Archive for the ‘Real Estate’ Category

Successful Leasing Strategies in a Volatile Market

This International Council of Shopping Centers (ICSC) held a webinar his past week called “Successful Leasing Strategies in a Volatile Market” which consisted of a panel of industry experts who gave their professional opinion on the most effective leasing strategies in the current market situations.

Hessman Nadji opened up the session with an overview of the driving economic forces in today’s market, and addressed his predictions on the future recovery, Nadji stated “There is plenty of positive evidence that suggests the worst is over in what is now being called the “Great Recession,” but stated that there are still plenty of obstacles before us.

“We’ve seen the steepest job loss since the great depression, but now that loss has moderated, showing the end is near. We anticipate the job loss cycle will hit bottom by the end of 2009 and the economy should be poised for recovery in 2010”,Nadji said.

CoSatar reports that retail sales where better last month than expected, Nadji warned the retail industry to still be ready for the worst case scenario because a recovery will be “muted and difficult” and consumers will still face issues with debt and lack of jobs.

Traditionally in past recessions, consumers home-buying confidence will increase as the Feds decrease the interest rates, decreasing the duration of the recession. The affects on consumers during this recession have been much deeper than what we have experienced in the past, and the recovery is taking much longer than most economists predicted.

“The effect of store closures on retail vacancies has been incredibly sharp because retail was the only sector in which construction actually went up during 2001-2003 because there was so much consumer stimulation going,” Nadji said. CoStar expects that vacancy rates (which are extremely high) will continue to rise well in to 2010.

What Should Landlord’s Do?

Marty Mayer, president of Convington, an LA-based Stirling Properties, said “keeping existing tenants intact is key.” If a tenant moves out, there are several additional costs incurred by the landlord including leasing commissions, tenant improvements, cost of the vacancy itself.

Another option landlords should strongly consider is allowing the tenant to reduce the amount of s.f. they occupy. It may save the tenant from going dark, which will limit the amount vacancies landlords are currently battling.

I used to drive through town and see a sub-par retailer or food establishment and think “I wonder how long are they going to be in business for?”

Today is a different story as I see many National Retailers that are closing their doors and I think “If they can’t make it, who can?”

Sarah M Pardy of Costar says that in their research, of the 15,000 s.f. or more retail leases signed across the country, there is an overwhelming majority of value-oriented retailers such as:

Khol’s, Beall’s Outlet, Ross Dress for Less, TJ Maxx, Big Lots, Dollar General, Tuesday Morning and several other local retailers.

As Landlords are anxious to find someone to occupy their space, some may argue that they are doing themselves a disservice by allowing the value stores to Anchor their shopping center. The risk is that as the recession ends consumers will once again be quick to pay full price for high-end items. If your shopping center is Anchored by value stores, you will not be able to draw in other “High-End” junior tenants, thus decreasing the integrity of the center and limiting your rental income greatly in the future.

This is a bogus argument. Everyone has changed their spending habits…Everyone. Buyer’s abilities have changed, their credit limits have greatly decreased, their disposable income is next to nothing, therefore they will continue looking for deals at the TJ Maxx and Ross Dress for Less stores. This new “bargain shopping” fad will not fade in the next year…five years…or even ten years.

In a recent survey distributed by Loopnet.com, they questioned three key groups in commercial real estate (the broker, the investor, and current property owners). The survey was to determine the confidence these groups have in when the Commercial Market will begin to turn around. Main points of interest were:

• Timing of Recovery in Transaction Volume (when will the transaction numbers begin to increase relative to 2009.)
• How much further will prices decline?
• When will pricing hit bottom?
• How much further will the prices decline?
• What is the best investment opportunity?

TRANSACTION VOLUME

According to Loopnet, the confidence of Investors have slipped since last quarter. Only 10% feel that there will be a recovery in 2009 and 33% of the investors feel that it will be in 2011.

Although this isn’t great news, 56% of the investors feel that mid-year 2010 we should see the transaction number start to increase.

Breakdown by Quarter and Role

PRICING

Although there is some consistency in the opinions regarding the transaction volume increasing, there is a pretty vast difference in how much further prices will decline. Of those surveyed, most believe that there is still an 11-20% drop ahead of us.

Current owners are a little more optomistic than are investors. 28% of the owners believe that pricing has bottomed out already, or will only decline 5% or less.

WHERE IS THE BOTTOM?

The consensus was not clear on when the pricing will completely reach the bottom, but the majority surveyed (60%) expects it to happen between Q4 of ’09 and Q3 of 2010. 17% surveyed expect that the declines will continue through 2011.

BEST INVESTMENT OPPORTUNITY

Of those surveyed, 48% felt that Multifamily was the best opportunity when considering a long term investment.

The Commercial Sector in St. George, Utah that are currently being professionally marketed in St. George Utah, there are:

• 11 Multifamily properties available for sale
• 29 Office buildings/Office condo’s for sale
• 25 Retail buildings/Retail condo’s for sale

Contact me if you are interested in viewing a list of available properties for Sale or Lease anywhere in St. George, Hurricane, Washington, or Cedar City.

“Growth Friendly” City

Washington City Utah recently announced their new Fast track program which will expedite the time it takes to pull permits, boasting a “growth friendly” city.

In order to accomplish this, the city will-

• 1. Assign a staff professional to act as a single contact person to better inform the applicant of the city’s development requirements.
• 2. Charge the assigned staff professional with conducting an initial meeting with the applicant to discuss the overall project and to develop a checklist of items, documents, and submittals needed for the specific project. A preliminary plans review time line will be developed with submittal deadlines and review deadlines for all development related issues. The timeline schedule may include additional meetings with the applicant’s design team to discuss submittal requirements, deadlines, and the review comments received from the city’s development review departments.
• 3. Charge the assigned staff professional with the responsibility to take the development plans to each of the city’s development review departments for their review.
• 4. Charge the city’s development review departments with submitting written review comments to the assigned staff professional within five (5) business days of submittal of the required program application documents to the city. The assigned staff professional will forward the written review comments to the applicant and a master timeline will then be developed by the assigned staff professional and the applicant for the project, which will include the final plans review timeline, and review and negotiation timelines for any necessary easement dedications, development agreements, economic development agreements, and other necessary documents.
• 5. Charge the city’s development review departments with adherence to the customized schedule and permitting process as they review plans and submit written comments.
• 6. Where necessary, allow permits to be provided on a phased approach.

In addition to this Fast Track Program, and regardless of whether an applicant has submitted an application for the Fast Track Program, building plan reviews may be expedited by submitting an additional fee to offset the cost of a building plans examiner working beyond normal business hours (contact the Community Development Department for details).

The cities new estimated timelines are as follows:

Recently I was reading real estate trends, recovery periods, and was encouraged by some of the articles that I read. Costar.com interviewed Hessam Nadji, the chief of research for Marcus and Millchap, and he expects that job losses and the recession will end Read More…