The Leader - January/February 2009 - (Page 10)

r eal e s t a t e i n t h e ne w s shifting Gears worlD eConoMiC ChallenGes DriVe new strateGies shocks in Commercial Mortgage trigger selloff in reit stocks The value of REIT shares has plunged due to shocks in the commercial real-estate mortgage securities market, where spreads have widened and the cost of insurance against default is still on the rise amid fears of escalating defaults, according to the Wall Street Journal. The SPDRs Dow Jones Wilshire REIT exchange-traded fund fell 14 percent on one recent day as the cost of insurance on Markit’s main commercial mortgage-backed index ballooned, while the cost of insuring $10 million in CMBS bonds against default rose to more than $700,000 that same day because of heightened worries about defaults. Deep payroll cuts in the financial services industry and a decline in retail sales is hurting a couple of major commercial property sectors – office buildings and retail centers, in particular. market. Central Tokyo’s office vacancies were at about 2 percent in 2008’s Januarythrough-March period. That rate could jump to as much as 9.5 percent by 2013, forecasts Property & Portfolio Research (PPR) Inc. Also during that time, office rents could dip by almost 33 percent with no clear end in sight. By contrast, PPR researchers state that London’s and New York’s office vacancies in the worst-case scenario are expected to peak higher than Tokyo’s, but are projected to improve before 2013. hidden costs an organization may be bearing, and then be prepared to renegotiate the terms of the lease agreement. Property Firms shift strategy As European property firms post quarterly earnings, many are not only reporting weaker results but also announcing new business plans aimed at riding out the recession, according to the Wall Street Journal. The third quarter marked the broader European economy’s entry into recession, which has prompted a number of property companies to abandon growth projects and instead focus on strategies to maximize cash generation to pay off debt. In just the last week, several firms have announced major moves. Germany’s IVG Immobilien AG, for instance, shelved plans to create a REIT for its office assets due to unfavorable market conditions. Instead, IVG plans to sell property valued at about $443 million to pay off debt. Spain’s Metrovacesa SA, meanwhile, has slashed 2009-2012 investments by approximately 75 percent and has put the brakes on seven development projects. Land Securities Group PLC, the United Kingdom’s largest REIT, devalued its investment portfolio by 12.7 percent, and scrapped plans to split the diversified property company into two REITs. One would have been focused on offices, while the other would be devoted to retail space. Still, some analysts insist that executives have not gone far enough to prepare for what could be an extended downturn in real estate that would threaten many companies’ long-term survival. Crucial tips to help Canadian Businesses Become recession-Proof Real Facilities Inc. President Stan Krawitz believes there can be significant benefits for those Canadian businesses that extend their leases in return for a space or rent reduction. However, there are subtleties to the negotiation process that have to be mastered, not to mention a science behind the financial calculations that many tenants simply do not understand. Krawitz offers five tips to assist Canadian businesses in recession-proofing their operations during tough economic times. They range from applying an integrated, organization-wide approach to reducing costs to conducting a location assessment that calculates the value and strategic importance of each physical location in the organization. Krawitz further suggests undertaking a space utilization study to determine if maximum efficiencies are being realized across the organization. Finally, he urges Canadian firms to perform a lease audit aimed at uncovering any Fallout From Crisis starts to trickle Down to tokyo Financial Center Tokyo’s office-leasing market has held fairly steady amid the global financial crisis, due partly to low vacancy rates and most Japanese firms’ general aversion to layoffs, according to the Wall Street Journal. Analysts, though, say the advantage is not likely to hold. Many owners of Tokyo-based office properties counted on formerly fast-expanding international financial firms to fill the newest projects. Add to that a surge in bankruptcies among small to midsize Japanese real-estate firms and the result is a likely deterioration in the overall strength of the Tokyo office 2 0 0 9 th e le aDer 10 january / FeBruary

Table of Contents Feed for the Digital Edition of The Leader - January/February 2009

The Leader - January/February 2009 Contents Leadership Message from the CEO Real Estate in the News Mergers and Aquisitions Assessing Green Building Performance Measuring Space You Actually Use Global Trends in Sustainable Real Estate Whirlpool’s Lee Utke Northmarq’s Kevin Farrell Plastics: Hoping for Resiliency in Resins Regional Profile: Heartland Holding Strong Industry Profile: Ascendas Brings New Age Business Space to Asia-Pac Industry Tracker From the Applied Research Center Discovery Forum Findings Capital Corner Career Development Young Leader Economic Development in the News Learning Spotlight Connect With CoreNet Global Index of Advertisers A Look Ahead In our Next Issue Calendar of Seminars

The Leader - January/February 2009

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