Vegas Office Complex Sold

CIP Real Estate and Buchanan Street Partners have sold a pair of office/flex buildings in Las Vegas for $30.2 million. Both office/flex properties are located within the 3.3 million sq. ft. Hughes Airport Center business park. The properties consist of two one-story office/flex buildings with roughly 100,000 sq. ft. of combined space. Credit One Bank occupies both properties. Kraemer II Glendale LLC and FKC Glendale LLC purchased both facilities.

“We are extremely bullish about Las Vegas’ office and industrial markets,” says Eric Smyth, principal with CIP. “Ownership’s strategy in selling the two properties was to release those buildings within our portfolio that don’t coincide with our current portfolio requirements, capitalize on the favorable local market conditions and provide additional equity for future prospects.”

The sale of the two properties also includes two billboards located in front of the airport connector that feeds into McCarran International Airport. Clear Channel currently leases the billboard.

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source: nreionline.com

Changing Market Scuttles Office Sales

Investors plunked down a record $17 billion to acquire Manhattan office properties in the first quarter. But as the credit downturn whipsawed demand for Manhattan skyscrapers, quarterly volume began to decline. Office sales volume during the second and third quarters totaled approximately $8 billion and $5 billion respectively, down sharply from the first quarter.

The wobbly credit market has also triggered thousands of layoffs in the finance sector that could easily dilute occupancy demand in coming months. As the city's key economic engine shifts into lower gear, Manhattan office landlords' winning streak may be nearing an end.

Here are some recent developments behind the growing uncertainty:

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Through Oct. 19 of this year, roughly 42,205 financial services job cuts were announced in New York City, reports Chicago-based Challenger, Gray & Christmas. Just 8,000 cutbacks were reported during 2006.
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In mid-October, Manhattan-based investment bank Merrill Lynch posted $7.9 billion in third-quarter writedowns associated with subprime mortgages and asset-backed bonds. It was the bank's first quarterly loss since 2001.
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Class-A leasing absorption during the first nine months of 2007 totaled 18.3 million sq. ft., down from 20.7 million sq. ft. during the same period in 2006, reports Manhattan-based real estate services firm Cushman & Wakefield.

“The office sales market has really cooled off since the earlier part of the year,” says Bob Stella, senior vice president at Manhattan-based tenant representation firm Cresa Partners.

“And I don't expect the fourth quarter to be very active on the leasing side either. I suspect that many finance firms will drag their feet until the credit markets really improve.”

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Tenants Go for the Green

After years of fits and starts, office building owners are finally getting the green message. Just ask Al Skodowski, vice president and director of engineering for Chicago-based Transwestern, which manages a 150 million sq. ft. office portfolio.

Six months ago, Skodowski recalls sitting in endless meetings with asset management groups, facing the same tired question: “What's LEED?” But in recent days Skodowski has observed a turning of the tide. With each passing day, the real estate community is increasingly embracing the Leadership in Energy and Environmental Design (LEED) program and other related green initiatives.

“I've since been back to three of those five groups and they are now saying, ‘OK, we're hearing it from potential tenants, from potential tenant rep brokers, from our owners' rep brokers. What do we need to do, and how do we figure this out?’” says Skodowski.

Until recently, owners had little incentive to invest in greening their existing properties. After all, most leases stipulate the pass-through of all operating costs directly to tenants. Besides, the notion of turning brown edifices into clean, green machines is anything but a new idea.

The U.S. Environmental Protection Agency launched the Energy Star program back in 1992, and the states of California and New York enacted mandatory energy conservation policies in 2000.

According to property managers, tenants are finally driving owners to walk the green talk. Why now? Chalk it up to the one-two punch of increased awareness and rising energy usage, particularly electricity.

Given the U.S. Department of Energy's forecast for electricity use in commercial buildings to increase by 50% by 2030, more tenants are now demanding highly energy-efficient facilities.

For building owners, energy savings are easily quantifiable and go directly to the operating income of the building. That data also gives owners another point of differentiation when the “for sale” sign goes on the front door.

According to a study released this past summer by Bethesda, Md.-based CoStar Group, multitenant Class-A office buildings that carried an Energy Star rating in CoStar's database achieved higher occupancy rates (89.2%) than those without the designation (87.5%).

The report, which covers building performance over the past three years, found that Energy Star buildings posted higher occupancy rates beginning with the fourth quarter of 2004. A similar trend was found for both rental rates and sale prices.

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Chattanooga office building fetches $18.1 million

California-based investors have purchased an office building in Chattanooga, Tenn., that is fully leased by phone company T-Mobile USA Inc. Los Angeles-based Tennessee Office Properties LLC, paid $18.1 million for the 78,921 sq. ft. structure and the 11.9 acres site.

Scott Tiano, Geoff Tranchina and Jereme Snyder of Sperry Van Ness represented the buyer. The seller was Atlanta-based HEG Chattanooga LLC, which was represented in negotiations by Robert Levin, also of Sperry Van Ness.

The purchased property at 6730 Customer Delight Drive in Chattanooga serves as a customer service center for T-Mobile. The tenant’s lease extends over the next 15 years. The buyers had a 1033 exchange requirement stemming from the loss of a commercial property ravaged by hurricane Katrina in 2005, according to Sperry Van Ness.

Sperry Van Ness has more than 900 advisors serving clients in more than 150 offices both in and outside the United States. Based in Irvine, Calif., the firm provides brokerage, consultation, asset management, property management, leasing, accelerated marketing, and auction services.

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Downtown Los Angeles Goes Upscale

Less than a decade ago, downtown Los Angeles was pocked with vacant eyesores — aging office and industrial buildings emptied out in the 1990s during an era of corporate downsizing and relocation. The liveliest nightlife bustled on skid row, and many workers fled to the suburbs at sunset, considering the city's core too dangerous a place in which to linger.

But the inner city's fortunes are changing. The infusion of $17 billion in private investment since 1999 is transforming downtown into a place to live, work and play, and giving Los Angeles the same caché as other top cities. In less than a decade, the number of residential units has expanded from 3,200 to 11,000, and another 8,000 market-rate units are being built.

“Those who weren't believers in downtown are having a tough time defending their position that downtown isn't emerging as a 24/7 place to rival some of the great cities in the United States,” says Marc Renard, capital markets managing director at Cushman & Wakefield in Los Angeles.

Among its impressive new developments, downtown has snared AEG's $2.5 billion sports entertainment hub called L.A. Live. The project's first phase opened in October near the Staples Center and Los Angeles Convention Center on downtown's south end. It houses the Nokia Theater, a 7,100-seat venue that will host award shows. When complete, the 5.6 million sq. ft. L.A. Live development will include a hotel, condos, offices, movie theaters, retail, restaurants and clubs.

At downtown's north end, the Related Cos. is building the Grand Avenue Project, a 3.6 million sq. ft. mixed-use development near Walt Disney Concert Hall. The $2.5 billion project's first phase is scheduled to open by 2011.

The emergence of major new projects was inevitable given downtown's daytime population of more than 400,000, says William A. Witte, president of Related of California. Development would have occurred sooner, he says, if not for the recession of the early 1990s.

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