LWR Commercial Real Estate
Archive for November, 2008
Commercial Development’s Impact on Sarasota
Nov 25th
Commercial Real Estate Development Contributes Significantly to Nation’s Economy
Study: Office, industrial and retail development annually contributes $549 billion to GDP
No where is this more clear than in the Sarasota, Bradenton market, where the development engine was cranking in overtime. As county officials raced to raise impact fees to capitalize their pet projects, smart developers saw the writing on the wall as absorption slowed. The small office condos that were doing so well were now going vacant and the flex space housing so many local Sarasota tradesmen in the commercial real estate market went dark. Lakewood Ranch saw a late commercial bloom as several projects pulled the trigger to get under the impact fee hike.
Unfortunately, what we have now is a glut, with no credit market enabling local Sarasota, Bradenton small businesses to snap up these deals.
November 24, 2008
Washington, D.C. — In today’s unstable economy – with frozen credit and capital markets and policymakers poised to act on key issues – understanding the significant economic contributions made by the commercial real estate development industry is more valuable than ever.
The NAIOP Research Foundation has issued a report that details the tremendous impact commercial real estate development has on the nation’s economy, citing construction-related spending reaching $549 billion and adding 839 million square feet of existing building space in 2007, the latest comprehensive data available.
“The magnitude of commercial construction’s economic impact is tremendous. This report reconfirms that a healthy real estate economy is vital to a prosperous U.S. economy,” said Thomas J. Bisacquino, NAIOP president. “Commercial real estate development has an immense ripple effect in the economy, providing wages and jobs that quickly roll over into increased consumer spending.”
How Commercial Building Construction Contributes
The data and analysis are detailed in “The Contribution of Office, Industrial and Retail Development and Construction to the U.S. Economy – 2008 Edition,” a report authored by Dr. Stephen S. Fuller, director of the Center for Regional Analysis at George Mason University, and funded by the NAIOP Research Foundation.
Three phases of development contribute to commercial real estate’s ongoing sustainability:
- Hard costs (actual construction costs)
- Soft costs (architecture, engineering, marketing, legal, management), site development and tenant improvements
- Building operations (maintenance, repair, custodial services, utilities and management)
Combined, the three phases of development represent commercial real estate development’s enduring financial strength and compounded economic impact. The breakdown:
- $283.7 billion was spent on the hard costs, or actual construction outlays
- Another $265 billion was spent on soft costs, site development and tenant improvements
- Ongoing maintenance and operating costs added an additional $5.1 billion to the GDP
The commercial real estate development industry is also one of the leading employers in the United States, supporting 4.89 million full-time equivalent jobs in 2007, and generating personal earnings of $170.1 billion.Overall, total construction spending (commercial and residential) totaled $1.16 trillion – approximately 8.5 percent of the nation’s Gross Domestic Product (GDP; $13.8 trillion in 2007). Of the $1.16 trillion, non-residential building construction (office, industrial, warehouse and retail) accounted for $400.6 billion, or 34 percent of all construction spending.
Economic Engine for Nation, States
Construction impact of adding 839 million square feet – enough space to house 2 million jobs* – will continue to provide economic benefits to the development’s host state after construction is complete. The ongoing outlays for building operations of office, industrial, warehouse and retail space built in 2007 are estimated at $2.4 billion annually. This direct spending – which recurs annually and accumulates as new space is added to the market – adds $5.1 billion to the GDP, supports 56,887 new jobs and generates $1.6 billion in new personal earnings.
The report also identifies the Top 10 states by construction value in four categories (office, industrial, warehouse and retail), and by the number of jobs and increase in personal income tied to that construction. South Carolina leads in industrial construction; Texas leads in office and warehouse; and Florida in retail. Overall, for total commercial construction, Texas ranks first, Florida second and California third, followed by New York, South Carolina, Georgia, Illinois, Arizona, North Carolina and Indiana.
This report enables the commercial real estate industry to quantify the numbers that demonstrate its considerable and sustained contribution to the U.S. economy. With this data, NAIOP hopes to educate the public and state and local governments on the ways that commercial development makes a positive and lasting contribution to their communities, including:
- Supporting the creation of jobs;
- Generating personal earnings, and;
- Promoting new spending activity across the breadth of the economy.
The report was produced using data provided by the Bureau of Economic Analysis, U.S. Department of Commerce, U.S. Census Bureau, McGraw Hill Construction and a NAIOP member survey. The NAIOP Research Foundation published a 2006 Edition last year.To access a copy of the report, please contact Kathryn Hamilton, NAIOP vice president for marketing and communications, at (703) 904-7100 orhamilton@naiop.org.
Commercial Real Estate Index Shows Slowing Activity Expected
Nov 25th
WASHINGTON, November 20, 2008
See Source
The economic downturn will slow commercial real estate markets into 2009 according to a forward-looking index for the commercial real estate sectors published by the National Association of Realtors®.
Lawrence Yun, NAR chief economist, said all components of the Commercial Leading Indicator for Brokerage Activity1 were down, with the exception of personal income. “Aside from weakening conditions in the index variables, the commercial mortgage-backed securities market is all but frozen, making it very difficult to rollover existing debt that is coming due,” he said. “It is encouraging to hear the Treasury Department is considering using the Troubled Asset Relief Program to help revive the commercial real estate debt market, but time is of the essence, and it must be implemented immediately.”
The CLI slowed 1.7 percent to an index of 116.5 in the third quarter from an upwardly revised reading of 118.5 in the second quarter, and is 3.1 percent lower than a level of 120.3 in the third quarter of 2007, which was the second highest index on record. NAR’s track of the commercial leading indicator dates back to 1990.
The decline in the index means commercial real estate activity, as measured by net absorption and the completion of new commercial buildings, is projected to weaken over the next six to nine months.
The Society of Industrial and Office Realtors®, in its SIOR Commercial Real Estate Index, a separate attitudinal survey of approximately 600 local market experts,2 also expects a lower level of business activity in upcoming quarters. The SIOR index has declined for seven consecutive quarters and is 33.6 percentage points below the 100 point criteria that represents a balanced marketplace.
NAR’s commercial leading indicator is a tool to assess market behavior in the major commercial real estate sectors. That index incorporates 13 variables that reflect future commercial real estate activity, weighted appropriately to produce a single indicator of future market performance, and is designed to provide early signals of turning points between expansions and slowdowns in commercial real estate.
The 13 series in the index are industrial production, the NAREIT (National Association of Real Estate Investment Trust) price index, NCREIF (National Council of Real Estate Investment Fiduciaries) total return, personal income minus transfer payments, jobs in financial activities, jobs in professional business service, jobs in temporary help, jobs in retail trade, jobs in wholesale trade, initial claims for unemployment insurance, manufacturers’ durable goods shipment, wholesale merchant sales, and retail sales and food service.
More than 82,000 NAR members offer commercial services, and 60,000 of those are currently members of the Realtors® Commercial Alliance, NAR’s commercial division.
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1NAR reviewed a wide variety of indicators, examined the relationships of indicators that demonstrated a historical impact on commercial real estate, and modeled a forward-looking index based on historic trends. Although individual indicators sometimes move in opposite directions, together they offer a better indication of future market activity.
Quarterly data for 13 selected series were reviewed back through the first quarter of 1990. The modeling demonstrated a change in commercial brokerage activity that could be seen two quarters later as measured by net absorption in the industrial and office sectors, and the completion of new commercial buildings as measured by the value of building construction put-in-place of office, warehouse, retail and lodging structures. An index of 100 is defined as the level of commercial real estate market activity during the first quarter of 1990, the first period to be analyzed.
2The SIOR Commercial Real Estate Index, conducted by SIOR and analyzed by NAR Research, is a diffusion index based on market conditions as viewed by local SIOR experts. For more information, contact Richard Hollander, SIOR, at 202/449-8200.
The next commercial leading indicator index will be released in combination with the commercial real estate market report and forecast on February 19.
For more information visit; www.realtor.org
Lowe’s Acquires Future Site in Sarasota for $14M
Nov 6th
Lowe’s Cos. Inc. purchased 20 acres on Central Sarasota Parkway in Sarasota, FL, from Sarasota-based Palmer Ranch Holdings for $14.74 million, or about $736,950 per acre. Lowe’s plans to build a 124,051-square-foot home center and a 28,000-square-foot garden center. The project will be LEED certified and the expected delivery date is July 2009.
LEED Certified Project To Include 152,000-SF Retail Space
