Market Trends Online(12)

Freedom Tower developer Larry Silverstein recommitted to delivering the four office towers replacing the World Trade Towers by 2012. Currently, the first tower’s steel structure is about 70 feet high. When completed, the project will deliver 10.6 million sf of space, which includes 488,000 sf of retail.

Self-Storage Snapshot

Region Capitalization Rate (%) Occupancy (%) Average Rent (psf/month)
North Central 8.2? 85.2? $.61, ?7.6%
Northeast 8.7? 79.0? $.85, ?2.2%
South Central 8.3? 83.9? $.62, ?4.8%
Southeast 7.7? 74.9? $.76, ?5.0%
West 7.1? 83.0? $.94, ?6.1%

Source: Marcus & Millichap

2008’s Hot Multifamily Markets

  • Salt Lake City
  • Inland Empire, Calif.
  • San Jose, Calif.
  • Minneapolis
  • Portland, Ore.
  • Seattle
  • San Francisco
  • Denver
  • Nashville, Tenn.
  • Philadelphia

Source: Multi-Housing News

Florida Industrial Stats 3Q07

Market Vacancy Rate (%) Millions of SF
Under Construction
Fort Lauderdale 4.9 2.8
Jacksonville 5.2 2.3
Lakeland 4.9 0.5
Miami 6.3 0.7
Orlando 6.5 1.0
Palm Beach 4.2 1.3
Pinellas 3.9 0.03
Tampa 3.9 0.9

Source: Cushman & Wakefield

Boston Tenants Go the B Route

A lack of class A space and escalating rents drove many Boston office tenants to lower-quality buildings, increasing class B rents by 14 percent in 2007, says the Boston Business Journal. A lack of new class A developments has 171 companies vying for 4.6 million sf of high-quality space in a market that has 3.5 million sf vacant. Class A rents increased almost 50 percent in 2007. No new buildings are scheduled to open for the next two years.

National Office Snapshot

  • 68 million sf of office space will be delivered in 2008, up from 55 million sf delivered in 2007.
  • 2008 year-end vacancy rate should increase to 13.4 percent, up 80 basis points from 2007.
  • Effective rents will rise by 5 percent, down from a 10 percent increase in 2007.

Source: Marcus & Millichap

There will be more empty beds at luxury hotels this year: A 3.8 percent occupancy decline is forecast.

Hotel Outlook Mixed

Hotels in Oahu, Hawaii, Los Angeles, New York, and San Francisco are expected to be top performers this year, with foreign tourists enjoying favorable exchange rates filling the rooms to 70 percent or greater capacity, according to PKF Hospitality Research in Atlanta. Not so lucky are San Antonio and Fort Worth, Texas, and Jacksonville, Fla., where new supply may lower demand growth. Nationwide the U.S. will add about 115,000 new hotel rooms this year, and average room rates are estimated to rise 4.7 percent. Midscale hotels without food and beverage are expected to earn the most money this year –- about a 3.4 percent increase in revenue.

Multifamily Conditions Remain Strong

The number of renters last year in professionally managed buildings increased by the largest amount since 2000, according to a National Multi-Housing Council survey. However, last year multifamily starts and completions were at their lowest levels since 1996 and 1997 respectively, says Mark Obrinsky, NMHC chief economist. That’s about one-third less than needed to keep up with forecasted renter demand. With nearly 2 million renters coming on line in the next 10 years, multifamily housing stock needs to increase by 250,000 new units a year.

Worth Quoting

“A significant piece of legislation currently in the Senate, the Farm Bill (H.R. 2419), includes a provision which places limitations on certain like-kind exchanges. This bill would prohibit exchanges of ‘improved real property’ with ‘unimproved agriculture real property.’ In other words, the owner of a building cannot use the 1031 exchange procedure to attain ‘unimproved agriculture real property.’ Additionally, this bill imposes a ‘toll charge’ or tax on any person selling the affected property. After strong opposition from NAR, this provision will likely not be included in the final version of this bill.”

-- CCIM Legislative News, February 2008

Read about other legislative issues related to commercial real estate at http://www.ccim.com/members/govaffairs/bulletins/VolXII4.html