Law Firms: Moving On Up

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Law firms are on the move in search of greener pastures. Shades of green range from trendier neighborhoods, closer proximity to amenities, new development, and greenest of all: reduced real estate expenses. While the increased desire to relocate has not translated into a surge in leasing activity, the number of relocations has outpaced renewals in four of the last five quarters. (For the purpose of this report, we are focusing on significant lease transactions, qualified by a minimum threshold of 10,000 square feet).

Nationally, law firm leasing activity during the first quarter of the year was nearly equal to the total during the same period last year. There were 68 transactions totaling 2.5 million square feet (msf) leased during the first three months of this year – only two less transactions (70) totaling slightly less square footage (2.3 msf) signed during the first quarter of last year. While seven of the largest 10 leases signed this quarter were renewals, there were actually two more relocations than renewal transactions signed nationally. While it may seem balanced, traditionally law firm renewals have dwarfed relocations on a square footage basis. In the current quarter, the number of relocation leases signed larger than 20,000 sf in the 10 US cities* outweighs renewals by 63.4%.

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Downtown Toronto’s Explosive Evolution

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With weak commodity prices choking off growth in Western Canada, and both Montreal and Ottawa deep in demand doldrums, downtown Toronto stands out as the lone wolf – the hottest market in the country. It’s hard to say whether it’s good timing or fortuitous circumstance, given the downtown market is in the midst of a development cycle that rivals activity unseen since the early nineties.

The first two developments in the current wave of new product arrived in Q4 2014 and 3.8 million square feet (msf) are under construction. In addition, Ivanhoé Cambridge is moving forward with a 1.5-msf tower in a two-tower development in the financial epicenter of downtown Toronto, set to open in 2018. And while vacancy is expected to reach 9.6% by 2017, this is still reasonable considering the extraordinary amount of new inventory.

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Washington, D.C. – No Longer Just a Government Town

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Washington, D.C. is finally beginning to shake off the effects of sequestration, government dysfunction, and the overall economic slowdown seen during the period from 2012 through 2014. During this time the Washington, D.C. office market was categorized by rising vacancy rates, subdued leasing activity, and negative absorption – something not often seen in the downtown market outside of a recession. No impact of this period of market softness was felt quite as hard as a complete shutoff in government leasing activity as the General Services Administration (GSA) focused on consolidations, short-term extensions, and moving from leased to owned space. Read the rest of this entry »

Here’s Why 20% Office Vacancy Doesn’t Matter

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Earlier this year, we reported on the resurgence of Downtown Los Angeles in recent years and the accompanying strength of the office market. Our Los Angeles Research team found this strength continued into first quarter 2015.

In the Central Business District, direct vacancy remained relatively flat at 20.8% with a small amount of occupancy losses totaling 6,540 square feet, but healthy leasing activity and diminished rightsizing will translate into occupancy gains in second quarter. Last year’s fire damage in a city-owned Downtown high-rise forced the tenants to move, but even without these large deals, leasing still outpaced activity from one year ago by 51.7%.

Landlords, encouraged by the growth in Downtown, also pushed rents, increasing the direct Class A asking rent to $39.24 per square foot/year, a 6.3% increase over last year.

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Millennials Reshaping South Florida’s Urban Areas

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Throughout South Florida, millennials, young adults born in the early 1980s through early 2000s, are flocking to the area’s amenity-dense urban cores. Since technology has inherently globalized their experiences and created a more diverse interconnected generation, millennials seek to feed their need to explore and interact. The world is at their fingertips due to advances in technology. Large cities appeal to this group because of diverse cultural options, large population and increased social opportunities. Young talent is migrating from northeastern states to warmer climates. New York and New Jersey are big feeder states for Miami and West Palm Beach where the financial market is less competitive but still well-respected.

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Gone To Texas: Headquarter Relocations And Expansions Are Transforming The Dallas-Fort Worth Economy

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The North Texas region is a hot spot for economic activity. Nearly every week an announcement is made in the media that another company has selected the Dallas-Fort Worth (DFW) area as their new home. The sheer number of headquarter relocations and other corporate expansion projects underway are transforming the local commercial real estate landscape. Once quiet suburban locales are now bustling with activity, and former agricultural tracts are now being master-planned to accommodate large corporate campuses.

The limited supply of inventory and the growing need for space has developers scrambling to meet demand. Office construction activity is at its highest level since the late 1990s with over 8.8 million square feet (msf) of new space currently being built. Nearly 5.2 msf are build-to-suit projects such as Toyota, State Farm, 7-Eleven, Raytheon, Liberty Mutual, and FedEx. Speculative projects make up the remaining 3.6 msf of which 25% is already pre-leased.

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US Retail: The New Developments of 2015

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The Newest Battle of the Bay: Should The Warriors Stay in Oakland or Move to The City?

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Raiders-49ers; Giants-A’s; San Francisco vs. Oakland. It’s been a ubiquitous debate among Bay Area sports fans as long as anyone can remember – A topic that has polarized neighbors, coworkers, and classmates every year during interleague baseball and preseason football. But every winter there is one team that everyone in the Bay can agree on, the Golden State Warriors. The oft-maligned and unfortunate Bay Area NBA franchise has found tremendous success in recent years and the Bay Area has rallied behind them as they compete for an NBA championship. Yes, the Warriors have been a come-together, feel-good story. But there is an empty lot in San Francisco’s Mission Bay that has triggered another “Battle of the Bay”: Should the Warriors move to San Francisco or stay in Oakland? From a humble real estate researcher and advocate for Oakland sports who works in San Francisco, here are 5 reasons for and 5 reasons against the move.

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A Possible Turning Point In Mexico City Office Indicators

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Office overall absorption in Mexico City has consistently surpassed completions in recent years. However, new delivery records will be broken in 2015, which points to a possible turning point in office real estate indicators.

In the first quarter of this year, the overall vacancy rate was up by 7.9% when compared with that of the first quarter of 2014. In the last twelve months overall inventory grew 5.9%, while the overall absorption was 4,598,700 square feet, 5.5% of inventory. It is interesting, however, that although this net demand is below the overall inventory expansion, it is well above the 4.4% average recorded in the last three years.

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Select South American Markets On The Rise

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While much of the world’s spotlight has recently been focused on Brazil, the commercial real estate markets for Colombia and Peru, in particular, have been performing notably well and are forging a much stronger presence on the world stage. Spurring much of this commercial growth is GDP. In 2014, the Colombian economy grew at a rate of 4.6%, mainly by the support of the construction sector which jumped by nearly 10.0% last year. Largely boosting this growth spurt is the 40% increase of the U.S. dollar against the Colombian peso, which has been fueled by falling oil prices, and is making local exports cheaper for international buyers. GDP growth was a bit slower in Peru, but it is expected to perform better in 2015 by growing at an annual rate of 4.1%. By the end of 2016, the GDP rate is anticipated to reach nearly 5.0%. In comparison, the IMF reports that the average annual GDP growth for Latin America was 1.2% in 2014.

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