• “Are Suburban Office Markets Making a Comeback?” – by Victor Calanog for National Real Estate Investor. Over the past 15 months, the amount of occupied suburban office space has increased by 17.2 million square feet, while the amount of occupied office space in central business districts (CBDs) has risen by 8.8 million square feet. So, does that mean the suburban office markets, which struggled even more than their downtown counterparts during the Great Recession, are now in better shape than CBDs?
Not quite, Calanog writes.
For starters, the national vacancy rate for suburban office properties – 18.8 percent – is 450 basis points higher than the rate for CBD offices. Also, “since suburban markets are about twice as large as CBDs (80 percent of all office construction from 1990 to 2010 occurred in suburban areas), occupied stock increased by about the same relative pace: around 0.8 percent over the last five quarters, relative to end-2010 figures,” Calanog writes.
Calanog goes on to note that office vacancy rates have been lower in CBDs than suburban areas since the late 1990s. He “does not expect any reversal anytime soon,” he writes.
• “High Tech Drives Office Fundamentals” – by Carrie Rossenfeld of GlobeSt.com. High-tech firms have accounted for approximately one-third of office absorption in the United States in recent months, and the industry is fueling strong rent growth in the five most tech-oriented markets – Boston, New York, San Francisco, Seattle and Silicon Valley – according to a new Jones Lang LaSalle report summarized by Rossenfeld.
“Despite high-tech’s relatively small footprint in office markets, accounting just 8.5 percent of all jobs using office space, it has had a tremendous impact on the absorption of office space in the top five tech-oriented markets,” said Colin Yasukochi, northwest director of research for Jones Lang LaSalle. “Additionally, the sector’s recent employment growth – roughly three times the overall U.S. employment rate – has begun to affect a growing number of other markets around the U.S. and Canada.”
Submarkets that have experienced strong office rent growth because of the high-tech sector include Vancouver’s Yaletown; Boulder, Colo.; downtown Pittsburgh; Washington, D.C.’s East End; and the West Loop submarket of Houston.
• “Real Estate Economists Underwhelmed By April Jobs Report” – by Matt Valley for ReBusinessOnline.com. Unimpressed by the recently released job statistics for April? You’re not alone. Real estate economists said the sluggish employment growth likely means “companies will remain conservative in their consumption of commercial real estate,” Valley writes.
The federal Bureau of Labor Statistics released numbers last week showing that the U.S. economy added only 115,000 jobs in April. Furthermore, although the professional services sector has been adding jobs, those jobs are equally as likely to be based at home rather than an office, Victor Calanog, director of research for Reis, tells Valley.
Still, all is far from lost, says Hessam Nadji of Marcus & Millichap. “The numbers, while disappointing, are strong enough to support the gradual recovery in commercial property demand across all sectors,” he explains. “We are seeing a moderate rate of decline in vacancies of retail and industrial space, and a sluggish recovery in the demand for office space unfold.”
• “More Buyers, More Properties Coming to the Retail Market” – by Mark Heschmeyer of CoStar.com. Investment sales activity in the retail market appears to be picking up, and many of the properties changing hands are located in secondary markets, Heschmeyer reports.
The increase in buyers’ appetites for non-core markets stems in part from the fact that many national tenants are expressing a desire to move into those areas, Heschmeyer writes. “So many of the [tenants] we work with are public, and they’re looking for opportunities,” says Marshall Loeb, president of Glimcher Realty Trust. “They’re looking at some of the smaller markets and how they change the stores that may work in Tampa or Columbus and have it work in Parkersburg, W.Va.”
“I think our market is starting to be there for these B assets,” says Michael Gilmcher, chairman and CEO of Gilmcher Realty Trust. “There are more buyers out there, and I think we’re optimistic.”
• VIDEO: “Built-to-Suit Steps Up” – from GlobeSt.com. Kathleen Barthmaier, executive director at W.P. Carey, discusses the increasing strength of the build-to-suit market. She also details how the financing firm makes decisions.