Market Data
Regional Outlook
South
Louisville's Big Deal
A public-private partnership is turning a 24-acre site once occupied by the National Tobacco Co. into a food hub - “a $45 million commercial agriculture park that will process, store, and distribute locally grown foodstuffs,” according to the Louisville Courier-Journal. After receiving the vacant land worth $1.2 million from the city, nonprofit developer Seed Capital Kentucky is seeking tax credits to fund the first phase of the West Louisville Food Hub: development of a warehouse, office building, and commercial kitchen. It is also working out agreements with agricultural companies to build a juicer, an industrial food processing plant, and a demonstration farm. A $20 million methane gas plant powered by compost will break ground later this year. An industrial and marketplace mixed-use format, food hubs have sprouted up in Baltimore, Philadelphia, and St. Louis.
Houston's Position Solid
Reports of Houston's demise due to falling oil prices are greatly exaggerated, according to a recent CBRE report. The city is in solid shape, having diversified its employment base and created four new jobs for every one it lost during the recession, says CBRE. Of the property sectors, retail should fare best: Houstonians, like the rest of Americans, will benefit from lower gas prices and most likely spend that money at the mall. Office is the most exposed property sector, given the number of energy firms headquartered in Houston, plus the large amount of space coming on line between now and 2017. Industrial and multifamily, already in strong positions, should fare well, with slower rent growth the only impact. However, CBRE expects oil prices to slowly drift upward in the next two to three years.
National
The Next Big Thing
Nashville, Tenn., East Bay, Calif., Raleigh-Durham, N.C., Denver, and Salt Lake City - dubbed the NERDS - are the next big thing for corporate tenants and office investors, according to a recent JLL report. The combination of an affordable housing and a big-city vibe without all the hassle has attracted a growing population of educated millennials. Since 2010, these cities have grown at twice the national rate and in the past three years the gross metropolitan product has increased 14 percent. For corporations looking to relocate or open additional offices, class A office space averages 35 percent below national average; for investors, those trophy properties trade at cap rates around 5.5 to 7.5 percent, and about $200 to $400 psf below national averages.
West
Office Investment Leaders
San Francisco, San Jose, Calif., and Seattle-Tacoma, Wash., topped Marcus & Millichap's 2015 National Office Property Index as tech firms keep offices filled and confined development keep tenants' space options tight. However, that may change as development ramps up big time in 2015.
East
New York Hospitality
Offshore investors traded trophy office buildings for luxury hotels in 2014, spending $1.9 billion in New York City hotel assets in 2014, according to JLL. That inbound foreign investment accounted for 58 percent of the city's hotel transaction volume, up from 12 percent in 2013. Along with Chinese investors, buyers from Qatar, Bahrain, Kuwait, Malaysia, and Singapore acquired properties. The strong activity pushed hotel cap rates down to 5.5 percent from 6 percent in 2013. JLL expects foreign hospitality investment in New York to reach $3 billion this year.
Midwest
