Waterparks Make a Splash
Waterparks are no passing fad, according to hospitality experts. Thirty-three resorts with waterparks opened in 2007 and 55 are scheduled to open this year, a 32 percent increase that will result in 224 U.S. waterpark resorts by year-end, according to Hotel Waterpark Resort Research & Consulting. While the number of new properties is roughly divided between large destination resorts and smaller hotels that are adding or expanding waterparks, more than 300 proposals for new indoor waterparks or waterpark additions are being tracked by Hotel & Leisure Advisors, which bodes well for continued growth during the next two years. While waterparks dot the U.S., many of the indoor parks are located in the northern states for year-round use and provide attractive returns for developers, according to H&LA. Hotels with indoor waterparks post far better occupancy and average daily rates than other hotels in the same markets. However, waterpark developers face major hurdles in financing as costs can range from $150,000 to $300,000 per room. In addition, lenders’ knowledge of the waterpark sector may be limited, so well-documented feasibility studies and appraisal reports are necessary to fully explain market dynamics and income potential.
Key Lime Cove, a 414-room resort with an attached 65,000-sf waterpark, located halfway between Chicago and Milwaukee in Gurnee, Ill., is one of 55 hotel/waterpark resorts forecast to open this year.
Indoor Waterpark Resort Financing
||8% to 11%, approximately
0 to 300 basis points over prime rate
|7% to 10%
||2 to 3 years
||5 to 20 years
||5 to 20 years
|Debt coverage ratio
||1.2 to 1.5
||1.2 to 1.5
|Loan to value
||50% to 80%
||60% to 80%
Source: Hotel & Leisure Advisors
Industrial — Industrial markets worldwide are bracing for a slowdown this year, although North American markets connected to the energy or agriculture sectors are expected to remain very strong, according to Colliers International.
Hospitality —Last year’s 36 percent increase in hotel development was led by upscale and mid-market projects from the top franchise brands; however going forward, properties under 200 rooms with top brands and experienced developers will have the most success in getting financing, says Patrick H. Ford, CCIM, Lodging Econometrics president.
Multifamily — Apartment building sales were down 47 percent year over year in January, despite the fact that $7.6 billion of new properties were put on the market, according to Real Capital Analytics.
Office — This year’s office absorption is pegged at 36 million sf, about half of last year’s, with 55 million sf of new space, according to Robert Bach, chief economist for Grubb & Ellis. Class A rent growth will slow to 3 percent downtown and 2 percent in the suburbs.
Retail — On a risk vs. return scale of 10, CCIM respondents rated retail 4.7 and stated that the sector offered the lowest investment opportunities for 2008 due to slowdowns in consumer spending, less demand, higher vacancy, and overdevelopment, according to 1Q08 Investment Trends Quarterly.
New industries are starting to form clusters in various locations around the country. Most of these are high-technology related, which often develop near research universities. Many states are becoming savvier about attracting high-tech industries since those wages often are substantially higher than other employment fields.
||Upper Midwest and Plains states, Illinois, Louisiana
||Silicon Valley, Calif., Portland, Ore.,
Albuquerque, N.M., Boston
||Southern California, Orlando, Fla., Austin, Texas
||Quincy, Wash., and other small communities
with access to cheap electricity and land
||Orlando, Fla., San Antonio, Tucson, Ariz.
Source: Area Development Online
Top Industrial Leasing Markets
Percent change in economic rent
|San Jose, Calif.
Source: CB Richard Ellis
2007 Store Closings Down
Although recent news of retail store closings may prove different for this year, last year’s overall store closings were down 3 percent from 2006, according to International Council of Shopping Centers research. In 2007, 75 retail chains closed a total of 4,603 stores, compared with 4,730 stores shuttered in 2006. In addition, the number of store closings announced in the second half of 2007 was the lowest number for that six-month period since 2001, and 23 percent lower than July to December 2006.
Top 5 Store-Closing Retail Categories
Number of Stores Closed
Share of Total Stores Closed
|Home furniture and furnishings
Source: ICSC Research
Site Selection Factors Change
Speed of relocation seems to be a priority to corporations seeking new locations for business headquarters and manufacturing facilities according to Area Development Online’s 22nd annual corporate relocation survey. In ranking site selection factors, the availability of land and existing buildings rated much higher this year than previously. Available land was rated eight places higher and the availability of existing buildings, which didn’t even make the top 25 list last year, was 13th in this year’s survey.
Also ranking higher in importance to corporate executives making real estate decisions was the availability of fast-track permitting and the presence of environmental regulations.
Seniors Housing Cap Rates, 3Q07
Average Capitalization Rate (%)
Number of Transactions Involved
Source: National Investment Center for the Seniors Housing & Care Industry
While empty big boxes plague numerous cities, Budget Development Partners based in Winston-Salem, N.C., is converting such properties to climate-controlled storage facilities, according to the Charlotte Observer. The company has plans to redevelop a shuttered furniture store and a department store on Charlotte’s east side to fill the need for additional residential storage. Downsizing empty-nesters and renters who move into downtown condominiums and townhouses have limited on-site storage, says Reade DeCurtins, co-owner of Budget Development. The company already has converted empty big boxes in Florida and Ontario to self-storage facilities.
“By shutting up once in a while, you will appear more confident and intelligent to everyone you come in contact with. Plus, it’s amazing how much you can learn when you stop running your mouth.” — Mike Staver, CEO of the Staver Group and author of Do You Know How to Shut Up?
Drive is the overreaching determinant of a good salesperson, according to Christopher Croner and Richard Abraham, authors of Never Hire a Bad Salesperson Again. And drive is composed of three elements: need for achievement, competitiveness, and optimism. When hiring salespeople, companies should consider asking specific questions to pinpoint those traits:
• What is the toughest goal you’ve ever set for yourself?
• What’s the most competitive situation in which you have ever found yourself?
• Describe a situation you were in that demanded persistence.
Industrial Land Value Snapshot
|San Jose-Silicon Valley, CA
Source: Colliers International
This 90-acre closed landfill in Camden, N.J., is slated to be redeveloped into a commercial mixed-use project.
Pinnacle May Fold Casino Plans
Pinnacle Entertainment may abandon its plans to build a $2 billion casino on Atlantic City, N.J.’s boardwalk. While the project is not scheduled to break ground until late 2009, the company’s chairman and chief executive officer acknowledged the difficulty of obtaining funding if the credit markets don’t improve. Pinnacle bought the former Sands Hotel Casino and demolished it last year to make way for the new casino-hotel project.
Brownfields Per Capita
Baltimore, the most contaminated U.S. city per capita, has more than 88,000 brownfield sites, or one per every 30 people, according to Environmental Data Resources, a company that has compiled a list of the top 10 most contaminated cities per capita. Other cities in the top five per capita rating include Portland, Ore., Milwaukee, Los Angeles, and Minneapolis- St. Paul. A number of well-known secondary markets fell into the bottom half of the top 10 rating, including Indianapolis, San Diego, Detroit, Seattle, and Cincinnati. EDR defines contamination as the presence of manmade chemicals or other alteration in the natural soil.