Market Data

Market Trends Online(17)

June 2006

Regional Roundup
Industrial

Orlando Industrial Condo Snapshot
Florida residential is not the only condo-crazy market -- industrial condos also have a strong showing in the Orlando area.

Condos

Existing Supply

Pricing

Flex

761,381 sf

$125-$180 psf

Office/warehouse

428,924 sf

$85-$160 psf

2006 new product deliveries

644,420 sf

Flex - $150-$200 psf
Office/warehouse - $115-$155 psf

Source: GVA Advantis

Office
More Jobs in Boston
Robust job growth in the greater Boston area helped send the 1Q06 office vacancy rate below 10 percent for the first time since 2002, according to Jones Lang LaSalle’s Market Intelligence Monthly. Job growth in the office-using sector more than doubled with financial services jobs increasing from 1,100 to 4,700 -- good news for Boston’s CBD office property owners. Net absorption in the greater Boston area totaled nearly 1.2 million sf in the first quarter.

Retail
Santa Monica Snapshot

Located a block from Santa Monica’s prime retail strip, Third Street Promenade, the fully leased 36,535-sf retail/residential Tides Building sold for $18.7 million in a 1031 exchange.
Image: Madison Partners



From Malls to Mixed Use
Congress of New Urbanism’s “Malls into Mainstreets: A Manual for Converting Dying Malls into Vibrant Communities” presents the lessons learned from studying six mall-to-mixed-use-development conversions, including:

Timing is everything. Consider such factors as market conditions, ownership, anchor status, and site and location factors.

Use parking carefully. Take advantage of shared parking opportunities, especially in mixed-use situations that include office, retail, and residential users.

Change is good. Many properties require extensive demolition as consumer and tenant preferences for physical space have changed dramatically over the years.

Go public. Incorporate civic facilities such as parks, museums, and town halls into redevelopment plans to broaden their appeal and foster a sense of public ownership rather than private development.

Photo Caption:Yesterday’s mall configuration of a fortress-like structure surrounded by a sea of parking has been turned inside to create the popular lifestyle center of today.
Image: Congress of New Urbanism

Managing Mixed-Use
A combination of strong local restaurants and national retailers may be the secret to a good mixed-use tenant base, according to Shopping Centers Today. For an anchor, developers aim for a winning combination of destination and convenience as they consider what attracts residents, visitors, and office workers to mixed-use developments. Often an upscale grocery store such as Whole Foods or Bristol Farms fills the bill. Signing national credit tenants now is easier given the success of mixed-use and the willingness of big-name tenants to create new store formats and adjust prototypes. Leasing small spaces to local restaurants often is easier than trying to find mom-and-pop retailers and they add to the development’s variety. Yet tenanting mixed-use remains a challenge: Each use -- office, residential, retail -- needs its own entrance separate from the other uses, and each segment needs to be economically feasible on its own, based on the area’s demographics.

Shopping for Premier Retail Space
Top U.S. psf rental rates (3,000 sf minimum)

1. New York’s Fifth Avenue: $800

2. San Francisco’s Union Square: $330

3. Los Angeles’ Rodeo Drive: $300

4. Chicago’s Michigan Ave. at Oak St.: $262.50

5. San Jose, Calif.’s Westfield Valley Fair: $200

Source: Grubb & Ellis Retail Market Trends Summer 2006

The Award Goes to…


Caption: Forest City Commercial Development projects Victoria Gardens in Rancho Cucamonga, Calif., and Stapleton District 1, the first phase of Denver’s Stapleton Airport redevelopment, won two of the Urban Land Institute’s2006 Awards of Excellence. The awards recognize the entire development process including leadership, community contribution, public/private partnership, and environmental issues. To read about the other winners go to www.uli.org and click on Awards.
Images: Forest City

Investing in Infrastructure
Recently the commercial real estate market has seen too much money chasing too few properties, but some of that private capital may take a detour into infrastructure investment, according to Ernst & Young’s Spring 2006 Global Real Estate Newsline. Given the crumbling state of U.S. highways and bridges and shortage of local and federal funds for infrastructure repair, the public/private partnership model seems a natural solution. Such projects are common in Australia, Europe, and increasingly Asia. In these public/private partnerships, or PPPs, governments solicit bids from private-sector companies to design, build, and operate infrastructure projects usually under a long-term lease arrangement. Companies then solicit financing from infrastructure funds created by banks and other sponsors. The Australia-based Macquarie Group is the most active fund in the U.S., but several European funds are interested in expanding into the U.S. market. Macquarie and Spanish company Cintra S.A. paid the state of Indiana $3.85 billion to operate the Indiana Toll Road for the next 75 years in exchange for toll and concession revenues. The two companies also paid the city of Chicago $1.8 billion for a 99-year lease on the Chicago Skyway Bridge, an eight-mile toll road connecting the city to Indiana.

Seniors Housing Update

Sector
Median occupancy
Median price per unit
Independent living
97%
$130,000
Assisted living
95.8%
$116,000
Skilled nursing
94%
$40,000 per bed

Source: Marcus & Millichap

1Q06 Office Asking Rents

High
Middle
Low
Class A: San Diego, $35.64 psf
Austin, Texas, $22.27 psf
Boise, Idaho, $15.60 psf
Class B: Washington, DC, $29.98 psf
Cleveland, $17.56 psf
Wichita, Kansas, $11.60 psf
Source: Grubb & Ellis

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