Cluttons First Dubai Office Market Bulletin

Cluttons LLP, the Central London, UK-based real estate firm, has introduced its inaugural Dubai Office Market Bulletin for Spring 2016, which "seeks to unpick the complexities of Dubai's fragmented office market, while providing a detailed overview of the city's office landscape." The bulletin draws from the performance of 22 submarkets across the city in the first quarter of the year, which revealed that 13 markets showed no change in starting rents in 2015, while seven markets had notable increases, and two markets with lower limit rents decrease over the 12 months of 2015.

"Despite sustained demand, occupiers remain cost conscious and budget driven in the face of a softening global economic backdrop, with the key word for many being 'prudence'," said Faisal Durrani, Cluttons' head of research. "Landlords, by contrast appear to be slow to react to the cooling market, with many reluctant to move on asking prices and others demonstrating a lack of flexibility for lease terms at renewal. The emerging gulf between market reality and landlords' expectations is a concern, particularly for a market that is now starting to show signs of maturity."

According to the bulletin, with the establishment of two new free-zones in the form of Dubai Design District (D3) and Dubai World Trade District in 2015, Central Dubai has become the focus of many occupiers and developers, particularly as it has long suffered from a demand-supply imbalance in the face of rising requirement levels. D3's lower and upper limit free-zone rents have registered a 67% and 28% rise respectively since its launch, pushing them to between AED 150 psf and AED 165 psf.

To read the full report, click here. For more news and information visit Blumberg Partners.

CoStar: 2015 Best US Office Year Since 2007

CoStar Group has released its State of the U.S. Office Market 2015 Review and Forecast, which reflects that U.S. office net absorption topped 100 million square feet for the first time since the Great Recession. With the office vacancy rate down from 11.3% in 2014 to 10.8% at the end of 2015, CoStar cites broadening demand and constrained levels of construction contributed to tightening space availability in virtually every metro area.

"The market is overwhelmingly strong at this point in the cycle. With the momentum in the market, I’m sure the next quarter will also be strong," said Hans Nordby, managing director of CoStar Portfolio Strategy, who presented the findings along with CoStar Director of Office Research Walter Page and Vice President and Research Director Dean Violagis.

Highlights from the report include:

— Vacancies declined in 64% of the nation’s office submarkets and 56% of metro office markets during the fourth quarter of 2015. CoStar analysts expect office vacancy to continue trending lower to approximately 10% in 2017.

— Annual net absorption of office space increased to 101 million square feet in 2015, compared with 93 million square feet in 2014, while developers delivered 64 million space feet, a 41% increase over the previous year. The amount of new space under construction, which has trended downward in the last couple of quarters, stood at 126 million square feet at year end, a modest 7% increase from a year ago, and near the historical yearly average since 2000.

— 2015's 4.4% annual rent growth topped the previous year’s growth of 3.8%, with rents surging at a particularly strong rate in CBDs such as San Francisco at 19.4% and Raleigh, NC at 13.9%. Even in the urban core of Atlanta and Detroit, rents in the urban core rose at 11.2% and 10.5%, respectively.

For more news and information visit Blumberg Partners.

Q2 National Office Sector Report from Savills Studley

Savills Studley Research has released its National Office Sector Report for the second quarter of the year, which found that the national overall office availability rate ticked down to 16.4% after three consecutive quarters at 16.5%. While availability inches lower, Savills Studley found that the US national overall rental rate rose for the 15th consecutive quarter, rising by 1.2% from the prior quarter.

"Availability has barely budged so far in 2015 as new construction expands in more markets and leasing slows. Deal volume in the first half of 2015 has fallen by more than 15% compared to the first half of 2014 in most major markets, with very sharp decreases in Boston, Manhattan, Atlanta and Dallas." said Keith DeCoster, Savills Studley Research.

An excerpt from the report follows:

Slow Start to 2015
Weaker demand in markets such as Houston and Washington, DC is to be expected considering the pullback in the oil and gas industry and constrained government spending. More surprising is the decreased demand in markets that registered strong leasing in 2014, such as Atlanta, Boston, Chicago and Dallas/Fort Worth. Some drop-off in the fastest-growing markets like Dallas/ Fort Worth was inevitable – there are only so many 500,000-sf tenants looking for space, after all. Despite very strong demand from the biopharmaceutical sector in Cambridge, tenants in the Boston region leased only 21.8 msf in the last four quarters, down by 17.6% from a year ago. As of midyear 2015, deal volume in Downtown Chicago and Manhattan was down by 24.0% and 31.7%, respectively, compared to the first six months of 2014. In contrast to these markets, leasing in Denver, Phoenix, Los Angeles and San Francisco and Silicon Valley shows little sign of cooling.

Multiple Factors Impacting Leasing
Slower leasing so far in 2015 in many markets (a decline of more than 15% in two-thirds of major markets) can be attributed to several factors. For one, the breakneck pace of job creation in high-growth markets such as Atlanta and Dallas/Forth Worth has decelerated just a bit – from 4.0%-5.0% to 3.0%-4.0% (still well above the national average). Also, the surge in 2006 and 2007 leasing created a cyclical peak in 2016 and 2017 rollovers, which was boosted by companies signing early renewals. The very largest of the tenants in this cohort have satisfied their space needs. Additionally, during 2013 and 2014 many of the very best bargains were spoken for. In Lower Manhattan, for example, the sub-$45 Class A space that was still out there a few quarters ago has been snared. As traditional tenants in more markets a bit of a standoff is emerging particularly between landlords and traditional space users unwilling to ante up. Biotech companies in Cambridge may be willing to pay 70 or even $80 but banks and law firms are not. It remains to be seen whether this slowdown in leasing is just a lull, or if the concern expressed by some analysts – that the recovery is getting long in the tooth – is becoming a reality. Of note, Boston, Chicago, Los Angeles and Manhattan (in contrast to San Francisco and Silicon Valley) still depend on traditional space users for most of their leasing. Banks and law firms remain firmly rooted in the reality that their profit margins and revenues are still below pre-recession norms. Consequently, resistance to rental rate escalation in Boston’s Back Bay, Downtown Chicago and Midtown Manhattan still prevails.

To read the full report, click here. For more news and information visit Blumberg Partners.

DC Office Obsolescence Creep?

A new report from GlobeSt.com suggests that whether DC landlords will admit it or not, a certain percentage of the city's buildings have become, or are becoming obsolete. "The rapid obsolescence of B and C properties, some of which cannot be cured, is surprising," said Newmark Grubb Knight Frank's Senior Managing Director of Research Greg Leisch. "In my 45-year career I have never seen such rapid obsolescence." Obsolete, in current vernacular, indicates that a property lacks robust amenities or an urban location, are not convenient to mass transit, or have smaller floor plates or an extensive glass line.

NGKF are still preparing their findings for a full report and, according to GlobeSt.com, will reveal them in an upcoming white paper. An excerpt from the report follows:

"There has always been a difference between best-in-class office product and the rest of the market," Leisch tells GlobeSt.com. "Now, though, the differences have become more profound."

One telling statistic, Paul says, is that the share of office leasing by Class A offices has really taken off since the recession.

According to the report, "Since the start of 2008, Class A office properties in the Washington metro area have totaled 18.6 million square feet of net absorption, while Class B and C properties have experienced negative 13.8 million square feet of absorption, with each year reflecting positive net new demand for Class A space and a loss of occupancy in the balance of the market."

For more news and information visit Blumberg Partners.

DTZ Global Office Cost Report

DTZ has released its 18th annual Global Office Thermometer, a report that reviews worldwide office markets and measures the cost of office occupancy on a workstation basis in 138 cities. According to the report, international occupiers are benefiting from significant falls in workstation occupancy costs. Globally, the average annual USD cost of occupying a workstation fell by 3.9% in 2014, reflecting a sharp depreciation of local currencies against the US dollar, and slower economic growth in Europe and increased supply in emerging markets.

"Broadly, declining occupancy costs reflect the sharp depreciation of local currencies against the U.S. dollar, slower economic growth in Europe and increased supply in emerging markets," said Steven Quick, DTZ Chief Executive, Global Occupier Services. "Additionally, occupiers are reducing costs by using space more efficiently in many cities. International occupiers will continue to benefit from ebbing cost pressures in several markets. Overall, we expect global occupancy costs to increase just 0.5% over the next two years."

DTZ projects occupancy costs in most major U.S. cities to moderate in 2015 and 2016. To read the full DTZ Global Office Thermometer, click here. For more news and information visit Blumberg Partners.

IRR 2015 CRE Outlook

Integra Realty Resources (IRR), the largest independent market research and commercial real estate valuation and counseling firm in North America, has released its Viewpoint 2015 report, which reveals projections for commercial real estate in 2015 across all property types. In total, IRR expects real estate values to appreciate across all markets, with improved property fundamentals continuing to drive positive yields and attract additional capital to the sector.

"With our independent position in the marketplace, in IRR Viewpoint we have been able to create an incisive and unbiased report that the industry relies on year after year as a primary resource for research and analysis of the commercial real estate industry in the United States," said John Albrecht, CEO of Integra Realty Resources. "This past year we also completed the largest technology investment that IRR has ever made, giving us even more advanced capabilities to research local and national markets and provide our clients with the benefits of our industry-leading expertise on commercial real estate assets."

Key findings of IRR Viewpoint 2015 for the office market include:

• The office property sector continued its relatively steady recovery in 2014, though the sector lags behind other property sectors in the latest national recovery cycle. More local office markets -- both Central Business District (CBD) and Suburban -- are now mired in the recessionary phase and many more are just beginning a recovery.
• After decades of suburban corporate campus building, a key national trend is the return to new CBD construction, as today's younger workforce wants tech-driven office spaces in populous areas. While developers and investors seemingly prefer the CBD office property sector, property fundamentals for the Suburban office sector strengthened just as much as those in the CBD sector nationally in 2014.
• Recent changes in stabilization expectations reversed the trend from the previous few years and now indicate that the Suburban office sector nationally is more likely to stabilize before the CBD sector, albeit at materially lower rental rates and marginally lower occupancy rates.
• 2014 was another robust year for transaction volumes, with most cities experiencing strong volume increases over five-year historical averages. Activity was notably strong in Cincinnati, Boston, Jacksonville, San Francisco, and Philadelphia; transaction volumes were down only in a handful of cities, including Pittsburgh, Seattle, Cleveland, Hartford, and Richmond.

A free download of the report is available here. For more news and information visit Blumberg Capital Partners.

High-Tech Drives Rent Increases

CBRE has released its latest research report, U.S. Tech-Twenty: Measuring Office Market Impact, which shows that high-tech companies have accounted for 20% of major leasing activity in the United States so far this year, up from 14% last year. The high-tech job growth has fueled the office market recovery, driving double-digit rent growth in eight U.S. markets over the past two years, including San Francisco, Austin, Manhattan and Silicon Valley. The accelerating rents was especially pronounced within tech-dominated submarkets, where rents have increased 30% over the past two years, Midtown South in Manhattan (up 29%) and River North in Chicago (up 26%).

"Within preferred submarkets, which, in many cases, are the neighborhoods of choice for millennials and high-tech companies, vacant space has become increasingly scarce. As a result, nearby submarkets may see increased leasing activity by tech companies," said Colin Yasukochi, Director of Research and Analysis for CBRE Global Research and Consulting.

Highlights of the report include:

• High-tech was the top industry leasing office space in the U.S., accounting for 20% of major leasing activity thus far in 2014, up from 14% in 2013.
• San Francisco topped the U.S. Tech-Twenty Office Markets list for the third straight year. Over the past two years, San Francisco's high-tech job base has grown by 51%, while average asking rents have climbed 35%. The key ingredient to this “tech-effect” on the office market is the concentration of high-tech employment in each market and how dominant new high-tech job creation is relative to overall office-using employment.
• The rent premium commanded by submarkets with heavy high-tech employment is increasing. The average office rent aggregate of the Tech-Twenty submarkets was 18% higher than the Tech-Twenty overall markets.
• From an investor's perspective, San Diego, Portland, and Orange County offer the greatest potential. These markets are also attractive to occupiers, although Raleigh Durham offers the best combination of low office rents and a growing high-tech labor pool.

For more news and information visit Blumberg Capital Partners.

US Big Box Demand is "High and Rising"

The inaugural Jones Lang LaSalle Big Box Velocity Index report was released this month showing that demand for large U.S. industrial distribution centers is high and rising. The report was coupled with results from the quarterly industry analyses, including JLL's Q3 2013 Office Outlook, which marked the first time in seven years that the U.S. office market can look more confidently toward 2014 with leasing activity, expansion and pricing picking up at a faster, more sustainable rate across the nation. It heralds a lot of encouraging news for the U.S. markets, with 96.7 million square feet of industrial construction currently underway, nearly half of which is speculative, with an average building size of 360,000 square feet.

The Velocity Index cites five key trends that are shaping the 2013 U.S. Big Box Industrial Market – and creating markets that are winners and losers:

1) WHO: At the top of the list of industries fueling demand include retail, especially e-commerce retail players, and the logistics & distribution and manufacturing sectors. However, retail (traditional retailers through consumer non-durables) accounts for more than one third of total demand with most concentrated in the Northeast – particularly New Jersey and Philadelphia.

2) WHAT: A resurgence in activity from distribution space users has manifested in rising demand in two primary categories: the 250,000 to 499,999-square-foot range, and in facilities of more than one million square feet. Together these two categories comprise more than half of the requirements from tenants in the marketplace.

3) WHEN: There have been 14 consecutive quarters of positive net absorption, bringing vacancy rates down. Construction activity began to increase during the first half of 2012 and much of this stemmed from committals prior to groundbreakings. More speculative development is currently underway.

4) WHERE: Traditional distribution corridors are showing strong market conditions, however the Northeast is seeing the majority of activity. Five of the top six industries with space needs are looking in this region with many in the market for spaces in excess of one million square feet. In the Midwest, however, tenant requirements (on a square footage basis) are down by 26% owing to robust leasing activity in quarters past.

"The Northeast is home to 55 million people, and this is appealing to retail distributors that want access to a lucrative market that a mega population offers: an expansive consumer base and an existing, intricate logistics infrastructure," said Aaron Ahlburn, Director of Research, JLL Americas Industrial & Retail. "Larger blocks of functional space are also more readily available here than in the neighbouring Midwest, meaning tenants in New Jersey have more choice as opposed to facing competition for fewer large space options in Chicago."

5) WHY: "It's no surprise that the retail sector comprises more than a third of our growth," said Craig Meyer, President of Industrial, JLL. "The demand from e-commerce is shaping the market more than ever before, and is influencing the requirements of both users and the institutional investors who make speculative construction possible."

For more news and information visit Blumberg Capital Partners.

Coasts Dominate List of Most Expensive US Streets for Offices

Jones Lang LaSalle released it's official list of 2013's top ten most expensive streets in the United States for office space, with bicoastal cities topping the chart. The recent study of 40 office markets across the United States, with rents on the most expensive avenues exceeding the market average by 49.8%. "This year's results are particularly interesting because, not only do they demonstrate the standard real estate rule that location is everything, but they also reflect the overall office space demand trend in the U.S.," said John Sikaitis, Managing Director of Office Research at Jones Lang LaSalle. "We are seeing a slight uptick in occupancy rates as a result of the rate of business growth in the economy combined with a lack of new development."

The Top 10 Most Expensive U.S. Streets for Office Space (click here to view the 2011 results):

1. Sand Hill Road, Menlo Park, Calif.: $111.00 p.s.f. (-2.5%)
Historically the most expensive area in Silicon Valley, Sand Hill Road has deep roots with the venture capital community and houses the top VC firms in the greater Bay Area.

2. Fifth Avenue, Midtown Manhattan, NYC: $102.00 p.s.f. (+5.0)
Consistently ranked among the most expensive shopping streets in the world, Fifth Avenue is also home to numerous hedge funds looking for top-quality space in Midtown and willing to pay more for those coveted office locations with their unparalleled amenities.

3. University Avenue, Silicon Valley, Calif.: $95.00 p.s.f. (+14.1%)
Located in Downtown Palo Alto, University Avenue is known for its vibrant startup community, as its proximity to Stanford University makes it an ideal location for recruiting top young talent.

4. Greenwich Avenue, Greenwich, Conn.: $93.00 p.s.f. (+3.4%)
Greenwich Avenue competes with the best commercial real estate, leveraging its rich history preserved through older buildings. Top-shelf retail establishments dot the historically-rich corridor, from the top of the Avenue down through the transit center. Hedge funds and financial services firms occupy the majority of office space, with many top executives only steps from their homes. Premier office buildings offer close proximity to train, and command rents as high as $100 p.s.f.

5. Pennsylvania Avenue, Washington, DC: $76.00 p.s.f (-5.5%)
Despite slower overall market conditions in recent quarters, Pennsylvania Avenue has continued to experience rent premiums to the rest of the market. Known as "America's Main Street," Pennsylvania Avenue is home to many firms wanting close proximity to Washington's two main points of power, the White House to the west and the Capitol to the east. A big growth area in tenant demand in recent years has stemmed from the government affairs sector of corporate America.

6. California Street, San Francisco: $62.10 p.s.f. (+43.9%)
The main street of the city's North Financial District, California Street, is known for its historic cable car route, broadness and high-priced real estate. Growth in tech and associated industries, along with limited new supply, have pushed rents up by almost half over the past two years.

7. Boylston Street, Boston: $60.20 p.s.f. (+14.3%)
Boylston Street runs through two of Boston's most prestigious areas, Back Bay and the Financial District. It is home to numerous landmarks, Trophy office buildings and high-end retail, as well as some of the city's most distinctive skyscrapers.

8. Avenue of the Stars, Los Angeles: $60.12 p.s.f. (+1.9%)
The thoroughfare through the highly desirable Century City market, Avenue of the Stars is home to many prominent legal and financial service firms and talent firms, as well as the largest cluster of Class A Trophy assets on the Westside.

9. Royal Palm Way, West Palm Beach: $58.52 p.s.f. (+0.9%)
Royal Palm Way is dubbed "Banker's Row" due to the concentration of wealth management and financial services firms, catering to the wealthy residents on Palm Beach Island.

10. Newport Center Drive, Orange County: $50.06 p.s.f. (+4.3%)
Sitting on a bluff overlooking the Pacific Ocean, Newport Center Drive is a 1.3 mile ring that encompasses the Fashion Island retail center. World class dining and retail amenities along with ocean view suites and access to posh residential neighborhoods make Newport Center Drive one of the most premiere places to rent office space in Southern California.

For more news and information visit Blumberg Capital Partners.

CBRE Says CRE Continues Recovery in Q4

According to the latest analysis from CBRE Group, the U.S. commercial real estate market withstood pressures from an uneven economic recovery in Q2 2012 and remained on a recovery path. With vacancy falling 10 basis points to 15.4% overall in the office markets, the suburbs outperformed downtown markets by a different of 10 basis points. An excerpt from the CBRE report:

Technology, software, and energy driven markets had the largest occupancy gains in 2012, with vacancy rates in San Jose, Austin, Boston and Houston falling by 200 bps or more. As in 2011, some housing-based or CANVFLAZ (California, Nevada, Florida & Arizona) markets were among the best performers last year, as tenants locked in low rents and expanded their office footprints. Vacancy rates in Phoenix, Miami, Orange County and Ventura fell by 150 bps or more in 2012.

"While the national office vacancy rate has fallen for the third consecutive year, it remains 300 bps above its pre-recession low of 12.4%," said Jon Southard, Managing Director of CBRE’s Econometric Advisors group. "After a strong start in 2012, job growth was disappointing and while the recent budget deal signed by Congress and the President to avoid the 'fiscal cliff' 2 might ease some near-term concerns, uncertainty surrounding continued negotiations on the federal debt ceiling and further government spending cuts will continue to pose near-term downside risks for commercial real estate. However, private sector hiring and confidence should accelerate if Washington DC is able to forge a long-term budget deal and concerns in Europe remain at bay, paving the way for stronger office-using job growth and absorption."

For more news and information visit Blumberg Capital Partners.

Demand for U.S. Office Space Still Sluggish

As we start 2013, several reporting agencies have taken a look into the commercial real estate market and the demand for office space with a fairly consistent analysis: the office sector is still struggling for traction in the U.S. with occupancy rising at disappointing rates. The amount of occupied office space grew by 3.7 million square feet during Q4 2012, down from 4.8 million in both the third quarter and the year-earlier period, according to a report released by real estate research firm Reis Inc. Asking rents were up to an average of $28.46 per square foot, according to Reis, which looks at 79 metropolitan areas.

"Without a robust labor market recovery there will be no robust office market recovery," said Ryan Severino, senior economist for Reis. Severino explained that weak demand for space gives developers little reason to build, and expected that lenders will continue to impose more stringent requirements on developers before they will provide construction financing.

The cities with the tightest markets continue to be those with stronger technology or energy sectors in their economies. Rents in San Francisco, for example, rose 3.6%, the most of any of 79 markets, to $34.69 per square foot. The vacancy rate in San Francisco was 13.8%. Washington, D.C. has the tightest market of all at the moment, with a vacancy rate of 9.3%. But Severino expects New York to take that title soon as its increasingly important technology sector takes more space and as the government in Washington cuts employment.

For more news and information visit Blumberg Capital Partners.

CBRE Reports Moderate Improvement in U.S. Commercial Real Estate

The latest analysis from CBRE Group Inc. showed that U.S. commercial real estate market continued to show moderate improvement across all property sectors in the third quarter (Q3) of 2012. The analysis, according to a Sacramento Business Journal report, is based on surveys of buildings more than 10,000 square feet, excluding government owned and medical. Hilights of the results include:

Vacancy in the nation’s office buildings continued to decline, falling 20 basis points (bps) during Q3 to 15.5%.

National industrial availability1 dropped 10 bps during Q3 to 13.1%, continuing a two-year favorable trend.

Retail properties continued to see modest improvement in availability, which fell 10 bps to 12.9%, during Q3.

Demand for the nation’s apartment buildings continued to be strong, with vacancy in Q3 at 4.6%, a decrease of 40 bps from a year ago.

For more news and information visit Blumberg Capital Partners.

Commercial Property Vacancies Decline in Q2

A new report from CBRE shows that the U.S. commercial real estate market showed improvement across all sectors as vacancy rates in the second quarter of 2012. With office building vacancies at its lowest level since 2009 during Q2, the 15.7% vacancy rate "is still well above its pre-recessionary low of 12.4% and the recent headwinds facing the office markets have not gone away,” said Jon Southard, Managing Director, CBRE.

The office and industrial market summaries from the report follow:

Office Market
The national office vacancy rate fell by 30 bps to 15.7% in Q2 2012 marking the first quarter since 2009 in which the vacancy rate has been below 16%.

The national suburban vacancy rate fell by 40 bps while the national downtown vacancy rate fell by 20 bps. Occupancy improved in almost two-thirds of markets nationwide. Vacancy rates fell by 100 bps or more in seven markets: Albuquerque, Boston, Charlotte, Norfolk, Richmond, San Diego and Seattle. Technology and energy driven markets continued to be among the top performers as vacancy rates in San Francisco, Houston, Seattle and San Jose fell by 50 bps or more in the second quarter and remain well below their year-ago vacancy rates.

Industrial Market
Q2 2012, with an availability rate of 13.2%, is now the eighth consecutive quarter in which industrial availability has declined. During the quarter, 34 markets reported falling availability rates, 18 reported increases, and eight reported no change. Among large markets, Indianapolis (-130 bps) Memphis (-120 bps), Detroit (-100) and Seattle (-60bps) all saw significant drops. Chicago and Riverside were both down by 50 bps while, Los Angeles, the nation’s second largest market after Chicago, reported a decrease of 20 bps. With most markets reporting improvement in availability rates, it appears that slowing but continuing economic growth, is still leading to increased demand for industrial space.

For more news and information visit Blumberg Capital Partners.

U.S. CMBS Delinquency Rate Rise Again, REOs Reach $11B

New data from Fitch Ratings shows that the volume of real estate-owned (REO) assets for lenders reached $11 billion in April, a new market record, representing one third of all outstanding delinquencies according to Fitch Ratings. The current and prior month delinquency rates for each of the major property types are:

• Multifamily: 11.64% (12.61% in March)
• Hotel: 10.20% (10.35% in March)
• Industrial: 9.34% (10.91% in March)
• Office: 8.36% (7.99% in March)
• Retail: 7.39% (7.23% in March)

A closer look reveals stark differences in REO trends by state, according to a Costar Group report. In states where non-judicial (power-of-sale) foreclosure is allowed, the inventory of REO assets increased by 64% since the start of last year. Conversely, the inventory in judicial-only states (where the foreclosure process can be notably slower) jumped by 111%. For the current inventory of REO assets, it took an average 179 days to foreclose on properties in power-of-sale states, versus 323 days in judicial-only states. This suggests that the current REO inventory from judicial-only states represents older stock that is finally making its way through the system.

For more news and information visit Blumberg Capital Partners.

US Office Vacancy Rate 16% in Q1 2012

CBRE Econometric Advisors (CBRE-EA) released their latest analysis of the real estate sectors in America for Q1 2012, showing that the office vacancy rate remained at 16% after Q4 2011 and industrial availability dropped to 13.4%. "The most important economic news in Q1 2012 was the pick-up in hiring, but so far we have only seen strong improvement in the multi-family sector," said Jon Southard, Managing Director, CBRE-EA. "For property types with longer leases, the employment gains served mostly to fill in "shadow vacancy" -- space that was previously leased but not used. The delay between stronger employment and a pick-up in leasing demand is typical for the early stages of recovery in the office, industrial, and retail sectors."

"The job market will need to approach its pre-recession form before more rapid improvement in the office market can take hold," Mr. Southard said. "We continue to anticipate more robust hiring during the second half of 2012, which will move us closer to that goal."

This past week CBRE Group Inc. also held its quarterly press event in Houston, noting that there may not enough available office space in the city to go around according to a Houston Business Journal article. Jon Lee, a first vice president with brokerage services at CBRE, noted that, in the Houston-specific submarket, the climate has shifted in such a way that where he previously had several options to choose from, he's now finding it difficult to find space at all.

"There are bidding wars that are occurring," said Lee, referring to west Houston. "We're seeing bidding wars on Class B space. It doesn't take a rocket scientist to see that in a couple of years, we're going to have a problem."

For more news and information visit Blumberg Capital Partners.

Washington, Manhattan Lead Office Sales Volume

Cassidy Turley has released its 2012 State of the Capital Markets report, showing a sharp jump in sales in the Washington, DC area in 2011 with a sales volume trailing only Manhattan according to a Washington Business Journal article. The report shows that Washington, DC metro area’s office sales volume totaled $7.2 billion in 2011, reflecting a marked increase of 68% over 2010. The region saw 73 transactions completed over the year and ranked second, behind Manhattan, in sales volume among all office markets for 2011.

"Washington, DC continues to be a strong market for investors. Over the next 12 – 24 months, the bulk of the sales activity will stay in core to core plus properties," commented Bill Collins, Executive Managing Director with Cassidy Turley. "But those investors willing to stray from the safest bets and assume future leasing exposure will be rewarded three years from now as the economy turns the corner and demand for space turns robust," he continued.

Click here to view the full 2012 State of the Capital Markets Report. For more news and information visit Blumberg Capital Partners.

Greater Boston Office Market Has Best Quarter Since 2007

A new article from the Boston Business Journal came with good news: according to a new analytis by Richards Barry Joyce & Partners the office market in the Greater Boston area is closing on the best quarter its seen in four years, even nearing an all-time high occupancy rate. An excerpt from the article:

The region's impressive gains are rooted in its employment growth since early 2009 and run counter to the contraction and rising vacancy rates rippling throughout most other office markets nationally. The occupancy upticks also can be linked to the flood of major life sciences companies and "think tank economy" employers flocking to the Bay State, said Bob Richards, a partner at RBJ.

"There are only so many of them out there," said Richards, alluding to the major firms — Bain Capital, Forrester Research, Pfizer Inc. and Vertex Pharmaceuticals, in particular — who have locked up significant office and laboratory space in recent months. "But we expect that trend to continue."

According to the U.S. Bureau of Labor Statistics, Boston has seen its employment expand by around 2.5 percent since February 2009, versus a 0.3 percent contraction in the United States as a whole. Demand for space has been especially acute in the technology and financial hubs of East Cambridge and the Back Bay, where double-digit rent growth is commonplace among Class A properties, according to RBJ.

For more news and information visit Blumberg Capital Partners.

NAR Says CRE Markets Stabilizing

The National Association of Realtors (NAR) has released its latest Commercial Real Estate Outlook report with projections and observations for the commercial real estate sectors and analysis of quarterly data. The report indicates that the improving economy and job creation will lead to growing demand for commercial real estate and reflects an overall stabilization in the market. "Job growth creates demand for commercial space, and the economy should be adding between 1.5 million and 2 million jobs annually both this year and in 2012, with the unemployment rate falling to 8.0 percent by the end of next year," said Lawrence Yun, NAR chief economist. "Given the minimal new supply in recent years, the rising demand means vacancy rates will be trending down in the commercial real estate sectors. Individual markets are now stabilizing and in some cases rising."

An excerpt from the report regarding office market conditions:

Vacancy rates in the office sector are expected to fall from 16.3 percent in the second quarter of this year to 15.3 percent in the second quarter of 2012.

The markets with the lowest office vacancy rates currently are Honolulu and New York City, each with vacancies below 9 percent.

Office rents are projected to rise 0.3 percent this year and another 4.3 percent in 2012. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, is likely to be 26.6 million square feet in 2011.

For more news and information visit Blumberg Capital Partners.

CBRE Releases New Report, Shows Office Market Recovering from Global Crisis

CB Richard Ellis has released its latest Global Office MarketView report examining the state of the office property market and featuring snapshots for each global region. According to the report, while commercial real estate and the global economy are recovering from the financial crisis, both are "doing so at a disjointed pace, with some regions and property types healing faster than others". CBRE forecasts that nearly 55 million square feet of new office developments will take place in Asia, or 62% of the global total.

"The decline in demand is over for most markets, but vacancy rates remain elevated and will impede the near-term performance of rental rates," said Dr. Raymond Torto, CBRE's Global Chief Economist. "Job growth also has a long path toward improvement in both the U.S. and European markets, albeit not Asia ex Japan, and will continue to slow the recovery of the global office market."

For more news and information visit Blumberg Capital Partners.

NYT Says Office Market is Making a Comeback

A new article from the New York Times reports that, for the first time since the collapse of the commercial real estate market, investors are returning with interest in office buildings with some properties commanding prices "reminiscent of the boom years". An excerpt:

Though the market is only now becoming active, last year about $27.7 billion worth of office properties worth $5 million or more had changed hands through mid-December, more than twice the volume in 2009, according to Real Capital Analytics, a New York research firm that tracks sales.

Some deals have been so costly that buyers have had to settle for low initial rates of return of 6 percent or even less. These yields, known as capitalization rates, have fallen faster for office buildings than for any other type of commercial real estate, Real Capital Analytics said.

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