Home sales in San Francisco slow as inventory rises
Home sales activity in the once-robust San Francisco Bay Area continues to slow. Local brokerages last month reported a surge in the inventory of homes on the market, according to the San Francisco Chronicle. Bay Area sales dropped by nearly 16 percent in December — the steepest year-over-year drop since November 2001. This ebb in what was one of the nation’s hottest residential real estate markets comes at the same time as the overall economy in the Bay Area slows. The area should experience slow-to-moderate economic growth this year, according to a recent forecast from the Association of Bay Area Governments, with the cooling housing market both a factor in that growth and a product of it as well.
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Atlanta
Commercial
Modest job growth will help drive down the office vacancy rate in Atlanta during 2006 to below 20 percent, according to a forecast from brokerage Grubb & Ellis. Class A asking rents, however, in the city’s downtown area will stay generally flat during the year at around $20 a square foot. In Atlanta’s suburban commercial areas, higher asking rents will also be flat, at an average of $22 a foot by the end of the year, according to the forecast.
Boston
Residential
Essex County just north of Boston saw Massachusetts’ biggest 2005 increase in foreclosure notices. The number of foreclosure notices issued in Essex increased 48 percent last year over 2004, the Boston Globe reported. The number of foreclosure notices filed against Massachusetts homeowners last year, in fact, reached its highest level since 1993, according to the Globe, with as many as 11,500 filings.
Commercial
The rebound in the Boston office market that started in 2005 should continue through this year, the Boston Herald reported. The overall vacancy rate should continue to decline (it declined for the first time in five years in 2005, to 13.3 percent), and rents are expected to increase, especially for Class A high-rises. Some Boston high-rise space already commands at least $35 a square foot, the Herald reported, and some as much as $50.
Chicago
Residential
The South Loop and Near South Side are expected to add more housing units this year than any other areas of the Windy City, the Chicago Sun-Times reported. More than 8,000 housing units alone are either under construction or planned in the South Loop, where 46 percent of Chicago’s new-construction condo and townhouse sales through the third quarter of 2005 happened.
Commercial
Chicago’s office market should continue to struggle, compared to other major cities’ markets, according to a forecast by brokerage Grubb & Ellis. New office space and consolidation by tenants into smaller offices will cause further negative absorption, and the city continues to have higher unemployment rates than the nation overall. There is some good news — the continued conversion of older Class B and Class C space into residential and office condos could help balance the Chicago office market.
Las Vegas
Residential
Rising construction costs are contributing to the cancellations of condo projects in Las Vegas. Labor and building material costs have increased 10 percent to 30 percent there over the last year, BusinessWeek reported, meaning that slow-selling condo projects must budget money for construction inflation into development. If a project doesn’t sell fast enough, developers might be tempted to sell the project or cancel it altogether rather than pay higher construction costs.
Los Angeles
Commercial
Business expansion and a dearth of new office construction continue to tighten the Los Angeles office market. The average vacancy rate for L.A. County dropped from 14.8 percent in December 2004 to 12.3 percent in December 2005. Asking rents over 2005 increased an average of 5 cents, to $2.11 a square foot, the Los Angeles Times reported. The trend toward lower vacancy rates and higher asking rents is expected to continue into the summer.
Residential
Home sales may be slackening in Los Angeles, but prices for them remain high. In December, for instance, home sales dropped in L.A. County 15.8 percent over the previous December. But, the median home price for the county in December was $552,760, a 19.3 percent jump over the same month the year before, the Los Angeles Daily News reported.
Miami
Residential
Home sales have declined in the Miami region, signifying perhaps more than any recent price drops that the South Florida housing market has decidedly cooled. Continuing a months-long decline, sales were down 41 percent in Broward County in December and 39 percent in Miami-Dade, the Miami Herald reported. Throughout the rest of 2006, the Herald reported, real estate experts expect the South Florida housing market to remain cool as mortgage rates creep upward.
Commercial
Low interest rates, tenant demand, and tax benefits for owners are helping spur an office-condominium development spree in Miami. There are 33 office-condo projects comprising 2 million square feet of office space that have either been completed or are in the planning stages in Miami-Dade County, according to brokerage CB Richard Ellis. The average office tenant in Miami-Dade uses less than 5,000 square feet of space, the Ft. Lauderdale Sun-Sentinel reported, fitting the profile of the typical office-condo user.
Philadelphia
Commercial
Center City’s current office vacancy rate of 15-plus percent could fall below 12 percent during 2006, according to a forecast from Grubb & Ellis. The 57-story Comcast Center, now under construction in Center City, Philadelphia’s main business district, won’t cause a spike in office vacancy rates there, according to the brokerage. Population growth, growth in smaller firms, and the conversion of office space to condos should help keep vacancy rates lower than anticipated, the Philadelphia Inquirer reported.
Commercial/Residential
The Science Center will add 1.8 million square feet to its existing 1.7 million square feet on Market Street in Philadelphia’s University City between the University of Pennsylvania and Drexel University. The five-building expansion, with a price tag of $600 million, is expected to include a residential high-rise with 260 units, a 225-room hotel, retail space, and office and lab space.
Phoenix
Commercial
Phoenix’s housing market often grabs headlines for its strength, but the city’s office market, too, remains very healthy. The Phoenix region’s overall office vacancy rate declined to 11.8 percent at the end of 2005, down from 13.3 percent at mid-year and 15.1 percent in December 2004, the Arizona Republic reported. Market observers expect the rate to keep dropping, too, as asking rents go up.
Washington, D.C.
Commercial
Washington is the best American city for foreign real estate investors, according to an annual survey by the Association of Foreign Investors in Real Estate. Washington, in fact, finished second only to London in the 2005 survey as a world destination for foreign real estate investors. The city’s continued low vacancy rates, good rental growth, and strong capital appreciation rate make it a solid fit for foreign investors, according to the Washington Business Journal.
Commercial
The commercial market in the Washington area exited 2005 strongly, with vacancy rates falling and asking rents rising. The vacancy rate was 9.1 percent at the end of last year, down from 10.6 percent at the end of 2004, the Washington Post reported. Over the same period, the average asking rent for office space rose to $39.49 a foot from $29.60. The strong market was fueled, according to the Post, by law firms leasing space downtown, government contractors adding jobs in Northern Virginia, and federal agencies signing large leases in Maryland.