News of economic improvement across the nation continues to roll out. Locally in San Angelo we have seen the same impact and continued increase in demand. Unemployment remains low and it appears that we are having new businesses looking to relocate to the area. The biggest push lately has been for yard space with warehouse/flex space. Although the leads and calls have had a major increase in our office, the actual lease and move into the area is still a little slower than exected. My assumption at this point would be for continued traffic leading towards a higher demand. That being said, rents in our area have historically remained low, we did not see a dip in rates during the recent cruch but we have not seen much in the way of increased rents for many years. The only major increase noted for this area has been in residential from apartments to rent houses to hotels, occupancy has also remained very high in these industries even with the increases.
Below are some comments that should be relevant to our area as well as most other cities and states. These comments were released in a recent article through CoStar in data search.
With Little New Supply Slated For Delivery, Landlords Should Slowly Gain Pricing Power If
Recovery Remains On Track
Although rising levels of office absorption and a falling U.S. vacancy rate signal a strengthening market,
the gains have yet to translate into meaningful rent increases for office landlords in most markets, CoStar
Group reported this week in the company's Second-Quarter 2012 Office Review & Outlook.
This week, CoStar analysts drilled deeper into the office market numbers in a report on the national office
market at midyear 2012 presented to CoStar clients. And while they see encouraging signs in the broader
CRE market, specifically in the office and industrial sectors, they cautioned that the recovery is likely to be
slow and dependent on the rate of job growth.
"Overall for the office market in terms of demand, it’s a pretty good story," said Hans Nordby, managing
director of Property and Portfolio Research (PPR), CoStar’s analytics and forecasting division. Nordby was
joined by Walter Page, PPR director of research; and Jay Spivey, CoStar senior director of research and
analytics.
Although office job growth slowed on a year-over-year basis to 1.9% from last quarter's 2.8%, it’s still
growing at a much stronger rate than the broader U.S. economy, which remains a nagging source of
concern to economists.
Office job growth is the life’s blood of real estate fundamentals. And those fundamentals are starting to
pick up momentum, with net absorption of U.S. office space more than doubling from 8 million square
feet in the first quarter to 18 million square feet in the second quarter of 2012. Despite the surge in
absorption "it's still not a screamer of a quarter" compared to the boom years of 2005 and 2006, Nordby
noted.
Net absorption over the last year has totaled about 63 million square feet, translating to a 0.9% rate of
growth in office demand, roughly half the rate of office job growth, Page noted. Houston, the nation’s top
energy market, led the nation in absorption growth at 3.1 million square feet of net absorption. The longsuffering
Atlanta market is starting to show significant demand growth.
At the other end of the spectrum, the pullback by pharmaceutical and insurance companies has resulted
in modest negative absorption in a handful of markets such as Northern New Jersey and St. Louis.
The office market is now reaping the benefits of job creation a year ago, especially in markets such as
San Francisco, New York, Minneapolis and Detroit. Other sectors such as financial services and
entertainment are starting to show job gains, nudging markets such as Orange County, CA into a stronger
recovery.
The vacancy rate fell slightly by 20 basis points to 12.6% in the second quarter from the previous
quarter, and is down 70 bps from a year ago. The slow rate of net absorption compared with the growth
in office jobs is due to the shadow space from the high levels of job losses during the past recession
without a corresponding loss of office demand. In short, tenants are burning off excess space that is left
over from the recession, before the need to lease additional space will be realized.
Copyright (c) 2012 CoStar Realty Information, Inc. All rights reserved.
Demand remains concentrated in top-tier 4- and 5-star buildings, achieving nearly double their fair share
of absorption of tenants take the opportunity to move up to higher-quality buildings, Page said. As the
recovery gains momentum and little new office supply on the horizon, absorption is spreading into lowergrade buildings, he said.
Gross leasing totaled roughly 95 million square feet per quarter between 2006 and 2009, a number that
has shot up to 125 million square feet on average during the last three years as tenants have sought to
upgrade their space, Spivey said. The 30% increase in leasing dovetails with a 10% decline in rents.
This year, deliveries of new office space as a percentage of inventory will total just 0.6%, far lower than
the 30-year average of just over 2%, Spivey said.
Don’t look for anything to change soon on the supply front. With no real uptick in construction starts, the
office market is still 3-4 years away from achieving significant new supply, with the scant level of new
construction tending to be highly preleased.
The higher absorption and lower vacancy has yet to translate into meaningful year-to-date gains in rents,
which are up only 0.7% from the same time last year, much of that driven by a 1.6% hike in Class A
rents. The prospect of future vacancy declines suggests that the scales are tipping toward positive office
rent growth, but growth has been underwhelming as of the end of the second quarter of 2012.
However, face rents move much more slowly than effective rents, as evidenced by landlords who are
starting to pull back from rent concession, tenant improvement allowances and other tenant perks in top
markets around the country, Nordby said.
While government spending driven markets such as Washington, D.C. posted the strongest rent increases
five years ago, technology and energy based markets such as San Jose and Houston are now leading the
charge.
Office investment sales are at roughly the same level as the first half of 2011, however, sales volume has
spilled beyond the top five U.S. markets into secondary markets with lower barriers to entry for new
supply.
Saturday, July 21, 2012
Wednesday, July 4, 2012
Stronger Commercial Real Estate Outlooks
It appears that many of the recent conferences I have attended as well as many of the articles that are circulating point towards a more positive outlook than in recent months. I have noticed a different attitude in today's market than we have seen in several years. The article below by Mr. Ziegler is just one of several views or outlooks as to what the future may hold.
Emerging Trends: CRE Profitability, Lending Look
Bright for Remainder of 2012
Commercial Property Executive
By Nicholas Ziegler, News Editor
The Urban Land Institute and PricewaterhouseCoopers L.L.P. have released the results of the annual Emerging Trends in Real Estate survey — and the
responses point to a stronger commercial real estate outlook for the remainder of 2012. The more than 195 participants “believe that profitability,
lending, and investor markets all show brighter signs” and that markets are looking up for CRE firms.
The survey, which has been issued for 33 years, is jointly produced by PwC and the ULI, and it includes survey responses from more than 950 leading
real estate experts, including investors, developers, property company representatives, lenders, brokers and consultants. For the mid-year survey, 195
participants who completed the original 2012 Emerging Trends survey were interviewed.
Most importantly, the survey showed a general trend toward optimism, even when compared with the year-end 2011 results. The number of
respondents rating profitability forecasts for 2012 as “excellent” rose by approximately 2 percent, and the number rating the category as “very good”
rose by the same amount. In fact, the only rating that fell was the “abysmal-fair” bucket, which dropped by approximately 10 percent.
According to the report, foreign investors and private equity will still lead the charge as active buyers of commercial real estate, but both values have
declined slightly. The biggest jump came from private local investors and public equity REITs. According to Real Capital Analytics through the first
quarter of this year, private-capital investors have completed the most deals, followed by public-equity companies.
The sources of debt capital values displayed some positive signs in the mid-year update. Insurance companies continue to be number one overall.
However, government-sponsored entities’ value increased over 11 percent from the original survey in November 2011. Other strong gains were found
in the CMBS market, commercial banks, and mezzanine lenders – all strong signs that the availability of debt is showing improvement. According to
Commercial Mortgage Alert, U.S. CMBS deals total $10.8 billion, up over 12 percent year-over-year. In addition, RCA states that there were increases in
lending as well in completed transactions.
Sentiment at ULI’s spring conference in Charlotte, N.C., in early May reflected the same results as the survey. During one of the sessions, Glenn
Grimaldi, executive vice president at HSBC, cited low interest rates as a major trend that is driving the real estate industry by allowing for low
acquisition cap rates. The low interest rates will also have implications on the amount of deleveraging as loans mature in the next few years, he said.
Grimaldi forecasted that banks may sell more loans at discount in the next years.
Emerging Trends: CRE Profitability, Lending Look
Bright for Remainder of 2012
Commercial Property Executive
By Nicholas Ziegler, News Editor
The Urban Land Institute and PricewaterhouseCoopers L.L.P. have released the results of the annual Emerging Trends in Real Estate survey — and the
responses point to a stronger commercial real estate outlook for the remainder of 2012. The more than 195 participants “believe that profitability,
lending, and investor markets all show brighter signs” and that markets are looking up for CRE firms.
The survey, which has been issued for 33 years, is jointly produced by PwC and the ULI, and it includes survey responses from more than 950 leading
real estate experts, including investors, developers, property company representatives, lenders, brokers and consultants. For the mid-year survey, 195
participants who completed the original 2012 Emerging Trends survey were interviewed.
Most importantly, the survey showed a general trend toward optimism, even when compared with the year-end 2011 results. The number of
respondents rating profitability forecasts for 2012 as “excellent” rose by approximately 2 percent, and the number rating the category as “very good”
rose by the same amount. In fact, the only rating that fell was the “abysmal-fair” bucket, which dropped by approximately 10 percent.
According to the report, foreign investors and private equity will still lead the charge as active buyers of commercial real estate, but both values have
declined slightly. The biggest jump came from private local investors and public equity REITs. According to Real Capital Analytics through the first
quarter of this year, private-capital investors have completed the most deals, followed by public-equity companies.
The sources of debt capital values displayed some positive signs in the mid-year update. Insurance companies continue to be number one overall.
However, government-sponsored entities’ value increased over 11 percent from the original survey in November 2011. Other strong gains were found
in the CMBS market, commercial banks, and mezzanine lenders – all strong signs that the availability of debt is showing improvement. According to
Commercial Mortgage Alert, U.S. CMBS deals total $10.8 billion, up over 12 percent year-over-year. In addition, RCA states that there were increases in
lending as well in completed transactions.
Sentiment at ULI’s spring conference in Charlotte, N.C., in early May reflected the same results as the survey. During one of the sessions, Glenn
Grimaldi, executive vice president at HSBC, cited low interest rates as a major trend that is driving the real estate industry by allowing for low
acquisition cap rates. The low interest rates will also have implications on the amount of deleveraging as loans mature in the next few years, he said.
Grimaldi forecasted that banks may sell more loans at discount in the next years.
Wednesday, March 17, 2010
Market Updates
Several recent articles explain our current and projected state of the industry. At this time reports are in conflict, some feel that the economy is on the upswing while some feel that we have not hit bottom. The view can be argued either way depending upon local economy and activity. Reports from Fox News and CNBC reveal that the upswing or continued down turn are becoming more centered in a micro economic standpoint and can be traced to individual markets at this point.
The Kiplingler report recently discussed current trends. The sales for commercial have continued to slide for 6 straight quarters. Estimated vacancy being 17.5% for office and 15% for industrial at this time. Forclosures are expected to climb for commercial by and estimated 25-50% due to maturing loans that were put in place during 2005-2007 in an inflated market. Since 2008 there have been 190 banks that have failed due to these loans for the most part and Kiplinger projects that that number will increase by 350 through 2014. Interest rates continue to remain at all time lows which is leaving a strong upside in deals for investors, especially those with large cash downpayments or no need for financing.
Good News Friday reports that the coomercial sector still remains troubled, 8.4 million jobs that were lost in the downturn will not return and commercial real estate must recapitalize as it did in the early 1090's. We are getting close to recovery, but a slow recovery is projected and prluections still show continued vacancy and closing for the next 18 months.
My thoughts are that we will see trouble as well as upswings in different markets. I have personally noticed the strong need for leases as opposed to sales from recent years. There is a movement and the local economy is trending up, but very slowly. There are some troubled properties and loans but this is leaving room for private investors to make a move. We are seeing several distressed sales and although the properties themselves are in management distress, the future upside is growing.
There are a lot of deals coming on line and a patient investor is now able to thrive in the current environment. I still think there is a rough road ahead but positioning investments now will create a very bright future in the coming years.
The Kiplingler report recently discussed current trends. The sales for commercial have continued to slide for 6 straight quarters. Estimated vacancy being 17.5% for office and 15% for industrial at this time. Forclosures are expected to climb for commercial by and estimated 25-50% due to maturing loans that were put in place during 2005-2007 in an inflated market. Since 2008 there have been 190 banks that have failed due to these loans for the most part and Kiplinger projects that that number will increase by 350 through 2014. Interest rates continue to remain at all time lows which is leaving a strong upside in deals for investors, especially those with large cash downpayments or no need for financing.
Good News Friday reports that the coomercial sector still remains troubled, 8.4 million jobs that were lost in the downturn will not return and commercial real estate must recapitalize as it did in the early 1090's. We are getting close to recovery, but a slow recovery is projected and prluections still show continued vacancy and closing for the next 18 months.
My thoughts are that we will see trouble as well as upswings in different markets. I have personally noticed the strong need for leases as opposed to sales from recent years. There is a movement and the local economy is trending up, but very slowly. There are some troubled properties and loans but this is leaving room for private investors to make a move. We are seeing several distressed sales and although the properties themselves are in management distress, the future upside is growing.
There are a lot of deals coming on line and a patient investor is now able to thrive in the current environment. I still think there is a rough road ahead but positioning investments now will create a very bright future in the coming years.
Friday, November 20, 2009
Commercial Real Estate Recovery or still headed Down???
A very intense question with views from both sides. Daily I am emailed with views stating that the worst is behind us followed by emails that state the worst is still to come. The problem with the cycle in today's time is that it is not a repeat of anything we have seen in the past. Most Economists can track changes and recovery by looking at historic information, this time however is more difficult, it does not appear to be taking the same approach as recessions before. An article from Recon just stated the economy is beginning to show signs of improvement while only 15 minutes later I received an email from sperry Van Ness Commercial stating "Commercial Real Estate is like a slow motion train wreck". I believe that there are some signs of improvement, however my personal opinion is that the worst is yet to come for some industries. Has anyone stopped to think about true unemployment lately? We are reporting figures of 8-10% but actually that does not account for the millions who have run through the cycle but have not found employment yet, they are treated as employed and lost in the mix. I talked to some people recently who believe actual unemployment to be in the upper teens as high as 17%.
Commercial Real Estate per the ICSC State of the Industry has not seen the bottom. Projections indicate that national and upper end retail will not bottom out for a possible 18 months followed by an additional 6 months before recovery begins. We are continuing to see large amounts of foreclosure across the nation and the number continues to rise almost daily. I believe that the Vulture Opportunities will begin to surface in the next 6 months and cash will again be king. I am starting to see opportunity and as others believe it is only going to increase in value added opportunities and short sell. As for myself, I believe all industries will experience cap rate and price adjustments in 2010, how much is yet to be determined.
Commercial Real Estate per the ICSC State of the Industry has not seen the bottom. Projections indicate that national and upper end retail will not bottom out for a possible 18 months followed by an additional 6 months before recovery begins. We are continuing to see large amounts of foreclosure across the nation and the number continues to rise almost daily. I believe that the Vulture Opportunities will begin to surface in the next 6 months and cash will again be king. I am starting to see opportunity and as others believe it is only going to increase in value added opportunities and short sell. As for myself, I believe all industries will experience cap rate and price adjustments in 2010, how much is yet to be determined.
Sunday, August 30, 2009
About Me
Here is a little about what I do and who I am. I have worked with Steve Eustis Co. for 6 years and EM Property Management (General Manager) for 3 years.
Steve Eustis Co. -
- Working with buyers and sellers for investmenet properties, owner user situations, portfolio management, and future goals for each client or partnership. I focus primarily on local properties but have the ability and have worked with properties spanning all across Texas as well as neighboring states. I travel frequently to marketing meetings in both exchanges and growth opportunities. We specialized in all areas of investments including but not limited to apartments, office, retail, warehouse, industrial, flex space, large and small free standing buildings, development and for some we will also work in farm and ranch if necessary.
EM Property Management -
- Focus on management of retial, apartments, and office for selected clients. My goal is to perserve the asset and make improvements as necessary while sticking to a tight budget. I have worked from value added opportunity to new construction and finishout.
BUX Investments -
- Is a limited partnership with ownership and managmenet ranging in apartments, retail, office, warehouse. Primary focus on value added opportunity, consisting mostly of management issues and less in structural rehab.
Current Organizations -
- Below is a little about who I am involved with.
- CCIM Candidate
- Attendee/Guest to Society of Exchange Counselors
- Leadership of San Angelo Graduate
- Young Business Professionals of San Angelo
- Board of Directors The Bank and Trust
- Board of Directors Economic Development in Downtown San Angelo
- Board of Directors San Angelo Country Club
- Tournament Chairman San Angelo Country Club
- San Angelo West Rotarian - Past President
- Paul Harris Fellow
TAR, TAA, NAR, REE, and I am sure a few I am forgetting.
We will have a web site operational within weeks, please see our ads and property listings at steveeustisrealesate.com.
Steve Eustis Co. -
- Working with buyers and sellers for investmenet properties, owner user situations, portfolio management, and future goals for each client or partnership. I focus primarily on local properties but have the ability and have worked with properties spanning all across Texas as well as neighboring states. I travel frequently to marketing meetings in both exchanges and growth opportunities. We specialized in all areas of investments including but not limited to apartments, office, retail, warehouse, industrial, flex space, large and small free standing buildings, development and for some we will also work in farm and ranch if necessary.
EM Property Management -
- Focus on management of retial, apartments, and office for selected clients. My goal is to perserve the asset and make improvements as necessary while sticking to a tight budget. I have worked from value added opportunity to new construction and finishout.
BUX Investments -
- Is a limited partnership with ownership and managmenet ranging in apartments, retail, office, warehouse. Primary focus on value added opportunity, consisting mostly of management issues and less in structural rehab.
Current Organizations -
- Below is a little about who I am involved with.
- CCIM Candidate
- Attendee/Guest to Society of Exchange Counselors
- Leadership of San Angelo Graduate
- Young Business Professionals of San Angelo
- Board of Directors The Bank and Trust
- Board of Directors Economic Development in Downtown San Angelo
- Board of Directors San Angelo Country Club
- Tournament Chairman San Angelo Country Club
- San Angelo West Rotarian - Past President
- Paul Harris Fellow
TAR, TAA, NAR, REE, and I am sure a few I am forgetting.
We will have a web site operational within weeks, please see our ads and property listings at steveeustisrealesate.com.
Saturday, August 22, 2009
Personal vs Career
As I sit around this afternoon I am tossing thoughts between work and personal. We have a new baby coming to join us within weeks, this is #2, also a boy. I can't help but feel completely excited. However, I have spent the last several years building a real estate career based on commercial property investments and managment. I have now been in commercial real estate for almost 6 years, I have just now decided to persue my CCIM designation (currently completed 101 and 102), I am a candidate for the SEC, and will take my broker's test within weeks. The next several months should be interesting as we explore the balance between wanting to spend every second with family and at the same time trying to acomplish 60+ hour weeks of work that will indeed begin to pile up. The bottom line is that I will achieve both but how I do this and still find time to sleep will be the challenge. I plan on being there for my family every step of the way and providing for them the best I can, I also do the same for each and every client I represent through selling, buying, or managing. I believe it is important to take care of all of my clients as though they were family (in many cases we feel that way). I hope everyone can understand the difficult times ahead as we work through a tough economy and my own personal sleepless nights. I would just like to add that I will never let my family or my clients down, I will always do my best to find time to take care of both. I will be adding several items to this in the coming months to help anyone who views this understand how I have worked through the tough times and treated everyone with the respect and attention they deserve. Hopefully I can help others who run into these situations in life.
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