After spending years as the nation’s hottest office market thanks to the booming tech industry, San Francisco landlords are bracing for a slowdown as startup valuations weaken and the flood of venture-capital funding slows. The city’s office-vacancy rate jumped in the second quarter by the most since the last recession, while the amount of space available for sublease almost doubled, according to a report to be released this week by brokerage Cushman & Wakefield Inc. New lease deals have tumbled so far this year. Trouble is expected to continue, as investors expect acquisitions of smaller companies whose valuations are falling to potentially lead to job cuts and office consolidation.
More than 30 trade associations and businesses are banding together in an effort to increase their push to get Wisconsin's personal property tax law repealed. The Coalition to Repeal Wisconsin's Personal Property Tax, which includes major business interests in the state like AT&T, American Family Insurance, Wisconsin Manufacturers and Commerce, and the Wisconsin Restaurant Association, says the lack of structure in determining what property is and is not exempt from the tax is unfair and disproportionately affects small businesses.
While there is a still a great deal of uncertainty of the global impact from the U.K.’s historic exit from the European Union, many are left wondering what effects might be felt here in the U.S. in regard to the commercial real estate market. The direct impact of Brexit will certainly be felt primarily by Britain and the E.U., but the U.S. could see a wave of new foreign capital as investors from the U.K. and other countries pull capital out of U.K. properties in favor or safer gateway markets like New York and San Francisco.
Pacific Investment Management Co. sees a storm brewing for the U.S. commercial real-estate market, predicting values to drop up to 5 percent in the next 12 months amid tightened regulations, a wall of debt maturities and property sales by publicly traded landlords. A global surge in demand for U.S. property investments that pushed real estate values to records may wane as slowing growth in China, lower oil prices and dislocated debt markets threaten to halt six years of price growth, according to Pimco’s latest report, titled “U.S. Real Estate: A Storm Is Brewing.” The report warns of several factors creating volatility in the U.S. commercial real estate market.
Categories: Real Property
Tens of thousands of new apartments are now opening in central business districts (CBDs) around the country, causing angst among apartment owners as supply is expected to continue accelerating for the next 12-18 months. In downtown sub-markets, the number of apartments is growing at a furious rate of 5.0 percent a year, on average. That fast growth will probably continue for the next year and a half, through the third quarter of 2017. The percentage of vacant apartments in downtown sub-markets averaged 6.3 percent in the first quarter, according to data firm Reis Inc. That’s up from 5.6 percent a year ago. Outlook for the next year will largely depend on whether these urban economies will be strong enough to attract new renters. Monitoring job growth will be crucial.
A recent study found the median time for cases to be resolved by the Indiana Tax Court has increased from about one year to almost 2.6 years since 2011, prompting criticism among practitioners and recommendations for reform. According to the Indiana Lawyer, by a 7-1 margin, those who responded to a survey on the court disagreed or strongly disagreed with the statement, “After taking the merits of cases under advisement, the Tax Court decides them in a timely manner without unnecessary delay.” The survey results are contained in a task force study of the court conducted by the National Center for State Courts, which was provided to the Indiana Supreme Court in April. The study examined performance of the court for the period of 2011-2014 compared with 2006-2010.
A plan to prevent big box stores from paying less in property taxes may be gaining steam in the Legislature after the House approved the measure, which supporters say will lead to fairer tax evaluations. Supporters say the measure is supposed to ensure property taxes are assessed more equitably for large retail stores. It passed the House by a wide margin despite opposition from big business interests such as the Michigan Chamber of Commerce and the Michigan Retailers Association. Opponents say the legislation would complicate the tax appeal process, increase the cost of appeals and violate a state constitutional requirement that property be valued uniformly.
As Manhattan enters peak moving season, a surge of new supply has given tenants more choices and bargaining power, causing apartment owners to boost incentives to attract new renters. Deal sweeteners, such as a month of free rent or payment of broker fees, were included in 13 percent of new leases in May, up from 1.6 percent a year earlier, according to a report by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. The share was the highest for the month since the data began in late 2010. Landlords also whittled an average of 2.1 percent from their asking rents to strike a deal.
Occupancy rates for U.S. hotels declined 0.5 percent during the first quarter of 2016, causing the first year-over-year decline since the fourth quarter of 2009, according to hotel data research firm STR. The national occupancy rate dropped from 61 percent in first-quarter 2015 to 60.7 percent in first-quarter 2016, raising concerns among U.S. hotel owners and operators. STR suggests that the industry has passed the inflection and is forecasting hotel occupancy declines in both 2016 and 2017.
Lenders are recognizing the value of apartment properties that use less energy and are offering incentives to multifamily owners that go green. Both Fannie Mae and the Federal Housing Authority (FHA) have created loan programs for apartment properties that use less energy. Apartment buildings that include green design features typically have lower utility bills that can make them more profitable and less risky for lenders. Fannie Mae and FHA now recognize likely energy savings in their underwriting calculations and in the interest rates they offer. The incentives are gaining a lot of attention from multifamily owners planning new construction or extensive rehab projects. And while it can be challenging to get enough new insulation into an existing apartment building to meet green standards, there are incentive options for older affordable housing properties that want to make green improvements.
The probability for a June interest rate hike plummeted Friday after a major miss in the May jobs report. According to CNBC, the Labor Department report said U.S. economy added just 38,000 jobs, far below economist estimates of 162,000. Prior to the jobs report, the CME Group FedWatch tool of market sentiment saw a 21 percent chance of a June rate hike. Those odds dropped as low as 4 percent after the employment report. Federal Reserve policymakers meet June 14-15 to decide on whether to increase the central bank's key interest rate for only the second time in a decade.
Categories: Real Property
ConocoPhillips is the latest energy company to add a huge chunk of office space to Houston’s growing sublease market. The Houston-based company announced June 1 it will put the entire Energy Center 4, a 596,000-square-foot, 22-story tower located in the Energy Corridor, up for sublease. The building was never occupied. "The decision to market the building for sublease aligns with the company’s focus on sustaining structural cost reductions and continued efforts to capture efficiencies," ConocoPhillips said in a statement. "We constantly review our entire portfolio and make adjustments where appropriate; office space being no exception.”
Jacksonville, Fla. is on the brink of going over the “financial cliff” due to the city’s pension crisis, according to Mayor Curry, who is warning voters that a failure to support the half-cent sales tax referendum on Aug. 30 could result in a startling 30 percent increase in the property tax rate. If approved by voters, the half-cent sales tax for pension debt would take effect immediately after the half-cent sales tax for the Better Jacksonville Plan expires in 2030. Curry says that wouldn’t be a tax increase because the overall sales tax would be the same as it is now.