Features

By John McCurdy WASHINGTON, D.C. — The decline in the Architecture Billings Index (ABI) in April — the first in 10 months — appears to have been a blip on the radar. The American Institute of Architects (AIA) reported June’s score was 51.6, slightly down from May’s mark of 52.9, but still showing increasing demand for design services. A number greater than 50 reflects an increase in billings, while a score lower reflects a decrease, according to the AIA. Widely considered a leading economic indicator of construction activity, the ABI reflects the approximate nine to 12 month lag time between architecture billings and construction spending. “With steady demand for design work in all major nonresidential building categories, the construction sector seems to be stabilizing,” says Kermit Baker, chief economist for the AIA. The new projects inquiry index for June, 62.6, was a significant increase from that of May, 59.1.The ABI also includes more specific figures breaking down the growth, these three-month moving averages as opposed to monthly figures. Among the different property types monitored, commercial/industrial posted the highest score with 54.7. Multifamily residential was not far behind at 54.0, mixed practice scored 52.4, and institutional scored 51.8. As for the …

By John McCurdy WASHINGTON, D.C. — The decline in the Architecture Billings Index (ABI) in April — the first in 10 months — appears to have been a blip on the radar. The American Institute of Architects (AIA) reported June’s score was 51.6, slightly down from May’s mark of 52.9, but still showing increasing demand for design services. A number greater than 50 reflects an increase in billings, while a score lower reflects a decrease, according to the AIA. Widely considered a leading economic indicator of construction activity, the ABI reflects the approximate nine to 12 month lag time between architecture billings and construction spending. “With steady demand for design work in all major nonresidential building categories, the construction sector seems to be stabilizing,” says Kermit Baker, chief economist for the AIA. The new projects inquiry index for June, 62.6, was a significant increase from that of May, 59.1.The ABI also includes more specific figures breaking down the growth, these three-month moving averages as opposed to monthly figures. Among the different property types monitored, commercial/industrial posted the highest score with 54.7. Multifamily residential was not far behind at 54.0, mixed practice scored 52.4, and institutional scored 51.8. As for the …

By Ann Hambly As a CMBS borrower advocate, I am frequently asked if the worst is behind us as far as CMBS defaults are concerned. Defaults have leveled off while property values have started to increase, so at first blush it does appear that the worst is over. But is that really the case? What follows are 10 key facts that I want to share with you that will enable you to draw your own conclusion. Fact No. 1: Of the approximate $3 trillion of commercial real estate debt, CMBS accounts for approximately 25 percent of that total, or $740 billion. Fact No. 2: CMBS defaults reached an all-time high of approximately $63 billion in May 2012 and have since receded to just under $50 billion. The reason the total dollar amount of delinquent loans does not continue to increase is that CMBS defaults are being resolved at approximately the same pace as new defaults are occurring. Fact No. 3: More than 88 percent of the defaulted CMBS loans were originated from 2005-2008 with over 76 percent of them originated in the years 2005-2007. The biggest reason for CMBS loans defaulting is not the geographical location of the property, property …

John Brozovic The U.S. economy is clearly improving, but that doesn’t mean shopping center landlords can relax. As owners strive to improve the financial performance of their retail properties, a key question is this: How much should you help your tenants financially? In our business, we often see this question play out in two ways. First, it arises when tenants tell you they are struggling and need rent concessions. It also comes into play when you consider whether it’s a good investment to support your tenants with marketing dollars. Tenant transparency is crucial The industry is seeing fewer rent concessions — a sign of the improving environment for retailers in general. But that doesn’t mean retailers have stopped asking for them. For us, the key is that a tenant needs to show that it is truly struggling by disclosing its financial situation to the landlord. Then, the tenant needs to show what it is going to do with the money saved if the landlord decides to offer concessions. Will the tenant rev up marketing, or change its inventory to better match demand? Or will the tenant simply pocket the savings and try to keep hanging on? Of course, the need …

Bart Plunkett The industrial real estate sector may not get the attention of some of its more glamorous cousins, such as the office and retail markets, but the sector is in the midst of a healthy recovery. Nationally, vacancies are dropping, rents are rising and — perhaps most strikingly — new construction is taking place. Of course, the emergence of new construction isn’t unique to the industrial market. Inspired by the thriving multifamily sector, developers are breaking ground on new apartment communities. But while concerns about multifamily over-development already have taken hold in some quarters, the construction of new industrial facilities in Atlanta, the Southeast and throughout the nation appears ready to unfold at an appropriate and significant pace for several years to come. Healthy Vital Signs Industrial real estate’s improvement during the past couple of years led Cassidy Turley to conclude the following in its most recent report on the market: “The U.S. industrial sector is moving into robust territory.” The U.S. industrial vacancy rate dropped to 8.5 percent at the end of the first quarter, its lowest mark in four years, according to Cassidy Turley, and 42.7 million square feet of industrial space was under construction when the …

Construction employment increased in a majority of states in May, setting all-time highs in Louisiana and North Dakota, according to the Associated General Contractors of America. The association noted that construction demand remains very uneven and urged policy makers to expedite stalled public and private projects. “The strongest recoveries in construction employment have occurred in states with oil and gas activity, while the steepest construction job losses have occurred in Sunbelt states,” said Ken Simonson, the association’s chief economist. “However, patterns for the past year show that even some lagging states are beginning to add jobs.” Louisiana added 2,100 construction jobs in May and 11,800 (9.4 percent) during the past 12 months, topping the previous peak set in November 2008. North Dakota gained 800 jobs in May and 900 jobs (3 percent) in the past year, exceeding the mark set in September 2012. For May, 27 states experienced a lift in construction employment, while 20 states and the District of Columbia lost construction jobs. South Dakota had the largest one-month percentage gain (4.1 percent, 800), followed by Vermont (3.7 percent, 500), Arizona (3.6 percent, 4,400), Iowa (3.5 percent, 2,200) and Missouri (3.5 percent, 3,600). Arizona added the largest number of …