Southern California Office Real Estate Blog

THE HISTORY OF THE FINANCIAL BUBBLE

THE HISTORY OF THE FINANCIAL BUBBLE

Allegedly, the first recorded speculative financial bubble occurred in the Netherlands in the 1630s when, according to Wikipedia, tulip contracts sold for 20 times the annual income of a skilled craftsman. When tulip prices came crashing down so did the economy, according to reports that have not been sufficiently documented for historians to conclude exactly what occurred.

sources:

http://www.flickr.com/photos/jimg944/2229214461/

http://www.inman.com/news/2008/10/23/dutch-toughen-downturn

NEW MARKET TERMS

NEW MARKET TERMS

We get lots of interesting email…this one, from Sanddra ay Costalife Services rollover@costalifeservices.com  gives us a chuckle…

BULL MARKET — A random market movement causing an investor to mistake himself for a financial genius.

BEAR MARKET — A 6 to 18 month period when the kids get no allowance and the wife gets no jewelry.

VALUE INVESTING — The art of buying low and selling lower.

BROKER — What my broker has made me.

STANDARD & POOR — Your life in a nutshell.

STOCK ANALYST — Idiot who just downgraded your stock.

INSTITUTIONAL INVESTOR — Past year investor who’s now locked up in a nuthouse.

PROFIT — An archaic word no longer in use.

INVESTORS STILL LIKE REAL ESTATE

INVESTORS STILL LIKE REAL ESTATE

A survey of more than 1,000 private and institutional real estate investors reveals that the majority are looking to invest more funds in the commercial real estate sector, according to the 2008 Real Estate Investor Outlook, conducted jointly by National Real Estate Investor, Marcus & Millichap and Countrywide Commercial.

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“To see that a majority of investors are still planning to increase real estate holdings and that the percentage is higher than last year is a strong validation that they are separating

capital markets issues from commercial real estate fundamentals,” says Harvey Green, president and CEO of Marcus & Millichap Real Estate Investment Services.

The Investor Outlook survey reveals that 62 percent of respondents plan to increase allocations in real estate over the next 12 months compared to 60 percent in 2006, 69 percent in 2005 and 74 percent in 2004. Only 7 percent of real estate investors plan to decrease their investments in real estate over the next 12 months.

“Investors are going to invest more in real estate because pricing is more attractive and they’ll be able to get slightly higher yields,” says Chris Tokarski, managing director of Countrywide Commercial’s real estate finance group.

Of the investors who plan to increase their real estate holdings, the average estimated

increase is 21 percent.

The theory: “Availability and cost of debt may have changed, but healthy occupancies, rent growth, lack of overbuilding and moderation in prices are the drivers behind the optimism,” adds Green.

Investment sales activity in 2007 is on pace to eclipse 2006’s $356 billion, according to Real Capital Analytics Inc. As of October 1, the New York-based research firm, which tracks all deals $5 million and above, had recorded $356 billion in sales of the five main property types (office, apartment, retail, industrial and hotel).

Respondents have an average of 19 years’ experience in the industry and an average of

$36.6 million invested in real estate. On average, 62 percent of respondents’ portfolios are allocated to real estate.

HOW GREEN RENNOVATIONS PAY OFF

 

HOW GREEN RENNOVATIONS PAY OFF

 

 

 

 Green remodeling can pay off — not only in lowered utility bills, but also in buyer appeal when the property is sold.

Green Seal Certified

  

Here are some green things to consider:

 

 

 ~ Energy-efficient products. Choose Energy Star appliances, double-paned windows, low-flush toilets, and compact fluorescent light bulbs.

 ~ Spray foam insulation. Seal the home with insulation that doesn’t let the heat or cooled air leak out.

 ~ Sustainable wood flooring. Select flooring certified by Forest Stewardship Council, which protects forests by managing the amount of wood harvested annually.

 ~ Locally made products. Buy products made less than 250 miles away to reduce transportation costs. Granite, for instance, is generally imported from afar.

 ~ Nontoxic paint. Use paint that is low in volatile organic compounds (VOCs) — chemicals that evaporate into the atmosphere. Look for Green Seal certified brands.

 Source:

http://www.realtor.org/RMODaily.nsf/pages/News2007123106?OpenDocument

 

CAP RATES WILL RISE

CAP RATES WILL RISE

Cap Rates are predicted to be going up in the next 12 months, marginally, mind you, but they will rise. Let’s look at the statistics, in October 2007, the average cap rate for commercial property was 6.94 percent, according to Real Capital Analytics. In 2006, the average cap rate was 7.12 percent.

Cap rates for top-tier properties are not expected to rise more than 25 basis points while cap rates for lower-tiered properties and markets will increase 50 basis points to 75 basis points, predicts Hessam Nadji, senior vice president and managing director of Marcus & Millichap Research Services.

“Many cap rates have been predicated on the availability of cheap debt, and that’s driven pricing to artificially high levels,” notes Bob Dougherty, chief acquisitions officer with Buchanan Street Partners “We’ve been underwriting a 100-basis-point increase in cap rates for almost two years because we’ve been expecting a correction. Now we think cap rates will return to historical norms of 200 [basis points] to 300 basis points over Treasuries.”

$40M FOR ONE OF THE LARGEST MULTI-USE TENANT CAMPUSES IN SOCAL

$40M FOR ONE OF THE LARGEST MULTI-USE TENANT CAMPUSES IN SOCAL

Koll/PER, a partnership of the Newport Beach-based Koll Co. and the Public Employee Retirement System of Idaho, has acquired the 313,367-sf College Business Park from the Newport Beach-based Wohl Investment Co. for $39.9 million. The property consists of 17 single-story industrial, office and flex buildings in a 24.55-acre business park that straddles the county line between Los Angeles and San Bernardino counties in Upland, CA.

College Business Park is situated at the northeast intersection of Foothill Boulevard and Monte Vista Avenue. The county line traverses through the property along Monte Vista.

According to Armando Enriquez, acquisitions manager for Koll Co., the investment firm was attracted to the property by its “exceptional location in a strong market area, great visibility, outstanding curb appeal and functional site layout.”

The concrete tilt-up buildings at College Business Park range from 13,369 to 22,426 sf, with tenant sizes ranging from 600 sf to 14,000 sf. The project comprises more than 200 suites, with 13 of its buildings offering small-unit warehouse and flex space with varying percentages of office-build-out. The other four buildings include 100% build-out. With 1,067 total parking stalls, the project has a parking ratio of 3.4 spaces per 1,000 sf of building space.

Enriquez notes that the property is one of the largest multi-tenant business campuses in Southern California, providing the flexibility of offering 100% office build-out and flex and industrial space in one project. This variety of product appeals to a diverse set of tenant types and the diversification “helps limit risk exposure to any one tenant type,” Enriquez says.

Lack of available large land parcels coupled with high land prices, creates barriers of entry that may minimize, if not prevent, future development of comparable properties nearby.

INVESTORS STILL FEEL RENTS WILL RISE

INVESTORS STILL FEEL RENTS WILL RISE

Rents will rise on investment properties, suggests a recent survey of more than 1,000 private and institutional real estate investors. The survey, which is packaged as the 2008 Real Estate Investor Outlook, was conducted jointly by National Real Estate Investor, Marcus & Millichap and Countrywide Commercial, revealed that 61% feel returns are artificially low, with 38% predicting that returns will rise back to long-term averages as conditions change and 23% percent feel that returns will rise as conditions change but will not reach long-term average levels.

INVEST IN LATIN AMERICAN REAL ESTATE – GET A GOOD RETURN

INVEST IN LATIN AMERICAN REAL ESTATE – GET A GOOD RETURN

1. Chile
Boasting the most stable and advanced economy in South America, Chile enjoys a high standard of living. Chile ranked eleventh—one spot behind Canada—in terms of the country’s degree of economic freedom, according to the 2007 Index of Economic Freedom put forth by The Heritage Foundation and the Wall Street Journal. Chile’s capital, Santiago, is a booming metropolitan center with first-class infrastructure. More than a third of Chile’s population resides in the metro area of Santiago. The capital is a business hub for Latin America and welcomes an abundance of business travelers. However, the bustle of activity in the manufacturing and mining businesses has created a considerable amount of air pollution, particularly in the Santiago area.2. Brazil