Rent Report: Retail Rising
The commercial real estate sector demonstrating the highest increases in effective rents continues to be retail, according to a new mid-year report.
The commercial real estate sector demonstrating the highest increases in effective rents continues to be retail, according to a new mid-year report by locally based Global Real Analytics. Retail rents are up 2.4 percent on average from 2003 while all other sectors were flat or down.
The top five retail markets rose by at least 4.2 percent (Salt Lake City) and as much as 6.4 percent (San Diego), according to Global Real Analytics’ National Real Estate Index Rent Trends report. Only three of the 60 markets reported a decline in retail rents, with the weakest retail market, Honolulu, down 1.3 percent, according to the report.
Global Real Analytics is the successor entity to the CB Richard Ellis Global Capital Markets Group. The National Real Estate Index, which is owned by Global Real Analytics, analyzes commercial real estate trends in 60 metropolitan markets in North America.
The rent report data shows that three areas have held up fairly well: The Washington, D.C. area, including parts of Baltimore and down as far as Norfolk; South Florida, including Dade and Palm Beach counties; and Southern California, including the counties of San Diego, Orange, Riverside, San Bernardino and Los Angeles.
The weakest sector remains office, according to the report. Suburban office, the worst of the worst, saw rents fall by an average of 4.3 percent compared to last year. The bottom of the range included the tech-dependent suburban office markets of Austin, Texas, and Boston. Boston was the worst performer, experiencing a 22.5 percent decline from 2003. Just five of the 60 markets experienced increases in effective rents, with the biggest gain being 1.5 percent for Riverside, Calif.
Downtown office rents were nearly as weak, according to the report, slipping 3.5 percent for the year ended June 2004. Countering its showing in the retail sector, the leader for Downtown office rents continues to be Honolulu, which posted a 2.8 percent increase in effective rents compared to one year ago. Of the contiguous states, only four U.S. markets posted positive rent growth in their Downtown office markets: Las Vegas, Washington, D.C., San Francisco and San Diego. The worst performers, which saw rates slide by between 7.4 percent and 9.2 percent, were Houston, Kansas City, Mo., Oklahoma City, Boston and Columbus, Ohio.
Industrial properties saw rents decline 0.9 percent nationally, according to the report. Among those with positive rent momentum (at least 3.3 percent) were leading trans-shipment markets such as Tampa, Fla., Columbus, Ohio, Fort Lauderdale, Fla. and Baltimore. Warehouse rents fell in in San Jose, Calif., Tulsa, Okla., Indianapolis, Greenville, S.C. and Oakland, Calif.
Apartment rents remained largely unchanged at the national level, although markets with higher population and employment growth saw annual increases of at least 4.0 percent. The five best-performing markets were Riverside, Calif., Birmingham, Ala., New Orleans, Norfolk, Va. and Washington, D.C. The weaker apartment markets realized rental rate declines from 3.3 percent (Dallas) to 5.7 percent (Charlotte, N.C.).
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