The Real Deal New York

National market report

December 01, 2011
By The Real Deal

The Houston skyline

The Houston office market is seeing a drop in available space, the Houston Business Journal reported. The Houston-area office market,  which includes some 240 million square feet of space, saw a 12.2 percent overall vacancy rate at the end of the third quarter, according to a report released last month by Delta Associates. The direct vacancy rate was 11.7 percent, down from a cyclical high of 12.7 percent in 2010, the report said. Delta projected that each of the next two years would see 4 million square feet of net absorption, decreasing the overall vacancy rate to 9.8 percent. “It would be the lowest vacancy rate ever reported in Houston,” Delta CEO Greg Leisch told the Journal, pointing out that only 1.5 million square feet of office space is currently under construction in the area. About 2.3 million square feet of industrial space was under construction in the region at the end of September, the report said.

Los Angeles

Pop singer Rihanna has listed her Beverly Hills home for $4.5 million, substantially less than the $6.9 million she paid for the property two years ago, the Los Angeles Times reported. The 8,520-square-foot, three-story house has eight bedrooms and 10 bathrooms, and sits on three-quarters of an acre with a swimming pool. But the home is a fixer-upper, with “extensive damage from moisture and water intrusion” on the roof, windows, doors and balconies, according to the listing, with John Woodward IV of Coldwell Banker and John Galich of Rodeo Realty. In fact, the leakage problems prompted Rihanna to file a lawsuit this summer against Prudential California Realty, her property inspector, and the former owner of the house, claiming that those involved with the sale failed to inform her that the residence was defective. According to attorneys for the Grammy-winning singer, the house sustained flood damage from a moderate 2010 rainstorm, when water pooled on the second floor and seeped downstairs.

Las Vegas

Las Vegas houses emptied by foreclosure are being turned into marijuana “grow houses,” the New York Daily News reported, as drug dealers take advantage of affordable real estate for rent. Last year, authorities dismantled 153 indoor grow sites in Nevada and seized more than 13,000 plants, compared with 18 sites and 1,000 plants in 2005, the U.S. Drug Enforcement Administration said. “You can’t have crime without opportunity,” University of Nevada criminologist William Sousa told the Daily News. “All those empty homes present an opportunity for criminal activity.” Growers can cultivate over 200 marijuana plants worth $3,000 each in a large home, the News said. Hydroponic marijuana grown indoors can sell for over four times what Mexican marijuana nets. “With this market, it’s almost a free-for-all right now,” Las Vegas police Lt. Laz Chavez told the Las Vegas Review Journal earlier this year. “These guys aren’t the fun-loving hippies with a small garden in the backyard. These are dangerous criminal groups doing this.”

Seattle

Seattle developer Schnitzer West last month sold its five-building Valley Avenue complex in Puyallup to International Airport Centers, the Seattle Times reported. The property, which includes office and warehouse space totaling 443,000 square feet on a 24.3-acre site, traded hands for $41.6 million, the Times said. The move prompted some industry insiders to wonder if Schnitzer might be getting out of development, an assertion firmly denied by the company’s founder and managing member, Dan Ivanoff. “Schnitzer isn’t getting out of the development game,” Ivanoff said. “It’s just reloading.” In the last 18 months, Schnitzer has sold most of what it’s built or bought since 2004, including the 36-story building at 1918 Eighth Avenue in Seattle’s Denny Triangle, two office towers in downtown Bellevue, and the 600,000-square-foot Advanta Office Commons in Bellevue’s Eastgate area. “We’ve always been an opportunistic seller when the market’s in our favor,” Ivanoff said. “It seems like a window has opened for us lately.”

Chicago

Developer Harper Court Partners and the Los Angeles-based Canyon Johnson Urban Fund have started construction on a mixed-use development in Hyde Park, after closing on a $65 million construction loan from Citigroup’s Citi Community Capital, Market Watch reported. The project, on a 3.3-acre site at the corner of 53rd Street and South Lake Park Avenue, will include a 150,000-square-foot office tower, a three-story retail building and a Hyatt Place Hotel. Construction is scheduled for completion in 2013. “Citi Community Capital recognized the transformative nature this project will have on Hyde Park,” said Douglas Leezer, a director at Citi Community Capital. “[It will inject] fresh vitality into one of Chicago’s most vibrant communities.” Earlier this summer, the University of Chicago inked a 150,000-square-foot lease to occupy the project’s office tower. The transaction is anticipated to be among the largest office leases signed in Chicago in 2011.

Boston

Boston-based Sonesta International Hotels has agreed to sell two of its hotels to Hospitality Properties Trust for $150.5 million, the Boston Business Journal reported. The sale, which includes the 400-room Royal Sonesta Hotel in Cambridge and the 483-room Royal Sonesta Hotel in New Orleans, is slated to close in the first quarter of 2012. Including assumed debt and other liabilities, the total purchase price is about $174 million. Sonesta will continue to manage the two hotels. Hospitality Properties, based in Newton, Mass., is a real estate investment trust. “We are delighted to announce this transaction, which will provide our stockholders with significant value,” said Stephanie Sonnabend, CEO and president of Sonesta.

Compiled by Katherine Clarke

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