Hello All,
I would like to begin some discussion as to WHY Commercial Real Estate (CRE) and WHY America…. As we all know the American economy has taken a heavy hit and finally the tides are shifting to brighter futures and ROI. As most of you may know I'm a Retail and Apartment guy but have many years of experience in all other product types such as Industrial, Land, and Special Purpose. So to kick off this Forum topic I wanted to share some market news on the Retail side of things.
During the first quarter, U.S. shopping center occupancies rose to a three year high, allowing landlords to raise rents as little space was added to the market, said Reis Inc.
Neighborhood and community shopping center vacancies fell from 10.9 percent to 10.6 percent, and effective rents rose to $16.63 per square foot from last year’s $16.51. Rents and occupancies were last higher in 2009.
“It’s a slow but consistent recovery,” Ryan Severino, a Reis senior economist, said. “There’s nothing being built, so as long as there’s any semblance of demand, it’s pushing vacancies down slightly and rents up slightly.”
The slowly improving labor market and little competition from new shopping centers is allowing retail landlords to benefit. In February, the jobless rate dropped 7.7 percent, the lowest since December 2008, from 7.9 percent the previous month, according to the Labor Department. During the first quarter, 873,000 square feet of new shopping centers became available, which is 57 percent lower than the previous year.
Occupied shopping center space rose by a net 2.73 million square feet in the third quarter, compared to 2.68 million square feet in the previous three months, and 3.51 million square feet a year earlier, Reis said.
At regional malls, which are larger than neighborhood and community shopping centers, and which usually include department stores, vacancies fell to 8.3 percent in the first quarter from 9 percent during the previous year. Rents rose from $39 to $39.46, Reis said.
Reis’s report states that until the U.S. employment recovery becomes more vigorous, “retail sales will remain listless” and shopping center “vacancy compression will be slow and tedious.”
John-USA-CommercialRE
Email MeI think it is also important that people understand that a commercial property can also be a residential apartment complex. In fact 4 and above apartments mean that it is treated as a commercial property. I recently looked at a 4 unit complex for around $125,000 returning around 15%
However as the US economy continues to improve we will see capital growth in commercial and residential property.
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
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The 400 or so dead malls are listed here with some history
http://deadmalls.com/index.html
The Death of the American Mall and the Rebirth of Public Space
By Robbie Moore
TUESDAY FEBRUARY 26, 2013
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A recent article in the Financial Times suggests that 15% of America’s regional malls will fail in the next five years. “The mall’s 50-year reign as the ultimate shopping destination appears to be coming to an end,” claims a report by the CoStar Group, a real estate analysis firm.
Many are failing despite significant state subsidies. A local government report found that in the St Louis metro area alone, $4.6 billion has been spent in the last 20 years subsidizing chain stores and malls,
- In 2007, a year before the crash, no new malls were built in America, for the first time in 50 years. A mall in Salt Lake City which opened in March 2012 was the first to be built since then. New Jersey’s ambitious $4 billion Xanadu mall and indoor ski slope – now re-financed and re-named the American Dream Meadowlands – still languishes, half-built. According to the New York Times, the American Dream, which was conceived before the crash, has struggled despite receiving upwards of $1 billion in the form of tax write-offs, free land and a highway connection from the state of New Jersey.
Demand for space in U.S. strip malls still weak in first quarter
By Ilaina Jonas | Reuters – Thu, Apr 4, 2013
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The total square feet of U.S. neighborhood strip centers – shopping centers typically anchored by grocery stores or drug stores – rose by only 0.04 percent, or 873,000 square feet, in the first quarter, according to preliminary figures.
It was the fourth-lowest amount of space added since Reis began tracking the sector in 1999. The rise was smaller than the 1.231 million square feet added in the fourth quarter and was less than half the amount added a year ago.
The small amount of space added helped offset an anemic demand for space. Retailers soaked up only a net 2.726 million square feet of space, about the same as the prior quarter but down from a year earlier.
[Strip Malls] Yet again, vacancy declined by only 10 bps during the first quarter. Although it is welcome that vacancy continues to decline on an almost quarterly basis, there is still no acceleration in vacancy compression. On a year‐over‐year basis, the vacancy rate declined by only 30 bps. Net absorption continues to outpace new construction, marginally pushing vacancy rates downward. With only 873,000 square feet delivered, even moderate demand for space would result in meaningful declines in the national vacancy rate. Yet despite the dearth of new completions, demand remains insufficient to make a meaningful dent in what is still an elevated vacancy rate..
Try going to America and see how many people are in shopping Centre. However you do need to be selective. We are not suggesting that you should buy anything.
If you are looking at commercial then you need to look at assets that have A grade tenants. I remember in Australia back in 1990 people who brought warehouses and cheap commercial property lost money. Commercial properties can also include apartment complexes currently the occupancy rate in around 95%. We are not asking that anyone blindly buys in America. However with care and due diligence there are some great opportunities available.
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
Email Me | Phone MeWe have just launched a new website join our membership today
So here's some real bully on employment that's really easy to understand.
Of those considered to be working age who are either not counted as looking for work for benefit purposed and those officially listed as unemployed where added together we get approximately 101 million people.
That's right….. 101 million people!!!! Whats that about 30% of the US population.
The most accurate and unfudged assessment of US employment is the US labor force participation rate. It tells a whole different story.
John USA wrote:The slowly improving labor market and little competition from new shopping centers is allowing retail landlords to benefit. In February, the jobless rate dropped 7.7 percent, the lowest since December 2008, from 7.9 percent the previous month, according to the Labor Department.It's bad enough that the govt manipulates the figures. It's understandable that back pocket MSM outlets propagandise this information to comfort the sheeple. But when individuals who claim to be intelligent, knowledgeable and ethical republish it as if it really really true …. …well that just leaves me scratching my head.
Yes the government really does tell the truth
I am wondering if you have ever been to the United States. People still need somewhere to live, they still need to buy food.
The fact is when you go to America they like to shop and they like to eat
If you spent any time in America especially in Texas or Florida you would see that things are really not that bad. I am not saying that things are back to normal but it depends on where you are. Cities like Detroit are broke, however you could not say that about Orlando or San Antonio.
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
Email Me | Phone MeWe have just launched a new website join our membership today
Nigel Kibel wrote:Try going to America and see how many people are in shopping Centre. However you do need to be selective. We are not suggesting that you should buy anything.If you are looking at commercial then you need to look at assets that have A grade tenants. I remember in Australia back in 1990 people who brought warehouses and cheap commercial property lost money. Commercial properties can also include apartment complexes currently the occupancy rate in around 95%. We are not asking that anyone blindly buys in America. However with care and due diligence there are some great opportunities available.
If our discussions in the past suggest anything it's that you guys believe a visual check over combined with local media reports are somehow tantamount to opportunity. When ever I ask for something substantive to back your position all I get is, "I should go and look for myself. "
So what is your cunning plan….
Blackadder: Baldrick, what are you doing out there?
Baldrick: I'm carving something on this bullet sir.
Blackadder: What are you carving?
Baldrick: I'm carving "Baldrick", sir.
Blackadder: Why?
Baldrick: It's a cunning plan actually.
Blackadder: Of course it is.
Baldrick: You see, you know they say that somewhere there's a bullet
with your name on it?
Blackadder: Yes?
Baldrick: Well, I thought if I owned the bullet with my name on it,
I'd never get hit by it, 'cos I won't ever shoot myself.
Blackadder: Oh, shame.
Baldrick: And, the chances of there being two bullets with my name
on them are very small indeed.
Blackadder: That's not the only thing around here that's "very small
indeed". Your brain for example, is so minute, Baldrick,
that if a hungry cannibal cracked your head open there
wouldn't be enough inside to cover a small water-biscuit.
When I first saw this thread this morning my first thought was of freckle.
Nigel Kibel wrote:I am wondering if you have ever been to the United States. People still need somewhere to live, they still need to buy food.The fact is when you go to America they like to shop and they like to eat
If you spent any time in America especially in Texas or Florida you would see that things are really not that bad. I am not saying that things are back to normal but it depends on where you are. Cities like Detroit are broke, however you could not say that about Orlando or San Antonio.
Freckle wrote:Nigel Kibel wrote:I am wondering if you have ever been to the United States. People still need somewhere to live, they still need to buy food.The fact is when you go to America they like to shop and they like to eat
If you spent any time in America especially in Texas or Florida you would see that things are really not that bad. I am not saying that things are back to normal but it depends on where you are. Cities like Detroit are broke, however you could not say that about Orlando or San Antonio.
LOL!!!!
Joe
I have lived in Texas and travel to Texas and Florida on a regular basis. The fact that you and who ever the Freckle is thinks that these are bad markets. That is your opinion and you are entitled to it. However the fact that I deal in these markets does not make me wrong. I am very careful with what I do. I am of the view that there are opportunities in what is still the largest economy in the world.
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
Email Me | Phone MeWe have just launched a new website join our membership today
Nigel Kibel wrote:fact that I deal in these markets does not make me wrong.No it doesn't. The problem is you can't support your assertions which begs the question, "Are their assumptions correct and valid?"
Having a look, local MSM advertorials and the fact you live or have lived there do not inspire me with confidence when you can't even argue effectively in support of your chosen locations or market segments.
For someone who promotes a property know how club I would expect a far better communicator with far greater depth of knowledge. To date I haven't seen anything that suggests you know much more than the local RE agent and what you read in the papers. You may have a range of technical skills but your broader knowledge base comes across as substantially lacking. Your posts are simply a collection of broad sweeping statements that don't help to inform or clarify.
Your partner has started this thread with the lead in sentence;
I would like to begin some discussion as to WHY Commercial Real Estate (CRE) and WHY America
I can only reply, indeed why? I hope you guys can expand on this conversation but previous discussions haven't made us any the wiser as to WHY anyone would want to invest in the US. I'm fascinated to know what your reasons are beyond having a look and MSM articles.
Just some data from other professionals in the CRE industry.
Real estate economists Hans Nordby, Shaw Lupton and Suzanne Mulvee of CoStar's Property and Portfolio Research (PPR) analytic and forecasting company were among the notable market analysts sharing their views in the latest semi-annual forecast from the Urban Land Institute (ULI) and Ernst & Young.
Rallying from the diminished expectations seen last fall when the economic recovery hit a soft patch, the consensus of leading real estate economists and analysts now expects steady improvement in commercial real estate fundamentals and capital markets, including a nearly 7% increase in commercial property transaction volume in 2013 to $310 billion, followed by increases to $340 billion and $360 billion in 2014 and 2015, respectively.
Commercial mortgage-backed securities (CMBS) issuance, a cornerstone of CRE financing, is expected to rise to $70 billion this year, a nearly 50% increase over 2012's $48 billion. CMBS will rise to $80 billion in 2014 and reach $100 billion in 2015.
Suzanne Mulvee, PPR's director of research, retail, was even more bullish on CMBS issuance than the consensus view, asserting that it will hit $100 billion next year, a year sooner.
"This is the first time in a number of years that all of the debt spigots are open," Mulvee said during a panel discussion on the findings Wednesday morning. "It's not a fire hose, but definitely a big change from a couple of years ago. I think you'll see transaction volume continue to accelerate."
Despite some tapering off of price increases and ROI, the forecast predicts commercial real estate will "be on solid footing for the next three years," with a revival of investor confidence following years of uncertainty about the economy, according to ULI Senior Vice President Dean Schwanke, executive director of the ULI Center for Capital Markets and Real Estate. And while strengthening property fundamentals and capital markets bode well for the market as a whole, question markes remain over such factors as government spending cuts through sequestration and other fiscal uncertainty.
"We've reached the point in the cycle where fiscal uncertainty seems to be the biggest hurdle," said Kevin Thorpe, chief economist and principal, Cassidy Turley, Washington, D.C. "If the full sequestration is allowed to take place, most economists predict it will slow growth by half a percentage point and 500,000 jobs would be lost. But we don't know if it's going to be fully implemented. Putting that aside, there are so many bright spots in this recovery, and you don't have to look any further than what's happening in housing and the equity markets. This economy really wants to go faster."
The consensus of economists now predicts that combined annual returns from direct investment in institutional-quality apartment, retail, industrial and office properties will continue a downward trend that started last year. Combined returns for the four major property groups will be 9.5% in 2013, falling to 9% and 8% in 2014 and 2015 — still within the range of historical averages.
Driving the projected CRE rally is a generally favorable outlook for the economic growth and employment by the panel of economists, which predicts gross domestic product (GDP) to rise by 2% this year, 3% in 2014 and 3.1% in 2015. The U.S. unemployment rate is expected to drop to 7.5% by year end, eventually falling to 6.5% by the end of 2015. Job creation will rise by 2.1 million this year, 2.4 million next year and 2.6 million in 2015 as the recovery hits full tilt.
While the U.S. recovery still has a ways to go, global cross-border capital is searching for the best risk-adjusted return and finding it in the U.S. real estate sector, a trend likely to continue for the foreseeable future, said Howard Roth, Ernst & Young’s global real estate leader.
As a further indication of the glass half full-half empty dichotomy, single-family housing starts and home values are expected to rise well above previous prediction — but so are inflation and interest rate as the economy heats up, which have a material impact on consumer spending and mortgage lending.
Economists expect the Consumer Price Index (CPI) to increase 2% this year, rising to 2.5% and 2.9% in 2014 and 2015. By the end of this year, 10-year Treasury rates are projected to rise to 2.3% by the end of 2013, 3% in 2014 and 3.5%in 2015.
While borrowing costs will go up, capitalization rates are expected to remain stable, boding well for commercial property values.
"It's no secret that with increased development on both the rental and for-sale side, we are seeing some building commodities start to rise," said Craig Thomas, vice president of market research, AvalonBay Communities, Inc. "If you want to look for the seeds of some higher inflation, you can look at construction costs, which are reflecting stronger development."
"With higher inflation, you can grow old waiting for it, but we're seeing some pressures on that side."
Among the CRE property types, the forecast includes the following:
Apartment vacancy rates will hold at 5% this year from 2012, edging up to 5.2% in 2014 and 2015. Rental growth is expected to be 3.8% this year, down from 4.1% in 2012, and decline to 3% in 2014 and 2.8% in 2015 as new supply hits the market.
Industrial/warehouse vacancy rates are expected to continue declining, reaching 12.2% at year end, and falling to 11.7% and 11.4% in 2014 and 2015. Rents will continue to strengthen, rising 2% in 2013, and 3% in both 2014 and 2015.
Office vacancy rates are expected to drop to 14.8% in 2013, 14.1% in 2014 and 13.6% in 2015, while rental rates will decline by 3.5% for 2013, and then rise by 4% for both 2014 and 2015.
Retail availability rates are expected to decline to 12.5% this year, then drop further to 12.2% in 2014 and 11.9% by 2015 as the economy and consumer spending improves. Retail rents are projected to rise by 1% in 2013, and 2% in 2014 and 2015.
John-USA-CommercialRE
Email MeMore self interested industry gobbledy gook backstopped by fudged government figures and bought economists.
Quote:panel of economists, which predicts gross domestic product (GDP) to rise by 2% this year, 3% in 2014 and 3.1% in 2015.Lets try some actual data. Note that if we use the old CPI deflator for GDP then growth is actually negative. But govt's change this to suit their economic message. See next graph for CPI
Quote:Economists expect the Consumer Price Index (CPI) to increase 2% this year, rising to 2.5% and 2.9% in 2014 and 2015Just about everyone who's awake knows the US govt CPI figures are rubbish.
I can't be bothered critiquing the rest. It's rubbish. More holes than my old socks.
I have no idea what's going to drive this CRE market you speak of. Business doesn't seem like it's in the mood to foster your growth message.
The National Federation of Independent Businesses (NFIB) shows 0% of their members planning to hire. One can only presume we need moar QE, moar deficits, and moar wealth effect.
Recovery? 0%!!
Building has gone back to contraction according to GS. More commercial activity on the back foot.
- Despite the market knowing better, the so-called housing recovery has hit a speed-bump (or brick-wall). Goldman's housing swirlogram shows that the revisions from an exuberant few months into January 2013 have dragged the reality of the 'recovery' rotating into full-blown 'expansion' to a crumble back into 'contraction'. Of course, we have seen homebuilder stocks exuberant like this before in the face of disappointing facts, but even the NAHB (desperate to portray confidence) is 'admitting' things are not as rosy as all-time highs in stocks might suggest.
From hopeful January to 'revised' contractionary March…
Shopping malls are literally anchored by large retail chain stores. They can't survive without them in most cases. These large retailers are the key to attracting a host of peripheral small businesses to add diversification and interest to a mall complex.
What the big guys do and how they perform economically is a key aspect of any future outlook. So lets have a look at just a few.
http://finance.yahoo.com/news/eight-retailers-that-will-close-the-most-stores-173320796.html?page=2
Best Buy
> Forecast store closings: 200 to 250
> Number of U.S. stores:1,056
> One-year stock performance: -36.8%
Sears Holding Corp.
> Forecast store closings: Kmart 175 to 225, Sears 100 to 125
> Number of U.S. stores: 2,118
> One-year stock performance: 8.8%
J.C. Penney
> Forecast store closings: 300 to 350
> Number of U.S. stores: 1,100
> One-year stock performance: -53.6%
Office Depot
> Forecast store closings: 125 to 150
> Number of U.S. stores: 1,114
> One-year stock performance: 50.7%
Barnes & Noble
> Forecast store closings: 190 to 240, per company comments
> Number of U.S. stores: 689
> One-year stock performance: 8.95%
Gamestop
> Forecast store closings: 500 to 600
> Number of U.S. stores: 4,471
> One-year stock performance: -2.2%
OfficeMax
> Forecast store closings: 150 to 175
> Number of U.S. stores: 872
> One-year stock performance: 80.8%
RadioShack
> Forecast store closings: 450 to 550
> Number of U.S. stores: 4,412
> One-year stock performance: -68.1%
- Blockbuster recently announced that this year they will be closing about 300 stores and eliminating about 3,000 jobs.
That's conservatively around 2300 stores…. I wouldn't touch a shopping mall with someone elses money.
These guys have huge buying power and massive efficiencies in scale but they're all struggling with a consumer who has no spending power. It's a trend that's been happening for a decade or more. It's a powerful indicator of commercial activity. Nothing survives long without a consumer at the other end.
Freckle, I'm impressed that you personally are so intrigued by absolutely everything I post. I truly feel you add a nice balance to any positive data that is posted related to the United States. As any wise person would know, there is two sides to almost everything to include real estate and the economy.
I picture you as a person who sits at home all day with no job and is totally obsessed with the internet while you blame everyone else in your life and the world for why life has treated you so unfairly. But, I could be totally wrong; either way who cares.
After this post I plan to totally ignore any further post or comments that come from you. But what I will say prior to that is I have challenged you in the past for evidence of your personal dealings here in the USA be it good or bad. Because coming from someone like you; should you ever have invested one dollar in this country knowing as much as you do you must be the next Warren Buffet by now. I know, I'm just being a smart ass with you but REALLY???? Seriously Freckle, if you can please keep posting 3 to 4 times as much as I do with regards to everything I say; you will help my conversation traffic. What I'm saying is that since I have a career and responsibility and that makes it more difficult for me to set on this computer all day and night; that by you always being so infatuated with me you totally boost my post by drawing so much attention. I love it; keep going my friend.
Now on a more useful means of my time:
An new 1 million square feet of distribution operation could be coming to Jacksonville.
The City of Jacksonville is seeking permits from the St. Johns Water Management District for 400,000 and 600,000 square foot warehouse and distribution centers for an unnamed company at Cecil Commerce Center, according to an April 2 permit application.
The proposed facility would be on a 102-acre site near the intersection of Normandy Boulevard and 103rd Street and runs along Alcoy Road. Look at the map below to see the parcel inside the green line.
The unnamed company could be FedEx Ground Shipping Services or Amazon.com, both of which are scoping out Florida for distribution centers.
John-USA-CommercialRE
Email MeJohn-USA-CommercialRE wrote:Freckle, I'm impressed that you personally are so intrigued by absolutely everything I post. I truly feel you add a nice balance to any positive data that is posted related to the United States. As any wise person would know, there is two sides to almost everything to include real estate and the economy.Sure there's 2 sides. You take a position but fail to support it with anything other than MSM comment and advertorials of questionable merit. I could play either side of this coin but in these threads I'm the Devils advocate.
Quote:I picture you as a person who sits at home all day with no job and is totally obsessed with the internet while you blame everyone else in your life and the world for why life has treated you so unfairly. But, I could be totally wrong; either way who cares.Being semi retired affords some of us that luxury. When I do work it's because I want to or like to. I'm in a transitionary stage at the moment as I wait for some scheduled surgery (on the 18 Apr). That'll see me much more physically able again. I (we) will be heading back to NZ around mid Jun and for some time we will be motor homing around NZ until something else takes my fancy.
Quote:After this post I plan to totally ignore any further post or comments that come from you.LOL.. I thought that's what you had been doing anyway.
Quote:But what I will say prior to that is I have challenged you in the past for evidence of your personal dealings here in the USA be it good or bad. Because coming from someone like you; should you ever have invested one dollar in this country knowing as much as you do you must be the next Warren Buffet by now.You've never challenged me on anything. Well nothing I'd call a challenge. When I was 20 I had a fairly serious back injury. An orthopedic surgeon I was under wanted to do some fairly radical surgery with a 50/50 outcome. I took some advice from a non surgeon, slowly recovered over the space of 2 years and haven't looked back. That taught me that the so called experts, especially those with a professional or pecuniary interest will almost always give advice more suited to their egos and pocket than my best interests. I made it a point from that time on that if I was to listen to anyone proffering advice purportedly in my or someone elses best interest then I'd better make sure I understood the issues and that testing their competency should be part of the DD process.
Quote:I know, I'm just being a smart ass with you but REALLY???? Seriously Freckle, if you can please keep posting 3 to 4 times as much as I do with regards to everything I say; you will help my conversation traffic. What I'm saying is that since I have a career and responsibility and that makes it more difficult for me to set on this computer all day and night; that by you always being so infatuated with me you totally boost my post by drawing so much attention. I love it; keep going my friend.Not a problem. Glad to help as always
Quote:Now on a more useful means of my time:An new 1 million square feet of distribution operation could be coming to Jacksonville.
The City of Jacksonville is seeking permits from the St. Johns Water Management District for 400,000 and 600,000 square foot warehouse and distribution centers for an unnamed company at Cecil Commerce Center, according to an April 2 permit application.
The proposed facility would be on a 102-acre site near the intersection of Normandy Boulevard and 103rd Street and runs along Alcoy Road. Look at the map below to see the parcel inside the green line.
The unnamed company could be FedEx Ground Shipping Services or Amazon.com, both of which are scoping out Florida for distribution centers.
Sounds fascinating. You must be very excited.
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A recent article in the Financial Times suggests that 15% of America’s regional malls will fail in the next five years. “The mall’s 50-year reign as the ultimate shopping destination appears to be coming to an end,” claims a report by the CoStar Group, a real estate analysis firm.
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