Commercial Real Estate Across the USA: A Current
View
By Timothy O’Connor, EVP/Regional Manager
The commercial real estate (CRE) industry has
struggled since 2008, but historically low interest
rates and investors in search of returns have again made
CRE a favored investment vehicle. In some ways, it feels
like the mid-1990s when we were recovering from the real
estate recession of 1990-92. Lenders have returned. Life
companies, the GSEs, banks, and a reborn CMBS industry
are active.
So where is this money being invested, and what is
the health of CRE around the USA? With 33 offices around
the country, NorthMarq is well-positioned to view the
overall market and comment on its strengths and
weaknesses. Here some of NorthMarq’s managing directors
from across the country share their views on the state
of their local markets.
Greater New York MSA (Ernie
DesRochers, Managing Director, New York City)
New York City’s property sectors began to
fire on all cylinders in 2010. Today, all metrics for
commercial and residential real estate indicate a strong
investment market. Residential rentals and sales are
stable to slightly increasing, commercial office vacancy
is down to pre-recession levels, and retail vacancies
are near all-time lows.
The recovery in the suburbs didn’t begin until 2011.
Northern New Jersey, Westchester, Fairfield County, and
Long Island have shown signs of improvement across all
sectors and most importantly, in the construction of
rental apartments. The office sector still has inventory
to lease in the NY suburbs as overall vacancy exceeds
15%. The largest industrial market is in Northern New
Jersey, and it, too, has shown signs of strength with an
overall vacancy rate less than 8%. The retail market is
strong regionally as overall vacancy rates are less than
7% with rents stable or slightly increasing. This market
fared better during the recession thanks to tight land
use controls in the region limiting retail development.
Texas (Ron Reese, Managing
Director, Dallas)
The Texas real estate market continues to be
healthy relative to other parts of the country.
Increases in employment continue to be higher than most
of the country, and we are now seeing increases in
housing prices and new housing starts in most major
Texas markets. The CRE market is seeing increases in
both occupancy and rent with the multifamily sector
continuing to lead the way. Several developers are
either underway with new multifamily developments or
have projects in the advanced planning stages. Rents in
Class A office and well-located retail properties are on
the rise. Industrial continues to be a strong performer
in all major Texas markets with overall occupancies over
90% with modest rent growth.
Chicago / Midwest (Sue Blumberg,
Managing Director, Chicago)
Midwest markets continue to stabilize. While values have
mostly recovered, growth has been gradual but not
robust. Multifamily continues to shine, although concern
over new units may dampen rent growth. Generally growth
is lagging in the suburbs, and some are still suffering.
Chicago is more robust than most. The city’s office
market has recovered, thanks in part to no new space
under construction, and the hospitality market is doing
extremely well. Minneapolis is doing well, with St.
Louis, Milwaukee, Kansas City, and Indianapolis holding
their own. Michigan and Ohio are better than one might
think due to the auto industry recovery. Indiana remains
stagnant.
Florida (Joel Coykendall,
Managing Director, Jacksonville/Orlando)
Florida really separates into a number of separate
markets. South Florida’s markets have rebounded well
from massive overbuilding of condos, most of which have
now been sold or converted to rentals. The office and
industrial markets are rebounding with shrinking
vacancies. Multifamily is strong with low-single-digit
vacancy numbers and new construction underway. In
Central Florida, the I-4 corridor from Orlando to Tampa
is also improving in all sectors, although retail, while
stabilizing, still has a ways to go. CBD office is
stronger than the suburbs where 15% vacancy numbers are
improving but slowly. In North Florida, primarily the
Jacksonville market, new construction in multifamily is
occurring for the first time since the recession with as
many as 2,000 units planned on the south side.
Southern California (Rob
Hervey, Managing Director, Newport Beach)
The Los Angeles Basin, which includes Los Angeles
County and Orange County, has encouraging news in
industrial, office, retail and apartment properties. In
the industrial sector, vacancy rates are low at 5% in LA
and 4.5% in Orange County. Average lease rates are
seeing modest growth or holding firm. Retail in the LA
basin has also shown positive numbers in terms of
absorption and a stabilization of rental rates and
occupancy for both counties. In the office market,
Orange County has had remarkable absorption over the
past eight quarters with the best submarkets like
Newport Center receiving the greatest benefit. The
overall vacancy rate in the county is a little over 14%,
down from almost 16% a year ago. The Los Angeles office
market is holding steady with vacancy (under 15%) and
rental rates flat over the last few quarters. The
apartment market in the entire basin is very strong as a
result of the housing crisis. Vacancies have dropped and
rents continue to climb. New construction is planned and
in progress in many areas. Overall, there are positive
signs in all sectors.
NorthMarq is on track to produce $9 billion in new
deals by the end of 2012 from these and the other 28
markets in which it operates. Visit our website at
www.NorthMarq.com to learn more about our activities and
to contact your local NorthMarq office.
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