LOS ANGELES — Office vacancy rates continued to decline in most major U.S. markets during the third quarter, based on preliminary data from CBRE Group Inc. Eight of the 13 largest markets showed lower office vacancy. Dallas, which led all markets, experienced a decline of 100 basis points to 18.1 percent. The U.S. industrial market also continued to show improvement during the third quarter, according to CBRE, with most of the demand coming from third-party logistics companies, the food service sector, home construction, automotive and automotive suppliers. Miami maintained its third place position among the top U.S. industrial markets, with an 8.1 percent vacancy rate in the third quarter, down 10 basis points from the previous quarter. “Despite rising interest rates and continued weak growth overseas, the U.S. office market continued to benefit from slow but steady job growth and limited new office development, which has allowed moderate leasing demand to cut the supply of excess space,” says Brook Scott, interim head of research for the Americas with CBRE. “Meanwhile the U.S. industrial market benefited from consumer and business spending, a recovering housing market and increased demand for logistics space tied to the growth of e-commerce during the third quarter …
SAN DIEGO — September was not only the time for industry experts to gather for the annual ICSC Western Division Conference, held last week in San Diego, but also a time to reflect on the five-year anniversary of what was deemed the start of the Great Recession. The collision of these two events was not lost on panelists and attendees. Many were happy to see deal volumes returning to healthy levels, but worried some might once again throw caution to the wind in pursuit of a perceived bargain. “There are lots of opportunities out there, but you have to be careful about what you’re seeing,” said Mark A. Schurgin, president of Los Angeles-based The Festival Companies and an ICSC trustee. “Don’t be lulled by interest rates, we don’t know where interest rates are going three years out. Assess all costs up front. There’s nothing worse than forgetting those fees.” Despite these worries, Schurgin, like his fellow Director’s Cut panelists, was quick to point out that a little unpredictability wasn’t keeping his firm on the sidelines. Festival has nine new projects under development, including four ground-up neighborhood shopping centers, as well as a Hispanic grocer with sub-anchors. It is also acquiring …
By John Garippa and Brian Fowler For the first time in many years, the city of Philadelphia has undertaken a comprehensive reassessment of all 579,382 parcels of property within its jurisdiction. Previously, the city had employed a haphazard approach to the assessment of real estate; the last partial reassessment in the city occurred in 2004, while many other properties were last reassessed in the 1980s. As a result of this disparate treatment, similarly situated properties often had very different assessments and tax burdens. For the current reassessment, the city has employed a traditional definition of market value as developed by the International Association of Assessing Officers, but will primarily rely on the sales approach to value. This may prove to be problematic. In the sales approach to value, an appraiser or assessor compares a taxpayer’s property directly with other recently sold properties in the marketplace using units of comparison, typically price per square foot. The appraiser adjusts these units of comparison for differences between the taxpayer’s property and the comparable sales. The sales approach is most reliable when the comparison data closely matches the taxpayer’s property, and works well for valuing homes, where there may be minor differences in size …
CHICAGO — Rising interest rates and the potential tapering of quantitative easing may have given investors momentary pause about committing to commercial real estate, but those two factors ultimately don’t appear to be dampening the enthusiasm that investors of all stripes have for the sector. According to Jones Lang LaSalle (JLL), investment sales in the first half of 2013 increased 18 percent compared to the same period last year. Transactions may slow in the early part of the second half of 2013 given the timing of interest rate increases and quantitative easing discussions, but activity is expected to bounce back strongly later in the third and fourth quarters. In the end, full-year sales volume should increase between 10 to 15 percent when compared to 2012, say the experts at JLL Capital Markets. “With institutions, private equity, high-net-worth individuals and foreign investors all in aggressive pursuit of commercial real estate, transaction activity in the United States should remain brisk and continue to grow,” says Jay Koster, Americas president for JLL Capital Markets. “In particular, we expect office sales transactions to significantly boost volume in the second half of the year, with activity propelled by improving employment growth within the technology, healthcare …
Jerry Nelson and Dolores Kelley Many shopping center owners, developers and others have cut costs, increased income and received other rewards from refinancing. Some borrowers are rushing to refinance now before interest rates jump up more than they already have. If you are nearing the end of your term loan, have an adjustable rate or have established equity in your property and desire to lower your monthly payments or cash out some of your equity, you should evaluate whether refinancing would benefit your bottom line. Should You Refinance Now? In March, we warned on our New Jersey law blog that interest rates could climb and asked readers to consider refinancing to cut costs and increase income before losing the opportunity to lock in a lower rate. In May, we advised on our New Jersey Law Blog that landlords were buying, financing, improving and selling properties to take advantage of low interest rates, available financing and rising values. As predicted, rates have started to tick upward, resulting in increased borrowing costs, which will continue to climb along with rates. The 10-year Treasury yield jumped to 2.93 percent on Sept. 12, up from 1.71 percent at the same last year. The good …
When Charles Dickens wrote his famous opening line, “It was the best of times, it was the worst of times,” he couldn’t have realized how apt it would be for the retail real estate market more than 150 years later. According to Jones Lang LaSalle’s U.S. Summer Retail Outlook, varying population growth and purchasing power across U.S. markets will widen the performance gap of centers creating a different outlook for owners and occupiers of these assets. “Competitive centers that are well-tenanted and ideally located are seeing vacancy rates near four percent, and we expect them to see further improvements,” says Greg Maloney, president and CEO of Jones Lang LaSalle (JLL) Retail. “However, underperforming centers that can’t sustain the needed sales volumes to remain competitive due to their surrounding demographic may continue to trend downward, and require eventual demolition, rebranding or a conversion.” During the last year, consumer confidence took a deep dive, but rallied this summer as consumers benefited from higher stock and housing values, falling gasoline prices and lower debt levels, according to JLL’s retail report. The improvement is expected to be tempered by high unemployment and slow income growth. “Consumer confidence remains volatile, as shoppers adjust to changes …
ATLANTA — Poor income growth, a cautious consumer and ongoing political uncertainty continue to hinder corporate investment, which is fostering a challenging economic recovery. While moderate job gains and strong auto sales are capturing headlines and bolstering optimism, the public should not misinterpret these trends, says Dr. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University (GSU). Auto sales, for example, are substantially above an annual rate of 15 million, the point at which Dhawan had previously predicted a strong economic recovery would take hold. “Car manufacturers needed to clear out an inventory buildup, and consumers responded to the resultant price drops by buying,” said the economist during his presentation at GSU's student center on Aug. 28. “Thus, the growth in auto sales is not fully indicative of a proper recovery that is gaining steam, but of special circumstances.” The other key components of the recovery — home prices and housing starts — also carry mixed signals. New construction typically cascades from banks to builders to suppliers, and ultimately to buyers who purchase new items for their new homes, explained Dhawan. The last leg is missing, according to the chief economist, who described consumers as utility shoppers. …
The Atlanta hotel’s strong performance in the last three months of 2012 may be tough to beat, says a local lodging expert. “The fourth quarter was terrific. Is that a good thing or bad thing?” asked Mark Woodworth, president of PKF Hospitality Research LLC. Woodworth opined that it may not be the best thing going forward because it makes the year-over-year measures more difficult. Woodworth’s presentation on the Atlanta market capped off the Atlanta Lodging Outlook 2014 conference, held on Monday Aug. 26 at the InterContinental Hotel Buckhead in Atlanta. The Atlanta hotel market recorded a great fourth quarter last year in terms of its revenue per available room (RevPAR). The biggest spike in RevPAR was in the downtown hotel market, which saw a 26 percent increase from the previous year. Every submarket increased in RevPAR in the fourth quarter compared to the fourth quarter of 2011. Other submarkets that posted large spikes in RevPAR include Midtown, Central Perimeter, Peachtree Corners, I-85 South, Buckhead and Town Center North. PKF forecasts that RevPAR in 2013 for the entire Atlanta hotel market will be $54.79, a 4.7 percent increase compared to 2012 ($52.31). Slide courtesy of PKF Hospitality Research Woodworth also relayed …
Michael Bull, CCIM The decision for companies to lease or purchase their real estate is critically important right now with favorable prices and low interest rates. There are many key criteria — including the expected growth of the company, location and the firm’s return when investing in their own business — that must be taken into consideration. At this point in the cycle, there are some extraordinary factors to weigh. That is why we assembled a panel of experts on a recent episode of the “Commercial Real Estate Show” to explore the lease vs. purchase decision. That’s right, like LeBron James, we created a show around the decision. Making an Informed Decision “For most companies, their real estate is the means to an end — it’s there to serve the business,” said Eric Entringer, senior manager at Ernst & Young's San Francisco office, during the show. “Businesses really need to understand where they are in their life cycle as a company and use real estate to support their overall objectives.” For many businesses looking for space, owning their own real estate does offer certain perks, such as controlling occupancy costs. There is no concern about escalating rents. In fact, if …
Construction employment continued its spotty improvement in July as the vast majority of states posted year-over-year gains. Still, most states posted decreases in July compared with June, according to the Associated General Contractors of America. The analysis is based on data from the U.S. Labor Department. The association says the steady improvement in employment in many states was welcome news, but cautioned that the industry’s recovery was still fragile. “Today’s report shows the fragile and fragmentary nature of the industry’s recovery,” says Ken Simonson, chief economist for the Arlington, Va.-based association. “Construction employment increased in 37 states during the past 12 months — the largest number with gains since early last year — but only two states have surpassed their pre-recession peaks, and barely a third of states added construction jobs between June and July.” Both the widespread annual gains and monthly losses were consistent with national totals for July. Data released earlier this month showed construction employment rose 3 percent from July 2012 to July 2013, but slipped by 0.1 percent, seasonally adjusted, in the latest month. The largest year-over-year percentage increase in construction jobs occurred in Wyoming (16.7 percent; 3,500 jobs), followed by Mississippi (12.3 percent; 5,800 jobs) …