Southern California Office Real Estate Blog

A repair in time saves nine down the road

A repair in time saves nine down the road
 
By Jodi Summers
 
Recently, we spoke about preventative maintenance for the rainy season … so continuing along that line of thinking, we thought we’d go one step further and talk about overall preventative maintenance for investment properties.

 
The art of preventive maintenance involves noticing small problems and fixing
them before major ones develop. Practicing preventive maintenance on your properties is like changing the oil in your car. By changing the oil at the recommended intervals, you will prolong the life of the motor. By inspecting and making basic repairs to your property, you can minimize your maintenance
budget.
 
According to Douglas D. Chasick, Senior Vice President of Professional Services,
CallSource, an effective preventive maintenance program accomplishes two goals:
 

1. By regularly inspecting and maintaining your buildings and equipment, you can avoid breakdowns. “For example, regular inspections of your air-conditioning units, filter replacements and coil cleanings all prolong the life of your HVAC equipment.”
   

2. Being thorough when making repairs can help avert more serious problems from occurring.
   

 
MAKE A LIST
First, identify what items need to be included in your preventive maintenance
program, and write down the list and what needs to be done to each item.
 
Your list may include:
 
* HVAC: Clean coils, change filters, oil motors.
* Rain Gutters: Inspect for secure fastening and clean.
* Roofs and Flashing: Inspect and repair.
* Water Heaters: Drain to remove deposits from the bottom of the heater,
which will corrode, and rust out the heater prematurely. Also, check the seams for leaks. In large buildings, boiler water should be analyzed by a laboratory to determine the need for chemical treatment, which minimizes the build-up of scale in the boiler that reduces efficiency and shortens equipment life.
* Plumbing: Inspect the underside of the building. Early detection will not only
reduce your water bills, but also reduce the damage from dry rot and the possibility of mold.
* Rooter the Common Drain Lines: Avoid big, smelly sewer back-ups by regularly
rootering the common lines. When a back-up is reported, attack it immediately.
* Elevators: Service companies offer contracts that range from providing minimal
service to full maintenance contracts
* Fire Extinguishers: Inspect and recharge.
* Smoke Alarms: Inspect and test battery.
* Photocells: Inspect, test and clean.
* Storm Drains: Inspect and clean.
* Lawn Sprinklers: Inspect, test, replace heads and reset timers.
* Exterior Doors: Inspect weather stripping, thresholds, hinges, door closers and locks.
* Balcony and Stairwell Railings: Inspect for secure fastening.
* Painting: Different exposure to the elements or patterns of use dictates that some areas need touch-up paint more often than others. Failure to treat wood when needed may result in unnecessary damage.
* Check Signage: Are the signs you posted still in place? Signs can disappear and you can become liable.
* Check Parking Areas: Look for debris, grease/oil spots, and unauthorized storage and/or vehicles. Look for evidence of leaks in the garage ceiling or walls. Inspect for cracks and potholes.
* Check Walkways and Driveways: Look for cracks, uneven surfaces and problem tree roots. Repair to avoid the lawsuits related to tripping and personal injury.
* Clean Out Dryer Vents: If you have residential units, this can turn into a pricey
headache if not done, and it can create a fire hazard.
* Exterior of Buildings: Inspect for wood rot, loose or damaged trim, paint deterioration and loose or damaged siding.
* Swimming Pool: Inspect filters and pumps, oil and adjust.
* Exterior, Common Area and Signage Lighting: Consider equipping the outside
lights on photocells instead of timers. You will be rewarded with lower utility bills and less maintenance.
 
Do a complete walk-through of the property, that will help you list everything to be included in your preventative program. When owners or managers feel that preventive maintenance is beyond their capability, they hire engineers to establish and implement a program.
 
“We nurse along about 100 buildings — it’s a super-handholding operation,” said
Arthur L. Spaet, president of Arthur L. Spaet and Associates, which handles maintenance programs.
 
MAKE A SCHEDULE
Obviously, to keep your property in top order, you will need to inspect various
aspects of your property on a regular basis. Ask the manufacturer, read the service book and talk to the subcontractors when figuring out how often you need to inspect each entity on your property that involves maintenance.
If you’re feeling inspired, add a frequency column to your list.
 
CHECK INSIDE THE UNITS
Experts suggest that an annual inspection of each leased unit is a good idea from a property maintenance standpoint. Check the smoke detectors for proper operation. Check for plumbing leaks, and areas that might need caulking or repair — running toilets, dripping faucets, walls, windows and ceilings.
 
COST-EFFECTIVE BEHAVIOR
Save time and money by having your service technician perform a “mini-maintenance” on additional units when they are completing a service request. After completing the service request, the service technician can check all faucets for drips, flush the toilets to see if they run, check all the window screens, graphite the locks, check the HVAC filter, etc. This “mini-maintenance” shouldn’t
take long and can be noted in the records.
 
CREATE A BUDGET
Bet you guessed that most preventive maintenance programs fail because of time and money. Your chances of success increase when you have a budget and then you divide that amount by the total number of units at the property to find out your “per-unit” cost.  Then, figure out approximately how much time is going to be involved with each expense.  
 
To come up with this budget, do similar research that you would do if you purchased the building — get a few years of financial statements and invoices together. Do you have common area maintenance fees? Do your CAM fees cover the preventative expenses?
 
USE RELIABLE TECHNICIANS
When implementing a maintenance regime, make sure you surround yourself with a reliable team. You don’t want your tenant calling you to fix the same problem again and again and again.
 
These items may seem costly and timeconsuming, but it is less costly and time-consuming  than allowing today’s crisis to determine your maintenance program. If you still aren’t convinced and won’t do everything, at least prioritize. Attend to the problems, which occur most frequently at a particular building.
 
For information on Southern California investment properties, there is a great website at www.SoCalInvestmentRealEstate.com. Jodi Summers is Director of the Investment Division at Boardwalk Realty. For your real estate needs, email
Jodi Summers at jodis@boardwalkrealty.com, or
call (310) 309-4219, or visit her website at www.santamonicalandmarks.com.

MARKET CONDITIONS REMAIN STRONG IN LOS ANGELES OFFICE SECTOR

MARKET CONDITIONS REMAIN STRONG IN LOS ANGELES OFFICE SECTOR

In the Los Angeles office market, supply has been slow to react to increased demand, driving rents skyward and pushing vacancy down for 12 consecutive quarters, according to a report by Marcus & Millichap Real Estate Investment Brokerage Company, the nation’s largest real estate investment brokerage firm. This trend should continue in the quarters ahead as job-growth in office-using sectors remains strong.
“Vacancy is down to pre-2001 levels in virtually every area of Los Angeles County, with vacancy in the Central San Fernando Valley currently below 5 percent,” notes Jonathan Weiss, a managing director of Marcus & Millichap and regional manager of the firm’s Encino office. “Santa Monica, West Los Angeles and Beverly Hills have seen effective rents increase by more than 13 percent during the past year.”
Following are some of the most significant aspects of the Los Angeles Office Research Report:
• After gaining 30,000 jobs in 2005, Los Angeles County employers will increase payrolls 0.6 percent by adding 23,500 jobs in 2006. Office-using employers are expected to create 12,500 new positions this year, a 1.2 percent increase.

• Strong tenant demand will outpace supply, pushing vacancy down 140 basis points to 9.8 percent by year-end 2006.

• Asking rents are forecast to grow 8.7 percent to $28.83 per square foot in 2006, while effective rents increase 9.9 percent to $24.48 per square foot.

• Developers are starting to respond to tightening vacancy rates and strong tenant demand. For the year, builders are expected to deliver 1.8 million square feet, up from 800,000 square feet in 2005.

• Investment activity has slowed from its torrid pace of the past few years. The median sales price increased 30 percent over the past 12 months to $246 per square foot, an all-time high for the county.

Developer Plans $17M Office Condos in WESTLAKE VILLAGE

 Developer Plans $17M Office Condos in WESTLAKE VILLAGE

By Bob Howard of GlobeSt.com 
WESTLAKE VILLAGE, CA-Locally based developer TR Funding expects to break ground in November on a 34,000-sf office condominium project at a site near the Ventura Freeway. The $17-million development will be the first such project in Westlake Village in a number of years, according to Tony Principe of Westlake Village-based Westcord Commercial Real Estate Services, which is marketing the project for the developer.
The new TR Funding project will be called the Vantage at Westlake and will occupy a two-acre site at 2629 Townsgate Rd., a block west of Westlake Boulevard and just south of the Ventura Freeway. The two-story class A building will feature concrete and steel construction and is scheduled to be completed in the fall of 2007.

Occupancy costs are a major factor driving the office condo project. Office rents exceed $3 per sf per month in the Westlake Village market and much of the new space is being preleased, so many professional office tenants are looking for space to buy.

The “zero availability” of professional condo office space in the Westlake Village market also is driving the new project. The Vantage at Westlake will offer 23 office units for sale ranging from 917 sf to 32,000 sf at asking prices starting at $475,000.

Designed by Neil Scribner Architecture of Thousand Oaks, the development will occupy a site near the Westlake Hyatt Hotel. The site is close to restaurants, banks and other financial services, entertainment and other retail and service businesses.

Another Banner Quarter for U.S. Office Markets

Another Banner Quarter for   U.S. Office Markets
 

Absorption Up, Vacancy Down as U.S. Office Markets Post Third Straight Year of Declining Vacancy
 

 Written by Tim Trainor 
 

After posting 10 consecutive quarters of decreasing overall vacancy thanks to continued positive absorption and relatively moderate construction levels, U.S. office markets showed steady improvement during the third quarter, according to CoStar’s just-released Third-Quarter 2006 Office Report. With a healthy 28,523,205 square feet of positive net absorption, U.S. office markets closed out the quarter with a vacancy rate of 11.6%, the lowest rate in nearly three years. A total of 579 office buildings completed construction during the quarter totaling 18,681,745 square feet, with 122,453,435 square feet still under construction at the end of the quarter.
With the positive absorption signaling continued demand, average rental rates increased slightly during the quarter to $23.05 per square foot.
 

A total of 13 office markets recorded 1 million square feet or more of positive absorption during the third quarter led by surprising Atlanta with 1.88 million-square-feet. Los Angeles, Washington and New York City followed. Other markets posting million-square-foot-plus quarters included Philadelphia, Boston, San Francisco, Denver, Houston, Phoenix, Silicon Valley, Chicago and Baltimore.
 

While the vast majority of markets posted absorption in positive territory, most of them recorded 500,000 square feet or less, indicating a relative stable overall market in terms of supply and demand.
 

Dallas/Fort Worth led the nation in office vacancy at an average of 17.5%. Detroit followed with an office vacancy of 16.9%, Cincinnati and Memphis were the only other two office markets with average vacancy above 15%.
 

New York City and Miami/Dade County took top honors as the two office markets with the lowest vacancy rate for the quarter at 6.4% each.
 

Local Market Highlights
 

Atlanta: The Atlanta office market ended the quarter with a vacancy rate of 14.0%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 1,882,275 square feet. A total of 37 buildings with 1,482,895 square feet of space delivered to the market, with 3,933,600 square feet still under construction at the end of the quarter.
 

Austin: The Austin office market ended the quarter with a vacancy rate of 12.5%. A total of 16 buildings with 185,021 square feet of space delivered to the market, with 1,385,922 square feet still under construction at the end of the quarter.
 

Chicago: The Chicago office market ended the quarter with a vacancy rate of 14.0%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 1,183,654 square feet. At the end of the quarter, 4,214,390 square feet of new office space was under construction.
 

Dallas/Ft Worth: The vacancy rate remained unchanged in Dallas/Ft Worth in the third quarter at 17.5%, the highest for any single U.S. market. During the quarter, another 1,049,686 square feet in new space delivered while positive absorption totaled less than one million square feet. More than four million square feet is currently under construction.
 

Los Angeles: The Los Angeles office market ended the quarter with a lower vacancy rate of 7.8% helped by positive net absorption totaling 1,786,850 square feet.
 

New York City: With no new office space being delivered to the market, and positive 1,611,483 square feet of net absorption, New York City’s vacancy rate dropped from 6.8% to 6.4% in the quarter. At the end of the quarter, there was 8,950,879 square feet underway for future delivery.
 

Orange (California): The Orange (California) office market saw vacancies fall and rental rates increase from the second quarter 2006 to the third quarter 2006. The overall vacancy rate currently sits at 7.0%, from 7.2% in the previous quarter. Although just 260,088 square feet of new space delivered in the quarter, there is 5,329,453 square feet currently under construction.
 

San Diego: The San Diego office market was one of the few to see overall vacancy increase during the third quarter to 10.0% with very low positive net absorption resulting from 10 new office buildings with 676,631 square feet delivering during the quarter with 4,998,087 square feet still under construction.
 

Washington: The Washington office market ended the quarter with a vacancy rate of 9.3%, a slight increase over the previous quarter despite positive net absorption totaling 1,760,197 square feet. Washington led all markets in adding new space. A total of 33 buildings with 2,653,217 square feet of space delivered to the market, with 15,411,479 square feet still under construction at the end of the quarter.
 

Largest Lease Signings
The largest office lease signings occurring in the third quarter included Moody’s 589,945-square-foot lease at 7 World Trade Center in New York City; the 481,981-square-foot lease signed by the U.S. Department of Justice at Liberty Square in Washington, D.C.; and the 480,147-square-foot lease signed by Chevron at Continental Center I in Houston.
 

Largest Office Building Completions
The largest projects underway at the end of third quarter 2006 were Harrison Metro Centre, a 3.65 million-square-foot building in the Northern New Jersey market with 96% of its space pre-leased, and Freedom Tower, a 2.6 million-square-foot office tower in New York City that is 100% pre-leased.
 

The complete report, as well as separate reports for individual markets, are available online to CoStar Property subscribers after logging in at www.CoStar.com. Simply select the “CoStar Third Quarter Market Reports” link listed under the Property Professional window. Copies are also available to non-subscribers for a fee. Please contact a CoStar sales professional at 877-726-7827. Each quarterly report highlights leasing and sales activity, inventory and development analysis, presented for the market as a whole, by property class, and by individual submarkets.    
 

Douglas Emmett Plans $1B Public Offering

Douglas Emmett Plans $1B Public Offering

Info courtesy of Bob Howard of GlobeSt.com
 SANTA MONICA, CA-Douglas Emmett Inc. has filed a registration statement with the Securities and Exchange Commission for an initial public offering that would turn the privately held firm into a publicly traded REIT with nearly 12 million sf of office buildings and 3,000 apartments. The new REIT would raise more than $1 billion through the stock sale, according to Emmett’s SEC filing, which did not specify a price for the stock or timing for the offering.

Emmett officials are in the quiet period following their filing, but REIT analyst Craig Silvers, president of Los Angeles-based Bricks & Mortar Capital, tells GlobeSt.com that the IPO could be well-received even though it occurs at a time when many REIT have gone from public to private.

“It could be the right product at the right time,” Silvers says, pointing out that Emmett’s holdings include prime West Los Angeles office and apartment buildings, for which investor demand is strong. He comments that Emmett’s reasons for going public likely include some of the same reasons that any company goes public, whether REIT or not: to provide liquidity to its owners, to access additional capital and to provide incentives to employees.

Real estate companies that go public via the REIT route can offer the additional benefit of granting operating partnership units to property owners in exchange for assets, an arrangement that provides substantial tax benefits in comparison with a conventional property sale, Silvers points out. He also notes that, with the private takeovers of Los Angeles-based Arden Realty and other office REITs, “Even though Main Street pays more for properties by and large than Wall Street pays, the demand for office properties might give a Main Street-type valuation to Douglas Emmett.”

The Emmett IPO says that the company’s office portfolio consists of 46 properties totaling 11.6 million sf, with an occupancy rate of 92.1%, while its multifamily portfolio consists of 2,868 units and is 99.3% leased. The company lists $2.75 billion in debt.

Besides owning and operating some of the most desirable office and apartment assets in Los Angeles, Emmett has a growing presence in Honolulu as a result of what the company describes as “a consistent and focused strategy of identifying submarkets that are supply constrained, have high barriers to entry and exhibit strong economic characteristics such as population and job growth and a diverse economic base.” Among its local holdings are the 100 Wilshire Blvd. office building in Santa Monica, the Trillium office project in Woodland Hills and the Sherman Oaks Galleria in Sherman Oaks.

G REIT Sells $27M Asset to Jamison

G REIT Sells $27M Asset to Jamison
 

LOS ANGELES-Santa Ana-based G REIT has sold the 136,000-sf Brunswig Square office building in the Little Tokyo district of Downtown for $26.9 million to Jamison Properties, the ever-growing private investment firm that is one of the largest owners of office buildings in Southern California. The sale is the latest in a series of dispositions by G REIT, which is managed by Santa Ana-based Triple Net Properties, a sponsor of tenant-in-common deals and other types of commercial real estate investments.
G REIT acquired the eight-story Brunswig Square building at 360 E. Second St. for $23.8 million in April 2004. The building, which includes ground floor retail space, was 94% occupied at the time of the sale.Built in 1931 and designed by A.C. Martin, the Brunswig Square building was renovated extensively in 1985 and 1986 with the addition of three new floors, the east and west ground-level retail wings and a parking deck.    Information By Bob Howard of GlobeSt.com     
 

Fifteen Commercial Properties Win The Office Building of the Year (TOBY) Awards

Fifteen Commercial Properties Win The Office Building of the Year (TOBY) Awards 
BOMA International Honors Distinguished Properties
 

The commercial real estate industry honored 15 commercial properties with The Office Building of the Year (TOBY) and Earth Awards at the Building Owners and Managers Association (BOMA) International’s annual North American Commercial Real Estate Congress® and The Office Building Show held recently in Dallas, Texas.
 

The TOBY and Earth Award winners were recognized for excellence in office building management and operations in specific categories of building size or type. To win the international award, the office buildings first won both local and regional competitions. Judging was based on community impact, tenant/employee relations programs, energy management systems, accessibility for disabled people, emergency evacuation procedures, building personnel training programs and overall quality indicators. A team of expert industry professionals also conducted a comprehensive building inspection.
 

The winners of the 2006 TOBY and Earth Awards in the 14 categories:
 

In the Renovated Building category, the winner is 500 Jefferson, Houston Texas, submitted by Darrel Holub. The property is managed and owned by Trizec Properties.
In the Historical Building category, the winner is LaSalle Bank Building, Chicago, Illiniois, submitted by Julie A. Nowak. The property management company is Jones Lang LaSalle Americas (Illinois), and the owner is LaSalle Bank.
In the Corporate Facility category, the winner is American Express Desert Ridge, Phoenix, Arizona, submitted by Barbara Wodrich, RPA, FMA. The property management company is Trammell Crow Company, and the owner is American Express.
In the Medical Office Building category, the winner is 1101 Madison Tower, Seattle, Washington, submitted by Lori Granberg. The property management company is Trammell Crow Company, and the owner is Health Care Property Investors, Inc.
In the Government Building category, the winner is United States Courthouse, Fort Myers, Florida, submitted by Lacey Willard, RPA. The property management company is the United States General Services Administration, and the owner is the United States Government.
In the Suburban Office Park Low-Rise category, the winner is Cumberland Metro Office Park, Chicago, Illinois, submitted by Marie T. Croce. The property management company is CB Richard Ellis, Inc. and the owner is State of Hawaii Employee Retirement System.
In the Suburban Office Park Mid-Rise category, the winner is Corporate Centre of Cool Springs, Franklin, Tennessee, submitted by Crystal Waller. The property management company is Crescent Resources, a subsidiary of Duke Energy, and the owner is Corporate Centre Acquisition Company.
In the Industrial Office Park category, the winner is Crystal Park Industrial Complex, Round Rock, Texas, submitted by Don Roberts. The property management company is Opus West Management Corporation, and the owner is Opus Real Estate Texas, VI, LP.
In the buildings Under 100,000 Square Foot category, the winner is 31 Inverness Center, Birmingham, Alabama, submitted by Betty A. Swann, RPA. The property management company is Cousins Properties Services, and the owner is Teachers Insurance and Annuity Association.
In the 100,000 to 249,999 Square Foot category, the winner is the Grand Avenue Courtyard, El Segundo, California, submitted by Christine Oritz. The property management company is Lowe Enterprise Real Estate Group, and the owner is Commonwealth Grand Avenue Corporation.
In the 250,000 to 499,999 Square Foot category, the winner is Hazard Center Office Tower, San Diego, California, submitted by Lisa M. Gualco, RPA, FMA. The building is managed by PM Realty Group, and owner is 7510 Hazard, LLC.
In the 250,000 to 499,999 Square Foot category, a Distinguished Entry Award goes to Tower 42, London, United Kingdom, submitted by Peter Merrett. The building is managed by Greycoat Estates and Atisreal, and owner is Tower Limited Partnership, a consortium comprising Merrill Lynch Investment Managers and Hermes Real Estate Limited.
In the 500,000 to One Million Square Foot category, the winner is One BriarLake Plaza, Houston, Texas, submitted by Lizabeth Green. The building is managed by Crescent Property Services, and owner is Crescent One BriarLake Plaza, LP.
In the Over One Million Square Foot category, the winner is Marathon Oil Tower, Houston, Texas, submitted by Mark R. Nicholson. The building is managed by Cushman & Wakefield, and owner is Tower Associates.
The Earth Award winner is Denver Place, Denver, Colorado, submitted by Lori Carter, RPA. The building is managed by Amerimar Realty Management Comapny, and owner is Denver Place Associates, LP
 

The TOBY and Earth Awards program is sponsored by
Securitas Security Services USA.
www.securitasinc.com