11/22/08

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National Market Review

Atlanta

Commercial Developer Regent Partners plans to put up an office tower on Peachtree Road, the first Buckhead office development in five years. That may signal a fresh return of confidence and jobs to the city. Bolstered by its central location and wealth of amenities, Buckhead has traditionally marched the rest of the city out of recession.

Commercial Even with office vacancy rates hovering at nearly 30 percent, some of Atlanta's biggest developers have placed their bets on the Perimeter area. Developers have won zoning approval to add at least 9 million square feet of office space to the business district, where the crossroads of I-285 and Route 400 draws office workers from east, west, north and south.

Boston

Residential As home prices rise on the island of Nantucket, many inns are being reconverted into private homes. More than 300 bed-and-breakfast rooms have been lost in the last 10 years, leaving a total of less than 60 inns and only 1,000 rooms. The median home price on the island surged from $290,000 in 1995 to $917,000 last year, and many innkeepers are cashing in to reap the benefits of such rapid appreciation. Similar trends are occuring in Santa Barbara, Calif., and Park City, Utah.

Residential As the Boston Archdiocese prepares to put 60 churches up for sale, developers and real estate brokers predict they will be scooped up and converted into condos because the market is hot for trendy, distinctive real estate. Others point out the tremendous loss of community caused by conversion to high-end condos, while others say apartment buyers often have an aversion to living in a building that was once a church.

Chicago

Commercial Suburban office rents in Chicago are among the lowest in major U.S. markets. The Studley Effective Rent Index concludes that they are almost break-even, with the effective rent for office property owners in Cook County just $3.40 per square foot after concessions are factored in, and just $3.08 per square foot in Lake and DuPage counties. Downtown isn't doing much better - property owners' effective rent is $5.75 per square foot, among the worst central business districts in the nation, the report found.

Residential The market for new condo units in Chicago's downtown area has remained active despite a rise in interest rates, according to the Appraisal Research Counselors of Chicago. The market has been especially strong at the entry level. About two-thirds of condo sales during the first quarter were at the low end of the price scale, under $400 a square foot, the appraisal company said. Some brokers say anything under $400,000 is moving well.

Detroit

Commercial Borders Books & Music has become an urban pioneer. The book retailer is opening stores in Chicago, San Francisco and Detroit in once-devastated retail areas or in commercial or industrial areas that have never had places to shop. The Detroit store opened recently on the ground floor of Compuware Corp.'s new world headquarters, amid shuttered storefronts and empty buildings - many of them under renovation. The 8,000-square-foot store is less than half the size of a typical Borders superstore.

Commercial Mayor Kwame Kilpatrick wants to build a new 1.2 million-square- foot convention center - and possibly an adjacent hotel - in Detroit to replace the aging Cobo Center. But expansion of the existing Cobo Center won the recommendation of a local task force put together by the mayor and the Detroit Convention Bureau last month. A new facility is expected to cost more than $1 billion, but expansion could be done for between $400 million and $650 million, the task force said.

Los Angelos

Residential The housing market in the Los Angeles area is coming back down to earth, according to local real estate brokers. Inventory is creeping up, price increases are slowing down, and the prolonged housing boom may finally be showing its age. The inventory of listed homes has doubled and even tripled in some parts of the Los Angeles basin, according to Inman News.

Commercial Six buildings under construction on and near Alameda Street will, over the next two years, expand L.A.'s downtown renaissance to the old neighborhood of El Pueblo, where the city was founded in 1781. The new construction includes a pair of U.S. Postal Service buildings and a 278-unit apartment complex. Some developers say the new buildings are part of the "recentralization" of Los Angeles.

Commercial Denver mogul Phil Anschutz's AEG Inc. has bought a 40 percent interest in the Staples Center from Fox Entertainment Group for an undisclosed price. As AEG buys in, the Center may be getting more neighboring retail - a 4 million-square-foot sports and entertainment district adjacent to the Center called L.A. Live. The proposed development features a 7,000-seat theatre and 1,200-room, 45-story convention center hotel in addition to residential housing, entertainment, retail, office space and parking. L.A. is the only city with a convention center that does not have a hotel development nearby, according to mayor James Hahn.

Miami

Residential Federal officials believe Florida's residential real estate market is awash in laundered money as buyers use shell companies to purchase upscale homes to conceal criminal activity, according to the Financial Times newspaper. The state's homestead exemption has long made it a hot spot for criminals who want to keep their homes after filing bankruptcy. For example, a luxury condo in Key Biscayne owned by former Nicaraguan tax collector Byron Jerez-Solis, was seized by U.S. Immigration and Customs Enforcement in December because it allegedly was purchased with laundered funds. Even more aggressive policing could develop if the property industry is forced to comply with the USA Patriot Act's anti-money laundering provisions, developed following Sept. 11.

Residential/Commercial More than 35,000 new condo units are expected in South Florida during the next three years or so and more than 10,000 apartment-to-condo conversions are in the works for the next 12 months alone, according to Picot & Co. Realty Advisors. Sales in those new developments could be helped by the drop in the value of the U.S. dollar against the Euro, since buyers from Europe and Latin America can sometimes represent up to 50 percent of the purchasers in a new project, developers say.

Philadelphia

Residential One of the few remaining Main Line estates that harks back to the genesis of the area as a summer retreat for wealthy city dwellers is on the market for $13.5 million, an asking price rarely seen in the area. Named Roselawn, the 1928 Tudor mansion, off Spring Mill Road in Villanova, has 20,000 square feet of living space, eight bedrooms, 11 bathrooms, and a theater, game room and library. It sits on 7.35 acres and also has an indoor and outdoor pool.

San Francisco

Residential The median price paid for a home in the San Francisco Bay Area passed the half-million dollar mark in May, DataQuick Information Systems reported. The median price paid for a Bay Area home was $506,000, a new peak. That was up 2.8 percent from $492,000 in April, and up 18.5 percent from $427,000 in May of last year.

Commercial Bank of America may sell its 50 percent share of the mammoth Bank of America Center, the premier office high-rise in San Francisco. Brokers said the building could fetch anywhere from $375 to $600 per square foot - a wide range that attests to both the shaky nature of the San Francisco market and the huge investor demand for commercial property. Given the building's 1.8 million square feet of rentable office space, that would value BofA's stake at between $337 million to $540 million.

Seattle

Commercial A new report by Colliers ABR finds that while the overall office vacancy rate in the Puget Sound area is at about 16 percent, the overall vacancy rate for lab space is less than 7 percent. The first life sciences real estate market report by Colliers said the Puget Sound area has more than 175 biotechnology and medical technology companies taking around 3 million square feet of office space in the area.

Washington, D.C.

Residential Ocean City in Maryland, once a middle-class holiday retreat, is morphing into an expensive resort destination, according to the Baltimore Sun. The purchase prices of property have doubled and tripled in the past four years, according to local brokers. The first waterfront condos in the area went on the market for $400,000, and are now selling for $1 million to $1.5 million.

Residential/Commercial Housing developers searching for ever-scarcer D.C. sites are moving into a new neighborhood: The H Street corridor of Northeast, a dilapidated stretch of boarded-up buildings and riot-scarred storefronts that for decades has seen little investment. Two large parcels, slated for hundreds of residential units, are now under contract along the heavily traveled east-west thoroughfare on the northern edge of Capitol Hill. Huge office buildings are also under construction or planned nearby. The D.C. government recently approved a Strategic Development Plan for H Street calling for more than $300 million in investment.

Residential In recent years, the Washington, D.C. metropolitan area has experienced the nation's most dramatic shift from barely affordable to unaffordable homeownership, according to a new Fannie Mae study. In 1999, a Washington, D.C.-area family that earned $62,000 could qualify for a mortgage on a median-priced house. By this year, a family had to make $100,000.