Positive Changes We Are Seeing
We are seeing changes beginning to happen in the thinking and strategies of our clients
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BUYING SIGNALS ARE ON
|
Date |
1 Mo |
3 Mo |
6 Mo |
1 Yr |
2 Yr |
3 Yr |
5 Yr |
7 Yr |
10 Yr |
20 Yr |
30 Yr |
|
09/01/11 |
0.02 |
0.02 |
0.05 |
0.10 |
0.19 |
0.31 |
0.90 |
1.49 |
2.15 |
3.10 |
3.51 |
|
09/02/11 |
0.02 |
0.02 |
0.05 |
0.10 |
0.20 |
0.33 |
0.88 |
1.41 |
2.02 |
2.92 |
3.32 |
|
09/06/11 |
0.02 |
0.02 |
0.07 |
0.13 |
0.21 |
0.33 |
0.88 |
1.40 |
1.98 |
2.86 |
3.26 |
|
09/07/11 |
0.00 |
0.02 |
0.06 |
0.11 |
0.21 |
0.34 |
0.92 |
1.45 |
2.05 |
2.96 |
3.36 |
|
09/08/11 |
0.01 |
0.02 |
0.07 |
0.12 |
0.19 |
0.33 |
0.88 |
1.41 |
2.00 |
2.92 |
3.32 |
|
09/09/11 |
0.00 |
0.01 |
0.05 |
0.11 |
0.17 |
0.31 |
0.81 |
1.34 |
1.93 |
2.86 |
3.26 |
|
09/12/11 |
0.01 |
0.01 |
0.05 |
0.11 |
0.21 |
0.35 |
0.87 |
1.38 |
1.94 |
2.84 |
3.24 |
|
09/13/11 |
0.00 |
0.01 |
0.05 |
0.10 |
0.21 |
0.35 |
0.89 |
1.42 |
2.00 |
2.92 |
3.32 |
(Daily Treasury Yield Curve Rates)
HOW ARE THINGS LOOKING?
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Customers always ask me, “How do things look?” Here’s one way to answer. In this roughly one square mile grid of Broadway/Rosecrans, there are about 120 buildings of decent size. I count 25 that have availability. Perhaps not the entire buildings are on the market, but enough to depict this picture. That’s about 20% of the buildings with significant availability. I’m working on a lease in Chatsworth and there is even more yellow. This is a pretty consistent picture throughout Los Angeles. In contrast, there have been times when there is no yellow.
Winter 2011 – Positives, Negatives, Quality and Change
A few years into the Los Angeles commercial real estate recession and some things are clear. Good deals are limited. Distress never hit the street. There’s an evident turn around but most people aren’t recovered. And the smart money is still cautious – for instance, no vacancy risk.
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KLEIN NEWS FALL 2010
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Activity Is Up, But Far From Celebratory
With the year of fear behind us and summer doldrums over, should we expect an increase of activity? Compared to the past two years of bad news, yes, activity is up. Many businesses that were paralyzed with fear are now investigating opportunities in the property market. Private companies are looking for space just in time to replace the waning influence of government stimulus. For instance, businesses that can access low interest rates are in a particularly enviable position. The evidence is demonstrated by a few stellar deals that were purchased by a few brave souls who struck when no one else could. Now that the great fear has receded, we are left with a bad market instead of a catastrophic one. Buyers and Tenants are coming out of their shell to see if they can find bargains and re-launch business plans.
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INTRODUCING MAPP 1.0
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Over the summer we created a commercial real estate mapping application that combines the important commercial real estate information for Los Angeles County in one place. It is designed to help buyers, tenants, developers, and investors get a spatial view of the real estate commitment they are about to make. We call this map application MAPP 1.0.
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Tenants Are the New Opportunity Buyers
Tenant decision making has radically changed since the Great Recession. The combination of low interest rates and falling prices mean that mortgage payments are the same as or less than rent. This has been a fairly rare occurrence over my 30-year career. Tenants with established histories are finding some great bargains. Even companies that may have difficulty obtaining loans and lack large down payments can team with sophisticated investors to solve many financing hurdles.
The Port Strategy Fallacy – It’s the Deal That Counts.
Both brokers and investors tout the strengths of investing in markets with a vibrant harbor and airport. This has been a pronounced strategy from at least 1997 when container imports began increasing beyond incremental growth. Many institutional investors have dubbed this the Gateway Strategy. But grand proclamations like these normally lead to increased competition amongst buyers and lower returns. If history is any lesson, the money was made by the first round Buyers who purchased these distribution buildings at distress. It was the following group who used port dynamics to justify their high purchases and are now sitting with vacant and poorly leased properties at rents vastly below proforma. In retrospect, it was the deal strategy that made investors money. Being located by the port was secondary.
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SIOR Spring Conference Brings More Optimism
We finished our semi-annual meeting in Orlando, Florida. The general sentiment is we have reached the bottom of the cycle. Although by what measurement? Recent sales and leases have indicated a low point. However, when other leases expire, those buildings will still need to discover their own downward level. Visually, think of dominoes falling down over a lengthy period of time. The current signals are more a psychological target rather than one of momentum. Monitoring rent tends will validate when we are at the beginning of a new upward trajectory.
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Economic Development in Greater Los Angeles
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More so than ever before, cities are vying for companies that create jobs. There’s the policy aspect that favors clean and green jobs. Then there’s the backroom bargaining that favors successful outcomes. Companies that can offer employment would do well to study some of the recent newsworthy examples. They include the failed attempt by Los Angeles to attract AnseldoBreda, local jostling to snare Tesla Motors, competition for Eli Broad’s museum, Los Angeles Stadium in the City of Industry, and the smaller manufacturing deals coming through the CRA of Los Angeles. Each one is fairly lucrative to the company and does not necessarily fit any set model. They are similar to the large retailers, like Costco or Walmart, who were able to negotiate attractive packages for redevelopment funds, property tax breaks, and property development benefits. I haven’t seen any studies if these retail developments met city economic expectations, but certainly the recent raise in sales tax makes up any marginal differences. It pays to understand the multitude of incentives available from local, state and national agencies.
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