Market Data
Market Trends
Invest in Detroit Now
Despite the dire bankruptcy
headlines, the time to buy in downtown Detroit is now, if Dan Gilbert hasn’t
already bought it. Since 2007, the founder of Quicken Loans moved his corporate
headquarters and 7,000 employees from the suburbs to Detroit’s CBD and has
purchased more than 15 buildings. His vision is “a lively live-work-play
district in the heart of the city based around entrepreneurial companies in the
digital economy,” according to a Brookings Institution report. And he’s not
alone: New market-rate apartment complexes — the 124-unit Broderick Tower and
the 58-unit Auburn — have gone up, and St. Louis-based developer McCormack
Baron Salazar is planning a $60 million riverfront residential and retail
development. “These are practical real estate strategies that we know will have
a lot of market acceptance,” said Sue Mosey, president of Midtown Detroit,
which has spearheaded $1.8 billion in public-private investment in Detroit’s
urban core.
“For commercial real estate, higher
rates [of inflation] mean the end of (some would say) the artificial boost to
the capital markets and an eventual return to more pricing power for landlords as leasing market fundamentals continue their
oh-so-gradual tightening.”
—Robert Bach, national director,
market analytics, Newmark Grubb Knight Frank
Briefly Noted
Hospitality — Atlanta, New Orleans, and Houston were
among the most active hotel acquisition markets for the first half of 2013,
according to Jones Lang LaSalle. “These large secondary markets will remain
targets for investors, as their revenue per available room growth should
outpace national averages,” said Art Adler, Americas CEO of Jones Lang
LaSalle’s Hotels & Hospitality Group. As of midyear, U.S. hotel transaction
volume was up 50 percent over 2012 to $8.0 billion, and Adler predicts a $17.5
billion total by year-end.
Industrial — For the first half of 2013, sales of
industrial properties are up 25 percent YOY, according to Cassidy Turley,
totaling $13.8 billion in the first five months of 2013. Most of the sales were
warehouse product, up 42 percent YOY.
Multifamily — No surprise, cap rate compression is
strongest in the Pacific regional market, where the overall apartment cap rate
— now at 4.92 percent — has lost 237 basis points in the past three years,
according to the 2Q13 PwC Real Estate Investor Survey. Southeast cap rates now
average 5.80 percent, down 213 bps since 2010, and Mid-Atlantic asset cap rates
have lost 173 bps in three years, currently at 5.67 percent.
Office — Occupancy gains are small, but widespread:
62 of the 80 markets tracked by Cassidy Turley increased office occupancy in
2Q13. And rent growth is coming — by year-end 2014, 80 percent of major metros
should experience rising office rents.
Retail — The nation’s second largest retailer,
Kroger, plans to buy the 212-unit Southern-based upscale grocery chain Harris
Teeter for $2.5 billion, hoping to gain entrée to a class of affluent shoppers
as well as counter Walmart’s expansion into the grocery arena. Kroger will
maintain the Harris Teeter brand as it does with its five other regional
chains.
Favorite Grocery Stores
A survey of 6,600 consumers reveals
where they spend their food dollars. What do they like most about their
favorite grocery store? The convenient location.
Northeast: Stop N Shop
South: Kroger
Midwest: Kroger
West: Safeway
Canada: Loblaws
Source:
Chain Store Age
Job
Growth Isn’t the Problem
2Q13 office absorption ticked up
14.9 msf from 1Q13 and vacancy fell 20 basis points — clearly upward movement
but at a subpar pace, says Kevin Thorpe, Cassidy Turley’s chief economist.
However, the economy has created an average of 189,000 jobs per month since
January 2012, above the 2004–07 prerecession pace of 160,000 jobs per month, so
what’s inhibiting office space use? Due to telecommuting, open space plans, and
cost-cutting strategies, companies are leasing less space, upending the
traditional ratio of job growth to worker psf.