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Commercial Real Estate Price Indices Post Fifth Straight Year of Growth

Randolph Taylor

Multifamily Investment Sales Broker at Marcus & Millichap
(630) 570-2246
Randolph Taylor


Q3 2016 Apartment Trends

  • The national vacancy rate for multifamily properties across Reis’s largest metro markets did not budge from it 4.4% in Q3 2016.
  • Close to 40,000 new units came online in Q3 2016.
  • Demand remained robust enough to absorb the amount of units that are coming online.
  • Asking and effective rents grew by 1%.
  • Year-over-year asking rents grew by 3.9% and effective rents grew by 3.8%.
  • Most expensive coastal markets’ highest priced properties are showing weakness.


Q3 2016 Office Trends

  • The national office vacancies remained moored flat at 16% in Q2.
  • Year-over-year office vacancies have declined 40 basis points.
  • Rents began to accelerate but fell back to its average quarterly level at .4% respectively for both asking and effective rents.
  • Year-over-year rents are seem to be healthy, pulling at 2.7% and 2.8%.
  • U.S. economy creating fewer jobs than in 2015 and 2014.
  • Upcoming November elections a determining factor for firms holding off long-term commitments.


Q3 2016 Retail Trends

  • Regional malls showed some improvement with vacancies declining 10 basis points to 7.8%.
  • Relatively strong asking rent growth at 0.5%; between 0.3% and 0.5% on a quarterly average asking rent growth.
  • Neighborhood and community shopping centers vacancies rising by 10 basis points ending Q3 at 10%.
  • Asking and effective rents both grew by 0.4%
  • Businesses are pulling back on capital spending and long-term investments, waiting on results of upcoming elections.


Q3 2016 Industrial Trends

  • Warehouse and industrial subsector vacancies remained stuck at 10.5% in Q3.
  • Year-over-year vacancies for warehouse and distribution declined by 20 basis points.
  • Asking and effective rents grew by 0.4% and 0.5% respectively, growing 2.1%-2.3% on a year over year basis.
  • Flex/RD showed more activity in Q3, falling 20 basis points to 11.4%.
  • Year-over-year Flex/RD has declined by 70 basis points.
  • Asking and effective rents grew by 0.4%, year-over-year growth in the low 2% range.
  • 75,000,000 SF of new construction for warehouse and distribution for all of 2016.


Coldwell Banker Commercial Real Estate

A subsidiary of Realogy Corporation, Coldwell Banker Commercial (CBC) is a worldwide leader in the commercial real estate industry. The CBC brand has its roots in the oldest and most respected national real estate brand in the country. Coldwell Banker Commercial has the largest commercial real estate footprint with over 3,500 professionals nationally, over 16,000 listings, nearly double that of the nearest competitor, averaging 13,000 transactions annually valued at over $4 Billion. Providing comprehensive Commercial Real Estate Services to the Greater Chicago Area and Nationally through our vast network of professionals and Global Client Services team.

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Source: Reis Nov 3, 2016

Demographic Shifts Contribute To The Changing Face Of Retail

Randolph Taylor

Multifamily Investment Sales Broker at Marcus & Millichap
(630) 570-2246
Randolph Taylor

Demographic Shifts Contribute To The Changing Face Of Retail

So far this year, retail chains have announced some heavy cuts. J.C. Penney said it would close 33 stores. Macy’s said it would lay off 2,500 workers. Sears will close its flagship Chicago store in April.

That’s creating a glut of excess space. But that’s just one of several forces changing the face of retail.

Jason Moser, an analyst at Motley Fool One, focuses on one key number in retail: revenue per employee. In Amazon’s case, every person the company employs generates an average of $800,000 in sales. For Best Buy? The number is much less than half that.

“What that means is that Amazon is able to do a lot more with a lot less,” Moser says.

Iconic Brands Being Battered

Moser says inefficiency in legacy brick-and-mortar chains is bleeding some iconic brands.

“Does the world really need a Sears at this point? I don’t think it really does, actually, and I think the numbers bear that out. I think the same really goes for J.C. Penney,” he says.

Along with the rest of the economy, retail is recovering. Vacancy rates at shopping centers are low. But analysts like Moser say that belies some dramatic changes going on in the industry.

“Over the course of the next decade, I am counting on the retail space to look very, very different than it does today,” says Michael Burden, a principal with Excess Space Retail Services, a company whose job it is to figure out what to do with unused retail space.

He says the footprint of stores is shrinking because consumers are shopping online more. And technology has streamlined inventory systems, making them more efficient, so stores need far less room to keep stock.

“That translates into the need for less space,” he says.

A Church Moves Into An Old Wal-Mart

And that is creating demand for what might be called “smaller boxes,” as well as a dilemma as to what to do with some of the old big-box space. Burden says some of the space might be repurposed as warehouses for mega-retailers like Amazon and Wal-Mart. But Burden says those in far-out suburbs or in rural areas pose the greatest risk of becoming “ghost boxes.”

“The more rural it is, the less likely there is a need or the ability for a single tenant to come in and utilize the space,” he says. “In those markets in particular, you’re going to be looking at churches, bingo places, flea markets, medical uses, call centers.”

One old Wal-Mart in suburban Milwaukee is now the Ridge Community Church. Lead pastor Mark Weigt says there was some skepticism about whether religion could fit in a space designed for retail. For starters, it meant sharing a plot with the new adjacent Wal-Mart.

“People to get to the new Wal-Mart actually drive through a driveway that’s connected to our property,” Weigt says.

But the location was central, and the cost unbeatable.

“The beauty of a big box is once the demolition from the interior standpoint is taken care of, you just have to work around the posts,” Weigt says.

The old Subway sandwich shop took new form as the church kitchen. The floors and the ceilings were simply repainted. And the church plans to lease the remaining two-thirds of the still-unoccupied remaining space to other retailers.

New Developments Merge Housing, Retail

It’s not just the buildings that are getting revamped. Maureen McAvey, a fellow at the Urban Land Institute, an urban planning nonprofit, says there’s a deeper shift happening: Retail is becoming much more integrated with housing, especially in cities.

She says in previous decades, homes, stores and offices were usually designed to be driving distances away from one another. Now, she says, that trend is reversing. You can find evidence of the trend in places like Research Triangle Park in North Carolina, a classic office park.

“That’s having a new master plan being developed where it will become much more mixed use, adding shopping, adding restaurants, adding residential,” McAvey says.

Another such example is the new Wal-Mart near the Capitol in Washington, D.C. Above the store, there are 200 residential units.

“Eighty percent of all the jobs in the country are basically in cities, and that’s where all the growth is,” McAvey says.

So it’s no surprise that retailers, including Wal-Mart and Target, are trying to adapt their models to suit urban areas, with their smaller, more expensive lots that don’t have as much parking.

Along another stop of our retail tour, McAvey stands in front of a construction site in Bethesda, Md., slated for more mixed retail and residential development. She says demand from baby boomers and the millennial generation is also driving the remaking of city life.

“On both sides of those demographic barbells, these are groups who want to be close to restaurants, they want to be close to places to exercise, and they don’t want to be tied to the yard and mowing grass and all of those things,” McAvey says.

In decades past, she says, people considered it déclassé to live above a store. But social tastes change. And retail development simply follows that lead.

Source: NPR.org Yuki Noguchi February 17, 2014