Commercial Leasing Opportunities for Tenants Abound

 The commercial leasing market is following the current residential marketplace with a descent into declining market rents for the Phoenix area. While this prediction has been forthcoming due to commercial loans heading into default for the balance of this year coupled with limited capital in the marketplace, the precipice has been reached and landlords/owners are facing reality. See article below.

Study: Commercial mortgage defaults to hit new high

Commercial mortgage defaults of loans on shopping centers, office buildings, hotels and other commercial properties are expected to peak in 2011, found a study by Real Estate Econometrics. Lending institutions expect fewer loans to be paid in full as the economy continues to take a toll on landlords. Reuters (9/8) 

Two years ago, market rents were reaching into the mid $30 psf range for Class A properties. Today these are dropping into the low $20s even high teens, which creates a golden opportunity for business owners to move into better locations. These rent rates are more sustainable for businesses and creates a vacuum effect that puts pressure on lower class spaces to redevelop or remodel to remain competitive. In addition, newly built product is going back to the banks and being repositioned at low competitive rates.

All of these are opportunities for tenants that might not be considered national accredited tenants but have operated responsibly in the local marketplace. One such client that I represent, Fitness One Gym, has been in operation over 15 years and has 3 local gyms. Fitness One has been courted by bigger developments and national real estate firms like Shea and Regency. These are exciting times to expand and garner a great lease term favoring the tenant. See article below.

Malls welcome new kinds of tenants to replace retailers

Across America, as the vacancy rate for regional malls settles in at 8.4%, property owners are filling the empty spaces left by departing retail stores with medical facilities, schools and churches, along with a wide variety of other unconventional tenants. Crestwood Court in St. Louis turned a big empty space into an artists' colony. CNNMoney.com/Fortune (9/9) 

I literally see 10 opportunities weekly and negotiate leasing on several sites as well. The interesting piece is seeing the change in position monthly of owners that are now facing reality in the marketplace. Understanding a good quality tenant paying some rent will keep the development stabilized. Banks are putting tremendous pressure on owners to find viable solutions or risk going into default.

In my current projects that are being developed by SoMo Development, proforma numbers are being built on high teen psf rent rates which is possible due to the drop in construction costs by over 60% in the Phoenix marketplace. This creates excitement to be able to offer a great site at great rates to viable tenants. In order to meet the mission of creating cultural marketplace center development it takes a win-win strategy for both developer and tenant which this marketplace offers.

Now is the time to align energy and efforts to embrace mission based development that encompasses the best interests of community, tenants and owners combined!

Adelante,

JGW

Ground Zero

I recently spoke to a colleague and was in agreement with his premise that were at 'Ground Zero' in the real estate industry. Although, the commercial sector is still going to bottom out over the next 9 months to year, construction companies, architects and developers in the Phoenix market are going by the wayside daily. These are proving to be very tough times and I'm pronouncing it the 'Year of Survival'.

While positioning to take advantage of this incredible time in history in the marketplace is alluring, it also requires the fortitude to stay the course. Unfortunately, as in the residential sector many companies are over-leveraged due to a continued lack of capital in the marketplace. Combine the dramatic drop in commercial projects and many companies are left by the roadside that were icons in one of the hottest markets in the United States.

Out of this will be born a new breed of developers that will be more nimble and synergistic in collaborating with other entities to get projects vertical. The same glut and greed that led to commercial corners being built and sold for quick transactions in the millions will now need to be held and based on needs of the community not wants of the developer. 

That is the premise of mission based development in creating cultural marketplace centers that embrace and incorporate the attributes of the community it serves. In this time of coming out of ground zero it will be the beacon of light to guide the market back to a responsible path of development.

I embrace the opportunities before us and will survive to be the genius of a new breed of mission based developers!

Adelante,

JGW

Going Green – the real savings

I recently completed Strategic Sustainability Consulting’s Green Audit certification program in Washington, D.C. and was very impressed with the President/Founder, Jennifer Woofter’s thoughtful and well-reasearched approach to conducting a green audit. Most impressive is the proprietary carbon calculator developed in collaboration with D.C. based think tank, Redefining Progress and San Francisco based, The Green Office. The quantitative analysis provides some hard facts on where the real savings in going green can be found.

Its true that reducing, reusing and recycling does have an overall impact to the environment as well as employee morale. It can definitely be a boost and draw folks closer together when a recycling program or “green” awareness campaign is started. However paper and waste generally is a small contributor to most office-based businesses overall carbon footprint.

The true opportunity for cost savings in this integrated methodology is looking at embedded carbon in a number of factors such as commuting, air travel and office infrastructure (these have some of highest embedded carbon). In many companies air travel is the number one contributor to its carbon footprint. Given the high cost of air travel, there are significant savings to be realized by developing an alternative to frequent travel such as video conferencing. Commuting is also a high contributing factor to many organizations carbon footprint and analysis via employee survey can provide hard data on determing if a telecommuting program would be a good approach for lessening your impact.

If you’ve been looking for the numbers approach to making the case for green, this audit provides both robust quantitative data and qualitative analysis to put a plan into action.

Specifically the audit includes the following five components:

• Employee survey
• Office/building survey
• Carbon footprint analysis
• Onsite visit by auditor
• Final green audit report

Plus results will be benchmarked against your peers so you can understand how you compare to other organizations going green.

If you’re interested in more detailed information please check out the link above.  I am certified by SSC to conduct these green audits and would be happy to talk with you further.

If you’ve implemented your own cost saving initiatives I’d enjoy hearing about them.

Thanks,
Lisa Barnard