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Long Island’s Industrial Boom

The industrial sector on Long Island is experiencing significant growth, with a report by JLL indicating that 1.1 million square feet of industrial space was leased in Q2 2023, nearly doubling the five-year trailing quarterly average. This surge in activity is driven by pent-up demand and the need for quality options in the region. Additionally, there is currently 2.4 million square feet of industrial space under construction, marking the highest construction volume on record.

Rockefeller Group is one of the major developers making inroads into Long Island's industrial market, with 675,000 square feet of industrial development in progress. The company's entry into the Long Island market aims to deliver high-quality industrial products that have been lacking in the area, with a focus on modern design attributes and multi-tenant scenarios to cater to various occupier needs. With strong demand for Class A industrial space in Long Island, developers are looking to meet the evolving requirements of modern logistics and distribution.

As industrial activity continues to thrive on Long Island, it presents opportunities for redevelopment and growth, with the region's supply chain resilience and access to the Long Island Expressway driving demand for industrial properties. Rockefeller Group sees Long Island as a promising market for its industrial portfolio expansion, and the company's national development experience has contributed to its swift entry into the region.

$45M Acquisition for Chicago Tower

Menashe Properties has made its entry into the Chicago market by acquiring 230 West Monroe, a 707,000-square-foot office tower, for $45 million from Accesso Partners. Accesso Partners had purchased the building in 2014 for $122 million. The property, which received an $87.7 million loan from Morgan Stanley in 2019, stands 29 stories tall and features 24,000-square-foot floorplates, 10,000 square feet of retail space, fitness centers, conference facilities, and an upgraded amenity lounge. Tenants at the property include Maxim Healthcare, One Medical, Realogic Analytics, and Aprimo. Menashe Properties CEO Jordan Menashe believes that office usage will eventually align with traditional averages, with office occupancy in Chicago reaching 53.6 percent post-Labor Day, according to a Kastle report. However, office sales in Chicago have slowed in 2023, representing 25.3 percent of the 2022 volume, with a city vacancy rate of 18.8 percent as of April, higher than the national average.

$1B Austin Mall Renovation

The Austin City Council has approved a planned unit development rezoning, allowing developers Barshop & Oles and Lionstone Investments to move forward with their $1 billion redevelopment of the Brodie Oaks shopping center in southwest Austin. The project aims to transform the underused retail complex, originally built in the 1980s, into a 37.6-acre mixed-use district featuring nearly 1.3 million square feet of office space, 1,700 residential units, restaurants, retail space, and potentially a 200-key hotel. The redevelopment will also include 13.7 acres of open space and plans for nine buildings up to 25 stories tall. The project faced community opposition regarding building heights and environmental impacts, prompting modifications such as increased green space and reduced impervious cover. Work on final designs and the first phase of permitting is expected to begin next year, with construction on the first phase starting in 2025 and overall completion spanning up to 10 years.

Multifamily Rent Growth Estimates

The multifamily housing industry is grappling with various challenges, including rising insurance costs and taxes. Kelli Carhart, Managing Director and Head of US Multifamily Capital at CBRE, discussed the sector's current state and future prospects. She noted that there is a growing focus on operations as rent growth moderates. While 2023 and 2024 are expected to see record supply in the multifamily market, there has been a 44% decline in construction starts compared to the peak in 2022, largely due to a lack of available construction debt.

Despite these challenges, Carhart remains optimistic about the year ahead, anticipating more accelerated rent growth after 2025 as construction starts decline. She foresees rent growth returning to historical norms of around 2.5%, along with typical 5% vacancy rates. However, this transition may take some time, and the industry is adjusting to a different norm, marked by higher interest rates and reduced capital availability. Carhart also highlighted the significant role that agencies play in lending, estimating that they provide 60% of the loans and that mission-driven housing enjoys lower interest rates in the current environment.

That's All For Today

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This is not professional and / or financial advice, the information in this newsletter is provided for educational and informational purposes only.