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Despite disappointing economic performance and severe winter weather in parts of the country, commercial REALTORS® reported broad-based market improvements in the first quarter 2014. In keeping with the upward momentum in the markets, REALTORS® rated the direction of commercial business opportunities 6.0 percent higher in the first quarter 2014, an improvement over the 5.0 percent rise from the fourth quarter 2013.
On a year-over-year basis, sales increased 11 percent in the first quarter, as prices rose 4 percent. Cap rates continued compressing with a 50 basis point decline, from an average of 8.7 percent in the fourth quarter 2013 to 8.2 percent in the first of this year. Multifamily properties recorded the lowest average cap rates, at 7.7 percent, followed by hotels, at 7.6 percent. Office and retail spaces posted identical cap rates of 8.0 percent, while industrial properties recorded capitalization rates of 8.1 percent.
The average transaction price moved from $1.2 million in the fourth quarter 2013 to $1.4 million in the first quarter 2014. In a noticeable change, commercial REALTORS® reported that the most significant concern during the first quarter was a shortage of available inventory. The second major concern was the pricing gap between buyers and sellers. After several years of topping the list of concerns, financing dropped to a distant third place, signaling a marked shift in market conditions over the past six months.
By: George Ratiu (National Association of REALTORS®)
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Apartment rents will grow faster in many secondary markets than in the top primary markets like New York City and Los Angeles, according to 2014 projections from data firms Reis Inc. and Pierce Eislen.

“There has been a tremendous amount of rent growth and growth in value in these markets,” says Robert Kadoori, senior vice president for debt and structured finance with CBRE capital markets, which quoted the Pierce Eislen projections in a recent multifamily presentation.

Apartment investors have been turning toward secondary markets this year as they look for higher yields on their investments. Rising rents will make those markets even more attractive.

In 2014, the top 10 metro areas for multifamily rent growth will not include New York City, Los Angeles, Boston or Chicago, according to projections from Reis, a New York City-based research firm. Instead, rents are set to grow more quickly in several secondary markets. Denver, Colo.,  Dallas, Houston and Austin, Texas, and Nashville, Tenn. are all poised to grow their average rents by more than 4 percent in 2014, according to Reis. These secondary markets all have local economies dependent on quickly growing industries. “The tech and energy markets are very prevalent here,” says Brad Doremus, senior analyst with Reis.

Projections from Pierce Eislen, an affiliate of Yardi Systems Inc., spell even stronger growth for average apartment rents in markets including the Southwest Florida coast (9.3 percent); Portland, Ore., (6.0 percent) and Atlanta (6.0 percent). “Many of those economies are recovering. There seems to be a consensus that their time has come,” says CBRE’s Kadoori.

Fading appeal

Most of the famous “sexy six” apartment markets are further down the list for rent growth, if they appear at all. New York City, for example, is projected by Reis to have 4 percent rent growth this year, with a multifamily vacancy rate of just 2.5 percent, down 0.2 percent year-over-year. The projection of 4 percent rent growth is impressive, but still less than the rent growth expected in leading secondary markets. The economy of New York City is more diversified and includes a great deal of financial services firms. Apartment rents are also already high in the core apartment markets, limiting potential for big rent hikes.

Seattle and seemingly every town in the San Francisco Bay Area still top the lists for projected rent growth in 2014, likely due to the strength of the tech business in their local economies.

Multifamily investors have been paying attention to the new trends.

“We have seen quite a bit of attention turn from the big six markets,” says Kadoori. “The core investors look at the secondary markets and their rising economies and see downside protection.”

A long list of metro areas is sharing the positive attention. Some brokers refer to these towns as “NFL cities,” because metros areas prosperous enough to feature a National Football League team also seem to be large enough to share in the quickening recovery.

However, investors are still most interested in class-A properties in the top sub-markets.

“The gulf between the two ends of the market is wider than I would expect,” Kadoori notes.

By: Bendix Anderson, NuWire Investor

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Thanks to all of the brokers, sponsors and guests who attended the June CCIM Deal Making Session. About 36 million dollars of commercial real estate properties available for sale were presented from all over New Mexico.

1.	Jim Wible, CCIM and Keith Meyer, CCIM, SIOR	5050 Broadway Blvd SE	$3,000,000
2.	Jim Wible, CCIM and Keith Meyer, CCIM, SIOR	7635 2nd St NW	$399,000
3	Randy McMillan, CCIM	2237 Trinity Dr	$6,600,000
4.	Erik Olsen, CCIM	426 Utah St NE	$1,425,000
5.	Brett Hills and Calder Conrad	156 Wyoming Blvd NE	$150,000
6.	Brett Hills and Calder Conrad	324 Isleta Blvd SW	$150,000
7.	Randy McMillan, CCIM	Sonoma Ranch	$22,132,000
8.	Cole Flanagan, CPA and Rich Diller, CCIM, SIOR	711 Encino Pl NE	$980,000
9.	Richard Hanna	630-680 Haines Ave NW	$1,200,000

 

Outdoor conference rooms. Employee fitness centers. Workplace health fairs and kitchens stocked with healthy snacks. The latest wellness tactics by a Washington employer? Nope.

It’s the landlord.

With amenities like attractive lobbies or ample parking no longer good enough, employee wellness has become a feature corporate landlords are increasingly using to recruit and retain business tenants.

“Environments matter,” said Roberta Levy Liss of Rockville-based Beco Management. “Companies know they can have happier employees in better environments.”

With competitive corporate real estate market in D.C. in recent years — in 2012, D.C. tenants shed more than 3 million net square feet of leased space as the federal government contracted and private companies moved to newer, more efficient buildings to lower their rent payments — every advantage can make a difference.

A survey of tenants released last year by the D.C.-based Building Owners and Managers Association found while health and hygiene amenities were comparatively rare, they were highly liked. In particular, the report pointed out flu shot programs and access to healthy food, which shows building owners may be able to quickly increase tenant satisfaction by adding health-related amenities with relatively little investment.

“Anything a landlord can do to attract tenants in a market as soft as this,” said Jessica Miller, Director of Tenant Advisory Group for Cushman and Wakefield in Washington. “Human capital is one topic on every client’s to-do list.”

There are a number of examples of Washington-area corporate real estate implementing wellness elements into their buildings. For instance, the Tower Cos. in Rockville and longtime partner Lerner Enterprises built its office building using vedic principles, based on ancient Indian philosophy espousing health, happiness and harmony. Among the features for lease, the building has free showers for those who bike to work, three small gardens and a meditation room. A full-size range is available in the kitchen.

Wellness amenities are expected to grow in popularity in commercial real estate. Just last year, wellness real estate group Delos unveiled its first WELL-certified office building, the Los Angeles-based headquarters for commercial real estate firm CBRE. The goal is to ramp up the amount of buildings, including residential properties, which seek WELL certification in a similar fashion to how LEED certification grew in popularity. It’s not all buildings where these sort of perks are found, but they are usually in Class A, or higher end, properties, Miller said. Some of the extras she’s heard are trainers in workplace fitness facilities, towel service in gyms and secure bike storage. “Just five years ago, a lot of leases told tenants they couldn’t bring bikes inside their building. Now clients demand it,” Miller said.
By: Tina Reed, Washington Business Journal
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