Real Estate and Financial - News & Trends
Architectural billings fall
WASHINGTON, D.C. – The Architecture Billings Index (ABI) dropped two points in March and fell to its lowest level since the survey’s inception in 1995.
As a leading economic indicator of construction activity, the ABI shows an approximate 9- to 12-month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the March ABI rating dropped to 39.7, following its steep 9-point decline in February (any score above 50 indicates an increase in billings). The inquiries for new projects score was 48.0, also the lowest mark for the survey.
The regional averages are: South (45.3), Northeast (38.7),West (38.7), and Midwest (36.9). The sector index breakdown: institutional (50.8), commercial / industrial (38.3), and multi-family residential (31.7). The project inquiries index is 48.0. For more information, see www.aia.org
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Wall Street overstates risk to commercial RE
LOS ANGELES –- CB Richard Ellis (CBRE) research finds that Wall Street credit markets have overreacted to the likely increase in commercial real estate mortgage losses, perhaps overestimating future default rates by as much as three times.
CBRE also reports that:
- CMBX (a set of derivatives that provides insurance against defaults) tranches rated “A” and above are particularly undervalued from a credit performance perspective. Based on real estate market fundamentals the widening of CMBX/CMBS spreads is unjustified.
- While vacancy rates across all major property types are expected to inch upward for the next few years, the peak vacancy level, expected around 2009, will be lower than the peak in 2002/2003.
- The cumulative ten-year loss rate for the entire CMBS conduit market is anticipated to be a manageable 2.53%.
- Current CMBS valuation implies “doomsday” loss rates in which the highest loss rates ever recorded—160 bps in 1992—continue for a number of years. Loss rates would need to jump unprecedentedly this year and be sustained at high levels for several years to justify current CMBS pricing.
To obtain a copy of the report, please contact Robert McGrath at robert.mcgrath@cbre.com
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Index points to downturn in commercial construction
WASHINGTON, D.C.— Reflecting the deteriorating conditions in the housing market and overall economy, the Architecture Billings Index (ABI) tumbled almost nine points in February.
As a leading economic indicator of construction activity, the ABI shows an approximate nine to 12 month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI rating fell to 41.8, its lowest level since October 2001, and down dramatically from the 50.7 mark in January (any score above 50 indicates an increase in billings). The inquiries for new projects score was 54.3.
Key February ABI highlights:
- • Regional averages: Northeast (51.5), South (48.3), West (46.3), Midwest (42.6)
- • Sector index breakdown: institutional (54.9), multi-family residential (46.6), mixed practice (43.9), commercial / industrial (40.6)
- • Billings inquiries index: 54.3
For more information, see www.aia.org
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OSCRE moves up
WASHINGTON, D.C –- The Office of the Deputy Under Secretary of Defense, Installations & Environment (ODUSD-I&E) has elevated its membership in the Open Standards Consortium for Real Estate (OSCRE) from Associate to Executive level.
ODUSD-I&E is responsible for providing military installation assets and services necessary to support our military forces in a cost effective, safe, sustainable, and environmentally sound manner.
Executive members of OSCRE play a critical role in establishing and monitoring the organization’s strategic plan; standards development, publication and adoption; and operations for both OSCRE Americas and the soon to be launched OSCRE International. OSCRE Americas and OSCRE International are each led by a Board of Directors drawn from the Executive membership pool. Additional committees comprised of Executive members will be launched within the next few months to further leverage the knowledge and expertise these members can offer. For more information, see www.defenselink.mil
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Investment still possible
NEW YORK CITY– A study by CB Richard Ellis indicates that corporate real estate investment is viable, albeit with appropriate analysis and assumptions.
The study anticipates the U.S. economic slowdown will persist through the first quarter and into the second quarter 2008 with an uptick starting in the second half of the year—provided monetary policy remains loose.
The economic slowdown will essentially keep economic rent flat. CBRE forecasts an economic rent change of -0.2% in the office market and 2.8% in the industrial market in 2008. This is in marked contrast from the previous two years, which saw strong growth in economic rent, especially within the office market.
CBRE anticipates that the leasing market will slow as compared to the last two years. Vacancy rates are anticipated to rise in 2008. However, some markets will do comparatively well. In the office market, Charlotte, N.C. (8.1%), Raleigh, N.C. (7.9%), Pittsburgh, Penna. (7.2%), Dallas (7.0%), and Indianapolis (6.7%) are all expected to rise. In the industrial sector, CBRE anticipates increases in Indianapolis (10.7%), San Jose, Calif. (10.6%), Akron, Ohio (9.4%), New York City (7.9%), and Pittsburgh, Penna. (7.9%). For more information, see www.cbre.com
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Canadian construction leaders
TORONTO, Canada – Reed Construction Data Canada has released The Leaders, the company’s annual publication ranking the top Canadian general contractors.
The publication includes top 100 lists for eastern and western Canada, and for the first time, a national list of the top 50 companies. In each list, companies are ranked based on the total value of projects under construction from October 1, 2006 to September 30, 2007, as reported by Reed Construction Data.
At the top of the list, the national leader is Mississauga-based EllisDon Corporation, an international construction services firm, with reported projects under construction valued at $8.5 billion.
Rounding out the top five companies on the national list are Kellogg, Brown & Root, $4.3 billion; PCL Constructors, Inc., $4.2 billion; Soc d’énergie de la Baie James, $4 billion; and Ledcor Group of Companies $1.4 billion. For more information, see www.reedconstructiondata.com
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Lipsey chooses top cos.
LONGWOOD, Fla. – The Lipsey Company has chosen the 2008 Top 25 Commercial Real Estate Brand.
The winners are: CB Richard Ellis, Cushman & Wakefield, Colliers International, Grubb & Ellis, Jones Lang La Salle, NAI Global, Coldwell Banker Commercial, Trammel Crow Company, Staubach Company, Oncor International, Equity Office Properties, Marcus & Millichamp Real Estate Investment Brokerage Company, Cresa Partners, Corfac International, Prologis, Wells Real Estate Funds, GVA Worldwide, First Industrial Realty Trust, Opus Corporation, Duke Realty Corporation, Sperry Van Ness, Blackstone Group, RREEF, TCN Worldwide Real Estate, Simon Property Group, Prudential Financial Inc., and Studley, Inc.
For more information, see www.lipsey-co.com
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Getting home info
SANTA BARBARA, Calif. – FMs thinking relocation need updated information about current and future housing markets. To that end, Whitestone Research has updated BrickBits.com, a detailed online housing cost calculator.
BrickBits.com estimates 12 housing costs by U.S. zip code: Cleaning, Trash/Recycling, Maintenance & Repair, Energy, Water/Sewer, Landscaping, Pest Control, Security, Phone, TV, Internet and Property Taxes. Changes to BrickBits.com include:
- Quarterly update of local energy costs
- More types of heating and air conditioning
- Improved landscaping model incorporating local growing seasons
- Link to Whitestone U.S. residential cost trends
BrickBits.com enables FMs to: compare their home bills with local averages, budget for upcoming maintenance expenses, and know the hidden costs (and savings) of moving. It is available free of charge.
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