Clay & Company » A Texas Commercial Real Estate Blog

via the San Antonio Business Journal

The good news is that employment numbers for San Antonio’s construction industry are continuing to rise.

The bad news is that fewer cities are enjoying the same fortune as San Antonio.

In its latest survey of the country’s 337 largest metros, the Arlington, Va.-based Associated General Contractors of America (AGC) found that between March 2011 and March 2012, employment increased in 155 of those cities.

Among the cities included in that figure: The San Antonio/New Braunfels metro — which saw a 7 percent increase in construction employment on a year-over-year basis. To date, the local construction industry is reporting a total of 44,300 employees — up 2,900 from the 41,400 employees reported at the end of March 2011, per the latest AGC report.

The San Antonio/New Braunfels metro area was also among the cities that posted construction employment gains in January and February as well.

Unfortunately, the number of cities actually posting job growth is shrinking.

In January, out of the total 337 metros tracked by AGC, 169 of those cities saw construction employment figures rise. In February, the number was up slightly — with 171 metros seeing employment gains.

Now in March, only 155 of the country’s largest metro areas were reporting construction employment gains.

Another 134 metros reported employment declines; 48 cities reported no change, the AGC analysis states.

Other Texas metros among the 155 that saw construction employment numbers rise between March 2011 and March 2012 are the the Dallas/Plano/Irving metro area, which saw a 1 percent increase in construction employment; and the Fort Worth/Arlington metro area, which reported a 5 percent gain in construction employment.

Meanwhile, the Houston/Sugar Land/Baytown metro area was among the 134 that saw employment figures drop — 1 percent between March 2011 and March 2012.

The Austin/Round Rock/San Marcos region was among 48 metro areas that saw no change in construction employment, AGC states.

Market uncertainty, AGC officials say, continues to hamstring construction-employment growth in many markets. Washington’s failure to approve long-term investment in highway and transportation improvements, for example, is putting the hurt on construction firms that work on these public infrastructure projects, according to the AGC.

“When it comes to politicians talking about the need to support private-sector job creation, construction firms could benefit from less rhetoric and more action,” says Stephen E. Sandherr, chief executive officer for the AGC. “… It would be helpful if Congress and the administration would instead help end much of the uncertainty holding back the industry.”

Source

Source

The May 2012 NAR Commercial Real Estate Forecast published today brings a bumper crop of good news about the economy and fundamentals in commercial real estate in all its sectors. Significant job growth, full recovery and growth in the apartment sector lead the report.

NAR Chief Economist Lawrence Yun points to new jobs as driving the recovery: “Ongoing job creation, which is at a higher level this year, is fueling an underlying demand for commercial real estate space, assisted by a steady increase in consumer spending,” he said. “The pattern shows gradually declining commercial vacancy rates, with consequential but generally modest rent growth.”

Jobs Coming Back In The Millions

Yun expects the economy to add 2 to 2.5 million jobs both this year and in 2013, on the heels of 1.7 million new jobs in 2011, assuming a new federal budget is passed before the end of the year. “Although we need even stronger job growth, by far the greatest impact of job creation is in multifamily housing, where newly formed households striking out on their own have increased demand for apartment rentals – this is the sector with the lowest vacancy rates and strongest rent growth, which is attracting many investors.”

In all areas of commercial real estate, indicators are in the green, according to the forecast:

Office Space Vacancy Projected To Fall

Vacancy rates in the office sector are projected to fall from 16.3 percent in the second quarter of this year to 16.0 percent in the second quarter of 2013.

The markets with the lowest office vacancy rates presently are Washington, D.C., with a vacancy rate of 9.3 percent; New York City, at 10.0 percent; and New Orleans, 12.6 percent.

Office rents should increase 2.0 percent this year and 2.5 percent in 2013. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is forecast at 24.7 million square feet in 2012 and 48.0 million next year.

Retail Markets: Rents and Absorption Up

Retail vacancy rates are forecast to decline from 11.3 percent in the second quarter to 10.7 percent in the second quarter of 2013.

Presently, markets with the lowest retail vacancy rates include San Francisco, 3.7 percent; Fairfield County, Conn., at 4.0 percent; and Long Island, N.Y., at 5.0 percent.

Average retail rent should rise 0.8 percent this year and 1.3 percent in 2013. Net absorption of retail space is projected at 8.0 million square feet this year and 21.9 million in 2013.

Industrial Markets Manufacturing Demand

Industrial vacancy rates are likely to decline from 11.0 percent in the current quarter to 10.7 percent in the second quarter of 2013.

The areas with the lowest industrial vacancy rates currently are Orange County, Calif., with a vacancy rate of 4.7 percent; Los Angeles, 5.0 percent; and Miami at 7.2 percent.

Annual industrial rent is expected to rise 1.6 percent in 2012 and 2.4 percent next year. Net absorption of industrial space nationally is seen at 44.1 million square feet this year and 62.4 million in 2013

A Boom In Multifamily

The numbers here seem to be the other shoe dropping concerning the pent-up demand for apartment housing we wrote about here at The Source in January:

The apartment rental market – multifamily housing – is likely to see vacancy rates drop from 4.5 percent in the second quarter to 4.3 percent in the second quarter of 2013; apartment vacancy rates below 5 percent generally are considered a landlord’s market with demand justifying higher rents.

Areas with the lowest multifamily vacancy rates currently are New York City, 2.1 percent; Portland, Ore., at 2.3 percent; and Minneapolis at 2.4 percent.

After rising 2.2 percent last year, average apartment rent is expected to increase 4.0 percent in 2012 and another 4.1 percent next year. “Such a rent increase will raise the core consumer inflation rate. The Federal Reserve, in turn, may be forced to raise interest rates, possibly as early as late 2013.”

Multifamily net absorption is forecast at 215,900 units this year and 230,300 in 2013.

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By Carisa Chappell for Reit.com

First quarter earnings reports showed solid fundamentals and opportunities in cellular towers, data centers, apartments and high-end malls, according to Jonathan Litt, managing principal of Land and Buildings Investment Management LLC.

Cellular towers provide the strongest secular growth opportunities in the real estate sector as global mobile data growth remains in the early stages, Litt said in a May report highlighting how commercial real estate fared during the first quarter.

“First quarter trends confirmed the need for additional infrastructure to meet this data demand, as same-tower revenue growth came in at 8 percent to 9 percent,” he said. “This high level of growth in cell towers is sustainable for at least the next several years as global mobile data traffic continues to grow.”

Litt’s report said apartments continue to validate analysts’ high expectations for the sector. The apartment sector still shows robust fundamentals, with first quarter earnings stronger than expected. Litt said with little new supply and a low number of tenants moving into homeownership, apartments should see near 20 percent growth in funds from operations in 2012.

Litt also noted that high-end malls are enjoying strong tenant sales. Owners of high-end malls witnessed an increase of 6.1 percent in same-store net operating income (SSNOI) from a year ago in the first quarter.

“Strong pricing power drove rents up 14.2 percent on new leases in the quarter, some of the strongest rent growth of any property sector,” Litt said.

However, grocery-anchored shopping centers and big box power centers continue to underperform.

Litt said potential downsizing by some of the larger chain store tenants, such as Best Buy, could continue to weigh on shopping center real estate owners. He projected that FFO growth for the sector will likely remain at a “modest” 3 percent in 2012.

Litt’s report also highlighted weaknesses in the office sector. Public companies saw leasing activity down nearly 10 percent in the first quarter from the year-earlier period, said Litt, who added that 2012 SSNOI is expected to be down 2 percent on average. Litt pointed out that leasing activity in the office sector strongholds of New York and Washington has tumbled.

Colliers’s recent Retail Whitepaper examines what is driving retail recovery and what will make retailers successful in the days ahead. A summary of the paper follows:

Retail’s dependence on a healthy economy and a fickle consumer makes it vulnerable, but as an investment category retail real estate presents attractive opportunities. For property owners, municipalities, and investors committed to the sector, opportunistic investments can materialize by thinking differently from the herd. This type of forward-thinking analysis involves digging beneath the top-line numbers to understand the factors and conditions necessary for asset performance and values to recover further, and how those elements will favor certain retailers and markets. This white paper aims to identify and analyze successful investment and branding strategies, and the retailers ahead of their peers in executing them.

• Retailers’ corporate success now hinges far less on absolute price than it does on corporate strategies for reinvesting in technology, elevating the in-store experience, and redefining the service aspects of the retailer’s offering.
• Technology investment takes the form of channel diversification: improving and integrating brick-and-mortar, online, mobile, and catalog operations.
• Real estate investments include opening new stores, experimenting with smaller prototypes and upgrading existing locations.
• While “Location” has always been the most important to real estate success, quality tenants are proving equally important at separating a retail project from it’s competitors.
• Retailers “ahead of the curve” in reinventing their physical spaces elevate the shopping experience to focus on every aspect of their business that matters to their customer.
• Retail is becoming more about service and less about “stuff.”
• Successful landlords will be those that remain focused on maintaining a unique tenant mix and be willing, if necessary, to accept lower rents short-term to achieve the long-term payoff of owning a commercially viable property with stable (or rising!) occupancy rates and cash flows.
• Another option is to develop tenants internally: incubating new retail concepts that will eventually take space.
• And, landlords and owners (and their lenders) have to be willing to demolish vacant or under-utilized spaces, foregoing short-term cash flow, to create new retail zones.
• Metro markets poised to outperform in the next decade exhibit one or more of the following attributes:

1. An improving housing market: For May, the Five states with the highest number of improved markets are Texas (11), Florida (10), Michigan(8), and Pennsylvania/North Carolina/Iowa (6).
2. Potential for favorable demographic shifts: The big shift will likelybe demographic, as the 78 million Millennials move into their prime household formation years and and a way to move out of their parents’ basements.
3. Ability to cultivate job growth and a skilled labor force in energy-and knowledge-based industries: Job growth is occurring in areas dominated by industry sectors that either were more resistant to the recession or began to improve earlier in the recovery like powerhouse Texas cities of Houston and Dallas.
4. And proximity to intermodal infrastructure: Big changes are coming for metro areas proximate to intermodal infrastructure, such as deep-water ports and rail lines, as macroeconomic dynamics shift import/export demandand the Panama Canal expansion nears its scheduled 2014 completion. Current growthtrends favor East Coast and Gulf ports.

Full report here.

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By Marty Kramer | Consumer columnist for TexasRealEstate.com

Have you ever protested your property-tax appraisal? I have. Twice.

The first time was easy. We had bought our home six months earlier, and the appraisal district thought it had appreciated 20%!

I attended an informal meeting with an appraisal-district employee. When she looked at the copy of our closing documents, she immediately adjusted the price down to our purchase price. Simple as that. She said I could have handled the whole thing over the phone.

My second appraisal protest was only slightly more complicated. I came to the informal meeting with appraisals of comparable homes in my neighborhood and pictures of my house.

The appraisal district employee and I went back and forth over the details, and after 10 minutes, she dropped the appraisal. Not as much as I’d requested, but still a helpful amount.

So, I didn’t make it to the formal hearing with the appraisal review board either time. I hear from a friend of mine that’s a little more stressful, but still a fairly easy process if you do your homework.

Here are a few things to keep in mind if you decide to protest your appraisal.

Meet the deadline

According to the Texas comptroller, you have to file a written protest (for single-family residences) “by April 30 or no later than 30 days after the appraisal district mailed a notice of appraised value to you, whichever date is later; however, an owner may file a notice before June 1 if the ARB has not approved the appraisal records. Note that it is 30 days after mailing the notice, not its receipt.”

Depending on when your district mailed notices or approved the appraisal records, you may still have time to file.

Follow the rules

You can’t protest your appraisal on the basis that your tax bill is too high. Not successfully, anyway. You have to show that your property has been appraised higher than what it’s actually worth … or higher than other similar properties in your neighborhood.

Bring evidence

Your opinion doesn’t carry much weight. Whether at an informal hearing or in front of the appraisal review board, you should focus on factual information supported by documentation.

Be nice

Some people come to an appraisal protest ready to do battle. I’ve heard some loud, nasty folks while I was there to protest my appraisal. I don’t think that works. Just my opinion, but I bet appraisal-district employees and the appraisal review board members will probably respond better to homeowners who are polite and respectful.

You can find more specifics about how to protest your taxes from the state comptroller’s website.

Source

This week’s Houston Business Journal reports that Houston tops the nation in super-commuters, a new breed of business traveler that travels long distances — mainly within the Texas triangle — once a week or more for work.

The super-commuter is defined as a person who works in one metropolitan area but commutes regularly to other metropolitan areas through various forms of transportation, according to a new study from the Rudin Center for Transportation atNew York University’s Wagner School of Public Service.

The Houston area has the highest percentage of super-commuters of all major U.S. cities, with 251,200 super-commuters making up 13.2 percent of the workforce, a number that increased by 98 percent from 2002 to 2009. Several factors have contributed to this increase including population growth and double income households. Mitchell Moss, director of the Rudin Center and an author of the super-commuter study, says if one person gets a new job in a nearby city, the household may choose to keep the original family residence and let person commute to the new job.

Another contributing factor to Houston’s super-commuter growth is the proximity of other major economic centers such as Dallas and Austin. However, the proximity these cities may have hindered the development of alternative forms of transportation since the drive between cities is not excessive, and there is an abundance of affordable air service, said Joe Schweiterman, a professor of transportation studies and the director of the Chaddick Institute for Metropolitan Development at DePaul University in Chicago.

“I think that’s why rail and bus haven’t seen that much action,” he said. “It is an untapped market waiting for entry.”

Read more about super-commuters and see the bus and rail options being explored.

The Houston housing market experienced continued growth in April as home buyers helped support an 11th consecutive month of positive sales. The volume of single-family home sales was the greatest for a single month since last August, and average and median pricing achieved the highest levels for an April in Houston.

According to the latest monthly data prepared by the Houston Association of REALTORS® (HAR), April sales of single-family homes climbed 9.6 percent versus one year earlier. That marks the second biggest monthly increase of 2012.

“The Houston real estate market continues to benefit from a healthy economic climate led primarily by the addition of 96,000 new jobs locally in the past 12 months, according to the Texas Workforce Commission,” said Wayne A. Stroman, HAR chairman and CEO of Stroman Realty. “Increases in pending home sales along with declines in active listings continue to keep our housing inventory at the lowest levels we’ve seen in more than three years.”

Source: HAR Press Release

Timothy K. Clay, President, Clay & Co

Specialty: Triple net investments and land

Clay is the founder and president of Clay & Co., which celebrated its 20th year in 2011. Last year, he assisted clients in forming a fund with the purpose of purchasing over $25 million of triple-net investment properties. The fund closed on its first property in October, a Baytown retail space with a 20-year lease to Academy Sports and Outdoors.

Who’s a competitor whom you admire in Houston? Larry Indermuehle, CEO and founder of Larry Indermuehle & Co.

Where’s the weirdest place you’ve closed a real estate deal? On the side of the road

What do today’s tenants get the most excited about on a tour? Amenities

What job did you receive your first paycheck for? Discount Tire store on U.S. Highway 6

When trying to sell Houston as a city, what’s your favorite thing to brag about? Job growth

See full list of Houston’s 2012 Heavy Hitters of commercial real estate here.