National Market Report

Atlanta

Commercial
Brokerage Grubb & Ellis ranked Atlanta as one of the top 10 retail markets for the upcoming year. Industry insiders say continued success depends on strong consumer spending despite a weakening housing market. Grubb & Ellis expects the market to remain stable, with slightly lower construction and absorption rates. However, if the weak housing market depresses consumer spending, there could be less demand for distribution centers.

Austin

Commercial
Austin’s office market ended last year on a healthy note, the Austin Business Journal reported. The average office rent in Austin rose by 10 percent during 2006 to $22.43 a foot, while Class A property rental rates increased 18 percent to $26.19. The office market absorbed 444,849 square feet during the fourth quarter, according to a report by Oxford Commercial. Commercial analysts say the healthy absorption rate in 2006 came from organic growth of companies already located in Austin.

Residential
Central Texas set a new home building record in 2006, Austin’s American-Statesman reported. Residential builders began 16,743 homes last year. According to Dallas-based market research firm Residential Strategies, that was a 10 percent increase from 2005. Median sales prices of new homes saw an increase of 8 percent to $196,443 during 2006. However, rising inventory pushed home builders to start 10 percent fewer homes in the last three months of 2006 than the year prior, the American-Statesman reported.

Boston

Commercial
The office market in Boston’s suburbs is getting tighter. According to a report by Grubb & Ellis, Concord, Lexington, Bedford and Burlington in the city’s northeast market absorbed more than 250,000 square feet of space during the fourth quarter, greater than the total 210,000 square feet absorbed during the first three quarters of 2006. Vacancy rates for the northwest section of the metro area, with 14.7 million square feet of inventory, fell from 19.1 percent in the third quarter to 17.4 percent during the fourth quarter. In addition, Manhattan-based Broadway Real Estate Partners LLC purchased a portfolio of 10 properties from Beacon Capital Partners LLC that includes the John Hancock Tower, Boston’s tallest skyscraper, at the end of the year. The portfolio went for $3.3 billion and also included properties in Los Angeles and Denver.

Chicago

Commercial
Investors are building office towers in Chicago despite the city’s sluggish office market, the Chicago Tribune reported. Chicago-based developer Fifield Companies is building a 16-story tower with 400,000 square feet of office space to be completed in two years at 625 West Monroe Street. The company’s last West Loop project, at 550 West Adams Street, sold last year for $378 per square foot, roughly 50 percent above the average price for the area.

The region’s slow economy and weak job growth has hindered Chicago office property leasing, but Fifield executives say record office sales in 2006 and investor appetite for Chicago property is reason to build. While office rent rates are predicted to plateau during 2007, tenants are hungry for new spaces, which could hasten the emptying out of some older buildings.

Dallas

Residential
The suburbs of Dallas are getting Balkanized. In McKinney, a suburb north of Dallas, developers are replicating a Croatian village, taking their cues from the architectural style of a town called Supetar, located on Brac Island in the Adriatic Sea.

The Blackard Group is building the Adriatica, a 45-acre, landlocked version of seaside tranquility. The $250 million mixed-use development will include about 80 villas, 300 condominiums and commercial space for retail and restaurants. In the center of the development will be a harbor town overlooking a 50-acre man-made lake featuring a replica of a 16th-century galleon. Construction began about 20 months ago and several buildings are complete.

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Las Vegas

Commercial
Las Vegas Valley’s retail market is enjoying a growth spurt, the Las Vegas Business Press reported. Last year, 61 shopping centers comprising a total of 2.2 million square feet of new space were built. According to Marcus & Millichap, during the fourth quarter, another 28 projects for a total 1.5 million square feet were under construction. Brokers say big-box and neighborhood shopping centers make up about half of the new retail space being added. Wal-Mart was the largest retail developer in the fourth quarter, thanks to two Supercenter projects adding 422,000 square feet. Industry analysts say the near future will remain busy with 157 projects totaling 10.7 million square feet in the pipeline.

Residential
The mega-resort MGM Mirage is adding 2,700 condo units to Las Vegas’ inventory. The condo units are part of the $7 billion CityCenter development on the Las Vegas Strip. Although the development isn’t scheduled to open for another two years, buyers began making reservations last month for the residential portion of the mixed-use, multi-building development, GlobeSt.com reported. Developers predict residential sales will bring in a minimum of $3 billion.

Los Angeles

Residential
Los Angeles County housing officials are allocating the area’s largest-ever yearly allowance of funds for new affordable housing development. After the median home price in Los Angeles County hit a record high of $522,500 in July 2006, housing officials began encouraging developers to increase affordable housing inventory, the Pasadena Star News reported. Developers can apply for more than $30 million in county and federal funds to build special needs, multifamily and senior rental housing. The California Association of Realtors reported that in the third quarter of 2006, only 19 percent of first-time buyers could afford a home in Los Angeles County.

Phoenix

Commercial
The Phoenix office market saw several major deals last year, the Arizona Republic reported.

Notable transaction included two property sales for more than $100 million each; several companies that moved into larger-than-average industrial buildings; a big land sale; andécorporations investing in headquarter or regional offices in Phoenix. In the fall, the Chase Tower in downtown Phoenix sold for $103 million to a Canadian real estate investment fund run by Brookfield Asset Management of Toronto. A few months earlier, the Hines building at 24th Street and Camelback sold for $113 million to German company GLL Properties.

According to Grubb & Ellis, lack of supply in the Phoenix market prevented more deals from occurring.

San Francisco

Commercial
Maybe the dot-coms are back. High-tech companies made sizable real estate purchases in the Silicon Valley commercial market in the past year. Google, Yahoo and Apple Computer made big buys in 2006, the San Jose Mercury News reported. Last year, Google purchased a share of Mountain View’s Shoreline Technology Park for $319 million for expansion. Meanwhile, Apple purchased 50 acres of land for $160 million and Yahoo paid $50 million for 46 acres of land in Santa Clara. On the leasing front, brokers approximate there are now 32 million square feet of available space for rent in Silicon Valley — a significant cut from the high of 45 million square feet in 2003 after the dot-com bust.

Washington, D.C.

Commercial
The Washington, D.C. commercial market is seeing a slowdown in demand. According to Jones Lang LaSalle, about 4.2 million square feet of office space entered the market in 2006. The report predicts D.C.’s market will only absorb about 3 million square feet in 2007. Industry insiders say large associations — one of the major tenant groups in the D.C. market — will be less active in taking additional space. However, private sector law and consulting firms, the most active tenants of 2006, will keep the market afloat. Brokers say these firms are the main reason that buildings with significant square footage to be delivered later this year — 1152 15th Street, 975 F Street and 505 9th Street — are almost fully pre-leased.

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