Cushman & Wakefield: Global Real Estate

Industrial construction activity in Atlanta increased dramatically in 2014 ending the year with more than 15 million square feet of inventory under construction, a new record for the market. Although build-to-suit development accounted for the majority of industrial construction activity in recent years (an average of 76% between 2009-2013), 2014 marked a major shift in this trend as speculative construction activity took over, accounting for almost 60% of total inventory under construction. There were 19 speculative projects underway as of 2014 year-end totaling nine million square feet. All of these are expected to deliver in 2015.

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According to the latest job numbers released by the State of California Employment Development Department on November 21, total jobs in the San Francisco Metropolitan Division (comprised of San Francisco, San Mateo and Marin counties) continue to climb ever higher – the area, in fact, hit a record high number of jobs in October with 1,125,300 now employed, blasting past the previous high of 1,117,700 recorded in December 2000 The unemployment rate for the three-county division stood at 4.2% in October, equal to the September figure though down a rather sharp 110 basis points from one year earlier.

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C&W’s Retail Research group recently released some facts and figures on Black Friday weekend in the United States. In conjunction with this nationally focused piece, Atlanta’s local research team has provided some data points focused on the upcoming annual shopping event in Atlanta. Since 2006, the national average spending per shopper over Black Friday weekend has increased at an annual rate of 1.8%. With Atlanta’s retail market in recovery mode, a number of new retail shopping experiences in Atlanta have entered the construction pipeline over the past two years, many of which are delivering new retail space just in time for the 2014 Black Friday weekend.

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The problem, which began in late summer, initially stemmed from a shortage of truck drivers and the chassis that they use to haul containers to and from the Los Angeles shipping terminals. As peak season has begun, there are not enough chassis to handle the peak season container volume. Those shortages had occurred as U.S. import container volume was surging (up 6% year-over-year from January-October at the So Cal Ports). Also, the increase of massive container ships that are deluging the docks with cargo have been pushing the limits of the terminals’ capacity to work ships in a reasonable time. Increased safety inspections in Southern California have also increased average truck turn times to two to three hours at terminal gates and yards. Combine these with rail- and drayage-related delays and the growing tension between U.S. West Coast dockworkers and their employers and we have a perfect storm that has resulted in the worst congestion in more than a decade.

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My family and I recently moved into a new house that is walking distance to our superregional mall. That means that I can walk through the traffic jams to witness one of the great retail spectacles of the modern era—Black Friday. In many households, a firmly established tradition of the Thanksgiving holiday weekend, right up there with football and pumpkin pie, is to head to the mall.

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For the first time in over 10 years, a significant quantity of speculative construction is taking place in many U.S. cities. Developers have demonstrated renewed confidence in market fundamentals by starting speculative projects in the northeast cites of Boston and New York.

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Sustainable real estate practices have become commonplace for any occupier that leases, owns, or operates corporate facilities. While the degree of emphasis placed on sustainability varies by organization, and is often tied to larger enterprise goals and objectives, a discussion about corporate social responsibility and being “green” is part of almost every occupancy decision made today.

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Over the last year and a half, São Paulo vacancy has jumped 3.1 percentage points for all CBD class A properties. Historical analysis of vacancy rates show that 15% is the market’s equilibrium point, so in second quarter 2014 São Paulo officially became a tenant’s market.

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The sheer physical size of the Inland Empire is remarkable; combined, the two counties of Riverside and San Bernardino cover more than one-sixth of California, about the same area as the state of Virginia. Once home to one of the nation’s largest concentrations of dairy farms, the Inland Empire has evolved into the “big-box” capital of the U.S. with an industrial base of 450 million square feet.
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Industrial construction in the U.S. has increased significantly since the bottom of the recession. Historically, build-to-suit (BTS) construction has remained a smaller factor in the industrial market than speculative projects, although from 2010 to 2012 very little speculative industrial space was delivered as few developers would risk construction without a tenant in place. In 2011, as industrial development slowed to a trickle, more than 85% of all new construction was BTS. As the economy has rebounded, BTS has become a smaller portion of total construction across the U.S., as expected. Less than half (45%) of the industrial construction expected to come online in 2014 will be BTS. Still, BTS construction in 2014, will account for 72.9 million square feet (msf) of new space, an almost 70% increase over 2013 and a 118% increase over 2012. Some of the largest projects completed this year will be BTS.

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