US shopping centre vacancies up for first time in a year

VACANCIES at US shopping centres rose for the first time in a year in the second quarter as retail properties lagged behind the rebound by offices and apartments, according to Reis Inc. Regional mall vacancies climbed to the highest level on record.

The vacancy rate at neighbourhood and community shopping centres rose to 11 per cent from 10.9 per cent, where it had stood since the second quarter of last year, the New York-based real estate research firm said yesterday in a report.

The rate for regional and superregional malls increased to 9.3 per cent, the highest since Reis began collecting the data in 2000.

Retailers are cutting back on space and closing stores as unemployment remains above 9 per cent and online competition grows. More than a dozen national retailers have declared bankruptcy since the recession in 2008 and 2009.

‘This remains consistent with our view over the last couple of years that the retail sector will be the last to recover from the effects of the recession,’ Ryan Severino, a senior economist at Reis, said.

Apartment vacancies fell to 6 per cent in the second quarter, the lowest since the end of 2007, from 7.8 per cent a year earlier, according to a Reis report on Thursday. Downtown office vacancies dropped to 13.9 per cent, the lowest since mid-2009, from 14.8 per cent a year earlier, Cushman & Wakefield Inc said yesterday.

Shopping centres, usually anchored by a grocery store or discount retailer, had a net drop in occupied space of 670,000 square feet from the first quarter, Reis said. A total of 638,000 square feet of space at strip malls came to market in the second quarter, the second-lowest amount since Reis began tracking the data in 2000.

Shopping centre owners’ asking rents and the actual rents paid by tenants after price breaks were unchanged from the first quarter, the 12th consecutive quarter of no change or declines, Reis said. Asking rents averaged US$19.03 per square foot, down from US$19.07 a year earlier. Effective rents fell to an average US$16.54 a foot from US$16.58.

‘With demand remaining so weak and new completions anticipated to increase in the latter half of 2011, we expect the vacancy rate’ to set a record later this year, Mr Severino noted.

Date: 09 July 2011 | For the full report, please visit http://www.businesstimes.com.sg

Midtown Manhattan ‘Red-Hot’ Office Prices Nearing Peak, Green Street Says

Midtown Manhattan office values are within 15 percent of their mid-2007 peak, as real estate investors flock to the city expecting rent growth, Green Street Advisors Inc. said.

Office prices in Midtown have recovered 88 percent of the value lost since the 2008 credit crisis, which made loans for real estate acquisitions scarce, the Newport Beach, California- based research firm wrote today in a report introducing its Manhattan Office Property Price Index.

“Value appreciation for midtown Manhattan office properties has been red-hot,” wrote Michael Knott, a real estate investment trust analyst at Green Street. “The market continues to benefit from improving fundamentals, a brighter outlook and strong investor demand. Midtown is one of the world’s most desirable office markets in which to invest.”

Rents have started to recover in midtown Manhattan, the biggest and most-expensive U.S. office market, and will probably continue to climb, Knott said. Lease rates for Midtown office space rose 1.6 percent from June 2010 through March after falling 27 percent since September 2008, according to data from brokerage Cushman & Wakefield Inc.

Date: 06 June 2011 | For the full report, please visit http://www.bloomberg.com

HK land sites sold above estimates

HONG Kong’s government sold three residential sites above analyst estimates, highlighting developers’ confidence that property curbs haven’t dampened demand and the economy expanded in the first quarter.

Sun Hung Kai Properties Ltd bought a site on Stubbs Road close to the Peak luxury housing district on Hong Kong Island for HK$4.49 billion (S$717.2 million) on Thursday, equivalent to HK$24,829 per buildable square foot, according to calculations by Centaline Property Agency Ltd. It was expected to be sold for almost HK$4.4 billion, the median estimate of five surveyors and analysts polled by Bloomberg News.

Government measures to cool surging real estate prices are unlikely to dent appetite for luxury apartments in locations where fewer plots are available for sale, said Eva Lee, a property analyst at Macquarie Securities Ltd. Hong Kong’s economy grew more than 7 per cent in the first quarter, sustaining an expansion that faces the threats of accelerating inflation and a property-market bubble.

‘Developers are still very confident about their abilities to sell homes at prices at or above their current prices in a couple years’ time,’ said Vincent Cheung, national director for valuation and advisory at Cushman & Wakefield Inc.

Estimates for the Stubbs Road site, with a buildable area of 180,835 square feet, ranged from HK$3.6-4.5 billion, with the median translating to HK$24,000 a square foot.

Sun Hung Kai, the world’s biggest developer by market value, plans to invest HK$8 billion in the project, said Victor Lui, an executive director at its property agency unit on Thursday.

China Overseas Land & Investment Ltd bid HK$579 million for a site in the Kowloon Tong area, beating the HK$500 million median estimate. Cheung Kong (Holdings) Ltd, controlled by Hong Kong’s richest man Li Ka-shing, paid HK$662 million, 60 per cent above the HK$410 million median, for a piece of land in the Yuen Long district.

China Overseas, the Hong Kong-listed developer controlled by the nation’s construction ministry, will spend about HK$850 million building houses on the site, Tony Yau, general manager for the company’s Hong Kong operation, told reporters after the auction. The company estimates the units will be sold at about HK$26,000 a square foot, Mr Yau said.

The government in November increased property transaction taxes and pledged to boost land supply amid public protests that prices are becoming unaffordable and as the central bank warned about the risk of a ‘credit-fuelled property bubble’.

The city’s first-quarter gross domestic product increased 7.2 per cent, the government said on its website yesterday, exceeding the 5.5 per cent median estimate in a Bloomberg News survey of 17 economists.

Date: 14 May 2011 | For the full report, please visit http://www.businesstimes.com.sg

London’s West End Rents Surge as Retailers Seek European Growth

International retailers such as Kate Spade and Forever 21 Inc. are competing for prime space in London’s West End, pushing rents to new highs as landlords elsewhere in the U.K. struggle with mounting vacancies.

Rents on Oxford Street, Bond Street and Regent Street, central London’s premier retail locations, rose as much as 20 percent last year, Colliers International estimates. That compares with gains of up to 17 percent on Avenue des Champs- Elysees in Paris, Hong Kong’s Russell Street and Fifth Avenue in New York, the other three members of the world’s “retail super league,” the broker said.

London has the highest proportion of international retailers of any city in the world because it serves as a base for expanding in Europe, CB Richard Ellis Group Inc. (CBG) said. Companies are jostling for outlets to prepare for an eventual recovery of the continent’s economies and the influx next year of hundreds of thousands of visitors for the Summer Olympic Games, brokers said.

“I have a number of clients saying they have to have a shop open in time for the Olympics, so it’s focusing people’s minds,” said Peter Mace, a partner in charge of London retail leasing at broker Cushman & Wakefield Inc. “Any deal done now on a new lease is at a record, for prime and secondary locations. I have never known such limited supply.”

Retailers establishing or strengthening their London presence in the past 12 months include Apple Inc. (AAPL), Prada SpA’s Miu Miu, Barcelona-based Desigual, Limited Brands Inc.’s Victoria’s Secret, Forever 21, Liz Claiborne Inc. (LIZ)’s Kate Spade, VF Corp. (VFC)’s 7 For All Mankind, Polo Ralph Lauren Corp. (RL)’s Rugby, Missoni SpA and German outdoor-clothing maker Jack Wolfskin.

Retail sales in London topped all global cities last year at 64.2 billion pounds ($104 billion) as the weak pound supported tourism, Newark, England-based Centre for Retail Research estimates. Sales on the West End’s three main shopping strips rose 7.3 percent in 2010 compared with the U.K. average of 0.8 percent, data compiled by destination visitor monitor Springboard show.

Zone A rents on Bond Street, the U.K.’s most expensive shopping street, will eventually exceed 1,000 pounds a square foot, said Cushman & Wakefield’s Mace. Zoning retail space is an industry measure derived from actual rents and used to compare leasing costs for different stores. Zone A rent is the cost calculated for the most valuable storefront space.

The highest zone A rent on the street is the 965 pounds that jeweler Piaget, a unit of Compagnie Financiere Richemont SA, agreed to pay in December 2009 for 169 Old Bond Street.

Date: 13 April 2011 | For the full report, please visit http://www.bloomberg.com

Manhattan office leasing highest since ’06

Manhattan office leasing reached a 41/2- year high in the first quarter as tenants sought to complete deals before rents climb further, according to property broker Cushman & Wakefield Inc.

Rental agreements were signed for 7.6 million square feet of office space in the period, the most since Q3 2006, the New York-based company said on Tuesday in a report.

Rents sought by landlords rose for the second straight quarter after more than two years of declines, to an average of US$54.73 a square foot.

‘You have a vibrant economy, a lack of new construction, and you don’t have any sublet space coming on the market,’ Joseph Harbert, Cushman’s chief operating officer for the New York region, said at a briefing for reporters.

‘It’s a pretty simple equation. What’s going to happen? Prices are going up.’

Rents have been rising and vacancies falling in New York as the market recovers from the credit crisis, which froze leasing by financial-services firms.

Demand in Q1 was led by government, education, and social services. The largest lease in the quarter was signed by the city of New York, which took 619,000 square feet in a tower being built at the World Trade Center site, Cushman said.

Li & Fung Group, a Hong Kong-based supplier to retailers, took 482,000 square feet in the Empire State Building, according to the brokerage.

The law firm WilmerHale on Tuesday signed a 210,000-square-foot lease of floors 41 through 45 at 7 World Trade Center, the first of the buildings destroyed on 9/11 to be rebuilt, according to a statement from Mayor Michael Bloomberg’s office.

The mayor is founder and majority owner of Bloomberg LP, parent of Bloomberg News.

WilmerHale, currently at 399 Park Ave, had been ‘very committed to being in Midtown’, Mr Harbert said, and the deal shows that the tightening of the market is driving tenants to less-expensive downtown space.

A recovery in jobs is helping fuel demand for offices, said Kenneth McCarthy, head of New York-area research for Cushman.

The city’s seasonally adjusted unemployment rate was 8.9 per cent in February, a percentage point below where it was a year earlier, the state Labor Department said on March 24.

New York has recovered about 43 per cent of the 140,000 jobs it lost in the recession, compared with about 17 per cent regained nationally, Mr McCarthy said.

For office-using jobs, the city’s recovery is 42 per cent, he said. Financial- service companies, Manhattan’s largest users of offices, have restored about 12,000 jobs since the rebound began, according to Cushman.

Date: 07 April 2011 | For the full report, please visit http://www.businesstimes.com.sg

Japan Reits aim to double property buys to 1t yen

Japan’s real estate investment trusts may double property purchases in the next fiscal year to one trillion yen (S$15.6 billion) by boosting bond sales amid the lowest borrowing costs in three years, Credit Suisse said.

The extra yield investors demand to lend to Japanese real estate firms instead of the government has fallen to 26 basis points, or 0.26 of a percentage point, on Jan 17 from 230 in April 2009. The comparable premium for US Reits has narrowed to 199 basis points from 1,079 in the same period, according to the Bank of America Merrill Lynch Global Bond Indices. J-Reits sold 179.5 billion yen of bonds last year, the most since 2007, according to data compiled by Mizuho Securities Co.

Investment trusts’ purchases may hit a four-year high in the period starting in April, compared with as much as 600 billion yen during the current fiscal year, boosted by the Bank of Japan’s economic stimulus, according to Masahiro Mochizuki, an analyst at Credit Suisse Securities (Japan) Ltd in Tokyo.

‘The Bank of Japan’s purchasing plan will make it easier for them to raise capital,’ Mr Mochizuki said. ‘Since J-Reits play a main role in the commercial property transaction market, the buying will push asset prices up.’

Vacancy rates in Tokyo’s prime office buildings declined to about 4.1 per cent in the three months ended December from a record 7.8 per cent a year earlier, a report dated Jan 12 by CB Richard Ellis Inc showed. Manhattan’s office vacancy rate fell to 10.5 per cent at the end of 2010 from 10.9 per cent at Sept 30, according to Cushman & Wakefield Inc.

J-Reits represent 20 per cent of Japan’s 45 trillion yen securitised real-estate market, according to the most recent government data published in August. The market was created in 2001 to be a financial tool that pools assets into tradable securities, making it easier to invest.

The Bank of Japan’s economic stimulus plan unveiled on Oct 5 as part of efforts to end a decade of deflation has helped drive the Tokyo Stock Exchange Reit Index up 15 per cent. The central bank has allocated 50 billion yen of its asset-buying fund to purchasing shares of J-Reits with credit ratings of AA or higher.

Land prices in Japan have declined for almost two decades and values are about half of what they were after the peak of Japan’s asset bubble economy in the late 1980s. Nationwide land prices fell 4.6 per cent in 2009, the government said in March. The decline will probably slow to about 4.3-4.5 per cent when the government releases land price data in March 2011, Credit Suisse’s Mr Mochizuki said.

The difference between yields on five-year Japanese government notes and inflation-linked debt was negative 0.59 of a percentage point on Tuesday, reflecting expectations for the average decline in consumer prices over the life of the securities. Yields on five-year government notes that aren’t indexed declined one basis point to 0.5 per cent.

‘The Japanese Reit market is the only one that has the backing from the central bank in the world,’ said Noriyuki Sato, who helps manage US$109.9 billion at DIAM Co in Tokyo. ‘That puts them ahead of others in terms of raising capital and seeking external growth.’

Date: 20 January 2011 | For the full report, please visit http://www.businesstimes.com.sg

Chinese Developers Turn to Commercial Properties, Cushman & Wakefield Says

Chinese developers shifted more investments to commercial properties last year with government curbs on homes, marking the start of an “era” for malls, office and industrial buildings, Cushman & Wakefield Inc. said.

Commercial real estate investment jumped 42 percent last year from 2009, while transaction volume rose 20 percent, according to the world’s largest closely held real estate services company.

“2010 saw the first year of the era of commercial property,” Cushman said in a press release today. China’s retail, office and industrial properties “delivered another year of strong rental growth with healthy demand from both international and local players,” it said.

Investment in commercial properties picked up last year as the government suspended mortgages for third-home purchases and pledged to speed up trials for residential property taxes. In October, the People’s Bank of China increased interest rates for the first time in three years and raised borrowing costs for a second time on Dec. 25.

Government regulation will remain the main challenge for China’s real estate market, Cushman said. Some investors shied away from the residential property market following the real estate curbs, it said.

Date: 13 January 2011 | For the full report, please visit http://www.bloomberg.com