Market Data

Market Trends(15)

Corporations Not Investing

Despite the fact that corporate profits are at their highest level in 40 years, today's chief executive officers are not investing back into business operations, says Deloitte Research's Chief Economist Carl Steidtmann. As a share of business investment, cash has risen from 68 percent in the mid-1990s to more than 145 percent in 2005 and corporate America has reduced its debt by 5 percent since 2001. But instead of investing in capital improvements, companies are hoarding their cash, possibly preparing for another round of expensive takeovers, Steidtmann says. Part of the unwillingness to invest may be anxiety about the future, he adds. CEO expectations are at the lowest level in the last four years, according to the Conference Board CEO survey. Such anxiety could become a self-fulfilling prophecy as corporations continue to cut back out of fear.

photo credit: The Coffee Office

Road Warriors' Street Club

Look out Starbucks: Not only is Dunkin' Donuts aiming for your Frappuccino drinkers, but The Coffee Office wants to lure your mobile office workers into its cozy confines. This Canada-based company has locations in Windsor and London, Ontario, and is finalizing sites in Calgary and Fort McMurray, Alberta, and Detroit. Requiring just under 5,000 sf, this franchise provides both a public café with food service and a members-only section that is divided into executive offices, mini board rooms, meeting booths, private workstations, and even sleeping modules, available free or on a per-use basis with a corporate or individual membership. The high-tech yet casual environment features plasma screen TVs, wireless access, and teleconferencing, as well as other business services.

Briefly Noted

• HOSPITALITY - Charleston, S.C., Jacksonville, Fla., Kauai, Hawaii, Mammoth Mountain, Calif., Portland, Ore., Sacramento, Calif., Savannah, Ga., and Scottsdale, Ariz., are among the top "hidden gem" markets for lodging investments, chosen by Jones Lang LaSalle Hotels.

• INDUSTRIAL - Institutional investors now account for almost half of warehouse sales, an increase of more than 30 percent in the last few years, says Marcus & Millichap.

• MULTIFAMILY - Nursing homes are the slowest-growing seniors-housing segment, with only 227 beds added in the top 30 markets since 4Q04, despite a slight occupancy rise, according to the National Investment Center for the Seniors Housing & Care Industry.

• OFFICE - The office investment market will continue to outperform other property markets for total returns over the next five years, with an expected annual return of 8.1 percent, according to Property & Portfolio Research.

• RETAIL - "A host of buyers are looking for value-added shopping centers, redevelopment opportunities, and other riskier deals with upside potential. Younger investors in particular seem willing to get creative," says Michael Dee, senior vice president, national director of retail at Grubb & Ellis.

The Retail Buzz

Retail landlords voted to choose this year's winners of the International Council of Shopping Centers' Hot Retailers Awards.

Citi Trends: This chain of 250 apparel and home décor discount stores wants to add around 45 new locations in predominantly ethnic minority locations of at least 25,000 people. Justice Just for Girls: Five stores going on 75, this clothing and accessory chain targets seven- to 14-year-old girls in malls and power centers.

Massage Envy: Offering massage for the masses for a monthly membership fee, this chain of 108 stores plans to more than double its number of locations in open-air centers near restaurants and supermarkets.

Muttropolis: Finding no shortage of consumers willing to pay $95 for a dog collar, this California-based chain of four 2,000-sf pet boutiques plans to take its canine couture to 10 new locations, preferring upscale lifestyle centers.

Teavana: Planning to double its store base to 80 this year, this tea specialty shop located in malls may expand into open-air centers and urban storefront locations.
photo credit: Muttropolis

Student-Housing Stats

• Units with three or more bedrooms have the highest median rent growth rates, ranging from 9 percent to 13 percent.

• Seven percent is the average rent growth rate across all apartments.

• Most student-housing providers surveyed offer 12-month leases.

Source: Student Housing 201: 2004-2006 Rent Growth in 64 College Towns

Top Industrial Investment Markets

1. Fort Lauderdale, Fla.

2. Oakland, Calif.

3. Palm Beach County, Fla.

4. Orange County, Calif.

5. Los Angeles

Source: Marcus & Millichap

Commercial Real Estate Professionals Unprepared

While most commercial real estate professionals surveyed say they are adequately prepared for disasters, nearly 40 percent never have tested their disaster plans, making them the lowest-ranked in disaster preparedness among six private-sector industries surveyed by Texas A&M University System's National Emergency Response & Rescue Training Center. Seventy-seven percent of commercial real estate respondents have updated disaster response and recovery plans within the past year, but 28 percent reported they do not train employees on their disaster preparedness plans.

Environment Key to Productivity

Office leasing brokers may help tenants find the right space by educating them about the effects of good workplace design on worker productivity. While companies give a lot of thought to locating in cities that attract skilled creative workers, they may be squelching productivity by not investing in good office design, according to the Gensler 2006 U.S. Workplace survey. Only 50 percent of workers surveyed say that their current workplace design encourages innovation and creativity, and office workers say they would be 21 percent more productive in a better designed working environment. Lack of space, too few quiet areas, uncomfortable workstations, and bad layout and design top the list of problematic physical features. Poor productivity due to workplace design costs U.S. corporations $330 billion annually, the survey estimates.

Urban Retail Rents

Annual psf triple net, Summer 2006

San Francisco, Union Square $330

Boston, Newbury St. $165

Philadelphia, Walnut St. $70

San Antonio, Riverwalk $40

Orlando, Fla., Downtown $25

Cleveland, Warehouse District $17
Source: Grubb & Ellis

Strong Words for New Orleans

Normally mild-mannered Urban Land Institute officials had strong words for New Orleans city leaders as they plan to rebuild after Hurricane Katrina. Part of a panel of 50 specialists who convened on Katrina's one-year anniversary, ULI experts decried the lack of organization and leadership for redevelopment. "Given the extraordinary circumstances that happened to your city, you cannot solve this incrementally," said ULI fellow and former Pittsburgh, Pa., mayor Tom Murphy. "You need an agency or authority that has people who wake up every day and their job is simply to make development happen." In July the U.S. Department of Housing and Urban Development awarded Louisiana $4.2 billion in community development and block grants in addition to a previously awarded $6.2 billion.
photo credit:Federal Emergency Management Association

Net Lease Cap Rates Continue to Rise

"The significant increase in supply has led to rising cap rates across all three net lease sectors ... The market, which most likely will be flooded with deals to close by year-end, simply cannot support the lower yields ... Moreover, a significant majority of the lower cap rate deals currently on the market have remained available since 2005, with sellers unwilling to change their pricing expectations.

-Boulder Net Lease Funds, Market Report, 3Q2006