Fringe Markets
United States | 2017
Fringe Markets Insight
Urbanization. It’s a massive trend.
Urban dwellers outnumbered rural dwellers worldwide for
the first time since 2007.
Since then, the country-to-city trend has picked up pace.
More than 54% of the world’s population now live in urban
areas and global demographic estimates suggest that
more than one million people move into cities every week.
54%
In 2017, more than
of the world’s
population live in urban areas.
Such a huge demographic shift causes obvious
infrastructure headaches for urban planners and
municipalities, but it also can have a positive impact. In the
U.S., the urban population shift is helping revitalize and
reinvent formerly dilapidated outskirts of many cities. The
fringe locations of these former ‘ghost towns’ are actually
an asset, offering a wider range of uses than the 9-to-5
coffee shops and office buildings often found in many city
centers. Living on the fringe, you’ll likely find great
restaurants, innovative office buildings, walkable
neighborhoods and inspiring residential communities as
well as access to parks, transit and other key amenities.
What’s most interesting is that this trend is happening in
markets from coast to coast, not just in major cities.
East Coast
2
Fringe Markets Insight | United States | 2017
Wynwood/Midtown/Design District,
Downtown Durham,
Office tenants eye Miami’s new cultural nexus
Big tobacco makes way for big tech
A few miles inland from Miami Beach an emerging chain
of vibrant micromarkets spanning from the southeast
corner of Buena Vista to Wynwood in the south are
gathering commercial momentum. In Wynwood, graffiti art
and food trucks merge with cool, converted industrial
spaces housing tech and other non-traditional firms. Luxury
retail boutiques and gallery showrooms line the streets in
the aptly-named Design District. In Midtown, mixed-use
and retail developments foster a live-work-play
environment. Planned office projects set to deliver in 2018 - such as RedSky Capital’s CUBE Wynwood, the area’s first
office tower – could help the area’s supply meet
heightened demand.
Durham is almost unrecognizable today from the big
tobacco and textile town it once was. Vacant factories and
warehouses—vestiges of its bygone agri-industrial past -have given way to creative collaboration and coworking
spaces. American Underground, located in the
redeveloped American Tobacco Campus and is home to
more than 200 startups. The city’s emerging innovation
cluster is supported by nearby Duke University, itself an
anchor to North Carolina’s larger Research Triangle Park.
Duke’s reputation as a world-renowned academic medical
center and the Triangle’s research infrastructure fuel a
burgeoning local life sciences segment. Redevelopments—
like The Chesterfield, a specialized lab environment in a
former cigarette factory near Brightleaf Square —are set to
meet this demand and new office projects may follow.
Downtown’s Class A office vacancy rate nears a record low
of just 1.1 percent, and overall asking rents have climbed by
15.8 percent since 2015.
Miami
Raleigh-Durham
East Coast
3
Fringe Markets Insight | United States | 2017
Shockoe Bottom & Scotts Addition,
South End,
Breweries and baseball recreating history
Historic charm meets modern convenience
Renewed interest abounds in Shockoe Bottom—
Richmond’s antebellum warehousing and trade district.
Spurred by tax incentives, developers are repurposing the
area’s low-cost historic buildings as hip alternatives to
downtown Richmond’s traditional stock. One example is
The Edgeworth Building, a former tobacco factory recast by
developers to offer modern amenities, office, retail space
and parking for prestige tenants including Hirschler
Fleischer, Ernst & Young, and HKS Architects. A few miles
north, a similar redevelopment dynamic is unfolding in
Scott’s Addition, a manufacturing district incorporated into
the National Register of Historic Places in 2005. Today,
Scott’s Addition is one of Richmond’s largest industrial and
commercial areas and multifamily housing has flourished
thanks, in part, to the district’s breweries and nightlife. The
area is also home to the new Washington Redskins training
facility, the Diamond - Richmond’s minor league baseball
stadium and nearby Virginia Commonwealth University.
The iconic HandCraft building—a former 1940’s art deco dry
cleaning facility turned office and brewery—and The
Symbol, a ground-up development which contains luxury
apartments and commercial space, exemplify the district’s
new image.
The revitalization of Charlotte’s South End is more about
reinvention than rebirth. Like most fringe markets, the
South End is a former industrial district that has embraced
the live-work-play trend and today offers restaurants, arts,
and culture for residents and employees. The area is
supported by Lynx, Charlotte’s light rail which takes
passengers from Uptown to South End along South
Boulevard, the neighborhood’s main artery. Two creative
office projects, 300 W. Summit and 2100 S. Tryon, are
expected to break ground in the next 18 months adding
another 147,000 square feet to an office market with a
vacancy rate of just 3.6 percent and almost 70 percent
preleasing for the 180,000 square feet currently under
construction. Other notable projects include Lennar’s
redevelopment of the old Pepsi bottling plant into
residential and office, as well as Marsh Properties’ and
Aston Properties’ redevelopment of the Sedgefield
Shopping center along South Boulevard.
Richmond
Charlotte
West Coast
4
Fringe Markets Insight | United States | 2017
Uptown,
Close In Eastside,
Creative people, places, and spaces
Mixing hip with historic
The American Planning Association’s choice as the hottest
neighborhood of 2014, Uptown is culturally diverse, artistic,
and harbors an entrepreneurial spirit unique to the city.
The formerly quiet commercial neighborhood has
witnessed a renewed emphasis on residential development
in the last few years, making it a true live-work-play
environment. Creative developments such as The Hive, the
adaptive reuse of a city block of historic industrial
structures into a social impact coworking space, a
microbrewery, restaurants, and a bakery, plus 105
residential units and a large event plaza are indication of
Uptown’s changing face. Office rents have skyrocketed by
more than 41 percent in the last 12 months, from $36.49 to
$51.51 per square foot but are still highly attractive when
compared to San Francisco. Uptown’s renaissance was
fueled, in part, by companies fleeing San Francisco’s high
priced office market and, despite a recent respite in the
pace of rent growth across the Bay, Uptown is positioned to
continue to appeal to a wide range of tenants.
Portland’s original Meatpacking District now is a hotbed of
creative activity with robust demand and exceptional rent
growth. Rich in history, the Close In Eastside has a solid
inventory of multi-story industrial buildings that meet the
aesthetic in demand from start-ups, creative and tech
companies: high ceilings, exposed wood beams and heaps
of character. Cases in point: the redevelopment of
Washington High School and One North buildings in 2014
and Clay Creative in 2016. Two local tenants leased virtually
all of the revamped high school building within six months
of delivery, and financial services company Simple took up
most of Clay Creative, a former warehouse that burned and
rose again from the ashes thanks to developer Killian
Pacific. Office vacancy in the submarket is now at 4.9
percent, down from a high of 9.3 percent in 2011. And, with
even less high quality product in inventory, the vacancy is
expected to remain low. Since 2014 overall asking rents
have increased 50.7 percent, and the recent surge in new
construction commands asking rents as high as $28.00$30.00 NNN. To keep pace with the increasing demand, the
City of Portland continues to designate key properties in
Close In Eastside and nearby for redevelopment, and a new
comprehensive plan update – Central City 2035 – proposes
to designate at least part of the Close In Eastside within the
city’s new “Innovation Quadrant.”
Oakland
Portland
West Coast
5
Fringe Markets Insight | United States | 2017
RiNo Arts District,
Downtown Arts District,
Culinary scene sparks urban renewal
Where art and industry live in harmony
Denver’s River North Arts District (RiNo) is flourishing due to
a confluence of urban revival, special tax districts, and a
thriving arts community. A 19th century iron foundry is now
a 25,000+ square foot specialty food market dubbed The
Source, home to locally-sourced food vendors and bakers,
hand-crafted spirit shops, microbreweries and other foodie
startups. Nearby, a 100-room boutique hotel is slated to
open in early 2017 and at least one upscale residential
community will break ground in the next few months.
These projects, and Zeppelin Station—a market hall and
office space— belong to Zeppelin Development, a fatherson team integral in securing special tax districts for RiNo in
2015 and prompting the neighborhood’s real estate revival.
Another addition to the district is the Denver Central
Market, which opened last September as the premier
showcase for Denver’s evolving culinary scene. And, in
keeping with RiNo’s image as a place where art is made,
HomeAdvisor’s 58,000-square-foot lease anchors plans for
a new office complex named The Hub, which hopes to
attract even more creative businesses to the area.
With tenant interest returning to Downtown LA, it was only
a matter of time before this industrial zone on the edge of
downtown attracted attention. It’s arguably one of the
most unique fringe markets in the U.S.—with active
industrial tenants anchoring the area, but major plays
being made in both office and multifamily development.
The demographics in the area are equally diverse. Today
there are not only artists living in lofts, but downtown
professionals and millennials taking residence in
redevelopments like Berkshire Communities’ One Santa Fe.
High-end boutiques and trendy restaurants, like Bastia,
populate the streetscape along with coffee shops like Blue
Bottle and Blacktop Coffee. Office tenants are on their way.
Warner Music Group is blazing the trail for LA’s
entertainment tenants and will move from Burbank to
occupy Shorenstein Properties’ redeveloped Ford Factory,
where Model T’s once were assembled. Other notable
redevelopment plays include the former Coca Cola bottling
building (4th & Traction) now being redeveloped by
Hudson Pacific.
Denver
Los Angeles
Midwest
6
Fringe Markets Insight | United States | 2017
Short North,
Fulton Market,
A 14-block strip does not fall short
A little bit of edge up and west of Downtown
The Short North, a former seedy industrial area between
the Ohio State campus and downtown, has emerged as
Columbus’ creative neighborhood and a prominent retail
corridor, complete with art galleries, trendy restaurants,
and vibrant nightlife. Revitalization began in the 1980s with
the migration of artists and the opening of several art
galleries. In 1998, a redevelopment of the Smith Brothers
Hardware Building into office space became the spark for a
larger urban revitalization and in the years following
intrepid companies began relocating to The Short North to
access Gen X, and then millennial, talent drawn by the
neighborhood’s creative, 24-7 vibe. Today, the 14-block
strip is home to 300 businesses. Just last year, The Joseph,
a 135-room Le Meridian boutique hotel opened as part of a
larger multi-million dollar project sponsored by Pizzuti
Companies. The project includes 60,000 square feet of
retail and office space, a 313-space parking garage, and a
museum. Recent reconstruction of the dilapidated
Wonderbread factory into high-end residential lofts reflects
the changing landscape that had once been the setting for
Columbus’ industrial and working class community.
Fulton Market’s burgeoning arts, culture and food scene
has quietly pulled this fringe district out of the shadows of
its more well-trodden neighbors, the West Loop and River
North. Now considered one of Chicago’s premier
submarkets, Fulton Market was once only known as the
setting for Oprah Winfrey’s Harpo Studios and was largely
populated by light industrial and distribution facilities
operated by mom-and-pop food and beverage retailers.
High profile recent developments transformed the
neighborhood. First, the Chicago Transit Authority
reopened the Market’s Morgan “L” stop after a 60-year
hiatus, spurring a restaurant boom around the
station. Soho House, a boutique hotel and members club,
opened in fall 2014, repurposing a 1900s-era rubber seal
manufacturing facility. Then, in January 2016, Sterling Bay
opened 1K Fulton, a converted cold storage facility which
houses Google’s new regional headquarters. The formerly
chilled, now totally chill, LEED Gold building features
numerous high-end tenant amenities including a roof deck
and is the first commercial building in the Midwest to
achieve WELL certification. Fueled by these successes,
more revitalization projects are underway: Fulton West, the
Ace Hotel, and Randolph West, where McDonald’s new
global headquarters is headed, will deliver over the next
24 months.
Columbus
Chicago
Midwest
7
Fringe Markets Insight | United States | 2017
Warehouse District,
Strip District,
Ohio’s second-largest city is first in revival
fueled by artists
A food destination reinvents itself
Cleveland
Pittsburgh
In the 1920s, the Strip District was the economic center of
Pittsburgh, the home to titans of industry such as U.S. Steel,
Cleveland’s Warehouse District has undergone major
Alcoa, Westinghouse and Heinz. Later it became a
transformation before. At the end of the 19th Century, the
wholesale district and then, filled with ethnically diverse
district was the epicenter of the nation’s garment industry
retailers and restaurants, morphed into an
but a century later it became the confluence of musicians,
artists, and urban pioneers—most of whom congregated in entertainment/tourist destination. But this artsy, culinary
historic buildings like The Bradley. Now, spurred by a state neighborhood northeast of downtown is now emerging as
a commercial and residential hot spot. Opened in late 2016,
tax credit program to fund restoration and preservation of
the 20-acre mixed-use development 3Crossing, has brought
the ornate, Victorian-like facades found throughout the
district, developers are moving in to replicate successes like high-profile office tenants—Apple, Bosch, and Burns
the Western Reserve Building which underwent renovations White—to the revitalized riverfront neighborhood. The
Produce Terminal, originally opened in the 1920s by
to accommodate a new office wing; trendy firm K.A.
merchants and retailers servicing the Pennsylvania
Architecture now occupies nearly 22,000 square feet.
Perhaps the most renowned of the historic buildings in the Railroad yard, along with 1600 Smallman located across
the street, will undergo a $140 million transformation by
district is the Swetland, which in 2014 was restored and
the same ownership, delivering 320,000 square feet of office
converted into apartments, office space, a rooftop
space, retail anchored by a ‘merchant shop’, and 18 liverestaurant and a specialty grocery.
work apartments.
Midwest
8
North Loop & Warehouse District,
Minneapolis
Tech fuels renewal in a former
industrial capital
Known mostly as an industrial area populated with
warehouses, factories, and a rail yard, the North Loop later
became a lightning rod for Minneapolis’ art scene. Now it
has evolved into the Twin Cities’ live-work-play hotspot.
Further strengthened by the Warehouse District, a sevenblock stretch to the south of the North Loop, employees
and residents alike have flocked to the area. The adjacent
neighborhoods collectively offer one of the greatest
densities of tech talent in the Midwest, and have seen major
redevelopments over the past five years. The most
significant is Hines’ 225,000-square-foot T3, an all-wood
office building designed with three key components in
mind—timber, tech, & transit. It’s the first speculative
development delivered in the CBD in the last 10 years.
Several other completed redevelopments, including Butler
Square, Colonial Warehouse, TractorWorks, Ford Center,
and the aptly-named Internet Exchange have attracted
techies and creative tenants. Nearly 100 technology
companies occupy over 830,000 square feet in Minneapolis’
Warehouse District and North Loop, equating to one fifth of
the total office inventory.
Fringe Markets Insight | United States | 2017
Julia Georgules
Director, Local Markets
+1 617 316 6453
[email protected]
Hailey Harrington
Research Manager, Chicago CBD
+1 312 228 3189
[email protected]
Tiffany Ramsay
Senior Research Analyst, New York City
+1 212 812 6515
[email protected]
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