Southern California Office Real Estate Blog

State of the Commercial Loan Market

April 23, 2010 on 12:09 am | In Funny...Money, Loans, Uncategorized, all, lenders | 6 Comments

By Robert Schroell

The rough ride isn’t over the for the commercial loan market.

Community banks in particular will likely have a tough time in 2010. Hundreds of regional institutions have a significant chunk of their loan portfolios ― up to and exceeding a quarter in some places ― in commercial mortgages.

At the same time, commercial debt is coming due at a staggering rate. The market will need about $1 trillion to service more than $3 trillion in commercial mortgage debt, according to a recent forecast by Keefe, Bruyette & Woods, a well-known New York analyst.

That’s likely to make cash a disappearing commodity, primarily for the banking industry. In fact, experts at Keefe, Bruyette & Woods are urging banks to consider offering extensions to cash-strapped homeowners, many of whom have struggled to refinance their existing mortgages.

A significant slew of delinquencies in CMBS (commercial mortgage-backed securities) and bank loans is also expected to shape the course of 2010. It’s also almost difficult to imagine CMBS delinquencies getting any worse ― the rate skyrocketed an astounding 500 percent last year, jumping past 6 percent in December 2009 for the first time ever.

The governor of the Federal Reserve Board recently tried to rally optimism, noting that recovery should begin to take root as the year progresses. But those rosy projections didn’t include the commercial real estate market, which continues to flounder amid strained credit conditions and stagnant refinancing.

All in all, it’s a less than inspiring picture of what’s likely on the horizon.

“We estimate that the weighted average price decline for the commercial mortgage market is roughly 25%,” the experts at KBW state in their analysis. “This suggests that almost all the equity in the commercial sector has been wiped out.”

Fortunately… there’s pretty much no place else to go but up.

http://www.mortgageloanplace.com/commercial-mortgage.html

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http://www.acumenlawgroup.com/wp-content/uploads/2009/11/commercial-loan.jpg

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http://www.sbasmallbusinessloans.com/moneywalk.jpg

20% OF CITIES HAVE PASSED GREEN POLICIES

April 15, 2010 on 12:14 am | In Fascinating Information, Green, Solutions, Trends, Uncategorized, all | 3 Comments

20% OF CITIES HAVE PASSED GREEN POLICIES

Edited by Jodi Summers

Here’s a note of real estate optimism in dismal economic times - according to a recent survey by the American Institute of Architects (AIA), more than one in five U.S. cities with populations greater than 50,000 report having a policy to promote green buildings.

The AIA report, titled Green Building Policy in a Changing Economic Environment, is an inventory of legislation intended to help policymakers advance a more sustainable legislative agenda for growth and development.

The report contains detailed case studies of the green building programs in Los Angeles, Philadelphia, Boston, Nashville, and Grand Rapids, Mich.

“It is encouraging that cities are recognizing the economic benefits of energy-efficient buildings, and equally encouraging that the number of programs across the country are increasing despite such difficult economic conditions,” said AIA Executive Vice President / CEO, Christine McEntee. “Our ultimate goal is to achieve carbon neutrality in buildings by 2030 and that all design projects will be sustainable as a matter of course.”

Highlights from the report:

* 138 cities have green building programs, compared with 92 cities in 2007 – an increase of 50 percent

* 24 of the 25 most populated metropolitan regions in the United States are built around cities with a green building policy

* The Western region has the most green building programs with 56 cities in just six states

* The Mountain region is second in the percentage of cities with green building programs, with 24 percent of residents living in those cities

* The Eastern region has seen a 75 percent rise in green building programs since 2007

* The central region has 21 cities with green building programs

The report goes on to make recommendations McEntee added, “The American Recovery and Reinvestment Act is helping to move sustainability efforts forward, with programs such as the Energy Efficient and Conservation Block Grant that are providing an unprecedented opportunity for the advancement of green building efforts nationwide. The inclusion of strong green building provisions in energy and climate legislation before Congress shows that our message about the importance of sustainable design is getting through.”

There are also a series of recommendations for steps a municipality could take to green their city. The AIA initially conducted this survey in 2007 for a Local Leaders in Sustainability report that has just been updated. It accounts for more than 53 million people.

http://www.aia.org/walkthewalk

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http://www.aia.org/press/AIAB081674

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http://www.archicentral.com/wp-content/images/lakeside.jpg

THE GREENEST BUILDING IS THE ONE THAT’S ALREADY BUILT

April 10, 2010 on 12:02 am | In Bravo, Fascinating Information, Green, Historic Properties, PROPERTY MAINTENANCE, Recycling, Solutions, Statistics, Trends, Uncategorized, all, websites | 2 Comments

By Jodi Summers

We love this website http://www.thegreenestbuilding.org/. The Greenest Building website is based on the premise of “the Greenest Building is the One Already Built,” and they have the calculators to support that claim.

The goal is to get developers to rehab existing buildings as opposed to tearing them down and building new structures.

For example, the embodied energy calculator will figure out the total energy spent in the production of a building, from the manufacture of materials to their delivery to construction.

The demolition energy calculator is to calculate the amount of energy “needed to raze, load, and haul away construction materials.”

Convert energy to gasoline, figure out BTU usage…http://www.thegreenestbuilding.org/ is fascinating.

LOS ANGELES OFFICE REAL ESTATE SNAPSHOT – APRIL 2010

April 2, 2010 on 12:17 am | In Fascinating Office Real Estate Information, Lease Rates, Office Fodder, Trends, Uncategorized, World, all | 3 Comments

By Jodi Summers

It’s no secret that office space in Los Angeles has taken a huge hit. Take comfort in knowing we are not alone. Vacancy rates rose as demand fell, and rents followed. Globally office market rents decreased by 10%, the last time prices fell all around the world was 2003. What made this office downtown unique, according to a recent report Cushman & Wakefield, was that. “no market escaped and rents were down in every region; a trend not previously seen.”

Globally, Asia Pacific recorded the steepest decline year on year, with rents falling on average by 16%. Singapore, Hong Kong and Tokyo recorded falls of 45%, 35%

and 21% respectively, but they weren’t the worst locations. Ho Chi Minh City saw the largest compression in rents with a fall of 53%.

In terms of rental performance the America saw rents decline by 7% during 2009. South America saw rental levels move down by 5%, while in North America they fell further, by 8%. Midtown Manhattan remained the most expensive office location in the Americas region during 2009, but rents dropped 4% over the year. Thanks to rising exchange rates, the Brazilian cities of Rio de Janeiro and Sao Paulo became the second and third most expensive locations in the Americas, surpassing the cities previously in second and third place Boston and New York (Downtown).

Los Angeles did not fare nearly as well year as occupier demand slowed and vacancy levels increased. We saw lease rates drop 16%, averaging $51.68 per square foot annually. Our economic recovery is so fresh; rents will still remain low for the first half of this year, but should start to improve in the third quarter.

Overall, North American rental performance was more uniform with Canada, US and Mexico easing down by between 2% and 14% in 2009.

On a more optimistic note, South America and the Middle East & Africa showed the best performance in terms of rents, recording rental falls of 5% respectively. Argentina was the only South American country to record double digit falls.

The great irony comes in South Africa, which actually saw rising lease rates. South Africa supported regional performance in the Middle East & Africa.

Western Europe recorded an annual decline of 11%, but was peppered by more series declines in some major areas. Madrid, Central London, Dublin and Oslo recorded rental declines in excess of 20%, as these markets were particularly hard hit from the fallout of the financial crisis. Office rents in Central & Eastern Europe did not hold up nearly as well, with many cities recording rental declines of more than 20% - Kyiv and Moscow were the hardest hit. Kyiv fell a whopping 52% while Moscow lease rates dropped 33%.

The top three most expensive locations remained constant, Tokyo was ranked number one in the world, while London West End moved into second place. Hong Kong fell

from first to third position.

And now, good news – most global economies are expected to see positive GDP growth in 2010. Globally, rents are anticipated to reach their low point by midyear. Tenants will still retain the upper hand as vacancy rates remain high and demand remains low.

Of course, the recovery will vary from region to region and from city to city. Expect stabilization in the final quarter.