2010 Global Market Report - NAI Commercial Real Estate

Western (Greater Springfield), MassachusettsDetroit, MichiganContactNAI Samuel D. PlotkinAssociates+1 413 781 8000Metropolitan AreaEconomic Overview2009Population2014 EstimatedPopulationEmploymentPopulationHouseholdAverage Income675,599658,190344,760$62,737Greater Springfield is definitely in a recessionary climatewith negative absorption in the office, retail and industrialsectors and vacancy rates that have continually increased inthe Western Massachusetts region. Overall, demand forcommercial space has slowed in the past year as nationalcompanies have scaled back, or stopped expanding altogether,due to a drop in consumer spending.Few retailers are expanding in the area with the exceptionof Lowes, which is constructing a new retail facility in Hadleyand is looking to develop a new retail facility in Holyoke inthe next two years. The Western Massachusetts industrialmarket remains flat, and as a result, there continues to bean oversupply of industrial space as manufacturers continueto restructure and downsize. The industrial market vacancyin the area has increased from approximately 9-12% andhas resulted in the average lease rates decreasing fromapproximately $4/SF to $3.75/SF. We continue to receivea number of inquires for warehousing and distributioncompanies searching for modern, high bay facilities with24’ to 26’ height, which are limited and seem to result innew construction.The weak economy has resulted in declining demand foroffice space in both the suburban and downtown markets.Landlords are trying to combat rising vacancies by loweringrental rates and increasing concessions to retain existingtenants and attract new ones. The Massachusetts DevelopmentFinance Agency recently completed the purchase ofthe former Federal Building located at 1550 Main Streetin downtown Springfield. The building will become the homeof the Springfield School Department and offices forBaystate Health.Constant changes in commercial real estate are hard toadjust to, but where others might see challenges, we seeopportunities. We remain hopeful that we will see a drasticturnaround in 2010. The current environment is a greatopportunity for companies in Western Massachusetts tobegin new businesses and expand locations.ContactNAI Farbman+1 248 353 0500Metropolitan AreaEconomic Overview2009Population2014 EstimatedPopulationEmploymentPopulationHouseholdAverage Income4,451,6214,408,6962,226,596$69,120The continual decline of the auto industry weighed heavilyon real estate markets throughout the Metro Detroit area in2009. Sweeping layoffs have not only hampered Detroit’sindustrial market, but the commercial and retail marketscontinue to suffer as well. Medical development drove mostreal estate growth but is beginning to show weakness.The office market has developed a churning trend with manyusers taking advantage of small spreads in rates betweenclasses. Though rate gaps have narrowed, landlords arehesitant to offer tenant improvement incentives as financingand cash remain scarce. New demand has entered themarketplace in the form of renewable energy and filmproduction, yet these industries do not have the critical massto benefit the entire market.Industrial vacancy continues to rise above 20%, primarilydue to the hard hit automotive industry. With minimaltraditional industrial demand, renewable energy firms arebeginning to look at flex space as an attractive option forsolar and wind technologies as these industries are currentlymore R&D focused. Ford Motor is in the process of selling4.7 million SF of plant space to an energy coalition aimed atcreating new solar technologies.Retail power centers have begun to feel the effects of fallingconsumer spending and increasing unemployment withmany anchor and smaller tenants vacating. The largest hitto the retail market came from sweeping closures of CircuitCity locations throughout the Metro Area. Many of thesespaces were replaced with significant investments fromMeijer and LA Fitness, helping to stabilize the slidingdemand for retail space. As vacancy continues to leadnational averages, retail will show weakness throughout2010, specifically for in-line applications.The overall real estate market in Metro Detroit shouldcontinue a decline through 2010 until new industries gaintraction and automotive profits return. With aggressive taxincentive programs in place, Detroit should slowly seedemand return in late 2010, most likely in the form ofenergy research and development.MedianHousehold Income$51,521MedianHousehold Income$64,464Total PopulationMedian Age38Total PopulationMedian Age39Greater Springfield At A Glance(Rent/SF/YR) Low High Effective Avg. VacancyDOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAILDowntownNeighborhood Service CentersCommunity Power CenterRegional Malls$$$$$$$$$$$$N/A15.0010.0018.5013.0011.002.003.006.008.008.5020.0025.00$$$$$$$$$$$$N/A23.0014.0022.5020.0016.005.255.258.0015.0016.0030.0040.00$$$$$$$$$$$$N/A18.0012.0020.5016.0014.003.003.757.0012.0010.5025.0030.00N/A15.0%20.0%10.0%10.0%15.0%12.0%12.0%6.0%15.0%11.0%10.0%10.0%DEVELOPMENT LAND Low/Acre High/AcreOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-park$$$N/A60,000.0055,000.0050,000.00$$$N/A100,000.0075,000.00200,000.00Retail/Commercial Land$ 100,000.00 $ 1,000,000.00Residential$ 10,000.00 $ 300,000.00Detroit At A Glance(Rent/SF/YR) Low High Effective Avg. VacancyDOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAILDowntownNeighborhood Service CentersCommunity Power CenterRegional Malls$$$$$$$$$$$22.0020.003.5014.769.009.754.001.002.956.325.00N/AN/A$$$$$$$$$$$33.0030.0023.0039.3645.0025.0035.008.0022.0020.0030.00N/AN/A$$$$$$$$$$$25.8523.0916.5028.2722.5018.974.246.505.6312.3012.74N/AN/A13.0%9.8%21.0%14.9%17.1%20.5%13.0%24.0%19.8%11.2%11.2%N/AN/ADEVELOPMENT LAND Low HighOffice in CBDLand in Office Parks$N/A40,000.00N/A$ 1,041,666.00Land in Industrial ParksOffice/Industrial Land - Non-park$ 191,666.00N/A$ 230,270.00N/ARetail/Commercial LandResidential$ 45,831.00N/A$ 1,024,590.00N/A2010 Global Market Report ■ www.naiglobal.com 98