Archive for category Commercial Real Estate News
New Growth Spurt For 192nd Avenue In Vancouver, Washington
Posted by Tom Smith in Commercial Real Estate News on September 27, 2011
$50 million retail project aims to take advantage of arrival of Fisher Investments
By: Cami Joner – Columbian Staff Reporter
Two of six planned retail buildings will soon be under construction at the $50 million 192nd Avenue Station development at the corner of Southeast 192nd Avenue and 20th Street in Vancouver.
(Photo by Troy Wayrynen)
A once-rural crossroads near the divide between Vancouver and Camas is shaping up to be one of the hottest development corners in all of Clark County.
The east Vancouver junction of Southeast 192nd Avenue and 20th Street is also poised to become a gateway to Camas, one of the driving forces behind nearly $70 million worth of construction planned near the intersection. Smoothie drinks, pizza, an orthodontist’s office and a barber are just a few of the services lined up to lease space in the $50 million, six-building 192nd Avenue Station retail center. The complex is being built on the northeast side of the interchange, which will soon lead to a $30 million Camas office complex under construction for Fisher Investments.
More retail, apartments and hotel construction, worth between $20 million and $25 million, are to be built starting next year on tracts south of 20th Street and 192nd Avenue.
The new retail tenants are focused on attracting 400 Fisher Investments employees who are about to move into the first of four buildings planned for the campus, said Roger Qualman, the Vancouver-based chief operating officer of NAI Norris, Beggs & Simpson commercial real estate firm.
In addition to Fisher Investments, the area is attractive to retailers — despite Clark County’s sluggish retail market — because of its affluent neighborhoods, nearby schools and access to state Highway 14 on the southernmost leg of 192nd.
Qualman said retailers, which generally follow rooftops, are not about to ignore a large concentration of daytime workers who are apt to go out for lunch, take clothes to the dry cleaners or stop for a haircut.
“Fisher employees will be looking for services on their way to and from work,” Qualman said.
The campus and a new street linking 20th Street to Northwest 38th Avenue on the Camas side are expected to generate an additional 20,000 daily vehicle trips past 192nd Avenue Station, according to Dean Kirkland and Tom Files, of Columbia Pacific Leasing and Income Properties, the project’s developers.
The business partners also developed the $12 million, two-building 192nd Avenue Plaza on the southeast side of the interchange.
The new project’s general contractor, K&F General Contracting, will build 192nd Avenue Station in stages, starting with one building at the north end of the site near 15th Street and a second building near 20th Street.
“The bigger building is 86 percent leased and the smaller one is 100 percent full” and expected to open in mid-2012, Files said.
The buildings, a 25,000-square-foot, two-story structure and a 10,000-square-foot, single-level building, are designed to resemble the neighboring retail complex on the south side of 20th. Site plans include generous parking arrangements for nearly 500 cars.
Qualman said Camas-based tech companies, such as WaferTech and Sharp Microelectronics of the Americas, also generate traffic along the corridor. However, manufacturing firms don’t produce many retail and restaurant patrons, he said.
“The big campuses typically have their own cafeteria and services,” Qualman said.
Gateway to Camas
If Camas officials have their way, the smaller city will soon be reaping the benefits of becoming a home base to new retailers. The city expects to start construction next year on a $3.5 million stretch of road to tie the city’s Northwest 38th Avenue to Vancouver’s 20th Street, making the location even more accessible to Camas residents.
That connection will open up more than 50 acres of commercial land for development on the Camas side of the border, said Paul Dennis, executive director of the Camas-Washougal Economic Development Association.
Dennis said Issaquah-based Costco had considered building its store on one of the tracts. Instead, it chose its current site at Southeast First Street and 192nd in Vancouver for a store that opened this year.
“They said the connection was one of the major deciding factors,” said Dennis, who was Camas mayor at the time.
Even with the city’s carefully cultivated cluster of businesses and upscale neighborhoods near its Vancouver border, Camas doesn’t receive a bit of the sales tax generated by big-box stores, boutiques and restaurants along Southeast192nd Avenue, said Scott Higgins, current Camas mayor.
Sales from those stores produce tax revenue for Vancouver, he said.
“The Costco and QFC, all of it goes to Vancouver. There’s nothing we can do about that now,” Higgins said.
Files said tenants in the already finished 192nd Avenue strip center include a convenience grocery store, a drive-through auto licensing business, a coffee shop and clothing boutique. It also houses a mortgage company and east-side restaurant locations of Applewood and Hula Boy Char Broil.
He said most of those tenants were attracted by the center’s location, adding that 192nd Avenue now carries a traffic count of 40,000 vehicles daily.
Other tenants that have signed leases for the north side of 20th in the 192nd Avenue Station include a chiropractor, a sushi restaurant, a martial arts school and a violin shop.
Commercial Real Estate Looking Better, Experts Predict What’s Next
Posted by Tom Smith in Commercial Real Estate News on September 23, 2011
Commercial real estate as an investment, is looking better, but what do the experts predict is on the near horizon?
Watch this presentation by Bob White of Real Capital Analytics, for the latest…
Morgan Stanley CMBS Sale a Boost for Banks Emptying Books: Credit Markets
Posted by Tom Smith in Commercial Real Estate News on September 22, 2011
Wall Street banks seeking to unload commercial mortgages amassed before Europe’s sovereign crisis deepened and a slowing economy rattled markets are getting a reprieve from rising yields after Morgan Stanley sold bonds yesterday that demonstrated demand for the debt.
Morgan Stanley signage is displayed at their headquarters in New York. Photographer: Peter Foley/Bloomberg
Relative yields on securities tied to offices, hotels and shopping centers have been hovering at about the highest levels since June 2010 as investors shun riskier assets amid concern a Greek default may infect European lenders and as economists lower U.S. growth forecasts. Banks have pulled back from making new loans to package into bonds as price swings erode profit margins on the deals.
“This momentum certainly would encourage banks, but it takes a few more pricings to demonstrate a trend,” said Jeffrey Berenbaum, a commercial-mortgage debt analyst at Citigroup Inc. in New York. “It’s a matter of taking a step back to see how things settle before looking to continue lending.”
Barren Pipeline
While lenders are poised to sell as much as $6 billion of stockpiled debt through October, the rest of the year may have no offerings, Bank of America analysts said in a Sept. 9 report. More than $24 billion of the debt has been raised in 2011, following $11.5 billion last year, according to data compiled by Bloomberg.
JPMorgan is marketing a $1 billion issue, according to people familiar with the sale. Goldman Sachs Group Inc., Citigroup Inc., Wells Fargo & Co., Royal Bank of Scotland Group Plc and Deutsche Bank AG are also arranging transactions, the people said.
Elsewhere in credit markets, a benchmark gauge of U.S. corporate credit risk fell for a third day from a two-year high. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, dropped 2.4 basis points to a mid-price of 126.4 basis points as of 12:03 p.m. in New York, according to Markit Group Ltd.
The index, which typically falls as investor confidence improves and rises as it deteriorates, has decreased from 135.9 basis points on Sept. 12, its highest level since July 2009. Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
Commercial Paper
U.S. commercial paper outstanding declined $22.6 billion to $1.043 trillion in the week ended Sept. 14, the Federal Reserve said today on its website. That’s the lowest level since the market, which has fallen for nine straight weeks, reached $1.042 trillion in the period ended Feb. 16, according to Fed data compiled by Bloomberg.
The commercial-mortgage bond offering from Morgan Stanley and Bank of America is composed of 63 loans on 76 properties, the person said. Retail property debt accounts for 46.3 percent of the offering and office debt is about 30 percent. Loans in Texas and California account for 31.2 percent of the pool.
Wider Spreads
The securities were priced as German and French leaders expressed support for Greece remaining in the euro monetary union and speculation that China may help the region’s most- indebted nations.
Political and economic turmoil drove relative yields on top-ranked commercial-mortgage bonds to 303 basis points more than Treasuries on Aug. 25, the most since June 2010, before narrowing to 291 yesterday, according to Barclays Plc index data.
Spreads climbed from this year’s low of 178 on April 26 as Fed auctions of mortgage securities assumed in the rescue of American International Group Inc. weighed on credit markets. The selloff was exacerbated in July as the sovereign-debt crisis engulfed Italy and lawmakers in Washington clashed over raising the U.S. debt ceiling, leading S&P to cut America’s top credit grade on Aug. 5.
Economists are lowering their growth forecasts for the U.S. Gross domestic product will expand 1.7 percent this year, less than the May forecast of 2.8 percent, according to a survey by the National Association for Business Economics issued Sept. 12 in Washington.
Delinquencies Fall
Commercial-mortgage bond sales have tumbled from a record $234 billion in 2007. A dropoff in new lending may make it harder for some borrowers to refinance maturing loans, according to the Bank of America analysts led by Alan Todd.
“Borrowers with less capital or less attractive properties will obviously have fewer options,” the New York-based analysts wrote. “It is likely that the trend of liquidating smaller loans and modifying and extending larger loans will persist.”
Delinquencies, which climbed to a record 9.01 percent in July, fell 36 basis points last month, according to Fitch Ratings.
Banks have increased the so-called credit enhancement, which protects AAA bondholders from losses, to 30 percent on deals offered since last month as investors pushed back on terms and demanded higher yields. That compares with 16.875 percent on a $1.48 billion transaction from Wells Fargo and Royal Bank of Scotland in July.
‘Nice Pickup’
The additional investor protection coupled with property valuations in recent deals compares favorably with bonds sold in 2005, while offering a “nice pickup” in spread and yield, said James Grady, a managing director at Deutsche Asset Management in New York, including commercial-mortgage debt.
“This is a trade that makes sense and you will see investors take advantage of this opportunity while it lasts,” Grady said.
The slide in the safest classes of commercial-mortgage bonds has made the debt attractive relative to other fixed- income investments, Wells Fargo Chief Financial Officer Timothy J. Sloan said in a Sept. 12 conference call with analysts.
“Spreads blew out pretty significantly over the past few months,” Sloan said, referring to the most senior portions of commercial-mortgage securities. “That’s not the only class that we think is attractive, but we definitely want to be able to take advantage of opportunities.”
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To contact the reporter on this story: Sarah Mulholland in New York at
Demand For Apartments Rises All Over, Despite Economy
Posted by Tom Smith in Commercial Real Estate News on September 19, 2011
Rising renter demand is filling apartment buildings around the U.S., in defiance of the economic malaise.
Vacancy rates are shrinking all over, in tight markets such as Minneapolis and loose ones like Phoenix.
It’s an unusual situation. Job creation typically drives apartment demand. But this time the tenant top-up is largely about a lack of new supply — in the face of paltry employment growth. Meanwhile, demographic trends and the single-family housing slump are creating tenants, says Hessam Nadji, a managing director at Marcus & Millichap Real Estate Investment Services.
“The demand for apartments is at levels that we haven’t seen since economic boom years like those in 1999 and 2000,” he said. “It is clearly decoupled from the economy.”
The property brokerage projects that asking rents will grow an average of 3.5% this year in the U.S.
After the Big Apple at just a 2.8% vacancy rate, the tightest areas are now Minneapolis, San Jose, Calif., and Portland, Ore., all under 4%.
Widespread Improvement
Some 3 million young adults age 24-34 that moved back in with family or roommates in the last five years are now moving into their own places as their employment prospects improve, Nadji says. Hiring has sputtered over recent quarters, but this age group captured 65% of the new jobs created in 2010.
Other factors are creating tenants too, Nadji notes: A double-dip in single-family home values has made house hunters wary of buying. Tougher mortgage qualification requirements deter purchases. And homeowners who lost houses to foreclosure have become renters.
Together, those trends helped to lower the U.S. average apartment vacancy rate to 5.9% at the end of the second quarter. That was a 1.9 percentage point improvement from a year earlier, as noted by Marcus & Millichap.
While bellwethers like New York and Boston are among markets with vacancies below average, Minneapolis, Milwaukee and other markets also beat the average, largely due to decent job creation and scant new construction. Minneapolis employers added 7,000 workers in the first half of 2011. They had let go 6,200 a year earlier.
Among very tight markets, Minneapolis and Portland vacancy rates fell 2.2 percentage points from a year ago in the second quarter.
Even markets that were battered by rampant speculative home and apartment construction in the last decade have seen rapid improvement. Vacancy in Las Vegas, for example, plunged to 8.1% at the end of June from 11.1% a year earlier.
Continuing weakness in the Las Vegas housing market contributed: One in every 99 homes in the metro received a foreclosure notice in July. But now the jobs picture is improving slightly. Employers are expected to hire 16,200 workers this year, which would mark the first year of job growth since 2007.
A glut of empty single-family homes reverting to rental houses in Sin City and other overbuilt markets could slow further occupancy gains, Nadji says. But he and other observers point out that single-family homes don’t appeal to most renters ages 24 to 35. Instead they want places that provide maintenance, amenities and services.
Terry Considine, CEO of Denver-based Apartment Investment and Management Co. (AIV), told analysts during the second-quarter earnings call in July that foreclosed homes and rental houses were “not really competitive with professionally managed apartments.”
A sign beckons renters near Tampa, Fla., where vacancy has fallen to 6.9%
Buying Splurge
Encouraged by improving fundamentals, investors are flocking to apartments. Some $21.6 billion in multifamily properties changed hands in the first half of 2011, more than double a year earlier, says Real Capital Analytics, which tracks sales of more than $5 million.
Capitalization rates slid to an average 6.4% in the second quarter from 6.6% in the first. They tell a property’s initial yield, falling as prices rise.
Sellers in major coastal markets are fetching prices that reflect cap rates of 5% or less, says Jeffrey Baker, executive managing director in the New York office of global brokerage Savills. That’s sending some institutional investors to secondary markets, where yields are higher.
It also is sparking new construction, which can ultimately generate higher yields of 6.5% to 7.5% for investors. Savills recently arranged equity financing for The Victor, a $140 million luxury apartment project in Boston that just broke ground. It’s the first big multifamily development in the city since the financial markets collapsed in 2008.
“There certainly will be some measured development that’s going to happen over the next couple of years,” Baker said.
Opportunities also exist for mom-and-pop investors in most markets among smaller properties, yet to appreciate at the same rate as top-tier assets, Nadji and Baker say.
While buyers typically need to do minor upgrades to justify rent increases in such properties, the reasons to pursue acquisitions have become more compelling, particularly with interest rates around 4.5% on a 10-year loan, Nadji adds.
“The turmoil in the stock market has made people think harder and more aggressively about buying apartments,” he said.
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By Joe Gose, For Investor’s Business Daily
Commercial Real Estate Markets Are Stabilizing, Demand Is Growing
Posted by Tom Smith in Commercial Real Estate News on June 8, 2011
Download the official Commercial Forecast for 2011, Q2 here.
The improving economy and job creation mean growing demand for commercial real estate, according to the National Association of Realtors®.
Lawrence Yun, NAR chief economist, said job creation will be the biggest factor moving forward. “Job growth creates demand for commercial space, and the economy should be adding between 1.5 million and 2 million jobs annually both this year and in 2012, with the unemployment rate falling to 8.0 percent by the end of next year,” he said. “Given the minimal new supply in recent years, the rising demand means vacancy rates will be trending down in the commercial real estate sectors. Individual markets are now stabilizing and in some cases rising.”
From the second quarter of this year to the second quarter of 2012, NAR forecasts vacancy rates to decline 1.0 percentage point in the office sector, 0.9 point in industrial real estate, 0.5 point in the retail sector and 1.1 percentage points in the multifamily rental market.
The Society of Industrial and Office Realtors®, in its SIOR Commercial Real Estate Index, an attitudinal survey of more than 360 local market experts,1 shows a firming up of market fundamentals.
The SIOR index, measuring the impact of 10 variables, rose 6.8 percentage points to 57.5 in the first quarter, the highest since the fall of 2008. The Northeast and South drove improvements in market conditions. Vacancy rates are improving, but concessions continue to make it a tenant’s market.
Although the SIOR index remains notably lower than a level of 100 that represents a balanced marketplace, this is the sixth consecutive quarterly improvement after almost three years of decline. The last time the index was at 100 was in the third quarter of 2007.
A separate NAR commercial lending survey shows 65 percent of Realtors® report lending conditions have tightened thus far in 2011, and six out of 10 failed to complete a transaction this year due to financing problems. Regional banks provide the majority of commercial loans, followed by private investors. National banks are a distant third.
“Just as in the residential sector, lending problems are the biggest issue impacting commercial real estate,” Yun noted.
The multifamily sector is the only area that has clearly turned the corner, resulting in consistently falling vacancy rates and rising rents. “Solid rises in apartment rents will force some renters to consider home ownership,” Yun said.
NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK2 offers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data were provided by CBRE Econometric Advisors.
Office Markets
Vacancy rates in the office sector are expected to fall from 16.3 percent in the second quarter of this year to 15.3 percent in the second quarter of 2012.
The markets with the lowest office vacancy rates currently are Honolulu and New York City, each with vacancies below 9 percent.
Office rents are projected to rise 0.3 percent this year and another 4.3 percent in 2012.
In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, is likely to be 26.6 million square feet in 2011.
Industrial Markets
Industrial vacancy rates are expected to decline from 13.9 percent in the current quarter to 13.0 percent in the second quarter of 2012.
At present, the areas with the lowest industrial vacancy rates are Los Angeles and Salt Lake City, with vacancies in the 7 to 8 percent range.
Annual industrial rent should decline 1.5 percent in 2011 before rising 2.0 percent next year. Net absorption of industrial space in 58 markets tracked is seen at 126.1 million square feet in 2011.
Retail Markets
Retail vacancy rates are forecast to decline from 13.1 percent in the second quarter of this year to 12.6 percent in the second quarter of 2012.
Markets with the lowest retail vacancy rates currently include Honolulu; Long Island, N.Y.; and San Jose, Calif., all with vacancies below 8 percent.
Average retail rent is expected to decline 1.4 percent in 2011, and then rise 0.7 percent next year. Net absorption of retail space in 53 tracked markets is projected to be 5.4 million square feet in 2011.
Multifamily Markets
The apartment rental market – multifamily housing – is continuing to tighten as household formation grows. Multifamily vacancy rates should drop from 5.8 percent in the current quarter to 4.7 percent in the second quarter of 2012.
Areas with the lowest multifamily vacancy rates presently are Pittsburgh; San Jose, Calif.; and Portland, Ore., with vacancies below 3 percent.
Average apartment rent is likely to rise 3.4 percent this year and another 4.3 percent in 2012. Multifamily net absorption is forecast at 250,800 units in 59 tracked metro areas in 2011.
The COMMERCIAL REAL ESTATE OUTLOOK is published by the NAR Research Division for the commercial community. NAR’s Commercial Division, formed in 1990, provides targeted products and services to meet the needs of the commercial market and constituency within NAR.
The NAR commercial components include commercial members; commercial committees, subcommittees and forums; commercial real estate boards and structures; and the NAR commercial affiliate organizations – CCIM Institute, Institute of Real Estate Management, Realtors® Land Institute, Society of Industrial and Office Realtors®, and Counselors of Real Estate.
Approximately 79,000 NAR and institute affiliate members specialize in commercial brokerage services, and an additional 171,000 members offer commercial real estate as a secondary business.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
# # #
1 The SIOR Commercial Real Estate Index, conducted by SIOR and analyzed by NAR Research, is a diffusion index based on market conditions as viewed by local SIOR experts. For more information contact Richard Hollander, SIOR, at 202/449-8200.
2 Additional analyses will be posted under Economists’ Commentary in the Research area of Realtor.org in coming days.
Information about NAR is available at www.realtor.org. This and other news releases are posted in the News Media section. Statistical data, charts and surveys also may be found by clicking on Research.
REALTOR® is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics. Not all real estate agents are REALTORS®. All REALTORS® are members of NAR.
Download the official Commercial Forecast for 2011, Q2 here.
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