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Hotel News
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LA, Orlando Lead Top 10 Markets To Watch
Written by Mark Heschmeyer
Posted May 15, 2006 |
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Los Angeles is the top retail investment market to watch in Sperry Van Ness' 2006 Top 10 Markets To Watch retail report. This is due to expected growth of 100,000 new residents and 80,000 new jobs in 2006.
In addition, Los Angeles is expected to post the strongest retail sales growth of the firm's markets at 7.9%. Furthermore, vacancy rates have improved to a near-index low of 3.6% with many submarkets recording sub-3% vacancy.
While some firms place heavy emphasis on cap rates and prices when reviewing market activity, Sperry Van Ness' report for the retail sector focuses on future trends and the markets that show the greatest potential for income growth based on these economic indicators, rather than historic market data as a truer indication of future performance.
"Investors must analyze forward-looking economic factors when deciding where to acquire property because our research tells us that the best indicators for a property's financial performance are factors such as area employment growth, personal income and vacancy," said David Frosh, president of Sperry Van Ness. "This information is more credible than merely the past analysis of cap rates and further proves that we need to be advisors first when directing our clients' investment interests."
Orlando comes in at number two highlighted by the fact that developers are scheduled to complete only 1.4 million square feet of space this year, less than one-half the average of the past six years. The region will have its lowest vacancy in seven years at 5.3%. Orlando will welcome 52,000 new residents and 44,500 new jobs this year.
In the number three spot is the Puget Sound region with 23,000 new households and 48,000 new jobs in 2006. Fundamentals will continue to improve with vacancy dropping to 4.5% and rent growth reaching 3.6% this year.
As the second Florida market in the top 10, West Palm Beach/Fort Lauderdale finished in the number four spot with 30,000 new residents and 54,000 new jobs expected in 2006. Vacancy will continue to improve with inventory increasing only 1.2% in 2006, the lowest level in four years.
Rounding out the top five is San Diego, which continues to record declining unemployment and a 6% increase in visitor spending. Additionally, San Diego boasts the lowest vacancy rate and highest rental increase among markets examined at below 3% and 5%, respectively.
Spots six through 10 are Phoenix, San Francisco/Oakland, Austin, Denver and San Jose. Each of these markets is expected to see strong population and employment growth in 2006, leading to increased retail sales.
In compiling this report, Sperry Van Ness analyzed more than 100 primary, secondary and tertiary markets examining economic factors that impact future retail investment real estate. The market rankings in this report were focused on dynamics including retail sales and inventory, vacancy factors and rental trends. Capitalization rates and price per square foot for property transactions valued at more than $1 million were also factored in, but to a much lesser degree.
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