Window shopping is becoming window dressing

by David Versel   •   April 25, 2012 1:13 pm

Summary: Consumer behavior toward retail stores are changing. Young shoppers with the resources to spend  visit stores to feel affluent but purchase online. Retail spaces must be about entertainment, not just shopping.

Key Quotes:

"The old retail model of traveling to a place simply to acquire goods is dying, thanks in large part to the Internet, they said at a panel on retail during ULI's April 17 Real Estate Trends Conference. Today's successful retail destinations are much more about entertainment experiences than shopping."

"The economics of retail is shifting. According to Placemaker Michael Ewing, of Williams Jackson Ewing, retailers now rely on the "clicks and bricks" model, with their physical stores serving as venues for customers to see and learn about products that they later purchase online. Ewing said that people want to feel younger and more affluent than they really are, calling this 'the psychology of aspiration.'"

"A final obstacle to retail developments is the balance between financiers and customers. Lenders still love "national credit tenants" (the big chains), the panelists agreed, but the younger and more affluent are not interested in such stores. Those are the shoppers and residents that developers want to attract, but they have little interest in living near the stores that lenders prefer."

Read the full article at Window shopping is becoming window dressing

A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

Insight: Falling home prices drag new buyers under water

By Tim Reid

Thu Apr 26, 2012 1:12pm EDT

Summary: Use caution when purchasing a home in today's economy: many who bought homes within the last two years see their home losing value. Study the local marketplace before signing on the dotted line!

Key Quotes:

"More than 1 million Americans who have taken out mortgages in the past two years now owe more on their loans than their homes are worth, and Federal Housing Administration loans that require only a tiny down payment are partly to blame."

"It is a sobering indication the U.S. housing market remains deeply troubled, with home values still falling in many parts of the country, and raises the question of whether low-down payment loans backed by the FHA are putting another generation of buyers at risk."

"The overwhelming majority of the U.S. is still seeing home prices decline," said CoreLogic senior economist Sam Khater. "Many borrowers continue to be quickly wiped out."

"CoreLogic predicts the overall U.S. housing market will finally bottom out this year."

Read the full article at: Insight: Falling home prices drag new buyers under water
  
A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

U.S. Federal Reserve Beige Book: Atlanta District

The following is the text of the Federal Reserve Board’s Sixth District-- Atlanta.

Real Estate and Construction

The majority of residential broker contacts reported that home sales exceeded the year earlier level in late February and March. More than two-thirds of the brokers indicated that sales met or exceeded their expectations. Florida contacts noted strengthening sales, particularly in South Florida markets. Many noted that inventory levels across the District continued to decline on a year-over-year basis and, in spite of this, home prices were flat to slightly down compared with a year ago. The outlook among brokers for sales growth remained positive, with most anticipating modest year-over-year gains over the next several months.

The majority of homebuilder contacts reported that new home sales and construction rose modestly during late February and March compared with a year earlier. Similar to brokers, builders also noted that home price declines abated somewhat and new home inventories continued to decline on a year-over-year basis. Contacts observed that multifamily construction remained robust across much of the District and new projects continued to be announced. Over the next several months, homebuilders anticipate sales and construction to be flat to slightly up compared with a year ago.

Most commercial real estate contacts indicated that conditions continued to improve slowly in the region. Contractors noted a slight improvement in demand, but the market remained very competitive and overall activity remained at low levels. Commercial real estate brokers continued to report modest improvements in demand, mostly for class A space in urban markets. Some reported that businesses have become more willing to move ahead with lease plans. Rent concessions continued to be noted with several brokers reporting that rates have begun to stabilize; however, longer leases were reported which included generous tenant improvements. The outlook among contacts was a bit more positive than previously reported, but most contractors and commercial real estate brokers continued to anticipate that activity would improve slowly this year.

To read the full report see U.S. Federal Reserve Beige Book: Atlanta District

A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

Commercial Property Owners May Be Held Personally Liable For Sour Investments

Bulletin Bulletin Bulletin...

Summary:

Michigan courts gave creditors more legal standing to sue for personal assets of borrower's non-performing assets. The court's decision was based on a "bad boy" clause in the mortgage contract.

Key Quotes:

...A Michigan appellate court recently upheld the decision of a lower court, which ruled that bondholders were justified in launching a personal lawsuit against strip-mall owner David Schostak after he defaulted on a loan, according to the Wall Street Journal.

The provision permits lenders to sue for personal assets and holdings if landlords engage in prohibited actions, such as fraud, the Journal explains. The bondholders argued that the provision was applicable for "special-purpose entities" that did not remain solvent, the newspaper adds.

Analysts say the ambiguity around the provision may spark more inquiries into how far-reaching the bad-boy clause should be.

Read the full article at Commercial Property Owners May Be Held Personally Liable For Sour Investments.

And when one considers that U.S. borrowers are falling behind on commercial real estate loans, to the tune of $58.1 billion, you can bet the bad-boy clause will be highly sought tool to recoup losses.

A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

Three recent speed bumps for commercial real estate.

CRE in Savannah is slow and steady. I am fielding more inquiries than ever for leasing, and the leases I complete are for longer periods of time (3-4 years vs. 1 or 2 years). Transaction attorneys at Lee, Black, Hollis and Rouse and busier than a partner there says.

Three recent news articles report market activity to watch though.

First, U.S. Commercial Real Estate Market Experiencing Decelerating Recovery according to JLL. 

Summary: Real estate recovery continues, but at a slower pace. Not all segments will recover uniformly, but they are recovering.

Key Quotes:

The U.S. office market absorbed a little less than 1 million square feet during the quarter - far below the 8.6 million square feet averaged over the prior six quarters.

Nearly two-thirds of the 45 markets tracked demonstrated stable or declining leasing volumes.

Technology expansion and startup activity gained momentum in almost every market with prospects for growth.

Energy-heavy markets posted some of the largest leases and witnessed sales momentum and speculative new construction.

Despite declines in leasing volume, 57.8 percent of the markets saw gains in tour velocity and active tenants compared to the previous quarter.

Sales activity and volume was evenly distributed among geographies with nearly one third of markets reporting an uptick in sales.

Construction remained low across most markets; however, activity has increased from 18.1 million square feet under development to 33.7 million square feet.

 Second, CMBS Slump As NY Fed Commercial Mortgage CDOs May Be Sold. This means the rumored sales of CRE collateralized debt obligations (CDOs) caused the value of CMBS to decline. This video explains CDOs really well. If CMBS decrease in value, it becomes harder to refinance them.

Third, Commercial Real Estate Woes Fueled Recent Bank Failures, two of which were in Georgia. As said in a previous post, if there is diminished (or no) cash flow or if real estate values are increasing as planned, then the notes aren't repaid and the banks can be at risk. Too much exposure to bad loans means the bank fails.

Savannah is doing well in its own little bubble, we just don't need the larger economy to burst it. 

A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

Ports project key to recovery

Tuesday April 3, 2012

By Curtis J. Foltz

The Georgia Ports Authority connects the Southeast’s economy to the global marketplace, generating opportunities for the entire region. As the fourth-busiest container port in the nation, the Port of Savannah was responsible for moving 8.7 percent of the U.S. containerized cargo volume in fiscal 2011 and 12.5 percent of all U.S. containerized exports.

Because shipping companies will grow their reliance on post-Panamax vessels after the 2014 expansion of the Panama Canal, it is imperative to keep pace with the evolving demands of world trade. One of the most important and productive civil works projects in the country, the Savannah Harbor Expansion Project will reduce the cost of shipping and improve our nation’s competitiveness.

The project has seen steady progress, with the state having budgeted $134.4 million toward its completion, and Gov. Nathan Deal seeking another $46.7 million in his fiscal 2013 budget request. The federal government has announced another $5.8 million — in part from a fund created by Congress and in part from a $2.8 million line-item in the president’s fiscal 2013 budget proposal.

The additional federal funds will allow the U.S. Army Corps of Engineers to prepare for the construction phase of the harbor deepening. The Corps of Engineers soon will release its final plan documents for SHEP, clearing the way for federal approvals and construction of the project.

This work is needed because Georgia’s deepwater ports are key to the nation’s economic recovery, encouraging development across a wide array of industries. Despite challenging times, Georgia’s ports generate substantial economic impacts, having supported job growth even during the worst recession in generations.

According to a 2009 study by the University of Georgia’s Terry College of Business, Georgia’s deepwater ports support 295,422 full- and part-time jobs. One job out of every 15 in Georgia is in some way dependent upon its ports. Georgia’s deepwater ports account for $61.7 billion in annual sales, $15.5 billion in income and $2.6 billion in state and local taxes.

Ranked by compounded annual growth rate, the Port of Savannah has been the fastest-growing, major-container port in the nation for 10 years, outpacing the growth of the nearest competitor by two to one.

Maintaining this preferred position among port users is key to state and regional recovery because the nation’s ports are among the first segments of the economy to turn around after a recession.

One of the keys to Georgia’s success in international trade can be attributed to its customer-driven and focused approach. Because Georgia owns and operates many of its deepwater terminals, the GPA has increased flexibility to devote space, equipment and manpower as needed to every customer. For instance, necessary dock space can be allotted with no waiting for proprietary berths. This flexibility allows Georgia to attract and handle more cargo, creating jobs and economic opportunities across the supply chain.

Among the most cost-effective and efficient facilities in the nation, the Ports of Savannah and Brunswick give Georgia a compelling advantage in the competition to win jobs and development.

Curtis J. Foltz is executive director of the Georgia Ports Authority.

Read the full article at Ports project key to recovery.

A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

Port project will rev economy, create jobs

Tuesday, April 3, 2012

By Johnny Isakson and Saxby Chambliss

The twin engines that drive the economy of Georgia and most of the Southeast are Hartsfield-Jackson International Airport and the Port of Savannah. We take seriously the provision in the U.S. Constitution that grants Congress the power to regulate commerce, including our navigational waterways and ports.

The Port of Savannah is the second-largest container port on the East Coast. It is the fourth-largest in the country. More than 20,975 companies throughout all 50 states utilize the Port of Savannah.

The Georgia Ports Authority and Georgia are leading the way in the nation by undertaking a project to deepen the Savannah port’s channel up to 48 feet. It’s a direct response to the Panama Canal’s expansion and widening.

As a result, shipping vessels are modernizing their fleets and purchasing larger vessels. To accommodate these vessels, improvements must be made to our nation’s existing infrastructure, including Savannah. 

Sen. Johnny Isakson, R-Ga. and Sen. Saxby Chambliss, R-Ga.

Deepening the port will protect existing jobs and create ones as these larger vessels call in the Port of Savannah. Economic growth throughout the East Coast and Midwest could be dramatically weakened if the port cannot be expanded to accommodate the larger vessels that will soon dominate ocean commerce.

At a time when the administration seeks to invest in projects that will create jobs in America, this project in Savannah is a perfect fit. Studies show that expanding the port would only help the goals of creating jobs as well as stimulating economic growth.

Opponents of the harbor expansion who cite “too many unknowns” about the project fail to consider certain irrefutable facts.

For example, the project has been studied and reviewed by engineers, environmentalists and economists since 1999. It’s one of the most studied projects in our state’s history. Independent studies conducted by the U.S. Army Engineer Institute for Water Resources and the Center of Expertise for Deep Draft Navigation show this investment in Savannah will have a benefit-to-cost ratio of nearly five to one. For every dollar spent, the economic benefit is five times as many dollars.

Additionally, as a result of the recommendations of federal, state and local natural-resource agencies, as well as independent environmental groups who participated in these studies over the past decade, the project contains long-term funding for unprecedented amounts of environmental mitigation. There are no “unknowns” regarding the Savannah Harbor project. 

It’s critically important that we expand the harbor to ensure that it serves as a gateway for business to Georgia and the nation. We will work relentlessly alongside state and members of the Georgia delegation to create jobs and stimulate economic growth in Georgia and the Southeast.
Read the full article in the AJC at Port project will rev economy, create jobs
.
A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

More doctors smoke Camels than any other cigarette, and one should always buy real estate.

This will not help me sell homes, despite the fact that the Savannah market is quite active, presently. Just as long as my home buyers are aware that the FHA is planning on a 1-4% decrease in home values this year, I feel guilt free when the deal closes. The "good news" is that home values are expected to increase 3.5% in 2014! Whew!

Never-the-less, I enjoy doom and gloom articles. They're cool refreshing reminders of the long road to recovery that is before us after getting excited from reading articles that proclaim "Housing Is Back!" in the head-line, and conclude with a sentence like "Real estate analysts expect more apathy and ambivalence for 2012 and 2013."

Anyway, the article...

Summary: Single family home sales are up! But they're being turned into rentals. Home prices will rise next year! And recover a tenth of what we've lost. Foreclosures are slowing! But home values are still falling.

My summary essentially captures the key quotes. Read the full article at The Greater Fool.

A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga