The Real Deal New York

National Market Report

October 12, 2007

Atlanta

Residential

Sea Island, the site of the Group of Eight summit of world leaders this month, is the nation s third-most expensive ZIP code, 31561, with a median home price last year of $2.2 million. Of the 700 property owners on the five-mile-long island, fewer than 10 are not members of the Sea Island Club, where the initiation fee is $100,000.

Commercial

Vacancy in Metro Atlanta s 162- million-square-foot office market rose to 22.4% in May, up 0.7% from year-end 2003, according to Colliers Cauble & Co. The vacancy rate is even worse for the class A market – 24.7% – with 1.2 million square feet of new product currently under construction.

Commercial

A prominent office tower for sale could fetch a record price for Atlanta area real estate. The 424,000- square-foot Pinnacle building could bring a record price of more than $300 a square foot. At the corner of Lenox and Peachtree roads in Buckhead, it is best known for its unusual open arched roof and as the location of the popular Bluepointe restaurant. The record sale price for an Atlanta office building belongs to One Atlantic Center (formerly the IBM Tower), which in 1988 was acquired by Sumitomo Life Realty Inc. for $300 million, or about $273 per square foot.

Boston

Residential/Commercial

There were many rental to condo conversions in Greater Boston 15 years ago, but the pace cooled in the recession of the early 1990s. Conversions are now underway again for different reasons – it s quicker and cheaper to convert an existing rental building to condos than to build a condo project from scratch, and conversions can be a good way to target the lower end of the condo market at a time when more consumers can afford to buy. Recently, Cambridge Side Apartments, a 104-unit building near the Lechmere MBTA station, was sold for $24.7 million to Crescent Heights, a developer based in Miami that specializes in condo conversions. In the first three months of this year, condo sales set a quarterly record. The median sale price for a condo during that period was $232,740, up 14.4 percent from $203,500 a year ago.

Commercial

Fan Pier, a 20-acre mixed-use development site located on South Boston s waterfront, is on the market. The sale has big implications for the area, which is considered the last frontier of developable land in the city. Developer Nicholas Pritzker spent nearly three years getting permits for the $1.2 billion hotel, office and residential complex, but never secured the financing to move the project forward.

Chicago

Commercial

Mayor Richard Daley is placing his bets on a casino for Chicago, calling for an establishment in the downtown area. Daley said he will push for state legislation that would allow Chicago to be the first municipality in the nation to own a license so that state and city taxpayers would receive all of the revenue benefits, estimated at as much as $850 million annually.

Commercial

CB Richard Ellis has replaced Trizec Properties as the manager of the recently purchased Sears Tower. CBRE promises to “return the original luster and international prominence to the Sears Tower,” now owned by New York-based 233 S. Wacker LLC. However, Trizec Properties Inc. s leasing efforts kept three 100,000-square foot-plus tenants at the 110-story building, and kept occupancy above the West Loop market at 89 percent.

Los Angeles

Residential

Many homeowners in Southern California believe the median price of $357,000 in the first quarter represents the top of the market, prompting some to sell now and either downsize, flee to cheaper locales, or rent until activity slows, according to the Los Angeles Times. Homeowners who resold their dwellings after just three years took in about $138,000 after paying off their mortgages, and those who sold their homes after two decades pocketed more than a quarter of a million dollars. Brookings Institution demographer William Frey speculates that robust appreciation in overheated markets like Southern California may spark the relocation of baby boomers entering retirement, many of whom are moving from the region to less expensive areas in Nevada and Arizona.

Others contend that most homeowners are either moving into larger dwellings or staying put due to lack of equity, the inability to secure new housing, or the desire to wait and sell at a bigger profit.

Miami

Commercial

The downtown office submarket saw overall asking rental rates drop and vacancy rates rise in April, according to CB Richard Ellis report on market conditions. While this submarket has seen just 81,000 square feet of leasing activity in the past six months, the firm said the long-term outlook is promising, as new Downtown developments will help create a 24-7 neighborhood.

Commercial

Miami Mayor Manny Diaz is expected to soon announce what may be the biggest private redevelopment project in the history of the Overtown district, which could have a widespread impact on the perpetually downtrodden neighborhood and environs. A $150 million project by Michigan builder Crosswinds would involve building 1,000 housing units in the neighborhood, more than have been built in Overtown in several decades. Around 200 of the units would be available for affordable housing. Fifty of them would be for current Overtown residents.

Philadelphia

Residential

The former Metropolitan Hospital is being transformed into a $30 million, 130-unit condominium complex, with amenities appropriate for a holiday resort. It will have an outdoor pool lined with cabanas, a spa and fitness center. The MetroClub, a circular eight-story, 230,000-square-foot building, is part of active housing growth in Center City during recent years, where construction projects have risen to meet demand. Between 1998 and 2003, the number of apartments and condominiums increased by 4,235 units.

San Francisco

Commercial

In San Francisco, building sales are expected to increase this year and in 2005, according to local brokers. There were relatively few transactions in the city last year because the market had not settled, making it difficult to price buildings accurately. Some brokers point to fire-sale prices. Stuart Shiff, co-chief executive of Divco West Properties of Palo Alto, bought the 555 Market St. office tower last year for $103 per square foot.

Commercial

California Governor Arnold Schwarzenegger issued an executive order calling for a thorough accounting of state-owned real estate assets and the underlying management process, saying the existing system is “disjointed” and “deficient.” The order calls for an accounting of all state-owned assets and identification of “high-value urban properties” that might be sold to help make up the state s multibillion-dollar budget shortfall. A report is slated for completion by June 30.

Seattle

Residential

Home sales in King County, Wash., rose 18.6 percent during the year-over-year period ended in April, while listings dove 20.5 percent to 3,741. The largest sales gains were seen in Maple Valley, Mercer Island, and Redmond. The amount of time that properties spent on the market shrunk from 65 days to 60 days during what is one of the busiest months for home purchases. The supply and demand imbalance has prompted some agents to send letters to homeowners in particular neighborhoods to see if they are willing to sell.

Residential/Commercial

Recent U.S. Census Bureau data shows that 18 out of 24 of the 100 largest metropolitan areas grew their downtowns in the 1990s. Atlanta and Seattle led the pack. Atlanta saw a 111 percent increase in downtown residents during the 1990s, and Seattle s downtown population grew by 44 percent in the same period.

Washington, D.C.

Residential

Home sales in the five-county Baltimore, Md., area surged 25 percent to 3,617 during the 12 months ended in April, while the average sale price shot up nearly 23 percent from $191,950 to $235,682. The city ranks fifth in the nation among overpriced markets, and the National Association of Realtors predicts it will surpass the national appreciation rate once again this year. NAR economist Lawrence Yun credits the city s lean housing inventory, robust job market, and lower prices in comparison to nearby Washington, D.C., for its robust performance.

Commercial

D.C. continued to have the strongest office market in the region with a vacancy rate of 7.2 percent during the first quarter, according to a study by brokers Advantis GVA, compared with 13.1 percent in Maryland and 14.5 percent in Northern Virginia. But there was only moderate leasing in the city despite current construction on office buildings creating 10.2 million square feet. Tenants leased only a net 161,000 square feet in the first quarter, well below the pace of 2003. But analysts say trends are favorable as rents remained stable. Several big law firms are poised to sign leases.

Commercial

The office deal that attracted the most attention recently has not yet been closed, but mortgage company Fannie Mae has signed a letter of intent for 1.5 million square feet of space at Southwest Washington s Waterside Mall, to be renovated and called Waterfront. If the deal is completed, it would be the blockbuster of the year and help trigger redevelopment in Southwest.

Commercial

New York isn t the only city with a new Mandarin Oriental hotel. A 400-room Mandarin Oriental Hotel in D.C. held an opening gala ceremony last month. The waterfront hotel overlooks the Tidal Basin in the southwest section of the city, and is part of an upscale mixed-use development known as the Portals. It took approximately $150 million to complete the property, the first five-star hotel in the District.

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