Southern California Industrial Real Estate Blog

CALIFORNIA BUSINESSES GET WAREHOUSING + DISTRIBUTION IN PHOENIX

Out of state investors are finding the Phoenix, AZ, industrial market encompassing Arizona’s a sexy place to buy. The Phoenix metropolitan area saw $870.8 million of industrial investment from November through April, far out-pacing such powerhouse markets as Dallas, Houston and Atlanta and only $70 million short of matching Chicago, the nation’s largest market, reports Real Capital Analytics.

Analysts point to two primary sources for interest in the market. First, the Census Bureau’s most recent figures rank Phoenix as the third fastest growing major metropolitan area in the country, adding more than 130,000 people in the last 12 months. Second, proximity to Southern California makes the region an attractive alternative to the coastal state’s increasingly congested and expensive markets.

Jay Ellingson, executive vice president of SunCor Development Co., calls Southern California proximity the major impetus for the Tempe, AZ company’s development of Palm Valley 303, a 1,600-acre, 19.6 million-sf business park in the Phoenix suburb of Goodyear. The project launched in April with the construction start of a 440,000-sf, speculative cross-dock distribution facility. “Tenants will be able to bring containers direct from the ports of Long Beach and Los Angeles for break-down, assembly and distribution,” he explains. “Even though there are added transportation costs, rents are significantly lower than the Inland Empire.”

Read all the details @

http://www.globest.com/news/1164_1164/insider/171120-1.html

COMMERCIAL REAL ESTATE CONDITIONS VARIED FROM AREA TO AREA

COMMERCIAL REAL ESTATE CONDITIONS VARIED FROM AREA TO AREA

INDUSTRIALS EVEN WEAKENED IN L.A.

Commercial real estate conditions are uneven across the country and vary notably in some areas, according to a commercial real estate update and forecast presented here at the National Association of REALTORS® Midyear Legislative Meetings & Trade Expo.

During the first three quarters of 2007, commercial real estate investment was in excess of $100 billion per quarter. In the first quarter of 2008 it slowed to the range of $35 billion to 38 billion.

In analyzing NAR’s Commercial Leading Indicator for Brokerage Activity, NAR Chief Economist Lawrence Yun said to expect broadly slower net absorption for industrial space.

“I see a topping off in commercial building construction, and a decline in private non-residential construction spending. We project generally softer rent growth in commercial real estate, and modestly lower business opportunities in most market areas for commercial practitioners. As in the residential sector, areas with strong job growth are doing fairly well.”

Overall job gains are slowing, but retail employment has been weak since the beginning of this year, construction jobs have been trending down since the beginning of last year, and manufacturing jobs have been trending down since the start of the decade, Yun noted. “On the other hand, professional business service jobs have been rising since the middle of 2003, and that supports demand in the office market. Wholesale trade jobs have trended up since the middle of 2004, reflecting stronger international trade conditions.”

Job growth has been strongest in Colorado, Louisiana, Texas, Washington, Wyoming and Utah.

Job losses are reported to be greatest in Arizona, California, Florida, Michigan, Nevada, and Ohio.

This is a different outlook than even two months ago. At the end of the first quarter, when Yun observed, “We’re seeing no significant changes in vacancy rates or rent growth, so the fundamentals in commercial real estate still seem to be respectable. Under normal circumstances, near-full occupancy coupled with positive rent growth would be of strong interest to investors, but we’re not seeing that. The credit crunch has filtered into the commercial real estate market.”

It was noted that Industrial activity remains strong in port and distribution hubs, with relative weakness around many manufacturing centers. International trade continues to play a pivotal role in industrial real estate, and it was predicted that as one of the areas with the lowest industrial vacancy rates, Los Angeles was expected to remain a landlord’s market for the next four to five years.  (http://www.socalindustrialrealestateblog.com/?p=255)

 “Commercial fundamentals are good, but investment has been hurt by the credit crunch,” he noted, reiterated heavily reported information that “investment in the commercial sectors decelerated in the first quarter after setting a record in 2007.”

Much of it due to the spidering of the subprime loan fallout, and election year hesitation. Even with concerns about inflation and consumer confidence, and weakness of the dollar, corporate profits have been near record highs. Exports are growing faster than imports, and business spending on equipment and software has trended up strongly since the beginning of 2003.

“Altogether, I don’t expect a recession, but rather a period of slow economic growth that should improve in the second half of this year,” Yun said.

Here is NAR’s forecast for the Industrial Real Estate Market

Industrial Market

Net absorption of industrial space in 58 markets tracked is estimated to edge down from 35.4 million square feet in the second quarter of last year to 33.3 million in the second quarter of 2008.

Industrial vacancy rates nationally will probably rise to 9.6 percent in the fourth quarter from 9.4 percent in the same period in 2007. Annual rent growth should be 3.3 percent by the end of 2008, compared with 3.6 percent in the fourth quarter of last year.

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http://www.realtor.org/press_room/news_releases/2008/mixed_commercial_real_estate?&WT.mc_t=LS052108&WT.mc_n=Comm

CONGRESS WANTS COMMERCIAL BUILDINGS TO GO GREEN

Green Future for Commercial Buildings

Today’s interesting statistic… buildings account for 29 percent of all carbon dioxide emissions, according to Andy Ehrlich, senior vice president of B&D Consulting, a national advisory and advocacy firm.

Ehrlich spoke He spoke to commercial practitioners at the Commercial Legislative and Regulatory Subcommittee at the National Association of Realtors’ Midyear Meetings.

FYI - Congress has created an agency in the U.S. Department of Energy to evaluate ways in which commercial buildings could reduce emissions and save energy. A proposed bill (S. 2191) follows up green building themes set by cities like New York, Los Angeles and San Francisco, requiring commercial buildings to reduce energy use by 30 percent beyond the standard currently espoused by American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE).

After 2019, standards would get even tighter.

The bill also offers incentives to states to update their building and energy efficiency codes.

The goal of the legislation, according to Ehrlich, is to reduce greenhouse gas emissions by approximately two-thirds by 2050.

“Most scientists estimate that this level of reduction would be sufficient to prevent significant climate change,” observed Ehrlich.

Necessity is preceding regulation. Rising fuel prices and growing tenant demand are pushing the demand for green buildings in the U.S. Currently, green buildings account for about 2%  t of new commercial construction; it’s estimated that by 2010, that percentage will increase to 10% percent of new construction.

“There’s no perfect bullet to reducing green house gases; we’re all going to have to take part, including the owners and managers of commercial real estate,” he concluded.

http://www.realtor.org/RMODaily.nsf/pages/News2008051506?OpenDocument

Q1 REPORTS SHOW INDUSTRIAL PROPERTIES LIMPING ALONG

Q1 REPORTS SHOW INDUSTRIAL PROPERTIES LIMPING ALONG

 Q1 reports from national brokerages show a US industrial market struggling to maintain equilibrium in the face of economic contraction, pointing to declining absorption levels, rising vacancies and stagnant rents as signs of a market in retreat.

The upside is that they predict improved conditions later in the year thanks to diminishing construction.

According to the report from Cushman & Wakefield, overall absorption has plummeted to the lowest quarterly rate in nearly five years. The 1Q 918,422-sf total represents a mere 4.6% of the past four years’ first quarter average. Leasing and user sales fell 15.3% and 19.6%, respectively, and many large spaces are available due to credit crunch-related consolidation.

Ten markets, including the Inland Empire and Silicon Valley, recorded more than a one million-sf decline in leasing demand compared to a year ago, and only six markets posted more leasing growth than last year.

 “The inability of consumers to maintain prior levels of spending has lessened the demand for imports. Demand for warehouse space in many of the larger markets is consequently suffering,” observes Laura Stone Mortimer, senior economist with Torto Wheaton Research.

The Marcus & Millichap report optimistically notes that while consumer demand is falling, rising exports should cushion the impact.

Cushman forecasts market fundamentals will improve as the year progresses.

Marcus & Millichap predicts asking rents will increase 2.5% and effective rents will advance 2% this year, compared to 3.5% and 3.3%, respectively, in ‘07.

More info @ http://www.globest.com/news/1154_1154/insider/170690-1.html?type=pf

BRAVO TO WARREN BUFFETT

Kudos to the richest man in the world, and noted philanthropist Warren Buffett. Berkshire Hathaway, company chaired by Warren Buffett, has bought portfolios of subprime mortgages and frozen their rates.

Buffett, who spoke at Berkshire Hathaway’s annual meeting, said Clayton Homes, a unit of Berkshire that makes and provides financing on manufactured homes, purchased the subprime mortgages. Clayton sent letters to all the borrowers involved telling them the interest rates wouldn’t reset higher.

“We’re not in the business of resetting mortgages higher,” Buffett said.

Warren Edward Buffett (born August 30, 1930, in Omaha, Nebraska) is an American investor, businessman and philanthropist. He is regarded as one of the world’s greatest stock market investors, and is the largest shareholder and CEO of the insurance and investment Berkshire Hathaway.

 With an estimated net worth of around US$62 billion, he was ranked by Forbes as the richest person in the world as of February 11, 2008.

Often called the “Oracle of Omaha,” Buffett is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth.

He lives in the same house in the central Dundee neighborhood of Omaha that he bought in 1958 for $31,500, today valued at around $700,000.

In 2006, he announced a plan to give away his fortune to charity, with 83% of it going to the Bill & Melinda Gates Foundation. In 2007, he was listed among Time’s 100 Most Influential People in The World.

Source: Dow Jones Business News, Alistair Barr (05/04/2008)

http://en.wikipedia.org/wiki/Warren_Buffett

Top 5 Actions to Green Your Business

Top 5 Actions to Green Your Business
by Susy Borlido Holyhead
Account Director, BGP

As Business Greening Program Director, I always get asked the question “What are the top five actions I can do to green my business?” Well, my advice is to always go for the lowest hanging fruit that will give you the biggest ‘bang for buck’ in terms of cost and/or resource saving. So, from my six years of experience doing my job, here are my top five:

Create a company wide Environmental Policy that includes the following (include this document in your Company Handbook and have employees initial after reading):

1. TURN IT OFF. Use Natural Daylight via windows/skylights when available. Turn off equipment, lights, appliances etc. when not in use. Set lights on timers to turn ‘ON/ OFF’ via business hours or implement an ‘opening and closing’ policy company-wide.
2. Implement a company wide environmentally-friendly purchasing policy that ranges from office products to janitorial supplies. Ensure that all paper products are chlorine-free and contain 30-100% post-consumer content recycled materials.
3. Use green, less toxic cleaning chemicals. A great resource for this is www.greenseal.org. They list cleaning chemicals that are green certified by a 3rd party non-profit group. You can find effective green cleaning chemicals.
4. REDUCE, REUSE, RECYCLE. Stocking employee kitchens with reusable dishes, mugs and silverware can save thousands of dollars a year! When you compare the costs of continuously having to stock disposables - and then hauling the trash away - to purchasing one set of reusables, the answer is obvious. Purchase condiments like sugar and cream in bulk. You can divert over 80% of trash by composting your food waste and recycling cans, plastic, glass, mixed paper. Hauling recyclables costs less than hauling trash.

Dispose of electronic and hazardous waste properly. It’s a California state law that these items must not end up in the trash. Electronic waste includes unwanted computer equipment, cell phones and anything with a plug. Hazardous waste includes batteries, fluorescent lights and paints. Contact your local City Waste Division for more details and for disposal procedures - for Los Angeles area, you can drop off electronic items for free at www.californiarecycles.com

OFFICE BUILDING TITAN GOSSIP UPDATE

Robert Maguire III, developer of many of the skyscrapers in downtown Los Angeles, has abandoned his last-ditch effort to buy the company that he founded and has been forced out as chief executive and chairman, according to people familiar with the matter.

The board of Maguire Properties Inc., under pressure from hedge-fund investors, voted Saturday to replace Mr. Maguire as CEO with Nelson Rising, a former Maguire executive who later ran another real-estate company, Catellus Development Corp., people said.

Read it all @

http://online.wsj.com/article/SB121096909950099407.html?mod=CommercialRealEstateMain_1

The~~ first article…

OFFICE BUILDING TITAN GOSSIP

We were reading the commerical real estate articles in the Wall St. Journal when we came across this interesting tidbit:

“Robert Maguire III, who built much of the Los Angeles downtown skyline, including the 72-story U.S. Bank Tower, is in danger of losing control of Maguire Properties, which he serves as chairman. A number of hedge funds have taken a sizable position in the real estate investment trust and have been threatening to put a new slate of officers up for election if the company is not sold or if the board does not take dramatic steps to forge a turnaround.”

read the whole article @

http://online.wsj.com/article/SB120959154985857475.html?mod=CommercialRealEstateMain_1