During an Albany budget hearing Wednesday, upstate Republicans and the Independent Democrats discussed the possibility of extending the state’s property tax cap to New York City. While the Real Estate Board of New York, which represents both commercial and residential landlords and developers, praised the state senators for pushing the tax cap, the city business groups have other priorities.
New legislation is being introduced in an effort to combat rapidly rising commercial property assessments in Savannah, Georgia. In a meeting with visiting Mayor Eddie DeLoach and members of the City Council and school board, Sen. Lester Jackson discussed a bill, to be called the Small Business Protection Act, which would limit tax increases for commercial properties.
It’s not a great time to own an office building in Houston, as companies are looking to unload workspaces as the local economy suffers from oil prices dropping to around $30 a barrel. Leasing has slowed dramatically in Houston and plans for new office buildings have been put on hold. In the fourth quarter of 2015, the amount of sublease space on the market in the Houston area hit 7.6 million square feet, or the size of more than two Empire State Buildings, up from 4.5 million square feet a year earlier, according to real-estate services firm Savills Studley. In all, 23.2% of Houston offices were vacant or otherwise available for lease in the fourth quarter, up from 17.8% a year earlier and well above the national rate of 16.2%, according to Savills Studley.
New York City’s 421a property tax program, which allows developers of rental apartments to reduce their real estate taxes on new projects for 10 to 25 years in exchange for affordable housing in certain parts of the city, drew a great deal of scrutiny and controversy last year. The program is referred to by both its backers and its critics as a developers’ tax break and has fueled the construction of apartments across the city since the 1970s. The program was championed by Mayor Bill de Blasio as a crucial tool to reach his affordable-housing goals, as it requires developers to set aside 20 percent of a building’s units as affordable to receive the tax break. But critics questioned whether the program, which cost the city over $1.1 billion in forgone taxes in fiscal year 2015, spurred enough affordable units.
As multifamily developers continue to concentrate in central and secondary business districts in cities across the country, many submarkets in downtown areas are at risk of overbuilding. Although developers hope strong demand will keep up with all the new empty units, vacancy rates are already rising sharply in many areas across the country. The percentage of vacant apartments rose 10 basis points to reach 4.4 percent in the fourth quarter, according to New York City-based research firm Reis Inc. “With construction outpacing demand, the national vacancy rate should slowly drift higher over the coming years,” says Ryan Severino, senior economist for Reis. “The national vacancy rate has already bottomed out and is set to keep increasing.”
New York City property values have surpassed $1 trillion for the first time ever, according to new preliminary tax rolls released Friday. The total market value of taxable property rose to $1.072 trillion for the fiscal year beginning July 1, a 10.6% increase from the $969.4 billion reported this year. It was the largest increase in market values since 2008, shortly before the financial crisis and the crash of the city’s real-estate market. Brooklyn’s surging real estate market lead the way, with properties climbing 16 percent, compared with a rise of 7.4 percent last year. The value of Brooklyn apartment buildings rose by 18.2 percent. In Manhattan, total market values rose 9.3 percent, while Queens saw a 9.9 percent increase.
While medical office buildings will continue to post strong occupancy stats into the New Year, industry executives are concerned the volatility in the health care sector, stemming from the Affordable Care Act aftermath, changes in technology and hospital consolidation, will keep growth and transactions low. Health systems have been looking more to retail centers to build new medical office building (MOB) projects in an effort to reach an expanding consumer base and make access to care more convenient, and there has been no shortage of investor demand and construction activity. In fact, every state experienced active medical real estate construction in 2015, according to research firm Revista. There was more than $86 billion in new construction in the first half of last year alone, much of which centered on MOB projects.
Atlanta’s industrial market is hotter than ever, thanks to an improving overall economy, a more relaxed lending environment, and a great deal of investment capital in the market. According to Southeast Real Estate Business, second-quarter activity set a single-quarter record with more than 18.2 million square feet leased or sold. When added to the activity from the previous three quarters, Atlanta strung together more than 59.6 million square feet of completed transactions. This represents the second highest activity level ever recorded for a four-quarter period. There was more than 6.3 million square feet of positive net absorption. Combined with the previous three quarters, Atlanta shows a total of more than 19.7 million square feet of positive net absorption for the last four quarters.
Nebraska Gov. Pete Ricketts and key state lawmakers announced a plan on Tuesday to curb rising property taxes and help control spending, calling it a "structural change" to how local governments tax Nebraska landowners. The two measures introduced in the Legislature would tighten limits on budget growth and levy increases for all local governments, and slow the rise in government-assessed cropland values across the state, the governor said Tuesday at a Capitol news conference. The bills will be sponsored by Sens. Mike Gloor of Grand Island and Kate Sullivan of Cedar Rapids, both of which co-chaired a joint committee last year that looked for ways to reduce Nebraska's reliance on property taxes to pay for K-12 public schools.
A booming technology sector combined with a tight supply of commercial real estate has driven San Francisco’s office rents to the highest in the country. This will be the first time in more than a decade and a half that the price of office space in San Francisco surpassed that of Manhattan, which was a short-lived reign due to the original Internet gold rush and subsequent bursting of the dot-com bubble wiping out many start-ups. Average office rents in San Francisco rose 14 percent last year, compared with 7 percent in Manhattan, according to a new report from CBRE Group, a commercial real estate services and investment firm. Average office rents that San Francisco landlords are asking for to $72.26 a square foot in the fourth quarter of last year, edging out the $71.85 a square foot in Manhattan.
The hotel building boom continues in the U.S., as a total of 103,230 rooms within 865 hotels are currently under construction and scheduled to open through the course of 2016, according to hotel research firm STR. The industry continues to break records on both the demand and revenue side, and developers are boosting investments to keep up with the surging demand. The 1.5% uptick in rooms opening this year is still below the long-term annual average of 1.9%, says Jan Freitag, STR’s senior vice president of lodging insights. But building activity has dramatically increased, with 21% more rooms under construction than a year ago.
All across the country, both companies and cities alike are competing to attract STEM-educated employees. STEM - which stands for science, technology, engineering and math - related fields are transforming the economy, and office building owners and investors wanting the best returns need to look no further. Industries such as health care and energy, job markets where STEM dominates, are already driving growth. And as baby boomers begin to retire, the competition for STEM employees will only get fiercer. For example, almost 55 percent of the energy industry’s current workforce may retire over the next decade, affecting both the office and manufacturing sectors, according to a recent report from commercial real estate services firm JLL.
Apartment rents across the country increased faster last year than at any time since 2007, rising 4.6% to $1,180. This was the biggest gain since before the recession, according to a report by real-estate researcher Reis Inc. Another report from Axiometrics Inc., a Dallas-based apartment research company, showed that rents increased 4.7% in the fourth quarter compared with the same quarter a year earlier, the strongest year-end performance since 2005.
The Pittsburgh Public School board voted Tuesday to maintain the current property tax rate of 9.84 mills for 2016. This will be the second straight year the school district will not increase property taxes. Last month the board adopted a 2016 general fund budget of $570.4 million, a 2.4 percent increase from 2015. The budget includes an operating deficit of $23.6 million.
A proposed California initiative, called the Lifting Children and Families Out of Poverty Act, would increase property taxes on real estate valued at more than $3 million to raise billions for public assistance programs. The additional property tax surcharge would be based on a sliding scale. For properties valued between $3 million and $5 million, a 0.3 percent surcharge would be added. For properties valued between $5 million and $10 million, a 0.6 percent surcharge would be added. For properties valued greater than $10 million, a 0.8 surcharge would be added. Rentals would be exempt.
Downtown populations across the nation are booming, driven primarily by millennials, who are displaying a strong preference to live in urban environments. Furthermore, millennials have shown a preference to renting over owning. As a result, developers are creating opportunities in cities that lack a big apartment supply. Philadelphia is a prime example, as major developers are stepping in to fill the city’s multifamily housing shortage. Houston-based property giant Hines is teaming up with Philadelphia developer Goldenberg Group on a $125 million, 322-apartment tower planned in the hip Midtown Village section of the Center City neighborhood and is expected to be completed in 2017.