News for the Commercial REALTOR®
February 13, 2007 Vol. 8 No. 2
Agent Shakeout
The long-awaited shakeout among real-estate agents is finally happening -- much to the relief of those who are sticking with the business and prefer a bit less competition. When David Lereah, chief economist of the National Association of Realtors, addressed the group's convention in New Orleans in November, he got one of the biggest bursts of applause by predicting there would be fewer Realtors around in a year. Mr. Lereah said in an interview that he expects membership in the trade group to decrease by about 6% to 8% from the record of nearly 1.4 million reached in 2006.
Source: Real Estate Journal.com
Too Many Agents in O.C.? Well, Here's a Place That Needs You
Mumbai, the largest city in India and probably in the world, is looking for a few good real estate professionals to meet the demand of its unprecedented booming real estate sector. "The real estate companies are facing a severe shortage of manpower in terms of experienced people who understand property business," says KN Vaid, director general of Akruti Institute of Real Estate Management in India. Demand far exceeds supply, Vaid says. Case in point: 18 recently graduated business students in a real estate track received more than 2,000 offers from various companies, Vaid says.
Source: The Economic Times
Laguna Beach Storefront Sells for $1,725 Per SF
Canon Heritage LP purchased the 2,203-square-foot retail/residential building at 354 N. Coast Highway in Laguna Beach, CA, for $3.8 million, or about $1,725 per square foot. The storefront property consists of two commercial units in the front occupied by art galleries, and a two-story, four-unit residential building in the rear. It was constructed in 1966 and sits on .14 acres.
Source: CoStar
Apartment Rents Continued To Climb In 2006
O.C. rates were up 6.9 percent. But analysts say they may slow as occupancy dips. The average rent paid in Orange County's large apartment complexes increased 6.9 percent in 2006, but falling occupancy rates may herald a slowdown in rent hikes, according to RealFacts. Rent averaged $1,517 a month in an Orange County complex with 100 or more units during the fourth quarter of 2006, according to rental tracker RealFacts. That's the third-highest monthly rent among the 30 Western U.S. metro areas that RealFacts tracks. Only San Francisco ($1,996 a month) and Los Angeles County ($1,614 a month) had higher average rents. Orange County's average rent was higher than fourth-place Ventura County ($1,485) as well as suburban Bay Area counties. San Diego County ($1,315 a month) ranked just below all Bay Area counties except Napa ($1,250); the Inland Empire ($1,141 a month) was just below Napa. Stanton was the only Orange County city with average rents below California's statewide average of $1,351. The average monthly rent in Orange County for all of 2006 was $1,480, RealFacts reported. Orange County rents have risen 26 percent in the past five years. One- and two-bedroom units accounted for 88 percent of the units in the survey. Average rents ranged from $1,124 a month for a studio apartment to $1,320 for a one-bedroom, one-bathroom; $1738 for a two-bedroom, two-bathroom; and $2,078 for a four-bedroom, RealFacts reported. RealFacts expects the pace of rent increases to slow because of declining occupancy rates. Occupancy rates here fell 0.9 percent from the fourth quarter of 2005, and such declines occurred throughout the 15-state region the firm tracks, by up to 3 percent in some areas. RealFacts determines average rent per quarter by surveying 491 Orange County complexes with at least 100 units. That included almost 122,000 apartments, representing one-third of the county's total rentals.
Source: OC Register
SoCal MLS and CRISnet MLS to Merge
During the 2nd half of February SoCalMLS and CRISnet MLS (Covering San Fernando Valley, Santa Clarita Valley and Burbank) will be merging MLS systems. This means that the SoCalMLS Tempo MLS will become the second largest multiple listing service in the nation!
Source: SoCal MLS
New $57M Irvine Business Park
The Koll Co. has unveiled plans for its Koll Center Irvine III, a 188,000-sf, $57-million R&D development by the Newport Beach-based company that will feature 56 for-sale units ranging from 1,100 sf to 6,951 sf. Koll will develop the project adjacent to the I-5 Freeway on a 12-acre site at Bake Parkway and Research Drive that the company bought last year from the Irvine Co. Koll is developing this latest project after two similar previous projects nearby showed “a strong demand for this type of high-quality, smaller office/R&D product in Irvine Spectrum," notes Alan Airth, a managing principal for the Koll Co. Airth, who has been responsible for the development of all three centers, says that the 11 buildings in this latest project will be of one and two stories, with a standard mix of 50% improved office space and 50% warehouse space that in many cases can be fully improved. The first two projects were the company's 27-unit Koll Center Irvine I and its 49-unit Koll Center Irvine II in the Irvine Spectrum. The first two developments total 324,000 sf and are located across the street from each other at the northeast and southeast corners of Irvine Center Drive and Scientific Way.
Source: GlobeSt.com
Big Jump in Office Space Deliveries Expected in 2007
Biggest Increase in Amount of Office Space Expected To Deliver in 22 Years Following a trend from the past 2 years, developers are expected to deliver more office space in Orange County in 2007. According to CoStar Group's 2006 Year-End Office Report, approximately 5,042,778 square feet of new office space is expected to reach completion this year, that's 3,432,173 square feet more than delivered in 2006 and the first increase in the amount of new office space expected to deliver in the region since last year. During the fourth quarter 2006, 10 buildings totaling 316,197 square feet were completed in the region. This compares to 6 buildings totaling 260,088 square feet that were completed in the third quarter 2006, 13 buildings totaling 645,885 square feet completed in the second quarter 2006, and 388,435 square feet in 29 buildings completed in the first quarter 2006. Some of the more notable 2006 deliveries include: Impac Center - Bldg 2, a 200,000-square-foot facility developed by Dorn-Platz & Co. that delivered in third quarter 2006 and is now 100% occupied, and Impac Center - Bldg 1, a 150,000-square-foot building developed by Dorn-Platz & Co. that delivered in second quarter 2006 and is now 100% occupied.
At the end of the fourth quarter, CoStar was tracking 84 office buildings totaling 5,372,611 square feet under construction in the Orange County region. Most of the new space under construction is concentrated in the Airport Area submarket where 3,352,132 square feet is under way and South County with 1,824,692 square feet underway. Approximately 47.3% or 2,541,946 square feet of the currently under-construction space has been preleased. Among the largest projects underway at the end of fourth quarter 2006 were 3161 Michelson Dr, a 530,380square-foot building with 57% of its space pre-leased being developed by Maguire Properties, and Opus Center Irvine - Phase III, a 314,075-square-foot building that is 0% pre-leased being developed by Opus/SPI Holdings Corp. The information in this news report was taken from CoStar’s Year-End 2006 Office Market Report, a 40+ page research report containing the most complete and verified statistics available from CoStar for you local market, down to the submarket level. Comprehensive charts, graphs and detailed narrative provide an in-depth, precise picture of absorption, vacancy rates, rental rates, existing inventory and buildings under construction, sales prices, and cap rates.
Source: CoStar
Apt Manager Allowable Lodging Credit Increase
As of January 1, 2007, the minimum wage is $7.50 per hour and the allowable lodging credit is $423.51 per month, up from the previous $381.20, for a single apartment manager. For a couple, the credit is now $626.40. So, if your manager works more than 56.4 hours per month, you must pay her the difference even if she receives a free apartment worth more than the credit amount. Example: Manager receives a $950 per month apartment free for managerial services. She works 80 hours per month. (80 hrs. X $7.50 per hr = $600). As the credit is limited to $423.51, you must pay her an additional $176.49. Also, remember that free lodging is exempt from withholding and Social Security taxes; the additional $176.49 is not, and therefore you must withhold the Federal tax, State tax, Social Security, Medicare and SDI. You must also pay the employer's side of the Social Security, SDI, Unemployment tax and FUTA. Next year (2008) will see additional increases. The minimum wage will be $8.00 and the credit will be $451.89 for a single person and $668.46 for a couple.
Source: AAOC
Tustin Bldg. Sold For $10.44M
Orange County Teacher's Federal Credit Union has purchased the 59,825-square-foot flex building at 15222 Del Amo Ave. in Tustin from Catellus Development Corp. for $10.44 million, or about $174.50 per square foot. The Teacher's Federal Credit Union will reportedly occupy the building.
Source: CoStar
CAR Sues Blue Shield
The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) today (Feb 12, 2007) announced it has filed a lawsuit against Blue Shield of California to prevent cancellation of medical insurance affecting more than 8,000 members and their families. C.A.R. also has filed a preliminary injunction due to the irreparable harm Blue Shield’s actions have caused. “We were abruptly notified – by mail – that our insurance coverage was being canceled,” said C.A.R. President Colleen Badagliacco. “Families are scrambling unsuccessfully to find replacement coverage by May 31. Many have operations scheduled, others are recovering from surgeries and require continued medical care or additional therapy. Some are dying and are in need of palliative care during their last days. Blue Shield is denying them all, just when they need medical care the most.” Under state law, group medical coverage is guaranteed as long as C.A.R. continues to meet legally stipulated guidelines, as it has done with policies underwritten by Blue Shield since 1999. “Blue Shield is not allowing us the opportunity to try and resolve this issue. Blue Shield has shown a callous disregard for the more than 8,000 people who will be stranded without medical coverage and has refused to engage in any meaningful discussions with C.A.R. or RealCare, our insurance broker,” Badagliacco said. “We strongly believe that Blue Shield terminated medical insurance coverage without cause. We are committed to doing everything possible for our members and intend to explore every legal option available so that our members and their families have access to the medical care they rightfully deserve. We expect to prevail with the litigation. “Blue Shield of California’s annual revenue tops $7.5 billion. If Blue Shield can arbitrarily cancel medical coverage for more than 8,000 Californians simply by writing a letter, every one of Blue Shields’ 3.3 million customers across the state should be concerned,” she said.
Source: CAR
Southern California Markets Cool on Condos - Better For Apartments
Southern California's multifamily housing market is in the midst of a slowdown—and that, analysts say, is good news. An over-exuberant conversion craze during the past few years weakened the market, but analysts and developers remain bullish on Southern California. In particular, the apartment market is expected to reap the benefits as the condo and single-family markets continue their corrections. Delores Conway, director of the Casden Real Estate Economics Forecast, USC Lusk Center, says a sense of normalcy is being restored to the market, which was skewed, in part, by fast-paced condominium investment speculation similar to that seen in Las Vegas and Miami. "Developers are stopping new construction, delaying projects and aggressively offering concessions to unload existing inventory caused by speculators abandoning the market as interest rates started rising and price appreciation slowed," Conway says. According to a report by Alan Nevin, chief economist of the California Building Industry Association (CBIA), low unemployment (4.5 percent) and steady job growth (180,000-210,000 expected in 2007) there will help sustain the market. "We're optimistic on Southern California as a whole," says Greg Willett, vice president of research at M/PF YieldStar. "With such a run-up in prices, apartments should do OK because they'll be able to capture more of the demand." Analysts and developers are high on the O.C. With most buyers priced out of the single-family market, where average prices are around $1 million, and demand for top-tier product is extremely competitive, the rental markets are tight—with occupancy around 97 percent and rent growth at 6.5 percent, according to Willett. "Orange County is a good place to be, especially in the rental business," says Al Neely, chief development officer for Archstone-Smith, which is building 884 units in Anaheim's Platinum Triangle. "Even though for-sale housing has cooled, the affordability gap between ownership and rental is wide." Brad Griggs, CIO for BRE Properties, agrees that Orange County is a strong performer. "We're projecting rent growth on par with last year," says Griggs, whose firm is building in the Triangle as well as other areas of the county. The key driver holding the market in check is supply. According to Marcus & Millichap's October 2006 report, "New units are quickly being absorbed, aided by the removal of nearly 2,500 units for condo conversion in 2005. Despite the relative strength of the apartment market, investment activity has slowed considerably in the past few years as cap rates have dipped below 5 percent, making the financing of deals increasingly difficult." Approximately 3,600 units are under construction in Orange County, and the CBIA projects that Orange County may permit as many as 5,000 multifamily units in 2007. Steve Donahue, president of Western National Property Management, is seeing strong growth in the rehabilitation market. "We did four rehabs in 2006 and that will carry over in 2007," he reports. With a portfolio that includes about 13,000 units in Orange County, Donahue says lack of supply and affordability is making the renovation market very viable.
Source:Multi-Housing News
New Corona Office Complex
An office/industrial project in Corona scheduled to open next month will bring 300 to 400 jobs to the city, according to the broker. Citrus Woods Business Center is a 29-building project - 15 office structures and 14 industrial - at the northeast corner of Joy and Harrison streets, said Jack Faris, senior vice president with Shaw Properties in Newport Beach. The office buildings will range from 3,400 to 10,000 square feet and collectively cover 62,000 square feet, Faris said. "We didn't want to put in too much office because we're not sure how much office product the market can handle right now," said Kevin Klemm, principal with Shaw Properties. The industrial structures will cover 5,000 to 11,000 square feet. They will be used for assembly and light manufacturing, said Faris, who is marketing both the office and industrial properties. All of the buildings are available for sale or lease. So far, eight industrial buildings and one office building have sold. Industrial buyers include an automotive aftermarket parts company and a business that installs windows in high-rise buildings. Faris declined to name them.
Source: The Business Press
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