High-Priced Office Markets
The location for the top five most
expensive streets for office space — San Francisco Bay Area, New York City,
Fairfield County, Conn., and Washington, D.C. — haven’t changed in two years,
they’ve simply shuffled places, according to Jones Lang LaSalle’s recent
report. However, a comparison of the 2013 and 2011 rankings illustrate the
difference between the fates of the No.1 and No.5 markets. The Bay Area
registered a 30 percent increase in average market rents psf from 2011 to 2013;
No.5 ranking Washington, D.C., clocked a 33 percent decrease in average office
rents psf. In between, New York, Silicon Valley, and Fairfield County
registered increases of 12 percent, 21 percent, and 14 percent respectively.
“The pendulum is slowly shifting
from a tenant’s market to a landlord’s market. Supply/demand fundamentals
suggest the bulk of the country will be pushing office rents upward by this
time next year.”
— Kevin Thorpe, Chief Economist at
Cassidy Turley, 3Q13 Office Market Report
Hospitality — Fifteen of the top 25 hotel markets
tracked have recovered their prerecession peak revenue per available room rate
as of August, according to STR. Two more markets are expected to recover by
year-end, with four more recovering in 2014 and the final four in 2015. San
Francisco tops the list with a $148.60 RevPAR, a 20 percent increase over its
Industrial — No one is sure how etailing will change
U.S. logistics, but CBRE suggests that a combination of large national or
regional distribution centers and local or urban parcel hubs will be the norm
going forward. Online retailing will support “a substantial expansion in
leasing demand for smaller cross-docked parcel delivery centers that are close
to major urban areas, with parcel courier companies accounting for a growing
proportion of demand,” says Richard Holberton, director of CBRE Econometrics.
Multifamily — The average overall apartment
capitalization rate is at 5.6 percent, according to the 3Q13 PwC Real Estate
Investor Survey, the lowest
cap rate in five years. Investors surveyed for the report see cap rates holding
steady for the next six months.
Office — Nine of the 13 largest markets issued
declining office vacancy rates in 3Q13, according to CBRE. Dallas showed the
largest decline — 100 bps — followed by Phoenix, Washington, D.C., and Seattle.
— Is it time for new big-box development? Perhaps says Marcus & Millichap’s
3Q13 Net-Leased Report.
While big-box retailers are downsizing to smaller formats in urban areas,
elsewhere the infill inventory is shrinking due to re-leasing during the
recession. Net lease sales of big-box product increased 16 percent YOY, as
appliance, furniture, and DIY enjoyed brisk sales, spurred by a stronger
“The lack of a knee-jerk reaction to higher interest
rates on the part of investors also reflects their confidence in the industry.”
— 3Q13 PwC Real Estate Investor Survey
More than 500 comments were
submitted to the Financial Accounting Standards Board and the International
Accounting Standards Board’s advisory committee, many of them criticizing the
plan to overhaul lease accounting rules next year. CCIM Institute participated
in coalitions that submitted comments to FASB/IASB. Concerns specific to the
real estate industry include:
• Increase in recorded lessee liabilities would
result in unexpected technical violations of financial debt covenants, offering
lenders the opportunity to restrict credit availability.
• Lenders will likely require monetary penalties
that violate debt covenants.
• Changes would increase the cost of lending and
reduce availability of credit.
• Firms would face increased administrative
costs for financial reporting, accounting functions, and internal controls.
• Companies may seek shorter lease terms,
resulting in reduced borrowing capacity for investment real estate.
FASB/IASB plans to make a final decision in 2014 with a
goal of implementing new rules in 2017.
Go to CCIM.com for further updates on current legislation and look for the
2014 Legislative Outlook in January/February 2014 CIRE.