INDUSTRIAL SECTOR MEANDERS TOWARD RECOVERY
Recovery in the national industrial market is taking its own sweet time, according to first-quarter data. The national vacancy rate — currently at 9.82% — will decline about 50 to 75 basis points through the remainder of 2004, with rents mostly flat for warehouse/distribution space and sliding a bit more for R&D/flex space.
| Warehouse/Distribution | General | R&D/Flex Industrial | |
|---|---|---|---|
| Total Sq. Footage | 4.8 billion | 2.7 billion | 1.01 billion |
| Vacant Sq. Footage | 459 million | 229.3 million | 155.4 million |
| Vacancy Rate | 9.56% | 8.41% | 15.4% |
| Asking Rent | $4.39 | $5.42 | $9.47 (Per Sq. Ft.) |
| Under Construction | 37.4 million | 17.4 million | 4.7 million (Sq. Ft.) |
| Source: Grubb & Ellis | |||
GOOD NEWS FOR TENANTS: OFFICE RENTS DROP
Net rents for national office tenants declined by 5.5% in 2003, according to the Studley Effective Rent Index 2004. That drop, coupled with a 6.5% increase in concessions, more than offset the rise in non-rent components such as operating expenses (up 3.9%), real estate taxes (up 5.2%) and electricity costs (up 0.7%).
THE NATION'S RETAIL GIANTS
California, Florida and Texas continue to outperform other states in shopping center gross leasable area (GLA). Together, they account for 27.3% of the nation's total GLA. By contrast, the sparsely populated states of Wyoming, South Dakota, Alaska, Vermont, North Dakota and the District of Columbia are home to less than 1% of the nation's GLA.
| Rank | State GLA (in millions of sq. ft.) | |
|---|---|---|
| 1 | California | 735.7 |
| 2 | Florida | 469.1 |
| 3 | Texas | 395.8 |
| 4 | Illinois | 274.6 |
| 5 | Ohio | 262.6 |
| 6 | Pennsylvania | 262.2 |
| 7 | New York | 261.0 |
| 8 | Georgia | 199.1 |
| 9 | North Carolina | 194.1 |
| 10 | New Jersey | 184.8 |
| Source: International Council of Shopping Centers | ||
DRUGSTORES HELP HEAL INVESTOR PORTFOLIOS
Due to the lucrative market of prescription drugs, drugstores are one of the fastest growing components of the retail sector. The mean asking price for drugstores is 71% greater than that of the entire net-leased retail sector, according to a report by The Boulder Group.
| Total Available Net-Lease Properties | 615 |
|---|---|
| Total Value | $2.5 billion |
| Mean Price | $4.2 million |
| Mean Capitalization Rate | 7.5% |
| Source: The Boulder Group | |
GENERATIONAL MAGNETS
Generations move in different directions and Gen Xers — building careers and “settling down” — are blazing new migration trails. The news is that pricey, glitzy, lifestyle-only cities are not cutting it with those in the 25-to-39 age range. Gen Xers select a mix of interior and coastal states with metro areas known for their New Economy, knowledge jobs and general employment growth, without the sting of high housing costs.
| Atlanta | 98,019 |
| Dallas | 58,774 |
| Phoenix | 55,774 |
| Denver | 53,795 |
| Las Vegas | 47,824 |
| Los Angeles/Long Beach | -83,013 |
| New York | -63,659 |
| Miami | -35,120 |
| Honolulu | -23,316 |
| San Diego | -22,105 |
| *Among metropolitan areas with more than 500,000 population | |
| Source: William H. Frey analysis of 2000 Census data | |