Multifamily Market Snapshot
There is ongoing multifamily construction in several submarkets. Most of the inner-loop construction is midrise structures — three to four floors — with a few high-rises also being built.
Midrise is becoming more accepted, definitely in the inner city where land is scarce. Mixed-use, while finally occurring, is a new concept for Houston due to a number of factors. Houston has no zoning; you can still build retail right next door to residential. Also people in Houston still use their cars instead of light-rail systems, and it is easier to pull up to a large retail parking lot than to find space in a parking garage shared by multifamily units. These reasons combined with the affordability of single-family homes in Houston meant that the demand for mixed-use historically wasn’t there.
— Kenneth B. Levenson, MAI, - Integra Realty Resources
Highlights By State
Iowa — Warehouse vacancy is decreasing in Des Moines; recent absorption of warehouse space has left few available properties larger than 100,000 sf. Older warehouse vacancy is at its lowest since 1998, according to CB Richard Ellis/Hubbell Commercial.
Kansas — Downtown Manhattan is undergoing a $160 million redevelopment project divided into two parts — while north side construction has begun, the south side plan still is in development pending eminent domain decisions, reports The Kansas State Collegian.
Nebraska — An empty former Wal-Mart store in York soon will house a locally owned appliance and furniture store and two other retailers. The 12,500-sf space was abandoned when a Super Wal-Mart opened nearby in 2005, according to York News-Times.
North Dakota — South Fargo increasingly is becoming a biomedical research hub with the Pracs Institute, the world’s largest single-facility pharmaceutical research company covering 255,000 sf with a 140,000 sf addition in the works, reports Prairie Business.
- Oklahoma — Oklahoma City’s northwest submarket soon may outsize the central business district’s office market. Current inventory is more than 5.4 million sf –- only 128,418 sf smaller than the CBD, according to Grubb & Ellis.
South Dakota — Owner-occupied office space will replace Rapid City’s Knights of Columbus bingo hall. Handling the redevelopment is a local developer that has tackled several rehabilitation projects in downtown Rapid City including carving retail, offices, and a health club out of a former bakery, reports the Rapid City Journal.
Texas — Austin, which will double in population during the next 20 years, is experiencing a construction boom. Growth is concentrated in the CBD where the population is expected to double in the next five years, reports CB Richard Ellis.
Kansas City, Kan.
Large Warehouse Steals the Show
Kansas City has become a focal point for the national industrial market as it is an inland port, located at the confluence of the Missouri and Kansas rivers. The demand for big-box warehouse space is expected to grow throughout the next few years as the industry trends toward closing satellite warehouses in favor of consolidating storage in a central location. Currently, the majority of Kansas City’s industrial inventory is 10,000 sf or more.
While most large, state-of-the-art warehouse facilities have been build-to-suit projects thus far, some developers are considering speculative large-scale distribution centers in the market for the first time. CB Richard Ellis currently has a speculative warehouse project underway adjacent to the Kansas City International Airport, according to Kansas City Business Journal.
1Q07 Kansas City Industrial Fundamentals
|Average asking lease rate (psf/year)
Source: CB Richard Ellis
Retail Changes Hands
“Retail in Oklahoma continues its positive momentum, benefiting from declining vacancy rates, upside lease potential, and numerous new residential developments,” says Scott Derrick, chief acquisitions officer at SCI Real Estate Investments in Los Angeles, which recently purchased the Bryant Square Center retail complex in Edmond, Okla., 14 miles north of Oklahoma City.
Suburban Office Sitting Pretty
- More than 130,000 sf of suburban office space was absorbed during 1Q07. This represents a significant increase from previous years. The market averaged 202,000 sf of absorption per year for each of the last three years.
- Suburban occupancy rose to 84.6 percent by March 2007 from 84.3 percent at year-end 2006.
- More than 1 million sf has been leased up throughout the last five years. During the same time period, more than 1.2 million sf of new office space has been built in west Omaha.
- Despite rising occupancy, vacancy rates are still higher than most landlords would prefer. New construction continues to drive up the rate, which was 15.4 percent at the end of 1Q07.
- Until new construction slows and the market levels off allowing vacancy to fall close to 10 percent, the office climate will remain competitive for landlords.
Source: Grubb & Ellis
Twisting Tower in Dubai
The hallmark of Dubai, United Arab Emirates, is unique development. The Middle Eastern city boasts everything from a sail-shaped hotel that rises above the ocean to an artificial archipelago shaped like the map of the world. A proposed new development, revealed in April, is a 68-story tower with offices, apartments, and hotel rooms featuring rotating floors.
The building, designed by Israeli-Italian architect David Fisher, would utilize wind turbines to power electricity and rotate doughnut-shaped floor plates attached to a circular core. The core will house elevators, emergency stairs, and other functional utilities. A single rotation will take 90 minutes and will be controlled by a building manager for most floors.
The building is expected to cost $330 million to construct — a relative bargain considering Fisher foresees selling it for a significant markup. “It can be sold for at least 40 percent premium because it will be an iconic building — a landmark,” he told the Wall Street Journal. Construction is expected to begin in the fall and complete in summer 2009.
A similar project by local developer Dubai Property Ring is underway. The Time Residences, a 30-story, 200-apartment building features floors that rotate completely once a day using solar power, according to USA Today.
Texas Retail Fundamentals
||Vacancy rate 2006
||Vacancy rate 2007 (projected)
||Asking rent 2006 ($/sf NNN)
||Asking rent 2007 (projected) ($/sf NNN)
||Total completions 2006
||Total completions 2007 (projected)
Source: Marcus & Millichap
Houston Pavilions is a mixed-use development featuring 350,000 sf of retail, 140 condominiums, and 200,000 sf of office space. Anchor tenants include House of Blues and Lucky Strike Lanes. The $160 million project is slated to open in 2008.
A 200-room, 251,000-square-foot hotel casino will open for business in Waterloo, Iowa, in July if all goes according to plan. The Isle of Capri casino, which originally was slated for delivery in April, has been delayed due to changes in the casino’s design and because of poor weather conditions, according to the WCF Courier.
The Isle of Capri is the last of four casinos the Iowa Racing and Gaming Commission approved in 2005. The casino industry fed $1.01 billion into Iowa’s state economy last year, according to the commission. More than $265 million in wages and benefits were paid out by casinos and Iowa companies received more than $347 million in payments from the casinos.
During 1Q07 Waterloo also recorded more commercial and industrial construction than ever before — primarily due to the Isle of Capri. Waterloo construction and remodeling permits totaled $28 million for 1Q07, $12.8 million more than the totals for the entire previous year. The city expects $145 million of construction activity through 3Q07.