Archives for November 2017

The city of Moriarty says now that it has assumed ownership of the state-of-the-art aircraft hangar abandoned by Google, it should be much easier to find a tenant.
In fact, drone manufacturers will likely “drool over this building,” said Myra Pancrazio, executive director of the Estancia Valley Economic Development Association.
Not only does it have a 39,000-square-foot manufacturing area, but its other amenities include two clean rooms and a paint room, a cafeteria, a meditation room, a kennel for pets, showers and bathrooms with toilets equipped with controls for water and seat temperature.
The hangar was built in 2014 by Google for development of solar-powered drone aircraft for communications. When Google later pulled out to consolidate its drone development in California, it was devastating news to Moriarty.
Once the value of all the equipment is assessed, the building’s value will be significantly more than $15 million, Mayor Ted Hart said.
That it was used for a short period also means the building is ready to be occupied immediately by any interested company, he said.
“It’s a turnkey operation,” Hart said. “It’s ready to go for anyone who wants to move in.”
Bob Hudson, manager of the Moriarty Municipal Airport where the hangar is located, said it has been difficult to get a new owner or tenant interested in the building because even though the city owned the land, Google owned the building and wouldn’t allow anyone to tour it.
All that changed Tuesday when the transfer became official. Although there were many months of negotiations, Hart said he was surprised that Google was willing to turn the hangar over to the city at no cost and agreed to pay three years’ worth of taxes and rent.
The city will get help from the state to market the 59,200-square-foot building, Lt. Gov. John Sanchez said.
“This is like the kind of building you would find in the Silicon Valley,” Hart said. “It’s a fantastic building. Now, if we just get somebody in here.”
By: Todd G. Dickson (ABQ Journal)
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Two new nap pods sat ready for visitors in the wellness center at Fifth Street Towers in downtown Minneapolis.
Amenities, not rankings, drive commercial leasing.

Office brokers, building managers and tenants have long followed the ABCs of commercial real estate, a subjective but helpful ranking to separate premier office towers from plain ones.

But the class system is breaking down as buildings that used to be lower ranked are being updated to the point where distinctions are getting blurred.

The changes have led at least one Twin Cities real estate services firm to create its own ranking system and have attracted clients to some renovated middle-of-the-road buildings.

“We don’t see tenants that say, ‘I want to be in a Class A building or I want to be in a Class B building,’ ” said Brent Erickson, an executive director in office leasing for the local offices of Cushman & Wakefield. “They would either say ‘I want to be along Nicollet Mall’ or ‘I want to be in the North Loop’ … and now what we are starting to see more often is tenants saying, ‘I want to be in a building that has these features.’ ”

Features that used to be reserved for landmark skyscrapers, like well-outfitted fitness centers and outdoor terraces, are now becoming common in remodeled buildings.

One of the most notable renovations of what many considered Class B space in the heart of downtown Minneapolis is the Baker Center, which had its grand reveal of its renovations this past summer. The complex now features a two-story lobby, new amenity floor and high-grade finishes.

Law firm Faegre Baker Daniels leased 85,000 square feet in the Baker Center to move its operations team from Wells Fargo Center, the biggest leasing deal downtown in the third quarter, according to a quarterly office market report by real estate company CBRE. Wells Fargo Center will still be the law firm’s primary location.

The new Facebook data center in Los Lunas is beginning to take shape. The village is beginning to see an increase in gross receipts tax collections, largely due to the construction activity.
The village of Los Lunas is reporting a steady rise in gross receipts tax revenue, mainly from the construction of the Facebook Data Center.

In a quarterly report for the 2017-18 fiscal year through September, the village reported revenues of more than $5 million, nearly $2 million more than at the same point last year.

“We’ve been lucky,” said Los Lunas Mayor Charles Griego.

Greg Martin, the village administrator said the village has not yet identified how the increased revenue will be spent, but a workshop is slated for January.

“We have to manage, realizing that the funds we are receiving are finite; that’s not going to be reoccurring,” Griego said. “Our expenditures have to match that reality.”

Also, the village has an obligation by agreement to provide Facebook a percentage of the construction GRT. It’s a local LEDA grant of up to $1.6 million annually. Facebook will use that money for water rights and/or infrastructure for its data center, but those improvements also benefit the village.

More on this story at Valencia County News-Bulletin

By: Deborah Fox (Valencia County News-Bulletin)
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Commercial prices will plateau and may fall in large markets, but secondary markets will experience sustained demand and stable real estate prices, according to Lawrence Yun, National Association of Realtors® chief economist.
During a commercial real estate forecast session today at the 2017 REALTORS® Conference & Expo, Yun and JLL Chief Economist Ryan Severino both expressed confidence that the commercial sector should remain on an upward trajectory, but buyers and sellers could be at odds over price.
“The commercial market should expect a standoff between buyers and sellers over price in the next year, which could lead to fewer transactions. Buyers cannot offer low cap rates because of rising interest rates, and sellers cite the strong economic climate as a reason for high prices. Furthermore, vacancy is falling, yet construction has been lagging because of worker shortages,” Yun said.
Yun went on to say that overall, the market is healthy; commercial property prices rose 90 percent in the last seven years, but recent headwinds are developing some ambiguity. “The economy is quite impressive and gross domestic product has grown 3 percent in the last quarter, despite hurricanes and other economic factors,” he said. “The consumer confidence index is also growing, and the nation’s net worth and consumer spending are at historic levels.”
Yun expects GDP to come in around 2.2 percent for the year and to expand to 2.8 percent overall in 2018, as long as job growth remains solid and construction picks up in both residential and commercial sectors. National office vacancy rates are forecast to remain fixed over the coming year with rent rising at 2.5 percent per year. The vacancy rate for industrial and retail space are expected to also remain stable with rent rising slowly at 4 percent and 2 percent, respectively.
Even as new apartment completions bring more supply to markets, the multifamily sector will likely see a vacancy rate remain steady, with rent rising slowly at 3 percent per year. Supported by the ongoing stretch of outstanding job creation since 2010, commercial real estate and vacancy rates, in particular, are expected to be stable across the country. Warehouse vacancy will continue to decrease because of a strong appetite for industrial space, specifically ecommerce and trade.
Yun went on to say that high-tech company expansions, such as Amazon, will have a large effect on regions across the country. “Depending on where these secondary headquarters land, nearby property owners will experience robust growth and property prices, but renters will indirectly feel a pinch of much higher rent payments,” Yun said.
Severino joined Yun onstage and delved into the global economy and the performance of major property types. “Global economic growth is accelerating, and 2018 sees the world’s economic trains running strongly together. Interest rates are also going up but remain low by historic standards,” Severino said.
He anticipates a strong performance from all sectors of commercial real estate, with supply starting to catch up with demand. “It is important to note that commercial practitioners may be getting too comfortable with the large demand for construction and the great performance of the industrial sector. Furthermore the suburban market is seeing more activity compared to downtown,” he said.
Yun also highlighted the current tax reform plan in front of Congress and the impact it may have on the commercial market. “The industry holds the 1031 like-kind exchange sacred and, currently, it is included in the tax code plan for commercial real estate. This is great news for commercial practitioners and for the industry at large,” he said.
By: National Association of REALTORS®
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