The Real Deal New York

National Market Review

October 16, 2007

Atlanta

Residential/Commercial

There is a gusher of new condominium projects with no end in sight in Atlanta. The trend started when The Metropolis opened its doors in Midtown in 2002. Some observers say gridlock on major highways and streets is pushing an urban renaissance. One of the latest projects is being backed by former basketball star Magic Johnson. The $103-million Plaza Midtown has just broken ground on a full city block site that runs from Eighth Street to Peachtree Place, and will include two 20 story towers with 452 condos.

Commercial

Atlanta’s commercial real estate market could be on the verge of a significant upswing after a four-year period of dormancy, some observers say. Cousins Properties announced plans to break ground on the first office tower constructed in the affluent Buckhead district since 2001. The 31-story, 500,000 square foot structure will be in the center of Buckhead’s financial district at Peachtree and Piedmont Roads. About 50 percent of the building is already leased.

Boston

Residential

The sales campaign for The Residences at Battery Wharf has begun, and the North End luxury condos are expected to be among the most expensive in the city on a per square foot basis. They will likely rival the Residences at Mandarin Oriental, a Boylston Street condo and hotel complex expected to be completed in 2007. The Battery Wharf condos will range from $975,000 to $5.2 million, an average price per square foot of $1,150, record territory for Boston real estate.

Residential

Philippe Starck, who recently completed his first New York City residential project at 15 Broad Street, is moving on to Boston. The French designer is involved in two condo projects: the conversion of a South End police station to 24 luxury condos and an inner courtyard of gardens and a Charlestown Navy Yard apartment complex which has been renamed Parris Landing.

Commercial

In a big surprise, a partnership of local mall developer Stephen Karp, The Related Companies and Boston Properties signed an agreement to purchase the coveted Fan Pier site on the city’s waterfront, stepping in after Florida-based developer Lennar Corp. failed to make a down payment on the property. Considered one of the most promising development sites in the Northeast, Fan Pier has full approvals for about three million square feet of mixed-use development.

Chicago

Residential

Street gangs are using real estate deals to launder money and committing mortgage fraud on an unprecedented scale, Chicago police said last month. An ongoing probe of such activities, called “Operation This Old House,” involved search warrants that uncovered more than 100 fraudulent mortgage applications involving more than $70 million. More indictments are expected.

Commercial

Equity Office Properties Trust, the nation’s largest owner of office buildings, said it expects its earnings per share to double next year because of newly signed leases and higher rents. The REIT said it plans on doing at least $1 billion a year in deals, aiming to be a net buyer of $500 million in assets a year. It currently owns or manages 699 buildings comprising 125 million square feet in 18 states and the District of Columbia.

Las Vegas

Commercial

The Related Companies was selected by a committee of Las Vegas city officials to develop a 61 acre parcel of downtown land. Related beat out Howard Milstein’s MB Real Estate and Triple Five, a local group. Related’s plans include an academic medical complex and performing arts center both of which the city is requiring as well as a hotel, office, residential and retail space and a park, according to The Slatin Report. The selection was a coup for Related, which was also recently chosen for the massive Grand Avenue Development Project in downtown Los Angeles.

Residential/Commercial

A $1 billion condominium-hotel will be built near the Hard Rock Hotel & Casino by developer Peter Morton. The 1,500 apartments, spread throughout four buildings, are expected to range from $420,000 to more than $4 million, and will be marketed to wealthy young professionals.

Los Angelos

Residential/Commercial

The first condo project in downtown Los Angeles to be built from the ground up in more than 20 years is under construction in the once-desolate blocks around the Staples Center. The $250-million project eventually will include as many as 750 for-sale properties in townhouses and high-rise towers. It is being built by Portland developers Williams & Dame Development and Gerding/Edlen Development Co.

Commercial

Los Angeles County’s office market will continue strengthening and will likely slip half a percentage point to 14.5 percent vacancy by year’s end, according to a recent study by Marcus & Millichap. One reason for the improvement is that some companies are taking space before they need it to obtain favorable lease rates ahead of a full market recovery.

Miami

Residential

In the wake of several hurricanes, buyers in South Florida are changing how they look at their next home purchase. Some are deciding they don’t want to live on tree-lined streets, brokers say. Others are gravitating towards condos, where they feel more secure and don’t have work as much to ready their homes for the next hurricane.

Philadephia

Commercial

The industrial market in the Philadelphia area recently saw its 12th quarterly vacancy rate increase, according to Grubb & Ellis. One reason for the weak performance is job growth while the Philadelphia region added 11,900 new jobs in the past year, many were white-collar positions. Although the immediate nine-county region lost ground again, activity in outlying areas, particularly the Lehigh Valley, began strengthening, Globest.com reported.

San Francisco

Commercial

The East Bay office market is faring better than the San Francisco office market, according to a report from Marcus & Millichap. Occupancy in the East Bay is slated to grow to 85.4 percent by the end of the year, the company said, while occupancy in San Francisco is expected to reach only 79.1 percent. Also, while there is no major office development under way in San Francisco, the East Bay has four large projects, totaling close to 500,000 square feet.

Commercial

The Citicorp Center one of San Francisco’s finest trophy properties has been put on the market by its German owners, who hope to get a jaw-dropping $400 a square foot. If that number holds up, the 20-year-old building located at One Sansome Street would sell for $218 million.

Residential

Brokers report that the luxury home market $2 million and up – in the Bay Area is seeing rising levels of unsold homes. Still, inventory market-wide is doing well there were 1.3 months’ worth of homes on the market in August compared to 2.6 month’s worth the year before.

Seattle

Commercial

Microsoft’s presence in Redmond, where its headquarters is located, could get even bigger. Safeco has announced plans to move next year from the area around Microsoft’s campus, freeing up 218,500 square feet of space, and AT& is expected vacate some of the 582,000 square feet of space it occupies in the area pending regulatory approval of its merger with Cingular Wireless. In the past several years, Microsoft has spent more than $300 million to expand its campus through a series of buys.

Washington, D.C.

Residential/Commercial

Residential building permits issued in the Washington, D.C. area plunged 9.6 percent from 24,426 between January and July of 2003 to 22,149 during the same seven-month period this year. Nevertheless, construction activity is continuing at a pace that could set new records this year. Some experts attribute the decline to local building restrictions, which play a greater role than the status of the overall housing market.

Commercial

The District is getting a professional baseball team, the former Montreal Expos, whose relocation is contingent upon the sale of the team and passing by the District Council of a $440 million financing package to renovate RFK Stadium and build a new ballpark on the Anacostia River waterfront in an area scheduled for economic development. Once home to the final incarnation of the unlamented Washington Senators baseball team, a renovated RFK would house the former Expos for the next three seasons.

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