2012 Global Market report - NAI Global

Greater Springfield, Massachusetts
Detroit, Michigan
Contact
NAI Samuel D. Plotkin
Associates
+1 413 781 8000
Metropolitan Area
Economic Overview
2011
Population
2016 Estimated
Population
Employment
Population
Household
Average Income
Median
Household Income
Total Population
Median Age
691,681
687,680
357,184
$68,651
$52,549
38
In 2011 the western Massachusetts real estate market was
stagnant in all sectors. Overall our problem remains no new
companies entering the market and local companies not
expanding. There are several publicly funded projects
underway in western Massachusetts that could help drag
us from the economic abyss we’ve been in for the past three
years.
On the list of developments are; the $70 million renovation
of the train station, the equally expensive state backup data
center, high speed rail and a public/private “high speed
computer center” being built in Holyoke at a cost of $170
million. Everyone is crossing their fingers that these
developments will bring permanent jobs to the area.
Of the 40 million SF of industrial space in western
Massachusetts, there are easily 6 to 8 million vacant SF. We
believe this represents 10 years of inventory. This is tough
to predict. By today’s activity it could easily be 15 years but
if we get back to 2005 activity it may be eight years. The
point being, we have a lot of vacant industrial space.
Because western Massachusetts has its roots in over
a century of manufacturing, a large percentage of the
industrial inventory is obsolete manufacturing space. With
the northeast trending toward warehouse and distribution
businesses, western Massachusetts seldom makes the site
selectors short list.
Activity in the retail sector stayed mainly in Class B locations
due to pricing and rates are still down 20% to 30%. Many
new developments were put on hold when the financial
markets crashed. Office tenants enjoy a very competitive
leasing environment and continue to get healthy landlord
concessions. Landlords with leases rolling over can be found
hiding under their desks.
Investment sales are soft although cap rates remain 6.5%
to 7% for credits and 9% to 12% for non-credit deals due
to low interest rates. Multifamily investments are still sought
after however the unfavorable lending requirements are
preventing acquisition. Overall 2011 has been a very tough
year for our market.
Contact
NAI Farbman
+1 248 353 0500
Metropolitan Area
Economic Overview
2011
Population
2016 Estimated
Population
Employment
Population
Household
Average Income
Median
Household Income
Total Population
Median Age
4,226,281
3,969,296
2,123,912
$71,132
$54,599
37
The Detroit real estate market has benefited from positive
momentum throughout 2011 with measured economic
improvement from the automotive and manufacturing
sectors. An influx of capital and corporate relocations to the
Detroit CBD has greatly improved market fundamentals and
generated a welcome increase in deal velocity. Vacancy
rates have continued to remain stable but are still near
historical highs and the leasing environment through the
suburbs remains soft with select areas of strength.
In the office market, the leasing environment remains soft
throughout the suburbs but has shown improvement
throughout the CBD primarily because Quicken Loans,
DTE and Blue Cross Blue Shield have all completed their
relocations to downtown. This momentum is attracting other
corporations to follow suit. Medical office continues to
remain a growing sector with supportive demographics
driving an expansion of medical systems and private practices.
Retail leasing remains slow with many power and strip
centers suffering from the continued reduction in consumer
spending.
Continuing last year’s positive momentum, industrial net absorption
remained positive (6 million square feet) throughout
Metro Detroit, signaling continued improvement and stability.
Warehouse and flex space throughout Wayne and Oakland
counties that is well located remains in demand and offers
affordable solutions for companies desiring to expand their
business. Michigan’s technology and alternative energy
investments continue to provide support for the industrial
market with start-up companies finding favorable tax
incentives and a qualified labor pool.
In the investment market, REO properties and distressed
notes continue to attract investors as they seek out an
opportunistic investment thesis. It will continue to be a
buyers’ market throughout 2012, as more loan defaults
work their way into the REO market and landlords continue
to struggle under the soft leasing environment. The CBD will
continue to attract the most attention for acquisitions.
Detroit multifamily assets continue to benefit from strong
demand from local and national investors as the market for
these assets continues to attract buyers. Student housing
remains the brightest spot within the multifamily market.
Greater Springfield At A Glance
(Rent/SF/YR) low High effective avg. Vacancy
doWntoWn offIce
New Construction (AAA)
Class A (Prime)
N/A
$ 13.50 $
N/A
20.00 $
N/A
16.75
N/A
18.00%
Class B (Secondary)
suburban offIce
New Construction (AAA)
$ 9.00
N/A
$ 12.00
N/A
$ 10.50
N/A
25.00%
N/A
Class A (Prime)
Class B (Secondary)
IndustrIal
$ 15.00
$ 10.00
$
$
26.00
16.00
$
$
20.50
14.00
10.00%
12.00%
Bulk Warehouse
Manufacturing
High Tech/R&D
retaIl
Downtown
Neighborhood Service Centers
$
$
$
$
$
1.50
2.25
4.25
6.00
7.50
$
$
$
$
$
3.50
6.00
8.00
15.00
10.00
$
$
$
$
$
2.50
4.00
6.00
10.00
8.50
20.00%
15.00%
8.00%
15.00%
15.00%
Community Power Center
Regional Malls
$ 13.00
$ 20.00
$
$
16.00
30.00
$
$
14.00
25.00
10.00%
10.00%
deVeloPment land Low/Acre High/Acre
Office in CBD
Land in Office Parks
Land in Industrial Parks
Office/Industrial Land - Non-park
Retail/Commercial Land
Residential
$
$
$
$
$
N/A
50,000.00
50,000.00
40,000.00
60,000.00
15,000.00
$
$
$
$
$
N/A
70,000.00
70,000.00
100,000.00
700,000.00
200,000.00
Detroit At A Glance
(Rent/SF/YR) low High effective avg. Vacancy
doWntoWn offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
suburban offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
IndustrIal
$
$
$
$
N/A
19.00
11.00
N/A
17.00
13.00
$
$
$
$
N/A
23.00
18.00
N/A
25.00
20.00
N/A
$ 21.00
$ 15.00
N/A
$ 21.00
$ 18.00
N/A
18.00%
22.00%
N/A
18.00%
25.00%
Bulk Warehouse
Manufacturing
High Tech/R&D
retaIl
$
$
$
2.00
1.00
2.00
$
$
$
9.00
6.00
11.00
$
$
$
4.50
3.25
7.50
13.00%
20.00%
16.00%
Downtown
Neighborhood Service Centers
Community Power Center
Regional Malls
$
$
$
$
11.00
9.00
12.00
5.00
$
$
$
$
35.00
25.00
35.00
25.00
$ 17.00
$ 12.00
$ 20.00
$ 15.00
14.00%
15.00%
9.00%
10.00%
deVeloPment land Low/Acre High/Acre
Office in CBD
Land in Office Parks
Land in Industrial Parks
Office/Industrial Land - Non-park
Retail/Commercial Land
Residential
$
$
$
$
$
N/A
50,000.00
50,000.00
50,000.00
75,000.00
5,000.00
$
$
$
$
$
N/A
250,000.00
250,000.00
300,000.00
700,000.00
100,000.00
2012 Global Market Report n www.naiglobal.com 106