Southern California Industrial Real Estate Blog

INVESTORS STILL STRONG ON REAL ESTATE

INVESTORS STILL STRONG ON REAL ESTATE

Statistics are always fun, and we like this set, which surveyed more than 1,000 private and institutional real estate investors and documented their findings in the 2008 Real Estate Investor Outlook, conducted jointly by National Real Estate Investor, Marcus & Millichap and Countrywide Commercial.

Among the key findings:

• Availability and cost of financing moved up to the top concern for 2008. Unforeseen shocks to the economy rank as the second-highest concern among all groups except developers;

• 43 percent of developers express concern over rising surveyed more than 1,000 private and institutional real estate investors and documented their findings in the 2008 Real Estate Investor Outlook, conducted jointly by National Real Estate Investor, Marcus & Millichap and Countrywide Commercial.

interest rates

• Investors are optimistic about rental increases, although not as much as they’ve been in the past. Seventy-eight percent of respondents expect to see an increase in effective

rents for one or more property types compared to 84 percent in 2006. Investors feel

most positive about rental increases in the apartment sector.

• Replacement cost continues to be a key criterion for investors when they make acquisitions. Almost 90 percent of investors agree that replacement value is important. Nearly two-thirds of respondents indicate their most recent acquisition was at or below replacement cost, while 12 percent of respondents say their acquisitions were above replacement costs.

• Sixty-one percent of respondents say that returns are artificially low, with 38 percent

predicting that returns will rise back to long-term averages as conditions change and 23 percent forecasting returns will rise as conditions change but will not reach long-term average levels.

DANCING PRESIDENTS TO DELIGHT U

As a holiday delight, please enjoy these disco dancing presidents courtesy of www.elfyourself.com

Click on

http://elfyourself.jibjab.com/view/9L025guZb3dngeLSREh0

and prepare yourself for some holiday cheer.

BUY INDUSTRIAL PROPERTIES WHILE THE PRICES ARE LOW CONCLUDES THE USC LUSK CENTER ECONOMICS FORECAST

BUY INDUSTRIAL PROPERTIES WHILE THE PRICES ARE LOW CONCLUDES THE USC LUSK CENTER ECONOMICS FORECAST

For the first time in years, we are experiencing a dip in the industrial marketplace, according to the latest report from the USC Lusk Center’s Casden Real Estate Economics Forecast. This quarter’s analysis projects a continued, though short slump in the Southern California industrial markets, noting that the region’s “weak industrial performance will continue…”

If you’re thinking about industrial properties, it’s a great time for buying an owner/user property or negotiating a lease agreement, as the USC Lusk Center economic forecast point to persistent high vacancy rates and weaker office demand through the end of 2009. With vacancies rising and rents declining, “The pendulum has swung from landlords to tenants for the first time since 2003 as…reduced demand is putting pressure on rents across the region,” director Delores Conway of the Casden Real Estate Economics Forecast observes. Conway says, “Credit-worthy tenants should be able to renegotiate leases to their advantage, and all-cash buyers will find well-priced properties in prime locations.”

In Los Angeles County, limited construction in recent years has tempered the rise in industrial vacancies. Rental rates are under pressure from growing industrial vacancy rates…which are still low by national standards, thanks to our proximity to two the nation’s three largest ports. “Rents should stabilize in the near term,” Conway’s forecast shows.

In Orange County, where the subprime mortgage industry collapse hit especially hard, expect industrial vacancy rates to remain at about 5% with stable rents and softening demand.

Conway cautions that any forecast for next year’s industrial markets must be tempered by the economic recession and tight commercial credit conditions. “The full depth of the financial crisis remains to be seen as companies struggle to meet their payroll while paying the rent or mortgage,” she says. “There is considerable uncertainty in the region’s economic outlook until the credit markets begin functioning normally again.”

In the Inland Empire, industrial development “will take a break with the slowing global economy,” according to the forecast, which notes that some eastern submarkets of the Inland Empire face large amounts of new supply and softening demand. The economic slowdown has caused developers to hold off on new projects so rents should stabilize around current levels.

The annual Casden Real Estate Economics Forecast analyzes economic data on rents, vacancies, transactions, and employment for office and industrial markets in Los Angeles, Orange, Riverside and San Bernardino counties.

The original story can be found @

http://www.globest.com/news/1305_1305/losangeles/175727-1.html

PRIVATE INVESTORS ARE DOING INDUSTRIAL LOANS

PRIVATE INVESTORS ARE DOING INDUSTRIAL LOANS

by Jodi Summers

Perhaps the reason foreign auto makers are surviving is because they’re getting more creative about their loans. An Orange county investor-developer has refinanced the 345,410-square-foot Nissan Motors building along the north side of the 405 Freeway, lending approximately $11.2 million -  despite the nearly frozen credit markets.

As GlobeSt.com reports, the borrower was able to secure the new financing for the 33-year-old property, a single-story industrial building that is 100% leased to Nissan Motor Corp. The silver lining is that although financing is difficult, a solid buyer and a good purchase team can still secure a number of competitive bids for the financing. The lender in this case was Minnesota Life Insurance Co. The SoCal Investment Real Estate Group can assist you in putting together a strong financing package. Please contact Jodi Summers -  jodi@jodisummers.com for more information.

http://cache.daylife.com/imageserve/08dvfOy8lz30e/610x.jpg

http://www.globest.com/news/1303_1303/orangecounty/175667-1.html

WAYS THE OBAMA ADMINISTRATION WILL BUILD A GREEN ECONOMIC SECTOR

 WAYS THE OBAMA ADMINISTRATION WILL BUILD A GREEN ECONOMIC SECTOR

by Jodi Summers

Allow us to share with you a collection of green initiatives proposed by President-elect Barack Obama. The quotes come from the President-elect’s website @

www.barackobama.com and information has yet to be offered as to how these initiatives will be implemented and funded. Nonetheless, we like to concept.

BUILDING EFFICIENCY

* Weatherize 1 million homes annually. “Obama will make a national commitment to weatherize at least one million low-income homes each year for the next decade, which can reduce energy usage across the economy and help moderate energy prices for all.”

* Set building efficiency goals. “Obama will establish a goal of making all new buildings carbon neutral, or produce zero emissions, by 2030. He’ll also establish a national goal of improving new building efficiency by 50 percent and existing building efficiency by 25 percent over the next decade to help us meet the 2030 goal.”

* Establish a grant program for early adopters. “Obama will create a competitive grant program to award those states and localities that take the first steps in implementing new building codes that prioritize energy efficiency, and provide a federal match for those states with leading-edge public benefits funds that support energy efficiency retrofits of existing buildings.”

* Expand federal efficiency grants. “Obama will also expand federal grant programs to help states and localities build more efficient public buildings, including libraries, schools, and police stations that adopt aggressive green building provisions like those provided by the Leadership in Energy and Environmental Design (LEED) program of the U.S. Green Buildings Council.”

UTILITIES AND ELECTRIC GRID

* Flip incentives to energy utilities. “An Obama administration will ‘flip’ incentives to utility companies by requiring states to conduct proceedings to implement incentive changes and offering them targeted technical assistance. These measures will benefit utilities for improving energy efficiency, rather than just from supporting higher energy consumption. This ‘regulatory equity’ starts with the decoupling of profits from increased energy usage, which will incentivize utilities to partner with consumers and the federal and state governments to reduce monthly energy bills for families and businesses.”

APPLIANCE/PRODUCT EFFICIENCY

* Overhaul federal efficiency standards. “The current Department of Energy has missed 34 deadlines for setting updated appliance efficiency standards, which has cost American consumers millions of dollars in unrealized energy savings. Obama will overhaul this process for appliances and provide more resources to his Department of Energy so it implements regular updates for efficiency standards. He will also work with Congress to ensure that it continues to play a key role in improving our national efficiency codes.”

* Phase out incandescents. “Obama supports the effort led by Senate Energy and Natural Resources Chairman Jeff Bingaman (D-NM) to update federal lighting efficiency standards to ensure that new lighting technologies are phased into the marketplace. As president, Obama will implement legislation that phases out traditional incandescent light bulbs by 2014.”

RENEWABLE ENERGY

* Increase share of government electricity from renewable sources. “As president, Obama will ensure that at least 30 percent of the federal government’s electricity comes from renewable sources by 2020.”

* Require 25% of electricity to come from renewable sources by 2025. “Obama will establish a 25 percent federal Renewable Portfolio Standard (RPS) to require that 25 percent of electricity consumed in the U.S. is derived from clean, sustainable energy sources, like solar, wind, and geothermal by 2025.”

COMMUNITY DEVELOPMENT

* Build neighborhoods around alternative transportation. “Obama believes that we must devote substantial resources to repairing our roads and bridges. He also believes that we must devote significantly more attention to investments that will make it easier for us to walk, bicycle, and access other transportation alternatives. Obama is committed to reforming the federal transportation funding and leveling employer incentives for driving and public transit.”

CARBON EMISSIONS

* Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80% by 2050. “Obama’s cap-and-trade policy will require all pollution credits to be auctioned, and proceeds will go to investments in a clean energy future, habitat protections, and rebates and other transition relief for families.”

GREEN JOBS

* Invest in clean energy. “The Obama-Biden comprehensive New Energy for America plan will help create 5 million new jobs by strategically investing $150 billion over the next 10 years to catalyze private efforts to build a clean energy future.”

Info courtesy of

http://www.barackobama.com

http://www.ecohomemagazine.com/news/obama-wins-green-movement-wins.aspx

BUY AND SELL STATISTICS FOR INDUSTRIAL REAL ESTATE 2008

BUY AND SELL STATISTICS FOR INDUSTRIAL REAL ESTATE 2008

As unheard of as it may seem, the Los Angeles and Orange County industrial markets both registered negative net absorption in the 2^nd half of 2008. Shocking news after the seemingly endless demand for industrial buildings – from airport area mega warehouses to industrial condo incubator suites. Because net absorption has not kept pace with the industrial space coming online, the vacancy rate has risen to over 10 percent, up from as low as three percent in some regions. Rents are predicted to stay flat.

**

http://www.realtor.org/research/commentary_industrial_market?&WT.mc_id=LS101508&CAT=Comm

http://www.globest.com/news/1282_1282/losangeles/174998-1.html

THE MOJAVE SOLAR PARK

THE MOJAVE SOLAR PARK

 by Jodi Summers

Bravo! In a perfect world, when the Mojave Solar Park is fully operational in 2011, it will deliver 553 MW of solar thermal power. In the middle of a sunny day will generate about 800 megawatts of power, roughly equal to the size of a large coal-burning power plant or a small nuclear plant.

The power will be sold to Pacific Gas & Electric, which is under a state mandate to get 20 percent of its electricity from renewable sources by 2010. (As opposed to Arizona, which is expected to do 15% by 2025.????) The utility which will use photovoltaic technology to turn sunlight directly into electricity, to be competitive with other renewable energy sources, including wind turbines and solar thermal plants (which use the sun’s heat to boil water).

The New York Times notes that California’s 20 percent renewable standard is one of the toughest, and companies there are afraid they will miss a deadline in 2010. Pacific Gas & Electric expects that when the new plants are completed, its total will rise to 24 percent, but not until 2013.

Solar power remains expensive compared with generating electricity from the more traditional methods of coal and natural gas, but quotas being set by the states are driving down the cost.

The Mojave Desert has been a solar center for several decades. Wikipedia notes that Insolation (solar radiation) in the Mojave Desert is among the best available in the United States, making the Mojave Desert particularly suitable for solar power plants. These plants can generally be built in a few years because solar plants are built almost entirely with modular, readily available materials.

Already, there are several solar power plants in the Mojave Desert which supply power to the electricity grid. Solar Energy Generating Systems (SEGS) is the name given to nine solar power plants in the Mojave Desert which were built in the 1980s. These plants have a combined capacity of 354 megawatts (MW) making them the largest solar power installation in the world.

Nevada Solar One is a new solar thermal plant with a 64-MW generating capacity, located near Boulder City, NV. That plant that uses mirrors to concentrate sunlight.

At 800 megawatts total, the new Mojave Solar Park will greatly exceed the scale of previous solar installations. The largest photovoltaic installation in the United States, 14 megawatts, is at Nellis Air Force Base in Nevada, using SunPower panels.

Spain has a 23-megawatt plant, and Germany is building one of 40 megawatts.

Sources:

http://www.car.org/newsstand/crem/current-issue/october2008/235686/

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

http://pubs.usgs.gov/fs/2006/3007/

http://www.environment.co.za/topic.asp?TOPIC_ID=2117

http://www.nytimes.com/2008/08/15/business/15solar.html