Office Space: Rents Still Rising, Absorption Slows
Submitted by
CalculatedRisk on Thu, 10/04/2007 - 6:35am (33 comments)
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As a result, the countywide vacancy rate ... rose to 10.9% in the last quarter vs. an average of 7.1% a year ago.
Ummm.... I thought 92% to 95% occupancy was the "healthy range."
89.1% occupancy is weak. More buildings coming and more mortgage jobs to be lost.
How are car sales doing in OC?
Got popcorn?
Neil
"There is a slowdown," said Barry M. Gosin, chief executive of Newmark Knight Frank, a New York-based commercial real-estate services firm.
"Today's revised figures showed business investment plans softened in the second month of the quarter. Bookings in August for capital goods excluding aircraft and military equipment, a measure of future business investment, fell 0.5 percent after rising 0.9 percent." [Bob Willis, Bloomberg]
Slow and soft...
Maybe the Czarina would want a Winter Palace in Orange County. She could absorb some of those vacancies and it would put her close to Wacky Mortgage Central.
" Otter...is it supposed to be this soft ? "
Buffy in Animal House
OT: 20% of homes in Flagler County, FL, for sale; 50% in Celebration.
"Location Factor In Home Sales, Foreclosures"
Location Factor In Home Sales, Foreclosures - Consumer News Story - WESH Orlando
Thank goodness the prices of those homes can only go up.
I'm sure the vacancy rate is not entirely due to CountryWide.
In NYC, the aggressive speculation by firms like Blackstone pushed cap rates down to low single digits, thus forcing the ultimate buyer (Blackstone et. al. simply flipped many of the buildings), to raise rents in order to remain solvent. There is a significant lessening of demand as well, especially in the financial sector, which is the main driver in NYC.
Even more significant, the reportedely impregnable Manhattan residential market is now breaking, and breaking hard. See Reggie Middleton's Boom, Bust & Bling Blog - HAS MOVED TO REGGIEMIDDLETON.BOOMBUSTBLOG.COM!!!: Manhattan Real Estate is Falling. That's Right, I said it!!! And Beware Those with Short Term Memory. for details.
What about luxury hi-rise condos? Are they subject to the same conditions as the rest of the housing market, or are they immune?
Luxury condos? Most defintely not immune.
The full financing comes thru once they hit a laughable presale number, then they pray like hell they move units. Imagine the comps on a building with a 10% vacancy rate, or if people start letting.
I can't imagine more than a fraction of the shuttered/shuttering/to be shuttered financially related office space in Orange County has filtered through to actually be showing up on the inventory.
According to a front-page story in today's NY Times on the housing slump in Balitmore, lots of homeowners took out mortgages that don't require escrowing of taxes. Now, they are falling behind on taxes.
Do you know the answer to this question: If a homeowner falls behind in taxes and then the house is foreclosed, who pays the taxes? I understand it's the owner's responsibility until title changes hands. But wouldn't the government keep a lien on the house until taxes are paid, forcing the lender to pay back taxes to gain clear title?
If lots of owners are falling behind in non-escrowed taxes, it could mean more foreclosures than estimated. Also, it could mean hardship for governments.
if you enjoyed that thingy about loss timing on cdo performance the other day (nerd!), you may find the part (link below) about why CES subprime AAAs are being downgraded all the way to BBB- of interest (this is the presentation from fitch's call today on their re-ratings):
FitchResearch
(click "view presentation" on the right)
In Oregon, when a property is foreclosed on, the taxes are still due until paid. I think that is the same everywhere.
The taxes are always paid. Always. The municipality doesn't care who and not particularly even when. Late penalties are a profit center and in really bad times COPs aka RABs (Certificates of Participation, Revenue Anticipation Bonds) cover cash flow requirements. Lenders who find themselves accidental owners usually bring all the taxes and HOAs current and include those costs in their sales price calculations. If there are outstanding encumbrances taxes, HOA, mechanics liens, they are usually first in line when title changes hands. Don't cry for the municipalities that are stilll playing catch-up for the recent run-up in taxable basis. By the time they are forced to devalue they should have enough reserves to cover ongoing operations unless they are insdane like the Ventura County Board of Supervisors who recently signed off on a massive salary contract that runs multiple years of guaranteed raises.
Texas homebuilders need to cut back, report says...
Texas homebuilders need to cut back, report says |
News for Dallas, Texas | Dallas Morning News
| Dallas Business News
Oh, the taxes are a lien on the property, not the person. So whoever gets the property also gets the tax bill. This is why unpaid taxes are justification for foreclosure.
I don't think the note holders are really monitoring taxes. I don't know for sure.
Well, as far as I know, mechanic liens and most other liens, including HELOC are wiped out in a foreclosure. Everybody gets wiped out except the government.
Condos are more subject to the market malaise than single family homes. They have too much supply, with a multi-YEAR (not month) inventory glut in places like FL and Vegas.
NY is fairly strict, but Florida will let you market a building with a set of plans. End users have access to 100% fincancing and have flipped several times before the condos are even built.
Then there is that multi-year glut again, despite that, just stroll through Manhattan, Brooklyn, South Beach or Ft. Lauderdale and guess what you see everywhere??? Cranes building more condos!!! A lot more condos!!! Things are going to get a lot uglier before it gets better.
The condo/townhome glut in Chicago and its suburbs is also a thing of wonder.
The Alarming Parallels Between 1929 and 2007. Has deregulation left the economy at risk of another 1929 scale crash? Should the Fed keep bailing out speculators? Robert Kuttner testified yesterday before the House Financial Services Committee.
Hmm.
I wonder about what commercial vacancy rate figures do and don't include.
For example, if Sun Microsystems vacates a building it owns but doesn't immediately put it on the market or try to lease it -- does that count as a vacancy? Probably not, but there's a certain amount of that sort of thing going on with the larger valley tech companies.
According to a breathless New York Times reporter, Seattle's office rental market is positively blooming.
SQUARE FEET; Investors Lining Up for Pieces of Seattle's Comeback - NY Times
The Seattle office market has made a spectacular recovery in the last few years. As a result many real estate investors want to park their money there. . . .
Seattle is now on every investors shopping list. This year, the city was deemed the best place in the country to buy and sell office buildings in the Urban Land Institutes annual survey of real estate professionals. Office vacancies are at a six-year low of 7.7 percent, and downtown landlords are getting as much as $50 a square foot annually,...
Booming trade with Asia and a recovery in the job market are the secrets behind the rosy office market. Blue-chip companies like Starbucks, Amazon.com and Microsoft call the Seattle area home and have been steadily hiring thousands of new workers and funneling millions into the local economy.
Everything is coming up roses here!
Citicorp lost 1.3 billion in the 3rd quarter due to subprime while UBS took a 3rdQ writedown of 3.4 billion. But both expect everything to return to "normal" this quarter. Does that mean that neither has any exposure to all the ARMs that will reset this quarter and into 2008?
Statement of John F. Bovenzi, Chief Operating Officer and Deputy to the Chairman, FDIC on Industrial Loan Companies, before the Committee on Banking, Housing and Urban Affairs; U.S. Senate Oct. 4, 2007
FDIC: Error 404 - Page Not Found
"Stocks remain flat as investors balanced hopes for economic strength with a continued desire for more Fed rate cuts" -- WSJ headline today
"You can't always get what you need, no you can't always get what you need, but if you try sometimes, you might find, you'll get what you want." - B. Bernanke
When do we dust off the Gift Card Conspiracy script?
Perpetually
how bout now...
jsut try and spend the last 3 bucks on a card....
"Well, as far as I know, mechanic liens and most other liens, including HELOC are wiped out in a foreclosure. Everybody gets wiped out except the government.
Kokopelli | 10.04.07 - 12:38 pm | # "
kokopelli -
as far as i understand it, tax and mechanic's liens actually have priority over a first trust placed by a lender. this is in part why the lender requires you to buy title insurance, because they are at risk from these types of liens on the title.
in order i believe it would be tax, other city liens, mechanic's liens, 1st trust, 2nd trust, and then any other recorded or unrecorded liens on the title.
thats my understanding at least.
That story is all well and good, but just try negotiating a commercial lease in Manhattan right now. Cushman Wakefield released a report last week saying that average rent psf was up 37% in the fourth quarter of 07 relative to same in 06. I can confirm this from my own experience as a commercial tenant.
That said, I'm long SRS. Call it tenant-freude.
In other rosie news:
Washington DC has the nation's lowest unemployment rate. Fueled in large part by the drunken spending of the 'fiscally conservative / starve the beast' Republican Party.
let me try my hand at html...
Area Jobless Rate Is Lowest in U.S. - washingtonpost.com
FFDIC,
That is a fantastic speech/testimony given by Robert Kuttner in your link above. Thanks for that.
Heck, I vote for him for Mortgage Zsar (assuming of course that Tanta declines as expected). In fact, I vote for him for Financial System Zsar.
I am seeing plenty of new construction of commercial buildings here in north california (bay area) most of them are without a tenant after they are finished for months.
How do you owners sustain the costs ?
"How do you owners sustain the costs ?
sr | 10.04.07 - 3:44 pm | # "
heh. we pay out the ass.
generally however, you'd like not to start construction until all the leases are done. and you'd like not to have to close on the purchase of the property until then, unless it has cash flow.
then again, nothing is perfect
people deride developers all the time but rarely do they understand how much is at risk
generally with a construction loan like that, its ALL AT RISK
only with the permanent financing can you get non or partial recourse
dc1000
What you say is true IF that mechanic lien is placed prior to the TD or mortgage which seldom happens IF the lender is doing their job. This is because the lender has inspections of completion during construction and or sends checks in the name of builder and sub to make sure that they don't end up with the money gone and nothing left for equity.
Any mechanic lien placed after the TD or mortgage (which is done usually during an upgrade or remodel) is wiped out along with all other junior liens.
At least that is how things work in Oregon.
AS for CR loans for construction, it all depends on the bank. Small local banks will often fund construction of projects on a prospectus that shows what the builder believes will happen. Usually with a lot of flowery salesmanship. I don't know how the really big stuff gets done but I assume it is similar. Tenants may sign some form of agreement OR not, but of course in a real down turn it isn't easy to get blood out of a turnip.
So most of this CRE building is done in conjunction with the projections that when all those houses are full of people, based on what the value of those houses are and the types of incomes that these people should have that the stores will be able to pay the lease fees and make a few bucks too.
All of this falls apart when the houses don't sell or don't get built or the people occupying the $500,000 McMansion are McDonald's workers and bought with an option are or interest only stated income loan. And things look even worse with the numbers of foreclosures and bankruptcies increasing and looking worse the further down the road you look.