Features

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 …

ORLANDO — Same-day delivery from major e-commerce and multichannel retailers during the 2012 holiday season introduced e-commerce as a viable option, even for last-minute shoppers. This evolution in customer demand now ripples through the supply chain for all retailers, prompting executives to re-evaluate real estate strategies, according to a new report from Jones Lang LaSalle. “Retailers are anxious to create effective multichannel strategies that cater to new customer expectations, such as same-day delivery as well as e-commerce and m-commerce,” said Kris Bjorson, head of JLL’s retail and e-commerce distribution group. “This means revaluating their supply chain networks and distribution models down to one of the most important components, their distributions centers.” JLL’s report chronicles the transformation of the warehouse and distribution facilities referred to as big boxes — those exceeding 250,000 square feet — that form the backbone of the supply chain. Multichannel retailers demand changes to these facilities to better support order fulfillment, including more picking and packing tasks that mean more employees are needed at each site. “Multichannel retailers must first articulate their service commitment, then align all their real estate decisions,” says Rich Thompson, head of JLL’s supply chain and logistics solutions group. “Location of big-box facilities …

By Mike Mullin TOTOWA, N.J. — Cloud technology is creating a stir in the commercial real estate world. However, the meaning of this term and the value of its associated technology platform remains ambiguous. So what, exactly, is cloud computing, and how can it help multifamily, office, industrial and retail real estate owners and operators? Most people are familiar with the concept of Software-as-a-Service (SaaS), where software is purchased by subscription, and then delivered to users via the Internet. Cloud has that component — and more. In the simplest sense, cloud computing can be thought of as enabling a large pool of users to share the same resources. The cloud platform enables organizations to manage all of their technology over the Internet. This includes networking components as well as mail, productivity tools and enterprise software. Storage is a big part of it too. Companies can perform backups, and store documents and data via the cloud. Image created by Sam Johnston. Cost reduction: In the cloud environment, a provider administers the infrastructure, including automatic network and software updates. Users have immediate online access to application software and databases; they simply log in and everything is up to date and ready to …

CHICAGO— Although global hotel deal volume in 2013 is projected to remain in line with the most recent three-year average, Jones Lang LaSalle’s Hotels & Hospitality Group believes that signs point to an ongoing uptick in hotel transactions activity in the Americas sooner rather than later. Five forces will drive the hotel investment market during the next five years, pointed out Jones Lang LaSalle at the recent Americas Lodging Investment Summit (ALIS) at the J.W. Marriott Los Angeles LIVE. “There will be a significant amount of property coming to market in 2013 from a combination of the deleveraging occurring as $55 billion of CMBS loans mature in the next few years, and we’ll see investors who bought earlier in the cycle want their capital gains and they’ll sell,” said Arthur Adler, Americas CEO of Jones Lang LaSalle’s Hotels & Hospitality Group. “You can’t underestimate the composition of hotel ownership over a long period of time, as many hotels today are in the hands of traders versus holders,” emphasized Adler. Investors should watch the following five key forces and their impact on the hotel market: Boom or bust?: Global deal volume is projected to reach as high as $33 billion this …