Cushman & Wakefield: Global Real Estate

The World Cup ended on Sunday and despite their loss the early consensus is that Brazil was generally well-regarded as host by the international community. The next big hurdle that awaits Brazil are the Olympic Games in 2016. While Brazil can take a sigh of relief now that one of their major forays onto the world stage appears to have successfully passed, investor skepticism has not lifted quite yet. Their recent economic slow-down and the civil unrest that preceded the World Cup still dominate global headlines, making investors somewhat wary.
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Brickell is not only transforming into a true 24/7 city, but attracting worldwide recognition. Innovative skyscrapers have helped brand it as one of the most prestigious neighborhoods in the county. There is a collection of cool and low-key bars and boutiques that are magnets for young professionals. The culturally heterogeneous mix of people that live and work in Brickell have led to a recent surge in commercial activity. Brickell is alluring due to its pedestrian-friendly environment featuring select local merchants and specialty restaurants. Its strategic location, surfeit of amenities and unique urban atmosphere have led to increased demand for residential space in Brickell. Cranes are again in the air. Several projects are under construction in the market with many more in the planning stage. International buyers who purchase second or third homes here and young professionals migrating to the urban core are each driving the current wave of residential real estate development, which is being absorbed at a rapid pace.
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Houston’s economy continues to add jobs well above the pace of the nation and in other large metropolitan areas. The unemployment rate in April was 4.6%, far below the national rate of 5.9%, with more than 85,000 jobs added over the last 12-months. The rate of job growth has averaged between 3% and 4% since the end of 2011, and is projected to remain above 3% through 2016 according to Moody’s Analytics. The energy industry is the primary driver of Houston’s economy, with manufacturing, distribution and logistics, the Port of Houston, health services (including biotechnology), and aerospace all contributing significantly to the region’s economic base.
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Cushman & Wakefield’s recent Southeast Industrial Client Webinar highlighted significant gains in the region’s fundamentals and indicate strong, positive momentum going forward. Construction, which has been confined mainly to build-to-suit or build-to-own opportunities over the past several years, saw solid growth on the speculative end, with over 2.5 million square feet currently under development. In fact, many developers have dusted off old plans long forgotten since before the recession, hoping to get projects shovel-ready as the market continues its expansion.
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Los Angeles has a limited supply of funky brick-and-timber buildings ready to repurpose. Despite this scarcity, there is an abundance of single-story, stand-alone concrete buildings in soon-to-be-hip areas that can serve as incubators for the start-up creative companies that crop up on a weekly basis throughout the city.
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Following the economy’s slowdown in 2013, when the GDP grew 1.2%, the consensus of analysts estimate that the Mexican business environment will accelerate and GDP will grow close to 2% in 2014; this as a result of increased external demand following the recovery in the U.S., increased government spending with emphasis on infrastructure and a potential recovery in domestic demand.
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Chances are if you’ve heard of them, they have a presence in the I-81/I-78 Distribution Corridor: Walmart, Lowes, Amazon.com, Nestle, PepsiCo, Procter & Gamble – and the list goes on. With access to over 50% of the U.S. population and 60% of Canada’s within a 24-hour truck drive, it’s not surprising that a wide range of companies continue to flock to this area.
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With almost 14 million square feet (msf) of new office developments rising in central Canada, this is the hottest development cycle in over 20 years. Particularly active markets include Vancouver, Calgary and Toronto, where downtown developments under construction total almost 11.6 msf. What is of concern is that this is occurring simultaneously to a pronounced downturn in demand. Net absorption across central markets has averaged negative 475,000 sf per quarter over the past year and a half. Remarkably, even in the face of weakening demand, new developments continue to be announced, as large asset owners and developers urge new product to the market.
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Construction activity in Manhattan is the highest it has been in over two decades. The resurgence of new development will have a substantial effect on the overall market in terms of both vacancy rates and pricing.

• Delivery of new product usually causes a spike in vacancy and in average asking rents—particularly in older/less desirable buildings.

• Newly-constructed space typically commands a rent premium over other class A properties.

Surprisingly, New York City’s inventory has remained nearly stationary since the early 1990’s. Residential conversions and the loss of the World Trade Center buildings in 2001, among other factors, have offset the square footage added to the market over the last 10 to 15 years. New York City is now in the beginning stages of inventory expansion with several projects recently delivered and currently under construction. Between 2013 and 2014, more than 6.5 million square feet (msf) of new office construction will be completed in Manhattan—representing the largest amount of new construction to hit the Manhattan market since 1989 when nearly 7.8 msf was delivered.

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We took a look at shopping center development in Latin America over the last two years and the findings were a mixed bag. Much of the data in our most recent Latin America Retail Shopping Center Development MarketBeat reflect recent overall economic activity in Latin America. But some surprises came out of C&W’s fist ever retail report from the region as well.

Focusing on six primary countries—Brazil, Mexico, Colombia, Argentina, Peru, and Chile—our report shows that shopping center inventory grew significantly in 2012 and 2013, and now stands at its highest level ever.
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