In “the first wave of
post-recession apartment developments coming out of the ground, small, dense,
urban, and cool are ruling the day — even outside core downtown markets,” according to Multifamily
Executive. Architects and developers currently working on apartment projects
say that smaller but denser projects are being built, due in part to financing
These projects are heavily
weighted toward one-bedroom apartments with a footprint that has shrunk by 20
percent: Unit size averages 600 sf for student housing, 700 sf for mid-market
projects, and 800 sf for luxury. They feature galley kitchens, undefined living
spaces, and narrower bedrooms because who needs room for a big TV today? Just
hang the flat-screen on the wall.
While there may not be
much counter space in the kitchen, those counters need to be granite or some
other high-end material. Exposure to TV design shows and the rash of broken
condos converted to multifamily have raised the bar among Gen Y renters for high-end
finishes, experts say.
Common areas are also
changing: Instead of separate, special-purpose rooms, one or two large rooms
are divided by furniture or plants into different purposes, such as business
center, cafe, and lobby. And clubhouse media rooms are so yesterday — screening
areas have moved outdoors as part of the barbecue, pool, or rooftop deck social
Canada Office Market Midyear 2011
Looking for a recovering
office market? Go north to Canada, where the midyear 2011 national office
vacancy rate stands at 7.8 percent, down from 9.9 percent a year ago, according
to Avison Young. Six of the 12 major markets tracked have vacancy rates below
the national average, including Vancouver at 7.6 percent. Although Toronto’s rate is 8.4 percent, it
fell 280 basis points from last year, the largest drop in the major markets,
followed by Montreal with a 260 bps drop to 8.5 percent. Canada’s CBD vacancy rate is an
enviable 6.2 percent, down 200 bps from a year ago.
Such figures have
kick-started new development: More than 8 million sf is under construction in
Canada, with 70 percent of it preleased. More than two-thirds of the new
development is in downtown areas, with 81 percent of that space preleased.
What’s the secret to the
recovery? Well, job growth helps. Canada’s unemployment rate in August was 7.3 percent,
having added 223,000 private-sector jobs in the past year.
Changing Made-Up Minds
Research has shown that
when people make mistakes, they try to justify them — understandable human
reaction — but can such behavior affect the market when those people making
mistakes are influential participants? Yes, say two business professors who
looked at the behavior of more than 6,200 stock analysts over an 18-year period
from 1990 to 2008. Analysts who made extreme forecasts — either above or below
the market consensus — tended to dig in their heels and justify their extreme
views, even after being proved wrong. Their attachment to their original views
led them to disregard companies’ new earnings forecasts when revising their yearly
forecasts and caused them to remain less accurate in succeeding forecasts.
This “escalation of bias” helped contribute to the
financial crisis of 2008, says John Beshears, one of the researchers and an
assistant professor of finance at the Stanford Graduate School of Business.
Many lenders and investors refused to recognize signs of a weakening real
estate market until it was too late. Beshears believes this research could also
shed light on how credit analysts and loan officers view the performance of
financial assets. “Psychological
factors like this play an important role in how people form expectations about
Hospitality — Lodging
lenders say that their two biggest considerations in loan requests are cash
flow and location, according to the sixth annual International Lodging Finance
Council survey. Lenders perceive urban gateways as the lowest risk while resort
locales cause the most concern.
Industrial — Detroit was
the seventh best-performing logistics market in the nation, absorbing 1.4 msf
during the first half of 2011, according to Grubb & Ellis. Pittsburgh was
the worst-performing market, with its vacancy rate going from 7.8 percent to 13.7
percent in six months.
Multifamily — The national
vacancy rate declined to 5.1 percent in 3Q11, just 30 basis points above the
historical norm, according to CBRE. YOY, 3Q11 apartment vacancy rates declined
in 53 out of 60 markets and 18 markets had vacancy rates at 4 percent or below.
Office — Overall, 3Q11
leasing activity was down 26 percent from 3Q10, a sign of waning business
confidence, according to Jones Lang LaSalle. Despite that, the market has
absorbed 75 percent more space YOY, a total of 24.5 msf, the majority of it in
the energy and high-tech sectors of Texas and the West Coast.
Retail — Big boxes
increasingly are becoming small boxes as Best Buy, Staples, and Office Depot
look to shed square footage, according to Chain Store Age. In addition,
retailers J.C. Penney, Old Navy, and Sears are downsizing, with Sears actively
leasing out space to other retailers such as Forever 21 and Whole Foods.