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Monthly Archives: February 2015


A Very Good Year for Commercial Real Estate

researchWith 2014’s increase in pricing levels and occupancies, vacancies that remained near cyclical lows, and rent growth that registered significant gains across property sectors and regions, commercial real estate enjoyed a very good year that garnered the continued attention of investors both large and small, according to a new CoStar release.

The February 2015 CoStar Commercial Repeat Sale Indices (CCRSI) analyzed commercial property sales through end of year 2014 to present one of the broadest measures of commercial real estate repeat sales activity.

The release noted that with investors continuing to earmark funds for commercial property, the value-weighted U.S. composite index in the CCRSI rose 11% in 2014 to reach 5.7% above its previous peak in 2007.  The indices also noted that while investor demand for core assets remained high, investors seeking higher yields increasingly moved toward secondary markets.

The equal-weighted U.S. composite index was up 13.3% in 2014, the CCRSI said.  This index, which weights each sale transaction the same regardless of sale price, more accurately shows the impact of smaller transactions and those in secondary markets.  The index was still 14% below its previous peak, indicating that a maturing cycle will allow for even greater price appreciation.

The release also highlighted quarterly property type and regional indices, finding that the CCRSI Multifamily Index, which hit its prerecession peak in earlier in the year, increased 11.7% more and now stands above its 2007 high.   Other major commercial property type indices seeing strong growth in 2014 but still under previous peak levels by more than 10% were: the Retail Index, the Industrial Index and the Office Index.

The release also noted the following property type pricing trends:

  • The Office Index (pricing up 9.5%) saw overall office market fundamentals post significant improvements as vacancies dropped to 11.3% in 2014 from 11.9% in the year prior.  Net absorption rose a strong 40% from 2013 level
  • Multifamily pricing continued to grow in 2014, rising 11.7%.  Bolstered by investor demand for well-leased assets in core coastal markets and increased availability of debt financing, the Multifamily Index was the first property segment to start its recovery.
  • The 13.9% gain in the Retail Index was 2014’s single largest annual increase among the four major property types.  Demand for retail space outpaced supply two-to-one, causing a 20-basis-point drop in vacancies to 6.3% in the fourth quarter 2014, while annual rent growth was steady at almost 3%.
  • The Industrial Index grew a healthy 11.9% in 2014.  With low vacancy levels and relative lack of supply, industrial rent growth was the strongest of the four main property types for the entire year, up 4.3% in 2014.
  • After a year of relatively flat growth in 2013, the Hospitality Index jumped 17.7% in 2014.  National hotel occupancies hit their highest level in nearly a decade.
  • Increased demand for development sites drove the Land Index up 19.9% in 2014, which was still 28.9% below the last cycle’s peak.

Regionally, pricing in the Northeast Composite Index grew steadily in 2014 to within 1% of its previous 2007 peak due to the region’s strong concentration of top-tier markets that attracted investment early in the cycle.  The Northeast’s outperformance can be traced most significantly to the Northeast Multifamily and Retail Indices, which surged past prior peak pricing levels in 2014 by 25.2% and 8.4%, respectively.

However, with a maturing cycle and rapidly rising prices in key Northeast markets,  the region is no longer outstripping price gains in the rest of the country.  The Northeast regional index, in fact, posted growth of only 10.5%, the slowest of the four major regions.

For more information about Philly office space, Philly retail space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) Leor Hemo (leor.hemo@wolfcre.com) or Lee Fein (lee.fein@wolfcre.com) at Wolf Commercial Real Estate, a leading  Philadelphia commercial real estate broker that specializes in Philly office space and Philly retail space.

Wolf Commercial Real Estate is a Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in  Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space or Philly retail space with the Philadelphia commercial properties that best meets their needs.  As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space or Philly retail space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

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U.S. Construction Spending Hits Six-Year High

researchU.S. construction spending rose in all three sectors — commercial, public and residential — in December 2014, with total construction spending ending the year at the highest level since the Great Recession, a new U.S. Census Bureau report says.

U.S. construction spending hit $982 billion on a seasonally adjusted annual basis in December, the bureau said.  That is the single highest monthly figure reported since December 2008 and represented an increase of 0.4% from the previous month and 2.2% from the previous year, the report said.  For the entire year, total construction spending rose 5.6% from year-end 2013 and, at $982 billion, was the highest total since 2008.

The hottest segments in 2014 were tagged by one economist as warehouses, which soared 50%, and multifamily, which was up 34%.  Both segments are expected to perform well again this year.

Private nonresidential construction spending in 2014 was up a healthy 11%, followed by private residential at 4.1% and public spending at 1.8%.

Private office construction increased 24%, manufacturing was up 16% and commercial retail, warehouse and farm construction grew 13%, the economist said, noting that office and retail construction included many renovations and repositioning projects, along with new starts.

New office space deliveries were in sync with demand, rising 9% in 2014 to 47 million square feet, according to a CoStar Portfolio Strategy researcher. The office construction pipeline jumped 32% to 107 million square feet in 2014.

Although the construction sector was firmly in recovery mode in most areas of the country, nonresidential construction backslid in the last two months of 2014, according to economists.  The loss of momentum should represent only a slight dip in overall industry momentum in 2015, one economist said, adding that there was solid recovery for the industry as a whole in 2014 and that total nonresidential construction spending was 6.6% higher than the year prior.

The slightly slower growth in nonresidential construction spending might be attributed to noise in the data and does not seem to be the result of the drop in oil prices over the past several months, as oil-related construction categories like transportation and manufacturing were keeping up their momentum, the economist said.

Federal spending contracted more that anticipated but spending on nonresidential structures is still rising, the economist noted, adding that all indications point to the expansion of nonresidential construction spending, especially private construction spending.

For more information about Philly office space or other Philadelphia commercial properties, please contact Lee Fein (215-799-6900-office; 215-206-5580-cell; lee.fein@wolfcre.com) at Wolf Commercial Real Estate, a premier Philadelphia commercial real estate brokerage firm with extensive expertise in Philly office space.

Wolf Commercial Real Estate is a Philadelphia commercial real estate broker that provides a full range of Philadelphia commercial real estate listings and services, marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker that specializes in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space with the Philadelphia commercial properties that best meets their needs.  As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

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Demand for U.S. Office Space to Remain Strong for Two Years

magnifying glassFueled by falling vacancy rates and rising rents in an increasing number of submarkets, demand for U.S. office space is expected to remain at post-recession highs through 2016, a new CoStar report says.

Also contributing to the rosy forecast is the U.S. office space market’s strong performance in 2014, when net absorption rose 42% from the previous year and a particularly strong fourth quarter saw net absorption reach more than 30 million square feet, according to a CoStar Portfolio Strategy analyst reporting in CoStar’s State of The U.S. Office Market 2014 Review and Forecast.

Net absorption of U.S. office space jumped from 64 million square feet in 2013 to 91 million square feet in 2014, CoStar said.  The amount of U.S. office space absorbed in 2014 almost doubled the level of new U.S. office space added to the market, the report noted.

Over the next two years, CoStar predicts annual absorption through 2016 to remain close to 2014 levels, hovering in the 90 million square-foot range.  With new development supported by increasing rents and tightening vacancy rates, the level of construction deliveries should increase over the period.

The robust demand for U.S. office space indicates occupiers are slowly moving away from the trend of shrinking square foot-per-employee office footprints, CoStar said.  In addition, the analysis said the shadow supply of empty office space remaining from the Great Recession is thinning as growth continues at a “very strong clip.”

The U.S. office space vacancy rate dropped 70 basis points from 12% to 11.3% in the year just ended, representing the biggest decrease since the recession ended, according to the analysis.  Vacancy rates for medical office properties were holding steady at a historically solid 9.6%, but all other vacancies were down across the board across markets, submarkets and building types and quality levels, CoStar said in the report.

Many markets are slipping below the vacancy average for U.S. office space, with nearly every metro registering year-over-year drop.  The single exception to this is the Washington, D.C. market, where vacancies rose minimally, primarily due to strong constructions activity.

One Costar analyst called the declining vacancies in office submarkets a “feel-good story across the country.”  Newer properties have enjoyed a stronger recovery, with vacancies for 2008 and newer buildings plummeting from a high of 45% in 2008 to nearly 10% in the last quarter 2014.  Older buildings from the 1980s, which are often located in less desirable outer-ring suburban submarkets, haven’t recovered at all as tenants tend to prefer Central Business Districts (CBDs) or the closer-in suburban markets, a CoStar analyst said.

The report also took note of the rising demand for high-quality space, with newer 4 and 5 Star space experiencing double the rate of absorption of lower-quality space.  High-quality space increased 2% from 2013 to 2014, in comparison to 0.9% for 1-, 2- and 3-star space, according to the report.

For more information about Philly office space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) or Leor Hemo (leor.hemo@wolfcre.com) at Wolf Commercial Real Estate, a premier Philadelphia commercial real estate brokerage firm that specializes in Philadelphia office space.

Wolf Commercial Real Estate is a Philadelphia commercial real estate broker that specializes in Philly office space, providing a full range of Philadelphia commercial real estate listings and services, marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with extensive expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philadelphia office space with the Philadelphia commercial properties that best meets their needs.  As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties, including Philadelphia office space, to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

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