Market Data

Regional Outlook(23)

Major Lease Fills Houston’s Pavilions Tower
In the market’s second largest lease in a year, NRG Texas signed on for 240,000 sf of office space at Pavilions Tower in Houston’s CBD. The transaction value was not disclosed, but the property’s average asking rent is approximately $24 psf, according to CoStar Group. The long-term lease, which includes space on the first 10 floors of the 11-story building, brings the property to 100 percent occupancy. Pavilions Tower is part of the 560,000-sf Houston Pavilions mixed-use de-velopment, which also in-cludes 360,000 sf of retail space and a 1,600-space parking garage. NRG will occupy the space in March 2011.

Chicago Industrial Year-Over-Year Comparison


Net absorption: -6.9 million,2.8 million

Vacancy (%):10.9,9.5

Under construction (sf):1.3 million,10.4 million

Source: Transwestern

Large Lease Transports Chicago’s Market
In the submarket’s largest logistics lease since 2007, developer KTR Capital Partners leased a 195,071-sf building at O’Hare East Business Center in Franklin Park, Ill., to R&M Trucking. Grubb & Ellis brokered the deal along with Interstate Realty.

Markets to Watch

Washington, D.C. — While real estate professionals wait to see positive effects from the federal stimulus bill, overall office vacancy rates in the nation’s capital reached 12.3 percent in 2Q09, reports Cassidy & Pinkard Colliers. With more than 2.6 million sf scheduled to come on line by year-end, rents and absorption are expected to continue to decline through 4Q09. However, about 18 million sf of demand will be created in the area over the next three years from the aforementioned legislation, Cassidy & Pinkard Colliers estimates.

Atlanta — Attracting renters in 2Q09 with widespread availability and significant rent cuts, Atlanta’s multifamily market posted positive demand for the first time since 4Q07, according to MPF Research. Effective rents declined 2.2 percentage points from 1Q09, and occupancy rose to 88.4 percent as the market absorbed 2,970 apartments in the second quarter. During the remainder of the year, occupancy and rents may suffer thanks to nearly 8,200 units that are scheduled for delivery. Apartment demand, on the other hand, is expected to remain positive through 4Q09.

Minneapolis-St. Paul — The second quarter brought another 181,698 sf of negative absorption and a 0.1 percentage point rise in vacancy to the Twin Cities retail market, reports Colliers Turley Martin Tucker. But the market is seeing some positive action in the form of retail openings and expansions. In 2Q09, Best Buy said it would open a new store in Hutchinson, Minn., and Buffalo Wild Wings, which is based in Saint Louis Park, Minn., announced international expansion plans. In addition, three fast-casual hamburger restaurants — Burger Jones, Five Guys, and Smash Burger — opened during the second quarter.

Falling Rents Boost Boston’s Industrial Leases
Boston’s industrial market saw an increase in lease activity in 2Q09, recording four transactions each exceeding 100,000 sf, reports CB Richard Ellis. In the quarter’s largest transaction, Rolf C. Hagen renewed its 302,000-sf lease in the Mansfield submarket. Many of these deals, however, were spurred by falling rents, which points to the continued threat of vacancy that looms over landlords. High bay rents fell 25 cents psf from 1Q09 to $5.68 psf in 2Q09. Rents for R&D/flex product also were down 25 cents psf from the first quarter, closing out 2Q09 at $10.27 psf. The Tewksbury submarket shed 255,000 sf of space, a significant portion of the market’s 903,000 sf of negative absorption.

Las Vegas Retail, Quarterly Comparison


Inventory (sf millions):51.3,51.3,49.9

Vacancy (%):9.8,9.3,6.3

Asking rent ($psf per month):2.06,2.07,2.18

Source: Applied Analysis

Trophy Tower Sells in Denver
Seventeenth Street Plaza, a 666,653-sf Leadership in Energy and Environmental Design Gold-certified office building in Denver’s CBD, recently was acquired by HRPT Properties Trust, according to CB Richard Ellis. The purchase price — paid in cash — was $134.3 million, reports CoStar Group. The property was 93 percent leased at the time of the sale, and the building’s anchor tenants include the U.S. Department of Justice, the U.S. Department of Treasury, and Molson Coors Brewing Co. Featuring a granite-clad exterior and two-story atrium lobby, the 33-story tower has received the Energy Star award annually since 2003.

Manhattan Multifamily Forecast

Market averageyear-end forecast

Construction (new units)

Asking rent (per month)

Vacancy (%)

Source: Marcus & Millichap

2Q09 Office Snapshot

Market,overall vacancy rate (%),net absorption (sf)

Orange County, Calif.,16.4,-672,880

San Francisco,14.7,-929,064

Seattle CBD,10.7,-683,331

Sources: Voit Real Estate Services, CB Richard Ellis, and Colliers International

Mixed-Use Takes Over Tarpon Springs
Meres Town Center in Tarpon Springs, Fla., broke ground in April. The area’s first mixed-use development, the center includes retail, medical office, and residential components and will serve as a gateway into the southern part of Tarpon Springs’ downtown. The retail section includes more than 100,000 sf and is anchored by a 37,570-sf Sweetbay Supermarket. The development also is expected to create numerous jobs during the two-year construction phase as well as long-term employment.

Orlando Attracts Discounters
Orlando’s discount retailers continued to grow in 2Q09, according to Cushman & Wakefield. Dollar stores and fast-food restaurants, including Five Guys, Jimmy John’s, and Firehouse Subs, leased space in the market to cater to financially strapped consumers. However, these and other gains were offset by the steady increase in vacancy, which reached 27 percent at the end of the second quarter. Lease rates also declined, with some landlords offering up to 12 months of free rent for credit tenants signing on for five more years.

Top 5 Most Expensive Pad Site Sales Markets (psf)

1. Boston,$66.00

2. Washington, D.C.,$65.00

3. Miami,$55.00

4. Seattle,$45.00

5. Orange Co., Calif.,$40.00

Top 5 Least Expensive Pad Site Sales Markets (psf)

1. Des Moines, Iowa,$9.00

2. Oklahoma City,$12.00

3. Minneapolis,$12.00

4. Columbus, Ohio,$13.20

5. Wichita, Kan.,$13.90

Source: Grubb & Ellis

Deals Pick Up in Orange Co. Office Market
Though job losses, rising vacancy, and negative absorption continued to squeeze the Orange County, Calif., office market in 2Q09, the news wasn’t all bad, says Jerry Holdner, vice president of market research for Voit Real Estate Services in Los Angeles. “Six office towers — all of which had been affected by vacancy problems — were sold in the second quarter,” he explains. Most notable is The Emmes Group’s $153.4 million purchase of a 532,000-sf complex in Irvine, Calif., from Maguire Properties. These transactions boosted sales activity to 1.5 million sf in 2Q09 compared with 200,000 sf in 1Q09. They also point to a narrowing of the ask-bid gap in the Orange County office market, Holdner says.


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