Commercial Real Estate Finance

Archive for the ‘Office/Industrial’ Category

Week in Review for April 27 – May 3

• Infrastructure Investor (requires free registration) reports that public-private investment partnerships are gaining traction in the Mid-Atlantic U.S. Last month, Maryland’s legislature passed the Transportation Infrastructure Investment Act of 2013, with which the state will fund two light rail projects to be developed over the next seven years. These two projects will serve the Baltimore and D.C. markets. Their combined development costs are estimated to exceed $4 billion.
• According to distressed real estate data service NewAcre, the month of April saw increased numbers of distressed properties throughout the U.S. This rise in distressed listings includes most asset classes, including multifamily. Florida listed the highest number of distressed properties in April.
• At the DLA Piper 11th Global Real Estate Summit in Chicago, industry executives report continued growth in the capital markets, including an overall recovery for CMBS. The event’s panelists include executives from Equity Residential (NYSE: EQR), Ventas, Inc. (NYSE: VTR) and Vornado Realty Trust (NYSE: VNO).
• In Fort Washington, a suburb of Philadelphia, pharmaceutical giant Bristol-Meyers Squib leases 45,000 SF in the Fort Washington Executive Center. The company will move into its new, Class A office space at the end of this year, reports CoStar.
• In Northeastern Pennsylvania, Equilibrium Equities closes on a 249,000-SF industrial property in the Keystone Industrial Park. The acquisition is near Interstate 81 in the Scranton area. Equilibrium, an investment and development firm based in the Philadelphia area, plans a number of capital improvements for this property. Read the rest of this entry »

Mensch 

Noun, informal. A decent, upright, mature and responsible person. 

Schlemiel 

Noun, slang. An awkward, clumsy, or unlucky person whose endeavors tend to fail; a loser. 

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Mensch of the Week:

Pittsburgh, Pennsylvania

With a few notable exceptions, most U.S. cities have reported little good news about their office markets. Contracting businesses coupled with lower space demands have created a less-is-more scenario in most office markets (except Manhattan, San Francisco, and a few others). Greater efficiency and consolidation in this sector wouldn’t be a problem if it wasn’t for (what turned out to be) massive overbuilding of the asset class up through 2007.

Back in January, Reis Reports noted that a great deal of office inventory would remain unleased until the labor market enters a significant recovery period. Of course, the average vacancy rate at the close of 2012, 17.1%, is a respectable improvement over the 17.6% reached earlier in the financial crisis, but it’s a far cry from 2007′s 12.6%. For most markets, the only way to lower the vacancy rate is to demolish or repurpose current assets. Read the rest of this entry »

Most of us associate Baltimore with Inner Harbor, a well-known aquarium, Edgar Allan Poe, and a certain football team (which I hear had a pretty good season). Many also associate Baltimore with HBO’s The Wire. This drama–which extensive scientific research has confirmed as the best TV show ever–portrays the city as a morass of crime, poverty, and political corruption. No doubt Baltimore’s reputation is partly informed by this portrayal.

To be sure, Baltimore struggles with such social ills. Like many other markets in the Washington-to-New York corridor–such as Philadelphia, Wilmington, and Trenton–the city is often passed over for CRE investment opportunities in the gateway markets to the north and south. Revitalization is not an easy task, and analysts have made their fair share of gloomy economic forecasts for the city. Still, there are some glimmers of hope.

CoStar Group recently reported that Baltimore’s vacancy rate for class A office properties decreased to 11.9%. That puts it between Philadelphia (11.6%) and Wilmington-Newark (12-15%, depending who you ask). At the very least, a slight bump in office absorption shows some amount of economic growth. Read the rest of this entry »

Mensch 

Noun, informal. A decent, upright, mature and responsible person. 

Schlemiel 

Noun, slang. An awkward, clumsy, or unlucky person whose endeavors tend to fail; a loser. 

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Mensch of the Week:

The City of Denver

After single-family, office real estate was one of the asset classes most hurt by the financial crisis of 2008-09. The factors that created the precipitous drop in office demand were something of a perfect storm: widespread corporate cutbacks (and outright closures) decreased the number of tenants, while changing workplace trends and more efficient technology limited the office footprints of many other companies.

Recent news of increased activity and values in the office sector is one clear indication of the overall economic recovery. Once again, companies have the confidence to expand and lease.

But the office recovery is more noticeable in certain markets, such as our Mensch of the Week: Denver, Colorado. According to research from CBRE (NYSE: CBG), the Mile High City enjoyed the greatest decline in vacancies among the top office markets surveyed in the first quarter.

Denver ended 2012 with a 15.1% vacancy rate but ended the first quarter of 2013 with a rate of 14.5%. While this pales in comparison to, say, downtown San Francisco, it shows strong improvement for the local market and looks especially positive when compared to the dismal national average (which has been hovering around 17% for quite some time). Read the rest of this entry »

Continuing our series of Top 10′s focused on specific asset classes, here is our list of the Top 10 Industrial Markets in the U.S. This ranking, based on each city’s 2012 transaction volume, comes from Integra Realty Resources’ Viewpoint 2013.

10. Atlanta

9. Inland Empire

8. East Bay

7. Seattle

6. North Jersey

5. Boston

4. Dallas Read the rest of this entry »

Here is another Top 10 based on data compiled and published by Integra Realty Resources in its IRR Viewpoint 2012. Take a look at this ranking of the Top 10 U.S. Office Markets of 2012:

Rankings are based on average price per square foot. 

10. Denver

 9. Dallas

8. Seattle

7. Boston

6. Houston

5. Chicago Read the rest of this entry »

This ranking is drawn from Business Insider’s Top 17 “Coolest” Co-Working Spaces.  Even though co-working and other business innovations have been discussed in the real estate community for some time now, it’s worth looking at how these unusual spaces (or collectives) can fit into the strategy of office real estate investors and operators. Here are my picks for Top 10 Co-Working Spaces in the U.S.: 

• Ace Hotel
• Citizen Space
• CoLab
• The Coop
• Green Spaces
• Indy Hall
• Jellyfish Cartel
• Link Coworking
•  Parisoma
• Officio

I found the Business Insider article through The Tenant Advisor, an excellent blog focused on workplace trends and office real estate. I’ve been quite interested in this subject as well, and have dedicated a number of posts to the open-space office layout that’s fundamental to most co-working setups. Let’s pause for a brief definition of Co-working, courtesy of you-know-who:

Coworking is a style of work that involves a shared working environment, often an office, and independent activity. Unlike in a typical office environment, those coworking are usually not employed by the same organization. Typically it is attractive to work-at-home professionals, independent contractors, or people who travel frequently who end up working in relative isolation Read the rest of this entry »

Looks like the results for our newest survey can be summed up with “all of the above.” Personally, I prefer the air hockey tables…

See our previous polls here.

Mensch:

Noun, informal. A decent, upright, mature and responsible person.

Schlemiel:

Noun, slang. An awkward, clumsy, or unlucky person whose endeavors tend to fail; a loser.

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Mensch of the Week:

Robert A.M. Stern, FAIA

Llenrock’s Mensch of the Week is often a newcomer to the industry spotlight, perhaps a successful dealmaker or newly promoted executive. But today’s Mensch, Robert A.M. Stern, is already a fairly illustrious figure thanks to numerous industry awards, a nationally recognized architecture firm, and his role as dean of the architecture school at some place called “Yale.”

So, being our Mensch of the Week isn’t exactly Mr. Stern’s big break. Even so, his integral role in designing the Philadelphia Navy Yard development, a sprawling mixed-use campus in South Philadelphia, deserves recognition.

The Navy Yard has been a much-needed success story for Philadelphia’s generally stagnant office market. This enormous, ultra-modern, sustainability-focused project has weathered a recession, real estate downturn, and resulting challenges in the investment world. Still, it has succeeded in drawing out-of-town companies like Urban Outfitters to the city. Years later, the project continues to grow.

To a great extent, the office/industrial/flex campus has succeeded because of the adaptability of its development partners–the Philadelphia Industrial Development Corp. (PIDC), Liberty Property Trust (NYSE: LRY) and Synterra Partners.

Without this flexibility, the Navy Yard may have faced the same fate as numerous other projects throughout the country, which were stalled, canceled, or reduced in scope due to the recession’s challenging fundamentals. Many once-promising projects couldn’t adjust to the very different CRE market that emerged from the economic downturn.

The tenant list and layout of the Navy Yard are quite different from those of the original design. The Inquirer’s Linda Loyd explains,  Read the rest of this entry »

According to an investor survey published by the Urban Land Institute and PriceWaterhouseCoopers, Dallas and Houston are two of the most popular markets for commercial real estate investment in 2013. Dallas shows up at number 9 in the Top 10 CRE markets list, beating Orange County. Houston shows up at number 5, ahead of Boston, Seattle, and Washington, D.C. Integra Realty Resources estimates Dallas has or will have 794,000 SF of office real estate under construction, while Houston has 1,000,000 SF. Compare that to Philadelphia’s 300,000 SF.

The office pipelines for Houston and Dallas signal significant growth, consistent with the ULI’s reports of these markets’ appeal to investors. Obviously, economic vitality and population growth are often a product of numerous factors. Healthcare, technology, education, and other industries are certainly major drivers for the ongoing growth of these cities and their commercial real estate activity. But no one will dispute the fact that the energy sector–in this case, “Big oil”–is fundamental.

Thanks to their proximity to oil assets both on land and off shore, these two cities host operations for some of the biggest energy companies in the world: BP America, Citgo, ConocoPhillips, ExxonMobil, Gexa Energy, and so on. The high concentration of energy interests in these cities has made some of their real estate markets, in the opinion of many, “recession-proof.” Read the rest of this entry »