Posts tagged Commercial Real Estate
In his latest white paper, “Unprecedented Global Government Intervention,” NAI Global Chief Economist, Dr. Peter Linneman, discusses the dangers and pitfalls of an extraordinary wave of global government intervention taking place in capital markets. Citing historical examples, he demonstrates intervention only prolongs periods of stagnation and uncertainty. “In all, government activity is now deterring the very investment it was hoping to spur.”
As we enter the third quarter of 2012, we are seeing the pattern of unprecedented government intervention continue. Governments around the world are using the powerful tools at their disposal; spending, regulations, fiscal policy, and taxes to interfere with the free market in hope of sparking economic recovery. The result is that instead of recovery, we are experiencing further distress as the Euro crisis intensifies and even Brazil and China’s economies slow.
The following post is an excerpt from the Summer 2012 issue of The Linneman Letter.
Every executive with whom we speak expresses utter confusion about the state of the global and U.S. economy and capital markets. As a result, they are in a muddle about their investment strategies. They closely monitor economic and capital market data for signs that “everything is all right,” yet even as the U.S. economy grows at a seemingly healthy rate, they remain extraordinarily ill at ease. Why?
Simply stated, this discomfort reflects the fact that even though U.S. real GDP and employment are growing at moderately healthy paces, we remain in totally uncharted waters in terms of both the economy and our capital markets. And when private decision makers are in unfamiliar (and unrecognizable) landscapes, they act very cautiously.
For example, we have not seen in our lifetime federal budget deficits as large as those which currently exist. Not only is U.S. federal spending as a percent of GDP at a peace-time high, but federal revenues as a percent of GDP are well below their historic norm, resulting in unprecedented budget deficits. Compounding the problem of unprecedented U.S. budget deficits is the fact that there is neither political leadership nor a political consensus on how to bring the federal budget back in balance. This is creating a situation in which the only clarity is that the current situation is not sustainable.
The Manhattan office market continued on its road to recovery in Q2 with the overall vacancy rate falling to 12.7%, a slight 10 basis-point decline from the previous quarter, and asking rents rising to $48.64, a 1.9% increase from Q1.
Leasing activity was dominated by financial services and media companies, which accounted for 16 of the 20 largest leases completed during Q2. Two blockbuster deals were completed in the quarter, with Conde Nast signing a lease for 1 million SF to anchor the under-construction 1 World Trade Center, and Nomura moving from Downtown to 900,000 SF at 825 Eighth Avenue in Midtown.
As we round the 3th quarter 0f 2011, we are seeing that lenders are increasingly willing to sell notes/assets to clear up their books. With the real estate recovery under way, more sideline capital are chasing the few opportunities on the market and The increased demand is prompting distressed debt owners to place more of their inventory on the market. More >
Since the beginning of 2011, there has been a torrid level of M&A activity in the commercial real estate services industry. Recently announced deals include CBRE’s acquisition of the ING Real Estate fund management business; the sale of Newmark to financial derivatives house BGC; Colony Capital’s loan and exclusive look period with Grubb & Ellis; the recapitalization of DTZ by investment group SGP and the possible follow on merger with BNP Real Estate; and the hotly rumored takeover of King Sturge by JLL. And that is just on the services side. On the information side, Argus is selling to Altus and Costar is acquiring Loopnet.