Features

New York City’s 5th Avenue has once again topped the list of most expensive retail rents in the world with an average of $3,500 per square foot annually, according to research by Cushman & Wakefield. Hong Kong’s Causeway Bay placed a distant second, with rents averaging $2,400 per square foot. The research comes from “Main Streets Across the World,” a research report that Cushman & Wakefield releases annually. It tracks over 500 of the top retail streets in the world by prime rental value. Across the U.S., retail rents increased 6.9 percent year-over-year. Seattle experienced the sharpest increase at 27 percent, though at $70 per square foot, is still the least expensive U.S. market tracked by the report. Rodeo Drive in Los Angeles also saw a dramatic rent spike — 23 percent — which maintained the street’s second-place finish in the U.S. with rents of $800 per square foot. Other U.S. markets singled out for strong growth were Chicago (Michigan Avenue), Miami (Palm Beach) and San Francisco (Union Square). “In San Francisco, a combination of a bustling tourism market — the city is one of the top international destinations — and an improving local economy has led to strong luxury …

All but one of the 10 largest office markets in the country can expect to see improvement in real estate fundamentals in 2016, according to a third-quarter report titled “Top Office Metros Snapshot” from Colliers International. The report measures absorption, rents and vacancy rates in 10 major U.S. metro areas — Manhattan, Washington, D.C., Chicago, Dallas, San Francisco, Houston, Atlanta, Los Angeles, Boston and Seattle. In the third quarter of 2015, vacancies declined in all of the top 10 metros except Houston. Overall vacancy across the markets decreased to 12.9 percent, which is 30 basis points lower than the second quarter and 60 basis points lower than a year prior. Absorption trends were mixed overall. Only half of the metros saw more office absorption in the third quarter than in the second quarter, but the report notes that all but Los Angeles still recorded positive absorption. For example, Dallas saw less absorption in the third quarter, but still managed to absorb more than 5.6 million square feet of office space. “With construction restrained in most markets, even this moderate leasing has helped reduce the backlog of vacant space, enabling vacancies to continue to track downward,” according to the Colliers report. …

CHICAGO — The number of new construction projects rose considerably in the third quarter of 2015 in markets across the country, according to data compiled by Chicago-based BidClerk, a leading provider of construction project data in the United States and Canada. The BidClerk Construction Index (BCI) reported more than 76,000 new projects valued at over $200 billion nationally in third quarter 2015; an upswing of 21,000 projects and $35 billion from third quarter 2014. Markets that saw spikes in new construction from second quarter numbers were Texas; Florida; Washington, D.C.; Pennsylvania; and the Southwestern U.S. In the third quarter, Texas recorded a 10 percent uptick in the number of actively bidding projects, with more than 3,800 projects at a combined contract value of $17 billion. High-profile projects out for bid in the third quarter included a $575 million addition and expansion of an educational facility in Fort Worth, and the $325 million Liberty Mutual offices at Legacy West in Plano. Areas in the report by BidClerk include Austin, Dallas-Fort Worth, El Paso, Houston and San Antonio. More than 2,100 construction projects with a combined contract value over $8.4 billion were actively bidding in the state of Florida in the third …

WASHINGTON, D.C. — After disappointing reports by the U.S. Bureau of Labor Statistics in August and September, hiring has surged with employers adding 271,000 new payroll jobs last month, far surpassing the 185,000 jobs forecasted in Bloomberg’s survey of economists. Revisions to the August and September reports were also minor, totaling only 12,000 jobs. While the hiring surge is positive in many ways for the commercial real estate industry, it may also prove to be a source of negativity, as it is likely to lead to a rise in interest rates. Many — including Ryan Severino, senior economist and director of research at Reis Inc. — were surprised by the findings in the October jobs report. “I was surprised not so much that the figure exceeded the forecasts, but by the magnitude by which it exceeded it,” says Severino. “I thought that the disruption of the past couple of months was a blip and this helps to confirm that.” While the hiring surge is unequivocally positive for commercial property leasing markets, as employers will take on more space to accommodate growing staffs, the report increases the likelihood that the Federal Reserve will raise the short-term federal funds rate — the interest rate at which banks and …

What will drive real estate and economic decisions in the future? Members of The Counselors of Real Estate (CRE) recently tackled that all-important question in a series of panel discussions at the organization’s annual convention in Charlotte, N.C. The organization, which serves 1,100 members worldwide and represents no single property specialty, is known for providing objective, balanced perspectives on critical issues affecting commercial and residential real estate. What follows are seven major takeaways stemming from this year’s convention. Big-box retail will not surrender to e-commerce — In a discussion led by Michael MaRous, president of Park Ridge, Ill.-based real estate advisory firm MaRous and Co., panelists stated that retail adaptation and integration of Internet shopping will be crucial in the coming years. The panel emphasized the need for big-box chains to create smaller formats more compatible with urban core markets. These smaller concepts, the panel believes, should be implemented alongside larger formats in select shopping centers. Drones are not novelties, toys, hazards or nuisances — Members of the Counselors of Real Estate believe drones to be essential tools that will open doors for smart users of the technology. “Drones are more affordable than ever, making aerial data gathering a mandatory piece …

Demand for office space decelerated slightly in the third quarter of 2015, but remained high enough to result in one of the strongest quarters of the current expansion, according to Cushman & Wakefield’s latest U.S. Office Snapshot report. The U.S. office market absorbed 17.3 million square feet of office space during the third quarter, which was down 10 percent from the level recorded in the second quarter. Still, demand remained strong enough to offset the limited amount of new office product deliveries, which in turn helped the vacancy rate inch downward from 14.4 percent in the second quarter to 14.2 percent in the third quarter. “As vacancy dips below equilibrium in most markets, the construction pipeline is ramping up,” notes the report. Approximately 95.1 million square feet of new office space was under construction at the end of September. Office Rents on the Rise The weighted average rental growth rate increased in the third quarter, posting a year-over-year jump of 4.7 percent. About 90 percent of all U.S. markets are experiencing positive rental growth, and more than 40 percent have seen year-over-year growth above 5 percent, according to Cushman & Wakefield. Meanwhile, Real Capital Analytics (RCA) reports that office investment …

The primary reason that property owners express such a disdain for commercial mortgage-backed securities (CMBS) is that the financing vehicle is “mysterious.” There is no source or website anyone can go to that will explain how a CMBS loan really works, and there is no one the owner can speak to at the loan servicing shops who will demystify the process. CMBS loans are governed by IRS regulations and documents an owner will never typically see, let alone know about. As the founder of a company that serves as a voice for property owners and borrowers, I have dedicated my entire career to demystifying CMBS. One way I do that is through quarterly webinars. Each webinar covers a different topic. The 2015 webinar series has been specifically devoted to exposing the naked truth about CMBS. In a recent webinar, we focused on the eight myths of CMBS. What follows is a recap. Myth No. 1 — It won’t cost much to miss the payoff date of your CMBS loan by a few days: Most property owners are now well aware that a CMBS loan has what is called an “open period.” The loan can only be paid off during that …

Tax assessors across the country are drawing battle lines to pit new valuation theories against accepted appraisal methodologies. This fierce ideological assault threatens the sustainability of retail businesses weighed down by ever-increasing property taxes. Retail landlords who desire to have their real estate valued on a fee simple basis routinely face assessors who claim that these owners want their property valued as a “dark store.” This prickly issue originally focused on how to value big-box stores for property tax purposes, but its scope has widened to affect a range of retail property types. Controversy’s roots run deep Woolworth’s opened the first big-box store in 1962, the same year that McDonald’s introduced the golden arches and ushered in the concept of branding stores with identical interiors and exteriors. Over the following decades, Walmart, Kmart, Target and other retailers married the big-box format with McDonald’s-style branding. Replicating the same store in many locations increased consumers’ brand recognition and reduced the owner’s cost to develop, stock, open and operate new locations. Much of today’s controversy over assessments stems from alternative financing methods that caught on with these major retailers. The two most common strategies are build-to-suit and sale-leaseback arrangements, both of which generate …

In the first half of 2015, the seniors housing market saw steadily rising demand, acquisition volume and return on investment, according to CBRE’s 2015 Mid-Year Senior Housing Market Insight Review. Seniors housing demand is driven by the aging of Baby Boomers, a healthy housing market, an attractive spread between borrowing rates and capitalization rates, and relatively limited new development in aggregate since 2000. Through the second quarter of 2015, the seven-year total return on investment for seniors housing was 10.5 percent. The one-year return was 15.2 percent. These figures are based on property index performance data provided by the National Council of Real Estate Investment Fiduciaries (NCREIF). These returns are considerably higher than that of other major real estate property types, according to NCREIF.   During the past four quarters, occupancy has steadily risen, with the second quarter of 2015 ending at 90 percent occupancy. Acquisition volumes set new records in 2014, with last year seeing 294 transactions totaling approximately $25.5 billion in the seniors housing sector. The total transaction volume by dollar amount in 2014 represented a 130 percent increase over 2013, and almost a 13 percent increase over the transaction volume in 2006, which held the previous record at approximately $22.6 billion across 146 …