OK, as indicated in previous comments , we are going to need to fall back in order to spring ahead. Lower rates going lower to paper over the Fed's wrong moves of earlier years.
Bargains are perceived when they fall 30% + off previous highs. Volume on the sales side is absolutely pathetic. Blame the banks, who blame the gov't and the new regs. Everyone is afraid of their shadow. No body wants to dive in the pool until other folks do. Confidence is the key ingredient lacking in the recipe for economic growth. Healthcare costs unknown, implied tax rates unknown, LT that is. Companies don't hire for short term, they temp it out. Bldg. lease prices are falling in concert with sales comps. The towns are getting flooded with tax appeal requests and the engines that drive retired pension benefits etc., are from real estate taxes. We are all working 2x as hard for 1/2 as much since the regular deal volume has slowed. America is learning to live with less as evidenced by all the furniture companies sales being hit super hard. Prices must reflect the real economy, denial phase of the cycle is probably where we are at. People will work for less. The education, healthcare costs must be driven down. I think the jobs our kids will have in 20 years from now don't exist today. Preparing students for 2032 world is going to involve speaking at least 1 or 2 foreign languages. BRIC nations (Brazil, Russia, India and China )and Korea as well
will be dominant real estate forces as their engines only get stronger and their middle class grows. Eyes are on Europe this September, when Greek 1 year bonds pay 60%, default is a matter of weeks. Stay tuned. Germany has probably realized they have to carry Greece on its back in order to protect their country's currency.
Monday, September 26, 2011
Sunday, March 27, 2011
2011 Q1 Summary
Bid and ask of commercial real estate coming in. Sellers are getting more in tune to the changing
playing conditions. Its not enough to have 2 parties agree to a sales contract. Sellers and Buyers better 1st check with the bank to see what their position is before the fees start coming on the due diligence. Absorption among some of the better geographically positioned properties are being leased all be it at 20% discounts. Many , many things must happen in order for this recovery to maintain an upward bias. Interest rates, oil prices, unemployment, political unrest and I mean London yesterday not the Middle East could derail the positive outlook. If any one of these issues gets more negative , all bets are off. Lets not forget inflation. Right NOW, things we NEED are inflating, ie.. food and energy and things we WANT are deflating. I think the gold/silver metal inflation edge is a combination of Asian countries looking to diversify out of the dollar into hard metal assets and ETF speculators have pushed up these prices 10-15% more than normal. Meaning that margin calls could wipe out a year to date gain in a matter of days. Watching the stock value of Prologis and First Industrial to get a read on how the debt will be managed as it matures. Follow the institutional money into these if you see highers highs and lower lows but be cautious if these can't hold. They both are at a crossroads of indecision as far the markets preceiving their value. It may be better to own the stock equity of real estate investment trusts vs. the actual real estate in the short to medium term. Resaon being , they are more liquid in a time of any crisis.
playing conditions. Its not enough to have 2 parties agree to a sales contract. Sellers and Buyers better 1st check with the bank to see what their position is before the fees start coming on the due diligence. Absorption among some of the better geographically positioned properties are being leased all be it at 20% discounts. Many , many things must happen in order for this recovery to maintain an upward bias. Interest rates, oil prices, unemployment, political unrest and I mean London yesterday not the Middle East could derail the positive outlook. If any one of these issues gets more negative , all bets are off. Lets not forget inflation. Right NOW, things we NEED are inflating, ie.. food and energy and things we WANT are deflating. I think the gold/silver metal inflation edge is a combination of Asian countries looking to diversify out of the dollar into hard metal assets and ETF speculators have pushed up these prices 10-15% more than normal. Meaning that margin calls could wipe out a year to date gain in a matter of days. Watching the stock value of Prologis and First Industrial to get a read on how the debt will be managed as it matures. Follow the institutional money into these if you see highers highs and lower lows but be cautious if these can't hold. They both are at a crossroads of indecision as far the markets preceiving their value. It may be better to own the stock equity of real estate investment trusts vs. the actual real estate in the short to medium term. Resaon being , they are more liquid in a time of any crisis.
Monday, August 2, 2010
August , NJ Commercial Real Estate Mkt. Bring it On !
Starting out the month with companies looking long and hard at their current lease and seeking remedies to cut overhead. Real Estate Taxes have quietly edged up to levels whereby most tenants are asking, "how did they the taxes rise so fast". 3% per year on average has been the norm over the past five years. Biggest indecision is because of the lack of clarity of the tax code upon us. Companies hoarding cash in anticipation of getting hit hard in 2011. Price reductions will accelerate as the askers try to meet the bidders to make a meeting of the minds by year end.
Chris Galiano-SIOR , NAI DiLeoBram & Co.
cgaliano@naidileobram.com
Chris Galiano-SIOR , NAI DiLeoBram & Co.
cgaliano@naidileobram.com
Sunday, July 11, 2010
Mid-Summer and its Heating Up!
Whenever one thinks of commercial real estate these days, you have to wonder about the
slowdown in retail, the unemployed and lack of demand for more office space (hitting a 17.5% vacancy this week, a high) and the seriousness of the "extend and pretend" loans on the books.
What the banks are doing is basically putting off a problem and hoping time heals it. A rolling loan gathers no moss. Many properties have 120% LTV or better but so long as the interest is paid, who cares. The banks don't want to show the loss, the borrower doesn't want to lose the property and the debt is getting serviced. We are in a new norm and THIS is what is propping up the entire economy. If the banks called in all these loans, look out 30% decrease in values would occur in just 1 year from the oversupply. Low interest rates are here to stay until we see unemployment ever break through 9%. There's a lot of pent up demand to purchase property, its starting to kick in and since we have a mid-term election in 6 months this should help maintain the level of activity.
slowdown in retail, the unemployed and lack of demand for more office space (hitting a 17.5% vacancy this week, a high) and the seriousness of the "extend and pretend" loans on the books.
What the banks are doing is basically putting off a problem and hoping time heals it. A rolling loan gathers no moss. Many properties have 120% LTV or better but so long as the interest is paid, who cares. The banks don't want to show the loss, the borrower doesn't want to lose the property and the debt is getting serviced. We are in a new norm and THIS is what is propping up the entire economy. If the banks called in all these loans, look out 30% decrease in values would occur in just 1 year from the oversupply. Low interest rates are here to stay until we see unemployment ever break through 9%. There's a lot of pent up demand to purchase property, its starting to kick in and since we have a mid-term election in 6 months this should help maintain the level of activity.
Friday, March 5, 2010
Leasing/Buying/Renewing
New Jersey Commercial real Estate
The last 6-12 months has been a very activewith our office helping existing customers recognize the value in saving money in the market by negotiating existing leases. Very , very few buyers of property over $5,000,0000. We have had a recent flock of leasing on some of our vacant spaces, notably the 150,000 sf across from Walmart in Edison.
As we get through 2010, everyone is eager to see what the FED and the banks due about this extend and pretend situation. From what we know, there are billions of dollars in commercial loans upside down and due to mature over the next 24 months. Note sales are just starting to creep into the fold, we will have a very interesting year like we have never seen before, due to the continuance of a frozen credit market.
Christopher Galiano, SIOR
NAI DiLeoBram & Co.
cgaliano@naidileobram.com
The last 6-12 months has been a very activewith our office helping existing customers recognize the value in saving money in the market by negotiating existing leases. Very , very few buyers of property over $5,000,0000. We have had a recent flock of leasing on some of our vacant spaces, notably the 150,000 sf across from Walmart in Edison.
As we get through 2010, everyone is eager to see what the FED and the banks due about this extend and pretend situation. From what we know, there are billions of dollars in commercial loans upside down and due to mature over the next 24 months. Note sales are just starting to creep into the fold, we will have a very interesting year like we have never seen before, due to the continuance of a frozen credit market.
Christopher Galiano, SIOR
NAI DiLeoBram & Co.
cgaliano@naidileobram.com
Sunday, February 21, 2010
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
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
Saturday, February 6, 2010
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.
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.
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