Archive for the ‘Industrial’ Category
Tuesday, November 23rd, 2010
Noted Chicago architect Ludwig Mies 
van der Rohe’s famous maxim “Less is more” should apply to ambitious plans for revamping Chicago’s Navy Pier, the city’s top tourist destination. Writing in the Chicago Tribune, architectural critic Blair Kamin says “The good news about the latest vision for the pier is that it discards the excesses of a 2006 plan that would have layered a roller coaster and an indoor water park onto an attraction that already resembles a shopping mall or a carnival midway. But it is one thing to ditch a bad plan and another thing to find the creative spark necessary to bring order and élan to Navy Pier’s architectural mishmash.”
A bold design framework is needed for the 3,300-foot-long pier, which was a vision of Daniel Burnham and was completed in 1916. The Urban Land Institute has issued a 40-page report with recommendations that address the ways in which the Metropolitan Pier and Exposition Authority could enhance the Pier, which has seen a fall in attendance to 8,000,000 annually from a high of 9,000,000 in 2000. According to Kamin, “The report’s principal recommendations lack flashes of insight about the great public work, which originally consisted of classically inspired buildings framing freight and passenger sheds. The sheds disappeared as part of the pier’s $225 million makeover, completed in 1995. Still, the Urban Land Institute is offering a few promising ideas that could refresh the pier’s identity as a public pleasure ground and replace its once-graceful appearance.”
Among the recommendations are replacing the white fabric-roofed Skyline Stage with a 950-seat venue that would expand the Chicago Shakespeare Theater. This has the potential to restore the pier’s clean-lined silhouette. Another is to replace the current Ferris wheel with a larger one similar to the London Eye. Some of the elevated pier’s edges might be redesigned, giving visitors access to Lake Michigan.
“But as the report itself acknowledges, the next step is for architects to translate these vague notions into a reality that is both user friendly and visually striking,” Kamin says. “Fortunately, pier officials say they will consider asking Chicago’s architects to submit redesign proposals based on the report. And well they should, given that the city has a mother lode of design talent that’s been sidelined by the construction downturn. It’s time to use that talent – and to use this fresh opportunity to make Navy Pier the great public space it ought to be.”
Tags: architecture, Blair Kamin, Chicago, Lake Michigan, London Eye, Navy Pier, Urban Land Institute
Posted in Development, General, Industrial, Student Housing | No Comments »
Wednesday, October 6th, 2010
Although foreign investment in United States commercial real estate doubled in the 1st half of 2010 compared with 2009, activity is still sluggish, thanks to the slow economy and a lack of trophy properties offered for sale. Currently, the United Kingdom is the hottest international destination for investment, according to Jones Lang LaSalle research. So far this year, $7 billion of foreign money has been invested in British properties, compared with just $4.3 billion in U.S. real estate.
“The rise in cross-border transaction volume also shows a real estate return in the major markets, and an encouraging 176 percent increase year over year in the United States, which had the greatest fall in cross-border investment during the downturn,” said Steve Collins, managing director, Americas, for Jones Lang LaSalle’s International Capital Group. “Demand is especially robust for well-leased, core-style product in gateway markets such as New York and Washington, D.C., whereas demand remains much weaker for the non-gateway cities markets.”
Another obstacle to foreign ownership of American real estate is the 1986 Foreign Investment in Real Estate Property Tax Act (FIRPTA), which gives the government the ability to tax gains earned when an overseas company sells a property. Opponents say that law blocks the flow of foreign capital into the United States; an attempt to overhaul FIRPTA this summer failed in Congress. Representative Joseph Crowley (D-NY) has introduced legislation that will increase the percentage of foreign ownership in publicly traded REITs from five to 10 percent before proceeds are taxed under FIRPTA. Although the legislation passed the House by a wide margin, the Senate has not yet acted on it.
“It’s certainly not what we hoped for. It’s really just a start,” said Jim Fetgatter, CEO of the Association of Foreign Investors in Real Estate (AFIRE), “It may encourage a little foreign investment, but it’s only going to impact foreign investors who are already investing in REITs, allow them to take a bigger piece of a company. But there are a lot of countries in the Middle East and Germany that don’t invest in REITs. They’re direct investors and the new law won’t have any impact on them.”
Tags: commercial real estate, congress, foreign investors, Jones Lang LaSalle, Middle East, REIT
Posted in Development, Economics, Financing, Industrial, Office | 1 Comment »
Tuesday, October 5th, 2010
Real estate professionals who had been expecting a worst-case scenario – an onrush of distressed commercial properties coming onto the market – are still waiting for that to come to fruition. Ben Johnson, writing in the National Real Estate Investor, notes that “Keep on waiting/lurking seems to be the prevailing view. According to New York-based researcher Real Capital Analytics, the default rate for commercial real estate mortgages held by the nation’s FDIC-insured depository institutions did increase by nine basis points to 4.28 percent in the 2nd quarter, up from 4.19 percent in the 1st quarter. For those of you keeping score on a historical scorecard, at its cyclical low in the 1st half of 2008, the commercial mortgage default rate was 0.58 percent. A mere pittance. Year-over-year, the tale is more striking, with the commercial default rate up by 139 basis points.”
Instead of accelerating, Johnson says that the negative drift seems to be slowing. “Year-over-year increases had been accelerating for 13 consecutive quarters through the end of 2009, but have moderated more recently,” he said. The dollar volume of commercial mortgages in default recorded the smallest increase since the 2nd quarter of 2007. Approximately $46.2 billion of bank-held commercial mortgages currently are in default, an increase of $547 million from the 1st quarter of 2010.
Tags: Ben Johnson, commercial real estate, default, distressed assets, mortgage, Real Capital Analytics
Posted in Financing, General, Industrial, Office | No Comments »
Monday, October 4th, 2010
Although construction in the United States has been slow since the financial meltdown of 2008, there is one niche segment that is thriving – green construction. According to McGraw-Hill Construction, green buildings now comprise one-third of all new construction, an increase of two percent over 2005, a surprise in an industry that is historically slow to change.
A case in point is the new Silver LEED-certified Ross School of Business building at the University of Michigan. The environmentally friendly building incorporates technologies such as dual-flush toilets, which use 0.8 gallons of water instead of 1.6 gallons. Firm in the knowledge that LEED certification is worth the money, the University of Michigan is now committed to going green on all new construction projects that cost $10 million or more.
Terry Alexander, Executive Director of the university’s Office for Campus Sustainability, notes that the added cost of LEED certification is actually a small percentage. Because the university already saves energy and water in its new buildings, the extra cost on a $100 million Silver LEED project would be just two percent. That includes the hard cost of eco-friendly features as well as soft costs for the paperwork required to achieve LEED certification. Alexander says that Michigan is confident that the LEED plaque sends a message about the university’s environmental priorities and that it increases the school’s prestige with students and employees.
Tags: Construction, Environmentalists, Green, LEED, sustainability, United States Green Building Council, USGBC
Posted in Development, General, Green, Industrial, Office, Residential | No Comments »
Thursday, September 9th, 2010
Yields on United States commercial real estate are nearing record levels compared to Treasury bonds, a sign to investors that the time to buy may have arrived. Capitalization rates, which measure real estate yields, averaged 7.22 percent in the 2nd quarter, according to the National Council of Real Estate Investment Fiduciaries (NCREIF). That translates to 429 basis points – or 4.29 percentage points, higher than yields on 10-year government bonds as of June 30, 2010.
Investors, though still wary, are showing interest in top-quality office buildings, hotels and apartments as the gap widens, said Nori Gerardo Lietz, partner and chief strategist for private real estate at San Francisco-based Partners Group AG. “The data indicate that real estate is poised for a rebound,” Gerardo Lietz said.
The NCREIF index measured 6,066 properties with an estimated market value of $234.5 billion. The spread over Treasury yields was analyzed using transaction cap rates based on real estate based on real sales – 48 of which occurred during the 2nd quarter – and tend to be more dependable than appraised values. Investors usually balance property yields with Treasuries to establish how much profit potential real estate offers when compared to a low-risk investment. The spread fell to less than 80 basis points, the smallest in 16 years, when commercial real estate prices hit their peak in 2007. Since then, Moody’s Investor Service says property values have fallen by 40 percent.
“Property is attractively priced versus the fixed-income market,” said Ritson Ferguson, chief investment officer of ING Clarion Real Estate Securities, whose management portfolio is valued at approximately $12 billion. Some investors are still wary of the wide spread because of the weak economy, reduced commercial rents and occupancy levels.
Posted in Development, Financing, Industrial, Office | 1 Comment »
Tuesday, August 31st, 2010
The nation’s financial system needs significantly more regulation than exists now. The lack of tough regulatory powers strongly impacted the recent financial crash and the Great Recession that ensued. The good news is that the Obama administration is moving firmly in this direction with financial reform legislation a critical item on its agenda. This is the opinion of Anthony Downs, a senior fellow with the Brookings Institution and former President of the Real Estate Research Corporation. In a recent interview for the Alter NOW Podcasts, Downs said that between 1980 and 2007, the value of international capital markets – including bank deposits, assets, equities, public and private debt – quadrupled relative to the world’s GDP, lifting millions of people out of poverty. Although unprecedented, this growth relied heavily on borrowed money to finance higher living standards and highly leveraged loans with limited reserves backing them. In the end, the growth was unable to be sustained.
The financial reform legislation currently undergoing reconciliation by a Senate-House conference committee is not a reinstatement of the 1933 Glass-Steagall Act – which separated investment and commercial banking — because banks will still be allowed to deal with securities. Under the new law, banks will have to register derivatives with some type of formal exchange and maintain records on who is borrowing money and under what terms. This marks a significant change from before the Great Recession, when derivatives were traded with virtually no oversight.
Downs believes that former Federal Reserve Chairman Alan Greenspan contributed to the financial crisis in two ways. In 2001, when Greenspan was informed that there was fraud in the subprime housing market and that he should do something about it, he refused to take action because he didn’t believe in regulation. According to Downs, “that was a terrible mistake and meant that all the horrible loans made in the subprime market could continue unchecked.” Greenspan’s second error was to maintain low interest rates for as long as he did at a time when an enormous amount of capital was coming into the United States economy from overseas. Because investors were avoiding the stock market, they put their money into real estate. That drove the price of properties sky high and destroyed the concept of intelligent underwriting and evaluating the risk before approving the loan.
Anthony Downs On Financial Reform:
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Tags: Alan Greenspan, Anthony Downs, Ben Bernanke, Brookings Institution, derivatives, Federal Reserve, financial crash, financial reform, financial regulation, GDP, Glass-Steagall Act, Great Recession, Obama administration, reconciliation, securities, subprime
Posted in Development, Economics, Financing, Industrial, Office | 1 Comment »
Monday, August 30th, 2010
London remains the most expensive place to park a car, according to the 2010 Global Parking Rate Survey by Colliers International. The City and West End scored number one and two in terms of monthly parking rates with The City topping out at $933 USD per month (£643), followed by the West End at $874 USD (£602). Hong Kong came in third at $745 USD per month ($5,800 HKD). Two Australian cities again made the top 10 list: Sydney ranked number six and Perth number seven.
The highest daily parking costs were found in European cities, with Oslo occupying the number two spot at $54.52 (352.00 NOK). Amsterdam, Vienna, Athens and Copenhagen all made the top 10 list. In the 2010 survey, Abu Dhabi won the dubious honor as the world’s most expense place to park for the day at $55 USD. The cheapest city to park is Chennai, India – a bargain at 96 cents for the day.
Tags: Abu Dhabi, Colliers International, global cities, Hong Kong, London, parking, Vienna
Posted in Development, Industrial | No Comments »
Tuesday, August 17th, 2010
In Chicago’s – and one of the nation’s — largest commercial transactions of 2010, the 60-story, 1.3 million SF 300 North LaSalle Street skyscraper was sold for a whopping $655 million. That adds up to $500 PSF. The buyer was KBS Real Estate Investment Trust II (KBS REIT II). The LEED Gold certified building, which is 93 percent occupied by such tenants as Kirkland & Ellis, LLP; Boston Consulting Group; GTCR Golder Rauner, LLC; and Quarles & Brady, LLP, is a Class AAA tower completed in the spring of 2009 by Hines Interests.
“This high-quality property, with its strong tenant credit and long-term leases, fits perfectly within our investment parameters to provide long-term cash-flow stability,” said Bill Rogalla, KBS Realty Advisors senior vice president. “It qualifies as one of the newest and highest-quality properties built in the U.S. in Recent years. The building’s features, unmatched view corridors and LaSalle Street address resulted in a rapid lease-up even during the economic turndown. We expect the building’s Class AAA-quality and environmental attributes to contribute to significant tenant retention over the long term.”
The interesting thing about the deal is it’s an indication of the large capital pipeline the REITs have amassed. Also, it proves that assets with long-term leases and high-credit tenants are still trading at historically low cap rates.
Tags: Class AAA, commercial real estate, Hines Interests, Kirkland & Ellis LLP, LEED
Posted in Development, Green, Industrial, Office | No Comments »
Monday, August 16th, 2010
One company that is holding its own despite the shaky economy is Peoria, IL-based Caterpillar, Inc., which reported an enviable quarterly profit thanks to growth in emerging markets. The world’s largest manufacturer of construction and mining equipment is benefiting from growing mining and energy operations with orders outpacing shipments to dealers. Additionally, Caterpillar plans to increase production during the second half of 2010 and has hired 3,650 new employees this year — 1,250 in the United States and 2,400 overseas.
Caterpillar, which laid off 30,000 employees globally from late 2008 through 2009, is being cautious, saying it still has “significant economic concerns.” Eli Lustgarten, an economist with Longbow Research, notes that “Construction in developed countries is not doing well, particularly in the United States.” Caterpillar is well aware that its second-quarter profit of $707 million was derived from sales which rose 116 percent in Latin America and 62 percent in the Asia/Pacific region.
Another company that is prospering is Boeing, which has delivered 191 Next Generation 737s so far this year, including 95 in the second quarter. Chicago-based Boeing has delivered 222 airplanes in 2010. Demand for single aisle planes comes not only from growth markets, but also for replacing older aircraft such as the 737 Classics, A320s, and McDonnell Douglas MD-80/90s. The demand for single-aisle airplanes remained strong even during 2009, according to Boeing. The growth of low-cost carriers, emerging intra-China demand, and a large need for replacement airplanes will keep the demand for single-aisle airplanes strong into the future.
“The world market is doing much better than last year, but there are still challenges,” said Randy Tinseth, vice president of marketing, Boeing Commercial Airplanes. “Looking at 2010, we see a world economy that continues to recover. We expect the world economy to grow above the long-term trend this year. As a result, both passenger and cargo travel will grow this year.”
Tags: Asia Pacific, Boeing, Caterpillar, China, emerging markets, energy, JP Morgan Chase, Latin America, Longbow Research, mining
Posted in Economics, Industrial | No Comments »
Thursday, August 12th, 2010
It’s surprising that the AIA still does not endorse LEED standards for green buildings. There has been some progress in forming some kind of strategic alliance, but that is only in the area of advocacy, education and research. There is still nothing concrete. Nevertheless, the Architecture 2030 Bulletin and the AIA 2030 Commitment story are very interesting. The AIA website has many downloadable forms that comprise their own version of building performance measurement. It’s likely that the AIA will step up to form their own rating system to compete with the United States Green Building Council (USGBC), which is a very lucrative non-profit organization that the government chose to use for their own needs to employ green strategies — and when the government chooses a program, everyone else follows.
I hope the AIA will offer an alternative form of measurement to the USGBC. The USGBC’s process requires too many consultants and specialty firms to work independently on hundreds of credit applications. Ideally, the architect and his/her engineering consultants should be able to perform all of the analysis as part of their basic services. As of now, we get huge additional fee requests for the architect/engineers to help fill out LEED forms, and separate fee requests for energy models, LEED consulting, and commissioning services. It costs more than $100,000 in miscellaneous fees just to fill out and upload credit point applications. Many think that $100,000 could be used to improve the building’s performance.
Tags: AIA, Architecture 2030, credit point application, Green, Green buildings, LEED, USGBC
Posted in Development, Green, Industrial, Office | No Comments »