All Commercial Real Estate Sectors Continue to Improve, Multifamily Strong

Shaking off a prolonged impact from the recession, fundamentals are gradually improving in all of the major commercial real estate sectors, according to the National Association of Realtors^Ò quarterly commercial real estate forecast.  The apartment rental sector has fully recovered and is growing.

The findings also are confirmed in NAR’s recent quarterly Commercial Real Estate Market Survey, which collects data from members about market activity.

Lawrence Yun, NAR chief economist, said new jobs are the key.  “Ongoing job creation, which is at a higher level this year, is fueling an underlying demand for commercial real estate space, assisted by a steady increase in consumer spending,” he said.  “The pattern shows gradually declining commercial vacancy rates, with consequential but generally modest rent growth.”

Yun expects the economy to add 2 to 2.5 million jobs both this year and in 2013, on the heels of 1.7 million new jobs in 2011, assuming a new federal budget is passed before the end of the year.  “Although we need even stronger job growth, by far the greatest impact of job creation is in multifamily housing, where newly formed households striking out on their own have increased demand for apartment rentals – this is the sector with the lowest vacancy rates and strongest rent growth, which is attracting many investors.”

Rising apartment rents also are having a positive impact on home sales because many long-time renters now view homeownership as a better long-term option, Yun noted.

A large problem remains for purchases of commercial property priced under $2.5 million.  “Our recent commercial lending survey shows that there is very little capital available for small business, which is significantly impacting commercial real estate transactions, although funding is less restrictive for bigger properties.”

NAR’s latest Commercial Real Estate Outlook¹  offers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets.  Historic data for metro areas were provided by REIS, Inc.,² a source of commercial real estate performance information.

Office Markets

Vacancy rates in the office sector are projected to fall from 16.3 percent in the second quarter of this year to 16.0 percent in the second quarter of 2013. 

The markets with the lowest office vacancy rates presently are Washington, D.C., with a vacancy rate of 9.3 percent; New York City, at 10.0 percent; and New Orleans, 12.6 percent.

Office rents should increase 2.0 percent this year and 2.5 percent in 2013.  Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is forecast at 24.7 million square feet in 2012 and 48.0 million next year.

Industrial Markets 

Industrial vacancy rates are likely to decline from 11.0 percent in the current quarter to 10.7 percent in the second quarter of 2013.

The areas with the lowest industrial vacancy rates currently are Orange County, Calif., with a vacancy rate of 4.7 percent; Los Angeles, 5.0 percent; and Miami at 7.2 percent.

Annual industrial rent is expected to rise 1.6 percent in 2012 and 2.4 percent next year.  Net absorption of industrial space nationally is seen at 44.1 million square feet this year and 62.4 million in 2013.

Retail Markets

Retail vacancy rates are forecast to decline from 11.3 percent in the second quarter to 10.7 percent in the second quarter of 2013.

Presently, markets with the lowest retail vacancy rates include San Francisco, 3.7 percent; Fairfield County, Conn., at 4.0 percent; and Long Island, N.Y., at 5.0 percent.

Average retail rent should rise 0.8 percent this year and 1.3 percent in 2013.  Net absorption of retail space is projected at 8.0 million square feet this year and 21.9 million in 2013.

Multifamily Markets

The apartment rental market – multifamily housing – is likely to see vacancy rates drop from 4.5 percent in the second quarter to 4.3 percent in the second quarter of 2013; apartment vacancy rates below 5 percent generally are considered a landlord’s market with demand justifying higher rents.

Areas with the lowest multifamily vacancy rates currently are New York City, 2.1 percent; Portland, Ore., at 2.3 percent; and Minneapolis at 2.4 percent.

After rising 2.2 percent last year, average apartment rent is expected to increase 4.0 percent in 2012 and another 4.1 percent next year.  “Such a rent increase will raise the core consumer inflation rate.  The Federal Reserve, in turn, may be forced to raise interest rates, possibly as early as late 2013.”

Multifamily net absorption is forecast at 215,900 units this year and 230,300 in 2013.

The Commercial Real Estate Outlook is published by the NAR Research Division for the commercial community.  NAR’s Commercial Division, formed in 1990, provides targeted products and services to meet the needs of the commercial market and constituency within NAR.

The NAR commercial components include commercial members; commercial committees, subcommittees and forums; commercial real estate boards and structures; and the NAR commercial affiliate organizations – CCIM Institute, Institute of Real Estate Management, Realtors^® Land Institute, Society of Industrial and Office Realtors^®, and Counselors of Real Estate.

Approximately 78,000 NAR and institute affiliate members specialize in commercial brokerage and related services, and an additional 232,000 members offer commercial real estate services as a secondary business.

The National Association of Realtors^®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

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¹Additional analyses will be posted under Economists’ Outlook in the Research blog section of Realtor.org in coming days at: http://economistsoutlook.blogs.realtor.org/.

²Beginning in the third quarter of 2011, NAR forecasts have been generated based on historical data provided by REIS, Inc., and do not correspond with prior historical information from previous forecasts.  This source permits coverage of additional metro areas than previously reported.

The next commercial real estate forecast and quarterly market report will be released on August 27 at 10:00 a.m. EDT.

National Flood Insurance Program Update

Last week during the 2012 Mid-Year Meetings many REALTORS® met with Members of Congress and urged action on NAR’s priority issues, including the National Flood Insurance Program (NFIP).  The United States Senate is expected to pass a 60-day extension of the NFIP. This extension will avoid a lapse in the program when the current authorization expires on May 31, 2012.  A lapse would have affected thousands of real estate closings across the nation.  While this extension is a positive development and will ensure program continuity it is not the long-term solution that NAR has been advocating.  

NAR has been firmly committed to working with our Congressional Allies on passing a 5-year National Flood Insurance Program reauthorization and reform bill.  That bill, H.R.1309 the Flood Insurance Reform Act of 2011, has passed the House of Representatives and awaiting action in the United States Senate.  Despite media reports that are indicating “progress” in the Senate on passing the reauthorization and reform bill, there a number of legislative hurdles that remain.  So we are holding off

“Where We Stand” Talking Points

·       The current program will be extended for 60 days to allow additional time for the Senate to take up and pass the Flood Insurance Reform Act of 2011

·       While NAR expects the Flood Insurance Reform Act of 2011 to be passed it remains an unfinished item

·       Once a bill is passed and signed into law NAR will provide comprehensive analysis of changes to the NFIP

·       Members who pushed their Senators to take up H.R.1309 helped move us very close to our goal and should be thanked for their efforts.

TCAR and Tacquire Social Media Update

The Triangle Commercial Association of REALTORS® (TCAR) and Tacquire have updated their social media accounts.


If you have not jointed the Linked In Group go to:  http://www.linkedin.com/company/triangle-commercial-association-of-realtors-and-tacquire
Ideally, this is meant to be the place for all other information outside of a place for property posts. TCAR and Tacquire allows their members two formats of email blasts through the Haves and Wants, as well as the Broadcast Email. So we ask that property posts be limited to those two formats and not LinkedIn. Feel free to open up conversations with the group and get involved. 


There is now a new Twitter Account  that is dedicated to TCAR and Tacquire and directly tied to our Association. So if Tweeting is the way you prefer to get your information, go to https://twitter.com/#!/TCARNC . 


Lastly, we have joined Facebook. Make sure you go there and like us at http://www.facebook.com/TCARNC .


This is our continued effort to communicate with our membership in the formats that work best for you. Of course we will continue to use the blasts that are generated internally from staff, but these are just different options based on how you, the member, wants to receive your information. The membership is more than welcomed to comment and get involved on any of these platforms.


Feel free to either call the office at 919-228-2588 or email us at kimb@tcar.com if you have any questions on TCAR or Tacquire. 

 

NCAR Legislative Meetings: June 4-6

The 2012 NCAR Legislative Meetings will be held June 4-6 in Raleigh. This is an important opportunity for REALTORS® from across the state to provide a unified voice for the real estate industry in North Carolina.  Of note, the Legislative Committee will meet on Tuesday, June 5, from 9 a.m.-10 a.m. and the Legislative Reception will be held that evening from 6 p.m.-7:30 p.m. at the NC Museum of Natural Sciences on Jones Street.  The reception is always well attended and is a great opportunity to talk with your legislators in an informal setting.



REALTOR® Day is on Wednesday, June 6, as REALTORS® from across the state walk the halls of the General Assembly and visit with their legislators.   A press conference will follow the briefing to officially announce that NC REALTORS® will award five $10,000 fellowships to high performing counseling agencies across North Carolina.  The fellowships are paid for through an NAR Foreclosure Prevention and Response grant.  Following the press conference, REALTORS® will visit their legislators’ offices.  Again, this is an important day as hundreds of REALTORS® make their presence known at the General Assembly and discuss issues important to the industry with the lawmakers who can impact these issues.

Xceligent Buys Commercial Information Exchange to Take on CoStar

Commercial Real Estate Direct Staff Report Xceligent Inc. has acquired a commercial real estate listing service to take on its rival and expand nationally. The company, which provides data on commercial space that's available for sale or lease, acquired ePropertyData from Second Century Ventures, the strategic investment arm of the National Association of Realtors. As part of the deal, Xceligent will be the exclusive provider of commercial real estate information services to the NAR. EPropertyData provides listings of properties that appraisers, brokers, developers and local title companies input. The listing service, which boasts nearly 5,000 members across the country, also provides a basic research platform.  "This acquisition will help us with our expansion and add to our national footprint," said Steig Seaward, Xceligent national director of client services. "We will be expanding into the top 65 markets within the next three years, and then we should be in the top 100 markets in about four years." Xceligent, of Independence, Mo., already operates in 33 markets and is looking to expand nationally to take on rival CoStar Group of Washington, D.C. Seaward said ePropertyData's listings provide a little less detail than Xceligent's existing platform at a lower cost to its users. "It's a member-loaded exchange," Seaward said. He said the service provides property listing information, demographics, sale and lease information, analytics and research tools. He declined to disclose the purchase price for ePropertyData. Allen Benson, founder of ePropertyData, said his company's development capabilities are a "perfect match" for Xceligent's research capabilities and industry presence. Xceligent bought ePropertyData less than a month after the Federal Trade Commission approved a consent order that cleared the way for CoStar to complete its $860 million purchase of LoopNet. FTC gave its approval only after Xceligent teamed up with DMG Information Inc., a business-to-business information provider, to buy the company back from LoopNet. Without that transaction, CoStar, in the eyes of regulators, would have achieved near monopoly status for certain commercial real estate information. "The focus of the new entity is going to use resources of DMG to develop a national robust platform that serves all markets," said Constance Freedman, Second Century Ventures managing director. EPropertyData has "traditionally" served secondary and tertiary markets, she added. Freedman said the "market is calling for a competitor" to CoStar. Xceligent's acquisition and its partnership with NAR will provide a strong presence in the market place, she says.

  

Copyright ©2012 Commercial Real Estate Direct, a service of FM Financial Publishing LLC. All rights reserved.

NAR Signs onto Lease Coalition Letter

A coalition of real estate and other business organizations (including NAR) recently wrote to the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB), reaffirming their calls for an economic impact study, extensive field testing, and full re-exposure of the entire lease accounting proposal — with the goal of creating a standard that will meet the tests of the marketplace and fulfill the needs of all stakeholders.


Under the boards’ proposal, U.S. companies that lease commercial space would be required to capitalize the costs of that lease — similar to as if they purchased the property — instead of recognizing the true costs of the lease transaction.  It is estimated that under current terms, businesses would be required to capitalize over $1.1 trillion in leased real estate assets onto their balance sheets.  For businesses leasing space, especially small businesses, this will change these leases into a major liability.


FASB and IASB plan to re-expose their controversial lease accounting reform proposal for public comment during the second half of this year, along with expectations of finalizing their lease accounting overhaul by mid-2013.


Read the Coalition Letter

TCAR Announces Sponsors for Commercial Classic

17th Annual Golf Tournament is May 7

TCAR (www.TCAR.com), the Triangle Commercial Association of REALTORS®, announces sponsors for the 2012 Commercial Classic golf tournament. The 17th annual event will be held on Monday, May 7, 2012 at Hasentree Golf Course (www.hasentree.com) in Wake Forest, N.C. More than 100 participants are expected to participate in the sold out tournament.
“We appreciate the tremendous support of our members, our sponsors and guests for our annual tournament, “says Kerry Saunders, TCAR president. “It is this sustained commitment that has made this networking event a success for 17 years.”
2012 sponsors include:
Hole-In-One Sponsors:                     Prize:
TrustAtlantic Bank:                            $25,000
Articulon:                                           Two round-trip airfares to anywhere in the Continental U.S.
Celito.net:                                           Golf package
Thomas Judy & Tucker:                     Electronics package
Wyrick Robbins Yates & Ponton:      Seiko watch
Dinner Sponsor:
Lend Lease
Cart Sponsor:
NAI Carolantic Realty
Longest Drive Sponsors:
Grubb & Ellis | Thomas Linderman Graham
Tacquire

Hole Sponsors:
Angle Contractors, LLC
Bannerman Construction Company
Cassidy Turley
CORT
Hunter and Associates
Phillips Architecture, PA
Professional Mortgage
Trinity Partners
Southern Community Back & Trust
Hasentree is one of the most beautiful and challenging golf courses in the Carolinas. The course was created by Tom Fazio, one of the game’s greatest architects. The tournament has a shot-gun start of 11 a.m. More information is available at www.TCAR.com or by calling 919.228.2588