Private equity firms are in a prime position to become the next big investors in the senior living segment of multi-family. According to the National Real Estate Investor, private equity groups are looking for places to put their money to work amid poor economic conditions and a rather lackluster commercial real estate market. Investors are drawn to the market due to the sheer volume of seniors who might need special housing, in addition to current occupancies rising and the lack of new construction under way.
Retailers who continue to use the same strategies and fail to make adjustments are the ones that will continue to struggle with current economic and market conditions. According to GlobeSt.com, many retailers are continuing to perform poorly, but decreased storefront sales don't necessarily translate to store closures. These days it is normal for retailers to look at culling poor-performing stores via closures or the downsizing of their footprints square footage.
US commercial property sales, led by retail and apartments, rose 57% in 2011 to more than $220 billion. According to a report by Real Capital Analytics, more than 14,700 properties, each worth at least $2.5 million, changed hands in 2011. Retail transactions rose 91% from 2010 to $42.4 billion, and sales of low-rise apartments rose 70% to $34.5 billion. By itself, Manhattan accounted for 12% of the total deal volume.
Are you planning on buying or selling a hotel? Have you addressed the sales tax implications of the transaction? During the hectic activity that accompanies the purchase of a business, buyers and sellers frequently overlook two sales tax issues that can arise when a transaction is structured as an asset sale. For specific transactions, the statutes and regulations of the jurisdiction where the transaction will take place must be consulted to provide guidance for your particular transaction.
Reality is starting to set in for those who have borrowed or lent the billions of dollars in commercial real estate loans made five years ago that are now coming due. According to The New York Times, experts have warned of a rash of recapitalizations, refinancing, and building sales. In New York City alone, nearly $70 billion worth of commercial mortgages that were bundled together and issued as collateral for bonds are maturing this year. $26 billion of those are five-year loans that were originated during the height of the real estate bubble.
It is becomes increasingly difficult for commercial property owners to find funding to make necessary improvements in order to retain or enhance their property's value. However, according to BusinessExcellence, cost segregation studies provide property owners an opportunity to write off depreciation of building assets over a shorter period than the 39-year depreciation period that's typical for real property assets in the United States. This in turn can lead to larger tax reductions, allowing the saved expenses to be used for improvements.
In the recent Hotel Sales Survey by LW Hospitality Advisors, 130 single-asset sales of more than $10 million in 2011 showed that the dollar volume of U.S. hotel transactions is gaining speed. According to HotelNewsNow.com, the deals totaled approximately $8.9 billion and compromised about 41,000 rooms. In comparison, the 2010 Hotel Sales Survey identified 84 transactions of the same criteria totaling only a little more than $5 billion and 24,000 rooms.
An Arizona business group, along with two legislators, has constructed a plan that intends on giving businesses a big break on property taxes in the state. According to the Arizona Business Gazette, the proposal would craft a partial exemption from existing constitutional requirements that businesses pay property taxes annually, not only on the value of their land and buildings but also on the worth of the equipment they own and use.
Since the state of Indiana successfully announced an agreement to begin collecting a 7% state sales tax on Amazon.com purchases staring in 2014, other states are likely to introduce Legislation requiring Internet retailers to collect taxes on online purchases. According to the CoStar Group, Indiana follows Texas, Tennessee and California to reach an agreement with Amazon, claiming a win for real estate-occupying retailers and their landlords who viewed the online giant as having a distinct competitive advantage due to lack of sales tax.
Over the last several quarters, the multi-family sector, apartments in particular, has been the shining star of the commercial real estate industry. According to the National Real Estate Investor, apartment fundamentals have improved significantly, with the vacancy rate dropping to as low as 5.6% in the third quarter of 2011, down from its peak of 8% in the first quarter of 2010. Additionally, new jobs and favorable demographics have supported an increase in apartment rents, with growth expected to continue through 2013.
Industrial properties in both the commercial real estate and manufacturing sectors experienced a strong performance over 2011. According to a study released by the national real estate company Cassidy Turley, demand for industrial space in 2011 totaled 97.6 million square feet, a level that rivals pre-recession levels from 2005 and 2006. Overall, out of 67 markets tracked in the study, 59 experienced positive demand for warehouse space over the course of 2011.
Office vacancies in the Twin Cities region of Minnesota dropped for the first time since 2006 this past year. According to the Minneapolis / St. Paul Business Journal, the overall vacancy rate in the area fell to 19.2% at the end of 2011, down from 19.9% a year ago. The trend is expected to continue with projections forecasting that by the end of 2012, vacancies could go down another 1.4 percentage points to 17.8%. This is going against the annual trend of increases that the Twin Cities has experienced since 2006.
As the battle over property tax reform this year in Iowa continues amongst several fronts, one thing everyone can agree on is that reductions are needed to make the state's business environment more competitive. According to the Des Moines Register, an owner of commercial or industrial property in Iowa pays taxes on 100% of the property's assessed value, while a homeowner pays taxes on roughly half of the home's assessed value.
Judge R. Stanton Wettick ruled this afternoon that Allegheny County (Pittsburgh, Pennsylvania) won't be seeing an increase in their property values this year. The County will be using the previous year's values for the 2012 assessments. With the previous assessment year coming in 2002, Allegheny County is now going on 10+ years of having no new current year property reassessments. Seeing as how many commercial property owners find several problems with their assessments in the first place, the fact that they will be using the previous year's values is good news.
Office properties across the nation are being foreclosed as large tenants move elsewhere or renew their leases at a significantly decreased rate. According to The Wall Street Journal, the office market may be the face of a new real estate crisis as many owners who have been able to keep their heads above water in the past are being undone by tenant contractions and the expiration of five-year leases that were signed at the peak of the boom. Rents across the nation are still well below what they were before the recession in 2007.
Reassessment values for tax year 2012 are currently being issued in Allegheny County (Pittsburgh), Pennsylvania. The last reassessment in the County was 2002 and many property owners (commercial & residential) are seeing significant increases, some up to 500% - 1,000% higher over last years’ Base Year (2002) values. Being performed under a mandatory court order, Allegheny County has been challenging this reassessment mandate for years, but in compliance with the order, the county began issuing reassessment notices last week. The residents of Pittsburgh took to the streets in protest.
If lenders and investors are not forced to pull back the reigns, commercial real estate sales are expected to rise as much as 25 percent in 2012. According to a Grubb & Ellis national real estate forecast report, the gradual improvement in leasing markets and boost in investment sales volume is based upon an assumption of GDP growth in the range of 2-2.5 percent in 2012 and an average of 125,000 net new payroll jobs per month.
The slow and indecisive leasing market that was experienced by Washington DC in 2011 appears destined to continue into 2012. According to Citybizlist, reduced tenant demand, combined with stable levels of office space, produced a modest uptick in vacancy rates and a downward shift in rents during 2011. Activity throughout the metro region involved mostly increased renewal activity and moves by tenants looking for greater operational efficiency.
Nationwide construction spending totaled $807 billion in November, the highest level recorded since June 2010. According to the Associated General Contractors of America, several segments of construction appear to be climbing out of a hole. Moving forward, the New Year should continue to expand on year-over-year gains in apartment, power, manufacturing, and private transportation construction. However, the improvements made in November by single-family homebuilding and public construction may not be sustainable heading into 2012.