INDEPENDENCE, MO—The recovery seems to be gaining some serious momentum. Or at least it’s not backsliding. That was the upshot of the most recent quarterly survey conducted by data provider Xceligent. The GlobeSt.com Thought Leader conducts quarterly surveys of its advisory boards around the nation, currently numbering roughly 1,000 of the top office, retail and industrial players.
And, according to national director of analytics James Cook, some serious benchmarking year-over-year can now take place since the firm started surveying its advisors in September of 2013. The latest survey, conducted in September of this year, provides some interesting takes on a market in recovery. By the way, continuing on its national expansion, Xceligent is set to add more brokers to its stable of advisors as more markets launch. Stay tuned for the latest on that growth.
In the meantime, Cook sat down with GlobeSt.com to analyze the latest statistics:
GlobeSt.com: So what were the major takeaways from the September survey?
James Cook: What I found most interesting about the latest survey is that there’s definitely a significant overall increase in optimism, especially in terms of growing lease rates and shrinking vacancy. In Q3 2013, the first time we took the survey, 56% of our advisory board respondents thought lease rates would go up, which they did. A year later, 60% expect increases. So I see a growing momentum of optimism.
When broken out by property type, and this is no surprise, industrial brokers are by far the most optimistic right now. Last year 68%% thought lease rates were going to rise in six months. That’s up to 73% now.
But the biggest jump is among office brokers. A year ago only 49%, a little less than half, predicted rising lease rates. A year later it’s jumped to 59%. That’s a big swing and indicative of the fact that the recovery has now been around long enough to affect the office market, especially the suburbs.
GlobeSt.com: And retail?
Cook: It’s the slowest to recover and the most bifurcated market. Unfortunately, a year ago 46% of retail brokers predicted rising lease rates. Now the number is 41%.
Cook: In terms of the bifurcation, we’ll see some submarkets doing really well, with a mall or grocery-anchored centers that are going gangbusters and other submarkets that are simply not. But I think that in the places that are doing poorly, it’s just a matter of time until overbuilt centers get absorbed. In a lot of markets we’re already seeing that happening, but the space is being filled not only by retail users. Rather, they’re also being filled by medical offices and other non-retail tenants.
Globest.com: Where are you seeing the most optimism?
Cook: By far, it’s Denver. We ask our advisors to predict how their local market will be doing in the next six months and the average response in Denver was definitely the most optimistic–3.9% (with five being red hot). We also asked them to rate their outlook for vacancies, with one being the lowest and five being record highs. Their average answer was 1.6, which was definitely the lowest we got in any of the markets we surveyed.
GlobeSt.com: And what is the outlook for investment?
Cook: Some 39% of our advisors say it’s going to heat up, which was pretty flat with last year. But that’s reflective of the fact that investment has different drivers, interest rates and capital availability, while leasing is driven by more direct economic factors such as job growth and consumer spending.
GlobeSt.com: So summing it all up, what’s ahead?
Cook: Overall, I certainly don’t expect anything negative in the next year. Industrial and office are clearly gaining momentum, and I believe retail has bottomed out. The next year will bring a continuation of what we have already seen…a slow and steady increase.