaurants.
  4. Gym or workout facilities.
  5. Windows for natural light and fresh air.
  6. Electric vehicle charging.
  7. Walking trails and outdoor seating.
  8. Games (e.g., table games or basketball court).
  9. Day care.
  10. Improved restrooms, break areas, and privacy rooms.

Source: Cushman & Wakefield  


Everyone Has to Eat

Grocery-anchored shopping centers will continue to be popular among investors thanks to steady demand and low competition from e-commerce. Among the trends to watch in the grocery sector over the next decade: 

  • Strong growth across nontraditional and specialty formats.
  • Increased consolidation among smaller and regional chains.
  • More small-format, convenience-oriented concepts in urban locations
  • An increase in online grocery share, which will require adjustments in-store layout for pickup options.   

Source: “2019 U.S. Food in Demand Series: Grocery,” CBRE


Vertical Care for Seniors

The first vertical medical city for seniors is planned in Orlando, with groundbreaking slated for the end of the year. Ponte Health plans a $1 billion three-tower complex that aims to streamline health care for seniors by providing apartments, medical offices, and research and pharmacology space in one development. Senior Housing News reports that Ponte also plans a smaller complex in downtown Chicago and is also scouting other Florida locations. 


Streaming Video, Physical Assets

Becoming a giant in video streaming, Netflix has built its brand on customers seeing little more than its finished product. But the video subscription service has ramped up investment in property and equipment in the last six months. According to CoStar Group, Netflix invested roughly $100 million in the first half of 2019, up from $64.5 million in the first six months of 2018. The company plans to spend $1 billion in Albuquerque, N.M., and $100 million in New York. In all, Netflix listed $452 million in property and equipment assets at the end of June. 


Growth in Office Asking Rates

Office markets with the largest short-term growth in average asking rates in 2Q2019:

Market     Changes from 1Q2019 May 2019 Listing Rates  Total Vacancy 
Brooklyn   10.0%  $54.30  9.7%
Houston  3.8%  $29.78   20.8%
San Francisco  3.1%  $69.43   8.1% 
Orlando  3.1%  $22.22   11.8% 
 Bay Area (excluding San Francisco)  2.7%   $47.25   15.2% 


Source: Yardi Matrix


Apartment Demand High in 2Q

Demand for apartments in the U.S. reached a five-year high in 2Q2019, according to real estate technology and analytics firm RealPage. Net move-in during the quarter totaled 155,515 units, which exceeded 2Q2018 product absorption by 11 percent.

 Metro Area  Quarterly Demand (in units)  Quarterly Completions (in units)
 Dallas-Fort Worth  10,443  6,441
 Chicago  7,418  2,617
 Houston  6,969  2,373
 New York  6,759  2,768
 Washington, D.C.  6,008  2,787

Briefly Noted

Entertainment: The popularity of esports has generated the development of - what else? - esports arenas. The New York Times reports on the rise of posh new venues devoted entirely to e-gaming. They include a $10 million stadium in Arlington, Texas; a 30,000-sf renovated nightclub in Las Vegas; and the planned 3,500-seat Fusion Arena in Philadelphia, which will include a training facility, production studio, and private suites.

Retail: J.C. Penney has had its share of problems in recent years, with its stock now trading for less than $1, risking possible delisting from the New York Stock Exchange. As the American stalwart in the retail space hopes to stay afloat,

it has contacted lawyers and consultants about restructuring its debt. Company executives aim to avoid bankruptcy while closing 24 stores in 2019.

Seniors Housing: The seniors housing industry might look to millennials to scope out ideas about catering to baby boomers as they age. Jane Adler, writing on the National Investment Center for Seniors Housing & Care's blog, notes that the two generations have a lot in common. They tend to seek out experiences rather than accumulate possessions, making them potential candidates for small apartments in vibrant urban areas with plenty of conveniences. They're also both interested in multigenerational communities, with Alder floating the idea that boomers could even be open to co-living developments.

Student Housing: Developers and college administrators are discovering that flashier might not always be better when it comes to building new student housing. In the amenities war, notes Bisnow, big-ticket trophy features - one complex boasted a skiing simulator, for instance - are valued less than features such as additional study rooms, conference rooms where groups can plan presentations, open spaces where students can socialize or host events, and fitness facilities that encourage wellness. Economics is a factor, too; parents may be more reluctant to pay for all the bells and whistles when lower-priced options are available.

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