Denver Business Journal - by Paula Moore

Grubb & Ellis Co. predicted Friday that the Denver area’s commercial real estate market will start a “slow recovery” in 2010, ahead of the national commercial market that’s expected to bounce back in 2011.

Based in Los Angeles, publicly traded Grubb & Ellis (NYSE: GBE) is one of the country’s — and metro Denver’s — largest commercial real estate brokerage firms.

While there will be leasing activity in the metro area this year, commercial property vacancy rates will likely stay flat because most tenants will move laterally to take advantage of attractive lease rates and landlord concessions, according to the G&E report.

The Denver-area real estate investment market is expected to remain generally flat in 2010, but buyers with cash are expected to purchase lower-priced properties, including distressed assets.

Metro Denver ranked 10th on G&E’s “Investment Opportunity Monitor” for 2010-2014, based on property, economic and demographic variables. Only Texas cities such as Houston and Austin; California markets like Los Angeles, San Francisco, San Diego and Orange County; Washington, D.C.; Portland, Ore.; and Raleigh-Durham, N.C., are expected to do better than the Denver area when it comes to commercial real estate investment.

“Leasing activity will certainly increase, and there will continue to be a large quantity of properties attractively priced for buyers with cash,” Mark Ballenger, executive vice president and managing director of G&E’s Denver operation, said in a statement.

Bob Back, G&E’s chief economist, thinks that while the national economy has started a “slow and cautious” recovery, the labor market won’t turn around until the second half of this year, since it often lags the broader economy.

“Because commercial real estate lags the labor market, [the national commercial real estate market] still has a ways to go before reaching its own low point,” Bach said in a statement.

Other high points of G&E’s Denver forecast:

• Most commercial properties sold this year will be “come in the form of note sales and other non-recorded transactions.”

• Highly leveraged, lender-held buildings will get new owners, removing a major impediment to the recovery of the real estate investment market.

• Many larger office-building tenants will try to capitalize on lower rents and concessions offered by landlords at Class A and B properties, causing Class C properties to struggle to keep tenants.

• Metro Denver’s industrial real estate market is expected to see “positive growth and activity in 2010” when it comes to leasing, with renewable energy companies likely being responsible for most of that activity.

• Retail leasing in the metro area could see a moderate increase in activity this year, with grocery-anchored shopping centers as well as urban sites staying “fairly stable.” Most of that activity will come from educational and professional service businesses, taking advantage of lower asking rents.

• Job growth will be key to improvement in the local apartment market. (Even though apartment properties include residences, they are considered commercial real estate because they’re largely owned by companies or investors who don’t live there.)

Posted via email from Find Office Space

Here is a quick analysis using Google Trends of the search volume in major west coast cities.  The search query is the city keyword plus “office”.  Obviously population and search volume are correlated, but not perfectly.  Although Los Angeles far outranks the other cities in population, it is relatively close in search volume for “office”. Read the rest of this entry »

Marketplace.org takes an insightful look at the current conditions in the commercial real estate sector. Although the Term Asset-Backed Loan Facility (TALF) and the Public Private Investment Program (P-PIP) are quietly keeping commercial real estate on life support, there are now signs that more assistance may be needed. If the unemployment rate exceeds 10% as expected, the elevated office space vacancy rates in commercial real estate will also increase. The jobs issue is becoming more pertinent as the consequences of extended high unemployment begin to reverberate through the economy. In fact, U.S. office vacancies hit a 5-year high of 16.5% in the 3rd quarter alone.

TALF has extended billions of dollars in loans to debt burdened developers in an attempt to keep the commercial real estate domino from falling. One of the biggest issues is the banks continued refusal to mark down any commercial real estate backed assets. Basically, banks are crossing their fingers and hoping that a recovery comes sooner than later, with the possibility of dire consequences if it ends up being later.

As the recession drags on, retail space vacancy continues to increase as consumer’s discretionary spending habits change, either by choice or necessity. This podcast discusses troubled retail developments in the Sacramento, CA area, and the declining demand across the country for retail space. Just ask General Growth Properties, a mall operator that filed for Ch. 11 bankruptcy earlier this year.

A perfect storm has developed as online retail and the recession decrease consumer’s demand for the traditional retail experience. The podcast also highlights the trend of municipalities wooing retail developments to generate sales tax revenue, and in the process creating over-development, while demand stagnated.

Google Trends is a tool that tracks how much people are searching for certain terms on Google.  Here are a few  interesting graphs created with Google trends related to commercial real estate search.  The first graph is the average search volume in the USA for the term “Office Space” since 2004.

Analysis: The graph represents the search volume index for the term “office space” since 2004.  The search volume index is the average number times “office space” was typed into Google search since 2004 and is set at 1.0.  The letters on the graph are news articles that Google thought were related to “office space“.   Today the search volume index is about .65 meaning the average number of times people type “office space” into Google search is 65% of the average since 2004.  The official start of the recession was in December, 2007, and since then the graph shows a 35% drop from the average search volume as the demand for office space declines along with the overall economy.

The next graph shows the search volume index in the USA for the term “commercial real estate” since 2004.

Analysis: The number of searches in the USA for the term “commercial real estate” shows an even more disturbing trend, decreasing around 50% from the overall average since 2004.

Google Trends also allows you to compare search terms.  In the next graph the search volume for the terms “San Francisco Office”,”Los Angeles Office” and “Sacramento Office” are compared.

Analysis: The comparison is ranked in relation to the average search volume for “Sacramento office”, which is set as 1.0.  This shows that on average people search for “San Francisco office” and “Los Angeles office” about 2 and 2.7 times more, respectively, than “Sacramento office”.  The graph also shows that in 2009 both Los Angeles and San Francisco search volumes are experiencing a slight rebound that seems to be correlated with the recent positive economic sentiment.  However, the Sacramento office market remains pretty stagnant.  Check out Rofo listings in each of these markets: San Francisco, Los Angeles, Sacramento.

I wouldn’t recommend completely relying on the accuracy of Google trends since there are many variables, but it does give an interesting glimpse into the Google search relationship to current market conditions.  Try it for yourself: Google Trends

The news doesn’t stop about the slowing commercial real estate market for 2009 and 2010.  It’s a reality and we saw it coming a long time ago.  Job growth slows and there’s less absorption.  Consumer confidence wanes and retailers struggle.

KTVU News in the Bay Area recently reported on the latest numbers and the current struggle for retailers.  We were very pleased to have Rofo included in this piece.

But despite the news and the numbers Rofo continues to reach out to new markets to provide entrepreneurs and small businesses the much needed tools to make informed real estate decisions.  We’re excited about our recent expansion to include the Sacramento Office Space, Sacramento Retail Space, and Sacramento Warehouse Space markets.

Stay tuned for more exciting announcements and added services for local businesses and entrepreneurs on the move…

This is certainly the conventional wisdom for what’s to come over the next couple of years. Today I saw an article on Reuters that sealed it for me.  Pictured above is Sam Zell (not exactly a household name) who’s Equity Office Properties was sold to a huge private equity firm just before the beginning of the mortgage meltdown.  Zell said the following:

“This is not a time to own commodity (office buildings) in the suburbs,” said Zell, speaking at the DLA Piper Global Real Estate Summit in Chicago. “If there’s going to be a diminution of demand for office space, it’s going to be out there.”

He went on to say that he thought the only the nicest downtown office buildings will fare okay.  Something to certainly keep an eye on if you’re planning to move your company within the next year.