The urge to move into the city even has reached small markets, including Sioux Falls, S.D., where developer Craig Lloyd is spearheading the $150 million Uptown at Falls Park on a 5-acre downtown site. Containing 500 residential units and 330,000 sf of office and retail space, the project will involve renovating several historic properties and constructing two new buildings connected with an arch in a design by local architectural firm Koch Hazard. Construction of the first phase began this summer, according to the Argus Leader. Sioux Falls was the only Midwest city listed among the U.S. Census Bureau’s 50 fastest-growing metropolitan areas.
- HOSPITALITY — Since May 2006 seven public lodging real estate investment trusts have been bought by private equity companies and two more are scheduled to close by year-end, totaling 435 hotels with a value of $17.4 billion, according to Lodging Econometrics.
- INDUSTRIAL — The possibility of a 2008 West Coast port disruption due to dock worker contract negotiations may increase the need for short-term space as companies try to stockpile goods, says Mike Peters, executive vice president of ProLogis.
- OFFICE — Demand for downtown office properties has fallen drastically, according to respondents to the RERC/CCIM Investment Trends Quarterly 2Q07 survey, who also gave the office sector the lowest investment conditions rating of all property types.
- MULTIFAMILY — Out of 54 metropolitan areas tracked, 29 faced rising apartment vacancy rates in 2Q07, up from 19 in 1Q07, with Orlando, Tampa, and West Palm Beach, Fla. — cities besieged by condo fallout — seeing the greatest uptick, reports Property & Portfolio Research.
- Retail — Of 42 cities surveyed, 26 percent ranked mixed-use as the most popular form of retail development, followed by lifestyle (24 percent), power (17 percent), neighborhood (14 percent), and community (10 percent), reports Colliers International.
Highest Office Vacancy Rates Mid-2007
Vacancy Rate (%)
YTD Absorption (SF)
Class A/B Rents ($/PSF)
Source: The Staubach Co.
Big Brokerage Networks
2006 Transaction Value
Source: Commercial Property News
Top States for Job Creation
Although the East and West coasts may attract commercial real estate investment dollars, it’s the U.S. interior states that walk away with top prizes for job creation and new facility investment, according to Area Development’s annual awards for states active in creating new business development. Georgia won top honors for attracting the $1.2 billion Kia Motors automotive plant to West Point, Ga., along with nine other projects ranging from $15 million to $800 million. Runner-up states include Michigan, Pennsylvania, Texas, Alabama, Kentucky, Missouri, Wisconsin, Kansas, Nebraska, and Utah. Go to www.areadevelopment.com/annualreports/jun07/goldshovel.shtml for the complete list of projects.
The Cost of Doing Business
Source: Milken Institute
Brokers looking for tenants to fill empty big boxes might look to God: Megachurches are strong candidates for reusing large, high-visibility locations, according to a Tierra Grande article. There are more than 1,200 megachurches nationwide, reports the Hartford Institute for Religious Research, which defines them as churches with a weekly attendance of 2,000 people. The largest number are in California (178), followed by Texas (157), Florida (85), Georgia (73), and Illinois (46). Wal-Marts, Chuck E. Cheese restaurants, and entire shopping centers have been leased or bought by megachurches, according to a ChurchExecutive.com article. High-growth churches are attracted by the parking and access, high ceiling heights that accommodate both sanctuaries and gyms for youth programs, and costs that are far below those to build new. The largest U.S. megachurch is located in Houston’s Compaq Center, the former home of the Houston Rockets. Lakewood Church, which draws an average of 30,000 congregants a week, has a 30-year, $12.1 million lease on the arena and spent $75 million to rehab it.
Picture: Lakewood Church, former home of the Houston Rockets,
is the largest U.S. megachurch with seating for 16,000.
What Renters Want
Forget the cozy hearth and crank up the cool for multifamily tenants: Air conditioning followed by parking are the highest-rated tenant amenities according to an Apartments.com survey. In-unit washer/ dryers, high-speed Internet, and dishwashers rounded out the top five amenities, followed by elevators, pools, and hardwood floors. Fireplaces came in last.
Transactions reported by CCIMs, 7/1/06 to 6/30/07
Volume (in millions)
Median Price PSF
Average Cap Rate (%)
Source: RERC/CCIM Investment Trends Quarterly
Hotels Sprout in Charm City
Baltimore’s dearth of hotel rooms will end in the next three years as 15 new inns are scheduled to open, adding 2,400 rooms, according to the Baltimore Business Journal. Because of the current lack of supply, Baltimore’s daily room rates average around $117, much higher than neighboring cities such as Philadelphia, where the average rate is around $98. However, with occupancy hovering around 66 percent, down from a few years ago, local travel consultants wonder if Baltimore’s convention and tourist trade can support such an influx of new rooms. Currently the city has about 64 hotels with slightly more than 10,000 rooms. The new additions range in price and sector from the 49-room Red Roof Inn to the 757-room Convention Center Hilton.
Neighborhood Center Snapshot
Land Cost PSF
Cap Rate (%)
|Walnut Creek, CA
Source: Colliers International
Regional Grocers Vie For Space
Site selection has become increasingly difficult for many regional grocery chains, according to a recent Progressive Grocer article. Stores such as Wegmans, which operates in the Northeast, must compete with big-box retailers for sites to accommodate its 140,000-sf stores. Since the chain sees its size as a competitive advantage, instead of downsizing it may explore a two-floor concept in order to enter new markets. Southeastern chain Bi-Lo may adjust its 48,000-sf and 57,000-sf prototypes downward to fit sites, particularly in downtown areas. Kroger, which operates several regional chains, is looking at urban redevelopment locations that require modified footprints and underground parking.
Picture: With 70 stores in five states, Wegmans large-scale format makes it difficult to find sites in new markets.
Hospitality New Openings Forecast
Supply Increase (%)
Source: Lodging Econometrics
Top Multifamily Design Trends
What do high-end apartment renters want? Closet space and curb appeal, according to Sanford Steinberg, architect and principal of Steinberg Design Collaborative in Houston. Open floor plans, lots of light and space, and kitchens without islands are other big features, he says in an interview in Multi-Housing News. Leaving the kitchen space open so renters can add personal design touches helps combat the 66 percent turnover rate in residential communities, he adds. Steinberg’s business is 95 percent apartments: Garden and residential mixed-use are his most plentiful projects. High-rise rental projects have diminished because of rising construction costs, he says.
Picture: Ravello at Tuscan Lakes is one of Steinberg’s designs.