by Sanford Nax

Sacramento commercial realty agents presented a mid-year report this past Wednesday, and it was mixed to say the least.
 
Some hopeful signs exist -- homebuilders are again looking for land, and some industrial developers are sniffing around for opportunity -- but the office market remains in the doldrums with high vacancies, low rents and little construction planned.
 
Randall Grimsman of CBRE said homebuilders are enjoying a surge in business as would-be buyers, enticed by low interest rates but turned off by investors snapping up used homes, are turning to new houses. He projects new home sales to reach 2,500 this year, a 35 percent boost from 2011 -- but off substantially from the peak.
 
Good sign: The sale of 200 lots in Lincoln to a local homebuilder who hasn't made any land purchases since 2005.
 
Bad sign: In a reversal of fortunes, some developers are selling land to farmers who are expanding their holdings. Richland American Homes, for example, sold acreage in the Natomas area to rice growers, Grimsman said.
 
Overall, subdivision land and parcels with improvements or maps attached are getting attention from would-be buyers. "The rest of 2012 will be fantastic," he said.
 
The forecast for offices wasn't as hopeful. The vacancy rate is at a record high, and landlords keep reducing rents or offer concessions to keep their spaces occupied. In some places, rents are below what they were a decade ago. "It is going to be a slow recovery," said Murray Wachtel of Cornish & Carey Commercial Newmark Knight Frank. "I can't tell you when. Maybe it will turn in 2013. Maybe it won't." (Sacramento Business Journal) Sacramento Real Estate

Bill Hunter Seminar -- Tenant Representation

Wednesday, September 12 -- 8:30 - 10:00 a.m.

Instructor: Bill Hunter

Additional Information Coming Soon

CCIM's Introduction to Commercial Investment Real Estate Analysis

September 12 & 13

SAR's Mack Powell Auditorium

CCIM's introductory course teaches you the fundamentals of the commercial investment real estate industry and demonstrates how to apply these skills using real-world case studies. You will have the self-confidence to answer your clients' questions, anticipate their concerns and plan for their needs when you have a solid commercial foundation from which to start.

• Solve investment problems using a financial calculator.
• Perform basic mortgage calculations using compounding and discounting techniques.
• Understand basic real estate investment analysis tools, estimate net operating income and estimate cash flows before tax.
• Calculate the internal rate of return.
• Evaluate similar properties, project vacancy rates and estimate absorption figures.  Course Flyer

How To Write A Letter Of Intent

Wednesday, October 3 -- 8:30 - 10:30 a.m.

Instructor: Sheryl Smith, CCIM

Additional Information Coming Soon

REGIONAL EVENTS

The California State Legislature is on summer recess until early August. Here is a synopsis of some of the issues currently standing that may affect you and your business:

REALTORS® are looking for information about your commercial market activity.  Your responses help inform members and markets about the direction of commercial markets, sales, pricing, and leasing activity. 

Please take a few moments to respond to the brief Commercial Real Estate Market Survey, covering 2nd Quarter 2012 sales and leasing activity.  The survey takes about 5-7 minutes.  Your individual responses on these important issues will remain completely confidential. 

Please click here by July 27, 2012.  The results of this survey will be emailed to respondents in an advanced report before its official release. If you have any questions, please contact NAR Research at (202) 383-1033.
  

by Sanford Nax 

Sacramento's economy is bigger than Cuba's, but the metropolitan area was among the slowest growing of the nation's 100 largest last year, a new report concludes.
 
A study prepared by IHS Global Insight for the U.S. Conference of Mayors, meeting earlier this week in Philadelphia, concludes that the nation's largest cities account for more than 90% of the nation's gross domestic product and 86% of its jobs.
 
The fastest growing metro economy in 2011 was that of San Jose, at 7.5%, the report concluded. With a decline of .3%, Sacramento ranked 8th from bottom among the 100 largest metro areas. Modesto, with a decline of 1.7 % was last.
 
At $93.3 billion, Sacramento's gross metropolitan product would rank No. 96 in the world among national GDPs, ahead of Cuba and Angola but behind Slovakia and Morocco, the report concludes. In 2012, the study authors predict, the average metro economy will grow 1.8 % and Sacramento's will grow 1.9%.
 
Among other conclusions of the report: population growth and congestion will create a drag on city economies unless the nation invests more heavily in transportation and infrastructure improvements. (Sacramento Business Journal) 

by Kelly Johnson

When the Laguna Pavilion shopping center in Elk Grove recently changed hands for $18.75 million, it was no surprise that the buyers were not local.

Most of the Sacramento region's big shopping centers are owned by out-of-towners, and that's been the case for decades. But when the real estate market tanked several years ago, those out-of-town investors bypassed Sacramento in a flight to buy only in the nation's largest cities.

Now they're back. In particular, investors who are getting priced out of the Bay Area are turning their sights to the capital region, where there's more risk but better deals given that Sacramento's economy has been slower to recover, commercial real estate brokers say.

But Sacramentans shouldn't get too excited and think this means we're returning to the glory days. "Has there been a massive influx of money back in the market?  No," said Scott Crowle, a commercial real estate investment broker with Cornish & Carey Commercial Newmark Knight Frank.

But nationally there's a lot of investors -- including pension funds and insurance companies -- looking for a place to put their money, and "real estate is still a safe bet," Crowle said. Besides, for investors needing to borrow some money for their purchase, credit markets have loosened up. And investors are eager to lock in these unprecedented low interest rates - say 4% for 10 years - before rates rise. They also hope that rents will eventually rise. (Sacramento Business Journal) Out-Of-Town Investors

By Randyl Drummer

Although rising levels of office absorption and a falling U.S. vacancy rate signal a strengthening market, the gains have yet to translate into meaningful rent increases for office landlords in most markets, CoStar Group reported this week in the company's Second-Quarter 2012 Office Review & Outlook.

This week, CoStar analysts drilled deeper into the office market numbers in a report on the national office market at midyear 2012 presented to CoStar clients. And while they see encouraging signs in the broader CRE market, specifically in the office and industrial sectors, they cautioned that the recovery is likely to be slow and dependent on the rate of job growth.

"Overall for the office market in terms of demand, it's a pretty good story," said Hans Nordby, Managing Director of Property and Portfolio Research (PPR), CoStar's analytics and forecasting division.

Although office job growth slowed on a year-over-year basis to 1.9% from last quarter's 2.8%, it's still growing at a much stronger rate than the broader U.S. economy, which remains a nagging source of concern to economists. (CoStar) Approaching A Tipping Point

Among key findings from the report:   

• The United States ranks as the world's most transparent real estate market in 2012, followed by the United Kingdom and Australia. Also ranking as 'Highly Transparent': Canada, Netherlands, New Zealand, France, Finland, Switzerland and Sweden.
• The MIST growth markets (Mexico, Indonesia, South Korea and Turkey) are significantly improving in transparency, with Turkey leading the way.
• Looking at regions, Latin America shows the strongest progress in transparency.
• Environmental sustainability and energy efficiency has emerged as an important transparency factor with the United Kingdom, Australia and France the most transparent markets in terms of real estate sustainability. The UK has a long history of building energy efficiency system and introduced the world's first Green Building rating system. Australia has been the test bed for new environmental laws, regulations and incentives. (CommercialSource) Most Transparent

Sanford Nax

The mood at last week's Pacific Coast Builders Conference in San Francisco was the most upbeat in five years, according to industry folks who attended.

Builders are reporting more traffic at subdivisions, and sales are picking up. Nationwide, lumber shipments are up, and residential construction activity is increasing significantly.

Builder Magazine just reported the following, which is based on U.S. Census data: private residential construction spending in May totaled $261 billion, a 3% gain over April and an almost 7.5% gain from May 2011. The biggest boost was in apartment construction, which posted a "jaw-dropping" 50% increase, although single-family construction increased 15% from May 2011.

Locally, John Orr, CEO of the North State Building Industry Association  in Sacramento, said new home sales totaled 149 through the first three weeks of June, which tops the 130 in all of June 2011. Through May, new home sales in the region totaled 1,052 versus 611 during the same five months in 2011. (Sacramento Business Journal) Home Builders Confidence

by Randyl Drummer 

Commercial real estate pricing continued to recover through May 2012 at a fairly surprising pace across the board given the disappointing level of U.S. job growth and other economic factors, with gains expanding from the best institutional-grade buildings to smaller and more general quality properties.

The two broadest measures of aggregate pricing for commercial properties within the CCRSI that comprise the equal-weighted U.S. Composite Index, which tracks investment grade and general commercial sale prices, each posted gains in May over year-ago levels, based on 853 repeat sales recorded during the month and more than 100,000 repeat sales since 1996, according to July's CoStar Commercial Repeat Sale Indices (CCRSI) report.

In another promising sign for the investment market and prospects for firmer pricing, the percentage of commercial properties selling at distressed prices in May was the lowest since mid-2009. Rising occupancy levels in most markets and increasing rents in the multifamily sector have dampened the overall level of distressed trading, helping lift commercial property pricing.

Both the U.S. Value-Weighted Composite Index and the U.S. Equal-Weighted Composite Index posted year-over-year growth in May, a sign that the pricing recovery is reaching across all size and quality categories within U.S. commercial property. (CoStar) Pricing Recovery Broadens

by Anita Likus 

With continued economic turbulence in the euro zone and lackluster performance elsewhere in Europe, the search for investment havens has alighted on an unlikely asset class: hotels.

The European hotel industry may be sensitive to economic fluctuations, but hotel values, which suffered less during the 2008-2009 financial crisis than those of shops or offices, have recovered and investors now appreciate the sector's resilience and cash generation, industry experts say.

As the euro has slipped in value against other major currencies amid the economic woes, the euro area has become attractive as a holiday destination for Asians and Americans, boosting occupancy rates and the market for hotel real estate.

Hotel property transactions in Europe, the Middle East and Africa reached 11.24 billion in 2011, up 14% from the previous year, according to property-services company Jones Lang LaSalle.

And 2012 is likely to be even stronger, Jones Lang LaSalle said. Four-star hotels accounted for 45% of the €2.5 billion in transactions in the first quarter of this year, compared with 27% a year earlier.

There is some skepticism about how long the trend will continue. Some market-watchers expect distressed sales to cause the market to soften again. (Wall Street Journal)

by Sanford Nax

With new owners, the historic Kress building on K Street is undergoing a facelift that, if successful, could bring more life to a troubled part of downtown Sacramento.

It's one of several downtown projects underway or near completion that, in keeping with the still-sour economy, seek to reuse -- rather than replace -- downtown buildings. Other makeover projects downtown include the former Greyhound terminal and the Hotel Berry.

K&R Development of Sacramento bought the five-story building at 818 K St. out of foreclosure in April 2011 and is preparing the inside for office space that can be leased or sold. Retail is proposed for the ground floor. The renovation is expected to be completed by mid-August. K&R declined to say how much it paid for the property, but according to Colliers Urban Properties Division it was nearly $1.8 million.

The 54,745-square-foot building was built in 1931, and was part of the Kress five-and-dime department store chain. It later became office space for the state until being vacated in 2008.
K&R principal Kevin Petrosyan said he bought it in part because it is close to a light-rail line, is structurally sound and can capitalize on other proposed revitalization efforts in the area. He says the apparent collapse of the downtown arena plans is troublesome, but he is proceeding, hoping for more housing and development in the area. "I see some movement," he said. "They opened K Street for cars, and that brought some activity." (Sacramento Business Journal) Kress Building