Has Commercial Real Estate Bottomed?

Has CRE hit the bottom? Is it starting to get better? These are the questions Jeff Reeves tries to answer in his latest article.

The problem with this question is that it leaves off a key component- locality.

I think that broad national stats are reassuring, but essentially worthless. Yes, Reeves is writing for a national audience and I don't fault him that. But CRE, like all real estate, is an inherently local business.

Miami and Washington, D.C. have had a great year. Charleston I am told had a so-so year. The Savannah market was on fire- blazing- all 2012. And as soon as the first dredging shovel hits the bottom of the Savannah River, West Chatham is going to explode with development.

A frequent question similar to the article's title was "When will the other economic shoe drop?" Well, again, where are you expecting a shoe to fall? There was no one humongous shoe, but a million little ones. Each market was affected differently.

Reeves' article uses office as a measure of CRE health- and it is an excellent choice. When companies hire, they need a place to do work, so office vacancy rates are a direct correlation to the health of U.S. employment.

National office vacancy rates could not sink past the 17% mark all year. So things aren't getting worse, they might get better or they could stay the same for a while. Half way through 2012, Savannah's office vacancy rate got just below 20%. Not great having 1 out of 5 offices vacant. But downtown Savannah's vacancy is around 9%.

But in an incredibly risky $30 mil gamble, the Cay Building was built downtown and pre-leased 96% at $35/SF. That's 96% of 71,000SF. Wow.

Would I buy an office building for an investment? Not unless I had a lease agreement in place with a tenant who would lease said building. Otherwise if I wanted to buy office space low and have potential to sell high I'd invest in an office REIT.

Invest smart, not spec. Think local, not general.

Update on 1/16/13. Genesis Capital also weighs in on office markets as a sign of market health.

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

SHEP "invasive", "sketchy" says Charleston Post and Courier

Court will put DHEC to test Posted: Monday, June 4, 2012 12:27 a.m

Summary: Editorial hopes the S.C. Supreme Court with see through legal morass and decide against DHEC.

Key Quotes:

Plaintiffs say the DHEC board acted inappropriately when, after Gov. Nikki Haley intervened in the process, it reversed an earlier decision and approved a water quality permit for Georgia. We agree.

If the Supreme Court agrees that DHEC was in the wrong, the prospect for stopping the ill-advised plan improves.

Yes, it will slow down the Georgia Ports Authority in its environmentally sketchy plan to dredge the Savannah River. But when you tease apart the controversial details, you still get a system that awards federal dollars to projects with the most political muscle instead of the most merit.

The disputatious situation calls for a more reasonable approach to funding projects like the dredging of the Savannah River and of Charleston Harbor.

The S.C. State Ports Authority believes the Charleston Harbor dredging proposal would fare well if it were compared to the much more expensive ($600 million) and environmentally invasive Savannah River proposal. And industry analysts suggest that only one of the projects is necessary.

Read the full article at Court will put DHEC to test.

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 of Savannah Sets New Record, Yet Officials Question Expansion

The Port of Savannah boasts that its throughput topped 2.9 million containers in the last fiscal year. This is eleven percent more than last year said Curtis Foltz, Executive Director of the Georgia Ports Authority, to the Associated Press.

The reason for this increase is obviously more imports and exports. The exports are going to China, India and Russia, while the imports are going to Wal-Mart.

Foltz said he does not believe 2012 will be another banner year due to the impact of unemployment and the housing slump on the global economy. The full details of this report can be found on Forbes.com/.

At the same time, South Carolina and Georgia port officials agreed to further study a potential Jasper Ocean Terminal that shares the Savannah River. Apparently, the officials are “unsure whether [a Jasper Port] would benefit or suffer from plans to deepen the harbor to the nearby Port of Savannah,” according to a report in the Atlanta Journal-Constitution.

I suppose a question they are pondering is “If the Port of Savannah would benefit from a deeper river, would a Port of Jasper benefit?” That question seems to be a no-brainer because it was already answered in 2010.

A more important question is, “Where do we put the muck from the bottom of the river as we deepen it?” Georgia said, “Simple, we’ll put it where the Jasper Ocean Terminal will go to build up the area above sea level. And we’ll continue to put all of it there for the next 50 years.”

To which South Carolina said, “You want to put 22 miles worth of dredge in Jasper County for 50 years when the Jasper Port requires only 8 miles of dredging for a limited period of time? Yeah, right.”

It seems like South Carolina should just get over it (or under it, as the case may be) so we can move this project along. But the economic and environmental impacts of digging and placing the soil will affect both states for 50 years. These concerns are weightier than the dirt itself. So the issue will be studied more. And rightfully so.

A. Joseph Marshall
Commercial Real Estate Agent
Savannah, Ga.