Many oil- and natural gas-producing counties in western Kansas are starting to suffer from the energy industry downturn, facing major local tax revenue declines just as the state is ending an aid program meant to insulate them from industry downturns. Reduced oil and gas prices resulted in lower property values, and many counties are forced to either cut spending or increase property tax levies to offset the revenue decline.
Los Angeles landlords enjoyed another good quarter, raising rents to cash in on the growing demand amid shrinking supply of office space. Overall, asking rents in Los Angeles County increased 8% in the third quarter to $2.82 per square foot per month compared with the same period a year ago, according to real estate brokerage Cushman & Wakefield. Vacancy fell about 2 percentage points to 15.1%. Thanks to the steadily improving economy, the office market remains strong and shows no signs of slowing down. Many stressed business had to cut staff and reduce space to save money during the economic downturn, which caused widespread office vacancies. However, Los Angeles has been experiencing a lot of business expansions and many large tenants in the marketplace are still looking for space.
Business confidence, employment growth and low interest rates are driving a major push in New York City office construction, as the city is on track to hit a 25-year high this year and almost double that built in 2014, according to a new report by the New York Building Congress. Big development sites at Hudson Yards on the West Side and the World Trade Center in lower Manhattan are helping to boost the pace of office construction, which is expected to reach 4.3 million square feet in 2015, the report said. That is a 79% increase from the 2.4 million square feet built in 2014 and the highest level since 1990. Office construction had been a laggard during the economic recovery, but that is changing as employment in office-using industries picks up, Richard T. Anderson, president of the Building Congress, told the Wall Street Journal. In 2015 and 2016, the report projects, 9.7 million square feet of new office space will be constructed in 19 buildings across Manhattan. The report’s analysis includes office space in buildings still under construction.
Baltimore's rebounding economy driving rising property tax revenues has Mayor Stephanie Rawlings-Blake proposing a bigger budget for 2016. The preliminary 2016 budget calls for $1.71 billion in general fund revenue, a 3.8 percent increase from 2015 levels. The year-over-year revenue increase is significant, as it is the largest the city has seen since the Great Recession. According to the Baltimore Business Journal, property tax revenue is a particular driving force, rising 9.2 percent to $72.3 million. Commercial tax revenue has outpaced residential taxes, and commercial properties saw the biggest percentage increases in value across the board. The city expects increased general fund revenue even though the Horseshoe Casino has sharply underperformed its expectations. Video lottery and table game proceeds were initially projected at $13.2 million, but monthly proceeds came in at under $700,000 through the first half of the 2015 fiscal year, budget documents said. The budget anticipates $9 million for the 2016 fiscal year and another $1 million going to a special school construction fund due to minimum payments built into the casino's lease agreement. Going forward, the city is still facing a general fund fiscal gap projected to accumulate to $612 million through 2022.
By Ivy L. Irwin, Managing Consultant, Atlanta
New York City's hotel sector has been growing for years and has long-been an attractive market for developers and investors. However, New York City hotels have been struggling recently, and industry experts are concerned about a number of factors that could make the market unattractive to investors. For starters, a sustained strengthening of the dollar and a weak global economy could curb tourism, according to the New York Times. Analysts agree that international tourism will most likely be affected if the dollar remains strong, which is bad news for New York, as the city is particularly dependent on international tourists. Industry leaders also expressed concern about the effects of foreign exchange rates on the city's tourism.
In an effort to make Nevada more competitive with neighboring states, Senate and Assembly members held a joint committee hearing on SB93 and AB161, which would expand tax abatements to the aviation industry. The bills have bipartisan support, as the abatements would would quickly create hundreds of good-paying jobs and would bring Nevada in competition with 45 other states that offer abatements or exemptions. During the hearing, industry representatives said aviation companies have avoided doing repairs, expanding their business or headquartering their planes in Nevada because adjacent states offer better incentives.
Although the hotel industry is in the midst of possibly the most successful period in the industry's modern era, some United States hotel leaders are concerned of the effects of reduced oil prices, the strength of the dollar overseas, and supply growth, according to Hotel News Now. When the cost of gas is low, it may give the perception that travel will increase. While this may be the case for some markets, low oil prices are a major concern for others. Some oil and gas companies are already experiencing lay offs due to lack of demand, and local economies that depend the industry are beginning to feel the impact. And hotels in major oil and gas markets aren't seeing a lot of new occupancy due to cancelled projects.
The performance of Atlanta's industrial real estate market is further indication of the city's rallying economy. According to the Atlanta Business Chronicle, over the past year, developers have bet on increasing demand for warehouses, distribution facilities, and other industrial space — enough to put 16 million square feet under construction across metro Atlanta. Almost 10 million square feet of that pipeline consists of "spec" projects, or those started without leases in place. At the same time, metro Atlanta — which boasts one of the top five industrial markets in the nation — should absorb at least 16 million square feet of industrial space this year, and that may be a conservative number. Vacancy should drop to less than 8 percent, a level Atlanta hasn't seen in 15 years.
Supervisors in Kern County, home to the five most productive petroleum fields in California, have declared a state of fiscal emergency in response to predictions of a massive shortfall in property tax revenues amid plunging oil prices. According to the LA Times, surging oil supplies domestically and weak demand abroad have left Kern facing what could be a $61-million hole in its budget once its fiscal year starts July 1, according to preliminary calculations from the county’s assessor-recorder office.