February 21, 2010-Activity Picking UP!!

OK, I think what we are seeing in the last few weeks is activity picking up by at least 20%, with quality space moving because the landlords have waited long enough and finally lowered rates to meet the bid. Industrial space centered around the Exits on the NJ Turnpike north of 8A are experiencing much more activity than January, chalk it up to many things but first and foremost is the deals are out there, the offers are made , it is now up to the landlords to realize that deflation has taken hold. Deflation of assets means much lower rentals, rental prices we haven't seen in 15 years. Empty space is no way to prosperity, therefor, better to have it occupied to find the path to a better rental market in the future. 2 Major woodworking shops in Middlesex County, NJ shut down, the business is not profitable with the lack of volume of orders. Steel fabrication is still doing good. Plastics will always be with us as well. Food and beverage continues to be steady as always. Arizona Ice Tea's purchase of the nearly 500,000 sf box in Edison (formerly Bradlees a long time ago)will be great for the Raritan Center market, now next up is the Fuji bldg. and the nearly 700,000 sf at the NY Times bldg.
I will not be surprised with a major deal being announced by April 1st on either one of these bldgs. Great landlords make deals and both bldgs. have both. We will have significant vacancy throughout 2010 but this will be the year that tenant's can step and grab a bldg. they never would have looked at before because of price and make a 5 year fixed rental deal at numbers not seen before.
As far as sales, banks are still extending and pretending, previous posts explained this procedure whereby the banks refuse to proceed with going after non-performing loans.
Stay tuned, watch for the REIT Index over the next few weeks as a cue to see if can break through and make new highs, LXP, Lexington Property trust I have my eye on as a litmus test, as well as watching to see how the Simon property/General Growth shakeout. Oh, and by the way, prediction, BLACKSTONE moves the market bigtime with M and A and the Graham packaging IPO start the ball rolling.
Christoper Galiano, Managing Director, SIOR
NAI DiLeo-Bram & Co.
cgaliano@naidileobram.com
732-985-3000

February Snow and Markets Fall Too!

Looks like we are going to reach lower lows in rental prices in 2010, the monster 1,300,000 sf box at Exit 8A leased to Williams Sonoma , the 500,000 sf to GIII took a small chunk out of the empty space but at 40% discounts to the 2007 mkt. ie: returns of cash on cash below 5%, not what investors were looking for went construction started. Nowadays 5% is better than -30%.

There will be slightly more sales in 2010, with gov't increasing cap. gains causing some sellers to sell vs. fish. The only problem is ALL this can't happen fast enough as the spiral of descending rents continue.

Increase in commission rates and incentives JUST for showing space will continue to be the norm in 2010, where almost any credible deal is a good deal vs. the pick and choose your deal of 2007. If I hear about one more group that has or is putting together a distressed asset fund then I reckon we will have One heck of a frenzied auction for these CMBS assets as they unwind, and the price of settlement will be lower than most folks realize.