Archive for the ‘Office’ Category
Monday, February 21st, 2011
Federal Reserve Chairman Ben Bernanke is knocking heads with Representative Paul Ryan (R-WI), the new chairman of the House Budget Committee, about how to best control inflation while buying billions of dollars worth of Treasury bonds to build up the economy in a process called quantitative easing 2 (QE2). As the nation’s debt climbs to an unprecedented high level, President Obama is in the difficult position of having to forge an agreement with Congress on how high the legal cap on how much money the government can borrow will be. The Republicans who now control Congress say they will consent to an increase in the cap only if President Obama agrees to make significant budget cuts. Ryan has been an outspoken opponent of the Fed’s stimulus policy, which is pumping $600 billion into the economy through purchases of long-term Treasuries. He is concerned that the policy will accelerate inflation, create asset bubbles and reduce the dollar’s value. “My concern is that the cost of the Fed’s current monetary policy…will come to outweigh the perceived benefits,” Ryan said. “We are already witnessing a sharp rise in a variety of key global commodities and basic material prices.”
Bernanke disagreed, saying “The inflation is taking place in emerging markets because that’s where the growth is.” In the United States, he said, “overall inflation is still quite low and longer-term inflation expectations have remained stable.” Bernanke pointed to growth in economies like China, India and Brazil as the real cause of rising prices.
Speaking in a different venue, Treasury Secretary Timothy Geithner expressed confidence that Congress ultimately will raise the debt limit. “I can say this with complete confidence – that the U.S. will meet its obligations, that Congress will act as it always has to make sure we meet those obligations,” Geithner said. “There’s always a little political theater around this.”
Democrats and Republicans remain sharply divided on the issue. “It would be reckless from an economic and financial perspective…to essentially default on our debts and question the creditworthiness and full faith and credit of the United States, correct?” asked Representative Chris Van Hollen (D-MD) “Wouldn’t significant reductions or addressing the short-term spending aspect be good for the market and economy?” asked Representative Scott Garrett (R-NJ).
Representative Ron Paul (R-TX) and a Libertarian characterized Bernanke’s testimony as “cocky”. Paul, a 2008 presidential candidate who is a long-term critic of the Federal Reserve, now has a platform to air his views, thanks to the Republicans winning control of the House. As chairman of the House Domestic Monetary Policy and Technology Subcommittee, Paul called the hearing to examine the impact of the Fed’s policies on job creation and the unemployment rate. Paul has advocated for measures that would review the Federal Reserve or even eliminate it. Additionally, Paul slammed the Fed’s latest $600 billion bond-buying program, saying it and near-zero interest rates haven’t led to job creation in the United States.
Tags: Ben Bernanke, Capitol Hill, congress, Corporate tax rates, economic recovery, Federal Reserve, House Budget Committee, House Domestic Monetary Policy and Technology Subcommittee, inflation, Libertarian, Long-term Treasuries, monetary policy, President Barack Obama, Quantitative easing, Representative Chris Van Hollen, Representative Chris Van Hollen (D-MD), Representative Paul Ryan, Representative Ron Paul, Representative Scott Garrett, Republican-led House, Timothy Geithner, Treasury Department, unemployment rate
Posted in Economics, Financing, General, Green, Office, Residential | No Comments »
Wednesday, February 16th, 2011
President Obama recently took a short stroll from the White House and through Lafayette Park to give a speech in what might be termed enemy territory – the U.S. Chamber of Commerce. The subject was jobs and what the Chamber can do to jump start hiring by the companies that form its membership. Noting that American companies are sitting on approximately $2 trillion in cash, the president challenged the Chamber to invest some of that money by hiring Americans who are out of work.
“Many of your own economists and salespeople are now forecasting a healthy increase in demand. So I want to encourage you to get in the game,” Obama said, referencing the tax credits his administration negotiated to spur new investments. “As you all know, it is investments made now that will pay off as the economy rebounds. And as you hire, you know that more Americans working means more sales, greater demand and higher profits for your companies. We can create a virtuous cycle. Not every regulation is bad; not every regulation is burdensome on business,” he said. “Moreover, the perils of too much regulation are matched by the dangers of too little.”
Relations between the president and the Chamber – one of the nation’s most powerful lobbying groups — have been chilly and the speech was an effort to find common ground. Since the Democrats’ defeat in the November mid-term election, Obama has been trying to mend fences with big business. One part of that strategy was to hire Bill Daley, a former Chamber board member and JP Morgan Chase executive, as his new chief of staff to replace Rahm Emanuel. Additionally, he named General Electric CEO Jeffrey Immelt to head an economic advisory panel dedicated to job creation. According to the president, “I will go anywhere anytime to be a booster for American business, American workers and American products, and I don’t charge a commission.”
The Chamber gave the president a warm welcome, with the organization’s president Thomas Donohue expressing the body’s “absolute commitment” to working with the White House on turning around the economy and creating new jobs. “Our focus is finding common ground to ensure America’s greatness in the 21st century,” he said. “America works best when we work together.”
The president’s remarks came on a day when several Illinois firms warned that they are planning to lay off employees or close facilities. For example, Kmart is planning to close several stores in Illinois. Gold Standard Baking, Inc., will close a commercial bakery in Chicago, slashing 73 jobs. Another 67 employees are likely to be laid off at Itasca-based C. D. Listening Bar Inc., which sells DVDs, CDs, books and video games online at DeepDiscount.com. AGI North America, LLC, a paperboard box manufacturing company in Jacksonville, is closing at the end of March, putting 70 employees out of work. Gray Interplant Systems, Inc. – a warehousing and storage company in Peoria and Mossville – is planning to lay off 167 employees in April.
So why are American companies not hiring – or not hiring on their home turf? According to the Chamber’s Donohue, it’s a variety of reasons, including new regulations contained in the Patient Protection and Affordable Care Act and the Dodd-Frank financial reform bill. Additionally, companies are holding onto their cash to fund future acquisitions. Consolidation makes new regulatory burdens easier to bear. Once companies’ regulatory costs are clear and under control, they can begin hiring, he said. Finally, demand remains relatively low. Once spending improves, the Chamber believes that companies will have no choice but to invest in additional personnel to meet that demand. As consumer and business spending grows, so should jobs.
And, the jobs are going elsewhere. The Economic Policy Institute, a Washington think tank, says American companies created 1.4 million jobs abroad in 2010, compared with less than 1 million in the United States. The additional 1.4 million jobs would have cut the unemployment rate to 8.9 percent, according to Robert Scott, the institute’s senior international economist.
Tags: Bill Daley, Chief of staff, Dodd-Frank financial regulation bill, Economic Policy Institute, economy, General Electric, Healthcare law, investment, Jeffrey Immelt, jobs, JP Morgan Chase, Lafayette Park, lobbyists, November mid-term election, Patient Protection and Affordable Care Act, President Barack Obama, Rahm Emanuel, Regulation, tax credits, U.S. Chamber of Commerce, unemployment, White House
Posted in Economics, General, Green, Office, Student Housing | No Comments »
Thursday, January 20th, 2011
President Barack Obama’s crackdown on Wall Street excesses could be hampered if the incoming Republican-controlled Congress refuses to fund two crucial regulatory agencies. The Dodd-Frank financial reform law – passed with heavy Democratic support – promised a generous budget to regulate the $600 trillion over-the-counter derivatives market. Now, the law’s implementation may be derailed by the incoming 112th Congress. Randy Neugebauer (R-TX), who will chair the House Financial Services oversight subcommittee, wants to review the regulators’ expansion plans. “Once you turn the money loose, it’s a little harder to stop that train,” he said.
The two regulatory agencies in question are the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The SEC, for example, had expected to receive an 18 percent increase to its 2011 budget, which would have allowed it to hire 800 new regulators to enforce Dodd-Frank. Roadblocks are on the horizon, however, in the form of Representative Spencer Bachus (R-AL), who will chair the House Financial Services Committee, and Frank Lucas (R-OK), who will chair the agricultural committee that oversees the CFTC. The two Congressmen wrote to regulators, saying “An overarching concern…is the need to get it done right, not necessarily get it done quickly.” The Republicans’ attitude to enforcing Dodd-Frank could be a boon to Wall Street firms, whose lobbyists are advocating a go-slow approach.
Mary Schapiro, SEC Chairman, said “We will have to take some more steps to cut back. At this stage, it will impact our work.” The chronically underfunded and understaffed CFTC, which had expected a 50 percent budget increase, had planned to hire 240 new regulators this year to enforce its new oversight of the swaps market. According to CFTC Chairman Gary Gensler, “I do think without sufficient funding next summer (2011) you’d see a significant number of registrants – swap dealers, swap execution facilities and so forth – whose legitimate applications would have to be slowed down. Michael Greenberger, a University of Maryland law professor and previously the CTFC’s director of trading and markets, says.
Tags: 112th Congress, Barney Frank, Christopher Dodd, Commodity Futures Trading Commission, democrats, Dodd-Frank financial reform law, Federal Deposit Insurance Company, financial crisis, Gary Gensler, Mary Schapiro, Over-the-counter derivatives market, President Barack Obama, Randy Neugebauer, Regulators, Republicans, Securities and Trade Commission, Spencer Bachus, Swaps market, Wall Street
Posted in Economics, General, Green, Office | No Comments »
Tuesday, January 18th, 2011
“The life you live trains you for the life you’re going to lead.” This is the opinion of Michael Lee Stallard and Jason Pankau, partners in E Pluribus Partners, the world’s leading experts on how rational and emotional connections can boost productivity, innovation and organizational performance in the workplace.
In a recent interview for the Alter NOW Podcasts, Stallard and Pankau cited a Gallup Poll that ranked 132 countries in terms of happiness. The United States ranked 12th, which was lower than the Scandinavian nations of Denmark and Finland and even Costa Rica. According to Stallard and Pankau, “If you look at what’s happening, people are working longer and harder days. We spend the bulk of our waking lives in certain kinds of relational environments – this has an enormous impact on our happiness and ability to connect with others.”
Using a number of systems, including humanist psychologist Abraham Maslow’s hierarchy of needs, Stallard and Pankau have created a list of six universal human needs that people want to experience in the workplace. They include:
- Respect – When we are with people who are condescending, patronizing, passive-aggressive or who look down on us in some relational way, there is a negative emotional impact. No one can thrive in that kind of environment, because humans need a basic level of respect in the workplace.
- Recognition – We rely on the interactions of people around us to recharge our internal batteries. Authentic, positive affirmation – not false – is the most effective. Otherwise, employees are drained of energy.
- Sense of belonging – Everyone needs people who have our backs and who are trustworthy. These people help us live up to the values that we aspire to, support us and are with us through the ups and downs of life.
- Autonomy, which is a task-mastering need – This gives us the freedom and flexibility to do our work free of bureaucratic red tape and without the presence of over-controlling personalities. People cannot thrive in that kind of environment. Additionally, autonomy assists with personal growth.
- A challenging environments – When people are over challenged, they are stressed; conversely, people are bored when they are not challenged. When work provides the right degree of challenge, people are so immersed in the task at hand that time flies and it is energizing.
- Need for meaning – People typically derive meaning from work that is consistent with a mission that is important to them. Additionally, they find meaning in the relational connections they have in the workplace; this provides a connection with their personal life.
To listen to Michael Lee Stallard’s and Jason Pankau’s full interview on happiness in the workplace, click here. To sign up for Michael Lee Stallard’s and Jason Pankau’s newsletter and receive a free digital download of their book, click here http://bit.ly/firedupebook.
Tags: Abraham Maslow, E Pluribus Partners, Gallup Poll, Humanistic psychologists, Jason Pankau, Michael Lee Stallard, Stress, Stress hormones, Workplace happiness
Posted in Economics, General, Green, Office, Student Housing | No Comments »
Wednesday, January 12th, 2011
As Chicago’s longest serving mayor leaves his post in May of 2011, Richard M. Daley leaves a legacy that includes the iconic Bean in Millennium Park to the flower-filled planters that ornament 85 miles of the city’s streets. Whoever fills his post will find that budget shortfalls resulting from the Great Recession will collide with reality; the bottom line is that it will be difficult for whoever succeeds Mayor Daley to extend his vision to beautify Chicago.
Writing in the Chicago Tribune, architectural columnist Blair Kamin says that “This was a mayor with a passion to build. By combining the roles of chief politician and chief planner, Daley became the ultimate shaper of Chicago’s cityscape. There was no denying his authority over the cityscape — just as there is no denying the deep anxiety his departure has spawned among the city’s architects and builders. Chicago, they worry, will go from being a city in overdrive to a city on hold.”
“I hope the intensity remains,” said Chicago developer Dan McCaffery, who is planning to turn the 580-acre former U.S. Steel plant on the southeast lakefront into a mixed-use community. “People in City Hall knew that when the mayor had endorsed something, it was aggressively pursued. You could feel the difference. It was palpable.” “Any new mayor has got to realize that being a green city has become a part of Chicago as much as hot dogs,” said Ben Helphand, president of the Friends of the Bloomingdale Trail, which is pushing to develop an elevated park, nearly three miles long, on a long-disused railroad spur on the city’s Northwest Side.
A 2010 survey conducted by the Trust for Public Land revealed that Chicago has a mere 4.2 acres of parkland per every 1,000 residents, according to Erma Tranter, president of the advocacy group Friends of the Parks. “We do not have sufficient park space for a healthy community,” Tranter said. “It’s an absolutely critical issue in neighborhoods where children don’t have places to play. That correlates to obesity, health problems and higher costs for future health issues. There are children who are bombarded with all these electronic games. They don’t have land anywhere near for them to go to.”
“Daley’s done a great job and he led the city very strongly. But if we’re going to move where we need to be, we need to engage the community in a different way,” said Peter Nicholson, executive director of the Foresight Design Initiative, a nonprofit devoted to sustainability issues. “It can’t be command and control.”
Tags: Blair Kamin, Bloomingdale Trail, Chicago, Chicago Tribune, Dan McCaffery, Erma Tranter, Foresight Design Initiative, Friends of the Park, Friends of the Parks, Loyola University, Mayor Richard M Daley, Millennium Park, Public works projects, Rahm Emanuel, The Bean, Trust for Public Land, U.S. Steel plant
Posted in Development, General, Green, Healthcare, Industrial, Office, Residential, Student Housing | No Comments »
Monday, January 10th, 2011
Distressed commercial real estate volumes seem to have reached a plateau of $186.9 billion in October, according to a report prepared by Delta Associates that crunched numbers provided by Real Capital Analytics. The trend has been apparent for several months, according to Delta’s CEO Greg Leisch.
Even as the industry breathes a collective sigh of relief, the question remains: When will the amount of distress start to recede? Industry experts believe that is unlikely to happen before 2012. According to Delta, the plateau first came onto the scene in the spring of 2010, though the firm doesn’t expect any consequential progress next year. Leisch says that lenders will continue to extend debt obligations, even as commercial property values stabilize in some markets. 2011 is likely to bring yet more pain, with $300 billion worth of CRE loans coming due. Delta’s report notes that the office sector has the greatest number of distressed assets, valued at $45.6 billion nationally.
There’s also good news in the fact that commercial property values increased 1.3 percent in October, according to Moody’s Investors Service. That’s the second consecutive monthly gain and represents a 3.2 percent increased over the previous year, notes the Moody’s/REAL Commercial Property Price Index. The Moody’s/REAL Index is 42 percent below the high point it reached in 2007.
Robert Bach, chief economist for Grubb & Ellis, Inc., said demand is rising for trophy office buildings in cities such as New York, San Francisco and Washington, D.C. In Chicago, 300 North LaSalle went for $655 million and the Hyatt Center fetched $625 million. Next year, investors may purchase lower-quality buildings in prime markets, and top-tier office towers in secondary markets. “This investor enthusiasm has been confined to core properties in primary, supply-constrained markets,” Bach said. “There’s still a lot of distress out there.” Despite the remaining distress, commercial properties sales doubled to $16 billion during the 3rd quarter when compared with the same timeframe in 2009, according to Real Capital Analytics. East Coast properties averaged a 22 percent increase over 2009, with prices rising 9.1 percent in New York City and 17 percent in Washington, D.C.
Tags: Bloomberg News, commercial real estate, CoStar Group, Delta Associates, Distressed commercial real estate, Globest.com, Grubb & Ellis, Moody’s Investors Services, Moody’s/REAL Commercial Property Price Index, Office sector, Plateau, Real Capital Analytics
Posted in Financing, General, Office | No Comments »
Tuesday, December 28th, 2010
The $625 million sale of the 49-story Hyatt Center at 71 South Wacker Drive is proof that the market is still strong for high-credit trophy buildings; the price represents a 6.1 percent cap rate. The purchaser is Southern California-based Irvine Companies, which plans to close the deal as quickly as possible.
The $419 PSF sales price is even higher than the anticipated $390 PSF when Pritzker Realty Group LLC initially decided to sell the approximately 1,500,000 SF office tower last summer. The Hyatt Center’s sale reflects a national trend where office building deals rose 124 percent in October to $2.1 billion, according to Real Capital Analytics, Inc (RCA). “Office investors focus on visible assets in major markets has resulted in stronger price pressures,” according to the RCA report.
The Hyatt Center was built in 2005 and has an A-list group of tenants that includes the Hyatt Hotels Corporation, law firm Mayer Brown LLP, and investment bank Goldman Sachs Group, Inc.
Tags: Cap rate, Goldman Sachs Group, Hyatt Center, Hyatt Hotels Corporation, Inc., Irvine Companies, Mayer Brown LLP, Penny Pritzker, Pritzker family, Pritzker Realty Group LLC, Real Capital Analytics, Trophy properties
Posted in Development, Economics, General, Office | No Comments »
Tuesday, December 28th, 2010
Approximately half – 47 percent – of American companies whose sales range from $25 million to $2 billion say they will hire more employees in 2011, according to a Bank of America survey of chief financial officers (CFOs). The new number represents a significant uptick over the 28 percent who planned to hire new employees one year ago. The news is not all good – 61 percent of companies who do not plan to hire said there is still reduced demand for their products or services. The survey of 800 firms covered a broad range of industries throughout the United States.
The CFOs are unsure that the economic recovery will last, as well as being concerned about the impact of the healthcare reform law that Congress passed in March of 2010. Their caution is evident in the fact that – on a scale of one to 100 – the CFOs gave the economy a rank of 47. This represents a slight increase over the 44 level recorded last year. An addition 64 percent expect their companies’ revenue will grow in 2011; 55 percent anticipate margin growth.
“Despite the challenging economic climate, many CFOs have growing confidence that their companies have weathered the worst of the storm and are poised for expansion,” Laura Whitley, Bank of America’s global commercial products executive, said. “Although concerns about the economy remain, the increase in CFOs who expect to hire employees could be crucial to improving the nation’s unemployment rate. It’s exciting to see a more positive mood.” Yet, she noted, the recovery has been slower than expected. “When talking with businesses we hear it all the time.”
Tags: Bank of America, CFOs, congress, economy, Healthcare costs, Healthcare reform law, hiring, jobs, manufacturing, Margin growth, Revenues, Services
Posted in Development, General, Office | No Comments »
Tuesday, November 30th, 2010
With the Patient Protection and Affordable Care Act now the law of the land, commercial real estate executives are waiting to see what impact the legislation will have on their business. Consensus is that the new healthcare law changes crucial demand drivers for real estate by introducing alternative models to deliver medical services. The potential to impact commercial real estate lies in the fact that as many as 32 million additional Americans will receive coverage when the law becomes fully implemented in 2014. They will need a place to receive healthcare.
In a white paper written by Kenneth Meyer and Rob Grossman, Principals with Deloitte Consulting LLP, the authors note that “Using an industry multiplier of 1.9 SF required per patient to estimate the net effect of additional patients on space utilization, it can be estimated that 64 million SF will be required to meet the increased demand. Since the demand for additional medical space will begin almost immediately, the industry cannot afford a long wait due to development of new medical office buildings, nor can the industry continue to thrive by building more square footage without addressing current square foot absorption.”
To fill growing demand, retail locations are becoming increasingly important to healthcare, especially wellness centers, preventive care clinics and urgent care clinics -a new and emerging trend. As of February of 2010, there are approximately 1,200 retail clinics in the United States. “CVS leads the market with 569 retail clinics in 25 states and the District of Columbia,” according to the authors. “Recent changes in healthcare legislation should help to drive demand and support profitability. Retail space dedicated to health education could see a boost in the near future.”
Healthcare providers present diversity in a tenant mix and can protect the owner against shifting market conditions. “A recent study of Fitch-rated Real Estate Investment Trusts (REITs) in the U.S. further illustrated the strength of the healthcare real estate sector,” according to Meyer and Grossman. “In 2009, Healthcare REITs were the only property type that did not receive a downgrade by Fitch. In fact, during that same time period two Healthcare REITs actually received ratings upgrades.”
Tags: commercial real estate, healthcare reform, Medical office buildings, Patient Protection and Affordable Care Act
Posted in Development, Financing, Office | No Comments »
Monday, October 18th, 2010
Who’s right about the state of the economy and commercial real estate – the bulls or the bears? Robert Knakal, chairman of New York-based Massey Knakal Realty Services, weighs both sides to help us cut through the mixed messages.
In a recent interview for the Alter NOW Podcasts, Knakal noted that the bulls like to cite the best back-to-back GDP growth since 2003 – 5.9 percent in the 4th quarter of 2009 and 3.2 percent in the 1st quarter of 2010. Bears, on the other hand, believe that weak consumer spending will cause the GDP to grow at an anemic two to three percent for the rest of the year. Knakal views this is an interesting dynamic because of the growing number of economists who back the bears’ position – numbers that are well below the trend coming out of a recessionary period.
Knakal, a graduate of the Wharton School of Business, also writes StreetWise, a nationally syndicated real estate industry blog, is concerned that many loans made by community and regional banks are five-year loans, which will mature in 2011 and 2012. These loans raise the loudest alarms, because many are still performing thanks to very advantageous interest rates – possibly in the form of interest-only loans or with interest reserves that are carrying the property. When these loans – which now could have an interest rate as low as two percent – mature, it will be renewed at a 5 ½ or six percent interest rate that will require a de-leveraging process. Some $10 billion banks are carrying half of all their commercial real estate exposure in Small Business Administration (SBA) loans.
Despite the bears’ lack of confidence in the commercial real estate markets, capital is available to credit-worthy users chasing high-credit projects. The amount of available private equity is currently estimated at approximately $173 billion. Public REITs raised more in common stock offerings in 2009 than they did in the previous nine years. Non-public REITs are expected to raise $10 billion this year. Sovereign wealth funds are said to have access to an astonishing $3.5 trillion. What Knakal cautions us to recognize is that these often represent the same pools of equity and to draw the distinction between capital that has been promised and that which is actually available.
Robert Knakal on the Bulls vs. the Bears - Who Do You Trust? :
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Tags: capital, CMBS, deflation, Fannie Mae, Federal Housing Administration, Federal Reserve, Freddie Mac, GDP, inflation, job market, REITS, Small Business Administration, Sovereign wealth funds, TARP money, unemployment
Posted in Development, Economics, Financing, General, Office, Residential | No Comments »