Atlanta
Atlanta is overbuilt and unattractive to investors, according to an annual survey by the Urban Land Institute. Out of 50 metropolitan areas, Atlanta ranked 33rd for commercial and multifamily development, 24th for commercial and multifamily investing, and 33rd for home building, the Atlanta Journal-Constitution reported. The city hasn’t ranked at the top of the list since 1995. Overbuilding could be problematic for the city’s real estate market in 2009, particularly in Buckhead, where more than 2 million square feet of office space is under construction, but where less than 500,000 square feet of office space is absorbed each year.
Boston
Overall rents in Boston’s downtown office towers fell as much as 10 percent in October as the economic crisis hit investment and law firms, the Boston Globe reported. Landlords are also offering tenants more incentives, including several months’ free rent, in an effort to keep buildings occupied. Average rents for Class A office space downtown have fallen to $66.54 per square foot, a $3 decrease since the end of 2007. The amount of sublease space available, an indicator of the market’s health, increased to 723,000 square feet in the third quarter, up from 638,000 the previous quarter. Real estate experts said they expected rents would continue to decline.
Home sellers are cutting prices in some of the most popular towns in the Boston area and in several of the city’s top neighborhoods, opening up opportunities for buyers. In Sherborn, a suburb, 71 percent of the homes for sale have had their price marked down in the last three months, and 51 percent of the homes listed for sale in Concord have had their price cut, the Boston Globe reported. In several historic city neighborhoods, including the South End, Charlestown and Beacon Hill, sellers have also slashed prices. The price cuts have encouraged some buyers to look at homes that used to be out of their price range, area brokers said.
Chicago
Chicago-area builders are scheduling few or no projects for next year due to economic uncertainty. Montalbo Homes opened six new developments in the Chicago area in the fourth quarter of 2007, but the builder has no projects planned for 2009, the Chicago Tribune reported. Lakewood Homes turned three projects back to lenders to avoid going into foreclosure and is now trying to renegotiate loans. Belgravia Group, which has several projects in the city, doesn’t plan to begin any new projects for a year or two, said Alan Lev, the company’s president.
Law firms have led a real estate expansion in downtown Chicago over the past five years, anchoring new developments. As a result, layoffs at law firms may now hurt the city’s office market. Law firms have paid over $50 per square foot in new buildings in recent years, compared to the average asking rent of $36 per square foot in high-end downtown office space, the Chicago Tribune reported. Demand for new buildings may decline as law firms shed staff. But as existing firms relocate, better office space may become available.
Las Vegas
For-sale home inventory has decreased over the past year and the number of closings each month has almost tripled, the Las Vegas Review-Journal reported. In October of this year, 2,718 homes were sold in Las Vegas, up 180 percent from the 974 homes sold in October 2007. There was an inventory of 22,929 homes for sale in October compared to 24,341 for sale in September 2007 — a decrease due in part to the dip in home sale prices. About two-thirds of the home sales in Las Vegas now are foreclosure-related.
Los Angeles
Irvine-based developer SunCal is seeking Chapter 11 bankruptcy for two projects, a skyscraper and a community, the Los Angeles Times reported. The Westside, a 45-story luxury skyscraper at 10000 Santa Monica Boulevard, was designed by French architect Jean Nouvel. Marblehead, a 313-home development in San Clemente, has long been a controversial project. Lehman Brothers Holdings, the investment bank that collapsed in September, had invested $2.5 billion in SunCal developments, including in Westside and Marblehead. More SunCal projects in California will likely file for bankruptcy, a company spokesperson said.
As the real estate market elsewhere slows, developers from around the country are still flocking to Hollywood to invest in entertainment and nightlife projects. Real estate in Hollywood sells for $800 to $1,000 per square foot, more than twice the average rate for downtown Los Angeles, the Los Angeles Times reported. Upcoming projects in the area include a poolside rooftop club at the W Hollywood, slated to open in 2009 or 2010. The city is now trying to grow non-nightlife-related businesses in Hollywood, such as retail, art galleries and restaurants.
Philadelphia
Philadelphia’s home market continued to do well in the third quarter compared to other areas of the country, according to a study by real estate search engine Zillow.com. Home values fell 5.5 percent in the third quarter this year from their third-quarter 2007 level, just over half the drop the rest of the U.S. experienced, the Philadelphia Inquirer reported. Only 4.4 percent of Philadelphia-area homes bought in the last five years were underwater, meaning that the mortgage was more than the current value of the home. Nationwide, 14.3 percent of homes are underwater. Philadelphia may be taking longer to reach a real estate market bottom, experts said, because the area’s home prices peaked in 2007, while values elsewhere in the country hit their peak in 2006.
Phoenix
Bankruptcy filings in Arizona hit a new high in October, partly due to real estate-related filings, the Arizona Republic reported. Consumers and businesses initiated 2,119 filings in October, the highest monthly figure for the year and an increase of 90 percent over the October 2007 numbers. Experts said more real estate investors were filing for bankruptcy, many because they had not been able to refinance their adjustable-rate mortgages. Most of the filings were for Chapter 7 bankruptcy, which allows those who file for bankruptcy to start over financially after the court uses their assets to pay creditors.
Seattle
The median selling price of homes in King County dropped below $400,000 in October for the first time in over two years, the Seattle Times reported. Sales volume also dropped, according to statistics from the Northwest Mu`ltiple Listing Service. Pending sales offers — those that have been accepted but have not yet closed — dropped 22 percent from October 2007 and 46 percent from October 2006. The number of closed sales fell by 20 percent from October 2007. However, the number of new listings in October was lower than it had been at any point since December 2007.
Washington, D.C.
The federal government’s bailout plan may increase demand for office space in Washington D.C. as new regulatory agencies form and lobbyists, consultants and accountants move to take advantage of government demand for their services. The Government Services Administration, the federal government’s real estate arm, is looking for 60,000 square feet near the White House for new employees of the Treasury’s Troubled Asset Relief Program, the Washington Post reported. Other government agencies, including the Department of Health and Human Services, the National Institutes of Health and the Department of Agriculture, are looking for new space for reasons unrelated to the financial bailout.
Compiled by Sara Polsky