A substantial portion of commercial real estate loans are floating rate, which makes them particularly vulnerable to Fed policy, and a large chunk of the debt will mature in the next two years. While the rate of new household formation will eventually fall, the volume of houses put back on the market by seniors will steadily increase. We need you to be cool with us holding onto your email address (if we already have it) and for us to email you about commercial real estate news and events. E-commerce will likely serve as a tailwind for the logistics industryand industrial warehouse and distribution propertiesfor at least 10 years, Calanog said. Find out how we shape the future of real estate for a better world. onurdongel/iStock via Getty Images. J.P. Morgans website and/or mobile terms, privacy and security policies dont apply to the site or app you're about to visit. Google moves into two big San Jose buildings within huge tech campus Find an expert unique to your industry or business objectives. Use the form below to reset your password. Find an expert by name or by state, province, or city. Get Morning Report and other email newsletters. Retail Development. The authors found two significant outcomes: that rent control 1) caused a significant decline in property values and 2) provided the most benefit to higher income renters. Avison Young identifies 10 key trends The information contained in this article does not constitute a recommendation from any Goldman Sachs entity to the recipient, and Goldman Sachs is not providing any financial, economic, legal, investment, accounting, or tax advice through this article or to its recipient. Real Estate | Find out how we create brighter ways of working with our partners around the globe. Commercial lending by national and regional banks tends to be relatively evenly distributed among the markets. Newer office properties in central business districts have been the most insulated from occupancy losses, she writes. Shorenstein Sells San Diego Office Building In Life Sciences Hub For $146M. Doug McCoy, Al and Shary Oak Director of the IU Center for Real Estate Studies | April 2023, Inside This Issue 2022 JPMorgan Chase & Co. All rights reserved. Banking and financial services industry set to become largest investor in AI. At present, demographic pressure on housing markets is at its peak. Submissions must be completely filled out by May 5. Related Articles 28 Apr 2023 02:26:22 Some error occurred. Even assuming the ratio of renter- to owner-occupied units remains constant as income increases (though ownership tends to increase in the higher income brackets), only about 19% of US households can afford the average rent in 2021. Accelerate your journey to become a more sustainable, more resilient, more responsible enterprise with sustainability solutions from JLL. Please refresh the page and try again. by Arpit Gupta, Vrinda Mittal, and Stijn Van Nieuwerburgh. Find an expert unique to your industry or business objectives. They don't materialize instantaneously.. Improve value through positioning, marketing and leasing of vacant space in owned assets. All Access Digital offer for just 99 cents! Get to know JLL's global leadership team. We read a lot of journals and research papers here at the Kelley School and the Center for Real Estate Studies, as you can imagine. Additionally, because of the nature of specialized building requirements like lab space, remote-work trends are less likely to negatively impact this sector. Find out how we shape the future of real estate for a better world. A substantial portion of commercial real estate loans are floating rate, which makes them particularly vulnerable to Fed policy, and a large chunk of the debt will mature Find out how our leading sustainability practices contribute to a better world. At the heart of wealthy Silicon Valley, the assessed value of all property grew by $15 billion over the last 12 monthsa jump from $215.9 billion to $231 billion. Among the notable subleases now available, as reported by Colliers: Intuitive Surgical, 88,900 square feet of sublease space at 1388 Kifer Road in Sunnyvale. Experts and county officials say the growth wont last. Meanwhile, Dietz expects total single-family home starts will drop this year to 978,000 units, down from 1.1 million in 2021. The future of office buildings remains up in the air. With a focus on chasing joy in life and supporting those around him, Steffens leadership in the Bay Area is bound to take Colliers to the next level. Get to know JLL's global leadership team. An accelerated shift to e-commerce coupled with supply chain disruptions continue to bolster demand Silicon Valley saw industrial annual occupancy gains reach 2.0 million square feet, making it the fastest growing property sector in 2021. Find out how we create brighter ways of working with our partners around the globe. Thought capital - commercial real estate insights and research. Improve your working capital, reduce fraud and minimize the impact of unexpected disruptions with our treasury solutionsfrom digital portals to integrated payables and receivablesall designed to make your operations smoother and more efficient. Real Estate News News Based on facts, either observed and verified directly by the reporter, or reported and verified from knowledgeable sources. Historically, changes in interest rates that increase affordability have been reported as having a modest impact on housing prices overall, but the authors research demonstrates that the majority of the impact of interest rates falls on mid-priced homes, with minimal impact on the lower and upper ends of the price range. The current bubble in demand generated by Millennials will slowly deflate, as Baby Boomers downsize their living space and age out of the housing market. Explore better ways to find, grow and run commercial properties with our innovative portfolio of real estate technology. Figure 5 shows the rent growth by sector for the 4th quarter of 2022.We see that rent growth has also been relatively strong for all sectors.Retail again has the strongest growth, but is now followed by industrial, with office close behind and apartment with the lowest rent growth.The differences are a result of how expenses grew for each of the property sectors. 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Gain a better understanding of San Jose - Silicon Valleys office real estate outlook and stay ahead of current office space trends. With the opportunity to further differentiate Colliers by being a be servant-based leader, Steffen was quick to recognize the value he could bring to the company. Overall, the $13.5 billion-asset Guaranty, based in Austin, focused on serving middle-market customers and making real estate construction loans and had more than 160 branches in Texas and California. There are signs that smaller offices in suburbs, as well as newer buildings in central businesses districts, could be more insulated from the stress. That will mark the first year-over-year homebuilding decline since 2011. The net impact is slow or stagnant population growth or even population loss. The divergence in returns for industrial vs. retail space started in about 2015. Here's A Post-Pandemic Shopping List To Get Ready. Plainly put a generational housing bubble is on the horizon. February 8, 2023 Avison Young selected as a top organization for 2023 Influencers in CRE Technology February 6, 2023 Avison Young identifies 10 key trends impacting commercial real estate in 2023 January 30, 2023 Avison Youngs ninth annual global Day of Giving event initiates change through action and partnership with local Locally Researched by: Rosie Downey Apr 28, 2023, 6:00am PDT. We take our responsibility to protect the personal information provided to us seriously. With over 10,000 experts across the globe, we're ready to help you buy, build, occupy, and invest in commercial real estate assets. We have over 300 offices in every major city around the world. Our team of real estate agents want to provide you with the most complete San Jose real estate market trends. But it has continued to be weighed down because fewer people are working in downtown offices.. Enter your email below. Jones Lang LaSalle (JLL), together with its subsidiaries and affiliates, is a leading global provider of real estate and investment management services. Industry. Create a brighter future with a career in real estate. Find media contacts, and get access to commercial real estate news and announcements. SVB Financial, 56,400 square feet at 3001 Tasman Drive in Santa Clara. Lets examine the impact of interest rate decreases on housing wealth. As explored in its Silicon Valley Q4 2022 Office Occupiers Survey released by global commercial real estate advisory firm Cresa, several key market indicators, such as vacancy rates and average asking rents, suggest uncertain times ahead. Our annual report finds founders are in a positive mood at the This is not a step This adds to the problem for the banks, and they WebSilicon Valley Commercial real estate news, market analysis, trends, and information for the greater Silicon Valley area Commercial real estate news, events, recruiting solutions, and Neighborhood shopping centers in well-populated residential areas continue to perform well. Recently elevated demand for homes in Indianapolis is thus real and persistent. onurdongel/iStock via Getty Images. As these loans mature, he says banks arent necessarily in a position to take these assets back on their balance sheets and simultaneously invest in them to stabilize their value or reposition them for a different market. January 30, 2023. Let us know what you're interested in and we'll get back to you shortly. A recent report by CommercialEdge shows occupancy rates for commercial real estate in many big cities as very low. Al Brooks, Head of Commercial Real Estate, Commercial Banking. Retail in city centers has been slow to bounce back. Its important to look at each of these macroeconomic factors: Together, these factors may lead to a mild to moderate recession in 2023. JLL Capital Markets arranged $290M in refinancing for Bergen Town Center, a shopping center anchored by Whole Foods and Target located in Paramus, New Jersey. Population trends strongly suggest that many local housing markets will peak within the next decade. That translates to less credit and lending activity, and continued volatility for asset pricing.. Get financial, environmental, and social returns with sustainability solutions. We need additional data to finish your registration. Browse properties for sale or lease that fit your location and unique needs. Capital Markets & Deal-Making Conference & Cocktail, Los Angeles Construction And Development Conference. February 8, 2023. Demand reversal will intensify by the mid-2030s when the annual number of homes that seniors add back to the market is expected to be 40% higher than current levels.1 This negative market impact of anemic population growth can be counteracted by policies that increase the share of seniors who age at home instead of a nursing facility, reduce the average age of a first-time home purchase, or elevate the volume of immigration. Silicon Valley companies continued to shed space in Q1 2023. Full recovery would take place over years, not months, and impact all asset classes. Download our quarterly insights to learn about the basic fundamentals of the Silicon Valley office market as well as major activity impacting the market and an outlook for the near future. February 8, 2023. On the other side of the ledger, however, several large blocks of space became available on the market through sublease offerings that pointed to a diminished appetite for office space among tech companies amid the coronavirus. The COVID-19 pandemic has undeniably disrupted the office market in 2020, the report said. +. Without a sudden spike in population inflow, residential real estate in Indianapolis must prepare for an eventual peak in demand within the next decade. JLL Capital Markets arranged $290M in refinancing for Bergen Town Center, a shopping center anchored by Whole Foods and Target located in Paramus, New Jersey. by Arpit Gupta, Stijn Van Nieuwerburgh and Constantine Kontokosta. Banking and financial services industry set to become largest investor in AI. April 21, 2023 at 6:15 p.m. Google If we extrapolate this to assume that new apartments enjoy a 29% premium over the average, the average rent for a new unit in the US goes from $1,800 per month up to $2,322 per month, and the hourly wage required to afford a new unit jumps to nearly $45 per hour (see Figure 2). Get in-depth office market reports and insights from commercial real estate experts in the Greater San Jose - Silicon Valley area. See how JLL pairs technology with unmatched real estate services and expertise. Center for Real Estate Studies Indiana Business Research Center, Robbing Peter to Pay Paul? Falling fertility rates mean post-Millennial generations will be smaller. Microsoft solidifies San Jose presence with fresh property deal With fewer companies seeking more space to accommodate growing headcount, the amount of available square footage mounts. He refused to let it end in Game 7, Do Not Sell/Share My Personal Information. Seattle-based Amazon was particularly active throughout Silicon Valley through property purchase or lease deals. Achieving cost savings, compliance and sustainability in medical devices, JLL helps global medical devices company centralize real estate transactions and facilities management to advance global healthcare, Horizon Hobby flies into new supply chain strategy one model plane at a time, The need for speed: Partnership with JLL sets radio-controlled company on an accelerated path to improve their distribution real estate strategy. We will then delete it safely and securely. Copyright2023 Jones Lang LaSalle IP, Inc. Stay up to date with the market trends shaping the future of We can devise ways to create new supply for a greater percentage of the population, in a broader range of household incomes, without sacrificing the ability of developers to make a profit. One of the highlights was the keynote by new San Jose Mayor @MattMahanSJ . The gap between industrial and retail properties widened with the advent of COVID, but the returns for these two sectors converged as the Fed began to raise interest rates starting with the third quarter of 2022. We need you to know that security is our top priority and that we hold any information we have about you under lock and key. 1, Sara Coers, Associate Director, IU Center for Real Estate Studies 25 APR 2023 Big office buildings in large U.S. cities are the most at risk from turmoil in commercial real estate, according to Goldman Sachs Research. Industrial real estate, which is largely made up of warehouse properties, had especially strong performance until recent quarters of higher interest rates. Silicon Valley tech firms have bolstered an office market rally in the Bay Area and nationwide, a trend that points to a commercial real estate rebound from coronavirus-linked ailments. the effects of the coronavirus have created some conflicting trends regarding office usage. April 11, 2023 Download our quarterly insights to learn about the basic fundamentals of the Silicon Valley office market as well as major activity impacting the market and an outlook for the near future. But they wont be empty for long, Google stays committed to downtown San Jose, mayor and tech titan say, Do Not Sell/Share My Personal Information. We endeavor to keep your personal information secure with appropriate level of security and keep for as long as we need it for legitimate business or legal reasons. By contrast, suburban offices, and medical offices in particular, have been less impacted, especially in smaller American cities, Goldman Sachs Research analyst Caitlin Burrows writes in the teams report. E-commerce accounts for less than 20% of retail sales, Aerospace, Defense and Government Services. Geography also matters. Stay up to date with the market trends shaping the future of real estate. Dear Abby: I have a great life, so why have I fallen into this shameful behavior? More than $1 trillion in commercial real estate loans will come due before the end of 2025, and as banks tighten their underwriting, many borrowers may struggle to refinance their debts. (Have we forgotten the Occupy protests of the Great Recession so quickly?). The industry must adjust current business decisions to this eventual changeover in market conditions or risk substantial oversupply and value loss in the housing market of the future. , Sara Coers, Associate Director, IU Center for Real Estate Studies. This sounds like great news until we cut that number down to reflect the percentage of renter-occupied housing units. Avison Young is your trusted source for commercial real estate office market insights in San Jose - Silicon Valley. We combine technology with global expertise to solve any real estate challenge. For example, the share of homeowners aged 55 or higher in the Indianapolis metro area was nearly 50% in 2021, up from 36% just twenty years earlier. Anna D. Smith, Silicon Valley Real Estate Broker based in San Jose, CA David Azimi, Silicon Valley Real Estate Broker based in Milpitas, Sunday, 30 April 2023 01:24 Single family residence sells for $3.3 million in Palo Alto, Big changes starting today in how mortgage fees are calculated, Sale closed in Los Gatos: $1.9 million for a three-bedroom home. Cushman & Wakefields Indiana Apartment Market Overview 2022, for example, shows that Class A apartments (assuming newer and better stock) average $1,492 per month, while the overall Indianapolis average is $1,160 per month, indicating an approximately 29% difference between rent for a new unit and average rent.2. Multifamily is currently the highest performing of all asset classes. Learn more about working at JLL. Between 2019 and 2021, a 2.0% annual rate of new household formation more than doubled the 0.8% average rate witnessed between 2013 and 2019. Summary and analysis of Silicon Valley's current economic and industrial real estate market conditions. The retail property forecast largely depends on location and retail category. Steffen Kammerer joined Colliers as the Silicon Valley Executive Managing Director in 2021 after a successful career in tenant representation at JLL. Find media contacts, and get access to commercial real estate news and announcements. This is true despite a population decline in Marion County since the beginning of the pandemic. Summary and analysis of Silicon Valley'scurrent economic and office real estate market conditions. 10 Emerging U.S. Industrial Markets to Watch in 2023, Explore Investment Opportunities on SalesTracker. The 2023 commercial real estate outlook indicates there may be challenges ahead. National and international geopolitical issues and market volatility combined with high inflation and interest rate hikes place the U.S. economy in uncharted territory. Find spaces and negotiate lease terms to help your business thrive. While cost-burdened renter households continue to grow, average asking apartment rates and the wages required to afford them (based on 30% of gross income) have also grown (see Figure 1): As of 2021, an estimated 54% of households can afford the average rent in the US. J.P. Morgan isnt responsible for (and doesnt provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan name. Achieving cost savings, compliance and sustainability in medical devices, JLL helps global medical devices company centralize real estate transactions and facilities management to advance global healthcare, Horizon Hobby flies into new supply chain strategy one model plane at a time, The need for speed: Partnership with JLL sets radio-controlled company on an accelerated path to improve their distribution real estate strategy. According to JLL's new Banking and Finance Outlook, the banking and financial services industry is expanding into new markets and growing their real estate portfolios. JLee Realty - Juliana Lee Team - Silicon Valley Real Estate - (650)857-1000 the multiple listing service used by nearly all licensed Silicon Valley real estate agents when listing real estate for sale. More than $1 trillion in commercial real estate loans will come due before the end of 2025, and as banks tighten their underwriting, many borrowers may struggle to However, its struggles continued, and the bank operated with negative capital in the months leading up its takeover. There's going to have to be a very organized public and private partnership to figure out a careful unwind of this current dynamic, he says. The industrial property sector remains red hot. As Millennials pass through their first-home buying years and Baby Boomers through their last stages of life, the current period of strong demand will transition into a period of slowly declining demand. SAN JOSE The outlook for commercial real estate in Silicon Valley remains hazy for the moment due to ongoing economic setbacks and uncertainties that the But at the same time, theres never been such an over-supply of office space in some markets, which risks creating a negative feedback loop where landlords must lower their rents, which in turn puts pressure on their income and drives valuations lower, Karoui says. Jones Lang LaSalle (JLL), together with its subsidiaries and affiliates, is a leading global provider of real estate and investment management services. Inflation hasnt been this high since the 1980s. While managers, investors, and developers make decisions to ensure good returns in the short run, they must keep their eye on demographic factors that fundamentally change market dynamics in the long run. The vacancy rates in Silicon Valley for the October-through-December period of 2020 were the highest for the region since July-through-September of 2017, stated the report from Colliers, a commercial real estate firm. Figure 4 shows the NOI growth by sector during the 4th quarter of 2022. Multifamily properties continue to perform well, and the hot streak for industrial properties remains. The dashboard was delivered through AVANT by Avison Young: leveraging real-time data and analytics to make cities and location-based decisions more transparent and efficient. Preliminary evidence suggests that returns will fall again during the first quarter of 2023. Dramatic increases in interest rates, uncertainty about pandemic-induced changes in the way real estate is used, and new federal investments in reshoring and infrastructure are all weighing on the minds of real estate managers, investors, and developers. Areas near natural amenities, transit hubs, or high-income commercial districts are also less vulnerable. These members of the real estate industry may have demographics in the back of their minds, knowing that real estate demand is created by factors like population, especially in residential markets. The authors report substantial price gains resulting from increased rents due to shorter commute times and reduced risk to investors. Here is a great question: What is the impact of investment in urban transit infrastructure on real estate prices? Ultimately, whether or not industrial performance metrics fare well will depend on the mix of supply and demand.. The Redistribution of Wealth Caused by Rent Control, Take the Q Train: Value Capture of Public Infrastructure Projects, Work from Home and the Office Real Estate Apocalypse, Interest Rates and the Distribution of Housing Wealth, www.fanniemae.com/research-and-insights/perspectives/coming-exodus-older-homeowners, https://cushwake.cld.bz/Where-Do-US-Property-Values-Go-From-Here, https://multifamily.cushwake.com/Research/Midwest. Avison Young identifies 10 key trends impacting commercial real estate in 2023.