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Matt Valley WASHINGTON, D.C. — Growing labor shortages in all facets of the residential construction sector are impeding the housing and economic recovery, according to a new survey conducted by the National Association of Home Builders (NAHB). “The survey of our members shows that since June of 2012, residential construction firms are reporting an increasing number of shortages in all aspects of the industry — from carpenters, excavators, framers, roofers and plumbers, to bricklayers, HVAC, building maintenance managers and weatherization workers. The same holds true for subcontractors,” says NAHB Chief Economist David Crowe. The survey also found that more than half of the builders reported that labor shortages over the past six months have caused them to pay higher wages or subcontractor bids to secure projects, and consequently, to raise home prices. Moreover, 46 percent of the builders surveyed experienced delays in completing projects on time, 15 percent had to turn down some projects and 9 percent lost or cancelled sales as a result of recent labor shortages. NAHB says that while it doesn’t have equivalent information from multifamily developers, it’s reasonable to infer that, in parts of the country where single-family builders have encountered labor and subcontractor shortages, multifamily …

Update: Cole Credit Property Trust III has rejected the $5.7 billion buyout offer from American Realty Capital Properties (ARCP). Cole said it still intends to buy the company that sponsors it, Cole Holdings Corp. In a statement, American Realty said it was “not only surprised but disappointed” that Cole rejected the bid without “seeking to contact ARCP or better understand its offer in any way.” NEW YORK CITY — American Realty Capital Properties (NYSE: ARCP) has made an offer to buy Cole Credit Property Trust III for $5.7 billion this week, in a move that would create the largest publicly traded REIT in the net lease sector. New York-based American Realty, a publicly traded REIT, offered to acquire 100 percent of the outstanding common stock of Cole for at least $12 per share, or $5.7 billion in cash and stock. The deal is valued at more than $9 billion, with the assumption of debt. American Realty said it will increase its annual dividend by 2.2 percent to 93 cents if the deal closes, which means that Cole shareholders who select the stock consideration would receive an equivalent dividend of 74.4 cents, a 15 percent increase over Cole's current 65-cent dividend. …

By Michael Bull, CCIM Fueled by cities’ hunger for replenished tax bases and the desire of residents for pedestrian-friendly urban living, mixed-use developments are becoming more prevalent across the country. The success of these properties is due not only to their receptive audiences, but also more careful planning on the part of developers. Those were some of the observations of a panel of mixed-use development experts on a recent episode of the “Commercial Real Estate Show” radio program. More willing partners Entitlement processes can still be difficult, but the recent economic woes of local governments have made them generally easier for developers to work with and more eager to approve mixed-use developments, said Emerick Corsi, president of Cleveland, Ohio-based Forest City Real Estate Services. “A downturn in the economy tends to bring out the best in everybody and it starts to bring everybody to the table, especially the private sector and the public sector,” explained Corsi. “Instead of looking at one another as the enemy, it’s a better planning process.” Michael Cohn, an executive vice president with Atlanta-based Cousins Properties, echoed Corsi’s comments. “We are seeing to some extent flexibility [from government officials], a little better process [and a willingness …

By Matt Valley ARLINGTON, VA. — Prices for construction materials jumped in February, driven by sharp increases in items used in new housing and nonresidential building renovations, according to an analysis of new federal figures released by the Associated General Contractors of America, a trade association based in Arlington. The increased materials prices are hitting contractors struggling to recover from a years-long downturn in construction demand. “For the second month in a row, contractors endured outsized price hikes for gypsum wallboard, lumber, and insulation materials,” says Ken Simonson, chief economist for the Associated General Contractors of America. “In addition, soaring diesel prices mean contractors are paying more for fuel they buy and, via fuel surcharges, for the thousands of deliveries of materials and equipment required for construction projects.” The producer price index for all construction inputs — what contractors pay for construction materials — climbed 1.3 percent between January and February, equaling the entire increase for 2012, Simonson notes. The index was 2 percent higher than in February 2012, outpacing the increase in the price contractors are able to charge for most types of new buildings. The increases in construction materials prices are cutting into firms’ margins just as the …

By Matt Valley The nascent recovery in the U.S. housing market helps explain why total nonfarm payroll employment surged by 236,000 in February, easily surpassing analysts’ expectations of 165,000 net new jobs, according to Ryan Severino, chief economist for New York- based Reis. But the effects of sequestration — mandatory spending cuts by the federal government — could restrain hiring in the months ahead, he adds. “Sequestration is likely to cause a slowdown in job growth during the next two quarters, which is unfortunate since it appears that in the absence of spending cuts roughly 200,000 job gains per month would be sustainable,” says Severino. While the private sector added 246,000 jobs in February, government employment decreased by 10,000, according to the Bureau of Labor Statistics (BLS). That follows the loss of 21,000 government jobs in January. With sequestration taking effect during the next few months, the loss of government jobs should continue, says Severino. Moreover, private government subcontractors will also experience job losses due to sequestration, he predicts. While the biggest gains in payroll employment in February came from business and professional services (+73,000), the BLS reported that the U.S. economy added 48,000 construction jobs in February. Healthcare added …

Matt Valley After reaching a record high in 2011, hotel investment volume in New York decreased to $2.7 billion last year. Despite New York’s transaction levels shrinking by 20 percent, the volume was still enough to rank Manhattan as the most active hotel investment market in the world. New York outpaced key United States cities including Miami, San Francisco, Los Angeles and Washington D.C., and internationally exceeded transaction volumes witnessed in Paris and Hong Kong. According to Jones Lang LaSalle’s Hotels & Hospitality Group’s Hotel Intelligence New York report, Manhattan is expected to remain the most active market this year, with volume potentially reaching $2.4 billion. The city’s largest transaction in 2012 was Strategic Hotels & Resorts and KSL Capital Partners’ purchase of the 509-room Essex House for $362 million. In 2012, private equity firms and real estate investment trusts (REITs) accounted for 54 percent of purchases by volume in Manhattan. “Looking to 2013, we expect private equity funds to remain the largest buyer group, seeking to achieve opportunistic returns through their significant buying power and risk tolerance. REITs will also feature notably, and continue to make acquisitions of core properties,” says Jeffrey Davis, managing director of Jones Lang LaSalle’s …

The delinquency rate for U.S. commercial real estate loans contained in CMBS fell 15 basis points from January to February to 9.42 percent, according to New York-based Trepp LLC. Since hitting a peak of 10.34 percent at the end of July 2012, the delinquency rate has fallen 92 basis points. Among the five major property types, hotel loans led the pack with loan delinquencies dropping a whopping 169 basis points to 10.08 percent. The rate on apartment loans also improved 16 basis points to 13.27 percent, while the rates on industrial and office loans were modestly higher (see table). The big drop in the hotel delinquency rate moved the property type from the second worst performer to the second best, leapfrogging both the office and industrial loan readings during the course of the month. While the magnitude of change in the gains among hotel loans is striking, a further examination leads one to believe that this is not nearly as impressive as it seems at first glance, Trepp points out. Many of the largest loans that cured were ones that went from “non-performing matured balloons” to “performing matured balloons.” As a result, the gains in February in the hotel sector …

By John Tennant ATLANTA — During the past five years, the retail world has seen tenant activity diminish and shopping center vacancy rise. Landlords have been forced to find creative ways to maintain net operating income (NOI) and reduce the surplus of retail vacancy. This trend has created a noticeable paradigm shift in retail leasing — specifically as it pertains to office and medical tenants — such as urgent care facilities, dentist clinics, chiropractors and call centers. Tenants who traditionally occupied space in office or medical complexes are finding that by positioning themselves within retail centers, they garner an increased exposure to consumers while reducing overhead cost. DaVita Dialysis, part of DaVita HealthCare Partners Inc., has opened several 4,000- to 6,000-square-foot clinics in shopping centers across the Atlanta area, including the backfill of a second-generation Blockbuster space positioned in front of an Inland Real Estate Group-owned Publix center at 4422 Hugh Howell Road in Tucker, Ga. The company has taken space in many shopping centers throughout the nation as one of two publicly traded dialysis companies in the U.S. Orthodontic practices are also becoming more frequent in shopping centers across the country. OrthoSynetics, a dental practice management firm, operates a …

ATLANTA — Although U.S. employers have added an average of 181,000 jobs per month during the past year, Americans shouldn't expect a significant economic rebound until 2014. That's the sobering message from Dr. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University (GSU), who urges consumers to just breathe. “In between now and 2014, the economy will have this stop-and-go progression that will really bother you,” said Dhawan during his presentation at GSU's student center on Wednesday morning. “Don't keel over. Have some hope.” Higher federal taxes will lead to less consumer spending during the first and second quarters of 2013. The workers' share of the Social Security payroll tax, which jumped from 4.2 percent to 6.2 percent in January of this year, means that a family that earns $50,000 will now pay an additional $1,000. That would mean the highest tax burden for most U.S. households since 2008, according to the Wall Street Journal. Source: Georgia State University Economic Forecasting Center Dhawan said that discretionary spending is already getting weak and the data from February, March and April is likely to reflect this trend. But, once the shock of higher taxes wears off, the consumer will …

By Michael Bull Depending on their circumstances, investors in commercial real estate could face noticeably higher tax burdens in 2013 and the years ahead. However, having to fork over more money to Uncle Sam isn’t likely to have a sizeable impact on transaction activity in the sector. Those were some of the points made by accounting and real estate experts in a recent episode of the “Commercial Real Estate Show,” a nationally syndicated weekly talk radio show about business and commercial real estate-related topics in the U.S. The episode provided a look at the many recent federal tax changes, such as increased income and capital gains tax rates, and provided detailed analysis of their potential effects on the commercial real estate sector. “Taxes aren’t what’s been motivating commercial real estate investors that have gotten back in the asset class in the post-recessionary period,” says Mitch Roschelle, a partner at PricewaterhouseCoopers and the leader of the firm’s U.S. Real Estate Advisory Group. “They like commercial real estate because of its durability of income over time.” “Any income-producing asset is going to have the same adverse tax consequences, and real estate is less volatile than perhaps stocks and bonds can be over …