Market Trends Online(10)
Office Transactions Down
When compared to last year, office investment activity was down 80 percent for the first half of 2008, according to Jones Lang LaSalle. Average values have declined more than 10 percent, and capitalization rates are up an average of 75 basis points. In leasing activity, Charlotte and Raleigh, N.C., as well as Dallas and Houston had the highest positive net absorption in 2Q08, along with Seattle and Washington, D.C. New York City and Denver had the largest 2Q occupancy declines.
Industrial Holding Strong
Increasing speculative development and slowing demand are causing a rise in the national industrial vacancy rate, up 70 basis points to 10.2 percent, according to Marcus & Millichap’s midyear industrial outlook. Nearly 70 percent of industrial product under construction is not leased. Developers will deliver 147 million sf this year with most of it opening in California’s Inland Empire, Phoenix, Houston, Dallas-Fort Worth, Chicago, and Atlanta. But demand for new product remains strong from both tenants and investors, with the latter avoiding secondary and tertiary markets in favor of primary locations. Secondary-market industrial prices have dropped to early 2006 levels, and the cap rate spread between primary markets and tertiary markets is 160 basis points, almost double last year’s spread.
Industrial Year-End Outlook
Markets with the lowest forecasted vacancies
|
MSA
|
Vacancy (%)
|
Completions (sf)
|
Median Sales PSF
|
| Los Angeles |
4.1 |
4,800,000 |
$143.57 |
| Orange County, CA |
4.9 |
1,200,000 |
$179.42 |
| Fort Lauderdale, FL |
6.2 |
900,000 |
$110.50 |
| Seattle |
6.6 |
2,200,000 |
$115.36 |
| Tampa, FL |
7.2 |
2,080,000 |
$71.57 |
Source: Marcus & Millichap
Retail Shutdown
Highest concentration of brands announcing store closings
|
Sector
|
Share of Store Closings
|
| Clothing |
48.4% |
| Housing |
19.4% |
| Electronics |
9.7% |
| Department Stores |
9.7% |
| Sporting Goods, Hobby |
6.5% |
| Miscellaneous |
3.2% |
| Auto Supply |
3.2% |
Source: Torto Wheaton Research
Retail Forecast
Markets with the highest forecasted year-end vacancies
|
MSA
|
Year-End Vacancy Rate (%)
|
Year-End Asking Rent PSF, NNN
|
| Dallas-Fort Worth |
15.6 |
$15.70 |
| San Antonio |
15.1 |
$15.10 |
| Riverside-San Bernardino, CA |
13.8 |
$22.53 |
| Cincinnati |
13.3 |
$14.75 |
| Indianapolis |
12.8 |
$15.09 |
Source: Marcus & Millichap
Las Vegas Industrial Activity, 1Q08
|
Market Activity
|
Unincorporated Clark County, NV
|
City of Las Vegas
|
City of Henderson, NV
|
City of North Las Vegas
|
| Inventory (sf in millions) |
59.2 |
7.3 |
12.5 |
19.4 |
| Under construction (sf in millions) |
2.4 |
0.0 |
0.5 |
0.7 |
| 1Q08 vacancy rate (%) |
5.7 |
7.5 |
9.0 |
7.9 |
| 1Q07 vacancy rate (%) |
4.5 |
7.1 |
3.3 |
4.2 |
Source: Applied Analysis
Texas CBD Office Stats, 1Q08
|
Market
|
Vacancy Rate (%)
|
Net Absorption
|
Under Construction (sf)
|
Asking Rent Class A/B($psf)
|
| Austin |
15.5 |
(56,179) |
78,720 |
33.64/26.27 |
| Dallas |
24.3 |
284,346 |
0 |
24.41/16.83 |
| Fort Worth |
5.1 |
4,214 |
358,679 |
29.03/19.14 |
| Houston |
10.1 |
215,732 |
2,066,871 |
37.34/24.53 |
| San Antonio |
12.6 |
(4,253) |
59,740 |
22.40/17.76 |
Source: Grubb & Ellis
World’s Highest Warehouse Rents
|
Market
|
Rent ($PSF Per Year)
|
| London (Heathrow Airport) |
27.64 |
| Tokyo (Ariake) |
24.51 |
| Yokohama, Japan |
18.89 |
| Urayasu, Japan |
18.89 |
| Oslo, Norway |
17.10 |
| Dublin, Ireland |
17.08 |
| Hong Kong |
16.92 |
| Honolulu |
15.72 |
| Bristol, U.K. |
15.35 |
| Singapore |
15.34 |
Source: Colliers International
Top 5 Factors for Business Success
Developers, owners, investors and asset managers most often chose the following factors as key to continued business success in today’s market:
1. Attracting new tenants
2. Retaining key employees
3. Managing the company’s portfolio of investments
4. Managing/reducing operating costs
5. Attracting new sources of capital/financing
Source: Grant Thornton’s 2008 Real Estate Survey