Commercial Property News - November 2008 - (Page 21)

Seattle also benefits from the technology industry. Contrary to reports of its demise, the U.S. tech market has held up well, Costello said, and cities with a healthy number of technology companies have not suffered as many job losses as have other areas. Other beneficiaries include the San Francisco Bay Area and Austin.“(Austin is) a small market and there has been volatility in the past,but they have a large,stabilizing influence with a large government presence,” he noted. Energy performance, of course, is also influencing investors. Houston and Dallas are enjoying strong job growth compared with the rest of the country,Nadji said,though those markets’tendency to overbuild has tempered investor enthusiasm. Austin also benefits from rising gas prices, according to Jack Minter, managing director of investment sales for Jones Lang LaSalle Inc.Liantonio noted that Denver’s energy sector and technology base have also drawn interest. The economic downturn will likely inhibit apartment investment less than other sectors, as apartments have a nationwide vacancy rate of 6 percent. While Nadji predicts that the figure may rise to 6.5 percent by the end of next year, vacancy in retail and office properties could increase by a much more damaging 200 basis points. The strongest apartment markets possess low vacancy rates and have avoided the huge housing slumps that would have resulted in shadow rental markets from single-family homes and condos, he said. New York City, Northern New Jersey, San Jose, San Diego, San Francisco, Philadelphia, Minneapolis and Portland, Ore., all have apartment vacancy rates between 2 and 4 percent. On the industrial side, international trade has declined, but investors will likely still favor warehouse product near ports like Los Angeles, Houston, Seattle and New York City, he noted. And distressed assets anywhere may attract attention, Costello said. “(Investors) want to be the next Sam Zell and swoop in and buy distressed assets,” he observed. Many investors, for example, are considering repositioning assets from South Florida’s broken condo market as apartments. Corporate Relocation Finding the Right Fit While cost savings naturally remain important to corporations in a tough economy, companies are also increasingly evaluating office locations based on both the market’s characteristics and the office’s function. For example, a corporation might previously have positioned a call center in a rural area to cut costs,but now it will also weigh more carefully whether that location would net the best individuals of the type of talent needed. In one case,CB Richard Ellis Inc.’s labor analytics group worked with a financial services firm that occupied nine locations across the United States. Rob Marsh, senior vice president for the group, said it worked to synchronize the company’s real estate portfolio with its personnel needs. Its call centers had been located in large population areas, prompting the firm to overpay to attract workers, and it had offices in rural locations, making recruitment of employees who possess financial expertise difficult.Adjusting the real estate portfolio saved the client $25 million a year in salary costs, Marsh said. Generally speaking,corporations continue to favor cities in the Atlantic Sun Belt,which ranges from Florida to Virginia; the inner Mountain region, from Montana to Arizona; and Texas, according to WDG Consulting L.L.C. principal Dennis Donovan, citing attractive labor pools, good infrastructure, a relatively low cost of doing business and city and state governments that are perceived as business friendly. One Southern city gaining particular favor is Raleigh,N.C.,according to Scott Redabaugh,consulting partner in Cushman & Wakefield Inc.’s business consulting group. Previously known for its technology sector,the city is gaining attention from companies that want to locate front-office facilities there. Fidelity Investments, for instance, Killeen, near Fort Hood, as attractive spots for back offices and call centers,as firms can recruit spouses of military personnel. Fort Bliss, for instance, is working on a $2.6 billion expansion under the Base Realignment and Closure initiative that will bring a population surge to El Paso. Some other cities rank surprisingly high on the Milken/Greenstreet scale.Provo-Orem,Utah, actually topped the index. It sports a new IM Flash technologies L.L.C. flash memory chip plant and is 3.3 times more dependent on software employment than the national average. Technology is also a driver to the index’s No. 2 market,Raleigh-Carey,N.C.,as IBM Corp.and statistical software giant SAS Institute Inc. BEST-PERFORMING CITIES maintain major presences there. (job creation and sustainability ranking Biotechnology firms, meanwhile, favor of largest metropolitan areas) areas like Boston, New York City, Silicon 2008 2007 Valley and Orange County,Calif.,according 1 Provo-Orem, Utah 8 to Mark Seeley, managing director for 2 Raleigh-Cary, N.C. 10 CB Richard Ellis’ labor analytics group. 3 Salt Lake City, Utah 18 Jeanne MacLellan, senior project manager 4 Austin-Round Rock, Texas 20 for corporate relocation services provider Fox RPM Corp., said the Boston-Cam5 Huntsville, Ala. 16 bridge area tops biotech firms’ list. 6 Wilmington, N.C. 2 Of course, long-term needs form only 7 McAllen-Edinburg-Mission, Texas 7 part of corporations’ decisionmaking strate8 Tacoma, Wash. 50 gy. With the volatile economy and tight 9 Olympia, Wash. N/A finances, they are forced to make decisions 10 Charleston-No. Charleston, S.C. 12 in shorter time spans with an eye trained on Source: Milken Institute/Greenstreet Real bottom-line impact.“Two years ago,corporaEstate Partners Best Performing Cities Index tions had more time and ability to look farther out and make a relocation decision based on becoming more prominent locations for backthe long-term benefit,” Seeley said.“We are seeing office facilities and call centers, Marsh said. In many cities, a significant amount of the populamore of a focus on what the immediate cost of the tion may be nearing or at retirement age, but relocation will be.” these two communities host a large population —Reach senior editor Eugene Gilligan of 12 to 18 year olds,supplying employers with a at eugene.gilligan@nielsen.com. pipeline of workers who will be eligible to enter Visit www.cpnonline.com/investment and www.cpnonline.com/corporate for more the workforce during the next five to eight years. investment and corporate real estate coverage. Marsh also listed El Paso, near Fort Bliss, and opened a large office in Raleigh last year. Texas figured prominently in this year’s Milken Institute/Greenstreet Real Estate Partners Best-Performing Cities Index, which ranks U.S. metropolitan areas on their ability to create and sustain jobs.Among the 10 largest cities by population, Houston and Dallas-Fort Worth grabbed the top spots. The latter continues to attract corporate facilities,from headquarters for financial firms to back-office and information technology uses, Redabaugh said. Meanwhile, other Texas cities that have won businesses include the Southwest Texas communities of McAllen and Brownsville, which are www.cpnonline.com • November 2008 • COMMERCIAL PROPERTY NEWS 21 http://www.cpnonline.com/investment http://www.cpnonline.com/corporate http://www.cpnonline.com

Table of Contents Feed for the Digital Edition of Commercial Property News - November 2008

CPN - November 2008 Contents Starting Line Seniors Housing Data/Analysis Conferences Through the Fog CPN’s Top Cities for Investment & Corporate Relocation Finance International Sustainability CPN-Nielsen Claritas Special Report

Commercial Property News - November 2008

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