Multifamily investment activity in Connecticut is expected to gain some additional momentum this year after a reasonably strong 2008. Last year, investors’ fears of the added risks associated with lower-tier assets limited transactions to mostly Class A and B+ properties in the state’s urban areas. While reduced investor demand for properties in secondary and tertiary locations will continue, buyers are expected to target Class B/C apartments in stable CBD markets. Buyers will likely target lower-tier properties in the New Haven and Hartford core, Hamden and the Fairfield/Bridgeport/Trumbull Triangle, where students drive demand for properties. Fewer Class A transactions and the presence of low-leverage opportunistic buyer funds will likely result in a shift in pricing trends, causing cap rates to increase to the mid-7 to 9 percent range. Apartment properties are trading and being financed in the region, thanks largely to agency lenders and still-active local and regional commercial banks. With the fall of the CMBS market, a financing void has emerged in the local and national markets. In 2006 and 2007 CMBS originations nationwide totaled more than $400 billion. Our research suggests that more than $80 billion in CMBS loans will come due in 2009-2010 and recapitalizing those loans will …
Market Reports
The Seattle market is currently experiencing the lowest tenant demand in 30 years. Both early stage companies and strong credit corporations are tightening their belts and are reluctant to commit capital. Large companies with strong credit usually look for cost saving consolidation opportunities, but unfortunately, this requires some up-front capital, which is being frozen by financially savvy executives. Many new developments commenced 2 to 3 years ago as Seattle was rated one of the top five real estate markets in the nation. Those projects broke ground without the foresight of the recession that followed. There are currently four new vacant office buildings complete or close to completion. Those buildings include West 8th, 1918 Stewart, 2201 Westlake and 1100 Eastlake. All of their anxious landlords and investors are competing for a small pool tenants. Additionally, the downfall of Washington Mutual has brought thousands of additional square feet onto market. JP Morgan Chase refuted most leases through its bankruptcy acquisition of Washington Mutual. This perfect storm of over supply totals more than 6,500,000 square feet of class A and B office space available for lease. The Eastside markets have been saved from excessive vacancy owing to Microsoft’s expansion last year. However, overall …
In the wake of rising office vacancies and sublease space, tenant opportunities are at their most pronounced for companies seeking office space throughout the Chicago Metro market, which includes both the CBD and the suburbs, in 2009. In Chicago and across the U.S., credit-worthy tenants continue to be in a position to strike deals at a fraction of previous rents. Landlords are beginning to offer increased concessions such as tenant improvement funds, rent abatement, and greater lease flexibility. Nationally, such offerings have escalated nearly 20 percent over the last 24 months, while rents have been driven down some 10 percent in the last 3 months alone. Chicago’s sublease space climbed to 7 million square feet, including 2.67 million square feet in the CBD plus the suburbs in the first quarter of 2009, according to Jones Lang LaSalle research. Sublease space will jump further in the coming months as corporate America's more recent job cuts trickle down to commercial real estate. The overall vacancy rate, including subleases, in Chicago’s CBD is 18,140,000 square feet, or 13.6 percent, and is 22,900,000 square feet or 23.9 percent for suburban Chicago in the first quarter of 2009. The absorption rate is at -0.8 percent …
Evan P. Kristol is senior vice president of Investments and Still Hunter, III, is first vice president of Investments for Marcus & Millichap Real Estate Investment Services in Fort Lauderdale, Florida. 1. What area is your expertise South Florida Apartments and Distressed Multifamily Properties (Broward County) 2. What trends do you see presently in multifamily development in your area? In recent years, strong population growth and an expanding job market drove demand for apartments in South Florida. Economic uncertainty involving the residential market has created an unstable situation for local developers causing them to become guardedly optimistic regarding their future construction plans. There is not much new development taking place. Unsold condos continue to compete with apartments. The positive aspect of supply-side fundamentals is an ongoing reduction in permit issuance. In Broward County 1,400 multifamily units were issued last year, an amount that is expected to fall to fewer than 1,000 units in 2009. 3. Who are the active multifamily developers in your area? Minto Group Inc, Altman Development Corporation, Gables Residential and ZOM are a few active developers in South Florida. 4. Please name one or two significant multifamily developments in your area. What impact will these projects have …
The proverbial good news–bad news scenario is at play when it comes to land values and transactions in Albuquerque, New Mexico. As always, the good news first. Albuquerque did not experience the effects of mammoth overbuilding and the resulting plummeting disintegration of value that has infected many other markets. The 180 degree reversal of values that commenced in the run-up to 2008 in areas like Phoenix and Las Vegas and continues as we write is in stark contrast to current Albuquerque price levels, where generally most commercial property and land in particular have suffered far less than in those areas and other markets nationally. There is, however, still bad news if you’re a local owner, prospective seller or broker trying to make a living in the land business. Historically Albuquerque has lagged behind most other areas of the country in economic timeline trends. If you subscribe to the theory that a housing sales slump is the precursor of a commercial real estate decline it’s easy to extrapolate why non-residential land here is beginning to experience a current decrease in demand. Current reports from appraisers and brokers in the residential subdivision business provide a gloomy picture of north of 10,000 lots …
The Birmingham industrial market was much like the rest of the country in 2008. The recession reared its head in Birmingham, resulting in an overall decline in average rental rates and occupancy levels. The multi-tenant bulk distribution sector was the hardest hit, falling to 82.4 percent occupancy with a negative absorption of 206,000 square feet compared to the previous year’s 600,000 square feet of positive absorption. Surprisingly, the service center market showed positive absorption for the second year in a row, settling at 91.7 percent occupancy for the year end. There were no new developments completed in 2008, as landlords struggled to retain tenants and conserve cash. Other than the delivery of a 150,000-square-foot building currently under construction in Shelby County, we anticipate much of the same for 2009. Despite these challenges currently facing our market, several significant transactions completed in 2008 meant that the market was certainly not stagnant. Brookwood Pharmaceutical, a manufacturer and leading provider of surface modification and drug delivery technologies to the healthcare industry, acquired the former Saks corporate headquarters facility in the Lakeshore corridor. This 286,000-square-foot office and warehouse will receive an additional $30 million of capital investment. It is a prime example of Birmingham’s …
While national multi-housing trends have begun to show recessionary weakness, Indianapolis area market fundamentals have held up well over the past 12 months. Indianapolis has long been one of the more affordable single-family markets in the country and until recently had been well-supplied with several very efficient large single-family developers. The deterioration of this industry is the single largest factor responsible for the city’s stable and improving multi-housing performance. The Indianapolis multi-housing market consists of 130,000 units in 683 communities (larger than 20 units). The average community size is 191 units. Market wide occupancies in Indianapolis bottomed out in 2003 at 87.1 percent and have been steadily climbing since to 90.9 percent in 2008. During this same period concessions have declined and 2008 rent growth was 2.2 percent, placing rents at $659 ($.75 per square foot). The city’s top 50 communities, once threatened to a greater degree by single-family housing, have faired well over the past several quarters. As with most seasonal markets, the Indianapolis market shows a very predictable bell shaped occupancy curve with fourth and first quarter occupancy lows and peaks in the second and third quarters. Until first quarter 2009, the impact of the current recessionary environment …
“Are we there yet?” seems to be the big question with the Dallas/Fort Worth office market. The most likely answer is no, there is still tough times ahead. The Dallas/Fort Worth (DFW) Metroplex refused to participate in the recession for most of 2007 and 2008, but the fourth quarter of 2008 started a down trend that has so far continued in the first quarter of 2009. Sales volume is down, rental rates are down and vacancies are up. National annual sales volumes for office properties peeked at nearly $208 billion in 2007 to be followed by a drop of 75 percent in 2008 according to Real Capital Analytics. Sales volume for office investments held up slightly better in the Dallas market decreasing only 65 percent in 2008 as the credit markets began tightening. The rental rates and vacancy percentages held up much better in the DFW Metroplex than did the national averages. According to CoStar DFW hit its high vacancy rate in mid 2003 around 18 percent. Since that time it has steadily dropped with 2007 and 2008 remaining fairly stable at slightly above 16 percent. In 2007 and 2008 the Metroplex added 11,278,582 square feet of new office space …
If there’s any good news to be had in today’s challenging economic climate, perhaps it’s that now is an opportune time to be an apartment investor in metropolitan Phoenix. While the credit crunch has undeniably put a dent in sales activity — the difference between $52 million so far this year compared to $600 million for all of 2008 and $3.5 billion during 2007 — interest from well-capitalized private investors hunting for bargains among the rising selection of lender-owned properties for sale may provide a boost moving forward. The number of distressed properties has crept into the double digits since early 2009. Offerings in good locations, where the pricing reflects the market correction, can easily garner 15 to 20 offers, on par with bidding activity occurring even during the best of economic times. Active investors are primarily individuals and private capital sources searching for positive leverage and high returns. Meanwhile, REITs and advisors looking to firm up balance sheets, developers needing to pay off maturing construction loans, and lenders hoping to unload distressed properties make up the bulk of sellers. Another piece of good news: tighter lending requirements, coupled with a downturn in population and job growth, have effectively put …
Greater downtown Waco is experiencing a renaissance of growth offering an exciting front door to visitors and residents. This district comprises between 5 and 7 square miles of land right along Interstate 35 in Central Texas. The Brazos River flows through the downtown area, linking Baylor University, Interstate 35, Cameron Park and Cameron Park Zoo. The Downtown Business District encompasses approximately 350 acres, featuring an emerging Central Business District and an array of redevelopment opportunities. Currently, there are approximately 18,000 residents in greater Downtown Waco and 16,000 jobs all within 1.25 miles of the heart of Downtown. There is resurgence in office development in the downtown Waco market. In 2008, an unprecedented 100,000 square feet of Class A office space was added to downtown. A vast majority of the space has been leased. More projects are under development for owner-occupied refurbishment, new construction and speculative lease space. In addition to these office developments, there are several new projects gaining momentum in downtown Waco totaling more than $200 million in new public and private investment. Phase I of Waco Town Square, which is nearing completion, will add 17 acres of mixed-use residential and retail space. This includes the 46-unit Austin Avenue …