Archive for April, 2010
Pension funds across the U.S. are expected to ramp up their commercial real estate allocations in 2010, according to a new survey from Institutional Real Estate Inc. and Kingsley Associates. Commercial real estate has long been considered a long-term stable asset for pension fund portfolios, but many funds took a beating during the economic recession over the last two years. Now that the economy is in recovery mode, those funds are poised to invest up to $34 billion into real estate this year, including allocations for safe commercial real estate investments, debt, overseas deals and some riskier private equity deals for land and distressed properties. More >
Earlier this month, NAI Global Chief Economist Dr. Peter Linneman provided forecast during the Global Economic Outlook web conference. Below is a brief excerpt from that conversation, moderated by NAI Global President & CEO Jeffrey M. Finn. To access the full audio and slide presentation click here.
Let’s bring it down to the local U.S. issue of California, for example, or many cities and towns across the country. Is there going to be a reallocation of federal money to prop up those budgets and save the day? More >
In Part One we discussed how outsourcing your company’s lease renewal process is beneficial to productivity and the bottom line. Now let’s take a look at the potential hidden costs and tips on how you can manage the process:
Putting too much faith in the relationship with the landlord (or management company) for cost savings is a mistake many companies make in the lease renewal process. Each landlord has a business to run, and has factored in a renewal commission and allowance for vacancy in their budgets. This 2-4% commission (on average) is often buried in multiple categories, making it difficult to locate. In a straight tenant-landlord negotiation, tenants believe they can negotiate this commission away, whereas landlords find ways to create sources of one-time profit within each renewal. Landlord budgets and rental rates reflect these renewal commissions simply because landlords would be naïve to assume that every tenant will renew in place and commission payments are not required. More >
With the stock market surging, and economists predicting job increases and a “prolonged recovery,” conventional wisdom provides that happy days may yet be here again. What a relief!
Uh oh… just as we hope to experience the tail end of the residential foreclosure mess, it’s an upsurge in commercial real estate loan failures that could potentially threaten America’s financial system. Between 2010 and 2014, roughly $1.4 trillion in commercial real estate mortgages will reach the end of their terms. It’s estimated that roughly half of these properties are “underwater,” whereby the borrowers owe the bank more than what the property is worth. Across the country, commercial property values have generally fallen more than 40% since their peak in early 2007. Rising vacancies and decreasing rental rates have exerted a strong downward pressure on how much these properties are worth. More >
Why are we so bullish on multifamily as an investment property? Multifamily fell off a cliff during this recent super recession. Multifamily vacancy rates are quite high. Of course it depends on what markets you are in, but vacancy rates are in double digits, low double digits or very high single digits in most markets. But we are only producing about 100,000 multifamily units. That’s not enough to even replace those units that are being burnt, destroyed, by floods, fires, etc. We need about 320,000 units a year for that. What really has happened to multifamily is that the loss of 8.5 million jobs has caused people to double up. Instead of forming new households, they are doubling up. More >
If you show me yours, I’ll show you mine-(balance sheet that is!)
Traditionally, financial information has flowed in one direction only. It was standard procedure for the Landlord to assess credit risk by reviewing the Tenant’s financial information before entering into a lease agreement. Nowadays, in this topsy-turvy market, the rules of the game are being rewritten by savvy tenants (and the brokers who represent them).
Tenants are taking advantage of leasing incentives right now, but they are not rushing in blindly. One of the most common scenarios of caution involves the tenant improvements, which are largely funded up front by the Landlord. Any delay or failure of the Landlord to deliver the premises as promised could be detrimental to the operations of the Tenant’s business. Even if the Tenant is released from the lease obligation, they would be hard pressed to find a new location on such short notice. More >
We are often asked whether it is better to work with large companies and conglomerates where your brand is just another spoke in the wheel or with young, hungry entrepreneurs. In working worldwide with leading franchisors, franchisees, retailers, landlords and companies large and small, I’ve seen start-up ventures get lost, delayed and mismanaged in big companies and entrepreneurs who didn’t have sufficient capital and resources to properly grow the brand. Finding a balance between these two extremes is critical.
Big or small, one area that should never be left to chance or dependent on the franchisee/partner is real estate. A new venture can ill afford one or two bad locations; this will kill the brand’s successful launch and introduction to the market. The ability to provide franchisees/partners with extensive global real estate expertise and resources needs to be among a franchisor’s core competencies and services. It is not a coincidence that the world’s largest F&B chain, McDonald’s, has historically devoted as much or more resources toward real estate development as franchise development. More >
On March 23, I went from the NAI Global Market Outlook in New York City back to New Jersey to attend an auction in Woodbridge for five multifamily properties in New Jersey and Pennsylvania. I’ve been watching the auction scene very closely as we ramp up for upcoming NAI PowerSales™.
The results were good but they didn’t surprise me. All five properties sold during less than 25 minutes of active bidding, with three going to the same bidder. There were about 60 active bidders in a room with more than 200 people including brokers, reporters and curious spectators. Prices were good with some cap rates actually surprising. More >
NAI Global is hosting its quarterly Global Economic Outlook web conference Friday, April 17 at 1:00 p.m. Eastern. Chief Economist Dr. Peter Linnemna will provide insight into the commercial real estate industry, the challenges we face in today’s economy, the impact of the PPIP and TALF/TARP programs, what defines a “bottom” and where we go from here.
Register now to attend this free, live web conference by clicking here.
Early first blush from the non-Apple PC community is that the iPad is pretty, but not much included and no one can really figure out what it does besides reading a book. It is not really a computer, you can’t use it as a cell phone, and it’s too big to fit in your pocket. And the real price after adding likely needed capabilities is closer to $1,000, not $500.
But what this means to commercial real estate professionals is that this is a noteworthy first shot in interesting remote computing to assist CRE professionals and service providers in a variety of tasks in the field, instead of being chained to their desks back at the office. Typical smart phones and PDA devices have just been too small to really see enough information on tiny screens. A tablet type PC would finally allow people in the field, sitting at an airport or train station, or walking around a new property doing a BOV and condition assessment, to do their work more quickly and efficiently on a device easily carried in a briefcase or handbag. More >