August 21st 2006

In This Issue

Putting Consumers First

Economic Notes:

This Weeks Leads



Commerce CRG Mid-Year Market Review Salt Lake County Office

Office Vacancy – Salt Lake County – Direct CBD
TypeQtr2 2006 Total SFQtr2 2006 Avail SFAbsorptionVacancy Qtr2 2006 Rents
Class A2,671,08650,6396 6,2531.90% $23.20
Class B2,291,542178,733 54,1207.79% $18.10
Class C1,620,339421,203 6,58625.99% $14.86
Overall 6,582,976650,273126,9 599.88% $19.37
Office Vacancy – Salt Lake County – Sublease CBD
TypeQtr2 2006 Avail SFVacancy
Class A21,5870.81%
Class B00%
Class C17,0001.05%
Office Vacancy – Salt Lake County Periphery
TypeQtr 2 2006 Total SFQtr2 2006 Avail SFAbsorptionVacancy Qtr2 2006 Rents
Class A1,032,68742,130- 6,7674.08% $19.61
Class B1,333,935160,791 40,26112.05% $17.26
Class C1,062,594212,895 12,76620.04% $13.64
Overall3,429,216415,816 46,26 012.13% $16.75
Office Vacancy – Salt Lake County Periphery – Sublease
TypeQtr2 2006 Avail SFVacancy
Class A00%
Class B14,7171.10%
Class C11,7391.10%
Office Vacancy – Salt Lake County Suburban
TypeQtr2 2006 Total SFQtr2 2006 Avail SFAbsorptionVacancy Qtr2 2006 Rents
Class A5,447,397491,905 122,6099.03% $21.12
Class B7,275,821685,517 -36,9179.42% $17.78
Class C4,531,594739,285 51,77416.14% $13.79
Overall17,304,8121,916,7 0413 7,46611.08% $17.78
Office Vacancy – Salt Lake County Suburban – Sublease
TypeQtr2 2006 Avail SFVacancy
Class A95,2311.75%
Class B130,8811.08%
Class C6,0150.13%
Overall232,1271.34 %
TOTALS Salt Lake County10.82%Office Vacancy – Salt Lake County Totals – Sublease
Total Qtr2 2006 Total SFQtr2 2006 Avail SFAbsorptionVacancy Qtr2 2006 Rents
Totals27,316, 9952,982,796310,685$18.05
TypeQtr2 2006 Avail SFVacancy
Totals297,1701.09 %

Vote how you shop?

What does where you shop say about how you vote? In the case of Wal-Mart, John Zogby, the highly regarded pollster, thinks it says a lot.

As he reviewed data from the Qtr2 2006 US presidential election,

Mr Zogby noticed something unusual: a strong correlation between how often people shop at Wal- Mart and how conservative they are.

The figures are stark: 76 per cent of voters who shopped at Wal-Mart every week voted for George W. Bush, while 23 per cent voted for John Kerry. By contrast, 80 per cent of those who never shopped there supported Mr Kerry, while just 18 per cent voted for Mr Bush.

"Wal-Mart is more than retail. I think it has become a culture unto itself," says Mr Zogby, who is writing a book about what he calls "the new American consumer". That culture is seen in the books and magazines the retailer puts on its shelves and those it keeps off. "You walk into a Wal-Mart and you're walking into the moral equivalent of a spiritual revival tent for born-again Christians."

Just as "soccer moms" and "Nascar dads" drew the scrutiny of pollsters in past elections, Mr Zogby is now paying close attention to weekly Wal-Mart shoppers.

African-Americans and Hispanics who shop there frequently are significantly more conservative than their cohorts who do not, he says. And he knew that Mr Bush was in deep trouble with the public when the president's standing slipped among weekly Wal-Mart shoppers, who had been among his strongest supporters.

Mr Zogby has placed other US retailers on the political spectrum. Firmly on the left are Neiman Marcus, Bloomingdale's and Macy's. Target, he says, is near the centre, "a hair to the left", and in the centre-right are Sears and JC Penney.

But none are as strong a predictor. "Wal-Mart's pattern is just incredible."

Source: The Financial Times, Qtr2 2006

City pick-up-and-go fleets wean drivers off ownership

Staff at Mountain Equipment Co-op, a store selling outdoor goods in downtown Toronto, seldom drive their own cars or call a taxi when they go out to training courses or boat demonstrations on nearby Lake Ontario. The store also owns no vehicles and public transport to the lake is not an option.

Instead, Mountain Equipment typically books a car for a few hours from AutoShare, one of a growing number of short-term rental - also known as car- sharing - services springing up in cities across north America and Europe.

The recent surge in petrol prices has triggered a wave of interest in car sharing among individuals and businesses. "It's a fantastic concept for me," says Nancy Harrison, an assistant manager at Mountain Equipment. "You don't have costs like parking and insurance. Most people don't need a car all the time."

Zipcar, the biggest north American operator, has signed up 60,000 members and runs a fleet of almost 1,600 vehicles in 12 US states and the Canadian province of Ontario. Across the Atlantic, StreetCar, which operates in London, Brighton and Southampton, has 6,000 members and is adding 750 each month, according to Andrew Valentine, co- founder.

The sector is drawing interest from prominent investors. Revolution Living, controlled by Steve Case, co-founder of America Online, bought a 55 per cent stake last year in the Seattle-based Flexcar, which is Zipcar's chief US rival. Mr Case raised his stake in June to 85 per cent. Honda, the Japanese carmaker, is a minority shareholder. General Electric's vehicle fleet financing arm recently advanced $23m in lease funds to help Zipcar enter new markets.

In theory, car sharing is a simple, seductive alternative to owning a vehicle. The idea - pioneered in Switzerland and Germany, where car sharing remains especially popular - is that members can pick up a vehicle whenever they need one, not from a central depot but parked at a location close to their home or office.

The rental period can be as short as an hour and the operator takes care of insurance, cleaning, repairs and a permanent parking spot.

Rental rates in the US are typically $7-$9 an hour, in addition to annual or monthly membership fees. In the UK, StreetCar charges 4.75 an hour, with no membership fee. Bulk-use discounts are common.

In practice, car sharing is notfor everyone - and the businessside can be complicated and risky.

According to AutoShare in Toronto, car sharing typically works best for people who do not need a car to get to work every day and who drive less than 12,000km a year. It also helps if members live or work close to a car-share outlet. Mountain Equipment Co-op rents three spaces in its parking garage to AutoShare, making it easy for employees to pick up a car.

As for running a car-share business, "when it first starts, it's very difficult to [reach] break-even", says Susan Shaheen, a transport researcher at the University of California at Berkeley. "Viability very much relies on a dense network of vehicles - and the availability of those vehicles."

Scott Griffith, Zipcar's chief executive, says his company typically assigns 100 cars to a city before cranking up a marketing campaign.

There are other difficulties. Ms Shaheen estimates that a car needs to be used at least six hours a day to earn a reasonable profit. But demand from individuals is typically heaviest over weekends, creating a double-edged sword for the operator. Members can end up frustrated at not being able to book a car when they want one for Saturday shopping, while the car-share service struggles to hire out the car on weekdays.

Zipcar has tried to address this mismatch with its Zipcar for Business service, known as Z2B, which offers discount rates on weekdays. According to Mr Griffith, corporate customers have grown to 20 per cent of the total over the past two years.

Success also requires a heavy investment in technology, from computer-coded electronic car keys to reservation and billing systems.

Members' co-operation is crucial for an efficient service. Toronto's AutoShare says about one in five members leaves each year. The most common reasons are relocation and the opportunity or need to own a car. About 2 per cent of those who leave are thrown out for inconsiderate behaviour, such as smoking in a car or returning it late.

In one sign that car sharing is gaining traction, competition has tended to expand overall demand in cities such as Washington and San Francisco, rather than eat into existing operators' market share.

Zipcar has signed up more than 500 members in Toronto since it set up in May. Yet AutoShare, which has been operating for eight years and has more than 2,700 members, also reports growth of 8-9 per cent a month. Kevin McLaughlin, AutoShare's president, says of his new rival that "they're creating a wave of interest and we're doing our best to ride it".

Ms Shaheen estimates that the ratio of members to vehicles in the US has fallen to about 40-to-1 from 64-to-1 last year. "Not only are [companies] attracting new members," she says, "but it appears that those users are using the vehicles more intensively."

Mr Griffith thinks that about 50 cities around the world, including Dublin, Sydney and Buenos Aires, could support a car sharing service.

While soaring fuel prices have helped attract members, those are not necessarily the driving force in car sharing. "The general hassle and car cost issues are the main thing driving growth here," says Mr Valentine of StreetCar in the UK.

Car-share participants are typically people in their 20s and 30s who are well educated but with relatively low incomes. Environmental awareness often plays a significant role in their decision to join. A service in the Netherlands is called Greenwheels.

According to Ms Shaheen, one shared car typically replaces between four and 10 privately owned vehicles. Mr Griffith says much of his job satisfaction comes from the 40-45 per cent of Zipcar customers who say they have either sold their own cars or decided not to buy one. "Twenty-five thousand cars have gone away because of Zipcar," he proclaims.

Source: The Financial Times


Salt Lake County Office Study

  • Putting Consumers First
  • The most effective way for countries (States?, Counties?, Cities? bs/br) to improve the economic welfare of their citizens, a McKinsey study shows, is to increase the productivity of their companies, primarily by encouraging competition.

    Consumers benefit because when more productive companies gain market share, less productive ones must close their doors or become more efficient.

    Either way, consumers get better goods at lower prices.

    India's government, for instance, abandoned many limits on foreign investment in the country's automotive industry during the early 1990s.

    Prices fell, demand for cars exploded, and output nearly quadrupled.

    Yet in many poor nations (also read cities?), government policies—such as zoning laws, investment regulations, tariffs, and tax codes— continue to limit competition.

    For more on how policy makers can remove barriers to economic progress, read "The power of productivity." http://www.mckinseyquarterly.com/article_page.aspx ?ar=1423&L2=19&L3=67&srid=63&gp=0

    Source: McKinsey& Co.

  • Economic Notes:
    • New Residential Construction (C20)

    • Housing starts decreased 2.5% to 1.795 million units in July. Housing permits decreased 6.5% during the month.
    • Consumer Price Index

    • The seasonally adjusted consumer price index rose 0.4% in July, after a 0.2% increase in June. Rising energy costs again pushed the top-line number higher. The core index, excluding food and energy prices, rose 0.2% in July; this followed four consecutive 0.3% monthly increases in the core CPI. Over the past year core CPI inflation has run at a 2.7% pace. The core number is good news, although inflation still remains a concern.
    • Global Business Confidence

    • Business confidence is sliding once again, under pressure from developments in the Middle East and energy price concerns. The index is at its lowest level since November Qtr2 2006 in the latest week, although it remains consistent with a global economy that is expanding at its potential. The recent decline comes after sentiment in July recovered much of its May and June losses. Sales have led the recent decline, although weakness has been broad-based. Asian and South American firms are the most optimistic, but followed closely by North American firms. European business confidence continues to lag, while high-tech firms are the most positive. Non-auto manufacturers also remain optimistic, and vehicle manufacturers, retailers, entertainment, and educational firms are negative.
    • ABC News/Washington Post Consumer Comfort Index

    • The ABC News/Washington Post consumer comfort index coughed up three points to -15 in the week ending August 13. The headline index now stands at a two month low. Weakness was broad based on all three of the underlying components falling over the week. An outsized four point decline in personal finances lead the overall charge lower.
    • NAR Metro Prices

    • House price appreciation is rapidly decelerating in the second quarter of this year. Y/y growth in the median house price is down in the single digits for the nation and a growing number of metro areas in the Midwest are posting declines, however, previously hot markets are also showing substantial weaknesses
    • Senior Loan Officer Opinion Survey

    • The July Senior Loan Officer Opinion Survey reflected a further easing of lending standards on C&I loans in the second quarter although demand for these loans were unchanged over the previous three- month period. Demand for commercial real estate loans was also unchanged since the previous survey and lenders indicated tighter standards. Reflecting the slowdown in the housing market, about 60% of respondents indicated weaker demand for residential mortgages and 10% of respondents indicated looser lending standards for mortgage loans.
    • NAHB Housing Market Index

    • Homebuilder optimism dropped 7 points to 32 in August.
    • Chain Store Sales

    • According to the ICSC, chain store sales were essentially unchanged in the week ending August 12. Year-over-year growth ticked up to 2.6%, the best growth in five weeks. State sales tax holidays continued to have a negligible impact on national data.
    • MBA Mortgage Applications Survey

    • Mortgage demand increased last week, with the market index rising 1.4% in the week ending August 11. The increase was entirely concentrated in refinance applications, which increased 4.6%. Purchase applications decreased 0.8%.
    • Treasury International Capital Flows

    • U.S. net capital inflows in June were $75.1 billion compared to a revised $63.6 billion in May. The June data beat market expectations for a net inflow of $69 billion.
    • PPI

    • Producer prices for finished goods rose by a modest 0.1% in July. Excluding food and energy, core prices for finished goods fell by 0.3%. Inflation remained much more rapid at earlier stages of processing. Prices for core intermediate goods rose by 0.7% in July, while prices for core crude goods rose by 1.3%.
    • Industrial production

    • Industrial production increased 0.4% in July, a touch below consensus expectations. The gain was largely due to a 2% boost in utilities production, an artifact of the nationwide heat wave in the second half of the month. Manufacturing production posted a tame 0.1% increase. Capacity utilization inched slightly higher to 82.4% from a downward revised 82.3% in June.
    • Oil and Gas Inventories

    • Crude oil inventories fell 1.6 million barrels for the week ending August 12. According to the Energy Information Administration, it in line with expectations. Gasoline inventories fell by 2.3 million barrels for the week, above expectations of a 1.8 million barrel draw. Refinery utilization remained unchanged for the most part, but these are the first releases that reflect the Prudhoe Bay shutdown. This report will have a mildly bullish impact in prices.
    • Internet Sales (E-Commerce Sales)

    • Internet sales increased by 4.6% q/q during the second quarter of Qtr2 2006 . This is a modest deceleration from the 7.0% increase seen during the first quarter of Qtr2 2006 . This report suggests that consumers remain resilient in their e-commerce spending habits, despite elevated energy prices and rising interest rates.

  • This Weeks Leads
    • Royal Doulton
    • Royal Doulton trades as Royal Doulton Co. Stores at 17 locations nationwide.
    • The housewares stores, which sell their own line of dinnerware, giftware, china, crystals and gifts, occupy spaces of 3,000 sq.ft. in lifestyle, outlet and power centers.
    • Plans call for three openings throughout IL, NY and PA during the coming 18 months.
    • Typical leases run five years. A vanilla shell is required.
    • Preferred demographics include a population of 900,000 within 30 miles earning $60,000 as the average household income.
    • Lenox is cited as competition.
    • For more information, contact:
      • Janet Drift
      • Royal Doulton
      • 200 Cottontail Lane
      • Somerset, NJ 08873
      • 732-357-2416
      • Fax 732-764-4978;
      • Email: janet@royaldoultonusa.com.
    • Fashion Day Spa
    • Fashion Day Spa, a 120-unit chain operates locations nationwide.
    • The day spa and nail boutiques occupy spaces of 2,000 sq.ft. in lifestyle centers and malls.
    • Plans call for four openings throughout AZ, CA and NV during the coming 18 months, with representation by The Zall Company.
    • Typical leases run 10 years.
    • For details, contact:
      • Gerardo Aguinis
      • c/o The Zall Company
      • 4725 South Monaco Street, Suite 330
      • Denver, CO 80237
      • 303-804-5656, Fax 303-804-9696
      • Email: gaguinis@zallcompany.com
      • Website: www.zallcompany.com
    • New York Sports Club
    • New York Sports Club, a 97-unit chain operates locations throughout CT, NJ and NY.
    • The health and fitness clubs occupy spaces of 15,000 sq.ft. to 35,000 sq.ft. in freestanding locations.
    • Growth opportunities are sought throughout Brooklyn and Queens, NY during the coming 18 months, with representation by Retail Zone.
    • For details, contact:
      • Mitch Weiss or Ezra Saff
      • c/o Retail Zone
      • 25-50 Francis Lewis Boulevard
      • Flushing, NY 11358
      • 718-321-7700, Fax 718-321-1801
      • Email: mweiss@nyc.rr.com
      • Website: www.nysc.com
    • AMC,
    • AMC, a 400-unit chain operates locations nationwide and internationally.
    • The movie theatres occupy spaces of 55,000 sq.ft. to 80,000 sq.ft. in malls, entertainment and power centers and urban/downtown areas.
    • Plans call for the opening of 150 screens nationwide during the coming 18 months.
    • For details, contact:
      • Chuck Stilley
      • American Multi-Cinema
      • 920 Main Street
      • Kansas City, MO 64105
      • 816-221-4000 Ext. 586, Fax 816-480-4619
      • Website: www.amctheatres.com
    • Texas De Brazil
    • Texas De Brazil operates eight locations throughout CO, FL, IL, TN, TX and VA.
    • The steakhouse restaurants occupy spaces of 10,000 sq.ft. in malls.
    • Plans call for five to seven openings nationwide during the coming 18 months, with representation by Papadapoulos Properties, Inc.
    • Typical leases run 10 years with two, five-year options.
    • Preferred cotenants include PF Chang’s and The Cheesecake Factory.
    • For more information, contact:
      • Ralph Tapiero
      • Papadapoulos Properties, Inc.
      • 1420-B 21st Street Northwest
      • Washington, DC 20036
      • 301-442-7579
      • Email: rtapieroI@verizon.net
      • Website: www.texasbrazil.com.

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