Recap: 2017 CBRE/New England – Rhode Island Market Overview

Next up in our New England Market Overview recap series, we cover the Ocean State. Our team down in Rhode Island presented on the state of the downtown, suburban and industrial markets. Alden Anderson, Senior Vice President/Partner, led the presentation by introducing Governor Gina M. Raimondo, who provided a compelling presentation on the status of the Rhode Island economy.

The first speaker to follow was Andrew Galvin, First Vice President/Partner, who highlighted the Downtown Providence and Suburban Rhode Island Office markets.

“Major themes for the Providence Office market include the continued progress and or delivery of several major projects; the continued growth in the multifamily space; the many newly proposed development projects attracting and growing an exciting tenant base; and the existing fundamentals in the market.” – AG

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2016 Development Progress

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“We’ve had the continued conversion of obsolete office buildings to housing stock, which has further tightened the available supply in the office market. The current downtown market vacancy rate sits at 13.4%. To put some context to this, since 2013, 11 office buildings totaling 544,000 SF have been converted to residential uses.” – AG

2017 Development Pipeline

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“These referenced projects, many of which have commenced construction or will break ground in 2017, total several hundred million dollars in in new development.” – AG

cbre-ne_rhodeislandmarket2017_blog05Rhode Island Suburban Office

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“Since 2012 there has been approximately 675,000 SF of positive absorption. Nearly 240,000 SF of that amount occurred in 2016. Similar to 2015, there were not market-changing types of large transactions, but 2016 represents continued improvement in the suburban market.” – AG

Rhode Island Industrial Trends

Tom Barry, Vice President, covered the Rhode Island Industrial market, stating that, “flexibility, creativity and persistence were all required to satisfy industrial needs in 2016.”

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“Pricing has gradually increased for leasing as well as properties sold in the range of 3-5%, but has not increased as much as the declining vacancy would seem to imply.” – TB

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“Companies searching statewide for alternatives, no longer can concentrate on a specific geographic area to solve their needs. The search radius continues to get wider and wider in search of viable options.” – TB

Our industrial forecast for the coming year includes:

  • The shrinking supply of quality product will continue to present limited options and will call for creative solutions from the available existing inventory along with exploring new construction as an option.
  • Both tenants and buyers will need to be opportunistic and ready to act once an opportunity presents itself.
  • Many tenants will be forced to renew leases at their present location given the limited options.
  • A good tenant and landlord relationship has become more important given potential renewal rather than losing their space and being forced to settle for a less desirable solution as well as a different geography, which may affect the labor force.

To wrap up the presentation, we were fortunate to welcome back CBRE’s Spencer Levy, Head of Americas Research, for his take on the state of the capital markets in Rhode Island.

Stay tuned for our next post, where we will cover this year’s CBRE/NE Hartford Market Overview. Did you miss our Boston Market Overview recap series? Click on the following link to catch up.

CBRE/New England 2017 Winter BioView: A Look at the Greater Boston Life Science Market

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A Good Win for Goodwin: United Bank Picks Tower for New Headquarters

united-bankThere has been a tremendous amount of investment in Hartford recently and a lot to look forward to as a result, including the new UConn campus opening this fall and the scheduled completion of the Yard Goats’ new ballpark this spring. Add to that list a piece of good news from the private sector: United Bank will move its headquarters from Glastonbury to Goodwin Square in the fall. The 68,000 SF lease will consolidate over 200 employees from two different buildings in Glastonbury, as well as a third location in South Windsor.

CBRE/New England’s John McCormick was responsible for bringing in the regional bank, whose move is expected to have a significant impact on the area. The United Bank tenancy in the building will increase the occupancy level by over 20%. Moreover, as a growing institution, United Bank is exactly the kind of tenant that Hartford wants to attract as the city looks to expand its downtown employment base and capitalize on the current national trend towards urbanization.

To learn more, please see the following Hartford Courant article covering the transaction.

Recap: 2017 CBRE/New England Boston Market Overview – Part 3

Next up in our Boston Market Overview recap series, our attention turns to representatives from our Capital Markets team. Brian Doherty, Senior Vice President/Partner, and Biria St. John, Vice Chairman/Partner, reflected on 2016 and selected their draft picks for 2017.

This past year, Boston made the list for “Best Metros for Investment 2016,” breaking into the Top 10 after previously being ranked out of the Top 15.

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* denotes metro previously not listed in the Top 15; CBRE Research, Global Investor Intentions Survey 2016

Draft Pick #1: Brian’s 2016 MVP = Urban Core & Value-Add Office

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“Boston had the home field advantage in 2016; some huge wins for a lot of Boston-based sponsors included Paradigm at 101 Tremont and Synergy at 101 Summer. These groups had great game plans, flawless execution, plus institutional exits.” – BD

Draft Pick #2: Biria’s Multifamily 2016 MVP = Value-Add Suburban & Urban Infill

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“The appeal for value-add space can be distilled down into a few key factors: fundamentals are still solid (outstanding employment market and inward migration) plus basis play that offers stability, durability, but upside with the opportunity to enhance the returns through upgrades.” – BSJ

Draft Pick #3: Biria’s Multifamily 2017 Player to Watch = Suburban Class B/C & Urban Infill

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“Millennials want an authentic neighborhood and like local flavor, not the sterile environment that is anchored by national chains and looking to catch a break on the $4.00-5.00/SF rents in downtown Boston.” – BSJ

 

Draft Pick #4: Brian’s Commercial 2017 Player to Watch = Industrial of All Shapes & Sizes

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“Looking back on 2016 and the deals we worked on, industrial product flew off the shelf. There were deep bidder pools, strong institutional interest and buyer support with multiple rounds of offers.” – BD

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Draft Pick #5: Brian’s Commercial Flex Pick = Fringe Core Opportunity Plays

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“Today, the market is a bit in flux with a Goldilocks Phenomenon occurring. The urban core appears to be getting more expensive by the day and the suburbs feel a bit too risky right now.” – BD

 

Draft Pick #6: Biria’s Multifamily Flex Pick = Unique Class A Core Assets

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“Because of a shift in capital towards value-add and core-plus opportunities, there is the opportunity to pick up some high-quality core assets at slightly higher yields than a year ago.” – BSJ

 

 

Stay tuned for our next post, where we will reveal what our Rhode Island experts covered at this year’s CBRE/NE Rhode Island Market Overview.

Did you miss the beginning of our BMO recap series? Click on the following link for Parts 1 and 2.

Recap: 2017 CBRE/New England Boston Market Overview – Part 2

In this next installment of our Boston Market Overview recap series, we look to our Suburban market experts. Alison Powers, First Vice President, and Andy Majewksi, Executive Vice President/Partner, have been following suburban migration for some time now. But why is this happening? What are the numbers behind these trends? Their draft picks tell all…

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Draft Pick #1: Alison’s 2016 MVP = Life Sciences

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“In 2016, over 1.3 million square feet was leased to the life sciences sector in the suburbs outside of Boston and Cambridge. That’s a 35% increase in life sciences leasing activity from 2015 resulting in one million square feet of positive absorption in the suburbs.” – APCBRE_2017MARKETOVERVIEW_2-65.jpg

Draft Pick #2: Andy’s 2016 MVP = Industrial


“Despite negative absorption on the office front, the industrial market experienced over 550,000 SF of positive absorption, which marks a 10-year high for the Greater Boston Industrial market. This is why my MVP pick is industrial. Where else on Route 128 can you find a vacancy rate of 6% and 18% rent growth? So what’s causing this upswing? It’s really a function of industrial migration in and migration out.” – AM

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CBRE_2017MARKETOVERVIEW_2-74.jpgDraft Pick #3: Andy’s 2017 Player to Watch = New Construction

“What do Beverly, Waltham, Watertown, Lexington and Newton have in common? New construction and, in some cases, major renovation—there are currently 10 projects across these five times in the works, demonstrating that there are no boundaries to new construction in the suburbs. ” – AM

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Draft Pick #4: Alison’s 2017 Player to Watch = Organic Growth

“There is continued migration outward from Cambridge and Boston of life sciences and even non-life sciences companies that need to accommodate expansion.” – AP

Draft Pick #5: Andy’s Flex Pick = Millennials Aging

“In 2017 the largest cohort of millennials will turn 26. That’s important because it’s the same age that young people start to get more serious about their careers, housing and their future.” – AM

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Draft Pick #6: Alison’s Flex Pick = Generation Z

“Generation Z is 25% of the current population. The oldest members of Generation Z are turning 21 years old next year and will be entering the workforce before you know it. Generation Z is comprised of 60 million people strong—outnumbering millennials by nearly one million—and they are going to boost the suburbs.” – AP

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Stay tuned for our next post, where we will reveal the draft picks chosen by our Capital Markets team at this year’s Boston Market Overview.

Did you miss our first installment of the BMO recap series? Catch up here.

Lowest Vacancy, Highest Ranked: Cambridge Leads the Nation

netherwood-schwesig_evianne_e2By Évianne A. Netherwood-Schwesig, Senior Research Analyst | Creative & Analytics

For anyone familiar with the world of commercial real estate in Boston, it’s well known that Cambridge has been the hottest office market in the last few years. Demand for space, particularly around Kendall Square, has driven rents into the stratosphere and left only small scraps of availability in its wake.

Dramatic descriptions? Maybe not. According to new national rankings by CBRE Research, Cambridge’s metrics aren’t just impressive at a local level. The city boasts the lowest office vacancy rate nationwide, at just 3.8%. This is head and shoulders above runner-up Nashville, which landed at 4.7%. At $65.26 per sq. ft., asking rents in Cambridge were the fifth highest in the country, bested only by a pair each of New York and San Francisco markets. It’s worth mentioning that Boston proper also did itself proud: among all urban markets, its 7.3% vacancy rate and $55.71 per sq. ft. asking rent put it in seventh and eighth place, respectively.

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Lowest Office Vacancy Rates:

Rank All Markets Rate (%)
1. Cambridge 3.8
2. Nashville (Suburban) 4.7
3. Oakland (Downtown) 5.1
4. San Francisco, (Downtown) 6.3
5. Manhattan, Midtown South 6.5
6. San Jose (Suburban) 7.2
7. Boston (Downtown) 7.3
8. Walnut Creek/I-680 Corridor 7.8
9. Manhattan, Midtown 7.9
10. San Francisco, (Suburban) 7.9

Source: CBRE Research, Q4 2016

Highest Office Asking Rents:

Rank All Markets Rent
1. Manhattan, Midtown $83.54
2. San Francisco, CBD $72.77
3. Manhattan, Midtown South $71.37
4. San Francisco, (Suburban) $68.28
5. Cambridge $65.26
6. Manhattan, Downtown $59.16
7. San Jose (Suburban) $58.34
8. Boston (Downtown) $55.71
9. Washington, D.C. (Downtown) $53.61
10. Oakland (Downtown) $52.56

Source: CBRE Research, Q4 2016