Continued growth in e-commerce has driven industrial vacancy to an all-time low, declining by 70 basis points from a year ago to an aggregate nationwide vacancy of 5.6 percent in the fourth quarter of 2016, according to the year-end industrial market report from real estate services firm JLL. JLL researcher Aaron Ahlburn says that the former record low vacancy was in 2000, when the rate dipped to a 7.0-8.0 percent range as a result of market expansion coming out of the dot.com bubble. Increasing competition for industrial space has caused rental rates to hit record highs, breaking the $5 per sq. ft. triple-net barrier for the first time, Ahlburn notes, and has set off a building boom.
The oil and gas industry is projected to make a significant increase in property taxes payments to eastern Ohio counties over the next decade, according to two industry groups who are estimating an increase from $43 million to $250 million. The Ohio Oil and Gas Association and the industry-funded group Energy In Depth collected data on property tax revenue for the six counties home to the most drilling in the Utica shale play since 2011, when hydraulic fracturing and horizontal drilling brought a bevy of drilling and related activity to Appalachian Ohio.
The hotel industry could be facing an uphill battle in 2017 as new supply may erode pricing power and hinder performance. Hoteliers are already seeing performance dip as supply meets and surpasses demand. In a Hotel News Now roundtable, hotel executives and market analysts provide perspective on supply growth and how it will affect the hotel industry going forward. Jan Freitag, SVP of lodging insights at STR (Hotel News Now’s parent company), says new supply will negatively impact occupancies, now more than ever since demand growth will slow. While it remains to be seen how hoteliers react to the new competition in their markets, Feitag expects continued pressure on pricing and limited (average daily rate) increases going forward. Some markets (such as New York City and Miami), however, are already observing pricing weakness and ADR declines.
Ohio’s oil and gas industry may get a retroactive windfall tax break estimated at $264 million under a bill passed by the legislature during the lame-duck session The heavily amended Senate Bill 235 would expand the sales-tax exemption for tangible personal property for the oil and gas industry. And in an unusual move, the General Assembly made the tax breaks retroactive to June 30, 2010, requiring refunds from the state totaling $215 million and local governments totaling $49 million.
Local officials expressed concerns last week over a bill that gives property tax breaks to Ohio developers, prompting significant changes to the legislation. Designed to help developers predict costs and make more job-ready sites available in Ohio, the business-backed bill would freeze property values for land under commercial or industrial development until the project is completed through a sale of the property, an occupancy permit or the start of business operations. However, local officials who deal with economic development around the state said without major revisions, the bill could do more harm than good in some regions.
Based on data recently released by Research firm Reis Inc that shows office markets with the biggest year-over-year changes in effective revenue per sq. ft. during the second quarter of 2016, the National Real Estate Investor provided a market snap shot of the top five best and worst performers. The tech sector continues to have a big influence on boosting performance in many office markets. And while it may not be entirely fair to single out some of the laggards on the list, there are some clear trends there as well. According to Reis, smaller tertiary markets continue to struggle to rekindle economic and job growth that will fuel demand for more office space.
While the Midwest multifamily market may never experience the headline-grabbing stats that core, coastal cities do, its reliability continues to make the region an immensely attractive environment for private equity and similar investors. Secondary and tertiary metro areas such as Cleveland, Kansas City and Indianapolis are strong, steady, and a solid bet for investment. The higher cap rates and steady rent growth found in the Midwest offer higher returns in asset values than the nation's primary markets, especially as the sector approaches affordability ceilings in places like New York and San Francisco.
Cincinnati is the most cost-friendly city to do business among the 31 largest U.S. metro areas (those with populations of 2 million or more), according to the 2016 Competitive Alternatives study by KPMG LLP. Cincinnati's favorable leasing costs and low property taxes contributed to its first place ranking in the study, which compares key cities across a range of costs and other factors related to doing business. Orlando, Fla., was the second most cost-competitive location in the large-cities category, followed closely by Tampa, Fla., Cleveland, and San Antonio. Other locations ranked among the top 10 large U.S. cities included Atlanta, Charlotte, N.C., Miami, St. Louis and Kansas City, Mo.
The Cincinnati City Council approved new framework for awarding property tax breaks to developers doing projects in downtown and Over-the-Rhine. The number or years that developers can receive property tax abatements was increased, and the amount that downtown and OTR developers will kick in to the streetcar’s operations fund will likely triple. The changes were made in an effort to firm up the streetcar’s operations funding for its first 15 years in service and minimize the likelihood that the it will need to dip into the city's general property and earnings tax revenue generated by all residents.
While tax abatements are an important tool for communities to attract new development and spur job growth, cities and other tax-abating governments don't often share the accumulated financial consequences of those tax breaks. However, the Governmental Accounting Standards Board (GASB) in August ruled that some of the financial details of those tax breaks are essential for a clearer understanding by citizens, municipal bond credit analysts and even public officials of a governmental body's financial health. Under GASB 77, as the rule is called, all governmental bodies will be required for the first time to disclose on their public, audited financial statements the annual cost of tax abatement for the reporting year. In addition, notes in the statements will explain the purpose of the programs, commitments made by recipients (such as pledges to create a specific number of jobs), and any ways those dollars might be recaptured — for example, if new income tax is coming in from jobs created by the abatement.