December 5, 2010 sundancecompany commercial real estate, Commercial real estate news, The Sundance Company

Commercial Real Estate News: Markets Stabilizing

A recent article from NAR (National Association of REALTORS®) discusses what 2011 looks like for commercial real estate markets.

Lawrence Yun, NAR chief economist, said commercial real estate sectors appear to be stabilizing. “The basic fundamental of rising commercial leasing demand, resulting from a steadily improving economy, means overall vacancy rates have already peaked or will soon top out,” he said. “The outlook for the office and industrial markets has moderated with modestly declining vacancy rates expected as 2011 progresses, while the retail sector should hold fairly steady. Still, high vacancy rates imply falling rents.”

Yun anticipates a rise in household formation from an improving economy, which will increase demand for housing, both ownership and rental. “Multifamily housing is the one commercial sector that has held on relatively well in the past year, and can expect the best performance in 2011,” he added.

“Apartment rents could rise by 1 to 2 percent in 2011, after having fallen in 2009 and no growth in 2010,” Yun said. “This rent rise therefore could start to force up broader consumer prices as well.” He noted that the housing shelter cost of primary rent, and owner’s rental equivalence, is the biggest component in the Consumer Price Index, accounting for 32 percent of its total weight.

The Society of Industrial and Office Realtors®, in its SIOR Commercial Real Estate Index, an attitudinal survey of more than 400 local market experts, shows vacancy rates are slowly improving, but rents continue to be soft with elevated levels of subleasing space on the market. The SIOR index, measuring the impact of 10 variables, rose 1.6 percentage points to 42.6 in the third quarter, but remains well below a level of 100 that represents a balanced marketplace. This is the fourth straight quarterly improvement following almost three years of decline.

The last time the commercial market was in equilibrium at the 100 level was in the third quarter of 2007; the index now matches where it was at the beginning of 2009. Fifty-nine percent of respondents expect improvements in the office and industrial sectors in the current quarter.

Commercial real estate development continues at stagnant levels with little investment activity, but is beginning to pick up in many parts of the country.

September 25, 2010September 14, 2010 sundancecompany commercial real estate, Commercial real estate news, Economy news, The Sundance Company

Commercial Real Estate Investment Remains a Smart Play

In economic terms, inflation is defined as a rise in the general level of prices of goods and services in an economy over a period of time. When prices rise, each unit of currency buys fewer goods and services, eroding real consumer purchasing power. Although deflation also is a risk to the economy, moderate inflation is much more prevalent over the course of modern history.

In the long run, the most significant factor influencing inflation is the growth rate of the money supply. Inflation occurs when the nominal supply of dollars grows faster than the real demand to hold dollars. However, in the short and medium term, inflation may be largely affected by supply and demand pressures in the economy, and influenced by the relative elasticity of wages, prices, and level of interest rates.

In the U.S., inflation is estimated by calculating the rate of change of the Consumer Price Index (CPI). The CPI measures prices of a selection of goods and services purchased by a typical consumer. The magnitude of inflation — the inflation rate — is usually reported as the annualized percentage growth of the CPI Index.

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About The Sundance Company
Established in 1976, The Sundance Company has the experience to help you with your commercial real estate needs in Boise, Meridian, Nampa, and the greater Treasure Valley. If your requirements include property management, leasing, real estate development, project planning, construction or space planning then look to us. The Sundance Company has more than 1.5 million square feet of office and industrial space available in prime Boise and Meridian locations. More information is available at www.sundanceco.com or 208.322.7300.

February 22, 2010February 22, 2010 sundancecompany commercial real estate, Commercial real estate news, The Sundance Company

Commercial Real Estate Lease Types

1. The Gross Lease – Though some sources break out the full service lease type from the gross lease in commercial real estate, they are more often the same. The landlord pays for: Taxes, insurance, and maintenance.

The gross commercial lease is used most often in multi-tenant and single tenant office buildings, industrial and some retail properties. The landlord collects fixed rents and pays the expenses out of them.

As costs increase over time, many gross and full service leases will contain escalation clauses that increase rents over time to offset tax increases and higher insurance and maintenance costs. It is important that a tenant shopping for space understand any escalation clauses in order to project rent expense into the future.

2. The Triple Net Lease – The triple net lease is used extensively in commercial real estate. It is popular for multi-tenant industrial and retail properties. With tenants whose expenses vary greatly, such as an industrial user of electricity, the triple net lease is best for the landlord.Tenants are resistant to triple net leases, as they have no control over increases in expenses and budgeting their costs is more difficult. This is especially true when it comes to repairs and maintenance. In a triple net lease, the tenants would be responsible for sharing the cost of roof replacement. This can be a large and many times unexpected expense.

Of course, fixed rent is lower with the triple net lease. If the building is a newer one, tenants may find triple net to be preferable to other choices. If establishing a new business, the triple net tenant in a new building can enjoy lower rent and expenses in their first few years. Once established, they may have grown to the point that larger space is necessary. The move can be to a different type of lease or another newer facility.

3. The Modified Net Lease – The modified net lease is a compromise between the gross lease and the triple net. The landlord and tenant usually set up a split of maintenance expenses, while the tenant agrees to pay taxes and insurance. Utilities would likely also be negotiated in the modified net lease.This type of lease might be used in industrial, retail or multi-tenant office properties. Tenant resistance to triple net leases, especially in older properties, makes the modified net lease more popular. It allows a compromise situation that shares the costs of building operation and maintenance.

The terms of a modified net lease are as varied as are building and tenant business types. The flexibility of this lease type makes for easier agreement between tenant and landlord. Many a lease has been put together because of creative modified net lease terms.

About The Sundance Company
Established in 1976, The Sundance Company has the experience to help you with your commercial real estate needs in Boise, Meridian, Nampa, and the greater Treasure Valley. If your requirements include property management, leasing, real estate development, project planning, construction or space planning then look to us. The Sundance Company has more than 1.5 million square feet of retail, office, and industrial space available in prime Boise and Meridian locations.

Please check out The Sundance Company website to view property photos, search for office space or learn more about Sundance’s start-to-finish capabilities. If you prefer to talk to someone in person about your commercial real estate needs, then just give us a call at our Boise office, (208) 322-7300

Commercial Real Estate News – Toronto Developer May Bring Aquarium to Times Square

Deal May Bring Aquarium to Times Square

December 2, 2009November 29, 2009 sundancecompany Commercial real estate news, silverstone business campus, Silverstone Corporate Center, The Sundance Company

Sundance Company News

With many thanks to the local community, we proudly offer an open house of the Silverstone Corporate Plaza to the general public. Please join us on Friday, December 4^th, 2009, from 11:00 a.m. – 2:00 p.m. at the Silverstone Corporate Plaza Building, 3405 E. Overland Road in Meridian (Silverstone Park at Eagle and Overland Roads). The Sundance Company invites you to take the tour. We want to showcase the Silverstone Plaza and our Silverstone Amenity Center, which provides everything from contemporary catering facilities to the ultra-modern conference rooms and our progressive classroom-style training rooms.
The Sundance Company is moving. Effective December 19, the Sundance Company’s corporate offices will be located in the new Silverstone Plaza building located within the Sundance Corporate Center. The new address will be:
The Sundance Company
3405 E. Overland Road, Suite 150
Meridian, Idaho 83642
The Sundance Company has tried to go beyond the typical commercial real estate development role. The company likes to take a visionary approach to its commercial real estate developments. Read the complete story here ….
The Sundance Company announced the company is standardizing on Landport’s Internet Driven Work Order Management System. Sundance is using Landport to manage all tenant service requests, work orders and preventive maintenance for its property management operations. Landport is a global leader in service request, work order, preventive maintenance and related property management services delivered via the Internet. The Sundance Company is fully operational on Landport. More information can be found here …

September 16, 2009September 13, 2009 sundancecompany Boise Commercial Real Estate, Boise Commercial Real Estate Development, Commercial real estate news, The Sundance Company

What U.S. cities like Boise, Idaho are doing to promote new construction

An interesting article from the Los Angeles Chronicle about what some cities in the United States are doing to entice new building construction, and the story features a quote from Boise mayor Dave Bieter. Also interesting to note that The Sundance Company – yep that is us – has continued to build in the market despite the sluggish economy. You can read all about it here.

With real estate vacancies on the rise and new construction having taken a sharp downturn, many cities across the nation are coming up with some clever and creative methods to entice new building construction into their respective areas.

Although home sale numbers may be resurrecting in some cities, this is not the case for most. Not only are home sales down, but new home construction has hit rock bottom in many major cities.

Commercial vacancies are also steadily climbing, which have caused the lending industry to raise the bar in obtaining new construction loans. Builders are now struggling more than ever with a variety of costs, and are much more hesitant in a down economy to begin new projects.

Insightful U.S. cities are noticing the significantly diminished number of new building permits, and are responding. In order to kick start the slumping industry, many cities are cutting various impact fees typically charged to builders. Generally, impact fees are one-time fees charged on new construction to pay for infrastructure for the new development, like roads, sewer systems, curbing, lighting, schools, parks and other community needs.

The hope is that the savings will entice developers to complete or build-out existing construction and encourage new residential and commercial development.

Earlier this year, the City of Harrisburg, Oregon, cut in half what are called the city’s Systems Development Charges. These are the fees the city bills home builders pay per house. City officials stated that the reduction in fees saved new home builders nearly $5,000 per house, a savings that is supposed to be passed along to the buyer. The city’s program ended August 1.

Following suit with numerous other local California governments, Riverside County reduced their impact fees to builders just this month. The California Building Industry Association says it’s a growing trend that’s paying off. Riverside officials voted to cut development fees by 50 percent for one year effective August 15. That adds up to a savings of about $2,100 per single-family dwelling. In addition, the Western Riverside Council of Governments will consider a reduction in the Traffic Uniform Mitigation Fee (TUMF) that currently cost builders $10,000 per home.

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Naples, Florida, made history in cities that are considering the reduction of impact fees. Known to charge the highest impact fees in the state, the city was one of the first to consider lowering impact fees in January of this year. The county’s commissioners voted to suspend certain impact fees for two years. Benefactors of the suspended fees will primarily be existing commercial property owners who change the use of commercial space listed on the building permit.

Arizona state government initially rejected, and then subsequently approved, a budget that included a two-year suspension for impact fees assessed by city governments relative to construction sales and building codes, along with reduced assessments for commercial property tax. The National Association of Office and Industrial Properties (NAIOP) and Home Builders Association of Central Arizona (HBACA) had been petitioning for a three-year moratorium on impact fees.

In attempts to bolster commercial development, Meridian, Ohio has also jumped into the fray. Officials have waived impact fees for fire and police for all commercial building permits through September 30, 2009.

Boise, Idaho Mayor Dave Bieter has deferred fees for building permits and inspections for new construction. The fees are not due until the occupancy permit is issued by the city. In addition, impact fees for fire, police and parks are being deferred.

The trend seems to be catching fire throughout the nation; although it is unclear as to what extent these deferred, reduced or eliminated impact fees will benefit the community in the long-run.

September 2, 2009August 30, 2009 sundancecompany commercial real estate, Commercial real estate news, Economy news, The Sundance Company

NAR: Commercial Real Estate Decline Starts to Moderate

Erika Morphy of GlobeSt.com published this article last week about commercial real estate.
The decline in commercial real estate appears to be slowing, at least according to the latest statistics from the National Association of Realtors (NAR). So suggests its leading economic indicator, which registered only a 1.3 percentage point decline in its Commercial Leading Indicator for Brokerage Activity for Q2. The index reading was 101.5, compared to 102.8 in Q1. The index is at its lowest point since its inception in Q1 1994–as well as a steep drop from Q2 2008, when it was at 117.6.

“The decline is moderating a bit–we can hope that the steep declines may be coming to an end–but we are not nearly back to normal,” Lawrence Yun, NAR chief economist, tells GlobeSt.com.

The slight easing of credit and introduction of liquidity into the sector is largely the reason, he continues. TALF was extended for a few months beyond the December 2009 expiration date, Yun notes. Also, “there has been a nice gain in the REIT stock price index, which implies that credit conditions may be loosening.”

Yun’s best guess for commercial real estate recovery? “We’ll be bouncing along the bottom for some time, but meaningful gains won’t occur until the second half of next year.”

Getting to that point, though, will not be pretty. NAR is forecasting sharp increases in vacancies for the next year. It expects office vacancy rates to increase from 15.5% in the second quarter to 18.8% in the second quarter of 2010.

In the industrial market vacancy rates are likely to rise from 13% now to 15% in Q2 2010. Retail vacancies will edge up from 11.7% in Q2 2009 to 12.9% in the same period of 2010. Multifamily vacancy rates, by contrast, are expected to slip from 7.4% now to 7.1% in the second quarter of next year.

NAR is not the only leading economic indicator to point to an upcoming recovery. The American Institute of Architect’s latest Architecture Billings Index also suggests a rebound may be underway.

August 19, 2009August 16, 2009 sundancecompany commercial real estate, Commercial real estate news, Economy news, The Sundance Company

Strategies for success

To succeed in this real estate market, investors and managers need a new kind of toolbox. While financial implements are still critical, more traditional tools of the trade, a hammer, paintbrush and the number of a good plumber, for example, have joined them.

As the industry experiences one of the worst downturns in decades, real estate investors and managers are reconsidering strategies for success. Many of them have embraced a back-to-basics approach that provides a path for staying strong in a difficult economy. A key part of that approach: actively maintaining their properties.

Gone are the days when making a profit in real estate involved a financial transaction and little else. Now, in an effort to remain viable, real estate professionals are focusing on 1) protecting and enhancing the value
of their assets; 2) adapting to a changed investment climate; and 3) reallocating precious resources.

And despite the rough sledding, there is a good likelihood that these strategies, taken together, will yield success. To be
sure, a meaningful recovery is not imminent. But there is a growing list of companies lining up to take advantage of the recovery when it occurs, giving perhaps the first indication that a slow turnaround may be beginning, at least in some sectors.

August 5, 2009July 26, 2009 sundancecompany Boise Commercial Real Estate, Commercial real estate news, The Sundance Company

Boise and the Treasure Valley – A great place to do business

Boise and the Treasure Valley is a great place to do business. But don’t take our word for it. Read what Forbes magazine has to say about the place The Sundance Company calls home, http://www.forbes.com/lists/2009/1/bizplaces09_Boise-ID_2388.html

At The Sundance Company, our team of specialist service teams strive to deliver levels of service and success beyond our clients’ expectations. We have developed numerous long-term relationships with our clients because of our goal to deliver beyond expectations. With The Sundance Company, you can be sure that you have a network of talented and committed people all working towards a common goal: the success of your business. The Sundance Company is one of the few local companies that self-manages and maintains its own properties—enjoying higher occupancy levels and superior quality control for its projects.

With more than 30 years of successful history in Idaho’s Treasure Valley and the Boise metropolitan area, The Sundance Company uses our individual expertise in the Treasure Valley market, combined with access to local market intelligence that few companies can match, to help you achieve, and surpass, your business goals.

July 29, 2009July 26, 2009 sundancecompany Boise Commercial Real Estate, Boise Industrial Space, Boise Office Space, Boise Retail Space, commercial real estate, Commercial real estate news, The Sundance Company

Midyear commercial real estate report for the Treasure Valley

Treasure Valley commercial real estate continued to lose tenants in the first half of 2009, according to a new report from Colliers International.

Vacancy rates went up as absorption rates and prices decreased in office, retail and industrial buildings. But the report points out a few bright spots.

For office space, downtown Boise is healthy and will likely remain so. Vacancy rose just slightly, from 9.5 percent at the end of 2008 to 10.6 percent in mid 2009.

And in retail, Eagle Road has become the “first choice for most retailers,” with the Eagle and Ustick intersection especially attracting new tenants.

Dollar stores, fast food, check cashing and cell phone dealers were actively looking for space.

Action in industrial development in the future will largely be attributable for “build-to-suit projects for companies with specific needs that can’t be satisfied by existing sites,” the report said.

The investment market is at a standstill, according to the report, because of lack of liquidity, income erosion and a disconnect between buyer and seller expectations.

“Owners are getting pummeled from multiple sides, cap rates are increasing and income is dropping as tenants are either failing or asking for rate reductions in their rent,” the report said. “There is money out there for good deals. Buyers tend to be enamored with the homerun deals, instead of focusing on doubles and triples that are available.”

“There appear to be more REITS and private groups raising equity to take advantage of future market conditions,” it continued. “Those investors that have access to capital and patience to endure more stringent lending standards should see great opportunities in the months and years ahead.”

July 1, 2009June 22, 2009 sundancecompany Commercial real estate news

And the most expensive office market in the world is …

If you guessed Tokyo, Japan then you should give yourself a pat on the back. Tokyo’s Inner Central District has supplanted London’s West End as the world’s most expensive office market, according to a recent survey.

London’s West End, is now the world’s second most expensive office market, followed by Moscow, Hong Kong’s Central Business District or CBD, and Tokyo’s Outer Central District in the report, which tracks office occupancy costs in more than 170 cities around the globe.

Financial centers have been most significantly affected by declining occupier demand and, as one would expect, registered the most material decreases in office rents. In many cases, major global office markets have seen occupancy costs fall by 20 percent or more over the last 12 months. Across the 170 cities as a whole, office occupancy costs fell 2.8 percent over the 12 month period ending March 31, 2009 (on an un-weighted average basis) compared with an increase of 8.0 percent in the 12 month period ending September 30, 2008 Singapore had the largest year over year decrease in occupancy costs with a drop of 34 percent.

Some markets did record increases in costs over the last 12 months but these markets—such as Charlotte (U.S.), Marseille (France) and Perth (Australia)—are very much the exception rather than the rule. Generally, these increases are either due to exceptional local market conditions, such as the completion of a top quality new building in a market where none was available previously, or simply that occupancy costs remain above the level of a year ago despite the fact that they are now falling. Such situations illustrate the uneven way in which the economic downturn is affecting different markets around the globe, according to the report.

Americas
The most expensive office location in the Americas is still New York’s Midtown with occupancy costs of $68 per sq. ft. However, that market’s occupancy costs declined 32 percent–the second steepest decline in the global survey. While occupancy costs in New York’s Midtown are high for North America, it ranked just 21st globally. Boston’s suburban market posted a decrease of nearly 30 percent, putting that market in fourth position in the top decreases chart in the report.

São Paulo (Brazil) posted the Latin American region’s highest occupancy costs at $57 per sq. ft. and is ranked 33rd globally. Latin America has held up better than the rest of the world with only three cities posting small negative growth rates, the worst being Mexico City with a 5.6 percent decrease. Nine markets in North America posted double digit declines.

Asia-Pacific
Tokyo (Inner Central) was the world’s most expensive market with an occupancy cost of $183 per sq. ft. Hong Kong (CBD) was the fourth most expensive global market with occupancy costs of $150 per sq. ft. Tokyo (Outer Central) and Mumbai were the other two Asia-Pacific markets in the top 10 most expensive cities roster.

Singapore, while experiencing the largest drop in occupancy costs, was not alone among Asia-Pacific financial centers in seeing a sharp decline. Hong Kong, Tokyo and Mumbai posted large drops in office occupancy costs. Conversely, Perth had the second fastest growing occupancy cost during the past 12 months with costs rising 22 percent, although it’s important to note that the increase took place in 2008.

Europe
London’s West End was the world’s second most expensive office market at $172 per sq. ft. and Moscow was a close third with occupancy costs at $170 per sq. ft. Dubai, Paris, the City of London and Dublin all were in the top ten most expensive markets.

Twelve cities in the region posted doubled digit declines in office cost. Moscow had the sharpest decline in the region followed closely by Oslo (Norway), while occupancy costs in London’s West End, previously the most expensive market in our report, fell 20 percent. In addition to Marseille, Durban (South Africa) was among the world’s top five markets with occupancy cost growing by 18 percent during the past 12 months.