2016 ann arbor downtown market scan ann arbor downtown...

2016 Ann Arbor Downtown Market Scan

4WARD PLANNING INC. 1

Ann Arbor DowntownMarket Scan

POPULATION & HOUSEHOLDS 5

RETAIL & RESTAURANT 14

MULTIFAMILY 9

EMPLOYMENT & OFFICE 18

OVERVIEW 1

CONSTRUCTION COSTS 22

August 2016



Socio-Economic Snapshot & Trends•Downtown

Ann Arbor•City and MSA•Comparable

Downtowns

Near-Term Real Estate Needs•Multifamily

Housing•Retail SQFT•Office Space

• A current snapshot of socio-economic trends

• Near-term real estate needs (multifamily housing, retail stores, and office space) over the next five years

• Benchmarks that can be updated periodically and tracked over time

• Relative performance metrics that enable comparison of Downtown Ann Arbor with the City of Ann Arbor,the Ann Arbor Metropolitan Statistical Area (MSA), and other downtowns located in mid-size cities (between 80,000 and 200,000 residents) with a major university or college presence

• A dashboard for presenting available public and proprietary data in a graphic-friendly manner, permitting ease of interpretation and distribution

More detail on the methodology and boundaries used in this market scan are presented on the following pages.

OVERVIEW Purpose & Overview

The following 2016 Ann Arbor Downtown Market Scan provides the following:



OVERVIEW Geographies

DowntownChapel Hill, NC

DowntownBoulder, CO

Downtown Berkeley, CA

4ward Planning examined historical and expected socio-economic and real estate trends (for 2010, 2016, and 2021) to comparatively analyze Ann Arbor (DDA) District (hereafter “Downtown Ann Arbor”), the City of Ann Arbor, and the Ann Arbor Metropolitan Statistical Area (MSA) (contiguous with Washtenaw County).

For some metrics, Downtown Ann Arbor four district were analyzed (Kerrytown, Main Street, State Street, and South University). Where available, metrics were also compared to similarly-sized downtown areas, located in towns with a college presence (Berkeley, CA; Boulder, CO; and Chapel Hill, NC), in order to identify Downtown Ann Arbor’s relative performance.

Downtown Ann Arbor

City of Ann Arbor

Ann Arbor MSA

LOCAL MARKET AREAS COMPARABLE DOWNTOWNS



OVERVIEW MethodologyPopulation & Households

Population and household trends are derived from data provided by Esri’s Community Analyst (provides current year estimates and projections based on Census data). Current and near-term (next five years) population and household growth for Downtown Ann Arbor is derived from census and new construction occupancy rates provided by the Ann Arbor Downtown Development Authority (DDA).

Retail & Restaurant

Retail real estate inventory and trends are derived from data provided by Esri’s Community Analyst, Swisher Commercial, and LoopNet. New near-term retail and restaurant store demand was based on population data provided by the U.S. Census and Ann Arbor DDA, employment growth provided by the U.S. Bureau of Labor Statistics (BLS), retail sales per household provided by Esri, retail sales per square foot assumptions derived from BizStats, and retail capture based on known industry standards.

Multifamily Multifamily real estate inventory and trends are derived from City of Ann Arbor building permit data, Esri’sCommunity Analyst, HUD, the Bouma Group, and Zillow. Near-term housing needs (next five years) were estimated based on existing multifamily real estate inventory, household income trends, and demand drivers for the top ten tapestry segments within the MSA.

Employment & Office

Employment earnings data is collected from the Bureau of Labor Statistics (BLS) and Census’s OnTheMap. Office real estate inventory and trends are derived from data provided by Swisher Commercial, Esri’sCommunity Analyst, and LoopNet. New near-term office space demand was based on projected employment growth provided by the BLS, average office workers per industry provided by the National Association of Realtors (NCRER), and an assumption of 175 square feet of office space per office worker.

Construction Construction cost data is based on 2016 square-foot estimates by building type provided by RSMeans Online for the City of Ann Arbor. Estimates assume standard union labor and contractor and architectural fees. Historic and expected construction data is provided by CMD Group for the Ann Arbor MSA. Historic building permit data is provided by the City of Ann Arbor for the City.



POPULATION & HOUSEHOLDS Key Findings

Strong population growthAccording to building permit data provided by the City of Ann Arbor, an estimated 1,170 new housing units have been built inDowntown Ann Arbor since 2010, adding approximately 2,470 new residents. From 2010 to 2016, Downtown Ann Arbor grew by 8.2percent per year, compared to just 1.6 percent within both the City of Ann Arbor and the MSA, over the same period. Downtown AnnArbor also grew at a rate much faster than other downtowns located in mid-size cities with a major university or college presencelike Berkeley, Boulder, and Chapel Hill – where the downtown population grew approximately two to three percent per year, over thesame six-year period.

Growth in non-family households and age cohorts influence housing demandConsistent with national and regional trends, non-family households (a group of unrelated persons or a single person living alone)in Downtown Ann Arbor are growing at a faster rate than family households (includes married couples and other families, with orwithout children). This trend is even more pronounced within the City of Ann Arbor and MSA. With a median age of just over 24years, the population living currently in Downtown Ann Arbor is relatively young. The age groups forecasted to undergo the greatestgrowth in the region over the coming years include Older Empty Nesters (65 to 74) and Mostly Retirees (75+), and to a less extentYoung Workforce and Grads (25 to 34) and Early Stage Families (35 to 44), age cohorts that will influence short-term housingdemand, particularly for smaller units.

Relatively flat household incomesIn 2016, 73 percent of Downtown households earned less than $35,000 per year, although the median household income varies widely by age of householder. The low median household income in Downtown Ann Arbor (and Downtowns Berkeley and Chapel Hill) is likely due to the large student population with incomes supplemented by parents or student loans. The median household income in Downtown Ann Arbor is likely to increase as more market-rate housing in Downtown is developed and targeted to higher-income markets (e.g. younger workforce graduates and empty nesters).



960

2,470

3,430

680 740

2000-201010-yr Trend

(2.7%)

2010-20166-yr Trend

(8.2%)

2000-201616-yr Trend

(4.8%)

2016-2021Moderate

Growth(2%)

2016-2021StrongGrowth

(4%)

Trend Forecast

- 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000

Downtown Ann Arbor

Downtown Berkeley

Downtown Boulder

Downtown Chapel Hill

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Tota

l Pop

ulat

ion

POPULATION Growth

From 2010 to 2016, Downtown Ann Arbor’s population grew by 2,470 persons. If the population within

Downtown grows by between two and four percent per year through 2021

(a moderate to strong growth estimate based on local and regional demand drivers), downtown could

gain between 680 and 740 new residents.

Source: Esri, Ann Arbor DDA, 2016

Population per Sq. Mi.

Change (2010-2016)Population Annual

2014 2016 Change Growth Rate

Ann Arbor MSA 490 500 16,370 0.8%Ann Arbor City 4,100 4,170 5,710 0.8%Downtown Ann Arbor 11,910 15,430 2,470 8.2%Downtown Berkeley 20,650 21,470 530 1.7%Downtown Boulder 2,870 2,870 40 1.1%Downtown Chapel Hill 10,480 10,900 420 3.1%

Population Trends Downtown Ann Arbor Population Growth Rate Trends & Forecasts



POPULATION Age & Household Size

Median HH SizeAge (2016) Size (2016)

Ann Arbor MSA 34.3 2.4 Ann Arbor City 28.5 2.2 Downtown Ann Arbor 23.9 1.9

Downtown Berkeley 24.5 2.0 Downtown Boulder 31.3 1.5 Downtown Chapel Hill 22.2 3.6

-0.36%

-1.30%

-0.84%

0.36%

1.30%

0.84%

-2.0% -1.0% 0.0% 1.0% 2.0%

Downtown Ann Arbor

Ann Arbor City

Ann Arbor MSA

Non-Family HHsFamily HHs

Household Change by Type (2010 - 2016)

Population Change by Age Cohort (2016 - 2021)

Source: Esri, 2016

0.9%1.6% 1.2%

3.2% 3.3%

-0.3%

2.4%

6.0% 5.5%

-2%-1%0%1%2%3%4%5%6%7%

Pre-School-AgeChildren

(0-4 years)

Grade School-Age Children(5-14 years)

High School &College-Age

(15-24 years)

Young Workforce& Grads

(25-34 years)

Early StageFamilies

(35-44 years)

Late StageFamilies

(45-54 years)

Young EmptyNesters

(55-64 years)

Older EmptyNesters

(65-74 years)

Mostly Retired(75+ years)

Annu

aliz

ed %

Cha

nge

Downtown Ann Arbor City of Ann Arbor Ann Arbor MSA



$0.0$10.0$20.0$30.0$40.0$50.0$60.0$70.0$80.0$90.0

$100.0

College-Age orYounger (<24

years)

Young Workforceand Grads

(25-34 years)

Early StageFamilies

(35-44 years)

Late StageFamilies

(45-54 years)

Young EmptyNesters

(55-64 years)

Older EmptyNesters

(65-74 years)

Mostly Retired(75+ years)M

edia

n Ho

useh

old

Inco

me

(000

’s)

Ann Arbor MSA

Ann Arbor City

Downtown Ann Arbor

73%36% 30%

63%44%

78%

0%

20%

40%

60%

80%

100%

DowntownAnn Arbor

Ann ArborCity

Ann ArborMSA

DowntownBerkeley

DowntownBoulder

DowntownChapel Hill

Perc

ent o

f Hou

seho

lds

< $35.0K$35K to $74.9K$75K to $99.9K$100K to $149.9K>$149.9K

POPULATION Household Income

Source: Esri, 2016

In 2016, 73 percent of Downtown Ann Arbor households earned

less than $35,000 per year, with median household income

varying widely by age of householder.

Households by Income Category (2016)

Median Household Income by Age of Householder (2016)

Median HH Income Est. % Change(2016) (2021) (2016-2021)

Ann Arbor MSA $60,940 $69,930 15%Ann Arbor City $52,450 $58,390 11%Downtown Ann Arbor $17,470 $17,990 3%

Downtown Berkeley $21,400 $20,760 -3%Downtown Boulder $42,650 $41,520 -3%Downtown Chapel Hill $15,590 $16,840 8%



MULTIFAMILY Key Findings

Strong rental and up-and-coming condo marketAccording to data provided by Padmapper and Zillow, average asking apartment rents in Downtown Ann Arbor have increased by 12 percent in the past two years ($1,540 in 2014, to $1,720 in 2016), while average asking condo sale prices according to data provided by the Bouma Group increased by 14 percent (from $335 to $382 per square foot), over the same period. According to a Second Quarter 2016 Marcus & Millichap report, demand for rentals in the Ann Arbor MSA remains robust, as job opportunities attract new residents to the region, and demand for an urban lifestyle continues to grow.

$1,480 for a one-bedroomAccording to data provided by Esri, approximately 81 percent of occupied units within Downtown Ann Arbor are renter-occupied --higher than Downtown Boulder (62 percent) but lower than Downtown Berkeley (96 percent). According to rental data provided byZillow, the average asking rent for a one-bedroom apartment in Downtown Ann Arbor was approximately $1,480. A one-person, low-income household earning between 50 percent and 80 percent of Ann Arbor MSA’s 2014 Area Median Income (AMI) would need to spend no more than $775 and $1,150 per month in order to not be considered cost-burned by HUD – a rent lower than the average rent for a one-bedroom apartment in Downtown Ann Arbor. Lower-income households not receiving subsidies (e.g., parental income or section eight vouchers) are likely priced out of the current Downtown housing market.

Demand for between 1,140 and 1,530 new apartment units by 2021In addition to the 470 units currently in the pipeline (under construction or approved but not built), there will be demand for between 1,140 and 1,530 new housing units in Downtown Ann Arbor by 2021, due to new households and pent-up demand from workers living outside the area desiring housing in Downtown Ann Arbor. Based on input from Esri top tapestry segments with propensity for multi-family housing, approximately 65 percent of new near-term multifamily housing demand will likely be for rental units and 50 percent of this demand will be from households earning less than $40k per year. While socio-economic factors like household income and housing preferences typically drive housing demand, additional factors like building and land costs, andzoning requirements also influence the type and price of housing that developers are willing to construct.

cknight

cknight



-

100

200

300

400

500

- 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

New

Uni

ts

Tota

l Hou

sing

New Housing BuiltTotal Housing

MULTIFAMILY Development

Downtown Development Under Approved(2010-2016) Built Constr. Not Built Total Percent

Apartments 1,142 - 470 1,612 97%Condos 25 22 - 47 3%Single Family 1 - - 1 0%

Total 1,168 22 470 1,660 100%(Affordable Units) 19 6 - 22 2%

Percent Downtown Workers that Live Downtown (2014)

Downtown Ann Arbor Residential Development Between 2010 and 2016,

1,168 new apartments and condoswere built in Downtown Ann Arbor.

Source: Building Permit data, DDA, 2016

12%

3%

18%

15%

81%

96%

62%

76%

7%

1%

20%

9%

Downtown AnnArbor

DowntownBerkeley

DowntownBoulder

DowntownChapel Hill

Owner-OccupiedRenter-OccupiedVacant

Housing Tenure (2016)

45% 21% 0.9% 1.3%

DowntownAnn Arbor

DowntownBerkeley

DowntownBoulder

DowntownChapel Hill

Live AND Employed in AreaLive in Area, Employed OutsideEmployed in Area, Live Outside



$1,188

$1,515

$400

$900

$1,400

$1,900

2010 2011 2012 2013 2014 2015 2016Aver

age

Aski

ng R

ent

1 Beds2 Beds

Based on average asking rents and condo sales prices,much of the available apartment and condo inventory inDowntown Ann Arbor is unaffordable to lower-incomehouseholds. Assuming an affordable rent is less than 30percent of a householder’s monthly income, averageasking rents in Downtown Ann Arbor ($1,720) are notaffordable to households earning less than $40k per year(an affordable rent would be less than $1,000 per month).

$587,514

$420

$0

$200

$400

$600

$0

$200,000

$400,000

$600,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

Pric

e/SF

Aver

age

Sale

Pric

e Avg Sale Price Price/SF

MULTIFAMILY Rents & Sale Prices

Condo Market Trends: Downtown Ann Arbor

Sources: Esri, HUD, Bouma Group, Zillow, Pad Mapper

Ann Arbor MSA Affordable Rents(30% of household income)

50% of AMI 80% of AMI1-Person HH $775 $1,150 2-Person HH $885 $1,315 3-Person HH $996 $1,479 4-Person HH $1,106 $1,643

Average Asking Rent Trends: City of Ann Arbor Downtown Apt. Asking Rents2014 2016 % Change

Studio $1,090 $1,300 19%1 Bdr. $1,520 $1,480 -3%2 Bdr. $1,900 $2,240 18%3 Bdr. $2,380 $1,890 -21%Average $1,540 $1,720 12%

Downtown Condo Prices (per Sqft))2014 2016 % Change

State Street $315 $311 -1%Main Street $323 $387 20%Kerrytown $354 $448 26%South University NA NA NAAverage $335 $382 14%



The chart below compares the share of households across geographies by the top ten Tapestry Segments with most propensity to live in multi-family housing (typically found in downtowns), along with notable socio-economic characteristics. Given their strong presence within the MSA (and within comparable college towns), successful housing development in Downtown Ann Arbor should consider the needs and preferences of these top socio-economic groups.

Source: Esri; 4ward Planning Inc., 2016

Dorms to Diplomas Emerald City

College Towns Metro Renters

Young and Restless Golden Years

Enterprising Professionals

Professional Pride

Social Security Set Bright Young

MULTIFAMILY Top Tapestry Segments

87% 80%100%

7% 21%

36%

56%

6%

DowntownAnn Arbor

DowntownBerkeley

DowntownBoulder

DowntownChapel Hill

Top Tapestry Segments, 2016



150 380

690 310

110 280

510

230

Studio. (10%) 1 Bdr. (25%) 2 Bdr. (45%) 3 Bdr. (20%)

Assuming population in Downtown Ann Arbor continuesto grow between two and four percent per year (andemployment by 1.2 percent), by 2021, there will be netdemand for between 1,140 and 1,530 new multifamilyhousing units, from both new household growth andpent-up worker demand. Although demand will vary byhousehold income, bedroom type, and tenure, much ofthe short-term housing demand will come fromhouseholds with incomes below $75k per year.

MULTIFAMILY Supply & Demand

Net Apartment Unit Demand by…

Household Income Category

Bedroom Type Housing Tenure

2021 New Apartment Demand by Tenure

Source: 4ward Planning Inc.

400

740 530

990

For Sale (35%) Rental (65%)

760 610

150 570

460 110

<$39.9k (50%) $40-$74.9k (40%) >$75k (10%)

Strong Pop Growth (4%)

Moderate Pop Growth (2%)

Downtown Ann Arbor Apartment Demand

By 2021Pop. Growth

Rate Scenarios(2%) (4%)

Pent-Up Worker Demand 930 930 Household Demand 3,820 4,210

Total Housing Unit Demand 4,750 5,140 Naturally Occuring Vacant Units 190 190

Net Marketable Housing Units 3,820 4,210Net Housing Unit Demand 1,140 1,530



Key Findings: RETAIL & RESTAURANT

$29 to $40 per square footAccording to July 2016 data provided by LoopNet, there was approximately 49,500 square feet of vacant street retail, restaurant and regional center in Downtown Ann Arbor, with average asking rents for vacant retail space approximately $35 per square foot per year. Average rents varied by district, from $30 per square foot within the Main Street District to $40 per square foot in the South University Street District. Average asking rents for retail space within other comparable downtown areas were lower withinDowntowns Boulder and Chapel Hill ($27 per square foot) and higher within Downtown Berkeley ($46 per square foot).

Increasing retail demand from new Downtown householdsIn 2016, the average Downtown Ann Arbor household spends $580 per month on selected retail trade goods and services, approximately 44 percent of the average monthly household spending within the MSA ($1,290 per month) but $14 more per month than what Downtown households spent in 2013. Given lower-than-average retail spending from existing Downtown Ann Arbor residents, existing retail stores and restaurants in Downtown Ann Arbor are likely capturing retail sales from the larger City or MSA households. As a greater supply and variety of housing is developed in Downtown Ann Arbor, and more middle- and upper-income households move into the area, average Downtown household spending on retail goods and restaurants will likely increase, supporting additional retail establishments - especially limited- and full-service restaurants.

Potential to capture retail demand from larger trade areasAccording to 2016 data provided by Esri, Downtown Ann Arbor’s retail trade and food and beverage establishments drew nearly $207 million in sales from shoppers residing outside the immediate Downtown trade area – a trend also experienced in other comparable downtowns (a retail sales surplus of $77 million in Downtown Chapel Hill to $224 million in Downtown Boulder). Although the existing supply of retail stores in Downtown Ann Arbor meets local retail demand from current Downtown residents, there is a leakage of retail demand not met within the larger City and MSA that could potentially be captured by existing or newDowntown businesses. Furthermore, strong household, employee, and retail sales growth projected to continue through 2021 within Downtown will have the potential to support new retail stores.



Key Findings: RETAIL & RESTAURANT

In 2016, 29 percent of all businesses in Downtown Ann Arbor consisted of retail trade

and food and drinking establishments.

16% 15% 14% 14% 17%

12%

14% 8%7% 14% 8%

24%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

DowntownAnn Arbor

Ann ArborCity, MI

Ann ArborMSA

DowntownBerkeley

DowntownBoulder

DowntownChapel Hill

Perc

ent o

f All

Busi

ness

es

InformationReal Estate, Rental & LeasingFinance & InsuranceEducational ServicesAdmin. & Support ServicesOther Services (except Public Administration)Food Services & Drinking PlacesRetail TradeHealth Care & Social AssistanceProfessional, Scientific & Tech Services

Downtown Retail Asking Rents (2016)

Main Street District $29.80 per SqftState Street District $36.50 per SqftKerrytown District $31.80 per SqftS. University District $40.00 per Sqft

Downtown Ann Arbor $34.70 per SqftDowntown Berkeley $45.80 per SqftDowntown Boulder $27.00 per SqftDowntown Chapel Hill $27.00 per Sqft

Sources: Esri, LoopNet, Colliers International, Downtown Boulder BID

Top 10 Business Categories (2016)



Key Findings: RETAIL & RESTAURANTMonthly Household Spending (2016)

Source: Esri, 4ward Planning Inc.

In 2016, the average Downtown Ann Arbor household spends $580 per month on

selected retail trade and food and beverage goods and services,

approximately 44 percent of what the average MSA household spends but $14 per month more than what the average Downtown households spent in 2013.

Retail Surplus Retail Retail (+) Surplus/(2016, $ Millions) Potential Sales (-) Leakage

Ann Arbor MSA $6,197 $4,988 -$1,209Ann Arbor City $1,953 $1,789 -$164Downtown Ann Arbor $45 $252 $207Downtown Berkeley $58 $172 $114Downtown Boulder $18 $242 $224Downtown Chapel Hill $6 $83 $77

Monthly Household Spending Trends (2013-2016)

$6

-$1

-$12

$23

-$2

$14

-$60 -$40 -$20 $0 $20 $40 $60

Groceries

Dining Out

Entertainment& Recreation

Apparel & Services

Personal Care

Total

Average Monthly Household Spending Change

Ann Arbor MSA Ann Arbor City Downtown Ann Arbor

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

DowntownAnn Arbor

Ann ArborCity

Ann ArborMSA

DowntownBerkeley

DowntownBoulder

DowntownChapel Hill

Groceries Dining OutEntertainment & Recreation Apparel & ServicesPersonal Care



Key Findings: RETAIL & RESTAURANTDowntown Retail Supply/Demand (2016 - 2021)

Source: Esri, 4ward Planning Inc.

6,300

4,400 3,600 3,100

1,700 1,200 1,200 1,000 400 400 -

1,000

2,000

3,000

4,000

5,000

6,000

7,000

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

Squa

re F

eet

Reta

il Sa

les

(Mill

ions

)

Existing Retail Sales (Millions)Potential Retail Sales (Millions)New Supportable Space (Sqft)

2021 Retail Demand Factors

900 New Downtown Residents2,500 New Downtown Workers5,100 New City Population

14,090 New MSA Population113,400 New Supportable Retail Space (Sqft)



EMPLOYMENT & OFFICE Key FindingsGrowth in Downtown earnings and employmentThe share of Downtown Ann Arbor workers earning more than $40k per year increased from just 37 percent in 2005 to 46 percent in 2014 – indicating an overall increase in earnings among workers. According to data provided by the Ann Arbor DDA, between 2012 and 2016, approximately 1,260 new jobs were added to Downtown Ann Arbor, with total employment growing by approximately 1.2 percent per year, over the four-year period. Based on job estimates from the Ann Arbor DDA and the University of Michigan for the Ann Arbor campus, there are currently approximately 29,310 jobs within Downtown Ann Arbor.

$25 to $28 per square footAccording to data provided by LoopNet, average asking rents for office space in Downtown Ann Arbor are nearly $26 per square foot per year, with average asking rents lower within the Main Street district ($25 per square foot per year) and higher within the State Street district ($28 per square foot per year). Average asking office rents are lower within Downtown Ann Arbor, compared to the other comparable downtown areas.

Declining office vacancies in DowntownAccording to year-end 2015 data provided by Ann Arbor real estate firm Swisher Commercial, there is approximately 1.7 million gross square feet of leasable office space within Downtown Ann Arbor – with just 335,370 square feet of this office space currently vacant (2.1 percent vacancy rate). According to Swisher’s office vacancy reports, the rapid growth of high-tech firms with a desire to locate Downtown is a significant reason for the scarcity of office space.

250,000 to 300,000 square feet of office space Based on estimated job projections for selected top industries in Downtown Ann Arbor, there will be demand for between 250,000 to 300,000 square feet of office space by 2021. While some of this office space demand will likely be met by the 335,370 square feet of office space currently vacant, new office space may need to be developed to accommodate near-term office demand.



33%12% 20%

42%

34% 39% 41%14%

Downtown AnnArbor

Downtown Berkeley Downtown Boulder Downtown ChapelHill

Less than $20K $20k-$30k$30k-$40k $40k-$50k$50k-$60k More than $60k

37%

46%

0%

10%

20%

30%

40%

50%

60%

70%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Perc

ent o

f Wor

kers

Downtown Ann Arbor Downtown Berkeley

Downtown Boulder Downtown Chapel Hill

EMPLOYMENT Primary Jobs and Earnings

Jobs per Sq. Mi.

Jobs:Housing

RatioEmployment

Jobs(2016)

Downtown Ann Arbor 29,310 69,790 8.5 Downtown Berkeley 9,280 37.120 3.5 Downtown Boulder 11,060 55,300 24.2 Downtown Chapel Hill 3,610 15,700 9.4

Worker Earnings (2016)

Workers Earnings More than $40k per Year

Source: Esri, U.S. Census Bureau, OnTheMap, Ann Arbor DDA

27,000

27,500

28,000

28,500

29,000

29,500

0

100

200

300

400

500

600

2012 2013 2014 2015 2016

Tota

l Job

s

New

New Businesses New Jobs Total Jobs

Downtown Ann Arbor Job and Business Growth



0%

3%

6%

9%

12%

15%

18%

21%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Downtown Total Market Average

EMPLOYMENT Office Inventory & Rents

Downtown, 1,667,744

Ann Arbor City,

9,161,076

Ann Arbor Leasable Office Space (Sqft, 2015)

Office Asking Rents (July 2016)

Main Street District $24.90 per SqftState Street District $28.20 per SqftKerrytown District $26.00 per SqftS. University District NA per Sqft

Downtown Ann Arbor $25.50 per SqftDowntown Berkeley $34.60 per SqftDowntown Boulder $36.20 per SqftDowntown Chapel Hill $29.20 per Sqft

Office Vacancy Trends

Sources: Swisher Commercial, Loopnet

(15%)

(85%)



EducationalServices

Health Care& Social

Assistance

Admin. &Support

Prof.,Scientific &

Tech

Accommod.& Food

Services

Finance &Insurance Retail Trade Information

Potential New Jobs 902 650 589 306 253 195 162 146Potential New Demand (Sqft) 89,557 54,594 36,215 47,779 3,283 32,806 6,523 17,752

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

-

100

200

300

400

500

600

700

800

900

1,000

Pote

ntia

l New

Dem

and

(Sqf

t)

Pote

ntia

l New

Jobs

2021 Office Demand Factors

3,000 - 3,500 Potential New Jobs (Top 10 Industries)1,500 - 2,000 Potential New Office Workers

250,000 - 300,000 Potential New Office Demand (Sqft)(@ 175 Sqft per Office Worker)

EMPLOYMENT Office Supply & DemandDowntown Ann ArborProjected Employment Growth& Office Space Demand:Selected Industries (2016 - 2021)

Source: NCRER, U.S. Bureau of Labor Statistics, 4ward Planning Inc., 2016



CONSTRUCTION Key Findings

3 million square feet of new development in 15 yearsBased on Building Permit data provided by the City of Ann Arbor, between 2000 and 2015, nearly three million square feet ofresidential and non-residential space has been developed within Downtown Ann Arbor. Most notably, mixed-use developmentprojects composed more than half of this square footage (nearly 1.8 million square feet).

Stable over the next four yearsAccording to construction data provided by CMD Group, approximately 3.4 million square feet of retail, hotel, office, and multi-family space was built in the Ann Arbor MSA from 2010 to 2015. Based on second quarter 2016 construction start data and key short-term demand factors (e.g. population, employment, income, etc.), CMD Group expects that another 2.4 million square feet of new retail, hotel, office, and multi-family space will be built within the MSA by 2020.

Construction costs range from $140 to $230 per square footAccording to second quarter 2016 data provided by RSMeans, per square foot construction costs in the City of Ann Arbor rangewidely by development type. For example, a 16-story, 260,000 square foot office building (steel framing) costs $140 per squarefoot to build ($36.5 million in building costs), while a three-story, 20,000 square foot office building (green building construction,steel framing) costs $229 per square ($4.5 million in building costs).

Construction costs comparable to the national averageAccording to 2016 City Cost Indexes data provided by RSMeans, Ann Arbor’s total construction cost index (101) is comparable tothe national average and not an obvious barrier to building in Downtown Ann Arbor. In comparison, Berkeley’s city cost index is17 points higher than the national average, and Chapel Hill’s city cost index1 is 19 points lower.

1 The City of Raleigh, located outside of Chapel Hill, was used since City Cost Index data for Chapel Hill was not available at this level.



0

100,000

200,000

300,000

400,000

500,000

600,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Area

in S

qft.

Mixed-UseMulti-family ResidentialOfficeRecreationalRestaurantRetailIndustrial

CONSTRUCTION Downtown Development

Between 2000 and 2015, nearly 3 million square feet of residential

and non-residential space was developed within Downtown Ann Arbor.

Development Projects: Downtown Ann Arbor

Source: City of Ann Arbor, Building Permits

Development Projects (2000 - 2015)

Sqft. PercentMixed-Use 1,707,309 51.5%MF Residential 967,104 23.8%Office 167,145 13.7%Recreational 78,371 6.9%Restaurant 32,385 12.3%Retail 26,340 1.7%Industrial 14,154 0.1Total 2,992,808 100%



2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Hotels - 237,623 - 60,185 - 174,218 161,127 139,604 135,344 134,406 130,175Multi-Family 74,642 150,000 219,236 246,242 1,229,413 171,647 53,957 115,758 121,475 126,173 127,802Offices 4,670 - 42,258 10,000 2,451 101,960 91,303 148,336 134,805 141,930 144,379Retail 14,030 149,522 72,000 84,646 352,680 64,655 77,377 171,171 174,271 179,410 182,237

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Area

in S

qft.

Hotels Multi-Family Offices Retail

CONSTRUCTION Metro Development

According to construction data provided by CMD Group, approximately

3.4 million square feet of retail, hotel, office, and multi-family space was built in the Ann Arbor MSA

from 2010 to 2015, and another 2.4 million square feet

of similar residential and non-residential space is expected

to be built by 2020.

Construction Trends and Forecasts: Ann Arbor MSA

Source: CMD Group, Q3 2016 Forecast. Actual starts through Q2 2016. Last Updated: July 31, 2016.

Historical Forecast

Construction Starts: MSAHistoric Forecast

2010-2015 2016-2020

Retail 737,533 707,089 Hotel 472,026 700,656 Office 161,339 569,450 Multi-Family 2,091,180 491,208 Total 3,462,078 2,468,403



$168 $170$197

$163

$229

$149$182 $140

$182$152

$181

$0$50$100$150$200$250

Low-Rise(3-story,

22,500 Sqft,brick/steel

frame)

Mid-Rise(6-story,


frame)

High-Rise(15-story,


frame)

Office(3-story,

20,000 Sqft,steel frame)

Office (Green)(3-story,


Office(8-story,




Office(16-story,




DepartmentStore

(3-story,95,000 Sqft,brick/steel

frame)

Hotel(6-story,


frame)

APARTMENT OFFICE RETAIL

$0$10$20$30$40$50

Cost

per

Sqft

Cost

s (M

illio

ns)

Total Building Cost

Cost per Sqft

National Avg.

Ann Arbor, 101.6

Berkeley, 116.7

Boulder, 90.8

Chapel Hill (Raleigh),

81.0 75

80

85

90

95

100

105

110

115

120

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

CONSTRUCTION Cost Indexes and Estimates

Over the past decade, Ann Arbor’s city cost index has been similar to the national

average, while Berkeley’s index has been much higher and Chapel Hill’s index has been much

lower. Ann Arbor’s city cost index suggests that construction costs are not obvious barriers to

building in Downtown Ann Arbor.

In Ann Arbor, construction costs for selected building types range from approximately

$140 to $200 per square foot.

City Cost Indexes

Average Construction Costby Building Type (2016)

Source: RS Means Online, 4ward Planning Inc., 2016



General & Limiting Conditions4ward Planning Inc. has endeavored to ensure that the reported data and information contained in this report arecomplete, accurate, and relevant. All estimates, assumptions, and extrapolations are based on methodological techniquesemployed by 4ward Planning Inc. and believed to be reliable. 4ward Planning Inc. assumes no responsibility forinaccuracies in reporting by the client, its agents, representatives, or any other third-party data source used in thepreparation of this report.

Further, 4ward Planning Inc. makes no warranty or representation concerning the manifestation of the estimated orprojected values or results contained in this study. This study may not be used for purposes other than that for which it isprepared or for which prior written consent has first been obtained from 4ward Planning Inc. This study is qualified in itsentirety by, and should be considered in light of, the above limitations, conditions, and considerations.

Limiting Conditions & Contact Information

For more information, please contact:Todd [email protected]

2016 ann arbor downtown market scan ann arbor downtown...

Documents