The commercial property market of the United States has made a significant comeback. But along with the recovery, came several changes that have now become trends in the industry.
In the 48th annual conference for the National Association of Real Estate Editors, experts discussed the various trends office building are adopting to become more attractive. Culture Map compiled a list of the most interesting trends that are taking over the real estate market and we sieved through the list to bring out the commercial real estate developments.
1. Bike Racks
As more companies strive towards hiring millennials (people aged between 18 and 33) bike racks have become an office building staple.
2. Pet Facilities
Pet friendly buildings have become all the rage, not only in multifamily structures but office buildings too. Dog-walking and pet-sitting services have become much popular with prominent developers adding these facilities to office buildings.
3. Fitness Facilities and Environment
With a large number of Americans struggling with obesity and other lifestyle-related health problems, access to fitness facilities and indoor work environment quality has become important. Most office building these days have gym facilities and access to parks and greener areas nearby. Indoor air-quality and temperature regulation have also become vital.
While these were some of the popular tangible trends taking over the office real estate market, a prior report by Urban Land Institute and PWC forecasted some emerging trends that will take over the commercial real estate market in 2014.
"Commercial real estate is reaching an inflection point" where "valuations will no longer be driven by capital markets," the report stated.
It also added that industry bigwigs believe, 2014 will be a year of "space market fundamentals and property enhancements."
Indeed, commercial real estate market has come roaring back in most of the states and experts expect it to keep mapping a steady growth.
"Money has come back into the real estate market," Bob Solfelt, vice president and general manager with Golden Valley-based Mortenson Development, a partner on the Mall of America project told Minnesota Post.
"There are investment partners, both equity and debt, that make some of these projects feasible."
Monday, June 23, 2014
Tuesday, June 17, 2014
Late-Pays in CMBS Dip Below 5%
Thanks to resolutions from a single 2007-vintage deal, JPMCC 2007-LDP10, US CMBS delinquencies in May fell to a level not seen since December 2009, Fitch Ratings said Monday. The rate of Fitch-rated late pays inched down 16 basis points from the previous month to 4.97%, the first time it has dipped below 5% in more than four years.
The largest resolutions in May by loan balance included two from JPMCC 2007-LDP10: the $103.5-million Long Island Marriott and Conference Center, which was resolved with a 40% loss; and the $55-million Overland Park Trade Center, resolved with a 67% loss. Other large resolutions included the $89.4-million Gateway I, from MSCI 2007-IQ13; and the $73.6- million Islandia Shopping Center, from LBUBS 2007-C6, both of which were brought current.
It was another ’07-vintage JPMorgan Chase CMBS loan that figured in May’s largest new delinquency, the $60-million Clark Tower loan, securitized under JPMCC 2007-CIBC20. However, Fitch notes that the loan has been in special servicing since last September.
In total, resolutions of $967 million in May outpaced new additions to the index of $465 million. Fitch-rated new issuance volume of $3.7 billion outpaced $3 billion in portfolio runoff, leading to a slight increase in the index denominator.
By property type, industrial experienced the largest decline in delinquencies last month, dropping 24 bps to 6.43%. It was followed closely by office at 21 bps to 5.43%.
Retail improved by a more modest 13 bps to 4.98%, while the multifamily and hotel rates improved by five and six bps, respectively, to 5.92% and 5.12%, respectively. ?Fitch’s delinquency index includes 1,446 loans totaling $19.7 billion that are currently at least 60 days delinquent, in foreclosure or REO, or considered non-performing matured out of the outstanding rated universe of approximately 30,000 loans comprising $395.6 billion.?
Fitch maintains a “stable” outlook on approximately 83% of its US CMBS portfolio by balance. Most of the remaining bonds either are considered distressed (9%) or have a “negative” outlook (8%).
The largest resolutions in May by loan balance included two from JPMCC 2007-LDP10: the $103.5-million Long Island Marriott and Conference Center, which was resolved with a 40% loss; and the $55-million Overland Park Trade Center, resolved with a 67% loss. Other large resolutions included the $89.4-million Gateway I, from MSCI 2007-IQ13; and the $73.6- million Islandia Shopping Center, from LBUBS 2007-C6, both of which were brought current.
It was another ’07-vintage JPMorgan Chase CMBS loan that figured in May’s largest new delinquency, the $60-million Clark Tower loan, securitized under JPMCC 2007-CIBC20. However, Fitch notes that the loan has been in special servicing since last September.
In total, resolutions of $967 million in May outpaced new additions to the index of $465 million. Fitch-rated new issuance volume of $3.7 billion outpaced $3 billion in portfolio runoff, leading to a slight increase in the index denominator.
By property type, industrial experienced the largest decline in delinquencies last month, dropping 24 bps to 6.43%. It was followed closely by office at 21 bps to 5.43%.
Retail improved by a more modest 13 bps to 4.98%, while the multifamily and hotel rates improved by five and six bps, respectively, to 5.92% and 5.12%, respectively. ?Fitch’s delinquency index includes 1,446 loans totaling $19.7 billion that are currently at least 60 days delinquent, in foreclosure or REO, or considered non-performing matured out of the outstanding rated universe of approximately 30,000 loans comprising $395.6 billion.?
Fitch maintains a “stable” outlook on approximately 83% of its US CMBS portfolio by balance. Most of the remaining bonds either are considered distressed (9%) or have a “negative” outlook (8%).
Thursday, June 12, 2014
U.S. commercial real estate market improving: Apartment rents could rise 4% this year, again in 2015, Realtors group says
The outlook for all of the major commercial real estate sectors is slightly improving across the country despite disappointing economic growth during the first quarter of 2014.
According to the National Association of Realtors quarterly commercial real estate forecast and its chief economist Lawrence Yun, the sluggish growth experienced in the first quarter is not indicative of the actual health of the economy.
"Gross Domestic Product should expand closer to 3% for the remainder of the year,".Yun said. "The improved lending for commercial loans and continuing job gains we've seen this spring bode well for modest progress in commercial real estate leases and purchases of properties."
However, Yun cautioned that with rising long-term interest rates on the horizon, consistent economic growth is imperative to solid commercial real estate investment in the years ahead.
National vacancy rates in the office market are forecast to decline 0.2 percentage points over the coming year, while international trade gains continue to boost use for industrial space, which forecasts a decline of 0.3 points.
The outlook for personal income and consumer spending is favorable for the retail market, likely leading to a vacancy decline of 0.2%.
"The multifamily sector continues to be the top-performer in commercial real estate with the lowest vacancy rates. However, tight availability, despite new construction, is causing rents to currently rise by nearly 4% annually in many markets," said Yun. "Many renters who are getting squeezed may begin to view home ownership as a more favorable, long-term option."
NAR reported earlier this month in its annual "Commercial Member Profile" that despite sub-par economic expansion, Realtors who practice commercial real estate saw an increase in sales transaction volume and medium gross annual income in 2013.
NAR's latest "Commercial Real Estate Outlook" offers overall projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data for metro areas were provided by REIS Inc., a source of commercial real estate performance information.
Office Markets
Office vacancy rates should decline from an expected 15.8% in the second quarter of this year to 15.6% in the second quarter of 2015. Currently, the markets with the lowest office vacancy rates in the second quarter are New York City and Washington, D.C., at 9.4%; Little Rock, Ark., 11.5%; San Francisco, 12.6%; and New Orleans, at 12.8%.
Office rents are projected to increase 2.5% in 2014 and 3.2% next year. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is likely to total 39.7 million square feet this year and 49.8 million in 2015.
Industrial Markets
Industrial vacancy rates are anticipated to fall from 9.0% in the second quarter to 8.7% in the second quarter of 2015.
The areas with the lowest industrial vacancy rates currently are Orange County, Calif., with a vacancy rate of 3.5%; Los Angeles, 3.9%; Miami and Seattle, 6.0%, and Palm Beach, Fla., at 6.5%.
Annual industrial rents should rise 2.4% this year and 2.6% in 2015. Net absorption of industrial space nationally is seen at 107.8 million square feet in 2014 and 107.1 million next year.
Retail Markets
Vacancy rates in the retail market are expected to decline from 10.0% currently to 9.8% in the second quarter of 2015.
Presently, markets with the lowest retail vacancy rates include San Francisco, at 3.2%; Fairfield County, Conn., 3.8%; and San Jose, Calif., at 4.7%. Northern New Jersey; Long Island, N.Y.; and Orange County, Calif., all have a vacancy rate of 5.3%.
Average retail rents are forecast to rise 2.0% in 2014 and 2.3% next year. Net absorption of retail space is likely to total 11.5 million square feet this year and 19.6 million in 2015.
Multifamily Markets
The apartment rental market (multifamily housing) should see vacancy rates edge up from 4.0% in the second quarter to 4.1% in the second quarter of 2015, with added supply helping to meet growing demand. Vacancy rates below 5% are generally considered a landlord's market, with demand justifying higher rent.
Areas with the lowest multifamily vacancy rates currently are New Haven, Conn., at 2.3%; Ventura County, Calif., 2.4%; and New York City; San Diego; Hartford, Conn.; Oakland-East Bay, Calif., and San Diego, at 2.5% each.
Average apartment rents are projected to rise 4.0% this year and in 2015. Multifamily net absorption is expected to total 221,400 units in 2014 and 173,100 next year.
According to the National Association of Realtors quarterly commercial real estate forecast and its chief economist Lawrence Yun, the sluggish growth experienced in the first quarter is not indicative of the actual health of the economy.
"Gross Domestic Product should expand closer to 3% for the remainder of the year,".Yun said. "The improved lending for commercial loans and continuing job gains we've seen this spring bode well for modest progress in commercial real estate leases and purchases of properties."
However, Yun cautioned that with rising long-term interest rates on the horizon, consistent economic growth is imperative to solid commercial real estate investment in the years ahead.
National vacancy rates in the office market are forecast to decline 0.2 percentage points over the coming year, while international trade gains continue to boost use for industrial space, which forecasts a decline of 0.3 points.
The outlook for personal income and consumer spending is favorable for the retail market, likely leading to a vacancy decline of 0.2%.
"The multifamily sector continues to be the top-performer in commercial real estate with the lowest vacancy rates. However, tight availability, despite new construction, is causing rents to currently rise by nearly 4% annually in many markets," said Yun. "Many renters who are getting squeezed may begin to view home ownership as a more favorable, long-term option."
NAR reported earlier this month in its annual "Commercial Member Profile" that despite sub-par economic expansion, Realtors who practice commercial real estate saw an increase in sales transaction volume and medium gross annual income in 2013.
NAR's latest "Commercial Real Estate Outlook" offers overall projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data for metro areas were provided by REIS Inc., a source of commercial real estate performance information.
Office Markets
Office vacancy rates should decline from an expected 15.8% in the second quarter of this year to 15.6% in the second quarter of 2015. Currently, the markets with the lowest office vacancy rates in the second quarter are New York City and Washington, D.C., at 9.4%; Little Rock, Ark., 11.5%; San Francisco, 12.6%; and New Orleans, at 12.8%.
Office rents are projected to increase 2.5% in 2014 and 3.2% next year. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is likely to total 39.7 million square feet this year and 49.8 million in 2015.
Industrial Markets
Industrial vacancy rates are anticipated to fall from 9.0% in the second quarter to 8.7% in the second quarter of 2015.
The areas with the lowest industrial vacancy rates currently are Orange County, Calif., with a vacancy rate of 3.5%; Los Angeles, 3.9%; Miami and Seattle, 6.0%, and Palm Beach, Fla., at 6.5%.
Annual industrial rents should rise 2.4% this year and 2.6% in 2015. Net absorption of industrial space nationally is seen at 107.8 million square feet in 2014 and 107.1 million next year.
Retail Markets
Vacancy rates in the retail market are expected to decline from 10.0% currently to 9.8% in the second quarter of 2015.
Presently, markets with the lowest retail vacancy rates include San Francisco, at 3.2%; Fairfield County, Conn., 3.8%; and San Jose, Calif., at 4.7%. Northern New Jersey; Long Island, N.Y.; and Orange County, Calif., all have a vacancy rate of 5.3%.
Average retail rents are forecast to rise 2.0% in 2014 and 2.3% next year. Net absorption of retail space is likely to total 11.5 million square feet this year and 19.6 million in 2015.
Multifamily Markets
The apartment rental market (multifamily housing) should see vacancy rates edge up from 4.0% in the second quarter to 4.1% in the second quarter of 2015, with added supply helping to meet growing demand. Vacancy rates below 5% are generally considered a landlord's market, with demand justifying higher rent.
Areas with the lowest multifamily vacancy rates currently are New Haven, Conn., at 2.3%; Ventura County, Calif., 2.4%; and New York City; San Diego; Hartford, Conn.; Oakland-East Bay, Calif., and San Diego, at 2.5% each.
Average apartment rents are projected to rise 4.0% this year and in 2015. Multifamily net absorption is expected to total 221,400 units in 2014 and 173,100 next year.
Tuesday, June 10, 2014
Energy exploration propping up Alberta commercial real estate market: Cities and towns being shaped by oil and gas sector
CALGARY - Billions of dollars invested in unconventional energy exploration is dramatically affecting economic and commercial real estate activity in key North American exploration hubs, including Alberta, creating opportunities for both investors and developers, according to a new report from CBRE Group, Inc.
The report said the new airport terminal in Fort McMurray, the gateway to the Alberta oilsands, is a prime example of some of the changes that are underway.
“Expectations are changing for energy markets in Canada and across North America,” said Ross Moore, director of research for CBRE in Canada, in a statement. “With new technologies and some of the largest oil and gas reserves on the continent, Canadian energy markets are set to experience sustained investment over several decades instead of the traditional boom and bust cycle. This certainly bodes well for local economies and demand for commercial real estate where energy exploration is taking place.”
The CBRE report, Energy Revolution Impact on Americas Commercial Real Estate, said Calgary and Edmonton have been joined by a growing number of cities and towns in the province that are being shaped by the oil and gas sector.
“We continue to see oil and gas activity bolster operations markets like Calgary and Edmonton where low office vacancy rates and significant industrial construction are the norm. Smaller energy exploration markets are also undergoing significant changes,” said Moore. “Robust demand for hotels in Whitecourt and Grand Prairie reflect this, as do rising apartment rents in Cold Lake.”
Greg Kwong, executive vice-president and regional managing director of CBRE in Calgary, said the reliance on the oil and gas industry is still very strong in the local downtown office market.
“But the good thing is that the oilpatch is a lot stronger than it was say 20 to 30 years ago. We have a lot more head offices here and those head offices comprises large chunks of office space,” said Kwong.
“The reliance on the oilpatch has proven to be good historically. If you look at the last 10 years, Houston, Dallas and Calgary have consistently been top office market performers because of the oilpatch. Even during the recession in 2009, Calgary and Houston came out not so bad.”
According to Calgary Economic Development, energy sector employment in the Calgary Economic Region in 2013 was 72,200, a 73.6 per cent increase from 2004. During the same time period, employment across all sectors increased by 27.8 per cent.
Employment in the energy sector accounts for 8.7 per cent of all employment in the Calgary Economic Region.
There are 1,743 energy sector businesses in the region accounting for three per cent of all businesses.
There are 135 head offices in Calgary as the city registered 60.7 per cent growth in head offices from 2003-2012.
Calgary has the highest concentration of head offices in Canada with 10.3 per 100,000 population compared with Toronto which is next with 4.1 per 100,000 population.
The report said the new airport terminal in Fort McMurray, the gateway to the Alberta oilsands, is a prime example of some of the changes that are underway.
“Expectations are changing for energy markets in Canada and across North America,” said Ross Moore, director of research for CBRE in Canada, in a statement. “With new technologies and some of the largest oil and gas reserves on the continent, Canadian energy markets are set to experience sustained investment over several decades instead of the traditional boom and bust cycle. This certainly bodes well for local economies and demand for commercial real estate where energy exploration is taking place.”
The CBRE report, Energy Revolution Impact on Americas Commercial Real Estate, said Calgary and Edmonton have been joined by a growing number of cities and towns in the province that are being shaped by the oil and gas sector.
“We continue to see oil and gas activity bolster operations markets like Calgary and Edmonton where low office vacancy rates and significant industrial construction are the norm. Smaller energy exploration markets are also undergoing significant changes,” said Moore. “Robust demand for hotels in Whitecourt and Grand Prairie reflect this, as do rising apartment rents in Cold Lake.”
Greg Kwong, executive vice-president and regional managing director of CBRE in Calgary, said the reliance on the oil and gas industry is still very strong in the local downtown office market.
“But the good thing is that the oilpatch is a lot stronger than it was say 20 to 30 years ago. We have a lot more head offices here and those head offices comprises large chunks of office space,” said Kwong.
“The reliance on the oilpatch has proven to be good historically. If you look at the last 10 years, Houston, Dallas and Calgary have consistently been top office market performers because of the oilpatch. Even during the recession in 2009, Calgary and Houston came out not so bad.”
According to Calgary Economic Development, energy sector employment in the Calgary Economic Region in 2013 was 72,200, a 73.6 per cent increase from 2004. During the same time period, employment across all sectors increased by 27.8 per cent.
Employment in the energy sector accounts for 8.7 per cent of all employment in the Calgary Economic Region.
There are 1,743 energy sector businesses in the region accounting for three per cent of all businesses.
There are 135 head offices in Calgary as the city registered 60.7 per cent growth in head offices from 2003-2012.
Calgary has the highest concentration of head offices in Canada with 10.3 per 100,000 population compared with Toronto which is next with 4.1 per 100,000 population.
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