Archive for May, 2011

Apartment Owners to See Outstanding Returns Through 2012

Tuesday, May 31st, 2011

Strong April performance numbers will help the multi-family sector deliver outstanding returns for owners and operators over the next 20 months, as effective rent growth and occupancy rates remain at near-record highs. According to OKCREview.com, the overall trend in the sector is onward and upward with the typical growth coming from the major markets now being joined by other regions experiencing similar positive results.

According to Axiometrics, a provider of data and analysis on the multi-family sector, national effective rents increased 0.68% between March and April 2011, and the year-to-date effective rent growth of 2.45% has outpaced 2010′s rate of 1.96%. Additionally, the national occupancy rate increased for the 11th time in the past 15 months, growing 33 basis points from 93.48% in March to 93.81% in April.

To read the full article from OKCREview.com, click here.

Posted in Apartments, Multi Family, Real Property | No Comments »

Landlord Concessions Complicate Appraisal Process

Friday, May 27th, 2011

Commercial property appraisal prior to the recession was as simple as dividing the number of vacant rental units at a property by the total number of rentable units to determine the vacancy rate. Since the economy has become, and continues to be, less stable, vacancy rates can be deceptive as landlords in commercial real estate have been forced to be more aggressive to secure tenants, according to the National Real Estate Investor.

One main incentive landlords have resorted to in attracting tenants is free rents for a period of time in exchange for the signing of a long term contract. The problem with this for appraisers is the fact that rent-free periods are economically equivalent to a vacancy for that unit even though a building may be 100% occupied. This creates issues with the calculating of economic vacancy.

Other concessions offered by landlords such as free furniture, equipment and moving, along with other typical tenant improvements can reduce the owners’ net operating income and thus affect the value of the property.

To read the full article from the National Real Estate Investor, click here.

Posted in Economy, Real Property | No Comments »

UPDATE: Property Tax Cap Gets Thumbs-Up from Businesses

Thursday, May 26th, 2011

New York Governor Andrew Cuomo and legislative leaders have agreed on a 2% limit on commercial and residential property tax increases. The proposal, which still has to be approved by the state legislature, has drawn the praise from business organizations statewide as it aims to stem economic decline in regions outside of New York City. The proposed hard tax cap will move New York closer to an economic recovery as it will help protect taxpayers and businesses.

Several businesses located in areas such as Nassau County on Long Island experience very high property taxes and need this relief in order to remain competitive. Property taxes are a huge factor in the cost burden of operating a business in New York, and the proposed tax cap should lessen that burden, stop additional economic decline and promote job growth. If passed by the legislature, New York will be in the right direction for becoming a more affordable place to live and operate a business.

This is an update on an earlier posting, Assembly Majority Leader: New York Tax Cap Will Pass This Session, from May 13, 2011.

Posted in Eastern, Economy, Real Property | No Comments »

Spike in Distressed Property Sales Is a Healthy Sign

Wednesday, May 25th, 2011

An index of U.S. commercial real estate prices fell to a cyclical low in March, down 4.2% from February and 47% from the peak in October of 2007. According to the National Real Estate Investor, the decline in the index, which measures price changes on completed sales of apartment, office, industrial and retail properties, stems in part from a surge in transaction volume among distressed properties, which accounted for more than 30% of March sales.

The high volume trading of distressed assets means investors and lenders are realizing their losses on these properties. While this realization is painful, experts insist that it is necessary to correct the prices on distressed assets in order for the nation’s commercial real estate market to regain its footing and for overstretched owners to regroup and bring cash flows into a positive territory. To be brief, the March decline in the all-property index does not mean commercial real estate values are dropping.

To read the full article from the National Real Estate Investor, click here.

Posted in Apartments, Economy, Industrial, Multi Family, Office, Real Property, Retail | No Comments »

Commercial Real Estate Markets Stabilizing, Demand Growing

Tuesday, May 24th, 2011

The improving economy, especially the extremely important increase in job creation, means growing demand for commercial real estate as job creation increases the demand for commercial space. When coupling the increased demand with the minimal supply created in recent years, vacancy rates will be trending down in all of the commercial real estate sectors, where some individual markets are stabilizing and in some cases rising.

Though Q1 of 2011 saw a little bit of a decrease in the recovery, according to marketwire.com, experts predict from Q2 of 2011 through Q2 of 2012 that vacancy rates will decline 1.0% in the office sector, 0.9% in industrial real estate, 0.5% in the retail sector and 1.1% in the multifamily rental market. Although market fundamentals seem to be firming up and vacancies are going down, there are still many other concessions, such as lending problems, which continue to make it a tenant’s market.

To read the full article from marketwire.com, which includes office, industrial, retail and multi-family market analysis, click here.

Posted in Economy, Industrial, Multi Family, Office, Real Property, Retail | No Comments »

Commercial Real Estate Sector Cooled in Q1

Monday, May 23rd, 2011

According to MIT’s Center for Real Estate, the commercial real estate market decelerated in the first quarter of 2011 as institutional property investors were stung by declines in both sales and prices. The total dollar value from Q1′s transactions declined to $2.5 billion, from $4.1 billion in the last quarter of 2010. Average deal size was also down to $35.7 million from $45.6 million during that same time frame.

In correlation with the setback of the recovery in the commercial real estate market, institutional sellers who unloaded properties in Q1 posted a negative 0.7 percent return on their investors. MIT used pricing data, sales data and net cash flow over each property’s investment cycle to arrive at their calculations.

To read the full article from the Boston Business Journal, click here.

Posted in Economy, Real Property | No Comments »

A New Era for Multi-Family

Friday, May 20th, 2011

According to industry experts, the negative stigma of living in an apartment is long gone as it is now considered more widely desirable than homeownership. According to Commercial Property Executive, those in the multi-family business are benefiting from the horror that went on with the single-family side, pent-up demand and low resident turnover as nowadays people just aren’t leaving like they used to. All of this leads to a state of slow but sure recovery for the sector.

The trend of moving towards renting is very evident as the approximately 3 million young adults that were forced to move in with family between 2005 and 2010 are beginning to get more confidence in the economy and move into apartments and start their households there, but not enough confidence to do that through the purchase of a home. The increasing tenant population is causing stability and projected growth in the multi-family industry.

To read the full article from Commercial Property Executive, click here.

Posted in Apartments, Multi Family, Real Property | No Comments »

Discounters Rev Up Retail

Thursday, May 19th, 2011

With retail vacancies continuing to mount and higher gas and grocery prices an inevitability, merchandising experts predict it could be years before the U.S. marketplace requires new sales space and some fear that consumer spending for apparel and electronics might soon evaporate. However, according to the National Real Estate Investor, optimism can be found in significant expansion from discount retailers as Dollar General plans to open 650 new U.S. stores this year, Family Dollar 300 stores and Save-A-Lot 100 stores.

Frugal shopping is where a good portion of retail action is at the moment as price continues to be a huge factor with the effects of the recession still looming. Retail in general though is still improving as the sector is on pace to top 2010 sales. In early 2010, retail chains planned 13,500 new stores and shops, the lowest level in a decade. This year the outlook is for 21,000 new stores, nearly matching 2007 levels but still 16% off the peak of 25,000 in 2006.

To read the full article from the National Real Estate Investor, click here.

Posted in Real Property, Retail, Store Chains | No Comments »

Hotel Transfers: Buyers and Sellers Beware!

Wednesday, May 18th, 2011

At a time in the commercial real estate market, and more specifically the hospitality industry, when credit is still tight due primarily to stricter lending requirements, there are a number of buyers who have been raising cash and looking for opportunities to invest in quality properties at below replacement costs. Because there are more dollars available to invest than there are deals to be made, some of the transactions that have closed recently have done so at prices that may be two or three times the taxable value of the real estate.

Buyers flush with cash after holding on to their purse strings for the last two or three years appear to be ready to spend whatever it takes to purchase well located assets in hope of taking advantage of the perceived upside potential. However, it is unrealistic to believe that the value of newly purchased real estate could increase as rapidly as currently projected by some, given the value history of the property and the current economy. This could leave investors who are overpaying and sellers who are going to be stuck with large amounts of excise taxes in a potential financial bind.

To read the full article and analysis, which includes examples of how Paradigm Tax Group helps hospitality property owners estimate the various components of assets so the amount of taxes they pay is no more than that required by law, click here.

Posted in Hospitality, Hotels, Real Property | No Comments »

Will Michigan Legislature Chop Business Personal Property Tax?

Tuesday, May 17th, 2011

After recently pushing through $1.7 billion in tax cuts for Michigan businesses, cutting personal property taxes on businesses in the state could be next. According to mlive.com, Michigan businesses paid $1.2 billion in personal property taxes last year. If personal property taxes were eliminated completely, local governments would lose $784 million in revenue and the state School Aid Fund would lose about $300 million.

Personal property taxes are obviously hated by the business community as it applies to most everything inside the walls of a business, including furniture, no matter the purchase date. The elimination of these taxes would hurt with funding to local governments and schools initially, but not as much as if businesses were scared away from the state taking their sales tax revenue with them to other nearby states like Indiana and Ohio who do not have a personal property tax.

To read the full article from mlive.com, click here.

Posted in Complex, Industrial & Manufacturing, Mid America, Personal Property | No Comments »

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