Hartman Simons Commercial Real Estate Blog

The Wednesday Wrap: April 24, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are four stories that caught our eyes in recent days.

• “Congress Looks at REIT Tax Exemption” by A.D. Pruitt of The Wall Street Journal.

As part of its comprehensive review of the tax code, the House Ways and Means Committee is reviewing the tax exemption REITs have enjoyed for decades, Pruitt reports.

“Like all other aspects of the code, it is reasonable to expect that REITs would be included in any top-to-bottom review of the code,” said a spokeswoman for the Ways and Means committee. However, because the exemption doesn’t pose a major loss of revenue to the Treasury, industry officials say it is unlikely that REITs will lose their exemption status, Pruitt reports.

Under the current tax code, REITs do not have to pay corporate taxes on their income as long as at least 90 percent of their taxable income is paid in dividends, Pruitt notes.

• “Don’t Look Now But Warehouse Demand Off to Strongest Start Since 2008” by Randyl Drummer of CoStar.

After finishing strong in 2012, this year is proving to be equally strong for the U.S. warehouse market thanks to increases in trade and manufacturing and the recovery of the housing market, Drummer reports. 

Forty-three of the 54 largest U.S. markets posted positive net absorption for industrial space, according to Rene Circ of CoStar’s Property and Portfolio Research (PPR). A recent transaction data survey by PPR showed warehouse new supply and demand at their strongest levels in at least five years.

During the first quarter, developers completed almost 13 million square feet of new warehouse space and 38 million square feet is still under construction, Drummer reports.

• “Hot Hotels: Big Boost Ahead for Lodging” by John Salustri of GlobeSt.com.

If the 2,500 hotel transactions that took place last year are any indication, hotel property asset sales will continue to climb through 2013, according to Gregory LaBerge, national director of Marcus & Millichap’s National Hospitality Group.

Supply was down last year, but demand soared; 2012 posted record room sales at nearly 1.1 billion nights, according to LaBerge. 

LaBerge says international business travel and tourism, along with low interest rates, are contributing to the growth in property sales.

National occupancy will rise 60 basis points to 62 percent in 2013, with ADR and RevPAR rising 4.8 percent and 5.8 percent, respectively, according to the National Hospitality Group’s latest report.

• VIDEO: “Awareness of Environmental Issues is Key for REITs, Farer Says” by REIT.com.

In this clip, Matt Bechard of REIT.com sits down for an interview with David Farer, chairman of the environmental department at Greenbaum Rowe Smith & Davis LLP, during the recent REITWise 2013 conference. 

The two discuss upcoming environmental legislation that will affect REIT development and trends emerging in green building.

Four on Friday: Ryan Rivera of Hartman Simons

Hartman Simons was proud to recently promote longtime associate Ryan Rivera to partner. In today’s Four on Friday, we get a chance to ask Rivera about his practice, his take on the current commercial real estate market and his love of a good (and long) run.

Give us a brief overview of your practice: what kinds of commercial real estate matters do you focus on?

While my practice includes all areas of commercial real estate, my focus continues to be on retail developments, including the acquisitions and leasing of shopping centers. In addition to retail development, industrial has recently taken on a greater focus. My practice has included a significant amount of warehouse leasing over the past year, along with the acquisitions and sales of existing industrial parks.

Hard to believe, but we're already approaching the end of the first quarter. What's your quick take on how the commercial real estate sector has performed during the first three months of 2013? 

On a personal level, I’ve been fortunate to work closely with a few national retailers that are rapidly expanding and several developers that are going full speed ahead with ground-up retail and mixed-use developments, which gave me the opportunity to work on a quite a few deals during the first quarter.

In contrast to the last few years, most of the deals that have hit my desk have been new construction (as opposed to second-generation space), including new developments and expansions at existing projects. While the deal volume for the sector may not be anywhere close to pre-recession levels, the new developments and expansions that I’ve seen in my capacity as an attorney for both landlords and tenants generally appear to be successful and have been opening at nearly full occupancy.        

What brought you to Hartman Simons?

As a second year law student at Emory University School of Law, I reached out to Hartman Simons due to my interest in commercial real estate. A few phone calls and interviews later, I had an offer to work here as a summer associate in 2003. Ten years later, I’m still here and couldn’t imagine practicing anywhere else.

We understand that you completed your first marathon last fall – are you still regularly pounding the pavement and what are some other ways that you enjoy spending your time outside of the office?

I’m running the Publix Half-Marathon this Sunday in Atlanta and recently registered for the Chicago Marathon this fall. Having experienced the indescribable feeling of accomplishment that comes from crossing the marathon finish line, I’m officially hooked on running and plan to keep running marathons.

While I always enjoy a round of golf with my brother and a few of my colleagues here at Hartman Simons, my partner Jeremy Cohen would tell you that I should stick to running.  

Related articles

Four on Friday: Avalon Groundbreaking

Four on Friday: Bob Simons Talks Retail Real Estate on the "Commercial Real Estate Show"

Four on Friday: New Hartman Simons Partner Jill Prussack

The Wednesday Wrap: Feb. 27, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Commercial Real Estate Forecast Shows Lower Vacancies, Higher Rents” by Carisa Chappell of REIT.com.

Vacancy rates are trending downward in each of the commercial real estate sectors, according to the quarterly commercial real estate forecast from the National Association of Realtors (NAR).

NAR is projecting positive net absorption and rent growth in 2013 for the office, industrial, retail and multifamily markets, according to NAR's chief economist Lawrence Yun. 

“Overall commercial real estate leasing activity continued to grow in most markets during the closing months of 2012, which is modestly lowering vacancy rates in all of the commercial sectors early this year,” Yun told REIT.com.

• “Office Supplies Merger Likely to Present Challenge to Landlords” by Elaine Misonzhnik of Retail Traffic.

Amid struggling times for office-supply retailers, OfficeMax and Office Depot announced a plan last week to merge the two companies. But market observers are speculating the merger will cause problems for landlords. 

Office Depot estimates that the merger will result in anywhere from $400 million to $600 million in annual cost synergies by the third year, according to a press release. A significant portion of those dollars is likely to come from store closings, according to Morningstar analyst Liang Feng. At least 100 or 200 stores will be closed over the next few years, Feng estimates.

The large spaces left vacant by the closings could be problematic for landlords, as most big-box retailers have been downsizing lately, Lew Kornberg of Jones Lang LaSalle told Misonzhnik.

• “Big Real-Estate Firms Are Going to School” by Dawn Wotapka of The Wall Street Journal.

Some of the biggest names in real estate — from Lennar Corp. to Brandywine Realty Trust — are investing in housing for college students, Wotapka reports.

Real-estate firms are looking to diversify into areas considered less sensitive to economic downturns, Wotapka notes. During the recession, single-family homes declined, and apartment landlords were forced to reduce rent, while student-housing landlords were able to raise rent.

As newcomers come in to the sector, established players are buying up properties rapidly in order to remain competitive, Wotapka reports. 

Analysts are concerned that new investors are unaware of the hidden risks and costs in student housing, which requires more maintenance and management oversight than typical apartments do, Wotapka notes.

• “Self Storage Gains Cachet as Values Rise” by A.D. Pruitt of The Wall Street Journal.

Self-storage facilities are the subject of increased investor interest, Pruitt reports.

Just 10 months ago, cap rates on storage space were near 7 percent, generally several percentage points higher than cap rates on most other types of commercial real estate, according to Green Street Advisors.

But recent activity by Acadia Realty Trust, which sold 14 self-storage properties for about $300 million and a cap rate of 5.5 percent, showed that self-storage cap rates are now quite competitive, Pruitt notes.

Although pinched during the recession, self-storage now has record-high occupancy rates around 90 percent. Landlords have raised rents about 5 percent on existing tenants over the past couple of years, according to Pruitt.

• “Home Prices in 20 U.S. Cities Increase by Most Since 2006” by Michelle Jamrisko of Bloomberg.

The S&P/Case-Shiller index of property values, which measures home values in 20 U.S. cities, increased 6.8 percent in December on a year-over-year basis, the biggest such gain since July 2006. Nineteen of 20 cities in the index showed gains in property values.

Atlanta and Detroit saw their biggest year-over-year gains since 1991, Jamrisko reports. Las Vegas and Los Angeles had the biggest month-over-month gains.

Only New York saw houses losing value, dropping 0.5 percent last year.

The Wednesday Wrap: Feb. 20, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Boom in Student Housing Construction Stokes Concerns of Oversupply” by Randyl Drummer of CoStar.

A large volume of student-housing projects have been announced recently during a time of lower-than-expected college enrollment numbers, slowed pre-leasing and rising tuition costs, raising concerns over whether demand will meet supply, Drummer reports.

However, developers say pent-up demographics will drive demand for dorms and off-campus housing in the coming years, according to Drummer.

More than three-quarters of the 13.5 million students now enrolled in four-year undergraduate programs at large public institutions live off-campus, which creates a supply gap of about 1.5 to 2.2 million beds, said consultant Michael Gallis during a Campus Crest Communities presentation.

However, investors and analysts are concerned about the overwhelming amount of supply ready to hit the market between now and 2015. “We’re very concerned in general about student housing,” said Hans Nordby of CoStar’s Property and Portfolio Research. “[T]he amount of student housing supply in this country right now is almost shocking.”

• “CRE Can Help Solve Climate Change” by Rayna Katz of Globe Street. 

During last week’s State of the Union address, President Obama issued a call-to-action to cut energy consumption in homes and businesses in half over the next 20 years, and New York City’s commercial real estate industry could help significantly in this effort, according to a new study by the Urban Green Council.

As the country’s largest city, New York City could feasibly cut its carbon emissions 90 percent by 2050, the study says.  

Technologies like improved insulation, heat pumps and transportation electrification could help reduce carbon pollution from New York City’s buildings and transportation, which together make up 96 percent of the city’s greenhouse gas emissions, according to the report.

• “Houston, Energy Sector’s Peak Nowhere in Sight” by Robert Carr of National Real Estate Investor.

More than half of the top performing office markets in the United States today are primarily technology- or energy-driven, as the country takes steps toward independence from foreign energy sources, Carr reports.

Houston is leading the pack, enjoying an unemployment rate at less than 6 percent. The city’s 195 million square feet of office space only make up 4 percent of the U.S. total, yet Houston accounted for almost 13 percent of the country’s total office absorption in the past year, according to a fourth-quarter report from Jones Lang LaSalle.

Houston is expected to remain the U.S. energy capital for 2013 and beyond. More than 50 percent of the 4.2 million square feet of office space now under construction has been pre-leased, Carr reports.

“Developers just can’t keep up with demand in Houston,” said Rudy Hubbard of JLL. “[T]here’s far more demand for people to own office buildings than supply.”

• “Bill Proposed to Require Online Retailers to Collect Sales Tax” by Allen Kenney of REIT.com.

A bill introduced in the House of Representatives last week is aimed at requiring online retailers to collect sales taxes on purchases, Kenney reports.

The Marketplace Fairness Act would help level the playing field between online retailers and brick-and-mortar stores, supporters say. States lost an estimate $23.3 billion in uncollected sales taxes last year, according to the National Conference of State Legislatures.

The bill has garnered support from industry organizations such as NAREIT and even some online retailers, like Amazon, Kenney reports.

• “New Hubs Arise to Serve ‘Just in Case’ Distribution” by Matt Hudgins of The New York Times.

Retailers and logistics companies have altered their supply chains by adding more distribution hubs, creating real estate opportunities in markets beyond traditional seaport hubs, according to CoStar.

The changes come as Hurricane Sandy and other unexpected events have prompted companies to alter just-in-time management to what is called “just-in-case” management.

Just-in-case is a response to the vulnerability of just-in-time supply chains, said Rene Circ of CoStar. Just-in-case planning keeps merchandise available should the supply chain by disrupted by an unforeseen event, such as when ports in New Jersey and New York were affected by Hurricane Sandy.

Companies are looking for a balance between “carrying the minimum inventory possible, yet never running out of things, because inventory equals cost,” Circ told The New York Times.

Retailers looking for competitive edge are now offering fast shipping from nearby distribution centers, Hudgins reports.

The Wednesday Wrap: Feb. 6, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Retail Investment Sales Up 20 Percent in 2012” from Retail Traffic.

Investment sales volume in the retail sector rose sharply last year, according to Real Capital Analytics (RCA).

Retail investment sales totaled $52.8 billion in 2012, up 20 percent from 2011, according to RCA. The number of transactions involving significant retail properties rose to about 4,400, also an increase of 20 percent.

New York City, Chicago and Los Angeles saw the greatest volume of retail transactions last year, Retail Traffic reports.

Indicators pointed to emerging retail markets in San Jose, Calif., which saw a 224 percent year-over-year increase in retail investment sales; Orange County, Calif., where sales were up 138 percent; and Cleveland, which saw a 112 percent increase in sales.

• “E-Commerce Plays Major Role in Industrial Sector Growth” by Robert Carr of National Real Estate Investor. 

The e-commerce boom has the industrial market emerging strong this year with declining vacancy and modest rent growth in most markets, Carr reports.

It may be causing destruction to the bricks-and-mortar retail industry, but e-commerce development helped prevent the downfall of the national industrial market, Carr says. As e-commerce continues to expand, demand for new distribution centers is rising, especially around ports and in major population centers, according to Cushman & Wakefield’s 2013-2016 Industrial Forecast Report.

The popularity of online retailer Amazon has inspired companies like Home Depot, Target and Walmart to evaluate their three-to-five-year multichannel strategies, Kris Bjorson of Jones Lang LaSalle told Carr.

These companies already have their industrial supply chains in place, but may need to alter their distribution centers to include trained workers for more automated processes, add parking to meet increased shipping demands and renovate buildings to handle single-item picking, Bjorson said.

• “Emory Point Welcomes Bevy of Phase 1 Retailers” by Josh Green of Curbed Atlanta.

Phase I of the Emory Point development, a collaboration between Atlanta-based firms Cousins Properties and Gables Residential, is now open and nearly 90 percent committed, Green reports.

Phase I opened last week with a group of tenants that includes Jos. A Bank Clothiers, LOFT by Ann Taylor, American Threads, Marlow’s Tavern, Tin Lizzy’s, Bonefish Grill and CVS Pharmacy.

Developers plan to break ground this summer on Phase II, which will include an additional 40,000 square feet of residential and retail space, according to a release by Cousins Properties.

• “Looking for a New F.B.I. Headquarters, the Government Proposes a Trade” by Eugene L. Meyer of The New York Times.

The F.B.I. is ready to relocate from its headquarters in the Hoover building on Pennsylvania Avenue in Washington, D.C., hoping to swap the building for a new headquarters in the suburbs, Meyer reports.

The F.B.I.’s current location sports outdated architecture that would be too costly for the government to demolish and rebuild, but its prime location is attracting plenty of interest, Meyer notes.

The General Services Administration (G.S.A.) is hoping to find a developer to take over the building and in exchange provide a new F.B.I. headquarters in the Washington suburbs. The G.S.A. held an “industry day” last month to discuss the new building, which 450 interested developers, architects, brokers and consultants attended, the largest for any such offering in memory, according to officials.

The F.B.I.’s search for a new headquarters comes as the government looks to dispose of unused or underused properties and is looking for buildings that will cost less to maintain, Meyer reports.

• VIDEO: “Questions Remain About Office Vacancy” by Ian Ritter of Globe St.

The Winter/Spring Allen Matkins UCLA Anderson Forecast, discussed in this video, shows there is still concern in the commercial real estate industry about future office vacancy rates as new product comes to the market.

Hartman Simons' Summey Orr Appears on "Commercial Real Estate Show" to Discuss U.S. Industrial Market

Orr

Last week, Hartman Simons partner Bob Simons appeared on the "Commercial Real Estate Show" radio program to discuss the U.S. retail market. This week, it was managing partner Summey Orr's turn to step into the studio.

Orr is a guest on the latest episode of the program, which takes a detailed look at the U.S. industrial sector. Other guests include Ryan Severino, senior economist for Reis, and Larry Callahan, CEO of Pattillo Industrial Real Estate. The one-hour, weekly show is hosted by Michael Bull, president and founder of Bull Realty.

The episode is now available for streaming or download at www.CREshow.com and on iTunes.

The episode also will air from 10 a.m. to 11 a.m. this Saturday in Atlanta on biz 1190 AM. The "Commercial Real Estate Show" also airs in nine other markets across the United States on the Wall Street Business Network.

To hear Bob Simons' appearance on the show, click here.

The Wednesday Wrap: Nov. 28, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Equity Residential, AvalonBay to Acquire Archstone for $6.5 Billion” by Matt Valley of REBusiness.

Equity Residential and AvalonBay Communities Inc. have entered into an agreement with Lehman Brothers Holdings Inc. to acquire Archstone Enterprise LP for roughly $6.5 billion in cash and stock, Valley reports.

Equity Residential will acquire approximately 60 percent of the assets, and AvalonBay will acquire the remaining 40 percent. Equity Residential will get 78 properties located across the United States. AvalonBay will receive 66 apartment communities, nearly half of which are located in California.

Before the deal was announced, it was thought that Lehman Brothers Holdings would take Archstone public, Valley writes. However, Lehman is liquidating U.S. assets and ultimately decided on the quick sale.

• “Will a Rise in Homeownership Rates Hurt the Multifamily Sector?” by Bendix Anderson for National Real Estate Investor.

The bargain deals available in the for-sale housing market could soon entice renters faced with the increasingly higher costs of renting. However, as of now, many renters are too uncertain about the broader economy to make decisions on buying a home, Brady Titcomb of Jones Lang LaSalle told Anderson.

Young people who bought their first home during the housing boom were often hurt the worst when the market fell, Titcomb said, noting that Generation X homeowners suffered a 59 percent drop in net worth in the crash.

The median home price inched up in October to $178,700, according to the National Association of Home Builders, and the interest rate on the average mortgage fell to an extremely low 3.34 percent, according to Freddie Mac.

However, enticing home prices don’t make up for the fact that inventory is low, and it can be hard for would-be homeowners to qualify for a mortgage, Lawrence Yun of the National Association of Realtors told Anderson.

• “The Coffee Wars Continue” by Jennifer V. Hughes for Retail Traffic.

Starbucks, Dunkin’ Brands and McDonald’s continue to fight for control of the U.S. coffee market, and the net-lease assets and small strip centers that often house the stores are attracting big interest from real-estate investors, Hughes reports.

The latest financial statements show increases in revenue for Dunkin’ Brands and Starbucks, but McDonald’s saw a drop in third-quarter profits as the economy remains fairly weak, according to Hughes. However, all three companies are aggressively pushing to expand. Starbucks is looking to create more drive-through locations for its Seattle’s Best Coffee business and to add more Starbucks sites, while Dunkin’ plans to double its stores in the next 20 years, Hughes adds.

Regional chains like Gloria Jean’s and Peet’s Coffee and Tea are fighting an uphill battle to compete with the industry heavyweights, as developers will want to go with one of the well-known brands, Bill Rose of Marcus & Millichap told Hughes.

• “Affordable Seniors Housing Keeps Going Green” by Robert Carr of National Real Estate Investor.

Developers are finding it easier than ever to incorporate sustainability into affordable seniors housing projects, Carr reports. Costs have been cut as more eco-friendly suppliers have emerged, and the federal government is pushing for more sustainable buildings.

Affordable housing, including senior housing, is usually financed by public funds or nonprofit institutions, and those funding providers are more likely to support sustainable projects, Colin Edelstein of NorSouth Constructs told Carr. Some states even require green features before rewarding tax credits to affordable housing.

Because the rents are relatively low, developers of affordable seniors housing often look for moderately priced environmental features – such as high-efficiency heating and cooling systems – instead of costlier items like solar panels, according to Laura Weyrauch of Pathway Senior Living LLC.

• “VIDEO: Industrial Sector Climbing Back Up” by Carisa Chappell of REIT.com.

In this clip, Hamid Moghadam, chairman and co-CEO of Prologis, sits down during NAREIT’s REITWorld 2012 to discuss the drivers in the industrial sector, its strength and the impact of the supply chain on the sector.

The Wednesday Wrap: Nov. 21, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are four stories that caught our eyes in recent days.

• “Retail Industry Expecting the Strongest Holiday Season in Years in 2012” by Elaine Misonzhnik of Retail Traffic.

The retail real estate sector could be set for a very merry Christmas, Misonzhnik reports. “Judging by early forecasts, the 2012 holiday season might turn out to be the strongest in years, with preliminary surveys showing that consumers plan to spend more on gifts this year than they did in 2011,” she wrote.

In a recent survey conducted by the International Council of Shopping Centers and Goldman Sachs, 19 percent of the respondents said they planned to spend more on gifts this year than last, and 5 percent intend to spend substantially more.

A number of surveys say online shopping will again be a substantial component of holiday shopping this year. In a Discover Financial Services survey, 75 percent of respondents said they would research prices online before making a purchase. Deloitte also predicted that non-store sales — including online, mobile and catalog channels — will grow 15 to 17 percent this year.

Among one of the reasons for the widespread optimism is the fact Black Friday comes a week earlier than usual this year. Still, several retailers aren’t waiting that long to kick off the retail frenzy. Wal-Mart, Target and Sears are among the firms that have announced they will begin the shopping season by opening stores on Thanksgiving evening.

• “Economy Watch: Industrial Production Dips Due to Sandy; Thanksgiving Travel, E-commerce Rise” by Dees Stribling of Commercial Property Executive.

Industrial production in the United States decreased by 0.4 percent in October after increasing 0.2 percent in September, according to the Federal Reserve.

Hurricane Sandy’s lasting effects have resulted in reductions in the output of utilities, chemicals, food, transportation equipment and electronics. Industrial production would have increased during October if not for the storm, Stribling reports. Unemployment claims also spiked as a result of Sandy.

• “Retailers’ Preference for Strongest Locations Complicate Retail Property Recovery” by Randyl Drummer of CoStar.

While the multifamily, office and industrial sectors saw continued growth during the third quarter, demand for retail space remained lukewarm, according to CoStar’s Third Quarter 2012 Retail Review and Outlook.

U.S. retail properties absorbed only 7 million square feet in the third quarter. Large retailers are holding out for the only the best spaces for their new stores, opting in many cases for new space instead of vacant space in existing facilities, leaving the latter sites struggling to find tenants, Drummer reports. Consequently, asking rents are dropping across much of the available retail space, while landlords at shopping centers in prime locations have been able to push rents.

• “Miami Booms Like Never Before on Rental Demand: Mortgage” by Nadja Brandt of Bloomberg.

Hit hard by the recession, the real estate market in Miami is finally booming again, Brandt reports.

The average monthly rent for a two-bedroom apartment increased 6 percent (to $2,568) in the third quarter when compared with the same time last year, according to Condo Vultures LLC. “There’s a boom in Miami that we’ve never seen before,” Stephen Ross of Related Cos. told Brandt. “Miami is probably the hottest real estate market in the U.S. from a residential perspective.”

Most of the city’s unsold condos have been converted into rentals, and the number of multifamily developments is soaring, Brandt says. In other areas of the United States, investor interest in the multifamily sector is starting to wane as low mortgage rates persuade more people to buy homes.

Apartment rents are projected to rise through 2017, with a 4 percent gain nationally expected this year.

Bisnow Panel Explores Atlanta's Recovering Industrial Sector

Above: Yesterday's "3rd Annual Atlanta Industrial Summit" included, from left to right, moderator Summey Orr of Hartman Simons, Chris Riley of CBRE, Lisa Ward of IDI, Marty McFarland of Weeks Robinson, Michael Ruen of DCT Industrial and Rob Rakusin of Seefried Industrial Properties.

Atlanta’s industrial market may be lagging some of its competitors, but it is definitely on the road to recovery. That was the overall tone of panelists participating in Wednesday’s “3^rd Annual Atlanta Industrial Summit,” which was organized by Bisnow Atlanta and sponsored by Hartman Simons and Catamount Constructors Inc.

Summey Orr, managing partner of Hartman Simons, moderated the panel discussion, whose participants included Martin McFarland of Weeks Robinson, Rob Rakusin of Seefried Industrial Properties, Chris Riley of CBRE, Michael Ruen of DCT Industrial and Lisa Ward of IDI. Below is a sampling of some of the notable topics touched upon during the comprehensive, one-hour discussion.

1) The need for greater economic diversity.

Ward noted that Atlanta’s industrial market is not performing as well as Dallas’ in part because the latter metro area’s economy is more diverse. “Our employment is so tied to housing,” she said, before adding that she believes Georgia Gov. Nathan Deal is doing a good job in his efforts to broaden the state and Atlanta’s economies.

2) The Port of Savannah.

The majority of the panelists agreed that a deepening of the Port of Savannah would have a powerful and beneficial impact on Atlanta’s industrial market, saying the result would be more containers transported to the metro area to be broken down and sorted before being passed along the supply chain.

The impact would “be huge,” Ruen said. Riley cited Atlanta Mayor Kasim Reed’s “fervid” support of the port’s deepening as an indication of what kind of an effect it would have on Atlanta’s economy.

Rakusin was the only panelist to downplay the importance of the port’s expansion. “At the end of the day, how do you really figure out which East Coast city benefits?” he said. “It’s a really overblown topic.”

Orr drew laughs by reminding Rakusin his comments came during a portion of the discussion dedicated to examining the positive aspects of Atlanta’s industrial sector.

3) Infrastructure.

According to Riley, the Atlanta metro area must do a better job of investing in its infrastructure if its industrial market is going to reach its full potential. “For us not to have a second Perimeter is absurd,” he said.

Other panelists stated that metro Atlanta’s traffic woes could make some industrial tenants reluctant to locate facilities in the area because of worries about the impact of congestion on their employees’ quality of life.

4) Awaiting the Smaller Guys.

Big tenants have returned in force to the Atlanta industrial market, Ruen said. However, smaller and medium-sized tenants – meaning those who lease 25,000 to 60,000 square feet – by and large remain on the sidelines, he added.

However, the time is approaching when those tenants can no longer postpone making decisions about their business plans, Ruen added. “They can’t afford not to make decisions,” he said. “You can’t run the risk of losing your market share.”

5) E-commerce.

While online sales pose an obvious threat to bricks-and-mortar retail sites, they present growth opportunities for the industrial sector, the panelists said. As Orr noted, “All that stuff’s got to be shipped from somewhere.”

“We see a lot of opportunities in e-commerce,” McFarland added.

According to Ruen, part of the e-commerce-related growth will come from traditional retailers like Target or Home Depot. “They have to be competitive in that [online] space if they want to survive,” he said.

Hartman Simons Managing Partner Summey Orr to Moderate Bisnow Atlanta's "3rd Annual Atlanta Industrial Summit"

Come see Summey at the Summit.

Put another way, Hartman Simons Managing Partner Summey Orr will be the moderator of Bisnow Atlanta's upcoming "3rd Annual Atlanta Industrial Summit." The panel discussion will be held from 8:30 a.m. to 9:30 a.m. on Wednesday, Nov. 14, at the Grand Hyatt Atlanta hotel in Buckhead. A one-hour continental breakfast precedes the discussion, which will also be followed by a 30-minute networking reception.

The discussion that Orr will lead should be a lively one. As the event description notes, "The Atlanta industrial market ... has experienced tremendous growth and fundamentals through the first three quarters of 2012. Absorption is way up, vacancy continues to drop, and spec construction has even returned to the market."

Panelists will include Martin McFarland of Weeks Robinson, Rob Rakusin of Seefried Industrial Properties, Chris Riley of CBRE, Michael Ruen of DCT Industrial and Lisa Ward of IDI. Tickets are currently $69 but will increase on Monday, Nov. 12.

Click here for more information and to register.

Further Reading:

• "Surging Ahead: Atlanta's Industrial Sector" by Summey Orr

• "Four on Friday: Jarred Schenke of Bisnow Atlanta"

The Wednesday Wrap: Sept. 26, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are four stories that caught our eyes in recent days.

• "CRE Holds Tight As S&P Predicts 25% Chance of Another Recession" by Jacqueline Hlavenka of Globe St.

Is another recession on the horizon? A new report from Standard & Poor’s (S&P), citing disappointing U.S. job growth and international financial woes, says there is a 20 percent to 25 percent chance of an economic relapse over the next two years.

Concerns about the economic road ahead have large corporations and businesses holding off on making major real-estate decisions, Kenneth McCarthy, an economist at Cushman & Wakefield, told Hlavenka.

“They are not making decisions unless they have to,” McCarthy said. “Having said that, businesses are in good shape, but they are just not taking risk. Slow growth is the mode we are in, and it is certainly reflected in the real estate business, and the one exception to that story has been the technology sector, which remains extremely active and strong both in terms of economic impact and hiring and in terms of real estate.”

“I’m not surprised that S&P is saying this,” added Peter Kozel, chief economist for Colliers International. “There’s been a lot of talk about the possibility of a recession next year.”

• “Highwoods Closes On Trophy Office Tower in Atlanta” by Finerve Holder of CoStar.

Highwoods Properties grabbed some major headlines in Atlanta recently with its $146.7 million purchase of Two Alliance Center in Buckhead. The 29-story, Class-A tower is LEED Gold-certified.

The building is 92 percent leased with no lease expirations until 2017. Tishman Speyer, the seller, granted Highwoods $6.4 million to pay for closing costs, free rent and other tenant concessions.

• “Location Strategy: Do Downtowns Go With Dentures?” by Robert Carr for National Real Estate Investor.

As the demand for seniors housing increases, developers are looking to use downtown sites in metropolitan areas to build such facilities. But politicians in some of these communities, looking instead to have exciting destination spots in their central business districts, are doing their best to block seniors-housing communities from taking root, according to Carr.

Seniors housing developers like to build in downtowns because it means residents can have access to surrounding restaurants and shopping, but doing so often requires building high-rises, which can pose an issue for seniors.

“It really depends on the downtown if they have these friendly neighborhoods, but the seniors love to take in what a downtown has to offer,” Todd Spittal, whose company Provision Living has two seniors housing properties in downtown St. Louis, told Carr. “It is hard to understand why a downtown would turn down an elderly facility to make it move five to six miles down the road.”

The Wednesday Wrap: Aug. 22, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Store Opening Plans Reach Four-Year High, Report Claims” by Elaine Misonzhnik of Retail Traffic.

U.S. retailers’ store-opening plans hit a four-year high in July, according to the latest “National Retailer Demand Monthly” report from RBC Capital Markets and Retail Lease Trac.

Over the next two years, the retailers in RBC’s database are expected to open a total of 78,325 stores. That’s an 11 percent increase over store openings expected at the end of 2011, Misonzhnik reports.

Notable companies that plan to aggressively expand include discount stores like Dollar General and Family Dollar and restaurant chains Subway, KFC and Five Guys Famous Burgers and Fries.

With tenant demand rising, the question of when the development of new retail sites will take off arises, Misonzhnik notes.

• “In Texas’s Capital, Construction on Many Corners” by Matt Hudgins of The New York Times.

An unlikely city — Austin — finds itself at the center of residential and commercial development in Texas, as the city’s diversifying business center and popular entertainment scene bring more residents downtown, Hudgins reports.

Gen-Y workers are drawn to more urban areas in cities across America, and that’s certainly the case in Austin. Five hundred apartments are under construction in the city, and more are in development. Apartment rents, at an average of $1.10 a square foot, are the highest in the state.

There’s also an influx of office development, geared towards high-tech companies such as Facebook and Google that have moved into the central business district.

• “Are Clicks Cannibalizing Bricks?” by Mark Heschmeyer of CoStar.

As retail begins to recover from the recession, many companies are shutting down brick-and-mortar stores to focus their resources online. That may be a mistake, Heschmeyer notes.

The American Marketing Association recently took a look at whether stores hurt or help a retailer’s online sales. Its verdict: the stores help.

“In the long run, sales in both the online and catalog channels benefit from the presence of retail stores,” Dr. Jill Avery, lead author of the analysis, told Heschmeyer. “The physical presence of a store attracts new customers to the direct channels and encourages existing customers to buy more.”

• “VW Adds $27 Million Center to Aid Expansion in U.S.” by Alan Ohnsman of Bloomberg News.

Volkswagen certainly is doing its part to help the nation’s industrial sector. The European automaker opened a $27 million testing center in Oxnard, Calif., on Monday as part of a $4 billion program aimed at boosting its sales in the United States.

The center will initially be staffed by 50 engineers and technicians, and 250 additional employees from VW’s other brands also will eventually use the center.

Last year, VW, whose U.S. division is based in Virginia, opened a $1 billion auto-assembly plant in Tennessee. It also has facilities in Michigan and Arizona.

VW is pushing to be the world’s largest automaker by 2018. In the United States, its sales trail those of foreign automakers Toyota, Honda and Hyundai.

• VIDEO: “REITs Proceed with Caution in Regards to Financing” from REIT.com.

In this clip, Andrew Nicholas, head of global property securities with Colonial First State Global Asset Management, shares his views on how deal making has changed since the recession. He also shares his expectations for REITs in the second part of the year.

Visit REIT.com to view the clip.

The Wednesday Wrap: June 20, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• "Class-A Office Leasing Picks Up, Mostly in Gateway Markets" — by Elaine Misonzhnik of NREI.

The wide gap between the demand for office properties in central business districts and those in suburban areas continues as businesses concerned over current economic turmoil are holding off on large-scale expansions, Misonzhnik reports. Those firms that do expand are choosing space in the downtown areas of gateway cities.

Even as the office sector shows positive net absorption for the fifth straight quarter and asking rents have increased slightly, the national vacancy rate of 17.2 percent is still nearly five percentage points higher than its most recent low in 2007.

One major worry for businesses is the economic crisis in the eurozone. “Everybody is pretty nervous right now about what’s going on in Europe and companies are reluctant to take on expansion space,” Robert Bach, senior vice president and chief economist for Grubb & Ellis, tells Misonzhnik. “Vacancies are declining; rents are flat for the most part, but increasing modestly in the best buildings in a few markets. But overall, the office market is not setting the world on fire right now. It’s a half-speed recovery.”

• "Big-Box Space Remains Hard to Fill" — by Kris Hudson of The Wall Street Journal.

Vacancies caused by the collapse of Borders have been hard to fill for many shopping centers, causing high vacancy rates, falling rents and debt defaults at many sites, Hudson reports.

According to Colliers International, one-third of closed Borders stores are still vacant. When landlords finally find replacement tenants, they’re leasing at rates about 30 percent lower on average than what Borders paid, resulting in weaker cash flows. Many landlords also are facing discontent among other tenants due to lessened traffic, Hudson notes.

As most big-box retailers continue to struggle because of the economy and current shopping trends, some developers are abandoning the big-box concept all together. “Some industry watchers believe that big-box centers are facing problems that go beyond a weak economy,” Hudson writes. “Rather, they suggest that these shopping centers are going to suffer long-term declines because Internet shopping offers more choice and greater ease.”

• "Pace of Recovery Accelerates For Lower-End CRE Properties" —by Randyl Drummer of CoStar.

Commercial real estate investors are looking outside primary markets and the best buildings for their purchases, according to this month’s CoStar Commercial Repeat Sales Indices report. The data shows that the price recovery originally felt by the largest and most expensive buildings is now broadening to the rest of the commercial real estate market.

The CoStar report also comments on a number of other trends in the industry: the share of commercial property purchases by European buyers has almost tripled in the last year; time on the market prior to sale is decreasing; and the sale of distressed property is also declining.

• "Seniors Housing Vital Signs Will Continue to Strengthen, Says M&M" — by Matt Valley of REBusinessOnline.com.

Certain segments of the seniors housing market are improving, according to a new research report by Marcus & Millichap Real Estate Investment Services. Both average occupancy and rents for independent living properties, the segment hit the hardest during the recession, are expected to rise.

“As nationwide occupancy for traditional apartments has soared over the past two years, rents have climbed to a level where traditional apartments are no longer a major substitute for independent living units,” Gary Lucas, director of the National Seniors Housing Group at Marcus & Millichap, tells Valley. “A short time ago, the independent living sector was the weakest, but now it is the second strongest and still has room to strengthen.”

Demand for senior housing is expected to grow as the economy recovers and the number of Americans over the age of 75 continues to swell.

• "Promising Signs for Commercial Real Estate" — by Carisa Chappell of REIT.

Those in the REIT industry are optimistic about their sector’s performance for the remainder of the year, according to a new survey by PricewaterhouseCoopers and the Urban Land Institute.

REITs generally are reporting healthy returns so far this year, a trend they expect to continue for the second half of 2012. REIT leaders also noted big improvements for the industrial sector, which showed gains in manufacturing, and added that the multifamily and retail sectors both appear stronger.

Europe’s financial crisis, however, casts a shadow over those in the REIT sector and the larger commercial real estate market. “The failure and break-up of the eurozone and a Greek default would be pretty dark scenarios that are weighing on investor sentiment,” Arthur Jones, an economist with CBRE Group Inc., tells Chappell.

Four on Friday: Hessam Nadji of Marcus & Millichap

Hessam Nadji is one of the commercial real estate industry’s foremost experts on the economy. The managing director of Marcus & Millichap’s Research and Advisory Services Group, he is a frequent guest on CNBC, Fox Business News, Bloomberg News and National Public Radio. He also is regularly quoted in such publications as The Wall Street Journal, Financial Times, The Economist and Bloomberg Businessweek.

We recently got a chance to chat with him about the performance of the economy as well as the showing of the various property sectors. Nadji also discussed the impact of the upcoming presidential election on commercial real estate and confessed to a strong enthusiasm for a certain quartet from Liverpool.

HS: What do the recent job statistics say about the health of the economy and, by extension, the health of the commercial real estate markets? 

Nadji: The pace of job creation in the United States has slowed measurably, stirring fears of another disappointing chapter in the struggle to stage a durable economic recovery. This disappointment in the domestic economy happens at a transitional time in Europe, as reflected in the election results from France and Greece, all of which add to volatility and renewed concerns. In other words, below-trend growth persevering through macro headwinds remains intact as the theme of this recovery.

The commercial real estate market, aside from apartments, which have already advanced into an expansionary cycle, will continue to face challenges in achieving substantive growth. Retail, office and industrial properties all made gains last year, and assuming we do not hit a worst-case scenario in Europe or encounter some other severe setback, they should continue to advance. The very limited construction environment will ensure that supply-side pressures do not inhibit the recovery, and baseline demand, though not robust, remains positive.

HS: Which commercial real estate sectors have shown the most improvement since the start of 2012 and which ones are stuck in the mud?

Nadji: Apartments continue to lead the commercial real estate recovery in 2012 with momentum only slightly below trend from last year. Vacancies have fallen to the lowest level in 10 years, generating upward pressure on rents.

Retail, office and industrial properties all maintained positive absorption in the first quarter, and although the improvements have yet to achieve a breakout performance, each of these property types has seen vacancies retreat from the cyclical highs of the recession.

Industrial properties have improved steadily, with vacancies down 70 basis points in the last year, and based on the positive momentum in both manufacturing and international trade, this sector should continue to make headway.

Office, though improving slowly, has yet to see a breakthrough quarter as companies continue to backfill existing space. Positive trends in corporate earnings and hiring in the professional and business services sector, however, indicate that office property performance will continue to improve.

Retail demonstrated the weakest first-quarter performance of the major property types. Though consumption well exceeds pre-recession levels, consumer behavior shifted dramatically during the recession. As a result, some retailers continue to face significant challenges while others have already begun a new expansionary cycle. This has created a somewhat uneven recovery in retail properties with some locations generating strong performance and others still facing numerous hurdles.

HS: To what extent, if any, will the upcoming 2012 presidential election affect the performance of the commercial real estate markets between now and November?

Nadji: The biggest challenge created by the election year will be uncertainty. Businesses and consumers alike continue to await clear direction on many important issues ranging from tax policy to healthcare to financial reform. With so many issues having been kicked down the road to the months following the election, it is quite difficult for people to make definitive decisions.

Nonetheless, the economy continues to make steady, though unremarkable, headway. This economic momentum will be sufficient to power continued improvement in commercial real estate performance, but it’s unlikely 2012 will be a breakthrough year.

HS: A non-commercial real estate question for you: when you're not advising clients or studying economic numbers, how do you like to relax?

Nadji: I’m a big Beatles fan and an avid reader.

 

Related Posts:

• Four on Friday: Kevin Thorpe, Chief Economist at Cassidy Turley

• Four on Friday: Summey Orr of Hartman Simons on ICSC RECon 2012

The Wednesday Wrap: June 6, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Apartment Upturn Lifts Post Properties” – by Dawn Wotapka of The Wall Street Journal.

What a difference a few years has made for apartment REIT Post Properties. In 2008, the firm unsuccessfully put itself up for sale and its shares dropped below $10. However, a focus on fixing its balance sheet and recent trends in homeownership have turned the company around, Wotakpa reports.

Under a weakened economy, millions of people were no longer willing or able to be homeowners, significantly boosting the rental market. Analysts and investors told Wotapka they’re confident the firm will continue to thrive when the housing market inevitably improves, in part because Post’s communities have the kinds of amenities that appeal to younger workers, who will continue to look to rent instead of own.

The good news for Post was that it had already started building new rental communities before many competitors decided to as well. “We expect they’re going to have their properties out of the ground faster and be able to capitalize on this upswing,” said Brendan Lee, a portfolio manager with TIAA-CREF’s Real Estate Securities Fund.

In the meantime, Post’s stock price is now near $50, and the firm carries one of the apartment sector’s lowest debt loads.

• “More Room for Ideas in a Smaller Office” – by J. Michael Welton of The New York Times.

In an effort to reduce office space costs in a tighter economy, many companies are looking to reconfigure their offices to use less square footage. Often, this means reducing the number of private offices for a more open layout.

The result? According to Welton, companies are reporting not only a reduction in office expenses, but higher collaboration and efficiency among employees.

One example he cites is the ad agency 22squared in Atlanta, which previously had three floors of space, but decreased to two floors with the help of architecture firm Gensler and commercial real estate services developer Carter USA. Walls were torn down in favor of less private offices, and collaborative work areas now dot the space. Glass walls for writing were constructed, and natural light is utilized across the space. According to Gensler’s Workplace Performance Index, collaboration has increased by 22 percent at the firm since the renovation.

• “Fast Times for Student Housing” – by Bendix Anderson for National Real Estate Investor.

States aren’t building new dorms fast enough for today’s rising college student population, says “Surging Student Populations Stress On-Campus Housing,” a new white paper from the National Multi-Housing Council (NMHC).

“That presents a huge opportunity for private developers,” said Jim Arbury, vice president of student housing for NMHC.

According to a report from College Planning & Management magazine, 42 percent of campus housing officers reported too little housing for students.

Anderson’s article cautions developers to not rush into the student-housing market but to make sure they are aiming for schools with strong demand and little supply available or in the pipeline.

• “Industrial Sector Is Silver Lining in Subpar May Jobs Report” – by Matt Valley of REBusinessOnline.

Employment numbers for May overall were not as strong as expected, but last month showed a healthy increase in jobs in the industrial sector, Valley reports. The manufacturing, wholesale trade, and transportation and warehousing sectors added 63,500 jobs in May versus 3,600 in April.

“The surprising surge in jobs important to industrial real estate indicates the continued health of the manufacturing sector and the strong volume of goods flowing through corporate supply chains,” Bob Bach, chief economist for Grubb & Ellis, told Valley.

Overall, though, nonfarm payroll jobs counted 69,000 additions last month, way below the expected 150,000 jobs, pushing the unemployment rated up to 8.2 percent. Economists had predicted a slowdown in job creation, but not this quickly, said Victor Calanog, director of research for Reis.

May is now the fourth consecutive month in which payroll job growth has slowed.

• “Retail Recovery Boon for Atlanta Architects” – by Jennifer LeClaire of GlobeSt.com.

Atlanta’s recovering job market is encouraging expansion by retailers and restaurants, LeClaire writes. According to Marcus & Millichap’s latest Retail Research Market Overview, retailers like Publix and Kroger are looking to open new stores, not just renovate existing ones, while Walmart is looking at introducing its smaller concept stores in the area. Restaurants like Dunkin’ Donuts, McAlister’s Deli, Taco Mac and Newk’s Express Café are also looking at expanding.

However, while Marcus & Millichap is very optimistic, Kevin Cantley, president and CEO of Cooper Carry, says the retail market is still relatively quiet. He says some property owners are looking at renovating shopping malls and building some new single-tenant retail sites as well.

Four on Friday: Kevin Thorpe, Chief Economist at Cassidy Turley

If you want a detailed, understandable breakdown of the economy and its impact on the commercial real estate markets, there are few people better to turn to than Kevin Thorpe, the chief economist for the commercial real estate services firm Cassidy Turley, which opened an Atlanta office last year and is a valued friend of Hartman Simons.

We recently got a chance to talk with Kevin about the health of the metro Atlanta economy and the city’s commercial real estate markets. We know you’ll enjoy his analysis. You also may be surprised to learn what his favorite movie is (hint: it stars a very hirsute Michael J. Fox).

HS: How optimistic or pessimistic are you about the Atlanta economy over the short and long terms?

Thorpe: Short term, cautiously optimistic with an emphasis on the word “cautiously.” Long term, as bullish as an economist can get. In the short-term, the subtle signs of recovery are there. Job growth is trending up, unemployment is trending down, demand for office and industrial space is quietly trending up, and vacancy is quietly trending down. It’s far from even: Class A product in many cases is the only product leasing up, but the general trend is one of slow improvement. Challenges remain, particularly the ongoing housing foreclosure crisis in Atlanta, but even on that front, signs of improvement are observable in stronger home sales and slowing delinquency rates.

A diverse economy and above all population growth are two strong reasons why Atlanta’s economy will bounce back, as it always does.

HS: What are the current strengths and weaknesses of the overall Atlanta commercial real estate market?

Thorpe: Strengths: No major rent spike during the boom. Office rents only rose 7 percent during the strong years (04-07). This will help rents avoid a free fall and should lead to quicker stabilization and better deal flow.

Another strength is the sheer office space demand numbers that Atlanta can put on the board very quickly. People forget Atlanta was averaging 4 million square feet of net absorption annually prior to the recession – huge numbers relative to most metros. On the industrial side, there is healthy demand related to manufacturing, technology, and the traffic to and from the airport and the Port of Savannah.

The weakness is oversupply. Atlanta had 11 million square feet of office space under construction when the recession struck. It will take time and solid economic growth to lease up that space – a solid 2 to 2.5 years until full recovery is reached.

HS: How long until the city's residential housing market becomes healthy once again?

Thorpe: If we define healthy as home price stabilization, then Atlanta is actually closer than most people realize. The existing inventory is already coming down. At its worst, the months supply of homes on the market in Atlanta was 18 months. It is now at 8.5 months. Normal is 6 months, so it is making progress. Assuming the recovery continues at its current trajectory, 2012 will be the year of better home sales, 2013 will be the year of home price stabilization and slightly improved new home construction, and 2014 will be the year of some home price appreciation and much stronger new home construction.

HS: We'll cheat a little and ask three quick personal questions in one: Favorite book? Favorite movie? Favorite musician?

Thorpe: Favorite book: Anything that involves wizards. If I couldn’t have been an economist, that’s what I would have been.

Favorite movie:  Hard not to choose “Top Gun,” so I will choose “Teen Wolf.”

Musician: I’ll instead offer you a decade: the 1980s, when all dance moves and hairstyles were deemed acceptable.

The Wednesday Wrap: May 16, 2012 (with video)

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Here are five items that caught our eyes in recent days:

• “Slip In First Quarter Warehouse Demand Tied to Slowing U.S. Economy” by Randyl Drummer of CoStar.com. The first quarter of 2012 brought both some good news and some not-so-great news to the U.S. industrial real estate sector. First, the good news: aided by a continued lack of new supply and retailers’ demand for distribution space, the sector’s national vacancy rate dropped 20 basis points to 9.4 percent, according to Drummer’s summary of new CoStar data.

Now, the not-so-great news: although net absorption remained positive in the first quarter, it declined by about 33 percent when compared to fourth-quarter 2011.

Still, Rene Circ, director of industrial research for Property and Portfolio Research (PPR), CoStar’s analytics and economic forecasting division, didn’t seem too concerned. “We definitely saw a slowdown in demand during the first quarter of this year," she said. “[But] It was a slight slowdown and we do expect it to pick up."

• “Clash of the Titans: Regional Mall REITs Fight for Limited Outlet Development Opportunities” - by Elaine Misonzhnik of National Real Estate Investor. While many retailer spots are struggling in the current economic climate, outlet centers have held their own, capitalizing on consumers’ recession-fueled desire for discounts.

However, most areas can only support one outlet center, meaning retail REITs now find themselves in intense competition to acquire the land and the tenants for new developments, Misonzhnik reports. Developers like Taubman and Simon find themselves aggressively competing for the biggest names in outlets, such as Saks Fifth Avenue OFF 5th, Coach, Polo and Neiman Marcus Last Call. These key stores attract other retailers, making or breaking a prospective outlet development, Misonzhnik says.

• “How Florida is Adapting to the Changing Retail Landscape” by Carrie Smith of Franklin Street for REBusinessonline.com. Florida is experiencing a particularly slow economic recovery, and that has forced shopping center owners and commercial real estate developers to adjust to the state’s “new normal,” Smith writes.

With the state’s unemployment continuing to hover above 9 percent, consumers are predictably cautious about spending their disposable income. However, chain restaurants with recognizable brand names and discount retailers are doing good business, and landlords are anxious to sign these tenants, according to Smith.

Retail landlords also are reducing leasable space and have become more discriminating in the tenants they choose, preferring to sign national retailers and even medical office tenants. Smaller, independent retailers are viewed more suspiciously by shopping center owners and must therefore look to Class B and C spots.

Like so many other states, Florida is also experiencing the urban infill trend, and retailers are looking to lease space in centrally located, walkable environments.

• “Novare Plans New Midtown Tower” - by Douglas Sams of the Atlanta Business Chronicle. More evidence of the continuing popularity of urban, mixed-use properties emerged recently in Atlanta, where developer Novare Group unveiled its proposal for a 23-story apartment tower in the city’s Midtown district. The tower would include up to 320 apartments. 

“Midtown is one of the most prominent cosmopolitan centers in the Southeast, where people, business and culture come together to create a true live-work-play community providing a quality of life very dear to its residents,” said Jim Borders, president of Novare Group, in a press release.

This project would capitalize on the evolving “rentership society” in the United States, wherein more people, especially those in their 20s and 30s, are looking to rent and live within the city, rather than own a home in the suburbs, Sams writes.

The Wednesday Wrap: April 18, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Here are five stories that caught our eyes in recent days:

• “Retail Sales Soar, Giving Life to Stocks” – by Don Lee of the Los Angeles Times. Talk about pleasant surprises. National retail sales rose by 0.8 percent in March, an increase that “far exceeded analysts’ forecasts,” according to Lee.

“The unseasonably warm winter weather appears to have played a role in the better-than-expected numbers,” Lee added. “Spending at home and garden centers last month surged 3 percent from February, and their sales were up a whopping 14.1 percent from March 2011. Sales of cars, clothes, electronics and home furnishings also grew robustly over the month.”

• “Balancing Act: Lack of New Commercial Space Overcomes Softening Demand” – by Mark Heschmeyer of CoStar.com. Demand for commercial real estate space slowed in first-quarter 2012 but an ongoing lack of new supply meant that vacancy rates improved across all property types in the first three months of the year, Heschmeyer reports. Furthermore, rental rates “generally improved from prior quarters,” he wrote.

“We may not be out of the woods just yet, but the data we’ve compiled for the first quarter certainly demonstrates an ongoing recovery and points towards future growth,” Walter Page, director of research for CoStar’s Property and Portfolio Research division, told Heschmeyer. “While the retail recovery was less pronounced than in the office and warehouse sectors, we’re witnessing positive net absorption across the board.”

• “Made in the USA Again: What Onshoring Means for Commercial Real Estate” – by David Bodamer and Elaine Misonzhnik of National Real Estate Investor. Politicians may understandably trumpet the trend of U.S. manufacturers bringing jobs back from overseas, but don’t expect a dramatic impact on the nation’s industrial sector any time soon, Bodamer and Misonzhnik report.

Onshoring “is not something companies or industries are doing wholesale,” Bodamer and Misonzhnik wrote. “Sectors that produce smaller goods that carry lower shipping costs — such as ones that produce microchips or circuit boards — will be less likely to consider onshoring. Low value-added sectors that rely on low-skilled labor won’t benefit as much either.”

The commercial real estate industry doesn’t expect the trend to increase in the near future, either. “I am a little skeptical of the government’s ability to encourage onshoring,” Robert Bach, senior vice president and chief economist for Grubb & Ellis, told National Real Estate Investor. “To the extent they can provide tax breaks or lower taxes, that could help.”

• “Real-Estate Redux” – by Craig Karmin and Serena Ng of The Wall Street Journal. Here’s another sign the financial sector is on the mend: American International Group Inc. (AIG) is looking to begin investing again in commercial real estate. The company, which skirted death with the aid of a 2008 government bailout, “hasn’t set specific targets on the size of its future investments in real estate, but people familiar with the insurer say that eventually it will amount to hundreds of millions of dollars annually,” Karmin and Ng wrote.

For the immediate future, the firm appears set on investing in the apartment market.

• “BGC Forms Newmark Grubb Knight Frank” – by Natalie Dolce of GlobeSt.com. Following the approval of a federal bankruptcy court, BGC Partners Inc. has completed its acquisition of Grubb & Ellis and is combining the firm with Newmark Knight Frank, which BGC purchased last October. The combined company will go by the name of Newmark Grubb Knight Frank.

“Newmark Knight Frank and Grubb & Ellis each have consistently ranked among the leading companies in the real estate industry, and now these two great brands have come together as an even more impressive competitive presence in the real estate marketplace,” said Michael Lehrman, global head of real estate at BGC, in a statement.

The Wednesday Wrap: March 28, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Here are five stories that caught our eyes in recent days:

• “Trepp: $362 Billion of Commercial Real Estate Debt Matures in 2012” – from Citybizlist.com. A total of $362 billion in commercial real estate debt will come due this year, according to a new estimate from Trepp. The figure is an increase from the $346 billion that matured last year.

Approximately $1.73 trillion worth of commercial real estate debt is set to mature from 2012 to 2016, Trepp calculates. Ominously, the firm estimates “that as much as 56 percent of the 2016 maturities are underwater by 10 percent or more, reflecting the large volume of 10-year mortgages that were originated at the market peak in 2006,” said Matt Anderson of Trepp’s research team in a statement.

• “Tech Firms Go Far and Wide for Space” – by Eliot Brown and Laura Kusisto of the Wall Street Journal. Almost every industry has decreased its office space in recent years. There is, however, at least one notable exception: the technology sector. According to Brown and Kusisto, “landlords in multiple cities throughout the country – including some that didn’t have a big tech sector in the past – are enjoying the benefits from expanding Internet-focused firms, software companies and other technology employers.”

“Companies in the tech sector accounted for 29 percent of all growth in the U.S. office market in 2011, adding an estimated 10.2 million square feet of space – nearly the size of four Empire State Buildings,” Brown and Kusisto write.

Austin, Texas; Cambridge, Mass.; New York; and Washington D.C. are just a few of the non-Northern California markets to benefit from tech firms’ need for more space.

• “CRE Starting to Embrace the Tweet” – by Miriam Lamey of GlobeSt.com. A new GlobeSt.com poll shows LinkedIn is the preferred social-media network of commercial real estate professionals but also indicates that Twitter is gaining popularity in the sector.

Twitter has something to offer virtually all of the segments of the commercial real estate industry, Robert Krueger, manager of social media outreach and communications for the Urban Land Institute, told Lamey. “If you are in the hotel and hospitality sector, [Twitter] can be used as a way to drive online traffic to your review websites and alert [users] to limited time specials,” he said. “If you are a developer, Twitter can be used to build public support for your project. Building owners and architects can also use it to raise awareness for a project, build their industry reputation and brand themselves as ‘green.’”

• “Don’t Look Now but Investor Interest Reviving in Warehouses” – by Randyl Drummer of CoStar.com. A slowly but steadily improving labor market has increased investor interest in U.S. warehouse properties, says this article by Drummer, based in large part on a new survey from PricewaterhouseCoopers.

Nearly all of the major U.S. industrial markets experienced positive net absorption last year and a few, such as the Inland Empire in Southern California, are in a full-fledged recovery, according to Drummer.

“Combined with limited construction over the past few years, the potential for rent growth in most markets is now a key driver for acquiring industrial assets,” he writes.

• “Six Tips for Leasing a Retail Center Profitably” – by Ben McLeish for REBusinessOnline.com. When leasing a shopping center, the first thing a landlord should look for are tenants whose customers are likely to visit those stores more than once a week. That’s one of six leasing tips offered by McLeish, the director of retail services for Colliers International Tampa Bay.

Another tip: make sure your rental rates remain competitive. “Don’t give space away, but realize that thriving retailers have plenty of choices for space in this market,” McLeish writes. “If you aren’t competitive with retail centers down the street, you won’t get the tenant. It’s that simple.”

Four on Friday: Lori Kilberg Addresses the Georgia Society of Certified Public Accountants

The commercial real estate sector is in the midst of a halting recovery, and women are making halting advancements in the commercial real estate industry. Those were the themes of Hartman Simons partner Lori E. Kilberg’s remarks to the Georgia Society of Certified Public Accountants earlier this week. Below are four of the interesting points she made in her presentation.

• Not Reaching the Top. While women are making strides in the commercial real estate industry, they are not consistently being promoted to what Kilberg referred to as the “C Suite,” meaning executive positions such as CEO, CFO and COO. “That’s one of the real problems,” said Kilberg, who is the immediate past president of the Atlanta chapter of CREW Network, a national organization dedicated to the advancement of women in commercial real estate. She also is currently on the organization’s Board of Directors.

“We’re getting stuck at the level below [the C Suite],” she said. “It’s hard to understand how slowly things have changed.”

• The Persistent Wage Gap. While the gap between what women in commercial real estate make and what their male colleagues make is narrowing, it’s still there, Kilberg reported.

According to a 2010 CREW study, women aged 35 and older in commercial real estate make about 75 percent as much as their male counterparts. The news is slightly better for younger women: those between the ages of 25 and 34 make roughly 89 percent as much as their male colleagues.

• Slowly Getting Better. Citing several commercial real estate forecasts, Kilberg said 2012 should be a year of improvement for all of the commercial real estate property types. The multifamily sector is poised for the strongest performance in the year ahead, followed by the industrial, office and retail markets, she noted.

At Hartman Simons, “we’re finally seeing a big uptick in [commercial real estate] activity across the board,” Kilberg said. But overall, the industry is “making its way very slowly to recovery.”

• The Office Sector: Go Intown and Buy Your Own. While the office sector continues to struggle in many areas of the country, properties in central business districts are generally performing better than their counterparts in the suburbs, Kilberg said, in part because the smaller companies and start-ups that generally lease suburban space have yet to experience renewed job growth.

Kilberg also said Hartman Simons is seeing an increasing number of users buy their office buildings. She noted that Hartman Simons did so several years ago.

Surging Ahead: Atlanta's Industrial Sector

By Summey Orr, managing partner of Hartman Simons

Note: This post originally appeared on the Atlanta Business Chronicle's Real Talk blog.

As the media focuses attention on trouble in Atlanta commercial real estate, those of us looking for good news might have an unlikely place to start: the industrial sector.

During the upcycles of real estate, industrial property tends to be the ugly stepbrother of the more glitzy retail and office sectors. Warehouses and distribution centers don’t majestically rise 1,000 feet in the air, they don’t boast trendy restaurants on their ground floors, and they don’t creep into your subconscious as you drive past them several times a week (well, unless you’re just driving around industrial parks all week, which is a troubling habit, generally speaking).

But by many accounts, industrial real estate might be coming out of the ditch a little sooner than some of its real estate brethren. How, and why, would this occur?

Here’s an explanation that a notable Atlanta industrial developer gave me back in April 2009. He said, “Industrial real estate relies on a company’s real estate manager going to his or her boss in the fourth quarter and saying, ‘We need more space. Let’s get a warehouse expansion in our budget for next year. ‘ Now, nobody in his right mind will make that pitch in 2009. Not only that, but I doubt things will have changed enough by the fourth quarter of 2010 to give anyone the courage to ask for that in their 2011 budget.”

“What we’re waiting for, really, is the corporate world’s budgeting process during the fourth quarter of 2011,” the developer continued. “By then, either the economy will have improved enough that management will feel comfortable asking for more space, or the economy will not have gotten markedly worse, and managers will decide they are so desperate for more room that it at least makes sense to ask. So, I think we’ll have a little activity in 2011, more in 2012 and maybe even a pretty good 2013.”

The Wednesday Wrap: Feb. 29, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Here are five stories that caught our eyes in recent days:

• “Space Influx Will Challenge Office Market” – by Laura Kusisto of The Wall Street Journal. Next year could be a scary year for the New York office market. With the economy in the midst of a halting recovery, more new office space is set for delivery in the Big Apple in 2013 than in any year since 1989.

But developers tell Kusisto they’re not stressed. “They note that the recent surge of new construction follows years of virtually no new development, so the city won't get deluged with new space like it did in the late 1980s,” she writes.

“I sleep well at night,” one developer told Kusisto.

Perhaps that developer should be tossing and turning: Among other warning signs, “the bulge in the delivery pipeline comes at a time when demand in the New York office market is showing signs of flagging because of the contraction in the financial-services industry,” Kusisto writes.

• “Are Institutions Ready for More Risk?” – by Beth Mattson-Teig for National Real Estate Investor. After a sustained focus on purchasing core properties in gateway markets, pension funds, life insurance companies and private equity funds may be ready to take what for them is something of a walk on the wild side by investing in higher-risk facilities in secondary markets.

“While institutions are still proceeding cautiously, they are also starting to take incremental steps toward more value-add opportunities,” Mattson-Teig writes. “‘We spent most of 2008 and 2009 curled up in a ball, hoping. Now we are slowly coming out of that defensive crouch position,’ says Jeffrey Havsy, director of research at the National Council of Real Estate Investment Fiduciaries (NCREIF) in Chicago.”

• “Social Media in CRE No Longer Just for Socializing” – by Mark Heschmeyer of CoStar Group. The commercial real estate sector hasn’t exactly been at the forefront of embracing social media websites like Twitter and Facebook, but many within the industry are starting to use the sites in the hopes of raising their profiles and increasing business.

Still, the industry remains divided on social media, Heschmeyer reports. “Many others still refuse to join the fold and flat out state they will resist until they're the last ones online,” he writes.

“Clearly social media is still a divisive issue in commercial real estate – the difference in sentiment between enthusiastic adopters and major detractors parallels the sentiments in other industries driven by client relations, such as nonprofits and law firms,” Angela Brown, external communications manager for CoStar Group, told Heschmeyer.

• “AIA Billings Index Remains Positive for Third Straight Month” – from the American Institute of Architects’ (AIA) web site. The institute’s Billings Index clocked in at 50.9 in January after registering scores of 51 and 52 in December and November, respectively. Any score above 50 reflects an increase in architectural billings.

Kermit Baker, chief economist for AIA, says the organization is expecting “modest” improvement in the design and construction sectors over the next few months. “Even though we had a similar upturn in design billings in late 2010 and early 2011, this recent showing is encouraging because it is being reflected across most regions of the country and across the major construction sectors,” he added in a statement.

• “Commercial Real Estate Vacancy Rates Improving” – from the National Association of Realtors’ (NAR) website. The most recent quarterly market survey complied by the National Association of Realtors says national vacancy rates for all the major commercial real estate sectors will decline somewhat in 2012.

The survey predicts the national office vacancy rate will drop by 0.4 percentage points, the industrial vacancy rate by 0.8 percentage points, the retail vacancy rate by 0.9 percentage points and the apartment vacancy rate by 0.2 percentage points. “Sustained job creation is benefiting commercial real estate sectors by increasing demand for space,” said Lawrence Yun, chief economist for NAR, in a statement. “Vacancy rates are steadily falling. Leasing is on the rise, and rents are showing signs of strengthening, especially in the apartment market where rents are rising the fastest.”

The Wednesday Wrap: Feb. 15, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Here are five stories that caught our eyes in recent days:

• “Less Building Now, Higher Office Rents Later” – By Eliot Brown of The Wall Street Journal. A paucity of new office development – only 56 million square feet of construction began last year, the lowest in at least 50 years – is paving the way for a much-anticipated rise in office rents, Brown reports.

Gateway markets like San Francisco and New York – where demand is likely to jump quickly if the economic recovery picks up – would be the most likely areas to see rents increase, whereas cities harder hit by vacancies, such as Las Vegas and Atlanta, would probably take longer to experience rent growth.

• “Retail Sales Rebound as Consumers Step Up Spending” – By Christopher S. Rugaber of The Associated Press. Retail sales increased by 0.4 percent in January when compared with the month before, a positive sign after a sluggish holiday season, Rugaber reports.

“The positive data suggest that hiring gains have boosted confidence and are encouraging more people to spend,” he writes.

Pierre Ellis, an economist at Decision Economics told Rugaber, “The good news is that the strong January gain establishes that the consumer trend is not folding.”

• “National Industrial Vacancy Continues Steady Decline” – By Jacqueline Hlavenka of GlobeSt.com. The national industrial real estate market experienced a noticeable uptick in its fundamentals last year, this article reports. The vacancy rate dropped from 10.8 percent to 10.1 percent over the course of 2011, and 417 million square feet of industrial leasing was completed last year, a 20 percent increase from 2010.  

Speaking about about the vacancy rate decline, Jim Dieter of Cushman & Wakefield told Hlavenka, “It’s pretty dramatic. That doesn’t sound like much, but the [size of the market] is around 12 billion square feet. When you have a drop in vacancy rates of almost 1 percent, you can see that’s pretty dramatic.”

• “MBA Attendees Expect Continued Growth in 2012” – By David Bodamer of National Real Estate Investor. The Mortgage Bankers Association (MBA) is projecting commercial and multifamily mortgage originations to reach $230 billion – which would be an increase of 17 percent from last year’s total. By 2015, the figure should climb to $290 billion.

“We’re in a period of stability,” Tom Fish, executive managing director of Jones Lang LaSalle’s Americas Real Estate Investment Banking division, told Bodamer. “Everyone is talking about increasing volume. Barring a major dislocation in capital markets, it should be a strong year.”

• “Construction Lenders Advise Caution on Apartment Construction Front” – By Liz Burlingame of ReBusinessOnline.com. The multifamily sector has been perhaps the only segment of commercial real estate to perform well during the Great Recession, but lenders warned during a recent panel discussion that the industry could be on the verge of becoming overbuilt, at least in certain markets.

Speaking at the MBA’s commercial/multifamily finance conference in Atlanta, Marc McAndrew of PNC Real Estate said Seattle, Houston and Dallas are markets in danger of having an oversupply problem.

According to Burlingame, fellow panelist Ken Broussard of KeyBank, “said the bank has internally discussed the possibility of too much apartment development and whether it may cause a bubble in the sector.”

“All of our regions are seeing a lot of requests for new construction and financing in multifamily,” Broussard added.