Category: News & Market Reports

CRE 2022 Outlook: It looks Good for America

Posted on by Sarah

“The risks are manageable, and the outlook is strong.”

This was the key takeaway from Cushman & Wakefield’s CRE 2022 Outlook. In the report, Cushman & Wakefield Head of Economic Analysis and Forecasting Rebecca Rockey discussed the company’s predictions for the US. commercial real estate market.

While some predictions will come as no surprise, others are not so straightforward. All things considered, 2022 looks good for CRE in America.

Office

Cushman & Wakefield predicts a turning point for office next year, and there are encouraging signs that this recovery has already begun as people gradually revert to normal behavior. One sign is that leasing is trending higher. Businesses are signing longer-term leases, and sublease space is trending down. Vacancy is also falling in an increasing number of markets, a trend that Cushman & Wakefield predicts will peak by year-end in the U.S.

Offices will continue to calibrate for remote work, challenging building owners to find the best ways to attract and maintain tenants.

Regional absorption is also on track to turn positive in the second half of 2022.

Industrial

Last year was a booming one for industrial, with demand surpassing 500 million square feet for the first time ever. According to Rockey, this rate of growth is not sustainable and was largely driven by confined demand from 2020. Cushman & Wakefield says that demand will remain 100 million square feet higher than historic norms, exceeding 400 million square feet for the next few years.

Despite the major pickup on the supply side, Rockey thinks vacancy will remain under 4 percent for the next two years in the aggregate. This will only further fuel rent growth. Values are expected to climb by close to double digits, and investors will be left to decide how much they’re willing to pay.

Retail

Retail was another sector that experienced a record year in 2021. Demand surpassed 37 million square feet in 2021 — the sector’s best year since 2017. In combination with the constrained supply side that was largely oriented toward mixed-use in specific high-growth markets, vacancy peaked at a much lower level. Vacancy continues to trend downward toward 6 percent. Cushman & Wakefield predicts an even further dip as we head into 2023.

“This is a different territory for retail,” Rockey said. “We’re seeing this narrative unfold. Recovery will pick up steam in gateway cities where international tourism, return to office and accelerating business travel will start to push the fundamentals in a more significant manor.”

Multifamily

Like industrial, last year’s significant growth rate is not sustainable over the long term, but Cushman & Wakefield says demographic forces will continue to fuel the sector during the next few years.

Rockey expects higher rates still on household formation: 1.3 million square feet this year and 1.2 million square feet in 2023. This year’s rate of demand is translating into one that is more than twice the long-term average.

Though supply is ramping up, it’ll remain a low vacancy environment for the next couple of years. Of course, this factors into rent pressure, resulting in strong overall rent growth. This will remain an asset class that investors will remain focused on, but the recoveries and expansions in retail and office will also start to push investors and rotate them back into those sectors, Rocky said.

Alternatives: Self Storage, Data Centers, Student Housing, Life Sciences, Senior Housing, SF Rental Homes

Just 10 percent of all sales were alternative pre-pandemic. Now it’s 15 percent and climbing, with demographics driving niche categories, like life sciences, which were among the first to post positive absorption within the broader office of R&D space markets.

High Expectations: Office Prospects Pursue Quality in Recovering Market

Posted on by Sarah

If there’s one thing to take away from Brandi Sikes’ analysis of the Houston office market, it’s that recovery may be slow, but the market is recovering.

“Based on what we know today, the worst is behind us,” says the Principal & Senior Advisor for SVN J. Beard Real Estate – Greater Houston, who merged Limestone Commercial Real Estate in November 2021.

Negative absorption peaked in Q3 2020 and leasing activity began to increase in Q2 2021, Sikes adds, noting Houston just posted its first quarter of positive absorption.

“Houston has one of the highest vacancy rates in the nation – 25 percent,” says Sikes. “Class A availability is closer to 30 percent, but the flight-to-quality offices with abundant amenities will help mitigate this vacancy over time.”

The demand for quality by prospective tenants almost assuredly requires buildings to offer amenities to remain competitive, she says.

“Tenants have high expectations when it comes to incentives but learn quickly that not all buildings are created equal,” Sikes points out. Stabilized assets can hold out for better deals in better days while the less fortunate are opting to ‘buy’ tenants on a short-term lease in hope of making it up on the renewal.” Click to read more at www.rednews.com.

Urban Farming Enterprise Infarm to Open Second U.S. Facility in Kyle

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Infarm, a network of urban farms founded in Berlin with centers in Asia and Europe, is expanding its footprint within the U.S. with a new facility in Kyle. This will be the second facility in the U.S. with the first located in Seattle.

Urban farming refers to growing food indoors, in or near heavily populated cities. The goal of Infarm is to minimize risks to the environment and provide pesticide-free food. The facility will be able to provide food 24/7 without any supply chain issues and thereby be more reliable, according to a press release.

To maximize space, the facility will be equipped with vertical farming units standing 33 feet tall and “producing the crop equivalent of land the size of a soccer field, using 95% less water and 95% less land compared to traditional soil-based agriculture.”

With the U.S. playing a significant role in Infarm’s global expansion plans, Texas was strategically chosen to root a new facility that will be able to feed over 18 million people, co-founder and CEO Ere Galonska said in the release. Click to read more at www.communityimpact.com.

Construction Financing Secured for Austin High-Rise Multi-Housing Development

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JLL Capital Markets secured construction financing for The Travis, a 423-unit, high-rise multi-housing community located in the Rainey Street District of downtown Austin, Texas.

JLL worked on behalf of the borrower, Genesis Real Estate Group and PGIM Real Estate, to secure a construction loan through JPMorgan Chase.

With a projected completion of the fall 2024, the 50-story tower will be Austin’s tallest single-purpose, for-rent multi-housing high-rise, redefining Austin’s skyline and providing future residents top-tier accommodations and views of downtown and Lady Bird Lake. In addition to luxury residences characterized by technology-enabled living spaces, modern interiors and over one acre of community amenities, the property will offer connectivity to over 14,000 acres of public parks and trails found within the city.

Located at 80 Red River St. within downtown Austin, the property offers convenient accessibility to the growing 17.3 million square feet of office space in the Central Business District, which includes the Convention Center District. Residents are also proximate to Rainey Street, Austin’s historic avenue turned cultural and nightlife attraction. The property provides walkability to over 40 restaurants and bars and shops.

The JLL Capital Markets Team representing the borrower was led by Senior Managing Director Campbell Roche and Senior Managing Director Robert Wooten.

What’s Squeezing the Commercial Property Insurance Market?

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The US commercial property insurance market continues to feel the sting from catastrophic weather and disaster events, which have become more severe, more frequent and harder to predict, according to the 2022 U.S. Property Market Outlook report from Risk Placement Services (RPS).

Expecting the unexpected has become standard for a market where losses from unanticipated catastrophic weather have reached the billions of dollars, RPS said. In recent years, such events have occurred in unusual regions or seasons, such as last February’s Winter Storm Uri in Texas, or the tornadoes that devastated portions of the central and southern US in December.

In a bid to boost profitability, E&S carriers have been dropping unattractive risks, raising rates, lowering coverage limits and adjusting policy terms, RPS said. Click to read more at www.insurancebusinessmag.com.

Retail Wrap: Target, H-E-B, Burlington Signal Rebound in Houston Retail Construction

Posted on by Sarah

Retail construction in the Houston region is set to rebound in 2022 as retailers such as H-E-B, Target and Burlington plan expansions, according to commercial real estate firm Weitzman. Retail projects completed in 2021 dropped by 11 percent over the year to 615,000 square feet, according to the company, which tracks projects with at least 25,000 square feet.

Target plans a 135,000-square-foot store at Valley Ranch Town Center at 11985 Grand Parkway N. in New Caney and a 145,000-square-foot store at 22165 FM 529 near the Elyson community the north Katy area. Fort Bend Town Center II in Missouri City will bring a Cinemark theater and Burlington, among other tenants. H-E-B plans stores in Magnolia, Manvel Town Center and the Market at Willis. Life Time Fitness is building a 140,000-square-foot location at 9000 Six Pines Drive in Shenandoah.

Houston retail occupancy returned to its pre-pandemic level of 95 percent at the end of 2021 as fewer stores closed and restaurants and other retailers filled in vacant spaces, according to Weitzman. The occupancy rate was up from 93 percent in 2020. Among the restaurants expanding are Halal Guys at The Crossing at 288 in Pearland, Southern Yankee Crafthouse in the former Good Dog Houston space at 1312 W. Alabama in Montrose, and Willie’s Grill & Icehouse in Pearland. Click to read more at www.houstonchronicle.com.