Industrial Insight • Watch the Spread Between Vacant & Available Square Feet

May 11,2011 

Most commercial real estate market commentators focus on vacancy and availability rates while neglecting what may provide better insight into market dynamics – the spread between them. Instinct suggests that the market’s availability should always exceed its vacancy. After all, landlords start to market space at least six months in advance of vacancy, and this lead-time doubles in a weak market. The accompanying graph illustrates the change in the spread over time, which ranged from 100 to 150 million square feet before the recession to as high as 400 million square feet at the market’s trough. During the recession, some tenants went out of business, some consolidated their operations and some were reluctant to renew their leases until they had expired, or even later, as landlords were willing to sign month-to-month leases to keep their buildings occupied. In each of these scenarios, landlords started to market the space for lease, impacting the availability rate while vacancy remained unchanged until the tenant moved out. During the recovery, the process should reverse as new leasing activity increases and existing tenants renew earlier. In fact, in an overheated market, such as San Francisco in 2000, it is possible for a market to have fewer available square feet than vacant as tenants lease space before it becomes vacant and the landlord is able to complete improvement work required by the new tenant. Over the last year, the national industrial market has experienced nearly 80 million square feet of positive absorption and an 80-basis-point decline in the vacancy rate. The available/vacant spread has remained unchanged, however, making it an important metric to watch for the remainder of 2011 – a stubbornly high level could signal that the market’s recovery is stalling.   Source: Grubb & Ellis

New Industrial Listing - 3791 N. Highway Drive

http://www.icontact-archive.com/ZFH3-wKlPPe3Pch39WJeUNeTtSLGlzmH

Weekly Market Insight • Interest Rates • 5/9/11

Long-term interest rates have been moving lower, surprising analysts who expected interest rates and inflation to rise as the economy gains momentum. Falling interest rates also are surprising many who thought the pending conclusion of the Federal Reserve's $600 billion bond-buying program called QE2, i.e. the second round of quantitative easing, would cause prices to fall and interest rates to rise as the 500-pound gorilla prepares to leave the market. The 10-year Treasury hit 3.18 percent on Thursday, its lowest yield since December 7th. Bond traders appear to be reacting to a recent string of disappointing economic indicators – a trend that was called into question by Friday’s report from the Bureau of Labor Statistics showing a solid 244,000 net new payroll jobs created last month. The recent decline in the price of oil and other commodities also is related to concern over weakening economic growth in the U.S. and globally. Crude oil futures trading on the New York Mercantile Exchange ended Friday at $97.18 per barrel, capping the biggest weekly slide in dollar terms since 1983 when oil trading began on the NYMEX. Lower interest rates and stronger job growth can be viewed as the best of all possible worlds for commercial real estate. Lower yields on 10-year Treasuries will keep the pressure off of cap rates and mortgage rates, while stronger job growth will help fill properties with newly hired workers.

Robert Bach

Senior Vice President, Chief Economist

Robert Bach, Senior Vice President, Chief Economist, has 30 years of professional experience in real estate market research, consulting and city planning. His commentary on the real estate markets is provided here on a weekly basis.

 

Grubb & Ellis Industrial Insight

Last month, I shared the preliminary findings of Grubb & Ellis’ newest research report, the Industrial Broker Sentiment Survey, which provides in-depth analysis of more than 100 surveys completed by industrial brokerage teams in over 40 markets nationally.

The final report, now available in the Knowledge Center on our web site, addresses their thoughts about market velocity, rental rates, lease terms and concessions, active industries and investment activity, providing valuable qualitative information not captured in statistical reports.

Decisions are best made when market statistics are supplemented with qualitative insight. With this report, it is our intent to supplement what the statistics are telling us with what the actual market participants are experiencing.

Rene Circ

National Director of Research, Industrial

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Tucson Office Properties Available for Sale or Lease

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Industrial properties are seeing renewed interest from out-of-state businesses

Real estate group: Retail vacancies up; churches making notable buys

Walmart may join Costco near Kino, I-10

Dale Quinn Arizona Daily Star | Posted: Friday, May 6, 2011 12:00 am
Construction of a new Walmart near South Kino Parkway and Interstate 10 could begin by the end of the year.

The discount retailer would join Costco Wholesale as an anchor tenant at the shopping center called Tucson Marketplace at the Bridges. The shopping center makes up the retail component of a mixed-use project that includes the University of Arizona's planned Bioscience Park.

Bruce Wright, the UA's associate vice president of research parks, told a group of real estate professionals at a forecast event Thursday that city officials are currently reviewing plans for the Walmart.

The retail center, developed by Retail West Properties LLC and Eastbourne Investments, is part of a larger project called The Bridges planned to include homes built by KB Home and Lennar, along with the UA bio park, Wright said.

Wright didn't mention any specific bioscience or technology companies that have expressed interest in locating at the park.

"We are in active conversations with a number of prospective tenants," he said. "Most of them wanted to see the infrastructure in place before they entered into serious negotiations with us."

Thursday's quarterly meeting of the Pima County Real Estate Research Council, held at the Tucson Association of Realtors, 2445 N. Tucson Blvd. also included updates on various market sectors:

Retail
Overall vacancies in the first quarter of 2011 were at 8.9 percent, said Craig Finfrock of Commercial Retail Advisors. That's up from about 8 percent two years ago, he said.

Rents have dropped to $14.96 per square foot from $18.62 per square foot back in the second quarter of 2009, Finfrock said. But even that can depend on location.

"Some prime locations have really held up their rates exceptionally well," especially those with storefronts that face major intersections and roads, Finfrock said.

Industrial
Industrial properties are seeing renewed interest from out-of-state businesses, said Ron Zimmerman of Grubb & Ellis.

"Transactions are happening," he said.

Zimmerman said he's again seeing clients from Albuquerque and Los Angeles. But it's still a buyer's market, with many financially distressed, bank-owned properties for sale.

And there's more of that on the horizon. "I do see more foreclosed buildings coming on the market," Zimmerman said.

Land
The land market is incredibly segmented, said Jim Marian of Chapman Lindsey Commercial Real Estate.

A bidding war can emerge for a property on the northwest side, while a property southeast of Tucson will see little activity, Marian said.

Churches have made significant purchases lately, he said. The Church of Jesus Christ of Latter-day Saints recently scooped up property in Green Valley and Sahuarita, for instance.

And the land that is selling is going for much lower prices than it did in previous years, Marian said.

Contact reporter Dale Quinn at dquinn@azstarnet.com or 573-4197.

Source:  http://azstarnet.com/business/local/article_d88e9d0b-0599-5a3b-bb62-520f05b2c154.html

Available Properties for Sale and/or Lease:

The Davis/DiVito/Kong Team Available Properties:


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