Washington DC Market Report

WASHINGTON DC OFFICE & INDUSTRIAL REPORT

The single tenant Office/Industrial market is highly competitive today, however, this competitiveness varies due to the nature of the tenant and the relevant market. High credit tenants in primary – especially urban – markets are among the highest in demand. According to Costar the market for single tenant NNN investments is averaging 10,000 transactions a quarter. A majority of those were Retail spaces, Corporate and Regional HQ’s in Primary and Secondary Markets.  

Of these primary markets, none is more interesting than Washington DC. Many Investors and Corporations have excess cash holdings and seek less volatile investments than the open stock and bond markets. 

This trend has been realized through the increased activity of  Institutional  Investors, Private Equity Groups, and both publicly and privately traded REIT’s D.C. is particularly fascinating with the inclusion of Government and Government Contracting Tenants such as SAIC, Booz Allen, Lockheed Martin, Northrop Grumman, etc. 

http://calkain.com/reports/research/calkain_research31.pdf

Boston Net Lease Market Heating Up

Invesco Real Estates Institutional Client has Paid $75 Million for 179 Lincoln St. in Boston.

Building owners are seeing their offices fill up, leading to higher rents, which makes their properties more attractive to potential buyers. Many buildings have been the objects of bidding wars in recent months, with pension funds, insurance companies, and overseas investors competing to own a piece of the skyline.

“Boston holds a very desirable spot in global capital markets,’’ said Michael Smith, a managing director at Jones Lang LaSalle. “Many investors believe the city has weathered the recession better than other markets.’’

The volume of sales is still far from 2007, when 34 buildings changed hands for total sales of $4.9 billion. But the improvement is unmistakable after a period between 2008 and 2010 in which only 14 office buildings were sold in Boston, the kind of cold streak that causes nightmares for commercial brokers.

Just this past week, CBRE | New England closed on the sale of a five-story office building that drew more than 50 bidders, including several large financial institutions that typically focus on high-rises. The building, at 179 Lincoln St., was sold to Invesco Real Estate for $75 million.

“179 Lincoln St. is a great example of how people are viewing Boston today as one of the most attractive markets in the US,’’ said Chris Angelone, an executive vice president at CBRE | New England. “Five years ago, it might not have been an institutional buyer, but today it is.’’

http://articles.boston.com

Hotel Investment Returns Tend to be Higher This Year

 The Occupancy Rate was 71% for the Highest-Priced Segment of the Hotel Market from January through November 2011

Private-equity firms will help drive an increase in hotel transactions this year in smaller U.S. cities, where investment returns tend to be higher than in large markets, according to Jones Lang LaSalle Hotels.

“While public real estate investment trusts have been focused on major markets, private equity has been looking at secondary markets,” where hotel income is greater relative to property prices, said Arthur Adler, managing director and chief executive officer for the Americas at the firm, part of Jones Lang LaSalle Inc. (JLL) “The reluctance to invest in secondary markets is melting.”Minneapolis; St. Louis; Nashville, Tennessee; and Charlotte, North Carolina are among cities attractive to lodging investors because they lure travelers and have healthy business climates, Adler said in an interview.

http://www.bloomberg.com/news

A New Storm's for Office Market

 Mushrooming in Office Markets Throughout The Country

Penn Mutual Towers, an office complex across the street from Independence Hall in Philadelphia, has seen its vacancy rise and income fall after one big tenant left and another renewed its lease for 15% less than it had been paying. Its creditors are foreclosing on the property, according to data company Trepp LLC.

Similar problems are mushrooming in office markets throughout the country, foreshadowing a new wave of real-estate trouble. While the housing market was at the heart of the most recent real-estate crisis, office buildings—the center of past meltdowns—until now haven't been a major source of concern. 

Rents in most markets are still well below what they were in 2007, with the drop in some areas as much as 26%, according to data firm Reis Inc. Because of the weak market, landlords with empty space or expiring leases also have to spend large amounts on incentives to attract tenants, like free rent and interior work.

To be sure, office vacancy rates have slowly improved in some markets as companies added jobs, and owners will benefit even more if the economy gains steam. Also, values of office property have increased in New York, Washington, Boston and other major cities, easing the stress on some properties.

For example, in New York, values of some office buildings are approaching boom-era highs, especially properties that are mostly occupied by credit-worthy tenants on long term leases. But six out of seven New York City's sub markets all have effective rents-which includes landlord incentives—down 15% or more since end-2007, according to Reis.




http://online.wsj.com