- While 1Q06 warehouse rents dropped slightly, they are up
5.5 percent year over year and new construction is up 13.2 million sf from a
year ago to 40.2 million sf, according to Colliers International.
- Midscale without food and beverage projects are up 120
percent over the last hospitality cycle peak, with a record of 1,328 midpriced
hotels under construction, adding 113,935 rooms, says Lodging Econometrics.
- Chicago was among the top five markets for absorption in
1Q06, along with Dallas, Houston, Atlanta, and Washington, D.C., according to
Grubb & Ellis.
- Immigration increases, fewer completions, and higher
interest rates are pushing up rental rates, with the highest rates in West Palm
Beach, Fort Lauderdale, Miami, and Orlando, Fla., followed by Las Vegas;
Riverside, Calif.; Los Angeles; and Orange County, Calif., says Ron
Terwilliger, Trammell Crow Residential chairman and CEO.
- Sales for REIT mall tenants rose faster than occupancy costs
last year, with Taubman Centers reporting a 9 percent increase,
Simon Property Group up 5.4
percent, and CBL & Associates up 4.1
percent, while all three saw occupancy costs decline slightly, according to
Shopping Centers Today.
os Angeles' Subway Terminal Building retained much
of its grandeur when it was redeveloped into Metro 417 - 274 luxury rental
units designed by Thomas P.
Cox: Architects - and 100,000 sf of office and
retail space. The National Associatio
n of Home Builders 2006 Pillars of the
Industry Awards chose the property as the best reha
bilitation of an apartment
Photo credit: Eric Figg Photography
Spreading the Word
As commercial real estate grows more complex, companies require the best
and the brightest young minds to stay on the cutting edge. But introducing
young people to commercial real estate careers and presenting the plethora of
opportunities available is no easy task. An Urban Land Institute initiative
reaches out to young people where they live - in between those tiny white iPod
earbuds. ULI is offering nine free podcast downloads that highlight the process
of carving out a real estate career based on Inside Track to Careers in Real
Estate, written by Stan Ross, chairman and senior fellow of the University of Southern
California Lusk Center for Real Estate. The podcasts are available through
iTunes.com or at www.uli.org/career.
Commercial Real Estate Women Network members also are targeting teenage
girls. CREW chapters presented "CREW Careers: Building Opportunities"
in 19 major markets this spring through local girls' groups such as Girl Scouts
and Girls Inc. The program is a CREW Foundation initiative and is sponsored by
Cushman & Wakefield and KeyBank.
Another Kind of Fast Food
Getting retail landlords to lease them space was one of the biggest
challenges - and surprises - for the co-founders of Let's Dish, an up and comer
in the fast-growing business of meal preparation centers, according to Upsize
magazine. Five years ago few people had even heard of meal assembling; today,
there are more than 500 locations where families gather to assemble a month's
worth of home-cooked meals that they freeze and pop into the oven on busy
nights. The two leading meal preparation companies, Dream Dinners and Super
Suppers, each have about 150 stores in 30 states. Let's Dish is closing in on
them, with development agreements for 11 franchises in the Philadelphia area,
eight in Kansas City, Mo., seven in St. Louis, and 16 in the Boston area. The
stores lease approximately 2,400 sf of retail/restaurant space and set up their
assembly lines on kitchen islands to promote socializing along with meal
Photo credit: Let's Dish
While blue skies prevail in today's lodging sector, a few trends could
cloud future forecasts, reducing hotels' value, says Stephen Rushmore, MAI,
president of HVS International. Rampant brand consolidation could lead to
over-expansion and intra-flag competition for hotel owners. Continuous amenity
creep and rising labor costs are poised to cut into profits. And developers'
overvaluing of condominium-hotel units leaves no room for buyer appreciation. A
good rule of thumb: A room that averages $150 a night is worth a sales price of
about $150,000, he says.
Increasing Corporate Flexibility
Many projections of corporate space needs are off by 100 percent, says a
Boston Consulting Group survey of corporate real estate executives. The reason?
CRE execs are too far removed from the business units that use space and senior
management fails to recognize that shorter business cycles demand more real
estate flexibility and that flexibility comes at a price-but one worth paying,
says Sandy Apgar, a BCG research director. "Real estate executives must
make more room for uncertainty as they plan, ... work more closely with
individual business units, and come to terms with the need to pay a bit more
for flexibility later," he says.
Upping the Auction Ante
Real estate was one of the most active live-auction categories in 2005,
with commercial real estate auction sales increasing 4.9 percent, land and
agricultural real estate auction sales up 7 percent, and residential real
estate auction transactions up 8.4 percent, according to the National
Auctioneers Association. A breakout of 2005 sales figures shows that real
estate auction sales totaled $51.2 billion, second only to live-auction
A Healthy Niche
Medical office building investments increased 19 percent last year, as
this specialized niche attracted greater interest from private investors,
according to Marcus & Millichap. MOB investments are too small to entice
institutional buyers and real estate investment trusts, but 1031 exchangers
accounted for nearly one-third of last year's buyers.
Vacancy rates that are below general office rates and a growing over-50
demographic with increasing health needs are two reasons for the MOB upswing.
Retiree hot spots such as South Florida, California, and Phoenix should have
the strongest MOB demand, but rent growth and increased value should continue
nationwide. Chicago is one of the strongest markets outside of warm weather
locations, with a 4Q05 8.8 percent vacancy rate and very few completions adding
ew product. Limited new supply should also improve MOB investment conditions
in Philadelphia, New Jersey, and Boston.
Strong healthcare employment also bodes well for this sector. Healthcare
ment grew 25 percent from 1997 to 2005 and is expected to continue
its stable growth pattern. MOB net absorption has topped 2 million sf annually
for the past six years even though new completions have added 2.4 million sf
annually to the market. Strong demand for medical office condominiums has
fueled some of this growth and should continue to be a factor in the future.