NAI Global Executives
Europe on the Mend or is it Gloss it Over and Hope?
May 25th
It has certainly been an exciting week in European politics. The UK election took place last Thursday and for the first time in decades the great British public could be said to have spoken but no one knew what they had said. The result gave the Conservatives 306 seats, Labour 258, the Liberal Democrats 57 and a rag bag of others 28. A minimum of 326 seats is needed to command a majority. No party could claim to have won and not even the Labour party, which lost over 100 seats, was prepared to admit that it had lost. The furthest one of their senior figures was prepared to go was to admit that they had not actually won. More >
Call Centers Return to North America
May 25th
We are starting to see more and more call centers returning to North America from India and the Philippines. Most of these are going to secondary and or tertiary markets in the U.S., or Mexico and Latin America, where call center operators are able to tap into abundant labor pools at fairly low wages. They can typically pay wages below $9.00 per hour. However, even with these lower wages, they are able to get bilingual languages (Spanish and English), which most call centers need.
Most of these call centers are approximately 40,000 to 60,000 rentable square feet to be able to acquire and keep the call centers fully occupied. These new centers are about half the size of the previous call centers, which historically ranged from 75,000 to 120,000 square feet but had turnover that ranged as high as 50-75%. More >
Governments in Asia Impose Property Anti-Speculation Measures to Avoid Future Bubbles
May 21st
As the US residential markets continue to creep along with mixed signals on whether we have already reached the bottom of the cycle, governments in Asia are implementing new regulations to control speculation and reduce the likelihood of a property market crash. Residential values have shot up in many of the major cities across Asia and investors have climbed aboard a rapidly rising market with 20-30% increases in just the last one-year period.
In China, the State Council, or cabinet, recently set a 30% minimum down payment for purchases of first homes larger than 90 square meters and raised the down payment requirement for second homes for the second time this year, from 40% to 50%. No loans are to be made to buyers of third homes. More >
German Investment Fund Regulations
May 20th
There are likely to be changes to property investment fund regulations in Germany that are said to negate any returns on the investments. Two open ended funds, namely Kan Am and SEB have suspended trading to stop investors withdrawing their money after €500 million was withdrawn by nervous investors in three days. They currently have assets of about €13 billion.
The bill is considered to be a step too far for the investment funds that are pushing for it to be diluted. The funds agree there should be regulation of outflows of money to avoid sudden collapse but the proposals are considered to be draconian. Investors would have to hold assets for two years and give 24 months’ notice of withdrawal. There is also controversy over values of the portfolios. The government is seeking to calm investors, saying that the bill will be amended to remove the write-down proposal. More >
Technology through the Looking Glass
May 19th
IWMS, BIM, CAFM, CAD, GIS, IOX, SOX, SAS, LEED, SQL, Cloud, Interoperability, Smart Buildings, Green Buildings… oh my! How do real estate professionals cope with all this jargon just to find a lease or sell a building? And are techies really taking over the world?
Unfortunately for the old fashioned broker, these terms are becoming the lexicon of more and more companies and their real estate departments trying to cope with change and finding ways of saving money. Add to that, companies today are using technology to do more with less (read: less staff) but also cope with critical data that comes from every part of a company requiring a “fully integrated, end to end, solution;” whether you are using crayons or PCs. More >
Is the Shopping Mall a Dead Concept?
May 18th
| At the start of the recession, regional malls were in a difficult position. Battling competition from online retailers and as people turned to lower-cost bulk items to save money, shopping malls lost a lot of foot traffic and were in danger of becoming extinct. New shopping mall developments were put on hold, and even mega-malls, like New Jersey’s Xanadu, had their plans scaled back significantly in an attempt to match consumer sentiment. |
As the recession dragged on, big box retailers started to go out of business, followed by a number of their smaller retail cousins. Mall anchor stores like Macy’s, Nordstroms and JC Penney began to reevaluate their retail footprints and cut underperforming stores, and in some cases halt altogether their chain’s expansion. As the anchor stores closed, many of the smaller retailers that rely on that foot traffic to survive soon followed. Not to mention, chain stores like DVD retailers and toy retailers began to close as people turned to cheaper options like Target and Walmart for their DVD and toy purchases, further changing the shopping mall landscape. And in short order, a number of communities were faced with desolate shopping centers, driving up unemployment in the local area and creating an eyesore. More >
Is Brazil Ready to Join the League of Respected Industrialized Nations?
May 17th
I am spending a couple of weeks in Brazil attending to business (of which there is plenty) and the certainty that Brazil is finally on the road to claiming its destiny as a top ranked economic power is palpable. Brazilians are sure that their time has come and soon they will join the League of Respected Industrialized Nations. I have no doubt that Brazil will continue to prosper and grow (in spite of its frustrating labyrinthine bureaucracy). However, on the real estate front it has to resolve some very real issues if it wishes healthy growth to continue; one issue is incredibly high lease rates.
Currently, using just Class A office space as an example, the lease rates are as high as US$83/m2/mo (US$7.72 per SF). Some would try to argue that the rates “seem” high due to the US$ to Real exchange rate (currently 1.8 to the US$), but that is a fallacious observation. Certainly that adds to the egregiousness of the cost, but even if we were to generously apply 3 Reals to 1 US$, the lease rates would still be too high – about US$50/m2. Some might also argue that Sao Paulo is a capital city and that Class A product is not so easily available and constructed in Brazil as in the USA, so there is a premium for it. As an ex-marketing executive, I understand all too well that logic (limited capacity to provide a high quality product in a market with a low-factor of deliverability), however, this completely ignores the fact that the economy has not attained overall consumption and demand levels equivalent to a Tier One Economy. In simple terms, Class A lease rates are sky high, but other goods and services are sold in the market at comparatively much lower rates. This means that it takes a much larger share of revenue for a company to pay its office rent than it would in a Tier One Economy – perhaps much more. More >
Commercial Real Estate Investors Hampered by European Banks
May 14th
Is the European Banks’ Policy of ‘Delay and Pay’ or ‘Pretend and Extend’ Working or Could it Still Go Horribly Wrong?
As Europe slowly emerges from recession, a number of major investors, many of them cash buyers, principally German, Scandinavian and Asian, are beginning to look for prime investments across the continent. Somewhat surprisingly, there is a shortage of such stock which, in turn, has led in some markets to boom-like conditions in this narrow sector of the market. Prime office yields in London, for example, have fallen to 4.75%. The shortage is partially due to the extremely conservative requirements of the investors-prime location, top specification, long leases, undoubted covenants, partially to the virtual cessation of development activity, but significantly also to the somewhat ostrich-like behaviour of the banks. More >
Trustee Sales Represent Nearly Three-Quarters of Vacant Land Transactions
May 14th
The Great Recession continues to influence the raw land market as valuations deteriorate from an abundance of distressed sales transactions. During the first quarter of 2010, southern Nevada witnessed 526.7 acres change hands with traditional sales taking a backseat to lender-involved trustee sales, which accounted for 391.6 acres or 74.3% of all vacant land deals. Over the last five quarters, traditional sales have averaged only 20.9% of all raw land transactions and downward pressure on pricing will continue as long as these levels remain.
The current average price per acre of $182,400 or $4.19 per square foot represents an 80.6% decline from the peak witnessed at the onset of the recession, during the fourth quarter of 2007. Current price points are now at a level not seen since the pre-boom cycle in early 2003. Southern Nevada will continue to lag behind the national economic recovery but we are optimistic that prices will begin to stabilize as local recovery becomes imminent. More >
NAI Global Firms, Agents Earn 230 CoStar Power Broker Awards
May 13th
NAI Global, the premier network of commercial real estate firms and one of the largest real estate services providers worldwide, today announced that 68 NAI member firms and 151 NAI agents were named Power Brokers by CoStar Group, a leading information provider for the commercial real estate industry.
CoStar Group tracks data on commercial properties and transactions throughout the U.S., UK and France. The Power Broker Awards are presented annually to the top brokerage firms and individual agents in major U.S. markets based on their leasing and sales transaction activities the prior year. NAI received a total of 230 Power Broker Awards across 57 markets for its performance in 2009. NAI firms were named Top Leasing Firm in 55 markets and Top Sales Firm in 21 markets. Only one other brokerage firm received awards in more markets. More >
