The commercial real estate market continues to rebound, showing steady gains in pricing and transaction activity in all major property types throughout the country, according to the latest CoStar Commercial Repeat Sales Indices report.
First-quarter sales volume rose 33 percent over year-ago levels, according to the report. Vacancies have dropped to within 100 basis points of pre-recession levels in the office and retail sectors, and they are lower than pre-recession levels for industrial properties.
What’s more, the percentage of deals selling at distressed pricing has also continued to fall, down by more than two-thirds from its peak levels in 2011, according to the report.
Pricing gains were posted in all major property types, with the retail and industrial sectors posting the strongest growth in the past year. Pricing has already overtaken previous peak levels in some primary markets, such as New York and San Francisco.
“While demand growth has so far been modest compared with the previous cycle, the slower pace of absorption has kept new development in check,” according to CoStar’s report. “That has allowed vacancy rates to continue to shrink in all but the apartment sector, where new supply has now exceeded absorption gains.”
The West is posting some of the largest gains among the four major U.S. regions. Multifamily property has risen to within 4 percent of its previous peak in the West. The office, retail, and industrial markets have all posted double-digit gains, and industrial properties in the West, particularly driven by demand by warehouses, has posted some of the largest gains in that sector in the country.
By: National Association of REALTORS® (REALTORMag)
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Archives for May 2014
Dixon's Apple Orchard Dispute Resolved; Former Operators Get $2 Million
Mud covered this house at Dixon’s Apple Orchard after monsoon floods followed a wildfire in 2011. (DEAN HANSON/JOURNAL)
The legal mess that resulted from the destruction of northern New Mexico’s famous Dixon’s Apple Orchard by wildfire and floods in 2011 has been resolved.
Under a deal that was finalized today, Jim and Becky Mullane — whose family has run the orchard for decades — will receive $2 million to relinquish their 75-year lease on the orchard site and an adjacent 8,800 acres, all of it owned by the State Land Office.
Cochiti Pueblo, which borders the apple farm site, is paying $1.8 million to the Mullanes and the other $200,000 comes from insurance proceeds that the Land Office received after the massive Las Conchas wildfire burned through Dixon’s and subsequent monsoon rains over the burned landscape completed ruination of the orchard three years ago.
The Land Office has signed a new five-year lease with Cochiti Pueblo. The 8,800 acres adjacent to Dixon’s includes cultural and historic sites that are “highly significant” to the pueblo, State Land Commissioner Ray Powell said.
During the five-year lease term, Powell said, Cochit and the Land Office will work on a land exchange under which the Dixon’s site and the adjacent land would be swapped to the pueblo. In return, the Land Office would receive property that would be better suited to commercial development and generating funds for the state land trust, Powell said.
The trust generates funding for public schools and other public entities.
After the orchard was ruined, the Mullanes wanted to move on — they now live in Wisconsin — and assign their lease on the orchard plot and the other 8,800 acres of adjacent state to San Felipe Pueblo for $2.8 million. The lease still has about 70 years to run.
But Powell rejected the proposal, a second time after a former district judge serving as a hearing officer this year found Powell’s decision-making process was “not rational and is arbitrary and capricious as a matter of law.” The Mullanes were irate that the Land Office was blocking their effort to get compensation for generations of running and building up the apple farm on public land.
Powell objected to the Mullanes’ long-term lease terms in part because they called for only a $100 annual payment to the Land Office for lease of the adjacent 8,800-acres and that’s all the state would receive from that part of the property for the next seven decades. That lease was struck by Powell’s predecessor as land commissioner, current state public regulation commissioner Patrick Lyons.
The Mullanes appealed Powell’s rejection of the lease assignment in state District Court. Monday’s agreements settle the litigation.
Powell said there is no expectation that Cochiti will restart the apple orchard operations. Dixon’s was a favorite spot for weekend visits in the fall when its apples came in.
“That day is gone,” Powell said. “… With the continued flood risk it’s going to be a decade or decades before anything could be done with the orchard. We’re all very sad. It’s nature and nothing we can control.”
Of the settlement arrangements, Powell said, “I think we got a real win-win out of this. With the fire and the flooding no one could control, I think we ended up in situation better than I ever anticipated… It’s definitely a big boost for the trust. It allows us to get land (in the expected trade with Cochiti Pueblo) that is unfettered land for commercial development.
Becky Mullane said she didn’t have much to say after the long legal fight over what had been her family’s home.
“It’s been such a long haul and there’s been so much wrapped up in it,”she said. “It’s okay.”
“We have mixed emotions,” Mullane said.
Tom Hnasko, the Mullanes Santa Fe attorney, said “I think it’s unfortunate that it’s taken this long to come to place that is really a vindication of the Mullanes’ position.” But he added that his side “respects that Land Office for negotiating in good faith.”
By: Mark Oswald (Albuquerque Journal)
Click here to view source article.
Under a deal that was finalized today, Jim and Becky Mullane — whose family has run the orchard for decades — will receive $2 million to relinquish their 75-year lease on the orchard site and an adjacent 8,800 acres, all of it owned by the State Land Office.
Cochiti Pueblo, which borders the apple farm site, is paying $1.8 million to the Mullanes and the other $200,000 comes from insurance proceeds that the Land Office received after the massive Las Conchas wildfire burned through Dixon’s and subsequent monsoon rains over the burned landscape completed ruination of the orchard three years ago.
The Land Office has signed a new five-year lease with Cochiti Pueblo. The 8,800 acres adjacent to Dixon’s includes cultural and historic sites that are “highly significant” to the pueblo, State Land Commissioner Ray Powell said.
During the five-year lease term, Powell said, Cochit and the Land Office will work on a land exchange under which the Dixon’s site and the adjacent land would be swapped to the pueblo. In return, the Land Office would receive property that would be better suited to commercial development and generating funds for the state land trust, Powell said.
The trust generates funding for public schools and other public entities.
After the orchard was ruined, the Mullanes wanted to move on — they now live in Wisconsin — and assign their lease on the orchard plot and the other 8,800 acres of adjacent state to San Felipe Pueblo for $2.8 million. The lease still has about 70 years to run.
But Powell rejected the proposal, a second time after a former district judge serving as a hearing officer this year found Powell’s decision-making process was “not rational and is arbitrary and capricious as a matter of law.” The Mullanes were irate that the Land Office was blocking their effort to get compensation for generations of running and building up the apple farm on public land.
Powell objected to the Mullanes’ long-term lease terms in part because they called for only a $100 annual payment to the Land Office for lease of the adjacent 8,800-acres and that’s all the state would receive from that part of the property for the next seven decades. That lease was struck by Powell’s predecessor as land commissioner, current state public regulation commissioner Patrick Lyons.
The Mullanes appealed Powell’s rejection of the lease assignment in state District Court. Monday’s agreements settle the litigation.
Powell said there is no expectation that Cochiti will restart the apple orchard operations. Dixon’s was a favorite spot for weekend visits in the fall when its apples came in.
“That day is gone,” Powell said. “… With the continued flood risk it’s going to be a decade or decades before anything could be done with the orchard. We’re all very sad. It’s nature and nothing we can control.”
Of the settlement arrangements, Powell said, “I think we got a real win-win out of this. With the fire and the flooding no one could control, I think we ended up in situation better than I ever anticipated… It’s definitely a big boost for the trust. It allows us to get land (in the expected trade with Cochiti Pueblo) that is unfettered land for commercial development.
Becky Mullane said she didn’t have much to say after the long legal fight over what had been her family’s home.
“It’s been such a long haul and there’s been so much wrapped up in it,”she said. “It’s okay.”
“We have mixed emotions,” Mullane said.
Tom Hnasko, the Mullanes Santa Fe attorney, said “I think it’s unfortunate that it’s taken this long to come to place that is really a vindication of the Mullanes’ position.” But he added that his side “respects that Land Office for negotiating in good faith.”
By: Mark Oswald (Albuquerque Journal)
Click here to view source article.
City Invests $1.9 Million in ABQid
The city of Albuquerque is poised to give $1.9 million to the new ABQid business accelerator program, Mayor Richard Berry said during a keynote speech at a NAIOP luncheon Monday.
The money will come from the city’s Economic Development Action Account, which is the fund the city set up with money from clawbacks from Schott Solar’s shutdown. It will help the new accelerator, which is based on the Techstars model, with programmatic needs.
“Now we’re taking what was a bet on one company, and we’ll turn it into a bet on 30 to 40 companies,” said Bill Bice in response to the announcement. Bice is a Verge Fund partner who is on the board of directors of ABQid.
ABQid is a new venture designed to help entrepreneurs in Albuquerque cope with the initial needs of a startup.
Entrepreneurs receive a $20,000 stipend, for example, so they can quit their day jobs and focus on their companies. They attend an intensive 90-day training that focuses on developing and testing their products. In exchange for the stipend and the training, companies give ABQid a six percent equity position.
“Take an idea, and run it through the business model canvas. What it’s really about is the assumptions you’re making about your business,” Bice said.
Bice said that entrepreneurs often find their assumptions are wrong in the process.
The program intends to enroll 10 companies in its first class, which is scheduled to begin in August. ABQid is hoping to recruit area high-growth startups that need a push — likely high-tech, software or hardware firms. “It can be any kind of company. It could be micro, it could be Main Street, whatever. But the focus is not on sector, it’s high-growth, and that has nothing to do with the type of company,” Bice said. “In no way is it exclusive to high-tech.”
The model has been proven in most major cities. The largest Techstars-type accelerator is Y Combinator, which is responsible for dozens of company launches every year.
The entire effort launched four years ago by Paul Short, who is the CEO of Pajarito Powder, and Bill Hartman, who is the CEO of Ion Linac Systems. At the time, though, Bice said the city was deep in the throes of the recession when the two started exploring the idea. They put it on hold.
But at a lunch one day with Gary Oppedahl, who is the director of the city’s Economic Development department, the two started talking about the idea and Oppedahl took it to the Economic Development Action Account council, Bice said.
The committee was set up in 2013 after the city received $5 million in clawbacks from Schott Solar, which closed its plant at Mesa de Sol.
“We’re creating startups that feed the larger ecosystem,” Bice said.
By: Dan Mayfield and Damon Scott (Albuquerque Business First)
Click here to view source article.
Adding Value to Office Space
Companies may be willing to spend more on their workspace these days, but developers and real estate pros need to know what will entice the tenants of the future.
Commercial real estate practitioners know that in order to make the sale, they’ve got to create an ironclad value proposition for every property. It’s just not about falling in love with the space.
“Commercial is all about numbers,” National Association of REALTORS® Chief Economist Lawrence Yun told the audience at the Commercial Economic Issues & Trends Forum at this month’s REALTOR® Party Convention & Trade Expo in Washington, D.C. He added that commercial clients “are not emotional; they are dispassionate.”
But there are ways to create value without relying solely on numbers.In the world of office space, that means offering workspaces that will attract top talent and maximize the utility of the floor plan.
A Need for Flexible Space
Although labor tends to be the most expensive piece of a company’s budgetary puzzle, the next item on the list is usually real estate, according to Jeffrey Kottmeier, a research analyst for commercial real estate services giant CBRE. He’s surveyed companies to get an idea of the emerging trends in office space, and found that some of the dire predictions for this sector that came out of the financial crisis have softened in the recovery. While many companies have specific goals to reduce their spending on office space, cost savings isn’t always the motivating factor behind a company’s decision to move.
Kottmeier noted that when they did the survey in 2011, the top business driver cited by respondents was indeed budgetary, but that concern slipped to fourth place in 2013, with work-life balance being the top priority. “It’s not all about cost… People are using a lot of different places besides their office desk to do their work.”
Of course, when commercial practitioners hear “work-life balance,” they might equate it with more employees working remotely. But that’s not necessarily the case. Kottmeier said he’s seeing a desire for more flexibility in the space, not less space overall. He’s seen firms where no one is assigned an office space but the CEO, and workers are allowed to sign up for the space they need depending upon their preferences and tasks on any given day. He’s also seen the rise of OFADs, or “office for a day” rentals.
John Sikaitis, senior vice president and director of office and local markets research for investment firm JLL, agreed:“Flexibility is going to reign. Working remotely is not.” Another trend that Sikaitis expressed skepticism in was the bench-style seating popular in the start-up, design, and high-tech worlds. He said that the intention of a workplace design such as that was to foster collaboration, but if you look at it in practice, most of those employees spend the day with noise cancelling headphones in their ears.
“They’re being forced, in a way, to work in this collaborative, bench-style workplace,” he said. “That did not work, and now I think we’re moving a little more toward the traditional.”
Changing Demands
Now that LEED certification and energy-efficient buildings are becoming the norm, Kottmeier says companies are moving on to “Sustainability 2.0,” which he said represents an effort to foster healthier internal environments for their employees. Developers are looking to integrate circadian rhythm lighting systems, antimicrobial surfaces, and environments that promote walking.
Such changes attract top talent, but healthier workplaces can also see benefits to their bottom line.
“Poor air quality alone costs $90 billion in lost productivity each year,” Kottmeier said. He added that companies are feeling an added sense of urgency over new findings of the problems that come with a sedentary lifestyle, as “inactivity is becoming the new smoking.”
In the aggregate, these trends add up to high demand for new, or newly remodeled, Class A office space.
“High quality space is dominating in this recovery,” said chief economist for real estate services firm Cassidy Turley, Kevin Thorpe. “Class B and Class C spaces are getting emptier… We’ve actually flooded the market with a product that the market doesn’t want.”
Investment Opportunities
Kottmeier said that one demand-side indicator that those looking to invest in high-tech office space should watch is whether or not immigration reform (specifically a loosening of the H1-B worker visa process) can pick up any steam in Washington.
“The only thing that enables future growth [in the sector] is immigration reform,” he said. “This would not even be on the table in Congress right now if it weren’t for the technology companies.”
Thorpe said the interest in U.S. commercial real estate from abroad is growing quickly, but it’s generally concentrated on the coasts. He said that a real estate professional working with international investors would be wise to demonstrate the value of other regions.
“There needs to be some education about other parts of the country,” he said. “That’s an opportunity for brokers.”
By: Meg White (REALTORMag)
Click here to view source article.
