Average apartment rents hit all-time high in April

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by Dan Rafter

Apartment rents aren’t getting any lower across the country. In fact, they reached a new high in April. That’s the good news for landlords and owners from the latest market report released by Yardi Matrix.

According to the report, the average national apartment rental rate rose $13 in April to hit $1,194. That marks the fourth consecutive month in which national rental rates hit a new high.

What’s behind the continued rise in rental rates? Yardi Matrix pointed to several factors, including high apartment occupancy rates in markets across the country, a growing number of both Millennials and older residents renting by choice and strong jobs growth. The fact that rents typically rise in the spring months helped account for April’s new high, too.

The average national apartment rent rose 1.1 percent from March to April. Even more impressive is that rents rose 6 percent this April when compared to the same month one year earlier.

Yardi Matrix researchers say that conditions continue to be supportive of steady rent growth. Nationally, the occupancy rate for stabilized and completed apartment properties stood at 96 percent as of February. Vacancies will increase in some submarkets this year as the country adds more than 300,000 apartment units this year. But most metropolitan areas have not yet been overbuilt when it comes to apartments, according to Yardi Matrix.

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Ryan Companies ready to make Minneapolis’ Downtown East its new home

 

A rendering of Ryan Companies' Millwright Building.

A rendering of Ryan Companies’ Millwright Building.

by Dan Rafter

Ryan Companies continues to make an impact in Minneapolis’ downtown, breaking ground this month on the Millwright Building at Third Street and Portland Avenue. The new building is part of Ryan’s $450 million mixed-use Downtown East development.

This development, located near the new US Bank Stadium, will bring a mix of housing, office space, hotels and retail to a formerly neglected slice of downtown Minneapolis. The 172,000-square-foot four-story Millwright Building is located adjacent to one of the new Wells Fargo towers in the project. The new Radisson RED Hotel will stand across the street from the building.

Ryan is making a commitment to the success of Downtown East with its plans to move its corporate headquarters to the Millwright Building once it is complete. Ryan will occupy about 65,000 square feet on the lower floors of the multi-tenant building. Construction on the new buiding is expected to wrap in the spring of 2017.

“We’re excited to begin construction on the Millwright Building,” said Collin Barr, president of Ryan’s North Region, in a statement. “Downtown East is quickly becoming one of the city’s iconic neighborhoods, and we are thrilled to deliver an architectural gem that embraces the history here and adds to the great character of this special place.”

The Millwright Building will offer the same skyway access enjoyed by the office buildings in the core of downtown Minneapolis. But this building will also offer access to The Commons, a new 4.2-acre public green space that is part of the Downtown East project.

Tony Barranco, Ryan’s vice president of development, said that companies when seeking to attract new talent more frequently have to point to modern office space with amenities. Office space in the Millwright Building will give companies the chance to dangle this kind of attractive space to top potential employees, Barranco said.

“With its authentic feel, pedestrian scale and tiered lobby, Millwright provides this unique combination of features that has produced a high level of interest from a wide range of prospective tenants,” Barranco said, in a statement.

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Vacancy rates keep falling in Detroit’s industrial market

farmington hills industrialby Dan Rafter

Detroit’s industrial market is on the rise. Need proof? Check out Signature Associates’ first quarter industrial review. According to Signature’s numbers, the vacancy rate in the Detroit-area industrial market fell to 7.20 percent at the end of the first quarter.

That’s a drop of 1.22 percentage points compared to the first quarter of 2015.

Michigan’s falling unemployment rate is one reason for the strong industrial market. Signature Associates pointed out that the unemployment rate in Michigan dropped to 4.8 percent in the first quarter. That’s down significantly from the rate of 5.9 percent in the first quarter last year. It’s also the first time the unemployment rate has been under 5 percent in Michigan since 2001.

And the news gets better on the unemployment front. Signature Associates quoted University of Michigan economists who are predicting that the state’s unemployment rate should drop to 4.5 percent by the end of 2017 based on the number of new jobs they expect.

The Detroit area’s industrial market saw several large lease deals in the first quarter of the year. Technicolor Videocassette of Michigan leased 200,000 square feet at 2500 Enterprise Drive in Allen Park. In Brownstown Township, Amazon signed a lease for 157,724 square feet at 19991 Brownstown Business Center Drive. Guardian Industries Corp. leased 130,600 square feet at 17950 Dix-Toledo Road.

In Westland, Great Lakes Air Production leased 102,015 square feet of warehouse/distribution space at 1515-1625 Newburgh Road.

The biggest sales transaction of the quarter was the investment sale of the 530,544-square-foot manufacturing facility at 32500 Van Born Road in Wayne. That facility sold to Industrial Realty Group. In Allen Park, a 300,000-square-foot warehouse/distribution building sold to International Wholesale at 24200 W. Outer Drive. And in Farmington Hills, the three-building portfolio sale of the Discover Centre Buildings, totaling 165,016 square feet, sold as an investment to Century Companies.

Signature Associates is predicting even more growth in the industrial market in the near future. This optimism is based largely on the recent success of the nation’s big automakers, as the Detroit area still relies heavily on the auto industry for its fortunes.

According to Signature, the automotive industry sold 1.59 million vehicles in March, an increase of 3.2 percent from one year earlier. Ford Motor Company and Fiat Chrysler Automobiles had especially big months, seeing their sales increase by 8 percent in March. General Motors’ sales were up, too, but only by 0.9 percent.

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Despite bankruptcies and online disruption, U.S. shopping centers enjoy steady start to 2016

Shopping centers enjoyed sound fundamentals in the first quarter, according to Cushman & Wakefield.

Shopping centers enjoyed sound fundamentals in the first quarter, according to Cushman & Wakefield.

by Dan Rafter

Higher rents and fewer empty spaces, that’s what the owners of shopping centers across the United States are enjoying today.

Cushman & Wakefield’s first-quarter U.S. Shopping Center Snapshot shows that while shopping centers across the country aren’t exactly enjoying boom times, they are at least holding steady in their ability to attract consumers who continue to grow more confident in the economy.

According to the report, the vacancy rate for U.S. shopping centers stood at 7.9 percent at the end of the first quarter. That’s down from 8.3 percent at the end of the first quarter of 2015, and marks the 16th consecutive quarter in which overall shopping center vacancy rates remained either steady or fell.

Shopping centers saw total occupancy growth of just under 4.8 million square of space in the quarter. Cushman & Wakefield said that this was the smallest jump in occupancy in a quarter in four years. However, there is even good news in that: The stable vacancy rate of U.S. shopping centers came in a quarter in which retailers closed the most stores since 2010, according to Cushman & Wakefield.

Cushman said that the first quarter of the year is known as “store closure season” among the owners of shopping centers. It’s a time when many retail chains close locations that aren’t performing. In the first quarter of this year, Walmart tweaked its superstore concept and basically scrapped its small-format efforts. Cushman reported that Walmart closed about 125 of its Neighborhood and Express stores during the quarter.

Also in the fourth quarter, Macy’s closed 40 of its full-line department stores. American Eagle, Aeropostale, Kohl’s and Stage Stores all shuttered underperforming locations during the quarter, Cushman & Wakefield said.

The shopping center market has also been hit with a growing number of bankruptcies, according to Cushman & Wakefield. In January, Joyce Leslie, which operates 47 stores across the country, announced its bankruptcy, while Hancock Fabrics, with its 185 stores, announced its bankruptcy filing in February. Sports Authority, with 140 stores, also filed in February. In March, Ovation Brands, the parent company of Hometown Buffet, filed for bankruptcy. This chain closed 78 restaurants in February. It’s not clear yet what will happen to Ovation’s remaining 328 locations.

Cushman & Wakefield predicted more changes for retailers throughout 2016. Much of this will occur as retailers focus more on online efforts and shutter brick-and-mortar locations that they no longer need. This is reflected in lower new-construction numbers. Cushman & Wakefield reported that there was 21.5 million square feet of new shopping center space under construction in the first quarter of 2016. That’s down from 25.8 million square feet during the first quarter of 2015.

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Betting on the Strand Theatre to boost downtown Pontiac

A rendering of the new Flagstar Strand Theatre in downtown Pontiac.

A rendering of the new Flagstar Strand Theatre in downtown Pontiac.

by Dan Rafter

Kyle Westberg looks at downtown Pontiac in Michigan and sees nothing but promise. Yes, Pontiac, like Detroit, struggled mightily during and after the Great Recession. The state of Michigan even appointed an emergency manager to take over the struggling city from the summer of 2010 through the summer of 2013.

But Westberg, president and chief executive officer of West Construction, today sees the beginning of a revival in the city’s downtown. And he’s helping to push it along by taking on the $20 million renovation of the 895-seat Flagstar Strand Theatre for the Performing Arts.

The renovated theater, which has sat empty since the mid-1990s, is expected to reopen its doors in the fall of this year. The hope is that the theatre, along with a new barbecue restaurant that will also open in the space — Slows Bar-B-Q — will provide another boost to downtown Pontiac.

“We feel that a performing arts theater, a destination gem, will bring in more restaurants and retail establishments,” Westberg said. “We feel that it will bring more job opportunities for the citizens of Pontiac. We can see a day when downtown Pontiac will be the arts, cultural and entertainment center for all of Oakland County. We don’t have a district like that now in the county. We feel that downtown Pontiac has the potential to be that.”

West Construction, of course, isn’t the only partner involved in restoring the former vaudeville house and one-time movie theater. West Construction is the general contractor on the project, while TDG Architects designed the renovation.

Financing for the Flagstar Strand Theatre project comes from a private-public partnership betweeen Develop Michigan, an affiliate of Cinnaire; the Michigan Economic Development Corporation; IFF; Enhanced Capital; Opportunity Resource Fund; Oakland County; and the city of Pontiac.

Making an impact

Develop Michigan is a relatively new organization, getting its start in 2013. Then, the organization had plans to bring financing to commercial real estate deals in Michigan that weren’t getting done.

Rick Laber, president of Develop Michigan, said that banks in 2013 were not overly excited about financing commercial real estate projects. In its earliest days, Develop Michigan acted as the senior debt lender in construction deals.

Slowly, though, banks did return to commercial real estate, first in construction lending and then by providing permanent debt. As the banks have returned to financing, Develop Michigan has turned to other ways of helping to make construction deals happen, most notably by providing bridge financing that traditional banks rarely provide.

That is the role that Develop Michigan is now playing in the Strand Theatre project, Laber said.

“The theatre project is an important one for us,” Laber said. “It will provide job creation in the area in a significant way. It should provide 133 construction jobs and 83 full-time jobs. That will have a positive impact on downtown Pontiac. We are interested in development and deals that can have a positive impact on low-income communities. That is a focus for us.”

Laber says that Detroit has benefitted from the efforts of Quicken Loans founder Dan Gilbert, who has sunk plenty of his own money into helping to rejuvenate that city’s downtown core. Pontiac, though, doesn’t have a Dan Gilbert. Instead, it has to rely on developers who are willing to take a chance on deals such as the Strand Theatre project, Laber said.

“Will this lead to more entertainment and restaurant projects in downtown Pontiac? None of us know for sure, but I think it will. We have to start somewhere. This is good place to start. We’ve seen it in other markets: Someone starts the development off with a project like this and then more development follows. I would be surprised if there wasn’t new development now that the theatre project is under construction.”

Westberg and his partner and brother Brent Westberg purchased the theatre in 2013 from the city of Pontiac. At the time, another potential buyer was considering turning the empty building into a nightclub. Westberg said that he didn’t see that as the best use of the space.

“We knew the theatre was in great shape, that it was an iconic and a gem of the community,” Westberg said. “We thought it should remain a performing-arts theater as originally intended.”

A crowd inside the theatre celebrates the project's ground-breaking.

A crowd inside the theatre celebrates the project’s ground-breaking.

The non-profit Encore Performing Arts Center will manage the daily operations at the Flagstar Strand Theatre. That organization’s president and chief executive officer, Bill Lee, said that there are 2.7 million residents living within a 20-minute drive of downtown Pontiac. He said that the Strand Theatre will help bring more of these residents into the city’s center.

“Our programming initiative is to inspire and educate via the performing arts,” Lee said.

The theatre will host a variety of performances, including musical acts, theatrical productions, comedy shows and family entertainment.

West Construction already has plenty of experience in downtown Pontiac. The company built, owns and operates Pontiac’s Lafayette Place development, which includes the Lafayette Place Lofts, an Anytime Fitness location and Lafayette Market café, catering service and market.

Westberg said that this mixed-use development has already inspired new businesses to enter downtown Pontiac. He has also seen an influx of investors purchasing properties in the downtown. Some of these properties are in the redevelopment process now, Westberg said.

“The location of downtown Pontiac is central to the county,” Westberg said. “All of the citizens of the county can access the downtown quickly. There is great transportation into and out of the city, whether you’re talking about driving in and out, taking the train or catching a bus. Our downtown is a very walkable community, and there are plans to make it even more walkable, to bring even more connectivity to the surrounding neighborhoods. We think the Flagstar Strand Theatre will spur momentum for this kind of central, cultural district in downtown Pontiac.”

For Laber, this is welcome news. It’s also the goal of any commercial real estate project that Develop Michigan helps to fund, he said.

“Pontiac has struggled from an economic perspective,” Laber said. “Anything we can do to provide investment in a downtown like Pontiac will help spur additional economic activity, will help breath more life into the downtown. These things feed on each other.”

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Can you spot the mistake with this ad?

The right marketing message can provide a boost to any commercial real estate company. And at Rejournals.com, we see plenty of skilled marketing messages. But sometimes, real estate companies — like all companies — miss the mark when it comes to their advertising materials.

Consider the ad below:

bad ad

It ran in a UK paper. Can you see what’s wrong with it? If not, check out this original post by The Poke, a site that boasts of “time well wasted.” But the gist? It’s not easy to “Click here” on an ad that’s running in print.

It’s obvious that the real estate agents here simply took one of their online ads and stuck it in a newspaper. Hopefully none of the paper’s readers spent all money pressing on the ad hoping to “find out how.”

This is a silly mistake, and the real estate specialists involved don’t work in commercial real estate. But it does show how simple advertising or marketing mistakes can make companies look unprofessional.

The lesson here is a simple one: Pay close attention to both your print and your online advertising. And just because an ad works for your Web site doesn’t mean it will translate to the still-important world of print media.

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Marcus & Millichap report brings plenty of good news

Grocery stores continue to thrive as the economy improves.

Grocery stores continue to thrive as the economy improves.

by Dan Rafter

Consumers might not be thrilled with the U.S. economy, but at least their confidence is growing.

That is the message from Marcus & Millichap in its latest national retail research report. According to the report, core retail sales — all retail sales not including gasoline and autos — rose 3.9 percent this March when compared to the same month one year earlier.

Marcus & Millichap said that the growth in retail sales is led by consumer spending on home-improvement projects, something that has boosted receipts at stores that sell building materials and supplies by 10.8 percent from last March to this March. Sporting goods and hobby outlets also saw solid gains, posting sales increases of 6.1 percent over the year.

The health and personal care retail category, a category that includes drugstores, registered a jump of 6.3 percent.

Of course, online retail sales have been strong, too. Marcus & Millichap reported that online sales jumped 6.5 percent during the past 12 months. Marcus & Millichap said that several retailers are changing their employment strategies to meet the growing online demand. Nordstrom, for instance, recently announced large job cuts as it shifted its labor force to favor e-commerce. Sports Chalet took even more drastic steps, announcing plans to close all of its stores.

Marcus & Millichap reported that expanding retailers will occupy an additional 61 million square feet of space this year. This should drop the U.S. retail vacancy rate 30 basis points to 5.9 percent, which would be the lowest level since 2005. Marcus predicted, too, that retail rents should jump 2.8 percent this year.

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