Market Data

Regional Outlook(4)

Markets to Watch

• New York — Despite the fact that 1Q08 co-op and condo sales dropped 34 percent from 1Q07, New York’s for-sale multifamily market is stable — although not growing as fast as in previous years, according to Multi-Housing News. Lack of excess inventory keeps the New York metropolitan area a healthy place for top real estate developers and investors, but small and midsize developers may have trouble securing financing.

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• Chicago — With an inventory of more than 1.1 billion square feet, the industrial market ended 1Q08 with an availability rate of 9 percent, CB Richard Ellis reports. Sales activity of 2.2 million sf reflects a 5 percent increase from 1Q07 and an 18 percent increase from 4Q07. Aggressive expansion continues despite the economy, with 13.9 million sf of industrial projects under construction as of 1Q08.

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• Los Angeles — The retail market remains attractive to investors, although a more-cautious lending environment could slow transaction velocity. Overall, developers will bring 2.6 million sf of new retail space to the Los Angeles market this year, a slower pace than last year, which saw 3.4 million sf come on line. The metro area has averaged 4 million sf of deliveries annually since 2000, according to Marcus & Millichap.

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• Dallas-Fort Worth — With 834,226 sf of positive net absorption, the office leasing market had a strong start in 1Q08, according to Grubb & Ellis. The class B sector drove the market’s activity, absorbing 643,552 sf, with class A and C properties posting 23,680 sf and 136,000 sf respectively.

Mediterranean Medical Condos

Developed by Bayshore Land Group, the Royal Palm Square medical condominiums in Coral Springs, Fla., include 25,000 sf of class A office space available to buy or lease and feature a Mediterranean-style setting and custom build-out options such as marble tile and granite countertops. The property, which broke ground in June, is close to two hospitals.

More Mixed-Use in Maryland

Montgomery County, Md., approved plans to bring a new “festival street” to the North Bethesda/Potomac area. This new project includes several hundred condominiums and a Whole Foods Market, according to GVA Advantis. In the same area, JBG Cos. will be redeveloping White Flint Crossing. Located across the street from White Flint Mall along Rockville Pike, the nearly 6-acre development will have 440 condos, including 66 affordable-housing units, 223,000 sf of commercial space, and five levels of underground parking.

Office Amenities Set New Standards

Dulles View, a new 355,000-sf class A office complex in Herndon, Va., is raising the office-amenity bar to stay competitive and attract tenants. The office complex features a 2,500-sf lounge, state-of-the-art fitness facilities, a fully furnished business center with three conference rooms, and a deli/café. Tenants also have access to a concierge program that provides corporate gift services, travel and personal reservations, event planning, and technical support. Currently, the complex, which was developed by Fifield Cos., has about 250,000 sf of office space available.

OK Multifamily Is Okay

Comparatively low rents, asking rent growth, and limited new construction may indicate value-add investment opportunities in Oklahoma City’s multifamily market.

Source: Apartment Brokerage Team

Nashville Hotel Makeovers

Several of Nashville, Tenn.’s downtown hotels are spending millions of dollars to renovate, according to the Nashvillecitypaper.com. The Doubletree Hotel just completed an $8 million revamp while the Renaissance’s renovation cost between $8 million and $10 million. The Sheraton Nashville Downtown also is proceeding with an upgrade that includes new rooms and halls and follows last year’s $3.5 million renovation of the lobby, fitness center, restaurant, and bar. Starwood Hotels, which owns the Sheraton brand, encourages owners to renovate to meet standards or risk losing the flag.

WEST

The legendary New York City restaurant Tavern on the Green is scheduled to open a location in San Francisco’s Metreon in summer 2009. The new eatery will feature more than 27,000 sf of indoor space, a 13,000-sf terrace, and whimsical decor to match its New York counterpart. Photo credit: Forest City Enterprises

Luxury Moves In

Phoenix’s Camelback Corridor will be home to a $36 million, 240-unit luxury multifamily rental community in fall 2009, according to the Phoenix Business Journal. Alliance Residential bought the 4.14 acres for $5 million last May. The property features one- and two-bedroom apartments with loft-style floor plans, hardwood floors, center-island kitchens, and spiral staircases. The community also will have a 2,700-sf recreational clubhouse, a 2,300-sf fitness and pool center, and a wireless cyber café.

Growing Office Space

The Indianapolis multitenant office market increased its inventory during the first three months of 2008, according to Colliers Turley Martin Tucker. The market now has 402 buildings containing more than 30.8 million sf of rentable space. One notable class A office development area in Indianapolis is Allison Pointe, which includes the more than 81,000-sf Woodland Center II and the nearly 81,000-sf Lake Pointe Center IV.

Atlanta’s Infill Fills In

Developers are picking out sites along Atlanta’s Peachtree Industrial Boulevard to launch commercial, residential, and retail projects that may turn the highway’s strip of small manufacturing plants, warehouses, and car dealerships into one of the city’s hottest infill markets. Plans call for townhomes and condos priced from $300,000 to $500,000 and several new stores, according to the Atlanta Business Chronicle. Projects coming on line in the city of Chamblee, which sits in the middle of the corridor, include the redevelopment of the 20-acre Chamblee Plaza. Archetype Management Co. already is developing International Village at Chamblee, a 30-acre mixed-use, transit-oriented development.

More Offices for KC

Office space in mixed-use developments has become a significant part of new construction in Kansas City, Mo., according to Colliers Turley Martin Tucker. South Johnson County has incorporated a mix of small office buildings along with retail centers. For the Park Place project, developers plan to include a 250,000-sf office tower, and in North Johnson County, the Gateway Project will include a 100,000-sf office tower along with retail, residential space, and an aquarium.

Revitalizing Renovations

In early June, Centro Properties Group, a New York-based retail investment company, announced it would spend $11.7 million to renovate the Southland Shopping Center in Middleburg Heights, Ohio. The renovation includes a redesign of the center’s parking lot, upgraded lights for the parking lot and walkways, new concrete islands, and better landscaping. Already open at the center is the 87,000-sf, 24-hour Giant Eagle Supermarket.

Multifamily Reaches New Heights

Denver apartment construction is expected to increase this year as developers move away from a softening condominium market, according to the Denver Business Journal. Developers built 2,262 units in 2007, according to Hendricks & Partners, an apartment sales and research firm. That number should increase to between 2,500 and 3,000 units in both 2008 and 2009. Overall, 217 new units were completed in 1Q08, and while the vacancy rate fell to 5.9 percent in 1Q08, rental rates increased. The average Denver apartment rent will surpass $900 per month, a new Rocky Mountain high, by year-end 2009, Hendricks predicts.

MOB Price Tops Pittsburgh Market

Bought for $14.5 million in 2002, Federal North, a 191,000-sf medical office building with lab space in Pittsburgh, is now on the market for $47.5 million, more than three times the original price, according to the Pittsburgh Business Times. The $248 psf price tag places the building among the area’s most expensive MOB space. A similar property, the 135,000-sf Bridgeside Point building, sold for $31.5 million or $202 psf in 2005. Both properties contain “wet” lab space, which doubles their replacement value. Currently, Federal North is fully leased to a variety of medical tenants.

Most Active Industrial Sales Markets, 2Q07–1Q08

Source: RERC/CCIM Investment Trends Quarterly

Dubai Attracts Hollywood Investor

Hollywood’s golden boy and humanitarian Brad Pitt is working with Los Angeles-based architecture firm Graft on the design of a new green hotel and leisure development in Dubai, United Arab Emirates. At the heart of the socially conscious resort is an 800-room, five-star hotel. The proposed hotel project will be developed by Zabeel Properties and is striving for the U.S. Green Building Council’s Leadership in Energy and Environmental Design gold certification.

Florida Office Market Stats, 1Q08

Source: Cushman & Wakefield

LA Gets Industrial

One of the Los Angeles area’s largest 2Q08 lease transactions, the 178,454-sf 605 Cerritos Distribution Center was leased for $15.3 million to Bunzl, a U.K.-based company. Completed in February, the building includes new concrete tilt-up construction, 28 dock-height doors, and 32-foot minimum clearance height. Photo credit: CityCenter Land LLC

Minneapolis-St. Paul Retail Sales

Source: Colliers Turley Martin Tucker

Texas Warehouse/ Distribution Snapshot

Source: Grubb & Ellis

Commercial Forecast as of March 2008

Sources: NAR, CB Richard Ellis/Torto Wheaton Research