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

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

SC and GA reach harbor deepening agreement.

Sweet! In our lifetime!

http://chronicle.augusta.com/latest-news/2011-11-10/savannah-harbor-deepening-settlement-reached?v=1320934479

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

A Deeper Harbor Not Likely to Jeopardize Species

Read the full article here!

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

Boy have I slacked off!

When business picks up I have to cut my time expenditures somewhere! During this last bout of activity, blog posts were put on the shelf to attend to pressing matters, like "Help my office burned to the ground last night and I need a new place tomorrow." True story.

But now I have a breather so I will resume regular postings.

Perhaps as a immensely huge and subtle reminder of the need to deepen the Savannah River, the Figaro will be returning to our fair city on Dec. 6. Please take the opportunity to watch this behemoth float by. This is the future of shipping. It is here and we are unprepared.

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.

Atlanta mayor expects 'significant' funds for port .

Note: Mayor Reed was representing the Building America's Future coalition (which is an educational fund) and his speech topic was "Successfully Promoting the Infrastructure Investment Agenda".

Associated Press

SAVANNAH, Ga. — Just back from visiting the White House, Atlanta's mayor said Tuesday he expects Georgia will win "significant" funding from the federal government to begin a $600 million deepening of the Savannah harbor — an economic priority for the state that's been threatened by the federal budget crisis.

Atlanta Mayor Kasim Reed's ties to the Obama administration have made the Democrat one of the top pitchmen in Georgia's efforts to expand the Port of Savannah. Officials want to deepen the Savannah River shipping channel by 6 feet to accommodate supersized cargo ships expected via an expanded Panama Canal by the end of 2014.

"I believe that we are going to be successful in obtaining a significant appropriation before the budget process concludes," Reed told reporters Tuesday after speaking in Savannah to a seminar of the American Association of Port Authorities.

Reed declined to discuss specifics of why he's so optimistic. But it's one of the most positive statements made by any supporter of the port expansion all year.

The Georgia Ports Authority is counting on federal permits being approved in time for construction to begin in 2012. Securing money from the federal government has proven extremely tough, with the president and Congress focused on cutting the deficit.

Also Republican members of Congress have sworn off so-called "earmarks" — line-item projects inserted into budgets by individual lawmakers, which are typically how port projects get funded — and President Barack Obama has pledged to reject them also.

Curtis Foltz, Georgia's port chief, said the soonest the project will be permitted by regulators is next spring. If the federal funds don't get included in the 2012 budget, but do get approved in 2013, that would only set construction back a few months because of the government's fiscal calendar, he said.

"It's clearly not the end of the world," Foltz said. "It just means it's another three months away."

Though he's mayor of a city 250 miles away, Reed has been aggressively pushing the Savannah port expansion in Washington. He made sure to mention it Monday at the White House, where Obama invited Reed and other mayors to discuss the economy.

Reed said his pitch to the White House and others in Washington has been simple, consistent and persistent: "The deepening of the Savannah port is consistent with the priorities of the nation. It is exactly in line with the president's focus on increasing the export capability for the U.S."

Monday was the Atlanta mayor's second Washington trip this month. Three weeks ago he joined Republican Gov. Nathan Deal for a bipartisan trip to Capitol Hill to strategize on the port expansion with Georgia's members of Congress.

After that meeting June 1, Deal said Georgia might have a chance at getting about $70 million — less than the $105 million port officials had wanted. The governor said he was "hopeful," but far from certain Congress would approve the port money.

Reed said work has continued behind the scenes in Washington. One reason he's keeping mum on specifics, the mayor said, is that other East Coast ports from New York to Miami are also seeking federal funds to deepen their harbors.

"I don't believe we should show our roadmap to people who are competing for the same dollars and for the same purpose," Reed said.
—Copyright 2011 Associated Press.