August 24, 2012
Energy and persistence conquer all things. -- Benjamin Franklin
SAR Commercial Members
Call for your free 30-minute
Call Tony at (916) 437-1205
|FORECAST SEES RECOVERY TAKING HOLD|
by Jack Robinson
This is the year that the economic recovery finally took hold in California's Central Valley, say economists in the latest quarterly forecast from the University of the Pacific. The Bay Area and Silicon Valley are leading the recovery, but its effects are beginning to spread, concludes the report.
The report predicts unemployment for the year in the Sacramento region will be 10.6%, matching the state average. It sees the rate declining to 8.2% by 2015, with the state average dropping to 7.8% by that year.
Noting that state government furloughs are holding the capital region back, the report predicts job growth in the Sacramento area of 1% this year and 2% in 2013.
Despite the slow pace of job creation, UOP economist Jeffrey Michael and staff of the university's Business Forecasting Center expect real personal income in the state this year to exceed the peak set in 2008. More details are available from the university's Business Forecasting Center. (Sacramento Business Journal)
JOB-GROWTH SPURT REPORTED IN SACTO
by Sanford Nax
The number of jobs in the six-county Sacramento region grew 2.6% in July from the previous year -- the first time since 2006 the capital region posted annual job growth greater than 2%, according to Ryan Sharp
of the Center for Strategic Economic Research.
That equated to 21,400 new jobs, and was the fourth consecutive month of positive growth, further suggesting the economic recovery is taking hold. In his just-released monthly Economy Watch report, Sharp said gains in education employment helped push the region's largest employer, government, to the positive side of the jobs ledger.
Several sectors showed growth, including professional and business services; educational and health services; trade, transportation and utilities; and construction. Leisure and hospitality dropped back into negative territory last month. (Sacramento Business Journal) Job-Growth
Representing A Commercial Tenant
Wednesday, September 12 -- 8:30 - 10:00 a.m.
Instructor: Bill Hunter, Esquire
REALTORS® and SAR Members -- $10/All Others -- $15
For this program, Bill Hunter will focus upon tenant brokerage, i.e., representing the tenant in commercial lease negotiations. His outline will cover the tenant's pocket-book issues such as rental adjustments, building expenses, CAM charges, limitations on personal liability, construction responsibilities, and payment of the brokerage commission. Tenant "exit strategies," such as subletting and early termination rights, extension options, and non-recourse clauses and arrangements will also be discussed.
- What is a "triple-net" lease?
- What is CAM in a shopping center lease?
- Should office "pass-throughs" be negotiated?
- What rules govern percentage rents?
- How should a "going to market" clause be written?
- What does "maintain and repair" actually mean?
- Is the destruction clause "just boilerplate?"
- What insurance can reasonably be required?
- Who owes rents accruing after assignment of a lease?
- How are the use and subletting clauses related?
As always, Bill will run an extensive Q & A period at the conclusion of this course. Register by calling Brian at 916-437-1210 or use this form.
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
Green Due Diligence - Fact or Fiction? A "Lunch and Learn" Program
Tuesday, September 25 - 11:30 a.m. to 1:00 p.m.
Speaker: Michele SkupicREALTORS® and SAR Members -- $10/All Others -- $15
The emerging evolution of benchmarking and rating criteria for energy-efficient buildings continues to move swiftly and is forcing commercial real estate practitioners to determine how climate change and sustainability issues MUST be integrated into lease and sale transactions. The following questions will be addressed at this session:
- Why should I care?
- Who is driving the green train?
- What are the risks?
- Where are the rewards?
Lunch is included in this session so you must pre-register! Let us know if you require a vegetarian option. Don't miss this new and informative program. Register by calling Brian at 916-437-1210 or use this course flyer.
How To Write A Letter Of Intent
Wednesday, October 3 -- 8:30 - 10:30 a.m.
Instructor: Sheryl Smith, CCIM
REALTORS® and SAR Members $15/ All Others $20
Leasing is a critical part of commercial real estate. When doing a lease transaction, the Letter of Intent (LOI) is the central player. It is also sometimes used for a purchase transaction, but mostly for leasing. Whether you are representing a tenant, landlord, buyer, or seller, an LOI can be an effective tool. The seminar is perfectly suited for incoming commercial practitioners and those revamping your skills. The following items plus much more will be highlighted:
- What is the purpose of the Letter Of Intent?
- LOI or Purchase Agreement -- When to use what?
- Are there different types of LOIs?
- How are Exhibits used in an LOI?
- How do I get paid on a lease?
- How do I find space that is available for lease?
Join us for this fun and informative seminar and walk away with an LOI structure that you can use immediately. Call Brian at 916-437-1210 to register or use this form.
Tuesday, September 11 -- 7:30 a.m.
R.J. Grins In The DoubleTree Hotel
Sacramento CCIM Chapter Luncheon -- SBA Hub Zone Opportunities
Thursday, September 13 at Downey Brand Law Firm
Call Blain Hardy at (360) 393-2494
CREW Luncheon & Networking -- "Davis: The Coolest School and the Coolest Project"
Thursday, September 13 -- 11:30 am
The Firehouse Restaurant, Sacramento
ULI's "Capitol Lofts Development" Tour & Discussion With Developer
Wednesday, September 19 -- 4:00 p.m.
Capitol Lofts Development on R Street between 11th and 12th Streets
Reception at Fox and Goose to follow
Sacramento Real Estate Exchange
Friday, September 21 -- 10:30 a.m.
China Buffet in Citrus Heights
Call Ben Couch at (916)989-4652 for additional information
NAIOP Sacramento Valley Chapter Discussion Forum
Wednesday, September 26 -- 10:30 a.m.
C.A.R. "Commercial Day"
Wednesday, October 3 -- 8:00 a.m - 5:00 p.m.
Commercial Investment Group Meeting of C.A.R.
Friday, October 5 -- 9:00 am to Noon
Anaheim, CA -- Additional Information Coming Soon
EPA Pushes Back Deadline for Lead Paint Proposed Rulemaking
Under a settlement agreement between the EPA and various public interest groups, the EPA is required to develop regulations that establish lead safe work practices for renovation, repair and painting (RRP) activities for commercial and public buildings.
Under the original agreement, a proposed RRP rule for the exterior of commercial and public buildings was due on Dec. 15, 2011. This date has been pushed back twice so far, most recently to Sept. 15, 2012. A final rule is due on July 15, 2013, although the delays in issuing the proposed rule will no doubt delay promulgation of the final rule.
NAR will comment on the proposed rule whenever it is issued and express its concerns regarding the lack of data related to lead paint hazards that commercial buildings pose to children during RRP activities. (NAR)
ADA BILL MOVES TO FLOOR
This year's ADA reform effort (SB 1186) continues to move forward, passing through the Assembly Appropriations Committee this week with a unanimous vote. This bill aims to reduce the number of frivolous "Drive By" ADA lawsuits. (CBPA)
PARKING BILL DIES
The bill that would have set state limits for parking (AB 904) has died in committee. The bill would have sought to reduce parking requirements for affordable housing projects in certain urban areas. This bill could have had a negative impact on existing and future retail/office/industrial projects by spillover of parking from residential projects without enough parking. (CBPA)
|CRE PRICING RECOVERY HITS SOFT PATCH|
by Randyl Drummer
While high-end properties continued to shine, the first half of 2012 ended on something of a flat note overall for commercial real estate, with uncertainty over the direction of the economy exacting a toll on property pricing gains and weakening fundamentals.
The most recent CoStar Commercial Repeat Sale Indices (CCRSI) report shows weaker investor demand across most property types in June, with pricing for higher-quality investment-grade property holding its ground but eroding for less-expensive holdings as investors returned their focus to the relative safety of the best assets in core markets.
In the second quarter as a whole, demand for space also weakened across most property types, in line with slowing global economic growth. Even so, the U.S. Value-Weighted Composite Index held its ground for the month of June despite lower leasing levels, while the U.S. Equal-Weighted Composite Index edged downward slightly. For the whole quarter, both indices rose by 2% and remained within 150 basis points of their cyclical peaks.
The investment-grade market segment reversed the price loss seen in May 2012 and advanced by 1.5%. The Investment Grade Index posted the highest quarterly growth among the four major CCRSI segments in the second quarter and remained 4.8% above year-ago levels, despite a 2.5% cumulative loss since the beginning of the year.
In some good news, distress continued to abate. Only 18.6% of trades recorded by CoStar in June were distressed, notably lower than the 28.8% observed over the past three years. (CoStar) Soft Patch
|SHORT SALES DOMINATE SACRAMENTO MARKET, BUT FORECLOSURES SHRINK|
by Sanford Nax
Short sales are becoming a bigger player in the Sacramento residential home market, comprising 31.8% of all transactions in July in Sacramento County and West Sacramento. That was up from 31.2% in June and from 22.7% in July 2011, according to SAR.
They have become such a factor in the marketplace that SAR added a new line to the monthly report: "Pending Short/Lender Approval." These are listings with offers accepted by the seller, and no other offers are being accepted while awaiting lender approval. The total is 2,281 in July.
The monthly report also shows that foreclosure sales shrunk from 37.4% of all transactions in July 2011 to 21.7% last month. Traditional sales increased from 39.9% in July 2011 to 46.5%. Meanwhile, the median price increased 5.4% from $166,000 to $174,000, while the number of sales jumped%.
Homes are selling faster too; the supply of available houses is about three weeks, compared with 2.4 months a year ago. South Elk Grove is particularly strong: the sales price is about 39% higher than the county as a whole, and climbed 2.5% over the year period, the association reported. (Sacramento Business Journal)
|IT'S GREENER TO RETROFIT THAN BUILD NEW, REPORT FINDS|
by Jennifer V. Hughes
Brand new green buildings are always white hot.
But experts have long been touting the environmental benefit of green buildings' slightly less sexy cousin: retrofitting existing buildings with green upgrades. Now there is proof.
A groundbreaking report released earlier this year found that it is unequivocally greener to retrofit an old building than construct a new green building, no matter how many high-tech bells and whistles are in the new construction. "The Greenest Building: Quantifying the Environmental Value of Building Re-use," was commissioned by Preservation Green Lab, a project of the National Trust for Historic Preservation with support from The Summit Foundation and in partnership with four companies, including Skanska Group.
Elizabeth Heider, Chair of the Board of Directors at the USGBC and Senior Vice President, Green Markets, for Skanska, says there has been a great interest over the past 20 years in tearing down buildings and raising new green ones.
"The thought was that in order to build green you had to build new," she says. But the numbers don't add up that way.
The report states: it can take between 10 and 80 years for a new energy-efficient building to overcome, through more efficient operations, the negative climate change impacts that come from construction. Environmental savings from re-use are between 4% and 46% over new construction when comparing buildings with the same energy performance level. (NREIOnline) Greener to Retrofit
|SACRAMENTO'S "CONSUMER DISTRESS INDEX" HIGH|
by Jack Robinson
Sacramento ranks as one of the nation's most distressed metropolitan markets in a new list published by a nonprofit credit-counseling agency.
CredAbility, an Atlanta-based organization that bills itself as a "financial emergency room" for struggling families, has for two years compiled a state-by-state "consumer distress index." For the first time, the organization this week also released figures for metropolitan areas.
The index measures levels of employment, housing cost, delinquency rates, credit scores, savings, net worth and other factors to produce a score on a scale of 0 to 100. Larger numbers indicate households with better financial health.
Sacramento, with a distress index of 64.66 for the second quarter, ranks 67th out of 78 metro areas with a population of 1 million or more. The overall national average was 71.25. Calculating back to the second quarter of 2011, CredAbility estimates that the national distress index has improved by 2.05 points. Sacramento's index has improved by 1.59 points.
Most other California metro areas showed comparable progress. The San Francisco Bay Area saw a 2.28-point improvement to 70.47; the Riverside metro area saw a small dip over the past year to 60.15. (Sacramento Business Journal)
|CITY STAFF PRESENTS COUNCIL WITH "ULI's DANIEL ROSE RAILYARDS, STUDY FINAL REPORT"|
At the August Sacramento City Council meeting, Fran Halbakken, City Railyard Development Manager, presented highlights from the final report, "Redeveloping the Railyards to Strengthen the Urban Core," published by the Urban Land Institute's Daniel Rose Fellowship program.
Sacramento was selected as one of four cities in the country to take part in this year-long program with a specific land use challenge "The Railyards" as the focus. City of Sacramento received technical assistance and expertise over the year from a national panel. The report summarizes the panel's findings including opportunities and challenges on developing the site. David Zehnder, ULI Sacramento Chairman, thanked key staff involved in the year long study and offered ULI Sacramento's support in the future as they continue the vision and planning stages for this important infill project for our region. For a copy of the final report, go to this link. (ULI)
|INTERNET SALES TAX LEGISLATION GAINS BIPARTISAN BACKING AS "BRICK-AND-MORTAR" RETAILERS SEEK "MARKETPLACE FAIRNESS"|
Legislation allowing states to require Internet retailers to collect sales tax for online purchases -- and to level the playing field between "brick-and-mortar" and Internet-based retailers -- appears to be gaining ground on Capitol Hill, prompting speculation that lawmakers could act before year-end.
Several factors appear to have shifted debate on this issue in recent months -- so that fewer lawmakers are questioning the legitimacy of collecting online sales taxes, focusing instead on how to avoid making the process overly burdensome for smaller businesses. These factors include:
- Increased recognition at the state level of the volume of sales occurring through online retailers -- and the lost sales tax revenue that represents
- Increased recognition (particularly among Republicans) that authorizing states to collect sales tax revenue would reduce the need for federal funding support
- States' significant strides toward simplifying their sales tax codes through the efforts of the Streamlined Sales Tax Governing Board
- The improving quality of tax collection software, which should reduce burdens on remote retailers
- Increased recognition that a federal solution is needed to resolve tax collection questions raised by the Supreme Court's 1992 Quill v. North Dakota decision (which held that a state may not compel a retailer to collect and remit state sales tax if the retailer has no physical presence, or "nexus," in the state)
There was also significant discussion at the Senate hearing about the need to minimize burdens on small business such as setting a threshold below which retailers would be exempt from sales tax collection requirements. Lawmakers also emphasized the need to avoid increasing the costs of e-commerce or discouraging economic activity -- themes echoed at a House Judiciary Committee hearing a week earlier.
In a joint letter to the editor of The Wall Street Journal earlier this month, the International Council of Shopping Centers (ICSC), Retail Industry Leaders Assn. and National Retail Federation wrote that "traditional retailers have had the rug pulled out from under them" as a result of the "sales-tax loophole," which has left them "unable to compete with the artificial price advantage enjoyed by online merchants." They warned that "this has created a domino effect in communities throughout the nation as local stores are forced to close and jobs are lost." (Wall Street Journal)
|TECH MARKETS ARE LEADING THE RECOVERY IN CRE FUNDAMENTALS |
by Victor Calanog and Brad Doremus
The vibrancy of technology in the U.S. permeates beyond the financial outlook of firms in the sector. It directly influences commercial real estate in metro areas where tech firms are the most active. In fact, an analysis of tech-heavy metros reveals that multifamily and office properties are among the many beneficiaries of a dynamic local technology cluster.
Nine metros were identified for this analysis, each of which boasts a tech sector that is a major driving force in the local economy. The metros selected include: Austin, Texas; Boston; Denver; Portland, Ore.; Raleigh-Durham, N.C.; San Diego; San Francisco; San Jose, Calif.; and Seattle.
San Francisco and San Jose are the stand-outs here, given their proximity to Silicon Valley, but all of these metros support a strong local tech cluster. Data from metros with a large technology base indicate above-average rent growth and occupancy gains over the past several years across commercial real estate property types.
For example, it is well known that demand for multifamily properties is strong across most metro areas. The vast majority (approximately 90%) of the 82 major metros that Reis tracks showed declines in vacancy for the past eight quarters. However, demand in tech-heavy metros is decidedly more robust than other markets. (NREIOnline) Tech Markets Recovery
|CHINESE DEVELOPERS WARY AT LAND SALES |
by William Kazer
China's property market has begun to show signs of a modest rebound, but property developers' skittishness at land auctions shows lingering strains from Beijing's campaign to bring down property prices.
A number of cities, including Shenyang, Dalian, Zhuhai and Tianjin, have seen disappointing land auctions, with many real-estate developers reluctant to add to their land holdings. That is bad news for local governments, which depend on land sales for a large slice of their revenue.
In Shenyang, 115 plots, or about one-third of the number offered for sale, failed to make their minimum price at auctions in the first half of the year, nearly double the level of last year's first half, according to private data provider China Real Estate Index System. If the minimum price had been met on all of those plots in Shenyang, that would have fetched more than 14.8 billion yuan for the government.
Government officials in Shenyang, Dalian and Tianjin all declined to discuss the data. An official in Zhuhai conceded that there has been a problem selling land even at reduced prices, adding that this has squeezed government resources. "It's difficult to sell land now," the official said. "The government had to scrap plans for auctions, and has had to sit tight and see how things work out."
In a campaign to keep once red-hot property prices from spiraling higher, the central government has clamped down on credit to developers, raised requirements on down payments for buyers, and limited home purchases. It has listened to widespread public grumbling over housing prices, a particularly sensitive issue as the Communist Party prepares for a leadership change at its Party Congress in the months ahead. (Wall Street Journal) Chinese Land Sales