New business is good business, and the economy is improving every year. NAI Global specializes in commercial retail services all around the world and has provided a list of the ten best markets for developers. This ranking is in conjunction with its 2006 Global Market Report* which assesses market data on over 200 markets around the world. These top ten cities all share low unemployment rates, low vacancy and increasing lease and rent prices. The West Coast appears to have some of the best prospects, as California leads all other states with four regions in the top ten and “explosive” business erupting in nearby Nevada. Nevertheless, New York was able to grab the number one spot, with the highest rents in the country.
Rent is quoted according to the 2005 effective average rent per square foot.
1. NEW YORK — MIDTOWN
The most populated city in the country commands the number one ranking for developing markets. Midtown is the core commercial area and extends from 40th street to 59th street, between Third and Ninth Avenues, and includes the high luxury market on Fifth Avenue that houses Gucci, Fendi and Bergdorf Goodman. Asking rents jumped nearly $2 per square foot, and though the area hosts a strong presence for retail, law and financial service firms ultimately drive the market, headed by law powerhouse McDermott and Bank of America.
2. WASHINGTON, D.C.
The political capital of the country is quickly becoming the center for retail market expansion. Construction of new buildings in the area is escalating, leading to heavy interest for many speculative projects such as a proposed stadium site for the upcoming Washington Nationals. Target Corp., always seeming to be in the right place at the right time, has a new store scheduled to open in 2007 in Columbia Heights, while H& M starts the apparel trend in Metro Center.
3. ORANGE COUNTY, CALIF.
Orange County is drawing a lot of attention. The latest “hot spot” for television with shows such as “The O.C.” and “Laguna Beach,” has drawn many spring breakers. Though the county lacks one central business district, retailers are spreading out into many corridors, resulting in lower vacancy and higher lease rates. Growth is fueled by the diversity in industry, high port activity, international trade, and the introduction of high-tech businesses in the area.
4. SAN FRANCISCO
Overall vacancy is down more than 3 percent and asking rents have increased more than 10 percent since last year and they are expected to continue to increase throughout 2006. This hasn’t slowed any of the large projects planned for this year, including the scheduled fall 2006 opening of the Bloomingdale’s center, a 666,000 square foot space divided evenly between Bloomie’s and specialty retail space. There have been many changes in leasing as well, such as the acquisition of the Prada Headquarters building by British realtor Grosvenor Group.
5. LOS ANGELES
Los Angeles is the third California market in NAI Global’s top five rankings, and the metropolis shows a strong, steady retail and industry market for 2006. Per-square-foot prices are at an all-time high, with the luxurious 90210 zip code boasting property trade over $600. For the majority of retailers though, the L.A. Basin is the most coveted area with a $56 billion in retail sales for 2005. “Super” superstores Target and Wal-mart are expanding into the neighborhood districts, driving competition and rental rates even higher.
Miami business is booming, attracting many new projects, even though there is little space to build. NAI Global determined in 2005 that the community was “built out,” but retailers continue to flock down south regardless of rising rent prices. Luxury retailers in particular are showing the most interest; WWD reported earlier this month Dolce & Gabbana’s 20th anniversary celebrations in Miami, quoting president Glenn McMahon as saying, “Miami is very important to us because it continues to enjoy double-digit increases.”
7. SAN DIEGO
The San Diego economy is a key factor in California’s success in the development market. Driven by the city’s expertise in biotechnology, wireless communications and tourism, construction increased rapidly throughout 2005. For retailers, downtown is the hottest spot, especially the areas of Gaslamp Quarter and Little Italy, with higher rents per-square-foot than the rest of the county; at $60 compared to $36.
Chicago disproves the notion that you have to be coastal to be successful. 2005 showed market stability with a consistently low unemployment rate, which attracts many people to the Midwest. The service industries are benefiting most from this population increase — the trade and transportation industry as well as the leisure and hospitality industry show the most growth — with “quick serve” casual theme restaurants, banks and drugstores popping up throughout the city.
9. PALM BEACH COUNTY, CALIF.
“If you build it, they will come.” The rapid growth of the residential market resulted in a second year of more than 30 percent in home sales. By the end of 2005, Palm Beach reported over 5,000 condominium units in the works; the population increase is driving employment, land prices and construction costs sky high. Leasing prices are increasing as well, particularly in the newly opened downtown Palm Beach Gardens, which consists of 340,000 square feet of entertainment and specialty retail.
10. LAS VEGAS
Though it currently is tenth in NAI Global’s ranking, Vegas is expected to climb further up the list well before the end of 2006. Virtually all areas in Vegas are witnessing explosive growth in home, office and retail space. Most of the revenue in 2005 came from rising room rates, and increasing efficiency in casinos due to new technology. Retailers and buyers dominated the city this month for the annual MAGIC show, which exhibited a continuance of BOHO trends and embellished denim for the upcoming season.
Source: NAI Global’s 2006 Global Market Report
*For full coverage of the 2006 Global Market Report, see the WWDList in today’s WWD.