Commercial Real Estate – National Summary OFFICE MARKET- through 3 rd Qtr 2008 LEASES: The US office market gave back space for lease helping to push the national vacancy rate up for the fourth consecutive three month period. Office Rents began to reflect real weakness in the general economy with downtown & suburban lease rates falling. Business confidence is unlikely to return before the financial crisis shows signs of abating, keeping decision makers on the sidelines & perpetuating a “wait-&-see” attitude. Overall Office vacancy rate increased for 3rd consecutive quarter, posting 10.6% in Central Business Districts (CBD), & 15.6% in suburban markets – 13.1% Total 3rd quarter absorption was again negative with occupied space contracting by 2.2 million SF Combined with 1st & 2nd quarters, year-to-date absorption registered -7.5 million SF. Financial & insurance sectors, & even law firms, expected to give back at lease 20 million RSF over the next 6-12 months. Expect vacancies in both downtown & suburban markets to rise again (to peak around 17% ) next year before stabilizing in 2010. National Average Rental Rates (Class A) = $49.50 per RSF Downtown & $28.50 per RSF Suburban BUILDING SALES: A frozen debt market, eroding fundamentals, & uncertainty in property pricing have combined to cause sales of significant properties to plummet to their lowest quarterly volume recorded since the 2nd quarter of 2004. Year-to-date, National sales volume is down over 60% from the same period in 2007 – at $23.9 billion for downtown & $26.2 billion for suburban markets. Source: Cushman & Wakefield & Colliers Michael S. Talmadge Licensed Real Estate Broker
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Commercial Real Estate – National SummaryOFFICE MARKET- through 3rd Qtr 2008 LEASES:
The US office market gave back space for lease helping to push the national vacancy rate up for the fourth consecutive three month period.
Office Rents began to reflect real weakness in the general economy with downtown & suburban lease rates falling.
Business confidence is unlikely to return before the financial crisis shows signs of abating, keeping decision makers on the sidelines & perpetuating a “wait-&-see” attitude.
Overall Office vacancy rate increased for 3rd consecutive quarter, posting 10.6% in Central Business Districts (CBD), & 15.6% in suburban markets – 13.1% Total
3rd quarter absorption was again negative with occupied space contracting by 2.2 million SF Combined with 1st & 2nd quarters, year-to-date absorption registered -7.5 million
SF. Financial & insurance sectors, & even law firms, expected to give back at lease 20 million RSF
over the next 6-12 months. Expect vacancies in both downtown & suburban markets to rise again (to peak
around 17% ) next year before stabilizing in 2010. National Average Rental Rates (Class A) = $49.50 per RSF Downtown & $28.50 per
RSF Suburban
BUILDING SALES:
A frozen debt market, eroding fundamentals, & uncertainty in property pricing have combined to cause sales of significant properties to plummet to their lowest quarterly volume recorded since the 2nd quarter of 2004.
Year-to-date, National sales volume is down over 60% from the same period in 2007 – at $23.9 billion for downtown & $26.2 billion for suburban markets.
Source: Cushman & Wakefield & Colliers
Michael S. Talmadge Licensed Real Estate Broker 727.214.4650
Commercial Real Estate – Tampa/St. Pete Office SummaryOFFICE LEASING - 130,279,073 RSFthrough 3rd Qtr 2008
Michael S. Talmadge Licensed Real Estate Broker 727.214.4650
Commercial Real Estate – Tampa Bay Area
Michael S. Talmadge Licensed Real Estate Broker 727.214.4650
OFFICE SALES - through 3rd Qtr 2008
Total office building sales activity in 2008 was down compared to 2007. In the first six months of 2008, the market saw 18 office sales transactions with a
total volume of $130,572,900. The price per square foot averaged $129.48. In the same first six months of 2007, the market posted 43 transactions with a total
volume
of $542,836,099. The price per square foot averaged $157.78 Cap rates have been lower in 2008, averaging 7.74% compared to the same
period
in 2007 when they averaged 8.04%. One of the largest transactions that occurred within the last 12 months in the
Tampa/St. Petersburg market is the sale of the SunTrust Financial Centre in
Tampa. This 527,000 square foot office building sold for $117,050,000, or $222.11 per square foot.
The property sold on 9/20/2007, at a 5.50% cap rate.
Commercial Real Estate – National SummaryRETAIL MARKET - through 3rd Qtr 2008
For past few years, Shopping center owners & retailers alike have witnessed a more sluggish retail environment as the economy has slowed & housing weakened.
Consumer confidence, a key indicator for the economy, registered a 15 yr low in the month of April 2008 (with the exception of March 2003 & the onset of the Iraq war).
The national shopping center vacancy rate increased to 10.2%
Despite a modest weakening of fundamentals, shopping center rents continue to increase with the latest annual increase registering at 3.9%
Rental Rates per SF increased to $16.93 per SF NNN
YTD Absorption has been 1.3 million SF.
NATIONAL FORECAST:
Destination & Large Malls (mostly owned by REITS) should weather the ongoing consumer retail retreat better than other retail segments.
Shopping centers have turned “High Risk” with energy and Inflation eating into retail sales.
Retailers will again focus on stores in the top centers, leaving some B & C malls behind.
Consumers crave bargains- outlet centers and discount clubs will hold their own.
Well located strip centers, anchored by top supermarket chains will continue to draw necessity shoppers.
Source: Urban Land Institute
Michael S. TalmadgeLicensed Real Estate Broker
727.214.4650
Commercial Real Estate – Tampa Bay Area SummaryRETAIL – 192,326,629 TOTAL SFthrough 3rd Qtr 2008
The Tampa Bay Area experienced a slight decline in retail market conditions in the 3rd qtr 2008.
The vacancy rate went from 5.3% in the previous quarter to 5.5% in the 3rd quarter 2008. Over the past year, the market has seen an overall increase in the vacancy rate from 4.6% in
the 4th Qtr 2007 to 5.5% in the 3rd quarter 2008. Net absorption was negative (6,635 SF), & vacant sublease space increased by
51,086 SF. Quoted rental rates increased from 2nd quarter 2008 levels, ending at $16.95NNN per SF Average sales price per SF decreased from $134.77 per SF in the 2nd quarter 2008
to $129.13 per SF in the 3rd quarter 2008Source: COSTAR
Michael S. Talmadge Licensed Real Estate Broker 727.214.4650
INDUSTRIAL MARKET - through 3rd Qtr 2008
Overall US Vacancy increased to 8.7% in the 3rd quarter, from 8.5% in 2nd quarter, & 8.2% in the 1st quarter of 2008
Net absorption for the overall US industrial market was positive 9,474,091 SF in the 3rd Qtr. 2008.
Vacant sublease space increased to 69,841,420 SF in the third quarter Average overall quoted rental rate was $6.09 NNN per SF 2008 Average Sales Price to date has fallen to $65.91 per SF compared to
activity. Markets tied to homebuilding will show continued weakness- homebuilders stop
buying construction materials and fewer new homebuyers mean reduced overall spending to fill homes with furniture and fixtures.
In 2009 & 2010, Builders need to back off due to rising vacancies, high construction costs and very limited financing.
Good News- Over the long term, the sheer volume of increased global trade and steadily increasing demand at the major coastal port gateways insures a growing need for new types of distribution and warehouse facilities.
Source : Urban Land Institute
Commercial Real Estate – National Summary
Michael S. TalmadgeLicensed Real Estate Broker
727.214.4650
Commercial Real Estate – Tampa Bay Area SummaryINDUSTRIAL MARKET – 258,827,746 TOTAL SFthrough 3rd Qtr 2008
Industrial markets in the Tampa Bay Area showed mostly negative activity during the 3rd quarter 2008
The Tampa / St. Petersburg Industrial market ended the 3rd quarter 2008 with vacancy rate of 8.2% up from 7.3% the previous quarter
Net absorption for the overall Tampa / St. Petersburg market was negative (1,174,940)
Vacant sublease space managed to decrease in the quarter, ending at 1,326,026 SF The average quoted asking rental rate for available space was $6.81 per SF at
the end of the 3rd quarter 2008 which represented a 0.3% decrease in quoted rental rates from the 2nd quarter 2008 when rates were reported at $6.83 per SF
Average sales price per SF decreased from $58.51 per SF in the 2nd quarter 2008 to $52.21 per SF in the 3rd quarter 2008
Source: CoStar
Michael S. TalmadgeLicensed Real Estate Broker
727.214.4650
Commercial Real Estate – National SummarySUMMARY OF NATIONAL COMMERCIAL REAL ESTATE LOANS – CREDIT CRUNCHthrough 3rd Qtr 2008
Third quarter 2008 originations were 53% lower than during the same period last year.
The year-over-year decrease was seen across all property types and most investor groups.
“Uncertainty stemming from the credit crunch, and now the deteriorating economy, has led to a continued pull-back among both lenders and borrowers,” said Jamie Woodwell, MBA’s vice president of commercial real estate research.
“The need among most investor groups to conserve capital and the uncertainty of how the slowing economy will affect property fundamentals is fueling a prolonged pause in all aspects of commercial real estate activity.”
Decreases in total commercial/multifamily mortgage originations continued to be led by a drop in commercial mortgage-backed security (CMBS) conduit loans and loans for commercial bank portfolios. These numbers show the impact of the recent credit crunch and other market disruptions.
When compared to the 3rd quarter of 2007, the overall 53% decrease in commercial/multifamily lending activity included:
87% decrease in loans for hotel properties, 61% decrease in loans for office properties, 59% decrease in loans for health care properties, 39% decrease in loans for industrial properties, 30% decrease in multifamily property loans, 30% decrease in retail property loans.
Among investor types, conduits for CMBS saw a significant decrease of 93% compared to last year’s 3rd quarter. There was also a 71% decrease in loans for commercial bank portfolios, and a 27% decrease in loans for life insurance companies. The dollar volume of loans for government-sponsored enterprises (or GSEs - Fannie Mae & Freddie Mac) saw an increase of 15%.
Among investor types, loans for commercial bank portfolios saw : A decrease in loan volume of 55% compared to the second quarter of 2008, Loans for conduits for CMBS saw an increase in loan volume of 67% compared to the second
quarter of 2008, life insurance companies increased by 27% during the same time span, GSEs volume increased 12% from the second quarter 2008 to third quarter 2008. On a quarter-over-quarter basis, the size of the decline in loans for commercial banks
overwhelmed increases among other investor groups.
Michael S. Talmadge Licensed Real Estate Broker 727.214.4650
Commercial Real Estate – National SummarySUMMARY OF NATIONAL COMMERCIAL REAL ESTATE LOANS – CREDIT
CRUNCH
Compared to the second quarter of 2008, third quarter Loan originations for: Hotel properties saw a 71% decrease. 42% decrease for health care properties, 28% decrease for office properties, 22% increase for industrial properties, 9% increase for retail properties, 9% increase for multifamily properties.
Source: WASHINGTON, D.C. - Commercial and multifamily mortgage loan originations remained low in the third quarter, according to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.
Michael S. Talmadge Licensed Real Estate Broker 727.214.4650
through 3rd Qtr 2008
Resale market is still the main event with foreclosures assuming the lead role Since early 2007, the current housing cycle resale trends would be the most important
gauge of the housing market’s trajectory. Homebuilders have mostly done what they needed to in wringing the excesses from the
new housing market. In August 2008, sales volumes declined by 17% from August 2007 in 41 metro
areas.
Foreclosures are still dominating the story There is a growing impact of foreclosures on the resale market. In the main foreclosures states of Arizona, Florida, California and Nevada, resale volumes
have turned positive. These volume increases aren’t reflective of real underlying demand, but instead are driven
by market clearing price reductions. In the bottom 10 markets in terms of pricing, volumes were up +32% But at the expense of prices that were down -32% year/year. Resale prices decline and will reach at least 25-30% from the May 2004 peak Real price declines could continue through 2010.
Source: Deutsche Bank
Residential Real Estate – National Market
Michael S. Talmadge Licensed Real Estate Broker 727.214.4650
The weather may still be warm in Florida during September, but the home and condo markets have clearly iced up:
Single-family home sales fell just 0.3% in September compared to August, but the median sale price dropped a substantial 6.3%.
Condo sales fell 10.5% month-over-month, while the median sale price fell 2.7%. On a positive note, statewide September home sales were up 24% from a year ago and condos sales
were up 10.9%. September 2008 as the first month that the “sub-prime meltdown” severely crimped sales activity. The crucial Miami market was the worst large market from a sales perspective, with 353 closings during
September, compared to 483 in August, a 26.9% decline. Florida has a 16.9-month inventory of single-family homes currently on the market, compared to a
9.4-month supply nationally. On the same measure, Florida has 35.6 months of condo inventory, compared to 14.3 months
nationally. Source: John McCrory – Sterne Agee
In short, although sales are above their sub-prime-crisis lows, they remain anemic and prices continue to tumble.
Highest Foreclosures/Households
Michael S. Talmadge Licensed Real Estate Broker 727.214.4650
Residential Real Estate – Pinellas County MarketPINELLAS COUNTY - through 3rd Qtr 2008
Single Family Housing market showed distinctive signs of improvement.
Pinellas County reported a higher number of pending Home sales: The absorption rate was the highest it has been this year. Year over year, unit sales increased 21.3%. 3rd Quarter 2008 held steady month to month. Inventory remained steady; however it is nearly 6.5% lower than last year. The median price was $165,000 in September 2008 - the lowest level for the year and reflects a 17.1% drop
from 2007. Of the homes that went under contract in September, the median price was $165,950. The number of pending sales was almost 26% higher than last year.
Condo sales, on the other hand, are still working through a slower market: Listings are down 17.2% and sales are also down 6% year over year. The median price continued to drop, now at $150,000 which is 7.7% below September, 2007. 22% of the condos sold were in the $100,000 to $140,000 price range, with another 12+% in the $200,000 to
$250,000 range. Just as with single family homes, the future looks brighter, with pending sales at 22% higher than last year. The median price of the pending sales is $149,900.
Source: Pinellas Board of Realtors
Michael S. Talmadge Licensed Real Estate Broker 727.214.4650
