Tag Archives: CRE

Albuquerque CRE Report 12.3.12

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Bob - Walt, the apartment market appears to be the strongest sector of commercial real estate, can you give us an update on what’s happening in the apartment market?

Walt - Good morning Bob. One of the things that stand out in the apartment market is the move away from the major markets. Secondary markets posted a 38% year over year increase in transaction volume and tertiary markets, like Albuquerque, had a 23% year over year increase. So the money is starting to flow from the major markets into smaller markets for one primary reason and that is investors are able to achieve a better yield on the properties in the smaller markets.

Another sign of the strength in the apartment market is developers purchasing apartment sites. Nationally, multifamily construction increased 45% year-over-year and developers have acquired more than $2 billion in multifamily development sites, that’s double the volume for all of 2011.

Bob - How are those national numbers translating to the Albuquerque market, are we seeing any development here in the apartment sector?

Walt - Titan development recently broke ground on the first phase of multifamily development project totaling more than 460 units in Albuquerque just north of San Antonio East of I 25.

And Titan has six more development projects in the queue so we are seeing some strength in the Albuquerque market on the development side.

Bob - Walt, with all these new projects being developed what are some of the changes being made in new apartment projects? What the younger generation looking for in an apartment?

Walt - Generation Y is basically looking for smaller, connected spaces in urban locations. They travel light and don’t collect a lot of stuff. And they’re also looking for smaller personal space and larger communal space.

And apartment owners are listening because are adding more outlets with built-in USB charger ports in kitchens and bedrooms, creating more open spaces, using cool color patterns to attract more tenants, and tenants are using their smart phones to find out what amenities are located in the area.

So generation Y is having an impact on construction of new apartments, both from the fact that younger people like the apartment life because it provides them the flexibility that they require and generation Y is also having an impact on the way developers are constructing new apartment units.

Bob - How can people get a hold of you to talk about commercial real estate?

Walt - Thanks Bob, give me a call, Walt Arnold, Sperry Van Ness, 256-1255, our website is walt.arnold.com. If you have any questions regarding commercial real estate, let’s talk. Bob thanks for the time today and I’ll talk to next week.

Listen to recorded show here

Albuquerque CRE Report 8.13.12

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Bob – Walt, is there any momentum at all building in the commercial real estate market?

Walt - The activity level of the commercial market has increased. Lenders are coming back to the market, loans are being refinanced, purchased, and restructured, one looming issue is the mountain of loans coming due over the next few years and as these loans come up for their renewals, borrowers might have difficulty renewing these loans because of the significant drop in property values. Banks might not want to renew these loans or might be unable to renew these loans, due to regulatory constraints.

Bank ArtWe could see continued rounds of properties coming on the market through foreclosure. Some good news is most pundits predict interest rates to remain exceptionally low during the next few years. With these low interest rates, real estate will look more attractive than other investments.

Bob - What do these low interest rates do for property values? Is there a relationship between interest rates and the investment returns on commercial real estate?

Walt - There definitely is, it gets a little complex. These low rates are keeping cap rates at lower levels. Cap rates are a standard measure of return for many investors. If we see a rise in the interest rates the cap rates could also increase. Investors want to maintain their return and if interest rates increase, cap rates should also increase. Cap rates are a little complex with various variables and if you’d like to discuss them in further detail please give me a call.

Bob – Walt do you have anything else and how can people contact you today to talk about commercial real estate?

Walt - Thanks Bob, just to summarize, moving forward this commercial market is improving, although very slight, and there are some sizable downside risks that remain ahead of us. Some of those threats are the Euro crisis, ongoing foreclosure crisis, oil spike pricing issues, that could all take us in a different direction. Even with these looming threats, the commercial real estate market is improving, but very slowly.

As we move forward, hopefully we will start to see more things go right than things that go wrong. If you want to talk about commercial real estate give me a call, Walt Arnold with Sperry Van Ness, my direct line is 256-1255, our website is Walt Arnold.com. If you have any questions regarding commercial real estate, or would like some market information, or just want to bounce a thought, question or idea give me a call at 256-1255. Bob have a great week talk to soon.

Listen To Recorded Show Here

Albuquerque CRE Report 7.9.12

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Bob - Walt, the real estate cycle? Can you explain that a little and in general where are we in the current commercial real estate cycle?

Walt - Good morning Bob, the real estate cycle consists of four stages: recession, recovery, expansion and oversupply.
In the recession phase, sales activity slows, rents and prices continue to decline and there is virtually no new construction. Eventually the rate of decline begins to decrease and bottoms out, which leads to the next stage.

Recovery, in recovery the market shows signs of stabilization, pricing begins to recover, excess space begins to be absorbed and eventually the vacancy rate begins to approach equilibrium were supply equals demand.

Bob - Walt, are we even close to getting out of the recovery phase? I know we’ve had discussions about supply and demand; supply is still strong and demand weak, correct?

Walt - Yes, I believe we have a ways to go before supply equals demand, but if things start to turn in this economy, recovery could happen quickly, since we still have virtually no new construction at this time.

So, I will be brief on the last two stages. The third stage is expansion.

In expansion we see a tightening market, rising prices, strong employment, and maybe some changing business dynamics and this all leads to the fourth stage, which is oversupply.

In oversupply, the market becomes overbuilt, prices begin to drop, vacancies begin to rise, and new construction continues because projects are set in motion and difficult to stop. In the oversupply phase, builders and lenders may not perceive that the market is saturated and capital is continued to flow into new buildings, thereby increasing the oversupply of real estate product in the market.

So there’s the Cliff Notes version for the real estate cycle of recession, recovery, expansion, and oversupply.

Bob - Walt is there any data on how long these cycles last?

Walt - There are many theories out there about the real estate cycle, but one that you can read about is, “The great 18 year real estate cycle”, by Homer Hoyt and later refined by Fred Foldvary.

Their 18 year cycle would put the next peak around 2025 and that gives us another 13 years before the bubble to take advantage during the down part of real estate cycle.

Bob, here’s a good plan for retirement, buy as much property as you can right now, ride out the next 10 years enjoying your cash flow, and then sell when the market starts to peak in the mid-2020s. Sure beats working till you are 80!

Bob - How can people contact you to discuss commercial real estate?

Walt - Thanks Bob call me, Walt Arnold, Sperry Van Ness, at 256-1255, website Walt Arnold.com. You have any questions regarding commercial real estate, let’s talk. Thanks Bob have a great week!

Click Here to Listen to This Show

Walt Arnold on the 1050 Radio Show

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Hosted by Terrie Q. Sayre

Showcasing Albuquerque’s Local Economy and the People Who Work It

Listen Saturday mornings at 10am to hear Albuquerque business owners talk about what they make, what they sell, and how they succeed.

The 1050 Show is a great place to learn from others. Host Terrie Q. Sayre interviews representatives of three different local businesses each week. You’ll hear new ideas about marketing, production, distribution, and many other aspects of running a local business in a world-wide economy.

Listen To Walt Arnold on Saturday’s 1050 Show

 

Albuquerque CRE Report 7.2.12

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Bob –  Walt, your topic today is the Letter of Intent. In residential real estate a buyer presents the purchase agreement to the seller, what’s different about using a Letter of Intent?

Walt - Good morning Bob, I’m not saying that a buyer or tenant won’t present a sales contract or lease to the seller or landlord, but in commercial real estate, the vehicle of choice, is a Letter of Intent or LOI. It’s a letter from one party to the other outlining the major components of the agreement, which could be either a sale contract or lease agreement.

Bob - So what’s in it?

Pen


Walt -First, make sure the parties and address or premises is identified correctly, with contact information provided so that the responsible parties are correct on the document.Second, set out the key terms that are going to be presented in an outline format, for example, the address, rental rates, occupancy dates, landlord or tenant’s obligations, survey criteria and environmental issues.Next, establish a timeframe and if not met one party should confirm in writing to the other party that the LOI has expired.Another point, most LOI’s are nonbinding, but the agreement needs to state that clearly in writing.Lastly, the LOI should include language that it will be superseded by a signed definitive agreement, for example, an executed purchase contract or lease.Bob – Walt, you mentioned nonbinding; if it’s nonbinding why go through all the effort of negotiating the deal.

Walt - Yes, why an LOI? The LOI can save time and money.  Complex commercial transactions have documents that are extensive and very long. By reaching agreement on the key terms, before generating massive documents it’s a wise and worthwhile step. Negotiating the LOI brings major issues to the surface and if they are insurmountable it’s better to discover them sooner than later.

Bob - The LOI helps to identify the major points of the lease or sales contract, so by going through this process it helps the buyer, seller, landlord and tenant agree on the major issues and components of the lease. So when you’re working with a commercial broker and he/she says they’re going to go through the LOI process, hopefully it’ll take a complex commercial transaction to a simple workable agreement that outlines all the important parts of the document.

Once the LOI’s agreed to, the agreed-upon items in the LOI are then transferred to the lease document or the purchase contract to help facilitate the transaction and move towards closing.

 Bob –  How can people reach you today to talk about commercial real estate?

Walt - Thanks Bob, Walt Arnold, Sperry Van Ness, direct line 256-1255, our website is waltarnold.com. To summarize again, the LOI if used appropriately will help reduce the risk of failure in the transaction increase the prospects of success and save time and money. Bob have a great Fourth of July, be safe and we’ll talk to next week.

Click Here To Listen To This Show

CRE Report 02.12.2011

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Office and Industrial updates

Bob – Good morning Walt, What do you have for us today?

Walt – Bob, I know you’re not a big Paul McCartney fan, but I really enjoyed the Grammy’s last night and his performance at the end was awesome.  But I digress, back to commercial real estate.

Today I wanted to give a year-end summary for office and industrial markets for the Albuquerque metro area,

The Albuquerque office vacancy was 18.7% which is slightly up from a year a year ago.  Some notable construction completions were the U.S. Forest Service building and DEA both completed projects in 2011. REDW also occupied a 46,000 ft.² built to suit in December 2011.

Median asking rates for the market were at $15.50 per square foot down $.13 from a year ago.

Blend and extend strategies where the landlord gives the tenant some concessions now and extends the lease term for longer a longer period of time are still working in this market. Most landlords are doing all that they can to retain tenants.

Class A space is $22.50 per square foot per year

Class B space is $17.73 per square foot per year

Class C space is $14.00 per square foot per yea

Bob – What about the industrial markets?

Walt – At the end of 2011 the vacancy rate in the industrial market was at 9.4%.

Some notables that happened in 2011: 609,000 ft.² of the former GE plant in the South Valley was removed from the market statistics when the building was demolished. CNM also moved about 82,000 ft.² out of the market vacancy numbers by occupying a building at Jefferson and Alameda; those two properties removed   1.7% of the industrial market from the vacancy statistics. That one way to improve the numbers is to remove supply from the market

Another notable was that US foods built a 134,000 ft.² building in the South Valley.   Only 23,000 ft.² of speculative space was built in the Albuquerque market in 2011.

Median asking rates: $6.69/sf/yr on a triple net (NNN) basis down 16 cents from a year ago and R&D/Flex space vacancy was at 9.5%.

Bob – If you were handing out any awards for last year, do you have any winners?

Walt - Yes I do, it would have to go to Titan Development/Reid and Associates for completing the Forest Service Building in the Journal Center, also for selling both of those buildings for approximately 50 million dollars and also the completion of the REDW building in the Journal Center.  If they were at the Grammys they would be like Adele, they would have won all the awards and been the star of the show, so congratulations to Titan Development and Reid and Associates for a great year.

Bob – Walt, how can people contact you for information on commercial real estate?

Walt – Thanks Bob, they can call Walt Arnold, 256-1255 or check us out on the web at waltarnold.com also follow me on Twitter of become a fan of Sperry Van Ness on Facebook.  For all you guys and gals out there don’t forget tomorrow is Valentines Day.  Make tomorrow a great day. See you next week!

Albuquerque CRE Report for 01.09.12

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New Year strategies for commercial properties investors, owners, buyers and tenants

Bob – Happy New Year!  Our first commercial report of 2012, what do you have for us to start off the New Year!

Walt – Happy New Year Bob and I hope you had a great time over the Holidays and the New Year.

I know you’re not a big New Year Resolutions advocate, but I wanted to talk about some New Year strategies for commercial properties investors, owners, buyers and tenants of commercial properties.

Bob - New Years Resolutions are difficult to keep and it is difficult for people to keep them.  But I’ll listen, what ideas do you have?

Walt – I think this is a great time for those involved in commercial properties to make some strategies and take some action to move forward on financial goals, which may include real estate.

Some quotes I remember are, “every journey begins with a single step”, or “if you aim at nothing you are bound to hit it”.  A question to ask this time of year is, “what is my exit strategy for the properties I own”, or “what can I do today to start looking at investing in commercial real estate”?

Those answers might not even come this year, but it’s important to start thinking about them now and develop the steps to move forward in that direction.

Bob – I would think this is not a great time to sell properties, but it appears to be a better time to buy properties.  How far in advance do someone need to start thinking about buying, selling or leasing?

Walt – There are many aspects to consider, for example a business that owns it real estate might say, “I need to raise some cash, but my bank won’t lend me any money”, a sale-leaseback might be a way to raise some cash and put cash back in the business to fund operations.

An investor just starting out might have the question,” how do I start investing in this market with all this opportunity to buy properties?”

A company currently leasing might ask, “I want to buy instead of lease, what do I need to know to get started?”

All of these decisions take time and planning.

Bob – So you’re saying there are a lot of things to consider and it might happen quickly or it could take time to develop a plan to decide what to do and how to go about it?

Walt – These aren’t snap decisions like, I need to lose 20 pounds, which by the way I do, these decisions take time and it helps to have people that can help define the strategies and a game plan to work through the issues and come up with solutions to accomplish these goals.

Bob – Walt, how can people get a hold of you to discuss how to make a strategic plan for 2012 and beyond?

Walt – Thanks Bob, my direct line is 256-1255, website waltarnold.com.  Let’s talk about strategy for 2012 and beyond.  You can connect with me on Facebook or Twitter.

CRE Report 12.19.2011

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End of the Year Budgeting for Property Owners

Bob – Walt as we approach the end of 2011 and the Holidays are upon us, what are some things commercial property owners should be considering at the end of the year.

Walt - One thing all investment property owners should consider is establishing a budget for the upcoming year and included in the budget should be the amount of distribution or money that you want to make to yourself.  Creating or updating a budget is forward thinking and helps to put money aside for items that will need to be replaced in the coming year and creates a plan for replacing parts of the property that will fail eventually.

Bob – What if someone rents a single-family house or a Four-plex, should they create a budget?

Walt - With larger properties it is a requirement to track income and expenses against the budget and this helps keep the property manager aware of any categories which have a surplus or shortage against the monthly budget.

Spending the time to create a budget for any size or type of investment property is very beneficial to the success or failure of an investment property.  For a single family rental or a Four-plex owner to spend the time to create a budget will be one of the best exercises they can do to preserve the asset and increase cash flow. Don’t neglect working on a budget for 2012.

Bob - Any other year-end tips for property owners?

Although we have already had some cold weather and more on the way, continue to winterize any water outlets or exposed water sources on the property, check gutters and canales for leaves so they don’t make a leaf dam at the drain creating ponding of water on the roof, and one last idea is to buy snow melt and snow shovels ahead of time because when it snows and you need it, everyone else will also need it and those items will be difficult to find when you need it the most.

Bob - Since there won’t be a Real Estate report next week, any year-end thoughts or New Year predictions today?

Walt - First, I would like to say thanks for talking to me almost every Monday morning this year; I appreciate you having me on the show, and Jen also thanks to you.  Sometimes this time of year is more hectic and stressful than it should be, I hope everyone has a great holiday season and New Year with an over emphasis of grace this Christmas season.

Next year will be a better than this year, a little, as we head on a slow gradual climb out a very tough market and one of the worst recessions in history.  I know that at Sperry Van Ness we are looking forward to 2012.

My number is 256-1255, website waltarnold.com.

Bob, the best to you, your family, the KKOB staff and your listeners. I will talk to you next year.

CRE Report 11.21.2011

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News from SIOR, NAIOP, and Urban Land Institute conferences.

Bob – Walt, what do you have for us today?

Walt – Well, I went to the Society of Industrial and Office Realtors (SIOR) market review and outlook at the NAIOP meeting on Monday and the Urban Land Institute meeting on Friday so I got some great info last week and wanted to pass some of it along.

The key factor at both meetings appears to be the need for jobs to start to get us back on a road to recovery.  New Mexico could see more job losses in government sectors as all levels of government are feeling the pinch of cutbacks.

Another topic was the office market vacancy which is 18.3% and one of the reasons is emerging technologies, as workers are working more effectively with technology.  Workers are able to connect to the internet wirelessly almost anywhere.  This trend will continue to have an effect on the office market.

Bob – Walt, that trend of working from home has been around for some time, but hasn’t really caught on.  What’s different this time around?

Walt – This time it also involves all those 20 and 30 year olds that multitask and can work from anywhere at any time.  So working from wherever will continue to grow stronger and will have some negative impacts on office space.

Bob – You also mentioned the Urban Land Institute, what was the discussion at that meeting?

Walt – One interesting point from Mark Lautman  was that all the states around New Mexico are winning the site selection battle for new companies and are gaining jobs; unfortunately, New Mexico is not really in the game at this time. So we need to do something to get out of this scenario and start making New Mexico “the place” to relocate.

Todd Clarke also spoke about the strength of the apartment market and the need for at least 4,600 more apartments in Rio Rancho and 1,300 more apartments needed in Albuquerque.  There was also discussion on how the youngest of the adult population, the millineals,  they have a desire for less space and less things and that will affect  how apartments will be built in the future and also where.  There is a much greater demand for housing to be on transportation corridors and in developments that minimize driving.

Bob – Anything else for today and how can people contact you to talk about commercial real estate?

Walt – There were a couple of quotes that came out of the meetings, one that I would like to quote was regarding how Landlords need to make vacant space as appealing to tenants as possible.  Debbie Harms,SIOR, quote was,” You aren’t going to have to buy a prom dress for that pig yet, but you are going to have to put some more lipstick on it.”  So get those vacant spaces ready to lease, it will help!

If you want to talk about commercial real estate. Give me a call, Walt Arnold, 256-1255, website waltarnold.com you can also follow me on Twitter of find me on Facebook for up to date news on all things CRE.  Talk to you next week.