Features

Matt Valley ATLANTA — U.S. hotels are poised for significant gains in all the major metrics in 2014. PKF Hospitality Research LLC is projecting that U.S. hotels will enjoy a 7.7 percent increase in revenue per available room (RevPAR) in 2014, along with a 15.4 percent boost in net operating income (NOI). “We expect the factors that have inhibited lodging performance during the first half of 2013 will dissipate as the year goes on,” says Mark Woodworth, president of Atlanta-based PKF Hospitality Research. “By 2014, any uncertainty caused by fears of fiscal cliffs and sequestration should be alleviated, thus resulting in improved attitudes among hotel guests, owners and operators.” One lingering concern among hoteliers may be the recent rise in interest rates. “Moody’s Analytics, our source for the economic forecasts that drive our econometric models, has been projecting a 150 basis point increase in interest rates by year-end 2014. Accordingly, our positive lodging forecasts do incorporate any detrimental influence this may have on investments and inflation,” notes Woodworth. Dissecting the forecast For 2014, PKF is forecasting a 3.3 percent growth in lodging demand, along with a projected increase in supply of just 1 percent. The net result is a projected …

WASHINGTON, D.C. — Nonfarm payroll employment in the United States rose by 175,000 in May, a “Goldilocks-caliber report” that the stock market was probably looking for — not too hot and not too cold, says Ryan Severino, senior economist at Reis. The measured recovery also means the Fed’s bond-buying program is likely to stay intact for a while longer. The Dow Jones Industrial Average rose almost 208 points, or 1.38 percent, to close at 15,248, on Friday, June 7, the same day the Bureau of Labor Statistics (BLS) released the May employment report. Net payroll gains in April were revised downward to 149,000 from 165,000 and March was revised upward by 4,000 jobs. Because of the downward revisions to April by the BLS, the three-month moving average of net job gains was 155,000 compared with 207,000 during the first quarter of the year. “Overall, the revisions are less worrisome than the downward trajectory of new job creation,” emphasizes Severino. “We have yet to see the marked slowdown that we have witnessed in the last few calendar years, but there is still a decline in the pace of new job creation.” In the wake of the report, all eyes are on …

ATLANTA — Interest rate risk, healthcare demand and energy and technology changes are among the top issues currently impacting real estate, according to The Counselors of Real Estate. The organization, an invitation-only association of top real estate advisors, released the list of top 10 issues affecting real estate at the National Association of Real Estate Editors annual conference in Atlanta. The list is adjusted annually in response to global economic conditions and domestic priorities. “Many of the issues on this list have strong interrelationships and affect multiple industries,” said Howard Gelbtuch, 2013 chairman of The Counselors of Real Estate and principal of Greenwich Real Estate Advisors Inc. Gelbtuch emphasized the importance of considering each issue in guiding business and investment strategy. “The headlines are filled with reports of events and conditions that often seem unrelated,” Gelbtuch said. “But, taking a broader view and looking at the issues from all sides will lead to more informed decisions.” The top 10 issues identified for 2013 include: 1. Low Interest and Capitalization Rate Risks: Real estate has dramatically benefited from low interest rates, which cannot go much lower. Cap rates continue to decline in primary, secondary and tertiary U.S. markets, but are especially …

Consumers were cautious spenders on discretionary items during the first quarter due to the sequester and expiration of the payroll tax cut. Consumer consumption accounted for 3.2 percent of GDP during the first quarter. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University (GSU), predicts that figure will decrease to 1.9 percent during the second quarter and fall further to 1.7 percent during the third quarter of this year. While consumer spending remains modest, the main problem facing the nation’s economy revolves around the federal budget, said Dhawan during his presentation at GSU’s student center the morning of Wednesday, May 22. “The biggest [question] is will we have a budget by fall of this year,” asked the forecaster. “I may be an optimistic fool, but I have a presumption that we will.” In late March, the Democrat-controlled Senate passed its first formal budget proposal in four years. The non-binding plan for the 2014 budget calls for $1 trillion in tax increases. While the Senate proposal effectively reduces the deficit over 10 years, it stands in sharp contrast to the House budget proposal. A budget deal would provide corporations with a measure of certainty about their tax rates, …

LAS VEGAS — The grocery industry has undergone a major transformation during the past five to 10 years due to changing demographics and shopping patterns, says Joseph McKeska, senior vice president of real estate for Bi-Lo Winn-Dixie, which operates approximately 700 grocery stores with $10 billion in annual sales. “You have a much broader ethnic mix around the country and that is going to continue to accelerate over time,” remarked McKeska at Retail Trends 2013, an hour-long program hosted by Marcus & Millichap at the Renaissance Las Vegas Hotel on Monday during the ICSC RECon show. What’s more, consumers are taking full advantage of all the options available to them today, ranging from traditional grocers to warehouse clubs to specialty stores to even dollar stores. Joseph McKeska (center) of Bi-Lo Winn-Dixie talks about the state of the grocery business during Retail Trends 2013 hosted by Marcus & Millichap at ICSC RECon in Las Vegas. Ten years ago, consumers generally would select one grocery store as their primary place to shop and identify a second store to pick up a few other items. “Today people are shopping in three or four different stores because they are watching cooking shows on the …

Experiences like dining out, watching a movie or participating in community events continue to be the main reasons people prefer the mall to online shopping, according to the Glimcher Retail Monitor, the first in a series of periodic surveys on the behavior of shoppers in today’s changing environment. Glimcher Realty Trust (NYSE: GRT) designed the inaugural survey to understand why people come to the mall. The results were released Monday during RECon 2013 in Las Vegas. “The way consumers enjoy the mall has changed. Today, the mall is a destination, offering more than just retail,” says Michael Glimcher, chairman of the board and CEO of Columbus, Ohio-based Glimcher. The real estate investment trust owns material interests in and manages 29 properties with total gross leasable area totaling approximately 21.6 million square feet. “While shopping will always be the primary reason people go to the mall, the survey supported our notion that going to the mall is about the experiences — whether that’s having a salad and a glass of wine with your girlfriends or enjoying a movie on a Friday night. People want a mix of retail, restaurants and entertainment,” adds Glimcher. C&T Marketing Group, on behalf of Glimcher Realty …

By Matt Valley Will the U.S. economy avoid a fourth consecutive mid-year slowdown? If the nonfarm payroll employment report for April is a harbinger of what’s to come, there will be no rerun this year. Employers added 165,000 net new payroll jobs overall in April, according to the Bureau of Labor Statistics (BLS), including 176,000 in the private sector. Just as significant, the job gains for the prior two months were revised upward by a combined 114,000 jobs. But economic headwinds still persist. Data on factory orders and international trade have softened recently, and retail sales remain choppy, according to Bob Bach, national director of market analytics for Newmark Grubb Knight Frank. “Moreover, sequester-related spending cuts, which are unfolding gradually, will knock about 0.6 points off of gross domestic product this year,” adds Bach. Real gross domestic product in the United States increased at an estimated annual rate of 2.5 percent in the first quarter of 2013. In each of the past three years, relatively solid GDP growth early in the year has been followed by a slowdown in either the second or third quarter. In some ways, the April jobs report was a mixed bag. One positive sign is …

Brent Auberry, Esq. This is not your mother's shopping experience. In the never-ceasing cycle of trying to stay hip and cool (or perhaps just relevant), mall owners in recent years have shifted away from the traditional, inward-facing enclosed mall to today’s outward-facing lifestyle center. This change in design for new shopping centers brings with it a potential change in valuation techniques for older malls. Assessors often apply a modified reproduction cost to malls, basing value on the cost of recreating the property’s identical shape, size, design and layout. A more relevant value is replacement cost, or the cost to replace the asset with a modern shopping center with the same utility. In other words, in certain circumstances assessors should assess large enclosed malls as if they were the less costly, more efficient lifestyle centers that could be developed on the same site. The difference might result in property tax savings for the owner. Lifestyle centers typically range between 150,000 and 500,000 square feet of leasable retail area and include at least 50,000 square feet devoted to upscale national chain stores, according to the International Council of Shopping Centers. Many rely on multiplex theaters or other entertainment components rather than traditional …

Cushman & Wakefield NEW YORK — Positive momentum continued in U.S. industrial markets through the first quarter of 2013 as e-commerce maintained its influence on reshaping industrial distribution strategies and facilities across the U.S., according to Cushman & Wakefield Inc. The overall vacancy rate fell to 8.2 percent in the first quarter, down 80 basis points from a year ago and to the lowest point since the third quarter of 2008. Lakeland, Fla. (4.2 percent), greater Los Angeles (4.4 percent) and Orange County, Calif. (4.7 percent) recorded the lowest vacancy rates in the nation (see chart). Only five out of 37 markets tracked by Cushman & Wakefield reported an increase in vacancies on a year-over-year basis. Warehouse vacancy has now declined for 12 consecutive quarters after peaking in the first quarter of 2010. Consequently, rental rates are now trending up. The U.S. direct weighted average triple-net rental rate today is $5.73, up from $5.59 one year ago and $5.68 at year-end 2012. “Expansion of e-commerce is fueling demand for big-box distribution centers in major distribution hubs, and has triggered an increase in both build-to-suit and speculative development,” says Cushman & Wakefield’s John Morris, leader of industrial services for the Americas. …