08/27/08

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National Market Report

Atlanta
Commercial real estate leasing in Atlanta will slow somewhat due to a lagging economy but is expected to remain relatively stable in 2008, according to a Grubb & Ellis forecast. The firm said that although the city will not be among the top markets for office leasing, industrial leasing could be healthy on the strength of increased demand for storage space. The retail leasing market is also looking up, due to demand for amenities like fitness centers and sports facilities, the Atlanta Journal-Constitution reported.

Metro Atlanta foreclosure notices went up 45 percent last month from the same period a year ago, according to Equity Depot, an Atlanta real estate data firm. The number of foreclosures has been rising steadily, with filings in 2007 up 29 percent from the previous year, the Atlanta Journal-Constitution reported. The numbers may also be higher this year due to leftover filings not submitted during the holidays and an extra week of preparation time in the reporting schedule.

Boston
The slowing Boston commercial real estate market received a boost to close out 2007, with the $477 million buyout of the Financial District office towers at 53 and 75 State Street, the Boston Globe reported. Brookfield Asset Management Inc. purchased a 49 percent stake held by partner RREEF Real Estate to claim sole ownership of the properties. The buildings went for $525 a square foot, about 10 to 15 percent lower than peak Boston prices, according to the Globe.

Foreclosure petitions in Essex County increased by 75 percent from January through October 2007, a sign that the local real estate market may be buckling under the weight of the nation's troubled mortgage industry, the Boston Globe reported. According to the Warren Group, a Boston publisher of real estate data that reported the increase, filings in Essex County outpaced other areas of Massachusetts, which saw an increase of 63 percent in foreclosure petitions from January to October 2006.

Chicago
Chicago's suburban office vacancy rate held steady in last year's fourth quarter at 15 percent, compared to 14.9 percent in the third quarter. But a shaky national employment report in January and the looming threat of a recession could hurt demand for space, Crain's Chicago Business reported. The U.S. unemployment rate hit 5 percent in December, according to the Labor Department. Foresite Realty Partners CEO Donald Shapiro expects the vacancy rate in the suburbs to rise to 17 percent by year's end.

Las Vegas
Demand for expensive high-rise condos in Las Vegas is increasing, causing developers and architects to flee the faltering Chicago real estate market to build there, the Chicago Tribune reported. On the Vegas Strip, $15 billion in construction is underway, more than anywhere else in the world except Dubai and China. Condo prices at MGM Mirage's new CityCenter, slated for a late 2009 opening, range from $500,000 to $12 million.

Las Vegas' office vacancy rate went up to 12.4 percent at the end of last year from 11.5 percent in mid-year 2007, according to Las Vegas brokerage firm Commerce CRG. That number excludes more than 1 million square feet of sublease space, or empty space that is under lease contract; this brings the vacancy rate up to 14.5 percent, the firm said. To counter the slowdown, landlords are offering deals such as six months' free rent or asking prices of 99 cents per square foot for the same period, the Las Vegas Review-Journal reported.

Los Angeles
The number of homes sold in Southern California fell 45 percent from a year earlier, and the median sales price for houses and condominiums is down 16 percent from last year's peak, according to DataQuick Information Systems. This could be a sign that the housing slump will continue well into 2008 and possibly into late 2009, the Los Angeles Times reported.

Los Angeles consulting firm Beacon Economics has forecasted a 30 percent decline in Southern California home values from peak prices seen in recent years. Prices are expected to drop in 2008 and remain static between 2009 and 2011, the Los Angeles Times reported. The median price for homes in Los Angeles County dropped 11.5 percent between August and November of 2007.

Philadelphia
The supply of Center City hotel rooms could grow by more than 20 percent due to a building boom triggered by the expansion of the Convention Center, the Philadelphia Inquirer reported. The Philadelphia hotel market is coming off two of its best years in a decade, with daily room rates reaching a record $169 a day in 2007, according to PKF Consulting. Center City hotels had an occupancy rate of more than 74 percent last year.

Phoenix
Home prices for metropolitan Phoenix dropped 11 percent in December from the beginning of 2007 and could drop more, the Arizona Republic reported. The decrease could be a drop-off from the housing boom of spring 2005, when home prices were inflated by 20 to 30 percent. Vacancies in offices and apartments are expected to rise this year, while sales prices drop, said Stanley Paul Cook, a real estate market watcher with Landiscor Aerial Information.

San Francisco
San Francisco's African-American community is being priced out of the city, as a wave of new condo developments drives home prices up, the San Francisco Chronicle reported. African-Americans in historical Bayview-Hunters Point, which is currently undergoing redevelopment, made up 65 percent of the population in 1990 but were no longer the majority by 2000. The median price of a single-family home there increased to $570,000 today from $129,000 in 1996. The city's black population dropped from 96,000, or 13 percent of San Francisco's population, in 1970 to 51,000, or 7 percent, in 2006.

Seattle
Commercial lease rates in Maple Valley, a city of about 20,000, are getting to be as high as rates in neighboring Seattle, the Seattle Times reported. Due to a shortage of city land for stores and businesses, prices today are up to $27 a square foot, compared to Seattle's $31. The lofty prices are causing small businesses to suffer while the city works to find a solution. Commercial rents in South King County, where Maple Valley is located, increased by more than $1 a square foot in the past year and 17.7 percent since 2005, according to CB Richard Ellis.

A building boom in downtown Bellevue is causing residents to suffer from construction noise and traffic. Currently, there are 15 construction projects underway, with about 1.8 million square feet of office space, 375,000 square feet of retail and 3,200 residential units in the works. The current projects are expected to be completed by next year, but 19 more projects are under review.
 
Washington, D.C.
For the first time, every local county in the Washington region saw home prices decrease for much of last year due to an increase in foreclosed properties on the market for sale, the Washington Post reported. According to the Case-Shiller Home Price Index, single-family home prices fell 7.7 percent in the third quarter of 2007 from the same period in 2006. The decline is among the area's steepest since a 5 percent drop between the first quarters of 1990 and 1991.

Renters in the Washington area have a greater selection to choose from and can now take advantage of lower prices, the Washington Post reported. The area's apartment supply grew by 10,000 new rental units last year. More homeowners are also opting to rent their homes rather than sell them in a slumping real estate market. Rent hikes are at a five-year low, and even more rental units have been made available due to mass conversion of condominiums into apartments. Landlords are also offering concessions like free rent and discounts to attract renters.