Archive for September, 2011

Industrial Vacancies Sign of Tough Economy

Friday, September 30th, 2011

As industrial real estate vacancies rise in Dayton, Ohio, an increasing amount of older space is being left empty and will be difficult to fill in a slow economy. According to the Dayton Daily News, a quarter-million square feet of industrial space in the area went dark this past year, sending vacancies up to 24.8% compared to 23.5% a year ago. Much of the vacant space can be attributed to the large amount of buildings with locations, ceiling heights or other features that make them unattractive to today’s companies.

The south market in Dayton experienced the greatest increase in vacancies. Much of the empty space in that region is being attributed to the ripple effects of the General Motors assembly plant closing. Once everything settles from that event, many believe that things will begin to level off. Another trend in the market is that companies are beginning to buy their space instead of renting. This is being driven by low interest rates and cheaper prices for industrial properties.

To read the full article from the Dayton Daily News, click here.

Posted in Distribution Centers, Economy, Industrial, Mid America, Real Property, Warehouse | No Comments »

Recent Portfolio Purchase Signals Confidence in Retail Assets

Thursday, September 29th, 2011

The recent acquisition by The Blackstone Group of 36 shopping centers should be a good sign for retail property owners, as it shows confidence in the future of retail valuations by a respected private equity firm. According to Retail Traffic, the portfolio attracted multiple buyers, and the $473 million price tag likely reflects the current market value of the centers. The problem is, with the current economic uncertainty, that market value is a highly unstructured term.

While the retail sector is still in recovery, now seems like the time to be buying. As the sector heads for another growth spurt, prices won’t get much lower than they are at this point. With most transactions so far this year being in the multi-family sector, this is the first sign of real investor interest in retail and more is expected to follow because of it.

To read the full article from Retail Traffic, click here.

Posted in Economy, Real Property, Retail, Strip Centers | No Comments »

Office Sector Recovery Makes Gateway Cities Good Acquisition Targets

Wednesday, September 28th, 2011

Rising office valuations in gateway cities have caused real estate investors to begin looking for potential acquisitions in the nations secondary markets. According to the National Real Estate Investor, investor appetite for second-tier cities is being driven by the desire for better returns. While primary location such as New York and Washington, D.C. provide fewer risks, cap rates for assets in those markets are now nearing pre-downturn levels.

There still is the fact that pricing is very robust in primary markets and gains in valuation are more limited in the second-tier. Second-tier market assets are beginning to trade at a high valuation, but still nothing in comparison to the likes of New York and D.C. Cap rates as of mid-year 2011 on office acquisitions, however, are coming in 1 – 2.5% higher in most second-tier markets compared to primary markets, at an average range of 7.5 – 8.5%.

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

Posted in Eastern, Mid America, Office, Real Property | No Comments »

How Accurate Are Commercial Appraisals?

Tuesday, September 27th, 2011

The size of the gap between appraised and market value for commercial real estate can have a real impact when a seller wants to evaluate an offer or a buyer wants to qualify for a loan. According to the October 2011 issue of REALTOR magazine, findings indicate that the median appraisal value assigned for individual properties was more than 12% above or below sales prices for transactions that took place two quarters after the appraisal.

The sales price can be higher than appraised value in instances where the property finds itself in a bidding war and price is driven up, and can be lower when markets are suffering like during the recession that started back in 2008. When markets change rapidly is when there is a wide variation between sales price and appraised value. When prices are rising, appraisals tend to underestimate value. When markets are tumbling, appraisals usually overestimate sales price.

Posted in Economy, Real Property | No Comments »

Property Value Can Take a Hit When Shops Open Elsewhere

Monday, September 26th, 2011

Newer or remodeled Western Pennsylvania retail centers are beginning to pull shoppers away from malls and strip centers as more retailers seem to be moving from place to place more often. According to the Pittsburgh Tribune-Review, in some cases, new development is reducing the property values of older ones, frustrating the likes of such affected property owners who feel that the frequent relocation is not necessary to improve customer access.

The reality is, even though retailers commonly sign 10-year leases, they want to be able to break away and move when newer livelier space opens up. While new development is always a good sign on the economy, the rate of expansion consequently leaves older centers with large amounts of vacant space. Despite the increased vacancies in older buildings, retail vacancies altogether in Western Pennsylvania have dropped from 7.6% at the end of 2010 to its current rate of 6.6%.

To read the full article from the Pittsburgh Tribune-Review, click here.

Posted in Eastern, Malls, Real Property, Retail, Store Chains, Strip Centers | No Comments »

Commercial Real Estate Prices Jumped 5% in July

Friday, September 23rd, 2011

As the economy begins to slow again, the recovery that the commercial real estate market has experienced with three straight months of increased prices, may experience some stalling. That being said, according to Bloomberg Businessweek, the Moody’s/REAL Commercial Property Price Index advanced 5% from June and is up 1.2% from a year earlier and almost 13% from its post-peak low in April. Still though, slow job growth will damper expectations for the absorption of vacant space and rent increases which should bring a halt to the price increases.

The recent price increases on commercial real estate can be attributed to an increase of sales of properties that are smaller assets located outside of the major markets of Boston, Chicago, New York, Los Angeles, San Francisco, and Washington, DC. However, hesitance in the issuance of CMBS loans for the deals may limit financing.

To read the full article from Bloomberg Businessweek, click here.

Posted in Eastern, Economy, Mid America, Real Property, Western | No Comments »

New Deals Demonstrate Continued Investor Interest in Chicago

Thursday, September 22nd, 2011

The recent acquisition of the Wrigley Building continues to demonstrate that downtown Chicago, Illinois office properties remain hot assets for investors. According to the National Real Estate Investor, now is a good time to sell big downtown Chicago buildings as there has been a shift towards safety amongst investors as they are willing to pay cap rates of 6% and more for prime buildings in quality markets. Most of the buildings that are being sold today are of institutional quality and are well leased, with limited amounts of tenant rollover in the near term.

Overall, commercial real estate sales in Chicago totaled $3.7 billion in the first half of 2011, more than triple that of the same time frame last year. Office sales alone were up more than 75% compared the first half of last year to $568.1 million. The best class-A office buildings are the ones that are most in demand as the vacancy rates there hover around only 2%.

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

Posted in Mid America, Office, Real Property | No Comments »

Las Vegas Commercial Real Estate Defaults Accumulate

Wednesday, September 21st, 2011

A new batch of lawsuits covering Las Vegas, Nevada office, hotel and retail properties are taking center stage. According to VEGAS INC, as the commercial real estate market continues to struggle in Las Vegas, lenders and distressed-debt investors are proceeding full speed ahead with these new lawsuits as they try to foreclose on properties, collect past-due balances or enforce personal guarantees.

The recent lawsuits are just a few added to the large amount occurring in Southern Nevada since the start of the recession in 2008. More still are coming as the market continues to adjust to a current unemployment rate of 14.2% and increasing residential foreclosures. As a direct result of the unemployment rate, the amount of excess office space also continues to rise with vacancies hitting an all time high in the second quarter of 24.8%. Retail is faring a little better with 10.1% vacancy.

To read the full article from VEGAS INC, click here.

Posted in Economy, Hospitality, Hotels, Office, Real Property, Retail, Western | No Comments »

Tax Plan to Turn Old Buildings ‘Green’ Finds Favor

Tuesday, September 20th, 2011

An effort to slash energy consumption of buildings over the next few years in the Miami, Florida and Sacramento, California areas has gained favor in the likes of a business consortium that plans to invest as much as $650 million. According to the New York Times, focusing mainly on commercial property at first, the group plans to exploit a new tax arrangement that allows property owners to upgrade their buildings at no upfront cost, typically cutting their energy use and their utility bills by a third.

The upgrade would be paid off by the building owners over a five to 20 year time span through surcharges on their property tax bills. The added on expense to the property tax would amount to less than the savings received with the upgrades. Both state and city officials are optimistic that they have found a way to combat the huge energy problem of waste in older buildings through this tax arrangement, without asking for new money from Washington, DC.

To read the full article from the New York Times, click here.

Posted in Eastern, Environment, Green Initiatives, Real Property, Western | No Comments »

Retailers Cautious but Confident about the Future

Monday, September 19th, 2011

New survey data shows that although U.S. retailers are still cautious about the current market environment, 59% plan to expand their stores due to lower rental rates. According to Retail Traffic, the survey, conducted by CB Richard Ellis, shows that only 27% of retailers view the economy as improving, compared to 35% last year. However, optimism remains for the future as 45% see the economy as stable and 27% feel recovery has already occurred in their market.

Three-fourths of the respondents ranked the West as the best market for retail growth with the Mountain and Pacific Northwest getting the lowest support with 32% and 33% respectively. Overall, despite the perceived risks of unemployment, consumer confidence, higher food and energy costs, and the housing market, retailers remain generally optimistic about their future business. The number of retailers expecting to expand their locations rose from 92% from 82% last year.

To read the full article from Retail Traffic, click here.

Posted in Economy, Real Property, Retail, Western | No Comments »

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