As industrial real estate vacancies rise in Dayton, Ohio, an increasing amount of older space is being left empty and will be difficult to fill in a slow economy. According to the Dayton Daily News, a quarter-million square feet of industrial space in the area went dark this past year, sending vacancies up to 24.8% compared to 23.5% a year ago. Much of the vacant space can be attributed to the large amount of buildings with locations, ceiling heights or other features that make them unattractive to today's companies.
The recent acquisition by The Blackstone Group of 36 shopping centers should be a good sign for retail property owners, as it shows confidence in the future of retail valuations by a respected private equity firm. According to Retail Traffic, the portfolio attracted multiple buyers, and the $473 million price tag likely reflects the current market value of the centers. The problem is, with the current economic uncertainty, that market value is a highly unstructured term.
Rising office valuations in gateway cities have caused real estate investors to begin looking for potential acquisitions in the nations secondary markets. According to the National Real Estate Investor, investor appetite for second-tier cities is being driven by the desire for better returns. While primary location such as New York and Washington, D.C. provide fewer risks, cap rates for assets in those markets are now nearing pre-downturn levels.
The size of the gap between appraised and market value for commercial real estate can have a real impact when a seller wants to evaluate an offer or a buyer wants to qualify for a loan. According to the October 2011 issue of REALTOR magazine, findings indicate that the median appraisal value assigned for individual properties was more than 12% above or below sales prices for transactions that took place two quarters after the appraisal.
Newer or remodeled Western Pennsylvania retail centers are beginning to pull shoppers away from malls and strip centers as more retailers seem to be moving from place to place more often. According to the Pittsburgh Tribune-Review, in some cases, new development is reducing the property values of older ones, frustrating the likes of such affected property owners who feel that the frequent relocation is not necessary to improve customer access.
As the economy begins to slow again, the recovery that the commercial real estate market has experienced with three straight months of increased prices, may experience some stalling. That being said, according to Bloomberg Businessweek, the Moody's/REAL Commercial Property Price Index advanced 5% from June and is up 1.2% from a year earlier and almost 13% from its post-peak low in April. Still though, slow job growth will damper expectations for the absorption of vacant space and rent increases which should bring a halt to the price increases.
The recent acquisition of the Wrigley Building continues to demonstrate that downtown Chicago, Illinois office properties remain hot assets for investors. According to the National Real Estate Investor, now is a good time to sell big downtown Chicago buildings as there has been a shift towards safety amongst investors as they are willing to pay cap rates of 6% and more for prime buildings in quality markets. Most of the buildings that are being sold today are of institutional quality and are well leased, with limited amounts of tenant rollover in the near term.
A new batch of lawsuits covering Las Vegas, Nevada office, hotel and retail properties are taking center stage. According to VEGAS INC, as the commercial real estate market continues to struggle in Las Vegas, lenders and distressed-debt investors are proceeding full speed ahead with these new lawsuits as they try to foreclose on properties, collect past-due balances or enforce personal guarantees.
An effort to slash energy consumption of buildings over the next few years in the Miami, Florida and Sacramento, California areas has gained favor in the likes of a business consortium that plans to invest as much as $650 million. According to the New York Times, focusing mainly on commercial property at first, the group plans to exploit a new tax arrangement that allows property owners to upgrade their buildings at no upfront cost, typically cutting their energy use and their utility bills by a third.
New survey data shows that although U.S. retailers are still cautious about the current market environment, 59% plan to expand their stores due to lower rental rates. According to Retail Traffic, the survey, conducted by CB Richard Ellis, shows that only 27% of retailers view the economy as improving, compared to 35% last year. However, optimism remains for the future as 45% see the economy as stable and 27% feel recovery has already occurred in their market.
Capital markets are funding a lot of student housing deals recently at aggressive rates and terms, all despite the uncertainty of the overall economy. According to the National Real Estate Investor, with continued enrollment gains nationwide generally boosting rents and operating incomes at student housing properties, the capital markets are bullish on the sector and it has never been easier to secure debt and equity for the properties.
In California, it is now the responsibility of the property owner to self-report a change in control or ownership of a legal entity within 45 days of the event. California Senate Bill No. 816 enacted significant penalties for non-compliance effective January 1, 2010. The California Tax Reform Association has contacted Assessors to ask why specific properties have not been revalued as required. As the articles below illustrate, it is a hot issue in California right now.
The downgrade of the United States long-term debt rating, paired with disappointing economic data, have led to stock market volatility and uncertainty among hotel investors. However, according to HotelNewsNow.com, a recent report titled 'Market Volatility Impact on Hotel Transactions' by Jones Lang LaSalle Hotels, claims that while the transaction market for hotels is expected to slow for the remainder of the year from the lofty first-half 2011 levels, the market should remain active due to: a growing investment interest from private equity investors, the continued attractiveness of assets with strong in-place cash flow or value-add opportunities, and an increasingly constricted supply pipeline.
As volatility continues to haunt the financial market and fear of a double-dip recession remains prevalent, the latest data is showing that recovery in commercial real estate fundamentals remains mixed. According to the National Real Estate Investor, last month, retail properties continued to lose occupied space; vacancies for neighborhood and community centers hit 11%, just 10 basis points shy of the record set in 1990; effective rents deflated slowly, falling by 0.1% year-to-date through July; Office properties saw a small gain with vacancies dipping to 17.4%; and the multi-family sector remains the best performer with another huge drop in vacancies down to 5.8%.
Hamilton County, Indiana, which is the northern suburb of Indianapolis, has sent out their assessment notices for March 1, 2011 real property values. Notices were only sent on properties that had assessment changes. If you received a notice of assessment, the deadline to appeal the value is 45 days from the date the notice was mailed, which is likely on or about October 21. Hamilton County has been one of the more aggressive counties when it comes to the valuation of commercial property.
A strategy by a Nevada real estate company may set a new precedent for investors attempting to reorganize under Chapter 11 bankruptcy protection. According to the National Real Estate Investor, by merging several single-asset operating companies, Whitton Corp. has avoided onerous restrictions that federal bankruptcy law places on property owners with only one asset. The U.S. bankruptcy court has allowed Whitton to file, even though most of its creditors claim they showed bad faith by merging the day before.
A lingering cloud of uncertainty remains as the economy entered a period of stagnation a few months back as confirmed by an August job report. According to GlobeSt.com, despite the disappointing job figures, drivers that make investing in commercial real estate favorable are still intact. The main reason for this is the fact that corporations are remaining cautious, but not panicking. Also, consumer spending habits have obviously changed in the past three years, but they are not pulling back on spending in a pattern that would cause for severe panic.
While commercial property in California is supposed to be reassessed once it changes hands into new ownership, many experience delays allowing the properties to be taxed at under market value. Such is the case for the acquisition of Anhueser Busch which gave the local government a rare chance to reassess their 14 California properties and tax them at their current market value. However, according to the Los Angeles Times, counties still haven't finished the job and are forgoing much-needed potential revenue.
Private equity funds are looking to raise $1.8 billion for the industrial sector this year, the most since pre-recession levels in 2006. According to the National Real Estate Investor, over 70% of that capital, or $1.3 billion, is targeting industrial warehouses in the US. Public and private pension funds are the primary investors in private equity real estate funds, turning their attention towards the industrial sector due to the recovery in world trade.
Determining if your property taxes are high depends on several perspectives; from how much they have changed in the past five years, to what percentage of a property's operating expenses they represent. When it comes to the District of Columbia, with all things considered, commercial property taxes are high. According to the National Real Estate Investor, one such example of several factors leading to high DC property taxes is with the office market in which building taxes ballooned from $4.97 per square foot in 2004 to $8.81 per square foot in 2009, an increase of 77%. That increase is more than double the rate of increase in office contract rents.
Maricopa County taxpayers are in for a shock when they receive their 2011 property tax bills. The average County's portion of the tax rate went up by 18% over 2010 tax rates... and there are even examples of tax rates increasing as high as 31%. The increase in tax rates are a result of poor economic conditions that led to a 25% decrease in the 2011 Full Cash (Market) Values. Full Cash Values were lowered an additional 25% for the 2012 valuation year, so we expect to see an additional 18% tax rate increase in next year's (2012) Maricopa County tax bills.