Archives for 2013

A podcast featuring Ted Blank, CCIM. Includes pointers on what to do before approaching banks for commercial real estate loans.
By: Ted Blank (National Association of REALTORS®)
 
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While we are still grappling with the delays from October’s government shutdown, the estimates for third quarter economic output show much of the same. Gross domestic product rose at an annual rate of 2.9 percent in the third quarter, on the heels of a 2.5 percent rise in the second quarter. While the acceleration in the economic pace is welcome, most of it was boosted by inventory adjustment.
All main GDP components—consumers, businesses, government and trade—were positive contributors to third quarter growth. Consumer spending gained 1.5 percent, driven by a 4.3 percent rise in consumption of goods. Businesses approached investments with a cautious outlook in the third quarter, as the specter of budget wrangling in Washington and the possibility of a government shutdown loomed large. Nonresidential fixed investments rose at an annual rate of 1.6 percent. Business spending on buildings jumped 12.3 percent in the third quarter, on the heels of a 17.6 percent gain during the second quarter. The noticeable advances point to a strengthening pipeline of commercial developments, as market fundamentals continue to improve.
The past few quarters have witnessed a broad slowdown in global economies’ rates of growth. Against this trend, the U.S. economy posted a positive trade balance in the third quarter. The increase in international trade provides for continued strengthening in industrial sector fundamentals, with warehouses seeing marked results.
Government spending posted a modest increase in the third quarter, as spending at state and local government levels rose after years of cutbacks. With stronger balance sheets, state and local governments increased their spending by an annual rate of 1.5 percent. Federal government spending continued declining, as the process of “sequestration” marched on, posting a 1.7 percent slide in the third quarter.
The outlook for the last quarter of 2013 does not bear much glee. With the knowledge of the government shutdown in the rearview mirror, and a retail season already eyeing steep discounts, the GDP outlook for all of 2013 projects an annual growth rate of only 1.7 percent.
Net absorption of office space is projected to total 32.2 million square feet by year end. Office vacancies are expected to decline to 15.7 percent by the end of 2013. The markets with the lowest forecasted office vacancy rates are Washington, D.C., New York and Little Rock, with availability rates of 9.8 percent, 9.9 percent and 12.0 percent, respectively. Rents for office properties are expected to increase 2.4 percent over the year.
Industrial markets contend with demand for warehouse space. Net absorption of industrial space is projected to total 97.0 million square feet by the end of 2013, driving vacancy rates to 9.3 percent. The metro areas with the lowest industrial vacancy rates are Orange County, at 3.9 percent, followed by Los Angeles with 4.0 percent, and Miami, at 6.0 percent. Rents for industrial buildings are expected to grow 2.4 percent this year.
Consumers opened their wallets in the third quarter, propping demand for retail spaces. Net absorption of retail buildings is expected to total 10.5 million square feet this year, accompanied by a vacancy rate of 10.5 percent by year-end. Markets with the lowest retail vacancy rates are led by Fairfield County, CT, at 3.9 percent. Rounding the top three are San Francisco, at 4.0 percent, and Long Island, NY, at 5.2 percent. Rent for retail properties are projected to increase 1.4 percent over the year.
The apartment market is on track to close the year on a strong note. Net absorption is expected to total 239,443 units this year. Against a supply of only 123,518 new units, vacancy rates are estimated to reach 4.1 percent by the end of 2013. Metro areas with the lowest vacancy rates are New Haven, CT, at 1.9 percent and Syracuse, NY, at 2.0 percent. Following closely behind are Minneapolis and San Diego, both at 2.1 percent. Apartment rents are projected to increase 4.0 percent in 2013.
By: George Ratiu (Economists’ Outlook)
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The bad news is that commercial real estate investment property costs increased when taxes increased in January. Interest rates have also increased. The good news is that savvy commercial real estate landlords can take proactive measures to improve the bottom line now and in the upcoming new year. With the help of experienced legal counsel, landlords and commercial real estate investment property owners can consider the following suggestions for increasing their properties’ profitability.
10 Tips to More Income
1. Refinance. As predicted, interest rates have climbed but still remain historically low, so now is the time to take advantage of low rates, available financing, and rising property values before the window of opportunity closes. Before you decide to refinance, compare the expected savings and income with the expected expenses and risks, and determine if and when the benefits outweigh the costs. The costs can include appraisal, inspection, legal, title, and other fees, and any penalties for early payment of the existing loan. The risks can include restrictions and guaranties in loan documents. The benefits can include lowering payments, accessing needed cash, avoiding balloon payments, reducing or extending the loan term, reducing the amount of debt, improving loan terms, and increasing income by using loan proceeds to make improvements. Review your properties to minimize your costs and risks and maximize your benefits.
2. Reduce Taxes. Have you considered a real estate tax appeal before the deadline? Even landlords who lease on a triple-net basis should consider filing timely tax appeals to lower their property taxes. In this economy, tenants are extremely sensitive to additional costs; this move avoids losing tenants because the taxes being passed through are too high, helps existing tenants survive by saving money, and attracts new tenants who are comparison shopping among potential sites. Another way to obtain tax benefits is through 1031 exchanges.
3. Plan. Consult with counsel to discuss and update your plans and options, including estate planning, exit strategies, and business succession planning. An experienced trusts and estates lawyer can ensure that the maximum amount of your money stays where you want it, instead of going to Uncle Sam.  Full Story
By: Jerry A. Nelson, Esq. (CCIM Institute)
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Downtown’s beleaguered office real estate market, carrying a close to 30 percent vacancy rate, has given the Albuquerque metro area one of those undesirable number rankings, according to a presentation Monday at a luncheon meeting of NAIOP, the commercial real estate development association.
“Unfortunately, our central business district has a higher vacancy rate than any other central business district in the country right now,” said Tim With of Colliers International, moderator of a panel discussion of the commercial real estate prospects for the office and industrial property types. The office market in general, which has a 20 percent vacancy rate, is facing a couple of major obstacles to recovery – the continuing trend of businesses packing more employees into less space and a substantial inventory of aging office buildings, many in Downtown, said panelist Tom Jenkins of Real Estate Advisors. “I believe the lack of quality space in the market will deter job growth,” he said.
The office and industrial real estate markets in the metro generally are lagging the national recovery, according to the “market update” at the NAIOP luncheon by the New Mexico chapter of the Society of Industrial and Office Realtors. The local industrial real estate market, which has a 9 percent vacancy rate, is seeing positive activity generated by distributors of consumer goods, a trend illustrated by the recent expansions of Pepsi-Cola Bottling Co. and Admiral Beverage, said panelist Jim Smith of CBRE.
Another generator of activity in the industrial market is the oil and gas industry, particularly from pipeline construction, he said. Net absorption – meaning more space is filling up than going empty – is expected to reach a level this year that surpasses the net absorption of the prior six years combined. A common theme in both the office and industrial market is the so-called “flight to quality,” a term used to describe the migration of companies away from renting older, cheaper buildings. High-quality Class A buildings of both property types are generally seeing rising lease rates because of demand.
By: Richard Metcalf (Albuquerque Journal)
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