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NAI Austin Releases 2007 Austin Commercial Real Estate Market Report
Every six months, NAI Austin publishes The NAI Austin Source - The Austin Metro Area Commercial Real Estate Market Report (formerly The Austin Source), a semi-annual market study. The Source data is compiled by NAI Austin broker-professionals, and is collected at the end of each study period in December and June. What makes The Source stand out from other commercial real estate publications is its attention to the market conditions for non-owner-occupied speculative industrial, office and retail buildings 20,000 square feet and larger. Other publications gather information from various public databases and lump together information by combining large/small and owner-occupied/non-owner-occupied buildings. The 2007 end-of-year Source can be accessed through the NAI Austin website at www.austinsource.com.
Industrial
Over the course of 2007, the Austin area industrial real estate market expanded by more than 1.4 million square feet. Even with such growth, it experienced the lowest vacancy rate since 2001, with a healthy 11% vacancy. Due to this low rate, industrial developers have a keen interest in the Austin area, with 976,000 square feet currently under construction and set to be completed within six months. Another result of the low vacancy rate is the increase in rental rates ranging from 8-15%, which is not likely to cease until the market vacancy rate is at 15% or more. Absorption in the industrial sector increased 17% over the 2006 figure, for a total of 1,792,693 square feet of space absorbed. 2007 was the third consecutive year in which the industrial market absorption was more than 1.5 million square feet. For more information on the Austin area industrial market or properties, contact a member of NAI Austin’s Industrial Team: Mark Milstead, Jerry Heare, David Barber, Cheryl Morse, Philip Bible, or Frank Niendorff. www.naiaustin.com
Office
The end of 2007 marked a strong year for the Austin area office space market. City-wide absorption was 628,075 square feet for the second half of the year, and rental rates continued to increase, although at a slower rate than the previous six months. There is currently an 11% vacancy rate, which is remarkable considering the large amounts of new construction in the region.
A rising rental rate and large amounts of new construction characterize a healthy market. Austin has low unemployment, positive job growth and low interest rates, which should also contribute to a healthy office market in 2008.
For more information on the Austin area office market or properties, contact a member of NAI Austin’s Office Team: Lise Wineland, Josie Marshman or Trisha Sims. www.naiaustin.com
Retail
During the last six months of 2007, retail occupancy remained relatively flat while rental rates continued to rise. The Austin area retail segment had a positive net absorption, and new construction continues to be absorbed even as more and more projects are announced by developers. These factors marked a good year for retail in Austin, even as other markets across the nation did not enjoy such success.
Although occupation has remained steady despite the addition of more retail space, only time will tell if the trend will continue.
For more information on the Austin area retail market or properties, contact a member of NAI Austin’s Retail Team: Sherry Sanchez, Travis Waldrop, Leo Morales or Ryan Coleman. www.naiaustin.com
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Selected U. S. Metropolitan Area Commercial Real Estate Market Activities - 2007
The following are highlights of commercial real estate market activities in selected U. S. MSAs during 2007. This information is extracted from NAI Global’s just released 2008 Global Market Report. This 148-page report, compiled by NAI Global members around the world, is a unique review and summary of global commercial real estate activities during the past year, and it provides comprehensive market data as well as geographical area and economic overviews for 213 primary, secondary and tertiary property markets worldwide.
Overview: In 2007, U.S. markets reported generally tightening vacancies and modest increases in rents. With any lingering remnants from the dot-com bust erased in 2006, the supply side is remarkably stable, as evidenced by the modest drop in the vacancy rate for Downtown Class A office space from 9.85% in 2006 to 9.55% in 2007. The 16.4% increase in the national average rental rate for Downtown Class A space translates into sticker shock for tenants with leases expiring in resurgent downtown areas such as New York City, Boston, San Francisco and Los Angeles, where supply is scarce and rents have risen more dramatically.
Suburban markets nationwide mirrored the vacancy trend without the velocity of rental rate growth. The national vacancy rate for Suburban Class A space declined slightly from 13.16% in 2006 to 12.87% in 2007, while rental rates increased 5.6% from $24.49 in 2006 to $25.87 in 2007.
Market conditions in the industrial sector also improved, with the biggest gains recorded in the bulk warehouse sector. Demand for bulk warehouse space has been strong in prior years, but not strong enough to keep pace with new supply. The national average vacancy rate for bulk warehouse space declined to 9.09% in 2007, its lowest level in over five years, after increasing four of the five previous years.
Retail vacancy rates declined modestly in all categories and are at their lowest levels in over five years. The most significant growth in rental rates occurred in regional malls, where the national average rose from $44.97 in 2006 to $46.26 in 2007. The rental rate for downtown retail climbed from $47.70 in 2006 to $48.09 in 2007.
“The outlook for 2008 calls for continued stability with moderate growth in occupancy and rental rates,” stated NAI Global President and CEO Jeffrey M. Finn. “Tenants in the most supply-constrained cities may have to consider other alternatives, such as splitting headquarters and back-office functions or relocating to lower-cost space in the suburbs.”
Atlanta: Office absorption hit the highest level since 2000 in Atlanta, but vacancies remained steady at 18-19% as new construction continues apace. Retailers are driving growth in the industrial market due to the need for distribution centers in close proximity to large retail markets.
Boston: Vacancy rates on Class A and B space in the CBD have tightened dramatically and tenants are facing significantly higher rents. Aggressive new owners are asking $75 to $90 per square foot for Class A space in high-rise buildings in the Financial District and Back Bay. Investment sales produced record-setting volume in almost every property type.
Chicago: On the whole, Chicago remains a tenants’ market with vacancy rates above historic averages. Office vacancy rates downtown have fallen to levels not seen since 2001, but there is ample supply to give tenants leverage. Leasing activity has been concentrated in Class A product with the strongest demand in the West Loop. The housing slump is beginning to impact retail rents, which dropped for the first time in over a year.
Dallas: Large spaces are easy to find in the Dallas industrial sector, but tenants looking for less than 50,000 square feet will find limited choices. Office vacancy rates remain stuck at high levels—21% downtown and 14.1% in the suburbs for Class A space—despite over 1.3 million square feet of absorption and 91,000 new jobs.
Denver: The Denver office market continued to benefit from in-migration and new job growth, which helped to push vacancy rates below 15% market-wide. Downtown vacancies actually are close to single digits with almost 1 million square feet of speculative development under way.
Los Angeles: Los Angeles County’s highly diverse economy, the second-largest in the nation, is driving growth in all sectors of commercial real estate. Large contiguous blocks of space are hard to find in West Los Angeles, Pasadena and Burbank, where buildings that were getting $20 to $24 per square foot a few years ago now command rents above $50 per square foot. The price of office buildings has skyrocketed. Sale prices in excess of $500 per square foot are now commonplace in West L.A. and certain Class A properties will top $700. The industrial market in Los Angeles is the tightest large market in the U.S., with vacancy rates for bulk warehouse a meager 3.4%.
Miami: The convergence of rising occupancy costs, living costs and a collapsing residential condominium market will return Miami’s stellar growth to earthly levels. Opportunistic investors will look to pounce on failed high-rise residential projects as prices of non-waterfront projects are expected to drop 10-40% in 2008.
New York: New York City continued its rampant growth of recent years, punctuated by a late-year pause resulting from turmoil in the capital markets. Office rents are topping $200 per square foot at the top-end, $100+ rents are now commonplace in Class A product and $1 billion+ sales transactions are no longer unusual. Midtown is a landlords’ market with a Class A vacancy rate of 5.2%. Downtown offers some relief in rent but supply is equally scarce with a Class A vacancy rate of 5.8%. It is yet to be seen if the hesitation in the market late in 2007 was merely a breather or the beginning of a broader market adjustment.
Phoenix: While office vacancy rates increased, Phoenix will continue to see growth from expanding and relocating businesses, including companies seeking relief from California’s higher-priced, supply-constrained markets.
San Francisco: The vacancy rate for office space is approaching single-digits market-wide with the vacancy rate for Class A space already at 9.4% and heading down. At $485 per square foot, prime street-front retail space in San Francisco is second only to New York City in price and ranks among the most expensive retail markets worldwide.
Washington, D.C.: Office rents continued to rise in 2007 on the strength of one of the country’s best markets for job growth and a shift in ownership from publicly-traded REITs to private equity funds. Although 10.9 million square feet of retail inventory has been added to the metro area since 2000, the market remains underserved as the growing population increases demand for retail services.
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2008 Commercial Real Estate Market Information for The Asia Pacific Region, Canada, Europe, Latin America and the Caribbean
NAI Global Market Report Highlights
NAI Global has just published its 2008 Commercial Real Estate Global Market Report. This 148-page report, compiled by NAI Global members around the world, is a unique review and summary of global commercial real estate activities during the past year. It provides comprehensive market data, as well as geographical area and economic overviews for 213 primary, secondary and tertiary property markets worldwide.This report provides a wealth of global commercial real estate market intelligence that will be used by corporations, institutions, developers, real estate investors, lenders, property owners and real estate brokers throughout the U. S. the Asia Pacific Region, Canada, Europe, the Middle East, Africa, Latin America and the Caribbean.
Asia-Pacific Region: Manufacturing continues to be focused on China, but as prices for real estate, utilities and labor rise, companies are pursuing a “China plus one” approach, where they locate a facility in China and a second facility in another low cost country in Asia. India has 1.1 billion people and cheaper production costs. China and India are attracting a lot of attention for joint venture development opportunities with local developers. However, investors should tread carefully. Most local developers in these markets do not have the experience in dealing with Western investors. Therefore, the time and effort invested in each project will be significantly greater than what Western investors generally expect.
Canada: Foreign investors are disrupting Canadian owners’ traditional hold on the market. Canada’s real estate ownership remains largely concentrated in the hands of a dozen institutions and trusts. However, Europeans and American investors such as Blackstone Group and ProLogis have made significant investments in the market.
Europe: France and Germany are experiencing economic expansion fed by historic levels of global growth. Property markets across the continent have been strong, although some shifts may occur as a result of overreaction to U.S. sub-prime concerns. The most expensive office space in the world can be found in London’s West End, where peak rents in Mayfair top $225 per square foot. Rental increases also have been particularly strong in Budapest (+17.5%), Madrid (+20%), Moscow (+25%), Oslo (+65%), Paris (+10%) and Warsaw (+30%). Copenhagen, London, Madrid, Moscow, Paris, Düsseldorf, Frankfurt and Stockholm all claim vacancy rates of 5% or less. Retail is particularly strong in Budapest, where rents have increased 25%, and in Moscow, where rents are up 45%.
Latin America & the Caribbean: A long-awaited period of sustained economic growth is finally occurring in much of Latin America. After decades of failed economic policies and dubious politics, much of the region is slowly entering the realm of stable and productive economies. Brazil is now awash with capital for Class A office, industrial and retail developments, as well as speculative acquisitions. Lease rates for all product types have increased 15-20% due to heightened demand and lack of inventory. Colombia may be the region’s best-kept secret. Although growth has slowed from 6.8% in 2006 to a projected 4.9% for 2008, inflation has been tamed to 4%. Real estate development activity is strong, but supply lags demand, particularly for higher-end office, retail and industrial properties. Developers can’t keep pace with demand in Mexico either, where all property types have single-digit vacancy rates. Prices for well-located land parcels are expected to rise as much as 15% in 2008.
About NAI Global:
NAI Global is one of the leading commercial real estate services providers worldwide. Headquartered in Princeton, New Jersey, NAI Global manages a network of 8,000 commercial real estate professionals and 375 offices in over 55 countries, and completes over $45 billion in annual transaction volume. Since 1978, NAI Global clients have built their businesses on the power of NAI’s expanding network. NAI Global’s extensive services include corporate real estate services, brokerage and leasing, property and facilities management, real estate investment and capital market services, due diligence, global supply chain consulting and related advisory services. To learn more, visit www.naiglobal.com.
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U. S. Commercial Real Estate Market Intelligence Overview: NAI Global 2008 Market Report
Following is an overview of NAI Global’s recently published 2008 Commercial Real Estate Global Market Report. This 148-page report, compiled by NAI Global members around the world, is a unique review and summary of global commercial real estate activities during 2007, and provides comprehensive market data as well as geographical area and economic overviews for 213 primary, secondary and tertiary property markets worldwide.This report provides a wealth of global commercial real estate market intelligence that will be used by corporations, institutions, developers, real estate investors, lenders, property owners and real estate brokers throughout the U.S.NAI Global President and CEO, Jeffrey M. Finn, said “The Global Market Report reflects that commercial property markets worldwide enjoyed a strong year in 2007 with slightly declining vacancy rates, rising rents and record sale prices. However, the outlook for 2008 is clouded by uncertainty following the mid-year emergence of the sub-prime debt problems, volatile credit markets and record high oil prices.”
“Fears of a slowing U.S. economy and the credit crunch are clearly having an effect on investment real estate markets, even though commercial real estate fundamentals remain strong. However, we believe the slowdown in activity is only temporary as the credit markets sort themselves out and a new pricing equilibrium is established. The U.S. economy remains fundamentally strong and supply is tight, especially in resurgent downtown areas. The U.S. story is counterbalanced by a dynamic global landscape with vast new markets continuing to grow at a rapid pace,” Finn said.
Finn noted that the state of the current market is causing stateside investors to be cautious, which could open the door for international investors to consider American investments. “Opportunities will emerge from the current volatility. The credit crunch is leaving many domestic investors on the sidelines for the time being, but a weak U. S. dollar and the relative returns to other global real estate markets make U. S. real estate quite attractive to offshore investors,” he said.
In 2007, U.S. markets reported generally tightening vacancies and modest increases in rents. With any lingering remnants from the dot-com bust erased in 2006, the supply side is remarkably stable, as evidenced by the modest drop in the vacancy rate for Downtown Class A office space from 9.85% in 2006 to 9.55% in 2007. The 16.4% increase in the national average rental rate for Downtown Class A space translates into sticker shock for tenants with leases expiring in resurgent downtown areas such as New York City, Boston, San Francisco and Los Angeles, where supply is scarce and rents have risen more dramatically.Suburban markets nationwide mirrored the vacancy trend without the velocity of rental rate growth. The national vacancy rate for Suburban Class A space declined slightly from 13.16% in 2006 to 12.87% in 2007, while rental rates increased 5.6% from $24.49 in 2006 to $25.87 in 2007.
Market conditions in the industrial sector also improved, with the biggest gains recorded in the bulk warehouse sector. Demand for bulk warehouse space has been strong in prior years, but not strong enough to keep pace with new supply. The national average vacancy rate for bulk warehouse space declined to 9.09% in 2007, its lowest level in over five years, after increasing four of the five previous years.
Retail vacancy rates declined modestly in all categories and are at their lowest levels in over five years. The most significant growth in rental rates occurred in regional malls, where the national average rose from $44.97 in 2006 to $46.26 in 2007. The rental rate for downtown retail climbed from $47.70 in 2006 to $48.09 in 2007.
“The outlook for 2008 calls for continued stability with moderate growth in occupancy and rental rates,” Finn said. “Tenants in the most supply-constrained cities may have to consider other alternatives, such as splitting headquarters and back-office functions or relocating to lower-cost space in the suburbs.”
About NAI Global:
NAI Global is one of the leading commercial real estate services providers worldwide. Headquartered in Princeton, New Jersey, NAI Global manages a network of 8,000 commercial real estate professionals and 375 offices in over 55 countries, and completes over $45 billion in annual transaction volume. Since 1978, NAI Global clients have built their businesses on the power of NAI’s expanding network. NAI Global’s extensive services include corporate real estate services, brokerage and leasing, property and facilities management, real estate investment and capital market services, due diligence, global supply chain consulting and related advisory services. To learn more, visit www.naiglobal.com.
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Industrial Tenant Opportunities Abound in Southeast Austin
Southeast Submarket and Austin Bergstrom Airport areas office space:
Airport Commerce Park –Austin Developers recently completed this 44.32-acre business park, located at the northwest corner of U. S. Highways 71 East and 183 South, on the north side of Airport Commerce Drive. Six buildings, ranging from 43,600 to 69,000 square feet and totaling 327,809 square feet, complete the first phase of the business park. Currently, 278,000 square feet are available. Each 40′ x 30′ building will have a clear height of 24′ and a 120′ bay depth. Developers have the ability to provide a parking ratio of 4:1,000.
MetCenter is a progressive corporate park and an innovative offering for Austin commercial real estate. Located at the intersection of Highways 71 & 183, MetCenter is in close proximity to Austin Bergstrom International Airport, which provides tenants with easy routes to all parts of Austin and Central Texas. Currently, existing buildings are at full capacity. However, there are 350 build-to-suit acres available on the 550-acre campus. Notable tenants include General Motors, PPD and Austin-born Heliovolt. Created in 2001, the corporate park provides many amenities for tenants, including on-site hotel accommodations and restaurants, and a retail center that is planned for the near future. For the physically active professional, MetCenter has a basketball/tennis complex, 1.5-mile hike and bike trail and a disc golf course. Additionally, a child-care center is in the works. There is a 4:1,000 parking ratio and two on-site electrical substations provide dual-feed redundant electric service, making the campus perfect for data centers.
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120,000 Square Feet of Class A Office Space Is Now Available in Frontera Crossing – N. Austin/S. Round Rock
Austin Commercial Real Estate - North Submarket (Round Rock) Office Space:Situated in North Austin/South Round Rock, Frontera Crossing sits between I-35, MoPac and SH-45. Each of its four floors is 38,800 square feet with a building total of around 160,000 square feet, 120,000 of which is available for lease. Frontera Crossing offers Class A interior finishes as well as a 5:1,000 parking ratio. Many retail options are available in the immediate area.
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Recently Completed in Northwest Austin – 509,799 Square Feet of Class A Office Space
Austin Commercial Real Estate - Northwest Submarket - Office Space:
Completed in 2007, Research Park Plaza is located one mile south of McNeil and Spicewood Springs at 12541 Research. This new development offers 272,579 square feet sitting on 11 acres, which is great for smaller tenants who have plans for expansion. The location along Highway183 provides several amenities such as nearby housing, a large selection of restaurants and shopping. There are 1,040 parking spaces.
River Place Corporate Park is a seven-building office park just five miles from Lake Travis near the intersection of FM 2222 and RR 620. The entire park sits on 48 acres of Travis County’s most beautiful land and is part of the 1,440-acre master-planned River Place Community. Of River Place Corporate Park’s 600,000 square feet, 237,220 square feet are available across four buildings. The office park is only four miles from Loop 360 and five miles from Highway 183. The parking ratio is 3.97:1,000.
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Southwest Austin Adds Five Class A Office Buildings Totaling Over 600,000 Square Feet
Austin Commercial Real Estate: Southwest Submarket office space:
Parkway at Oak Hill is a new, Class A office development on a 22-acre site on Austin’s Southwest Parkway. The location offers easy access to downtown and Austin Bergstrom International Airport as well as views of one of Austin’s greenbelts. There are two buildings totaling 145,789 square feet. Building 1 has 59,376 square feet and Building 2 has 86,412 square feet, all of which are available. Both buildings are fully-sprinklered, and locker rooms and showers are available for both men and women. The 4.3:1,000 parking ratio yields 634 parking spaces, 452 of which are covered.
Located at MoPac and Loop 360, The Park on Barton Creek is a new office complex offering 211,000 square feet split evenly between two five-story buildings. Recently completed, this Class A office space sits on 20 acres, just six miles from the Central Business District and kitty-corner to The Barton Creek Mall across the MoPac/360 interchange. Floors are 21,000 square feet with 42′ bay depths. All parking is structured with a 4:1,000 ratio. A cistern is on site to recycle rainwater.
San Clemente at Davenport is a business park development situated in Davenport Ranch off Highway 360, south of the river. San Clemente is being developed in stages, and its newest offering, 3900 San Clemente, was completed in December. The park area is 49 acres, and there is the possibility of expanding total square footage to 800,000. 3900 San Clemente will be five stories, each of which will have 50,000 square feet of usable space for a total of 250,000 square feet. The parking ratio is 4:1,000, and several amenities are offered within San Clemente at Davenport, such as financial services, day spa and salon, dry cleaning and restaurants.