September 5, 2012

The Wednesday Wrap: Sept. 5, 2012

Each Wednesday, The Wrap presents a compilation of recent noteworthy
commercial real estate stories from a variety of publications.
Below are five stories that caught our eyes in recent days.

Hartman Simons Commercial Real Estate blog“Occupancy
Rates Stabilize, Rent Growth Slows”
by Bendix Anderson for National Real
Estate Investor.

As a result of affordability in the for-sale housing sector
and a sluggish job market, apartment rent growth has slowed ever so slightly since
peaking in the summer of 2011, Anderson reports.

Annual effective rent growth dropped to 3.73 percent in July
from 3.83 percent the month before, the article notes. Still, average apartment
rents will steadily improve over the next few years, Jay Denton, vice president
of research for the data firm Axiometrics, told Anderson.

On another positive note, occupancy rates remain high. The
national occupancy rate dipped in July from 94.36 to 94.33 percent, but the
rate is still up 71 basis points year over year, according to Axiometrics.

“Small
is New Order for Struggling Malls”
by Kris Hudson of The Wall Street
Journal.

When it comes to struggling shopping malls, “small” is the
new name of the game, Hudson reports.

Smaller real-estate companies are buying up cheap, low-performing
malls and finding ways to improve them, sometimes reducing their size before
starting other turnaround strategies like upgrading tenants.

Roughly 300 of the 1,000 enclosed malls in the United States
are considered subpar, meaning they generate less than $300 in sales per square
foot, according to Green Street Advisors.

Although the purchase prices for challenged malls can be
low, plenty of challenges and risks come with investing in these properties.
“These mall transactions show that investors now are interested in higher risk
but potentially higher yielding retail investments in the U.S.,” Ben Carlos
Thypin, Real Capital’s director of market analysis, told Hudson.

“As
Tech Office Boom Rolls into Third Year, Can Growth Maintain Impressive Pace?”

by Mark Heschmeyer of CoStar.

The high-tech sector’s strength over the last two years has
pushed rents and occupancy higher in tech-oriented office markets across the United
States. Now, investors are wondering if that momentum will continue.

High-tech service jobs grew by 9.9 percent between 2009 and
mid-2012, according to a report by CBRE Global Research and Consulting. By
comparison, non-farm jobs overall rose by just 1.7 percent in the same
timeframe. Office rents have increased over the past two years in 15 of the top
20 tech-oriented markets.

Analysts are saying, however, that the high-tech industry
may be starting to cool and that it could enter a period of slowing employment
growth and earnings, according to Jones Lang LaSalle’s newest industry outlook. 

“The pipeline … indicates that several million square feet
of gross absorption is ahead for the industry, but with many large deals
already completed in the last 12 months, the tech industry may be approaching
its peak,” JLL said in the report.

“The
Commercial Real Estate Industry Tries to Update Its Identity”
by Elaine
Misonzhnik of National Real Estate Investor.

The commercial real estate industry is slowly becoming more
diverse, Misonzhnik reports. The change is in part due to the changing
demographics of the United States, where non-whites make up a third of the
population, and women make up half of it, according to the author.

In the past, the exclusive nature of the industry made it
unattractive to outsiders, Misonzhnik writes. Today, diversity is looked upon
by the industry fondly, but it’s been a slow road to get there.

“I think that the days of women being excluded from the decision-making
process just because it was a clubby environment are behind us,” Michael P.
Kercheval, CEO of the International Council of Shopping Centers, told Misonzhnik.
“More often, companies are eager to get diversity, but until you get women or
people of different racial and ethnic heritage in senior positions, it’s hard
to get other people to see it as a possibility.”

VIDEO:
“Lack of Supply is Impacting CRE Financing”
from Globe St.

In the clip below, Michael Derk of Marcus & Millichap sits down during the
RealShare Orange County 2012 conference to discuss commercial real estate
financing. He discusses the lack of inventory in the market, demand across all
product types and the effect of supply on cap rates.

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