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Texas was declared the winner of the coveted Best Business Climate ranking from Business Facilities Magazine, which covers a range of critical development factors including cost of labor, incentives, infrastructure and tax climate. Please click here to read the full article. From now to the end of 2010, the economy of Austin is projected to grow by $5 billion, and unemployment has stayed relatively subdued. The city’s diverse economy, home to Dell, the University of Texas and the Texas state government, has kept the economy strong. Forbes.com also recently ranked Austin the Best Big City for Jobs. Please click here to read the entire article. Austin, Texas is in as good a position as any city in the United States in the current market, and in many regards, better-positioned. In contrast to most cities, the unemployment rate here has dropped two-tenths of a percent. Jobs are being added – 6,000 positions in February alone. And Austin continues to accumulate accolades, receiving top positions on a variety of “Best Of” lists. It was just named in Forbes magazine as one of the fastest growing metro areas in the nation, based on business opportunities, weather and affordable housing. Retail The Austin Retail Market, with a footprint of 65 million square feet, has remained surprisingly strong, given the current national economic conditions. The overall vacancy rate for the Austin MSA increased slightly from 6.9% in 4Q 2008 to 7.1% the first quarter of 2009. There was approximately 450,000 square feet of retail space under construction by the end of the first quarter of 2009. The current total retail inventory in the Austin MSA is comprised of roughly 25 million square feet of general retail, 25 million square feet of shopping centers, 10 million square feet of power centers, 6 million square feet of malls and 300,000 square feet of specialty center retail space. Two newcomers to the Austin Retail Market are Sprouts and El Rancho Supermercado. Sprouts – an organic produce, prepared foods and general mid-sized supermarket – is working on their fourth location in the Austin MSA and has signed agreements for Sunset Valley, Round Rock and Rollingwood already in place. They’ve taken approximately 30,000 square feet overall. El Rancho Supermercado has taken slightly less square feet and has inked its first Austin location at 8700 Research Boulevard off Ohlen Road. The average quoted retail rental rate for the Austin MSA dropped only slightly from $20.64 last quarter to $20.41 in 1Q 2009. The highest rates were $30.06 in the Central Business District and $28.67 in the Southwest submarket. The lowest average rates were found in the North submarket at $15.88 and Southeast submarket at $16.52. The highest vacancy rate was in the Southeast at 11.4% and the lowest vacancy rate was the Central Business District at 1.8%. All economic indicators show Austin to be a strong Retail market. The future continues to look bright. Land The global capital market meltdown has had a tremendous negative impact on land sale transactions in the Austin area. According to Costar Comps, land sales volume in the Austin MSA decreased by 85% between 1Q 2008 and 1Q 2009 and 93% from 1Q 2007 to 1Q 2009. Liquidity issues have forced many banks to insist on unrealistically high equity positions from developers, and more seller financing has been required to help close transactions. Much of the activity that is occurring in the land market is user-driven with some large investment land plays on the periphery of the market. For the most part, only projects that commenced before the onset of the financial crisis are under construction. Very few developers have started construction on new commercial projects. There is still a “wait and see” and “it’s safer to do nothing” attitude from both banks and developers. Up until recently, pricing has held steady as owners try to ride out the recession. We are now starting to see owners who are more willing to concede on price due to their own liquidity issues. Austin by most accounts is expected to swing back out of these economic doldrums with a vengeance. And it is the hope of many land owners that they can hold out until the turnaround. Office New construction of office space has had huge impacts on Austin over the past couple of years. Most recently in the first quarter of 2009, Austin saw the delivery of almost half a million square feet. Newly delivered construction is located in the Northwest and Far Northwest submarkets where the Domain Gateway, Pecan Park 2 and Travesia Corporate Park were completed. Nearly half a million square feet is now under construction, which is an 80% decrease from this time a year ago. Vacancy in office product increased to more than 19% in the first quarter of 2009. This is a dramatic increase from one year ago when the vacancy rate was in the 14% range. Full service office rates decreased from an average of $0.50 to $0.26. Although rates in the Central Business District increased overall – mostly due to increased tax hikes – rental rates in the Northwest and Southwest submarkets decreased. Naturally, sub-lease office availability has increased dramatically, exceeding one million square feet. This number is likely to increase as layoffs continue and companies attempt to consolidate their space. Industrial From the start of 2008 through the 18 months ending in June of 2009, Austin added a whopping 3.1 million square feet to its base of 34.5 million square feet of industrial investment space tracked by NAI Austin. That’s a 9% increase and is a historical record for growth in the Austin market. Even without the new inventory, Austin vacancy rates were beginning to rise by late 2008 and have increased into 2009. Official numbers will be counted as of the end of June but we expect the vacancy rate could increase by as much as another 1,000,000 square feet resulting in a total vacancy of over 20%. It is a great time for tenants to renew leases for long terms as lease rates drop by 15-20% and incentives for TI allowance or free rent are being used more each month. About 65% of Austin’s industrial market is bulk warehouse and 35% flex space. Final industrial figures for the first six months of 2009 will be available in early July. Click here to download the pdf version of the Austin Chamber’s monthly newsletter, the Member V.O.I.C.E., which includes the article below. The Austin Chamber of Commerce has released the results of a recent national survey of corporate leaders of companies with revenues in excess of at least fifty million dollars. The goal of the survey was to find out how these executives looked at Austin relative to other cities as a site for possible expansion or relocation. Out of 15 possible metropolitan areas across the country, Austin was the city most often chosen as a desired target for expansion or relocation. Executives cited an educated workforce, top-notch universities, a thriving tech community and abundant quality of life as reasons to consider Austin, the Human Capital, when repositioning a company. The survey, conducted in the fall of 2008 by The Benchmark Company, an Austin market research firm which numbers many national firms among its client base, mentioned that Austin was also perceived to be the city that would stand a greater chance of being recession resistant. “Considering the current national malaise that has affected so many cities, the fact that Austin has maintained a strong, favorable perception among C-level executives across the country is extremely important,” said Dr. Robert Balon, CEO Benchmark. “This should bode well for increased corporate visits and interest in Austin from a cross section of large companies representing many industries. And ultimately, that should pay dividends for Austin businesses and residents.” The survey shows a drastic increase in recognition of Austin-based companies over 2006, indicating that a greater number of executives not only distinguish Austin as a strong business climate, but also understand that Austin is an attractive market for headquarter relocation as well. The Austin Chamber, through Opportunity Austin 2.0, has made a commitment to drive the healthy growth and expansion of Austin’s business community with a committed focus on attracting new business from around the country and the globe as well as retaining and expanding existing businesses. The primary goal is to create 117,000 new jobs and $10.8 billion in payroll in the next five years. Opportunity Austin 2.0 is targeting five specific industries to strengthen and grow, creating a greater depth of diversity in Central Texas: convergence technologies, creative media, green industries, corporate headquarters and health care/life sciences. Texas wins 2009 Best Business Climate ranking Austin a preferred target for expansion or relocation Austin is the 2nd-fastest growing city in the nation Austin home prices are up, still dropping elsewhere Austin’s unemployment rate drops; region adds jobs Austin is the nation’s top city for a “fresh start” Austin is at the top of the list for rising home values Texas tops the national new home market Austin is the #1 city for recession recovery Austin is the 8th best city for business and careers Austin is one of the best cities in which to ride out the recession 14 Austin companies made the Deloitte Texas Technology Fast 50 List Austin is one of America’s favorite cities Austin is one of the 5 cities on the verge of recovery (video) Austin is one of the top 5 cities that Americans are relocating to Austin is one of the top 5 U.S. metros likely to experience greatest retail success This article was written by the WSJ staff for the Wall Street Journal Blog Real Time Economics Please click here to view the the Real Time Economics blog NASHVILLE –The latest big threat to economic recovery in the U.S., the commercial property market, could be the next target of an expanded special lending program from the central bank, Dennis Lockhart, president of the Atlanta Federal Reserve Bank, said Saturday. “On our watch list this year as a risk to the [economic] outlook is continuing The central banker was speaking at a conference on financial policy hosted by Fed policymakers are still considering whether to include sponsorship for “The details haven’t been fully worked out,” he said. Lockhart is currently a voting member on the Fed committee that deliberates The commercial real estate market has suffered on a variety of fronts, from NAI Global recently named three NAI Austin members as top producers, based on production in 2008. Dean Janeff qualified as a top producer at the Global Elite level. Alan Lacey qualified at the Silver Elite level, and David Barber was a top producer at the Elite level. These groups comprise the organizations’ top performers. NAI Austin is one of Austin’s most experienced commercial real estate firms and the Austin area representative for NAI GlobalTM, the industry’s largest global network of real estate service-providers, comprising 5,000 brokers in 325 offices serving more than 55 countries worldwide. For more information on NAI Austin, please visit www.naiaustin.com. NAI Global is one of the leading commercial real estate services providers worldwide. Headquartered in Princeton, New Jersey, NAI Global manages a network of 5,000 commercial real estate professionals and 325 offices in over 55 countries, and completes over $45 billion in annual transaction volume. Since 1978, NAI Global clients have built their businesses on the power of NAI’s expanding network. NAI Global’s extensive services include corporate real estate services, brokerage and leasing, property and facilities management, real estate investment and capital market services, due diligence, global supply chain consulting and related advisory services. To learn more, visit www.naiglobal.com. NAI Austin announced it is participating in the Commercial Property PowerSale™, an Accelerated Marketing Program created by NAI Global to help property owners and financial institutions dispose of troubled real estate needs. NAI Global is the premier managed network of commercial real estate firms and one of the largest real estate services providers worldwide. NAI Austin is the exclusive NAI member firm in Austin and the surrounding area. “Given the current uncertain conditions of the commercial real estate market created by the global economic slowdown and frozen credit markets, NAI Austin’s Accelerated Marketing Program gives clients yet another option for disposing of commercial real estate while retaining control of the terms and conditions of the sale,” said Sherry Naquin Sanchez, Director of Operations for NAI Austin. “Delinquencies are on the rise, and with an estimated $400 billion dollars of commercial real estate loans coming due in 2009, we believe there is an urgent need for nontraditional marketing approaches,” said Jeffrey M. Finn, President and CEO of NAI Global. “The days of buyers standing in line for each new offering ended abruptly with the credit crisis in 2008. With limited access to new capital, more and more property owners are faced with a difficult situation – what to do with their troubled assets as loans come due in a depressed economy and with a distressed debt market. Our Accelerated Marketing Program gives clients the opportunity to sell their assets quickly, reducing their holding costs and securing true market value for the property.” The Commercial Property PowerSale™ employs a variety of accelerated marketing techniques that have proven effective in previous economic cycles when traditional sales channels are gridlocked. Property owners will have the option to offer their properties for sale via a series of live online auctions, sealed bids, or a unique combination of the two formats. Properties in the Commercial Property PowerSale™ benefit from an aggressive marketing campaign that includes focused print, broadcast and electronic advertising, and a direct-to-buyer outreach to more than 175,000 active buyers. Sellers are assured a shortened sales process and a date-certain sale schedule. The three program options – Auction Marketing, Sealed-Bid, and Sealed-Bid Plus™ – set up a competitive bidding environment that creates urgency, forcing buyers to act immediately. “The Accelerated Marketing Program is designed to meet the demands of our clients – property owners and financial institutions – with troubled assets, as well as sellers with healthy properties who are having trouble finding a buyer in today’s market,” said Finn. “Together with our longtime partner, Higgenbotham Auctioneers International, we have successfully completed more than $2.3 billion in sales through accelerated marketing programs. We are able to leverage our knowledge and relationships with the most active buyers at any given time to help our clients achieve the best possible value for their asset, despite the current economic climate.” The program is open to both private and institutional owners and will include the sale of both commercial real estate equity and loans. Sellers may submit an individual asset or an entire portfolio, and property types will include everything from office, industrial, retail, hospitality, and multi-family properties, to residential subdivisions and land for development. Both performing and non-performing commercial real estate loans may also be offered for sale. The NAI team will evaluate each property and guide sellers through the program process, helping them to choose the sales vehicle that best suits their needs. Property owners and financial institutions interested in learning more about the Commercial Property PowerSale™ should visit www.naiglobal.com/amp or contact NAI Austin. NAI Austin is one of Austin’s most experienced commercial real estate firms and the Austin area representative for NAI GlobalTM, the industry’s largest global network of real estate service-providers, comprising 5,000 brokers in 325 offices serving more than 55 countries worldwide. For more information on NAI Austin, please visit www.naiaustin.com. For more information, please contact Craig S. Meyer, SIOR, President at craig.meyer@amjll.com. Six hundred fifty-four SIOR market experts across the country weighed in on local industrial and office market conditions for the Fourth Quarter 2008 SIOR Commercial Real Estate Index, compiled by the SOCIETY OF INDUSTRIAL AND OFFICE REALTORS (SIOR) in association with the NATIONAL ASSOCIATION OF REALTORS (NAR). SIOR members’ account of their local markets reflected the malaise of the general U.S. economy. In fact, 90 percent of respondents report that leasing activity in their local markets is down from historic levels and in general, vacancy levels are higher than normal. It is a “tenants market” as tenants are benefiting from above average concessions offered by landlords—some offering deep discounts—in an effort to fill empty space. There are no cranes on the horizon as more than half of SIORs surveyed indicated that there was virtually no new construction going on in their marketplace and the vast majority SIOR respondents—90 percent—indicated that, in general, construction was down in their market as the national economy continues to negatively impact the commercial real estate business. The national Index, which measures 10 variables pertinent to the performance of U.S. industrial and office markets, dropped for an eighth straight quarter to an overall total of 48.7 points. This score reflects conditions that are significantly less favorable for landlords and sellers, but excellent for tenants and purchasers—if they can find the financing and if, in this economy they are growing—not likely. The commercial real estate market is suffering along with and due to the national economy. To put this in perspective, a score of 100 points represents a balanced office and industrial marketplace (see Methodology below). Remember the spring of 2006? The SIOR Index stood at 119.7 points—those were the good old days from a landlord’s perspective. In fact, the drop from Third Quarter to Fourth Quarter 2008 was a whopping 17.7 points, the largest quarter-to-quarter drop by far since the market began its downward slide in the Spring of 2007. Office Market Industrial Market Regional Breakdown The short-term market outlook looks bleak according to SIORs in the Northeast who scored a mere 50.4 points this quarter. In a repeat performance of third quarter results, SIORs in the Northeast continued to feel that the national economy was affecting their local markets more than any other region. Although they felt that pricing in their region was stable, their short-term outlook for improvement in market conditions was glum. The Mid-West dropped to 49.2 this quarter. While investment prices are lowest in the Mid-West, respondents reported that sublease space was closer to normal than SIORs in other sections of the country indicated. The West, plunged to 39.3 points—26.3 points from Third Quarter 2008—to the lowest Fourth Quarter score of all the regions. The West was hit with a decline in asking rents, higher vacancy rates, increased sublease space, deep tenant concessions, development activity lower than all other regions, and falling prices. METHODOLOGY The Index is based on a survey questionnaire with ten topics. The topics covered are (1) recent leasing activity; (2) trends in asking rents; (3) trends in vacancy rates; (4) subleasing conditions; (5) levels of concession packages in leases; (6) development activity; (7) site acquisition activity; (8) investment pricing levels; (9) the impact of the local economy on the property market; and, (10) the effect of the national economy on the property market. Survey respondents are given five choices. For each topic, five choices are provided, corresponding to conditions that are very weak, moderately weak, well-balanced, moderately strong, or very strong. For each question, answers are tallied and the percentage of responses for each of the five choices is calculated. If survey panelists indicate “very weak” conditions (the “a” choices in the questionnaire), the answer is assigned 0 (zero) points; “moderately weak” (“b” answers) earn 5 points; an indication of “market balance” (“c”) receives 10 points; “moderately strong” indications (“d”) score 15 points; and “very strong” (“e”) responses receive a maximum 20 points. Thus a score of 10 for a given question can be earned if responses are evenly distributed across all five choices, if all responses were “c”, or if the answers form a “bell-shaped curve” centered around the “c” choice. The total index value is derived by summing the scores for all ten questions. Index values for each of the two property types are similarly calculated. The survey was developed by Hugh F. Kelly, CRE, clinical professor at New York University, who worked with SIOR on research projects since 1989. Headquartered in Washington, DC, the SOCIETY OF INDUSTRIAL AND OFFICE REALTORS (SIOR, www.sior.com) is a global professional organization that certifies commercial real estate service providers with the exclusive SIOR designation. Individuals who earn their SIOR adhere to the highest levels of accountability and ethical standards. Only the industry’s top professionals qualify for the SIOR designation. Today, there are more than 3,200 SIOR members in 590 markets in 25 countries—2,800 of whom hold the SIOR designation. For more information, please contact one of our Industrial brokers. Please visit www.austinsource.com to view the Year-End 2008 Industrial Market Report. Austin set a historical record in 2008 for most new industrial space added in a single year. The industrial-investment property tracked by NAI Austin brokers expanded to 36.9 million square feet in 2008, a 7 percent increase in total capacity over the 34.5 million square feet at year-end 2007. The overall vacancy rate at the end of 2008 was 18 percent, which, although high, did not approach the record vacancy rates of 20-21 percent during the high-tech bubble years of 2002-2004. At year-end 2008, Austin’s industrial market recorded a net positive absorption of 8,671 square feet in a market of 36.9 million square feet. At the half-year mark in June, absorption was a positive 253,141 square feet, despite the slowing economy since late 2007. By the end of December, following a near total meltdown of the national economic health in the second half of 2008, Austin’s absorption slipped to a negative 244,470 square feet, leaving a net positive absorption of 8,671 square feet for 2008. The slide is likely to continue through 2009, but no one can predict how much. Lease rates are coming down as landlords with the flexibility to do so try to retain or attract what movement there is in the market. Transactions for the last half of 2008 slowed dramatically, and the recent trend of higher absorption and leasing activity in the third and fourth quarters of the last several years ceased. Nonetheless, if credit access and reliability can be stabilized, the Austin market should outperform the national market. NAI Austin is one of Austin’s most experienced commercial real estate firms and the Austin area representative for NAI GlobalTM, the industry’s largest global network of real estate service-providers, comprising 5,000 brokers in 325 offices serving more than 55 countries worldwide. For more information on NAI Austin, please visit www.naiaustin.com. |
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