Daily Archives: June 30, 2014

Thinking Like a Farmer

by Jim Rohn

One of the difficulties we face in our industrialized age is the fact we’ve lost our sense of seasons.

Unlike the farmer whose priorities change with the seasons, we have become impervious to the natural rhythm of life. As a result, we have our priorities out of balance. Let me illustrate what I mean:

For a farmer, springtime is his most active time. It’s then when he must work around the clock, up before the sun and still toiling at the stroke of midnight. He must keep his equipment running at full capacity because he has but a small window of time for the planting of his crop.

Eventually winter comes when there is less for him to do to keep him busy.

There is a lesson here. Learn to use the seasons of life. Decide when to pour it on and when to ease back, when to take advantage and when to let things ride. It’s easy to keep going from 9 a.m. to 5 p.m. year in and year out and lose a natural sense of priorities and cycles. Don’t let one year blend into another in a seemingly endless parade of tasks and responsibilities.

Keep your eye on your own seasons, lest you lose sight of value and substance.

Office Fundamentals Continue To Improve

By Katie Hinderer – GlobeSt.com

DALLAS–The local office market has seen continuing improvement in market fundamentals in the second quarter of 2014. According to the latest report by Cushman & Wakefield tenant demand is stronger than it has been since 2006.

Direct and overall absorption has reached 2 million square feet in 2014, this is an increase of 37% compared to the 1.5 million square feet absorbed during the same time period in 2013. Major tenants who took space this year include Santander Consumer Finance, Perkins Coie, Lockton Companies, Liberty Mutual, Kohl’s, Nationstar Mortgage, Conifer Solutions, Ernst & Young, Time Warner Cable, Bell Helicopter and Trend HR.

To date there has been 8.3 million square feet of leasing activity, an increase of 9.8%. Class A space accounted for more than half of the leased space (57.3%).

Rental rates have also been rising this year. Asking full-service rental rates rose 3.9% to $21.19 per square foot. Class A space saw the greatest increase, 5.4%, rising to $26.22 per square feet.

During this period 2.5 million square feet of construction projects were completed. Of that, 1.4 million square feet were speculative projects. An additional 5.1 million square feet of office projects are currently under construction, including 12 speculative buildings, which will total 2.6 million square feet. Of this spec space, 30.7% has already been pre-leased. During the third quarter, an additional 2 million square feet of projects will break ground.

Personal Income, Spending Up in May; Mortgage Delinquency Rates Edge Down

By Dees Stribling, Contributing Editor – CommercialPropertyExecutive.com

The Bureau of Economic Analysis reported on Thursday that U.S. personal income was up $58.8 billion, or 0.4 percent, in May compared with April. Personal consumption expenditures – or PCE, as the government calls people out buying things — increased $18.3 billion, or 0.2 percent, month over month.

It turns out, however, that the increase in spending was due to rising prices, even though inflation is still fairly modest. Real PCE — PCE adjusted to remove price changes — decreased 0.1 percent in May, compared with a decrease of 0.2 percent in April.

The PCE price index increased 0.2 percent in May, the same increase as in April, and excluding energy and food, the month-over-month increase was also 0.2 percent. Compared with a year earlier, the May 2014 price index for PCE was up 1.8 percent, or roughly the same as the CPI. Take food and energy out of the equation, and the PCE price index was up 1.5 percent in May 2014 compared with May 2013.

Mortgage Delinquency Rates Edge Down 

Freddie Mac said on Thursday that the single-family serious delinquency rate for mortgages that it owns or insures declined from 2.15 percent in April to 2.1 percent in May. The current rate is down from 2.85 percent compared with May 2013, and is in fact the lowest rate since January 2009; the GSE’s serious delinquency rate peaked in February 2010 at 4.2 percent.

According to the company’s reckoning, “serious delinquencies” involve mortgage loans that are “three monthly payments or more past due or in foreclosure.” Such loans are rarely cured with back payments, but rather end up in foreclosure or a short sale. The “normal” rate for serious delinquencies – the pre-recession average — is about 1 percent, so the current rate is still elevated.

Separately this week, Freddie Mac released its Multi-Indicator Market Index (MiMi), which tracks the U.S. housing market. According to MiMi, most housing markets remain weak despite declining mortgage delinquencies, improving local employment, house price gains, and attractive mortgage rates.

The national MiMi value stands at -3.01 points, indicating a weak housing market overall with only a slight improvement (+0.05 points) from March to April and a three-month trend change of (+0.07 points), which is considered flat. However, on a year-over-year basis, the U.S. housing market has improved by 0.65 points as reflected in the national MiMi, according to the GSE.

Wall Street had a modest down day on Thursday, with the Dow Jones Industrial Average off 21.38 points, or 0.13 percent. The S&P 500 was down 0.12 percent and the Nasdaq declined a scant 0.02 percent.

A Record Low Unanchored Retail Cap Rate

By Jennifer LeClaire  – GlobeSt.com

TAMPA, FL—With a record low cap rate for unanchoredretail that some brokers say signals a recover, East Bay Plaza has trade hands. The Largo, FL retail center sold for $2.95 million in an all-cash deal. The sale price represents $283.63 per square foot.

“The in-going cap rate of 7% is the lowest we have seen for a stable retail center in years,” Franklin Street’sJonathan Graber tells GlobeSt.com. “The market for unanchored retail centers has been improving since 2013 and is approaching levels last seen in 2007 and 2008.”

Graber and Franklin Street’s Rafeal Wright represented the seller, East Bay Plaza Integra, a Florida Limited Liability company. Franklin Street put together this off-market transaction with a 1031 buyer, Warner Enterprises, a California Limited Partnership.

“The seller was an experienced retail owner and developer out of Southeast Flora,” Wright said. “This retail center is located in one of the area’s most important retail sub-markets.

As Graber sees it, this is happening for several reasons. He lists the reasons as: record-low cap rates for triple net and multifamily property; historically low interest rates; a lack of new construction; positive absorption of retail space; and access to attractive financing.

Built in 2008, the 10,401-square-foot unanchored retail plaza is 100% occupied with a mix of national and regional tenants including Einstein Bagels, Anytime Fitness, Liberty Tax Service, Radio Shack, and Zoom Tan. The deal also included a long-term billboard lease.

“With Kimco Realty working on one of the area’s largest retail redevelopments across the street and Walmart opening a new supercenter on the opposite corner earlier this year, this intersection continues to gain in value,” Write tells GlobeSt.com. “Additionally, this area of Pinellas County has some of the strongest population densities and traffic counts in all of Tampa Bay.”

East Bay Plaza is located at 5395 East Bay Drive in Largo, FL. It sits on the southwest corner of US 19 and East Bay Drive.