Multi-Family Properties Might Be The Way To Multi-Millions

In the current commercial real estate market, investing in multi-family homes should be on the radar. Multi-family properties don’t always have to be 20 floor sky rise apartments in a big city. They can be smaller duplexes, town homes Read more

New Real Estate View: Why The Homeless Are Big Business In New York

It's a grim scenario: In New York, there are more than 50,000 homeless. Of that number, 21,000 are children, an increase of 21 percent from last year, according to a report by the Coalition for the Homeless, a New Read more

Red Is the New Green – Chinese Investors Eye US Assets

***This blog entry is a guest post from Elton Steinberg, Marketing Associate at United Realty*** American fund managers should be aware of current and future trends that may make the Chinese account for a more significant portion of overall foreign Read more

Gimme Shelter - Foreign Investors Seek Returns and Safe Haven in US Real Estate

***This blog entry is a guest post from Elton Steinberg, Marketing Associate at United Realty*** Foreign investment has been a significant driver of the US real estate market recovery. Investors from across the globe have been responding to negative stimuli Read more

Wall Street Journal

CRE Opportunity in 2013

Office Buildings NYC - Real Estate NYCThe Mayans might have had a bleak vision of 2012, but the financial forecast of 2013 – as far as the commercial real estate market goes – is a future worth exploring, and possibly living in. It’s been a hard road for many Americans since the recession began eating away at the economy as far back as 2007, resulting in a calamitous decline in property values, and a rise in foreclosures. But while other sectors are slowing, the Wall Street Journal reported that the U.S. Housing market remains a key economic driver.

According to the National Association of Realtors’ (NAR) chief economist, Lawrence Yun, the market has been slowly building momentum, and the economy is expected to grow by 2.5 percent next year. The NAR’s quarterly real estate forecast finds that vacancy rates over the next four quarters are forecast to decline 1.0 percentage point in the office market, 0.6 point in industrial, 0.2 point for retail and 0.1 point in multifamily.

In a recent article, the New York Times reported home values in the first six months of the year were up by 5.9 percent (the best it’s been in seven years), and a report by The Conference Board, a private group, have pointed at an increase in consumer confidence since September. Throw in the Labor Department’s report earlier this month citing the addition of 146,000 jobs in November (which brought the unemployment rate down to 7.7 percent), and a more optimistic view is clearly on the horizon.

Forbes contributor Bill Conerly, has a less enthusiastic view of 2013, and sees only marginal improvement ahead as it relates to commercial real estate, with a real boost occurring either in 2014, or 2015. But perhaps, the real lesson here has more to do with the country’s mood than with hard numbers and statistical projections. True enough, improvement in commercial real estate will likely hinge on improvement of the national economy, but good news can be its own catalyst.

Just take a look at your own neighborhood. Some homeowners are already seeing an increase in their home’s value, however small. And more people are renting with an option to lease, as a way of getting around the stricter criterion for traditional mortgages.

While no calendar exists to give us a glimpse of 2013 before it actually happens, the evidence, so far, seems to suggest a more robust economy than we’ve seen in years, which should have a positive impact on commercial real estate.

So what comes next? If you ask me, there is plenty of opportunity out there.

Posted on by Jacob Frydman in Commercial Real Estate, News, United Realty Leadership Leave a comment

No Vacancy Signs Dominate Rental Market

Landlords boosted apartment rents to record levels in the second quarter as demand from tenants sitting out the home-buying market pushed vacancy rates to their lowest point in more than a decade, said the Wall Street Journal. Despite the sluggish economy, average rents increased in all 82 markets tracked by Reis Inc., a real estate data firm. Average rents are now at record levels in 74 of those markets and now top $1,000 a month on average in 27 of them, including Miami, Seattle, San Diego, Chicago and Baltimore.

The biggest rent boost of the second quarter was in New York City, where the average rose to $2,935 per month, up 1.7% from the first quarter. The nation’s vacancy rate fell during the quarter to 4.7%, its lowest level since the end of 2001, Reis said.

Reis said that this is only the third quarter in over three decades that the vacancy rate has been below 5%. When vacancies fall to this level, landlords typically accelerate rent increases “and that is exactly what is transpiring,” the Reis report states.

And it’s not likely to stop soon. Rents could “spike as landlords perceive that tight market conditions afford them greater pricing power over tenants,” Reis said.

A report from AC Lawrence indicates similar trends in their June report.

According to SmartRealEstateInvesting.com, values of apartment buildings are soaring, contrasting sharply with the single-family housing market. In some cities, investors are now surpassing peak prices for rental property buildings. TIAA-CREF, which spent $800 million on apartments last year and could spend more this year.

Demand for rental apartments also may fall if some builders succeed with appeals to move renters into the market for single family homes. Home builders have begun marketing to renters: PulteGroup Inc., one of the nation’s largest publicly held builders, recently introduced a line of homes marketed as being more affordable than some monthly rents, called The Independence Series from the Centex division of the firm.

Landlords will be looking for a 6 to 10 percent increase on current tenants and an 8 to 12 percent increase on new vacancies, according to a report by Bond New York.

Overall pricing in Manhattan will likely increase by 8 to 10 percent on average for the coming year. “We anticipate landlords’ confidence levels will increase with the high occupancy rates and high prices, which will cause vacancy pricing to increase as well,” the Bond report said.

A Bloomberg News story notes that Prudential Douglas Elliman found that median rents jumped 9.5 percent to $3,121 from the fourth quarter of 2010 to the fourth quarter of 2011.

And Citi Habitats announced that their fourth quarter report found average rents rose 8.4 percent to $3,309.

 

 

Posted on by Jacob Frydman in Commercial Real Estate Leave a comment

Investors Plow Equity Into Projects

The Wall Street Journal recently highlighted an upbeat trend in real estate;  a handful of high-risk real-estate projects are moving forward in major U.S. cities.

But the WSJ points out, developers are financing these projects with equity, mostly from outside investors. That lowers the risk of turning over a building to lenders if the project fails, but it also raises the stakes for developers and investors, who are putting more of their own money on the line. 

In the years leading up to the recession, developers and investors typically would borrow up to 90% of the financing for a project. Putting up only a small sliver of their own capital, they stood to make oversize gains. But when the downturn hit, many investors couldn’t pay back their debts and were forced to turn over their properties to lenders.

Firms such as Hines are moving ahead with a speculative, 45-story office building in Chicago. Montreal-based Ivanhoe Cambridge, the real-estate arm of a Canadian pension-fund money manager, has committed $300 million in equity to that development along the Chicago River.

And in New York, private-equity firm CIM raised equity for its condo tower by tapping individual investors who put in at least $1 million each. CIM is also active in other cities.

In Hollywood, a 1.7 acre site that housed a closed Old Spaghetti Factory restaurant was bought by CIM who said the high-rise will house a 301 residences, 39,000 square feet of office space, 13,500 square feet of ground floor retail and a 21,000-square-foot public park.

And in Chicago, CIM acquired Block 37, the struggling State Street shopping mall, from Bank of America Corp. Crain’s reported in February that CIM had agreed to buy the 305,000-square-foot property, which is about 30 percent leased to tenants including Anthropologie, Sephora and Puma. CIM plans to lease the balance of the building to national and local retailers.

The WSJ also said the developments now moving forward are primarily in markets that have seen high demand for certain types of space. Demand for high-end condos in New York remains strong, while a booming technology sector is pushing office vacancies down and rents up in San Francisco.

While part of that increase has been driven by rising rents and occupancies, analysts say much of it comes from increasing investor demand for properties. As a result, many buildings’ values have risen even though their incomes have stayed relatively flat. That has made development attractive. In San Francisco, for example, investors have paid as much as $800 a square foot for office buildings, while developing a new property would cost about 25% less than that.

Posted on by Jacob Frydman in Commercial Real Estate Leave a comment

Taking The LEED

The 2011-12 BOMA/NY Pinnacle Awards were handed out earlier this month and included the highest total of LEED- and Energy Star-rated buildings in the competition’s history. The Pinnacle – New York’s competition of the TOBY (The Building of the Year) Awards of BOMA International – is the highest award given to owners and property managers in Gotham’s commercial real estate industry. This year’s competition recognized a number of green buildings.

The Norman Foster-designed Hearst Tower became the first LEED for New Construction Gold-certified commercial office building in New York City to subsequently earn Platinum under the LEED for Existing Buildings: Operations and Maintenance rating system. Tishman Speyer manages the building in cooperation with Hearst. Since 2006, total annual energy consumption has dropped by 40 percent and water usage by 30 percent.

According to Crain’s, tenants looking for older, environmentally friendly buildings have a slightly better chance of finding one on the West Side than on the East. However, a mere 37 existing buildings in Manhattan have obtained LEED certification from the U.S. Green Building Council, or USGBC, which bestows the distinction.

There are 19 building on the West Side that were certified after renovations and retrofits, compared with 18 on the East Side, according to data from USGBC. The data does not include new building such as 11 Times Square or 7 World Trade Center, new skyscrapers that were designed with LEED certification in mind.

Three new speculative, LEED-hopeful office buildings are slated to come on line in 2013. Together, One World Trade Center, Four World Trade Center, and 51 Astor Place will deliver 6 million square feet of new space into the Manhattan office market.  The Wall Street Journal points out that the success of leasing efforts at the 2013 towers will have repercussions for other high-profile projects who will also seek LEED certification. 7 Bryant Park510 West 22nd Street and Related’s Hudson Yards project on the far West Side are three such projects.  While the more efficient use of office space is great for the environment, it’s not good for developers and landlords looking to fill up their buildings.

Posted on by Jacob Frydman in Commercial Real Estate Leave a comment