Housing Market Tracker - Commercial Real Estate Outlook

Quote of the Day

"In an economy that's somewhat struggling, we're expanding business." – Brokerage Colliers Turley Martin Tucker in its annual "state of real estate" report for the Indianapolis area. Indianapolis has gained and is still gaining millions of square feet of commercial space. (Indianapolis Star, Jan. 10th)

Commercial Real Estate and Real Estate Investment Trusts (REITs)

Slowdown Expected in '08. "A national lending crisis has nearly ended the flow of out-of-state investment capital to commercial real estate in Indianapolis... Developers locally will find it harder to finance new office buildings, apartments and shopping centers. And owners of existing properties will have a tougher time finding buyers. The lending crisis has hit just as the Indianapolis area's commercial real estate markets went through a growth spurt in 2007. The thriving industrial market added 7.1 million-sf, the most active year for industrial construction in a decade. Office developers built more space for multitenant use last year than any year since 2001." (Indianapolis Star, Jan. 10th)

Plan To Buy Sears Site Falters. Chicago: "The landmark Sears, Roebuck & Co. building in East Los Angeles is back on the market after a final purchase agreement with popular boxer Oscar De La Hoya and his partners was not reached by year end... De La Hoya's team acknowledged plans last summer to acquire the 23-acre property on Olympic Boulevard for about $70 million and turn it into a housing and shopping complex. Owner Mark Weinstein said the deal stalled after about six months of negotiations with the boxer's Golden Boy Enterprises and partner Manarino Realty, and no down payment had been made by year-end." (LA Times, Jan. 9th)

SL Green Hangs For-Sale Sign on 1250 Broadway. New York City: "SL Green Realty Corp. (SLG), who over a year ago recapitalized 1250 Broadway due to the property’s jump in value, now hopes to sell the 770,000-sf 39-story building. In 2001, when SLG and Canadian SITQ formed a JV, the property was valued at $126.5 million. In October 2006, the class A building was worth $260M, and now the owner hopes it will fetch $350M... Richard Baxter, who is handling the marketing of the sale: The property is 99% occupied at this time; however, 30% of the building is rolling over within the next five years." (Globe St., Jan. 9th)

Housing Drop Saps Retail Landlords' Strength. "Sparked by the housing boom across the country, shopping-center and mall developers... delivered millions of square feet of new space... Since 2005, U.S. developers have produced more retail space than office space, rental apartments, warehouse space or any other commercial real estate category. But just as that new space is hitting the market, demand is declining. Mounting home foreclosures have sapped the strength of previously hot markets like Phoenix and California's Inland Empire... leaving retail-property owners with rising vacancies and slower leasing rates for new space. Anemic sales gains in the just-completed holiday season fell short even of the retail industry's tepid preseason forecast." (Wall St. Journal, Jan. 9th)

Goldman, BRP to build in Harlem, Bed-Stuy. NYC: "Goldman Sachs' (GSC) urban investment group and BRP Development Corp. have signed a joint venture to spend $20 million on three mixed-income housing projects in Harlem and Bedford Stuyvesant. More than 200 condos and rental units and 16,000 square feet of retail and community space are planned." (The Real Deal, Jan. 9th)

Massachusetts REIT Buys Maryland Service Station For $24.9M. "Hospitality Properties Trust (HPT), a Massachusetts REIT, has acquired the TA Baltimore South Travel Center #151 in Jessup, Md., from a private investor for $24.9 million... The property consists of a travel center and service station with a 110-room hotel, full service restaurant and travel store. It is located at 7401 Assateague Drive on 20.23 acres and sold with a capitalization rate between 6%-7%. It is one of the largest travel centers in the country as measured by traffic volume." (Commercial RE Deal News, Jan. 9th)

Study: Commercial Real Estate More Than 10 Percent of Colorado's. "National Association of Industrial and Office Properties study: The commercial real estate industry was accountable for more than 10% of Colorado's state economy during 2006... Commercial real estate comprises 10.5% of the state's economy, totaling out to a value of $23.4 billion. The state's three major metropolitan areas -- Denver, the northern Front Range and Colorado Springs -- had nearly 85% of Colorado's existing commercial and multifamily properties, with metro Denver alone representing nearly 58% of existing income-producing square footage." (Commercial Property News, Jan. 8th)

AMB Property Corporation Acquires 560,000 SF Facility in Tilburg, a Strategic Logistics Hub in the Netherlands. "AMB Property Corporation (AMB), a global developer and owner of industrial real estate, today announced it has acquired a fully-leased, 560,000-sf (52,000-sqm.) facility in Tilburg, the Netherlands. Tilburg is an established logistics hub, with a central location that serves the local Dutch distribution market as well the greater European continent... AMB's Europe portfolio totaled more than 9.7 million-sf (904,500-sqm.) of operating and under development properties as of September 30, 2007." (Fox Business, Jan. 8th)

Market Spotlight: REITs. "Citi analyst Jonathan Litt forecasts total REIT returns to be flat to down 10%, with most of the losses coming in H1'08... A decline in job and wage growth could hurt apartment and retail REITs, while any cut back in business spending will shrink office and industrial space demand and pressure rents... Topping most analysts' lists are shopping mall owner Simon Property Group Inc. (SPG), which has a modest amount of debt and a large, open credit line; industrial REITs ProLogis (PLD) and AMB Property Corp., which are both well-positioned to capitalize on global growth with distribution centers in Japan, China and Europe; and Digital Realty Trust Inc. (DLR), an office REIT specializing in high-demand, low-supply data centers." (CNN Money, Jan. 8th)

Q4 Reversal In Silicon Valley Commercial Real Estate. California: "Brokerage CB Richard Ellis: Commercial real estate in Silicon Valley saw a reversal across the board in Q4'07. Tenants occupied nearly 1.5 million-sf less of offices, research and development buildings, and industrial space at the end of 2007 than they did at the end of September. Vacancy rates also ticked up in all three sectors. Hardest hit was the R&D sector where tenants occupied 724,000-sf less at the end of Q4 than at the beginning. South San Jose, Milpitas and Cupertino showed the greatest weakness with both South San Jose and Milpitas showing negative net absorption for the year exceeding 200,000-sf." (Silicon Valley Business Journal, Jan. 7th)

Principal Real Estate Investors Acquires San Francisco Office Tower . "Principal Real Estate Investors... announced today that they have acquired 150 Spear Street office tower in San Francisco, Calif. The 256,827-sfbuilding enjoys an ideal location on the vibrant Spear Street Corridor in San Francisco's South Financial District... The property is currently 78% occupied by a number of high-quality tenants, including NASDAQ, Kessler Pacific, Department of Defense and Market Tools." (Reuters, Jan. 7th)

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