Commercial Real Estate Basic Stats More Than 59% UP!
Published May 15, 2014 | By ListedBY
Chicago-area commercial properties jumped in the first quarter to their highest level since 2008, fueled by rebounding rents and occupancies and a pickup in lending.
Investors plunked down more than $3 billion to acquire 192 apartment properties, retail centers, industrial buildings and hotels in the first quarter, up 59 percent from $1.9 billion in year-earlier period, according to New York-based research firm Real Capital Analytics Inc. It was the best first-quarter showing since the first three months of 2008, at the tail end of the last boom, when investors bought $3.9 billion in commercial real estate here.
“That’s really strong for the first quarter, especially considering the weather we had,” said Real Capital Managing Director Dan Fasulo. “It wasn’t easy for people to get into town and see the buildings. That makes the number all the more impressive. If you write a check for $100 million, you had better go look at the damn building.”
Investors are stepping up acquisitions as the real estate market continues to recover from the worst of its post-crash depths. Rents and occupancies have improved across all property types in recent years.DOWNLOAD YOUR FREE EBOOK HERE – -
An improved lending climate is helping, too. More investors are able to finance acquisitions on favorable terms because banks have boosted their lending.
‘WEALTH OF HUNGRY BUYERS’
“There’s a wealth of hungry buyers. Why not when money is available?” said Al Klairmont, president of Chicago-based real estate firm Imperial Realty Co.
In February, Mr. Klairmont’s firm capitalized on the investor appetite for retail properties in luxury shopping districts, selling a 6,306-square-foot building on Oak Street for $18.9 million to New York financial services company TIAA-CREF.
Borrowing costs have remained low because of low interest rates, though that could change as the economy improves and the Federal Reserve continues to scale back its bond-buying program.
The market can “digest a slow rise in rates, but a massive spike could certainly have some serious implications,” Mr. Fasulo said.
During the quarter, sales were distributed fairly evenly over property types, Real Capital’s data show. The office sector led in the Chicago area, with $855 million in sales, followed by retail, at $690 million, industrial, $616 million, and apartments, $620 million. Local hotel sales totaled $288 million.
Where sales go from here will depend on whether the local economy continues to improve, further boosting occupancies and rents, Mr. Fasulo said. Key economic indicators in the region have lagged the rest of the country. The unemployment rate here was 8.1 percent in March, down from a year earlier but still higher than the 6.7 percent national rate that month.
To push sales volumes back to 2006 and 2007 levels, “going forward, people have to kind of believe in the Chicago story,” Mr. Fasulo said. He noted that Houston is booming for commercial real estate deals right now because of the region’s expanding energy industry. “Chicago needs a similar type of gravitational pull.”
Significant sales that closed in the first quarter include:
• A venture between Chicago-based Zeller Realty Group and Chinese investor Cindat Capital Management acquired a 65-story office tower at 311 S. Wacker Drive for $302.4 million.
• White Plains, N.Y.-based Acadia Realty Trust bought the retail shops in the Waldorf-Astoria hotel for $44 million.
• New York-based Pioneer Acquisitions LLC paid $28.9 million for eight apartment buildings on Chicago’s North Side.
• Farmington Hills, Mich.-based Village Green Cos. bought a 21-story Gold Coast apartment tower for about $19 million.
• Chicago real estate firm Newcastle Ltd. spent close to $19 million for a 21,000-square-foot, two-story retail and office condominium at the base of the Bristol condominium building in the Gold Coast.
