June 22 - July 8, 2013

Climbing Rates Seen Stalling Rise in Values

6.25.2013 | Wall Street Journal | Eliot Brown and Al Yoon The sharp rise in interest rates in recent weeks has raised the specter in the commercial-real-estate industry that nearly four years of steady gains in property values could come to a halt. Until recently, the low-rate environment had been fueling the rise in property values, even while rents and occupancies generally remained below peak levels amid sluggish growth. Lowering borrowing costs enabled buyers to pay more. Also, low rates increased demand for property from investors who felt yields were too low in the bond market. Analysts warn that higher rates likely will put downward pressure on prices and demand even as if the recovering economy keeps giving gradual rise to rents and occupancy rates. Click here for more...

Asian Investors Dig Into U.S. Property

6.26.2013 | Wall Street Journal | Craig Karmin Asian investors are pumping money into U.S. commercial real estate at a record pace, pushing real-estate values higher and helping get stalled projects off the ground. Equity investments in the U.S. from Singapore, South Korea and China are already at all-time highs this year, for a combined total of $5.2 billion through mid-June, according to data from Real Capital Analytics. At this pace, Singapore and China would invest several times their amounts of last year, while South Korea would more than triple its investment. The forces behind the surge vary. Some Asian pension funds are expanding and accumulating assets as they prepare to support aging populations; state-run funds are scouring the world for diversification and stability; and some Asian countries, including China, also are liberalizing rules about investment abroad. But the U.S. is often the preferred destination of Asian investors because it offers a broad of mix of office buildings, hotels, retail and industrial properties. The market has better disclosure and title rights than highoctane emerging markets and better growth prospects than Europe. Click here for more...

If FBI Moves, D.C. Would Net Millions

7.1.2013 | Washington Business Journal | Michael Neilbauer The city stands to lose more than $9 million a year if the FBI moves from its grossly inadequate Pennsylvania Avenue NW digs, but a privately owned mixed-use building at the same site would offset that loss, and then some, according to study for the D.C. Office of the Chief Financial Officer. The report, released Friday, states that the redevelopment of the 290,000-square-foot property at Ninth Street and Pennsylvania Avenue NW into a 2.3 million-square-foot mixed-use community, for example, would net $28 million a year for the District's coffers, plus $41 million in one-time tax revenue as a result of the construction itself permits, fees, recordation taxes, sales and income taxes. If the FBI chooses to move to Poplar Point, as Mayor Vincent Gray has proposed, D.C. would net an additional $34 million a year and gain 6,800 jobs, according to the study, conducted by National Academy of Public Administration and real estate consulting firm Bolan Smart Associates Inc. Click here for more...

Lawmaker Kicks Off Campaign to Repeal 'Rain Tax'

7.1.2013 | Gazette | Daniel Leaderman Republican Del. Patrick McDonough kicked off a campaign this weekend urging state lawmakers to repeal the so-called rain tax, a law requiring several jurisdictions to adopt stormwater management fees. The law, which took effect July 1, required nine counties and Baltimore city to adopt the fees, which support the health of the Chesapeake Bay. Property owners are charged based on the amount of impervious surface, but the local governments set their own fees. Lawmakers, including several Democrats, expressed concern in April that the impact of the fees on businesses, nonprofits and homeowners associations could be greater than anticipated, and said the law may be revisited in the next General Assembly session. Click here for more...

Ending the Tyranny of the Open-Plan Office

7.1.2013 | Bloomberg Businessweek | Venessa Wong Its official: Open-plan offices are wildly distracting places to work. About 70 percent of U.S. employees now work in open offices, according to the International Management Facility Association. But the collaborationfriendly environment with minimal cubicle separations proved ineffective if the ability to focus was not also considered, according to a new study by the design firm Gensler. When focus is compromised in pursuit of collaboration, neither works well. The key to making workers happy and productive is having a mix of spaces for different activities. Gensler found that workers spend more than half their time at work in deep focus and about one-fourth in collaboration, with the rest split between learning, socializing, and other tasks. Of course, office workers still spend most of the day at their desks, but when its time to do some hard-core collaborating or learning, moving to a different environment can help them shift gears. Click here for more...

Commercial Property Values With Rising Interest Rates

7.2.2013 | Forbes | Bill Conerly What will rising interest rates do to commercial real estate values? I asked a similar question about home prices a few months back. Now with the run-up in interest rates on commercial mortgages, and my forecast that long-term interest rates will continue to rise, its time to wonder whether non-residential real estate will suffer from higher interest rates. A drop in commercial property values is not baked in the cake if interest rates rise. In economic jargon, you must worry if you do partial equilibrium analysis; you worry less if you do general equilibrium analysis. The English translation: If I look at interest rates as magically set by a fairy living outside the economic system, then I worry. However, if I recognize that interest rates are part of the economic system, I am less worried. Will commercial property values respond to interest rates in the future as they have in the past? The world is increasingly global. Its possible that global demand for credit would be strong even though one countrys economy is soft. If we are an island of weak economics in a sea of economic strength, then we could see real estate prices go down with higher interest rates. However, its even more likely that global economic strength would lead to domestic economic strength, pushing property values prices up. (Although Im thinking of the United States as the domestic market, this analysis works even better for smaller countries.) Click here for more...

REIT Outlook Positive Despite Recent Fall

7.2.2013 | Wall Street Journal | A.D. Pruitt Real-estate investment trust stocks had their worst quarter in nearly two years, as investors worried that rising interest rates could derail the commercial real-estate recovery. If rates climb even higher, REITs will have to pay more to borrow money, and their dividends will look less attractive to investors compared with the other high-yielding investments. But some analysts believe that REIT investors may have overreacted to rising interest rates by dumping the

stocks. Indeed, they point out, since June 24, REITs have outperformed the broader market as investors have returned to the sector. Analysts said REITs were set on a downward spiral in mid-May after Federal Reserve Chairman Ben Bernanke signaled that the U.S. central bank would phase out its quantitative-easing program as early as the end of this year. Click here for more...

Small Business Shafted Once Again on Federal Contracts

7.2.2013 | Baltimore Business Journal | Kent Hoover This is definitely not Small Business Week -- the SBA waited for the slow Fourth of July week to release its annual piece of bad news: once again, the federal government has failed to meet its goal of awarding 23 percent of its contracts to small businesses. Federal agencies got a little closer -- 22.25 percent of all federal contracting dollars went to small businesses in fiscal 2012, according to the Small Business Administration. That's up from 21.65 percent in 2011, so the SBA touted this as "real progress." It's been seven years since the federal government hit its 23 percent small business contracting goal, and no one believed that number was accurate back then. That's because the government's data showed that many contracts that were counted as small business contracts actually went to large businesses. Plus, some types of contracts, such as work performed overseas, are excluded from this report under the theory that it's unrealistic to expect that small businesses could perform such work. Click here for more...