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CompStak’s Spotlight on Recent Economic Statistics

  • Interest rates froze for the fifth consecutive time during the FOMC’s most recent March meeting—the next meeting will be April 30. Chairman Powell recently indicated that the FOMC is not in a hurry to cut rates and remains ambiguous on a possible June rate cut, noting that strong employment data is affording the central bank more time to get inflation rates closer to its 2% target.
  • Consumer confidence is rising with the latest University of Michigan index reaching its highest level since July 2021. 
  • The number of office-using and government job openings rose 1.1% and 6.5%, respectively, in February from the previous month, while the number of unemployed ticked up, according to the latest JOLTS survey.
  • Industrial manufacturing output rose 0.8% in February in a recovery from weather-related declines in January, as tracked by the Federal Reserve. 

Warehouse capacity, as measured by the Logistics’ Managers Index,  remains lower than one year ago, registering 44.6 points in February, below 50.0 for the first time since January 2023, indicating that capacity in warehouses is anticipated to decline going forward.

Click the graph above for more economic insights.

Manhattan’s Sixth Avenue Submarket Has Effective Rents Rising To 2019 Levels

According to a recent Commercial Observer article, Manhattan’s Sixth Avenue submarket is performing well with brisk office leasing activity, declining sublease availability, and robust tourism and foot traffic driving retail leasing interest. According to CompStak’s data, the Sixth Avenue submarket ranks in the top half of Midtown submarkets for the highest average effective rents for 2023 transactions. Still, the rest of Midtown excluding Sixth Avenue yielded greater effective rent growth from 2019. In 2023, Manhattan’s Sixth Avenue submarket ranked fourth in terms of effective rent averages among Midtown Manhattan’s 12 submarkets. It stood at 51.2% below Hudson Yards and 8.2% below Madison/Fifth Avenue, while also falling 4.3% lower than the average of Park Avenue’s submarket. At the same time, while the rest of Midtown was just 0.6% below 2019’s level, Sixth Avenue’s average effective rent in 2023 remained 1.1% lower than in 2019. Despite this, Sixth Avenue saw its average effective rent reach its highest level since 2019 with notable deals like Bank of America’s expansion on floors 40 and 47 at 1 Bryant Park and Paul Weiss’ 766,000-square-foot relocation to 1345 Avenue of the Americas, helping to boost the average. In Prime Class A transactions only (trophy, new construction, and recently renovated buildings), the rest of Midtown showed a 4.5% growth in effective rents from 2019 to 2023. In contrast, Sixth Avenue experienced a 2.8% decline from its 2019 levels, reaching just under $89 per square foot.

Baltimore’s Tradepoint Atlantic Industrial Complex Is Strategically Important Post-Bridge Collapse And Houses Long-Term Tenants

The Baltimore industrial market is facing unique challenges following the tragic collapse of the Key Bridge last month which resulted in the deaths of six people and the indefinite closure of one of the East Coast’s busiest ports. Distribution hubs like the Tradepoint Atlantic industrial complex at the foot of what was the northeast span of the bridge are home to large 3PL tenants like Amazon and fall within CompStak’s Eastern Baltimore County submarket, previously one of Baltimore’s strongest industrial areas before the accident. Additionally, this is now the only shipping point outside the Key Bridge, meaning it can still accept new cargo. Per CompStak data, the average weighted average lease term (WALT) of leases within Tradepoint Atlantic outpaces that of the overall Baltimore market (118.5 months vs 60.7 months). Long-term Tradepoint Atlantic tenants such as Home Depot contributed to this longer average WALT as the brick-and-mortar retailer signed a 20-year NNN lease in September 2019, making it one of the lengthiest in place in the complex. In addition, Arnold Packaging signed a long-term lease of 15 years in 2021 through January 2037 in the complex. According to CompStak data, industrial starting rents in Baltimore overall averaged $13.70 per square foot in 2023, surpassing those in I-95 adjacent submarkets in Philadelphia-Central PA-DE-So. NJ and Washington D.C., which averaged $11.48 and $13.38, respectively.

Gap Between Dallas-Fort Worth Industrial And Office Starting Rents Narrows With Ascent Of Industrial Sector

Office-to-industrial conversion in the Dallas-Fort Worth market is becoming easier and more attractive as the price difference between office and industrial properties shrinks as industrial rents rise and office rents decline or stagnate. The strategy appeals to both office players seeking solutions for outdated office space and industrial developers grappling with a scarcity of land for warehouse development. CompStak data also shows there is a narrowing delta between industrial and office starting rents. The difference between average gross industrial adjusted starting rents and those of gross office space built before 2010 closed from $17.41 per square foot in 2019 to $7.39 per square foot in 2023, according to CompStak data. This narrowing occurred amidst a weaker Dallas-Fort Worth office market in which the average adjusted starting rent for office space built before 2010 decreased by 1.3% from 2019 to 2023, while the average gross industrial adjusted starting rents tripled to $15.40 per square foot from 2019 to 2023, per CompStak data. Collective Health, however, signed a new 25,719-square-foot gross lease in October 2023 at a starting rent of $42 per square foot, nearly double the average that year.

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