Archive for the ‘Office’ Category
Monday, March 8th, 2010
Economic indicators show that the recession is over. This is the opinion of Rick Mattoon, a senior economist and advisor in the economic research department of the Federal Reserve Bank of Chicago and a lecturer at the Kellogg School of Management at Northwestern University. Rick’s primary research focuses on issues facing the Midwest regional economy.
In a recent interview for the Alter NOW Podcasts, Mattoon warned that most people probably don’t feel like the nation is coming out of a recession because there are few signs of job creation or easier access to credit. One of the major concerns economists have is that this will be a double-dip “W-shaped” recession because once the bump from the $787 billion stimulus ends, there will be scant pent-up consumer demand for products and services to take the place of government spending.
One positive sign is an uptick in hiring by temporary employment agencies, which usually is considered to be a good harbinger of what future demand will be. Another interesting theory about this particular recession in terms of jobs is the idea that companies adjusted their employee levels much more aggressively at the beginning of this cycle. As a result, they are operating at extremely lean levels and so may hire earlier rather than later.
One problem is that there is a skills mismatch in the economy. Many people who have lost their jobs don’t possess the right skills to find employment in growth industries such as clean energy or healthcare. The challenge is training these individuals to bring their skills up to par.
Rick Mattoon: Is the Recession Over? :
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Tags: American Recovery and Reinvestment Act, Chicago, deficit, Federal Reserve Bank, GDP, Great Recession, inflation, Rick Mattoon, stimulus bill, treasury bills, wage growth
Posted in Economics, Financing, General, Green, Healthcare, Office, Residential | No Comments »
Thursday, March 4th, 2010
The last 30 years have seen a boom for skyscraper construction because the cost of borrowing money had declined significantly. When investors borrow money to purchase assets, they send prices higher. The problem is that this borrowing makes the markets susceptible to busts when investors sell assets to pay their debts. The recent financial crisis was one result of this process, with the debts larger and the price swings broader than has been seen in the past three decades. According to central bank critics, focusing on consumers - and not on the dangers of asset-price inflation - have encouraged bubbles by keeping interest rates artificially low.
The central bank critics argue that the desire to end the credit crunch may be causing authorities to make the same mistake by maintaining short-term interest rates at less than one percent in a majority of the developed world. Developing markets, thanks to their tendency to emulate richer nations, have the same cheap-money policies. The irony is that many of these economies are growing faster than those in the developed world.
For the commercial real estate industry, the bubble means that it is unlikely that we will see more high-profile skyscrapers like the Burj Dubai or Petronas Towers under construction very soon. All three projects were started during financial booms and delivered in hard economic times.
Listen to our interview with Rick Mattoon, a senior economist and economic advisor in the economic research department of the Federal Reserve Bank of Chicago, on the dangers of asset price inflation. Click here for the podcast.
Tags: Asset-price inflation, Ben Bernanke, Burj Dubai, central banks, Federal Reserve, financial markets, interest rates, investors, MSCI index, Petronas Towers, Skyscraper construction, Wall Street crash
Posted in Development, Economics, Financing, Office | No Comments »
Monday, March 1st, 2010
Arizona, Georgia and Texas are the growth centers in terms of new residents in the last few years, according to an Associated Press analysis of Internal Revenue Service migration data. The IRS compared the states where taxpayers filed their returns from 2007 to 2008 to arrive at their conclusions.
Texas led the nation, with 62,827 new households; the largest number of families moved there from California and overseas. Georgia ranked second, with 37,559 new households, many of whom moved there primarily from Florida and New York. Arizona reported a net gain of 20,300 new households, with the majority relocating there from California and Michigan.
The IRS statistics indicate that Americans are not moving much at present, with the annual migration rate at 11.9 percent - the lowest number in decades. United States Census Bureau estimates released at the end of 2009 confirm the IRS numbers. According to the AP analysis, counties with better-educated taxpayers typically see the highest county-to-county migration gains.
“People who move tend to be younger and have lower incomes,” according to William Frey, a demographer with the Brookings Institution. “Normally, if there is a big influx of young people, that could pull down the income of an area; and if there is a big outflux of young people, that can raise income in an area.”
Tags: Arizona, Associated Press Economic Stress Index, bankruptcy, Brookings Institution, demographics, Georgia, Internal Revenue Service, Migration, recession, Texas, unemployment rate, United States Census Bureau
Posted in Development, Industrial, Office, Residential | No Comments »
Wednesday, February 24th, 2010
Commercial real estate will begin its long-awaited recovery in late 2011 or 2012, according to the fourth-quarter Korpacz Real Estate Investor Survey, which questioned more than 100 real estate investors, including REITs, pension funds, private equity firms and insurance and mortgage companies. Confirmation is provided by a PricewaterhouseCoopers survey, which notes that Washington policymakers are increasingly tweaking the strings that impact pricing.
According to the Korpacz survey, “Rental rates will continue to decline until strong, consistent job growth resumes. With $1.4 trillion of commercial real estate debt maturing by the end of 2012, some property owners will not be able to survive the downturn. Problems related to refinancing that debt could further delay a recovery in the sector.”
Government and regulatory policy will have greater impact on pricing than occupancy levels or rents, according to Real Capital Analytics, Inc. “Policymakers control what happens to commercial mortgages in default,” Robert White, the president of Real Capital Analytics, wrote in a report. They “have encouraged loan modifications and extensions even in cases where loans are above a property’s current value. Tax policy, meanwhile, has made it easier for special servicers to negotiate with borrowers, a move meant to prevent a wave of maturity defaults and property fire sales. Keep rates low and easing restrictions on foreign capital will also influence industry prospects.” Real Capital Analytics notes that commercial mortgage-backed securities (CMBS) hold 42 percent of distressed loans; American banks 31 percent; and foreign banks 13 percent.
Tags: CMBS, commercial real estate, Pricewaterhousecoopers, Real Capital Analytics Inc, recession, recovery
Posted in Development, Industrial, Office | No Comments »
Monday, February 15th, 2010
A building boom is transforming the core of a fabled city that endured decades of war and turmoil. It’s Beirut, where battered Ottoman-era building are being restored and high-rise apartment towers with mirrored facades are rising along the Mediterranean waterfront.
Beirut’s unprecedented building boom is transforming Lebanon into an investment haven at a time when regions such as the oil-rich Persian Gulf are bleeding cash. “The market is continuing to really stun a lot of people and to attract some new players,” according to Raja Makarem, the founder of Ramco, a real estate company. Makarem noted that Lebanon has seen property values rise 30 percent in each of the past four years. Beirut’s boom might be partially related to Dubai’s financial meltdown, forcing all-cash buyers in search of a better real estate market.
Luxury high rises with apartments selling from $5,000 to $8,000 per square meter are being constructed in downtown Beirut, while buildings dating back to 19th-century Ottoman rule are being carefully restored. One project is the Beirut Souks, a 1,076,400 SF, $300 million high-end outdoor shopping mall constructed by Soldiere, Lebanon’s largest development and construction firm. Beirut’s number and value of property sales have soared over the last year, according to statistics from the Bank Audi. In December, the value of real estate sales was $1.25 billion, an increase of 40.8 percent over the same month of 2008.
“The global crisis that has strongly impacted the real estate market in the Gulf has somehow pushed investors to turn toward Lebanon,” said Tina Chamoun, marketing manager for Plus Properties, the Dubai-based marketing firm that is promoting two high-profile projects in Beirut. The $700 million developments - Plus Towers and Venus Towers - encompass five luxury residential towers with penthouse views of downtown Beirut and the city’s waterfront. The 50-story Sama Tower, which is scheduled for completion in 2014, will be Lebanon’s tallest office building.
Tags: Bank Audi, Beirut, Beirut Souks, Dubai, Hezbollah, Lebanon, Ottoman Era, Persian Gulf, Plus Properties, Raja Makarem, Ramco, Sama Beirut, Soldiere, Tina Chamoun, Venus Towers
Posted in Development, Office | No Comments »
Thursday, February 4th, 2010
Capital is flowing out of the Middle East and being invested in real estate across the globe, according to Nicholas Maclean, Managing Director, CB Richard Ellis, Middle East. “The outflow of capital from the Middle East to be invested into real estate properties worldwide has been higher than the influx of global capital into real estate properties in the Middle East. The UAE, in particular, has been looking to diversify its investments and part of the reason has been the lack of transparency within this region.”
Europe and the Far East have received the lion’s share of Middle East investment, with India and China perceived as strong growth markets. Additionally, United Arab Emirates capital is being infused into Abu Dhabi’s office and hospitality sectors. “Capital spent as FDI into real estate within the Gulf Cooperation Council represents only 11 percent of the total. Cross-border activity in the world has exceeded 50 percent and so we have a great opportunity to be the recipient of more investment,” Maclean said.
In terms of where the Middle East is placing its investment dollars globally, “London, Paris and Germany have been the largest recipients in Europe while Hong Kong, Singapore and Australia saw the largest inflows in the regions in the Far East. Knowledge and liquidity have been the key driving forces for the Middle East investors transferring capital to these areas. Institutional investors from the Middle East are investing in commercial developments in these markets while individual investors are looking at residential properties in the UK,” Maclean said.
To learn more about the Middle East and its real estate market, listen to Rochdi Younsi, director in the Middle East and Africa practice of Eurasia Group, analyze the major players in real estate and the new investment opportunities in the Middle East.
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Tags: Abu Dhabi, CB Richard Ellis Middle East, Dubai, Gulf Cooperation Council, Jumeirah, Middle East, Offshore real estate funds, Saudi Arabia, Sheikh Zayed Road, United Arab Emirates, Zawya
Posted in Development, Economics, Office, Residential | No Comments »
Wednesday, February 3rd, 2010
Washington, D.C. office leasing is on the upswing for the first time in a year. Not surprisingly for the District, the rise in leasing activity is driven primarily by expanding federal agencies. A study by CB Richard Ellis of fourth quarter leasing activity showed that the private sector is again leasing space they had subleased in late 2008 and early 2009, a sign that they might be on the verge of rehiring laid-off employees. According to the report, the amount of vacant space shrank 715,384 SF during the fourth quarter. That is a major change from the third quarter, when vacant space grew by 375,558 SF.
Vacancy rates reached a high of 11.8 percent last year, thanks to the region’s net loss of 24,000 jobs and new office buildings coming on line. Now, commercial real estate brokers are seeing new interest from law firms, associations and financial service firms wanting to lease space. Some are planning for future growth, while others are taking advantage of large discounts being offered to attract new tenants. “We have clients call and say maybe this is the time to go into the market and see what’s available,” said Ernie Jarvis, managing director of CB Richard Ellis’ Washington office.
Approximately 32 percent of commercial leases are with the federal government, an increase over the 21 percent reported in recent years. In normal years, the government has three of the top 10 transactions in the region; that rose to eight in 2009. These include 802,000 SF leased by the Department of Health and Human Services in Rockville, MD; 503,000 SF leased by the Drug Enforcement Administration in Pentagon City, VA; and 360,000 SF leased by the Nuclear Regulatory Commission in North Bethesda, MD.
Tags: Capital Riverfront, Cassidy & Pinkard Colliers, CB Richard Ellis, commercial real estate, Department of Health and Human Resources, Drug Enforcement Administration, NoMa, Nuclear Regulatory Commission, vacancy rates, Washington DC
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Thursday, January 28th, 2010
London has overtaken Washington, D.C., as the preferred city for commercial real estate investment, primarily because investors believe that prices have bottomed out and the time to get into that market is now. The British capital has overtaken the previous favorites of Washington, D.C., and New York, according to a survey conducted by the Association of Foreign Investors in Real Estate (AFIRE).
“London currently offers investors the advantage of a ‘re-priced’ market,” says James Fetgatter, AFIRE’s CEO. “The re-pricing began sooner than it did in other cities.” London’s score is 31 points higher than the perennial favorite Washington, D.C., and 40 points ahead of New York City. A year ago, London occupied second place, ranking four points behind Washington. The survey of the association’s approximately 200 members was taken in the fourth quarter of 2009 and represents ownership of more than $842 billion of commercial real estate. Of that, $304 billion is invested in the United States.
London, along with the rest of the United Kingdom, has rebounded with investment rising 56 percent from the first to the second half of 2009. Property values rose 2.4 percent in November, the largest monthly increase in 15 years. Savills, the real estate advisory firm, is predicting London will eclipse New York as the fastest growing global financial center.
Despite London’s success, the United States is still preferred as the “most stable and secure real estate investment environment,” according to 44 percent of survey respondents. This is the first time the United States ranked below 50 percent in the survey. It ranked 53 percent in 2008 and 57 percent in 2007. Germany occupies second place with 21 percent. In terms of price appreciation, the United States ranks first, followed by the United Kingdom and China.
The preferred property for investment is multifamily residential, followed by office, industrial, retail and hotel.
Tags: Boston, China, financial crisis, Germany, London, Los Angeles, New York, Real Estate Roundtable, San Francisco, United Kingdom, United States, Washington DC
Posted in Industrial, Office, Residential | No Comments »
Wednesday, January 20th, 2010
Foreign banks, American private equity firms and a leading Chinese sovereign wealth fund have been investing in commercial real estate in the United States in the hope that interest rates stay low.
This increasing interest from investors could be a sign that the market is experiencing some stabilization. According to Bob Steers, co-chairman of Cohen & Steers, a real estate investment firm, “We believe the real story is that capital is ready to buy, even though it may not be so visible today.” As one example, the state-owned China Investment Corporation has enlisted several investment firms to identify commercial real estate opportunities in the United States.
Another sign of incipient recovery is the fact that Colony Capital won a Federal Deposit Insurance Corporation (FDIC) auction for $1 billion worth of commercial property loans previously held by banks that had failed. The transaction valued the loans at 44 cents on the dollar and is structured so the FDIC put up $136 million owns 60 percent of the equity. Los Angeles-based Colony put up $90 million for a 40 percent share. Colony’s founder, Tom Barrack, said the investment is “an implicit bet that rates stay low.”
In another example, JPMorgan Chase raised $625 million for Inland Western, which put $500 million into CMBS. The deal was significant because it closed without assistance from the Term Asset-Backed Loan Facility (TALF).
Tags: Bank of China, China Investment Corporation, CMBS, Colony Capital, commercial real estate, Federal Deposit Insurance Company, Inland Western, interest rates, private-equity firms, recession, recovery, SL Green, Sovereign wealth funds, TALF
Posted in Development, Economics, Office | No Comments »
Monday, January 18th, 2010
By 2015, green buildings could constitute approximately half of all commercial space, according to a study by Good Energies, Inc., a New York venture capital firm. Although sustainable initiatives were perceived as a niche market just 10 years ago, developers now realize that going green in new and renovation projects is not as expensive as previously thought.
According to Greg Kats, senior director of climate change for New York-based Green Energies and the study’s author, he applied the U.S. Green Building Council’s Leadership in Energy Environmental Design standards - which encompass such categories as energy and water use, site location, landscaping and proximity to mass transit and shopping - to define what qualifies as a green building. LEED certification was not required, though buildings had to adhere to the standards.
Similarly, a McGraw-Hill Construction study released last October found that the share of the green retrofit market could grow to 20 or 30 percent over the next five years. That translates to market opportunities for major projects totaling $10.1 to $15.1 billion. At present, green building practices are incorporated into five to nine percent of building retrofits. The market opportunity for major projects - those costing more than $1 million - could total as much as $2.1 to $3.7 billion a year.
“We now have a large enough, detailed enough body of data to say that the presumption is ‘why wouldn’t you do a green building?’” Kats noted. “It’s very cost-effective and it reduces risk in a number of areas including health, exposure to energy and water prices and obsolescence.”
Tags: Aria Resorts & Casino, commercial real estate, Good Energies, Green buildings, LEED, LEED standards, USGBC
Posted in Development, Green, Industrial, Office | No Comments »