Swedish office market starts the year off right

This week I’ll be heading to Sweden for my first trip outside the United States. While I’m not going to be scoping out office properties on my vacation, the market had a good start to 2016. As noted in the June issue of Institutional Real Estate Europe: “Sweden leads the way as the Nordics power ahead.”

Sweden experienced strong economic growth and an expanding office market in first quarter 2016. Stockholm and Gothenburg were the best-performing markets, with a significant amount of new and refurbished office properties, according to Cushman & Wakefield’s Sweden Office Market Snapshot.

Malmö and Gothenburg have a large number of new projects that will be completed this year, though most of the properties in Malmö are already fully leased. Stockholm, however, has very few new projects under development, despite a strong demand.

Investment in the first quarter was up 43 percent in Sweden. Value-added property funds are the biggest buyers in the region. Rents are increasing due to strong demand, but the limited supply in Stockholm may stunt growth through the rest of the year.

And here’s a round-up of recent Swedish stories in IREN:


ZoeWolff119x91The views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Zoë Wolff is a reporter with Institutional Real Estate, Inc.

Life in the big city

Big cities aren’t really my thing. I prefer to spend my time away from the crowds of people, confusing one-way streets and heavy traffic. Growing up just 25 miles outside San Francisco I never really understood its appeal.

Recently, U.S. News & World Report released a list of the 100 best cities grouped by size: medium (500,000 to 1 million), large (1 million to 2.5 million) and mega (greater than 2.5 million).

The top 10 overall list was dominated by mega-cities and large cities, but I was surprised to see two medium-sized cities grace the overall top 10, and four more round out the top 20.

The top 10 medium-sized cities seem more like my type of city and I was happy to find the city where I’ll be living soon — Boise, Idaho — was number two on the medium-sized city list and number six overall.

The top 10 medium-sized cities are:

  1. Colorado Springs, Colo.
  2. Boise, Idaho
  3. Des Moines, Iowa
  4. Sarasota, Fla.
  5. Omaha, Neb.
  6. Charleston, S.C.
  7. Madison, Wis.
  8. Harrisburg, Pa.
  9. Honolulu
  10. Portland, Maine

The cities were ranked based on five factors: the job market, cost of living versus average annual salary, quality of life, desirability and net migration.

The top 10 cities overall are:

  1. Denver
  2. Austin
  3. Fayetteville, Ark.
  4. Raleigh-Durham, N.C.
  5. Colorado Springs, Colo.
  6. Boise, Idaho
  7. Seattle
  8. Washington, D.C.
  9. San Francisco
  10. San Jose

Despite my distaste for big cities, I may have to give some of these a second look.


ZoeWolff119x91

The views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

Not a subscriber to IREI Insights blog? Sign up to receive alerts on new blog posts.

Zoë Wolff is a reporter for Institutional Real Estate, Inc.

Baltimore office market continues upward trend

Baltimore Skyline and the Inner HarborLast month, I wrote about the top 10 cities for quality of life, and mentioned that, with my husband joining the military, we’ve been thinking a lot about where we would like to end up. For the next few months, the Air Force has taken us right outside Baltimore, where the office market is experiencing a positive trend in fundamentals.

Baltimore has had employment increase by approximately 31,600 jobs from the end of 2014 to the end of 2015, with the unemployment rate dropping from 5.6 percent to 5.3 percent, according to Cushman & Wakefield’s Baltimore Office Snapshot Q4 2015.

The Baltimore office market experienced approximately 286,000 square feet of net absorption in the fourth quarter, raising the annual total to approximately 1.1 million square feet of net absorption. This is the second consecutive year that Baltimore has exceeded 1 million square feet of positive annual net absorption. The office vacancy rate in Baltimore decreased from 15.7 percent to 14.7 percent. Overall, the vacancy rate has dropped 386 basis points since the end of 2012.

Looking to 2016, Baltimore’s average rental rate has grown and should continue on that path. Some 1.9 million square feet of new office space is currently under construction, but the large quantity of lower-quality buildings struggling to retain tenants will hold back overall rental growth, according to Cushman & Wakefield. Absorption in 2016 is expected to reach 1 million square feet for the third consecutive year.

With bustling hub of Washington, D.C., 40 miles to the south, Baltimore’s recovery from the recession has been slow in comparison, but the city’s outlook is improving and will continue in 2016.

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ZoeWolff119x91Zoë Wolff is a reporter with Institutional Real Estate, Inc.

Top 10 cities for quality of life

Where you choose to live can affect the type of job you have, how much you get paid and how much you spend. Settling down is a big decision. Making that decision a little easier, Mercer has released its 18th annual Quality of Living Survey. Western Europe dominates the top 10:

  1. Vienna, Austria
  2. Zurich, Switzerland
  3. Auckland, New Zealand
  4. Munich, Germany
  5. Vancouver, Canada
  6. Dusseldorf, Germany
  7. Frankfurt, Germany
  8. Geneva, Switzerland
  9. Copenhagen, Denmark
  10. Sydney, Australia

Even looking at just North America, the United States falls short with four of the top five spots belonging to Canadian cities. San Francisco is the first to hit the list at 28, followed by Boston (34), Honolulu (35), Chicago (43), New York City (44) and Seattle (46).

The bottom five cities are:

  1. Khartoum, Sudan
  2. Port-au-Prince, Haiti
  3. Sana’a, Yemen Arab Republic
  4. Bangui, Central African Republic
  5. Baghdad, Iraq

Mercer evaluates 39 factors, including political and social environment, economic environment, sociocultural environment, medical and health, schools and education, public services and transportation, and housing and consumer goods.

With my husband recently joining the military, we have been thinking a lot about where we would like to be stationed if given the choice. I was happy to see our first choice — Frankfurt — ranked seventh on Mercer’s list; however, none of our stateside choices — Las Vegas; Santa Barbara, Calif.; Denver; Boise, Idaho; Norfolk, Va.; and Spokane, Wash. — made the list at all.

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ZoeWolff119x91Zoë Wolff is a reporter with Institutional Real Estate, Inc.

Is telecommuting bringing down the office market?

Between 2005 and 2014, the United States saw a 102 percent increase in the number of people working from home, according to Global Workplace Analytics. One of the most common sectors for telecommuting is technology, and many of those companies are headquartered in San Francisco and Silicon Valley.

Companies such as Adobe Systems, Apple, Salesforce, Intel and Google all have work-from-home options for their employees. Automattic, the parent company of WordPress, employs 230 people spread out across 170 cities. Telecommuting is becoming more popular every year — between 2013 and 2014 there was a 6.5 percent increase in teleworkers.

So what does this mean for the office market? As more people start working from home, companies can begin downsizing their office space to save money on rent and other operating costs. But has this trend affected the office market? Not really.

Looking just at Silicon Valley and San Francisco — where all the aforementioned companies are headquartered — office vacancy rates declined by 2.3 percent and 1.5 percent, respectively, from 2014 to 2015, according to research reports from Cushman & Wakefield. Rents also have increased in both regions, showing there is still a demand for office space.

Though telecommuting is gradually becoming a popular alternative to traditional office work, teleworkers still only make up about 2.5 percent of the workforce. It seems the idea that this progression is leading to a downturn of the office market is farfetched at this point. Many tech companies, such as Uber, are actually expanding their office space.

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ZoeWolff119x91Zoë Wolff is a reporter with Institutional Real Estate, Inc.

A new story for Oakland

UptownStationRenderingDuring the 2014 NFL season, the Oakland Raiders went 3–13. A team that was once dominant hasn’t won a Super Bowl since 1983. That isn’t going to change this year, but they are definitely taking steps in the right direction. The same could be said for the city in which the team plays.

This year has been a year of significant growth for Oakland, Calif. In the third quarter, vacancy rates of class A office properties decreased from 5.8 percent to 3.7 percent and class B office vacancy decreased from 10 percent to 4.4 percent, according to Colliers International’s Oakland Metropolitan Area Office Q3 2015 Research & Forecast Report.

Uber recently began the process of moving its headquarters to Oakland, acquiring a 372,000-square-foot property that is set for completion by 2017. Additionally, Pandora Media added nearly 50,000 square feet onto the firm’s 230,000-square-foot headquarters. Other recent moves into Oakland have included Brown and Tolland Physicians, The Sierra Club and CoreLogic, according to the Colliers report.

With San Francisco rents high and office supply low, it is not surprising that major companies are moving to the city across the bay.

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ZoeWolff119x91Zoë Wolff is a reporter at Institutional Real Estate, Inc.

Best cities for millennials

As a millennial, any time I see an article with a title “best ____ for millennials,” I click on it. Recently that led me to Niche.com’s ranking of the best cities for millennials. My generation grew up with TV shows including Friends and How I Met Your Mother, which made cities such as New York look like a blast. Now, as we graduate college and move into the workforce, we seek to replicate the lives of those characters: hanging out in bars and coffee shops with our friends. Personally, I’m not a big city person, but I think the Niche.com list reflects what most people in my generation are looking for when it comes to life after graduation.

Some 232 cities (with more than 100,000 residents) were evaluated, mainly using U.S. Census data.

The cities were judged in several categories including easiest commute, residents 25–34 years old, crime and safety, millennial newcomers, unemployment rate, access to bars, access to restaurants, access to coffee shops, median rent, percentage change in employees, rent-to-income ratio, higher-education rate and resident diversity.

The top 10 best cities for millennials in the United States are:

  1. Cambridge, Mass.
  2. Manhattan
  3. Alexandria, Va.
  4. San Francisco
  5. Jersey City, N.J.
  6. Seattle
  7. Washington, D.C.
  8. Berkeley, Calif.
  9. Boston
  10. New York City

Cambridge is made up of 27.7 percent millennials, 6.9 percent of which have moved to the city within the past year. Looking specifically at Manhattan, the borough’s millennial residents make up 22.1 percent of the population, 3.1 percent of which came to the city in the past year. Northern Virginia’s Alexandria consists of 24.4 percent millennials, and 6.2 percent are newcomers.

Every city in the top 10, with the exceptions of New York City and Berkeley, has a millennial population above 20 percent of the city’s total population. Millennials are drawn to these cities for job opportunities, proximity to bars and restaurants, and diverse communities.

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ZoeWolff119x91Zoë Wolff is a reporter with Institutional Real Estate, Inc.

The future of smart properties

In 1999, the Disney Channel released a movie called Smart House. I was seven years old at the time and thought the idea of a house that could think for itself was incredible. But by the end of the movie, the house has turned evil and tries to hold the family hostage. As long as I’ve been alive, and well before, we’ve had movies warning us about the dangers of technology — and it never ends well for the humans.

Apparently, scientists and tech gurus didn’t heed the warnings of the Disney Channel or the numerous other science fiction movies out there because now we have the Internet of Things.

If you haven’t heard of the Internet of Things yet, it’s actually pretty cool. The idea is that eventually everyone and everything will somehow be connected to the Internet. Early stages of this technology include products such as the Nest thermostat, which can be controlled from your smartphone but also learns your household habits and adjusts itself accordingly. A recent article on the “intelligent edifice” explored some of the commercial applications.

Beacon technology is another example, and one that could revolutionize the residential real estate industry. Beacons transmit a signal via Bluetooth that allows home buyers to view real-time property listings. Rather than seeing a for-sale or for-lease sign, if a buyer is anywhere near a property, a notification will pop up on their smartphone. Beacons can also take potential buyers on real-time virtual tours of a property right on their mobile devices, making business faster and easier.

This is just the beginning, and the possibilities of where this technology could take the real estate industry are endless. Products such as the Nest will help keep properties functioning at peak energy levels, so waste will no longer be a concern. Beacons will make purchasing properties a task that can be done from your office. Research data will be easier to compile, as properties will eventually be able to collect it themselves.

The only thing we have to remember is that one day the robots may take over.

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ZoeWolff119x91Zoë Wolff is a reporter with Institutional Real Estate, Inc.

Success can be found in unlikely places

Last week, the Arizona Cardinals announced Jen Welter would join the team’s preseason coaching staff, making her the first female coach in the NFL. Welter has been coaching and playing professional football for 14 years and was the first woman to play in a professional men’s league in a contact position, making her a more valuable coach than some of the NFL’s current coaching staff.

In a sport dominated by men, the Arizona Cardinals turned to an unlikely source in hopes of having a successful season this fall. The Cardinals did all right last year, going 11-5 during the regular season, but they only made it to one postseason game; maybe someone like Welter is exactly what they need to make it to Super Bowl 50.

How does this relate to real estate, you ask?

A recent report from CBRE Group shows that Midwest secondary markets are becoming more and more popular for development. The 11 cities included in the study — Cleveland, Cincinnati, Columbus, Detroit, Indianapolis, Kansas City, Louisville, Milwaukee, Minneapolis, Pittsburgh and St. Louis — have all experienced significant population growth during the past decade and as a result are seeing a strong demand for new development.

The data suggests it is not only millennials that are moving to urban centers, but recent empty nesters as well. This in-migration, combined with the generally lower cost of living, involved public leadership, various incentive programs, and vibrant and innovative urban cores, has made these Midwest secondary markets appealing to employers and employees.

In Pittsburgh, technology jobs represent about 5 percent of total employment, notably higher than other markets across the United States, and while the technology sector only makes up 3.4 percent of the total U.S. workforce, it accounted for the largest share of U.S. office leasing activity in 2013 (13.5 percent) and 2014 (19 percent). Indianapolis, Cleveland, Detroit, Pittsburgh and Minneapolis currently have more than $1 billion of new construction projects under way.

Perhaps, like the Arizona Cardinals, real estate investors will find success in these less frequently considered markets.

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ZoeWolff119x91Zoë Wolff is a reporter with Institutional Real Estate, Inc.

New bill in California may be the end of coal investment

coal and shovelCalifornia pension funds such as the California Public Employees’ Retirement System and the California State Teachers’ Retirement System may be required to sell their investments in companies that generate at least half of their revenue from coal mining after a bill passed a California State Assembly committee by a vote of five to one on June 24. The bill will go to the California Assembly Appropriations committee, and if it passes, it will head to the Assembly floor.

With a bigger push toward environmentally friendly forms of energy, the pension funds have been under pressure to move away from such investments.

According to Reuters, CalPERS’ coal mining investments are valued at $100 million to $200 million, and CalSTRS has around $40 million in coal investments as defined by the bill.

While the boards of the pension funds should be able to have a final say regarding where they can and cannot invest, moving away from coal investments may be in the retirement systems’ favor. The United States is beginning to turn away from coal toward more efficient and less expensive energy sources.

According to NPR, coal has dropped to about 40 percent of the nation’s power, while natural gas now accounts for nearly one-third. And when solar or wind power can’t do the trick, natural gas can fill the gaps.

As President Obama pushes his climate change action plan, the country will be required to cut carbon emissions by 30 percent from 2005 levels by 2030. Natural gas produces about half the carbon emissions that coal does when it is burned.

“The writing is on the wall. Our policies, our technologies, and global markets are moving in concert away from coal as an energy source,” said the author of the bill, Kevin de Leon, to the committee prior to the vote.

According to Reuters, neither pension fund has a position on the bill.

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ZoeWolff119x91Zoë Wolff is a reporter with Institutional Real Estate, Inc.