Market Data

Market Trends

Gone Green

Building or managing sustainable office buildings is now the norm rather than the exception, according to a CBRE report. In the past nine years, the percentage of certified green buildings in the largest 30 markets has grown from 1.5 percent in 2005 to 13.2 percent in 2013, according to the National Green Buildings Adoption Index. These certified buildings represent more than 39 percent of all the office space in those markets. In Minneapolis, the market with the largest share of green buildings, 77 percent of the market’s square footage is certified green. In Houston and Atlanta, more than 50 percent of the space is green, and in even smaller markets such as Philadelphia and Tampa, Fla., 36 percent and 27 percent of the space is certified. To qualify, properties had to be certified by either LEED or Energy Star, the two major programs for commercial real estate. The rapid growth of sustainable buildings is a combination of many factors, the report says: the emergence of LEED certification, the drive to lower operating costs, and the fact that “many Fortune 500 companies, the most desired tenants, are now demanding sustainable buildings to meet their own environmental policies.”

“The post-recession pattern is that every office-using job created generates 173 sf of net new demand for office space. Based on the latest job growth trends, the U.S. office sector will observe a nearly 10 percent increase in demand for office space in the coming quarters.”

Kevin Thorpe, Chief Economist, Cassidy Turley

Briefly Noted

Hospitality — Hotel transactions hit $12.5 billion for the first half of the year, on track to meet a $25 billion year-end forecast, according to JLL. About 40 percent of the buyers are private equity, 25 percent are real estate investment trusts, and the rest are private investors, including new buyers interested in $20 million to $40 million deals in secondary markets, according to HotelNewsNow.

Industrial — Demand for 1 msf or larger industrial product is almost five times the supply available, according to JLL research. Supply and demand is in equilibrium for 750,000-sf to 900,000-sf product; smaller product segments are tightening but still available. Overall 2Q14 vacancy was 7.4 percent, a 20-bps drop from 1Q14.

Multifamily — “The national apartment demand is now growing at a rate of almost 270,000 units or 1.9 percent on an annual basis, a pace that is stronger than what the market has seen historically, as well as during the last three years,” according to CBRE’s 2Q14 report. Vacancy rates declined in 38 of the 63 markets tracked, with a dozen markets showing YOY drops of 80 bps or more. CBRE estimates an average vacancy rate of 4.7 percent for this year.

Office — Class B and C buildings accounted for 40 percent of the office market absorption in 2Q14, which is “a major shift from the 25 percent averaged earlier in the recovery,” says Cassidy Turley’s Chief Economist Kevin Thorpe. More than 15 msf of office space was absorbed in 2Q14, up 41 percent from the previous quarter.

Retail — The foodie trend and the highest percentage of Americans living alone — 27 percent — are changing the rules for restaurant site selection, as local chefs and restaurateurs look for “great real estate, cool buildings and fantastic neighborhoods, places where people are gathering and where there is soul and liveliness,” according to “Foodie Revolution,” in the June 2014 issue of Shopping Centers Today.

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