US Retail: The New Developments of 2015

Q1_2015_US_Retail_Fast_Facts

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The Newest Battle of the Bay: Should The Warriors Stay in Oakland or Move to The City?

Park

Raiders-49ers; Giants-A’s; San Francisco vs. Oakland. It’s been a ubiquitous debate among Bay Area sports fans as long as anyone can remember – A topic that has polarized neighbors, coworkers, and classmates every year during interleague baseball and preseason football. But every winter there is one team that everyone in the Bay can agree on, the Golden State Warriors. The oft-maligned and unfortunate Bay Area NBA franchise has found tremendous success in recent years and the Bay Area has rallied behind them as they compete for an NBA championship. Yes, the Warriors have been a come-together, feel-good story. But there is an empty lot in San Francisco’s Mission Bay that has triggered another “Battle of the Bay”: Should the Warriors move to San Francisco or stay in Oakland? From a humble real estate researcher and advocate for Oakland sports who works in San Francisco, here are 5 reasons for and 5 reasons against the move.

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A Possible Turning Point In Mexico City Office Indicators

Construction

Office overall absorption in Mexico City has consistently surpassed completions in recent years. However, new delivery records will be broken in 2015, which points to a possible turning point in office real estate indicators.

In the first quarter of this year, the overall vacancy rate was up by 7.9% when compared with that of the first quarter of 2014. In the last twelve months overall inventory grew 5.9%, while the overall absorption was 4,598,700 square feet, 5.5% of inventory. It is interesting, however, that although this net demand is below the overall inventory expansion, it is well above the 4.4% average recorded in the last three years.

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Select South American Markets On The Rise

Bogota

While much of the world’s spotlight has recently been focused on Brazil, the commercial real estate markets for Colombia and Peru, in particular, have been performing notably well and are forging a much stronger presence on the world stage. Spurring much of this commercial growth is GDP. In 2014, the Colombian economy grew at a rate of 4.6%, mainly by the support of the construction sector which jumped by nearly 10.0% last year. Largely boosting this growth spurt is the 40% increase of the U.S. dollar against the Colombian peso, which has been fueled by falling oil prices, and is making local exports cheaper for international buyers. GDP growth was a bit slower in Peru, but it is expected to perform better in 2015 by growing at an annual rate of 4.1%. By the end of 2016, the GDP rate is anticipated to reach nearly 5.0%. In comparison, the IMF reports that the average annual GDP growth for Latin America was 1.2% in 2014.

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Queuing Up For Office Development In San Francisco

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With all due respect to Austin and its unofficial city motto, San Francisco had the “keep it weird” rallying cry long before that upstart. It follows, then, that development of almost any sort has been a tricky prospect for many years in this progressive city. Yet it does occur albeit under the close scrutiny of local government and a myriad of watchdog groups.

THE BACKGROUND
Though there are many moving parts (rules, regulations, zoning, processes, etc.) to office development in San Francisco, two items stand out above the rest.

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Ports Of Los Angeles & Long Beach: The Aftermath – Back To Normal?

Port

Negotiations to replace the ILWU-PMA contract that had expired in July 2014 dragged on far longer than anyone had anticipated. After nine months of negotiations that contributed to monumental cargo backlogs at West Coast ports, the ILWU and the Pacific Maritime Association finally agreed on a tentative five-year contract in February and the tentative agreement is awaiting ratification.

The agreement is a great relief, across the globe, but particularly in Southern California. The five-year contract is shorter than usual, however, which has everyone concerned with the prospect of more trouble ahead. The labor dispute has left many in the shipping and logistics industries with a level of anger that will take some time to overcome, perhaps longer than anyone is expecting. Assessing the long term damage caused to the Southern California ports will probably take more than a year to really sort out.

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Brazil: A Sort Of Quagmire

Brazil
On February 8th, The Economist printed a major article entitled, “In a quagmire,” about recent economic events in Brazil. The article was on point, and does a good job of explaining what the country is going through; politicians wagging the dog, soaring inflation, eroding consumption, deteriorating fiscal accounts, corruption scandals (i.e. Petrobras), and a major currency devaluation. All of this is wearing out the incumbent party, which is increasingly having difficulties maintaining popular support.  The article, however, says little about prospects, and, by reading it, one might think that the country is heading into a total collapse– which is simply not true.

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Capital Flows Shaking Things Up In San Francisco

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Capital flows continued to shake up the San Francisco office market in 2014. Deal volume set yet another record during the year while prices climbed to unprecedented highs thanks to more and more investors having a mandate to invest in the City by the Bay. Most interesting to note, however, is that in this cycle, more foreign buyers have been taking a stake in San Francisco.

A ground rattling 13.9 million square feet of space was sold in 2014 totaling $6.8 billion, a new record high for this recent up cycle. In dollar volume, this was nearly three times the amount that traded in 2013. While this was sizeable, it was still below the previous cycle’s peak in 2007 when nearly 22.4 msf of product was sold for a total of $9.0 billion.

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It’s Going Down – A Wave of Redevelopment to Lure Tenants Back to the CBD Submarket?

Construction

In recent years D.C. has seen a number of its largest, most prominent, tenants shifting eastward to be in or around new developments in the Metro Center, Gallery Place, and Mount Vernon triangle areas. Covington & Burling was the first, shifting its address from Pennsylvania Avenue to mega-development CityCenter DC. This year, Norton Rose Fulbright will move from Market Square to the newly renovated 799 9th Street NW and Arnold & Porter will leave 555 12th Street NW for the new 601 Massachusetts Avenue NW. Venable will finalize its move from 575 7th Street NW to Boston Properties’ new 600 Massachusetts Avenue NW in 2017. As a result of these, and similar moves, the East End has tightened substantially in the last four quarters, with class A overall vacancy declining 4.4 percentage points year-over-year to end 2014 at 9.9% – a number not seen since before the Great Recession.

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Boston: Room to View at the Top

Boston

As the Boston CBD began recovering from the last recession, an interesting shift occurred in its 29.36 million square feet (msf) class A tower market¹. Low-rise space (floors below the twentieth) is now in higher demand than high-rise space. Traditionally, high-rise product was quickly absorbed from the market by stalwart tenants in the financial and legal services sectors who were willing to a pay a premium for the city’s best views. Low-rise space, which was typically used to house back office operations of financial services firms, moved more slowly from the market, keeping vacancy levels comparatively elevated for longer periods of time.

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