Real Estate Investor Up Close

Back here in the U.S., personal income growth accelerated to 0.5 percent in August, the largest increase this year, which helped propel a solid 0.4 percent increase in spending by individuals. The stock market completed its best September since 1939 as the Standard & Poor's 500 index rose 9 percent, the Dow rose 8 percent and the NASDAQ composite index gained 12 percent. The U.S. and global economies face daunting challenges, but the latest batch of data puts the chances of a double-dip recession further in the rearview mirror. Source: Grubb & Ellis Research

There were signs of the nascent industrial market recovery at Grubb & Ellis’ national industrial meeting held near Dallas this week, where a panel of leading executives debated the state of the market. · Tenants, though still cautious, are beginning to emerge from their shells. Jeff Thornton, Senior Vice President of Duke Realty’s Dallas operations, cited three examples of large tenants beginning to execute on their expansion plans. · Jim Martell, Chairman and CEO of Ridge Property Trust, coined the term “vacancy tranches,” noting that some key size categories are tightening. Jim cited large distribution centers of 700,000 square feet and up in Southern California’s Inland Empire, noting that few options are available for tenants and owner-users. · Brian Townsend, Senior Vice President at CenterPoint Properties, confirmed this trend, noting that a tenant in one of his developments opted for two smaller buildings because a single, larger building was unavail

Grubb & Ellis recently surveyed its investor clients. One of the notable findings is that 81 percent say they are net property buyers in the next 12 months. This is consistent with an informal show-of-hands survey at the company’s client dinner last night in Chicago. Most of our guests had closed a deal in the last 60 days. At a similar dinner around this time last year, no one said they were buying or selling. But now, the commercial real estate industry – and in fact industries across the economy – are moving ahead, cleaning up the excesses of the bubble years and dealing with still-sluggish demand as best they can. They are no longer frozen in place. They are buying, selling, pruning, hiring (selectively) and positioning themselves for stronger growth in the years ahead. That is the very definition of a recovery. Source: Grubb & Ellis Research

The dollar value of U.S. exports rose to $153.3 billion in July, a monthly increase of 1.8 percent which more than erased the prior month’s decline of 1.3 percent. Imports dropped by 2.1 percent to $196.1 billion. The surge in exports combined with the smaller import volume narrowed the July trade deficit to $42.8 billion, a reduction of nearly $7 billion from June. The decline in the trade deficit is a positive early indicator for third-quarter GDP because exports add to GDP while imports are subtracted from the calculation -- although the decline in imports is likely to be a one-month aberration. Overseas demand for U.S. exports should help propel the manufacturing sector even as domestic demand remains tepid. Overall the report is a positive sign for the U.S. industrial market, suggesting that the third quarter should bring a second consecutive decline in the vacancy rate. Source: U.S. Census Bureau, Grubb & Ellis

By Grubb & Ellis Research: • The market turned around in a big way in the second quarter as measured by vacancy and absorption while construction activity and rental rates continued to move lower – all signs of a nascent recovery. • Vacancy fell by a decisive 30 basis points to 10.6 percent, ending a string of 10 consecutive quarterly increases. While the softening cycle appears to be over, the market remains awash in space with vacancy still 50 basis points above its year-ago level and 300 basis points above its cyclical low of 7.6 percent notched in the second and third quarters of 2007. • Net absorption lunged ahead to 19.2 million square feet, breaking a string of six consecutive quarters in the red. This was the strongest performance since the first quarter of 2008 but still less than half the quarterly totals during the vigorous expansion of 2005 and 2006. • Just 4.5 million square feet of new space was delivered in the second quarter, of which 74 percent was build-to-suit. P

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By Grubb & Ellis Research. The vacancy rate crept higher in the second quarter but just barely, up a mere 10 basis points to 18.0 percent. This ties the all-time record peak in the 24-year history of Grubb & Ellis’ national office database. Previously the vacancy rate hit 18.0 percent in the fourth quarter of 1990 and again in the third quarter of 1991. · Absorption turned positive in the second quarter following eight consecutive quarters in the red. The final tally was 3.9 million square feet – low but mercifully in the black. · Developers completed 5.3 million square feet of new space, the sixth consecutive decline and the lowest rate of new deliveries in nearly five years. Space still in the construction pipeline fell for the eighth consecutive quarter to 20.4 million square feet. This is equivalent to 0.5 percent of the total inventory of office space, which is the lowest such ratio in nearly 15 years. · The average Class A and B asking rental rates for space available at