Market Trends Online(7)
Office transactions totaled $99.7 billion last year, a 34
percent increase over 2004. Office’s allure should continue this year as the
biggest rent and occupancy increases are still ahead.
Supply and Demand:New
product is adding just a little more than 1 percent to existing supply;
conversions and redevelopment are further reducing supply.
Best Investment Bets: Tech markets such as Seattle,
Austin, Texas, Denver, and San Jose, Calif., as well as high-growth Phoenix
and Orlando, Fla.
Good Bet for Growth:Medical
office; during the next four years the 55-plus age demographic will increase
14.0 percent compared with a general population increase of 4.5 percent.
Highest expected 2006 office
employment growth:Austin, Texas, Fort Lauderdale, Fla., San Antonio,
Texas, Tampa, Fla., Phoenix, and Tucson, Ariz.
Sources: NAR Commercial Real Estate Outlook; Marcus &
Millchap National Office Report
Windrose Medical Properties Trust
recently agreed to purchase three Texas
medical properties from Medistar Corp. totaling 231,530 sf for $81.3 million.
The deal included two Houston properties and
this integrated medical plaza in San
CRE Returns Hit All-Time High
Annual investment returns for U.S.
commercial real estate hit an all-time high of 34 percent in 2005 according to
the MIT Center for Real Estate’s new
Transaction-Based Index. The index is based on transaction data from the National
Council of Real Estate Investment Fiduciaries property database of nearly 5,000
properties nationwide. The previous highest return was 23 percent in 1997 and
over the 21-year period indexed, the average annual return was around 10
percent. The four major property types all showed high returns for last year,
ranging from 29 percent to 40 percent. The current index covers 1984 to 2005
and will be updated quarterly by MIT’s Commercial Real Estate Data Laboratory.
To view the set of 15 indices, log on to http://web.mit.edu/cre/research/credl/tbi.html.
How Commercial Real Estate Stacks Up
MIT’s commercial real estate Transactions-Based
Morgan-Stanley EAFE International Stock Index
NAREIT Equity REIT Index
Ibbotson Small Stocks Index
Lehman Bros. Govt./Corp. Bond Index
Standard & Poor’s 500
New Measures Cropping Up
The acceptance of commercial real estate as an asset class
has prompted professional organizations to develop measurement indexes. The
National Association of Realtors released its new Commercial Leading Indicator
for Brokerage Activity in February. This quarterly survey relies on 13 economic
variables including industrial production; real estate investment trust price
index; National Council of Real Estate Investment Fiduciaries’ total return;
personal income minus transfer payments; jobs in financial activities,
professional business service, temporary help, retail trade, and wholesale
trade; initial unemployment insurance claims; manufacturers’ durable goods
shipment; wholesale merchant sales; and retail sales and food service. The
inaugural index predicted a continuing broad recovery in commercial real estate
through the end of this year.
of Industrial and Office Realtors also has released its Commercial Real Estate
Index, which indicated that industrial markets are ahead of office markets in
recovery. This is a diffusion index based on a survey of SIOR members in 114
markets who were asked about industrial and office leasing, asking rents,
vacancy rates, subleasing, concessions, development, site acquisition, pricing
levels, and the local economy.
Market Outlook -- 1Q06
2006 rent growth
2006 lowest vacancies
Ventura and Orange counties,
and Riverside, Calif.;
New York; Miami
Palm Beach, Fla.; Las Vegas; Los Angeles, Riverside, and Orange
Francisco, Las Vegas, San Diego, Seattle, W. Palm Beach, Fla
Source: NAR Commercial Real Estate Outlook
Being Spaces -- New Property Type?
While New York
leads the market for 2006 office investment, some of its other trends may bear
watching too. For instance, the third-room concept is cropping up in various
neighborhoods. Condominium and apartment dwellers with no room for a home
office use these commercial living room spaces for writing, reading, and
meeting friends and associates. New
York’s Paragraph and the Village Quill are
members-only writing centers. The 2,500-sf Paragraph (www.paragraphny.com/space)
provides a loft space with 38 work stations, a living room, and a kitchenette
area. The Village Quill (www.villagequill.com/) is 1,700-sf space with 20 work stations
equipped with Internet and wireless connections. Monthly access fees range from
$80 to $132.
Two Rooms (www.tworooms.net/Home.aspx) combines incubator
office space with childcare for freelancers and home-based workers. This 2,200-sf
communal office provides wireless Internet access, computers for rent, basic
office equipment such as a fax machine, copier, and scanner, and a receptionist
for package delivery and other business duties. Half of the space is devoted to
childcare and a kitchen area. The facility operates as a nonprofit organization
and offers a variety of membership-level as well as drop-in fees.
Paragraph and the Village Quill are two examples of the
“third room” space trend that offers shared office and living room space for New York City apartment
and condominium dwellers.
Can You Bank on It?
While bank branches gobble up retail real estate in almost
every imaginable neighborhood, E-Loan co-founder Chris Larsen is moving in the
opposite direction: creating the first U.S. people-to-people lending
marketplace. Prosper (www.prosper.com) is a Web-based lending environment modeled
after eBay. Would-be lenders bid on loans and can base their decisions on
credit scores and default history or borrowers’ own personal stories, which
include the amount they need, why they need it, and the interest rate they are
willing to pay. Recent borrowers include a developer looking for $15,000 toward
converting a Victorian nursing home into 21 condominuims, an online ticket
broker looking to fund season-ticket purchases, and a cat breeder who needs $2,200
to extend her line of Himalayan cats. While Wachovia and Washington Mutual
probably aren’t worried about the competition, Larsen has lined up some fairly
impressive backers, including Fidelity Ventures Benchmark Capital.
Source: International Council of Shopping Centers
Ready for the Big League?
Can your town support a major league sports team? Check out
the ratings of 176 metropolitan areas and the amount of personal income
available compared with the amount it takes to support a professional team.
For more information on the original ratings, go to http://www.bizjournals.com/specials/2006/0213/major_metros_chart.html?hbx=slide_sport_article.
Coming to a Strip Mall Near You
The fast-casual restaurant marketplace is overflowing with
concepts and rollouts, ready to cash in on a projected $70 billion market this
year, according to Fast Casual magazine. More than 300 brands are feeding the
frenzy for dining out and curbside takeout, the hottest fast-casual trend. Takeout
sales are predicted to reach $126 billion by 2007, which means fast-casual
dining establishments will be looking for outpads and endcaps rather than inline
concepts on the Fast Casual movers-and-shakers list include anything from
Raving Brands in Atlanta, which markets Moe’s Southwest Grill, Boneheads, Doc
Green’s Gourmet Salads, Shane’s Ribshack, and Mama Fu’s Asian House among
others. Buffalo Wild Wings Grill & Bar also makes the list as the one of
the top 10 fastest-growing restaurant chains, with approximately 200 locations.
Camille’s Café also made the list, with 80 sites in 35 states and 800 in
development. And if your town doesn’t have Mexican-themed fast-casual dining,
someone’s not doing his job -- 11 brands are listed in the top 100 list, more
than any other type of food.
Camille’s Café is one of the many growing chains in the
fast-casual dining market.
Super Sites Come Out of Hiding
Given the competition from residential and retail
development, industrial site specialists are having a difficult time finding
large tracts of land for industrial development. Visit Site Selection Online to view a chart listing the
top 50 U.S.
sites as well as who to contact for more information. http://www.siteselection.com/issues/2006/jan/p65/superSitesChart.htm