Professional Documents
Culture Documents
Kootenai County Market Forum 2008 Slides
Kootenai County Market Forum 2008 Slides
Mike Gregg
“Borrow 50 cents? Sorry, I‟m staying out of
the sub-prime lending market.”
Topics
• New Construction Building Permits
• Development Land Values
• Overview of Several Development Projects
• Development News
• Development Land Forecast for 2008
Kootenai County Permits
New Construction Residential Building Permits*
Year Total Units Single Family Units Multifamily Units
Highway 41 & Lancaster Rathdrum 300 2/22/2007 $30,000 Motivated by 1031 Exchange?
Interstate 90 x Beck Post Falls 234 11/17/2006 $86,000 Commitment from Cabela's,
improvements, and TIF/URD
Lancaster x Meyer Road Rathdrum 45 5/16/2006 $66,000 In City Limits & Zoned
Atlas Rd, CdA Cd'A 320 10/13/2005 $20,000 Adjacent to City Limits & Services
Hwy 41 (South of Prairie) Post Falls 192.5 6/17/2005 $35,500 Annexed ($12k/acre city fee)
Hwy 41 & Prairie Post Falls 147 1/27/2005 $20,400 Frontage on 41 & Prairie
Hwy 41 (South of Prairie) Post Falls 192.5 1/13/2004 $11,100 Adjacent to City Limits
Hwy 41 & Prairie Post Falls 124.2 6/18/2004 $13,900 Adjacent to City Limits
Construction activity
increases dramatically,
but vacancy remains
normal or lower. This
phase can last for a few
months or years.
Efficient Design
USF/RSF = EP
16,830/20,806 = 81%
Class A Space
• Quality of Construction
• Exceptional finish, amenities and location
• New or built in the past 5 years
• Modern technology
Class B Space
• Older buildings needing updating or new construction
• Lesser quality interior finishes and amenities
• Possibly more efficient design than new “Class A”
• More affordable space for tenants
Class C Space
• Older, with obvious signs of “functional obsolescence”
• ADA, Parking, HVAC, Technology, Location
• “GRINDER”
• “Value add projects”
Class A Space
• Rents - $16-$24, NNN
• Net Charges - $5.50-$6.50 psf
• Vacancy - 4%-5%
• Interior Finish Cost - $60-$100 psf
Class B Space
• Rents - $12-$15, NNN
• Net Charges - $4.00-$5.50 psf
• Vacancy - Less than 3%
• Interior Finish Cost - $35-$50 psf
Class C Space
• Rents - $8-$12, NNN
• Net Charges - $3.00-$4.00 psf
• Vacancy - 8% or higher
• Update Tenant Improvements Lessor/Lessee
Investor Decisions
• Hold and do nothing
• Refinance and pull equity out
• Sell
• Great time with low Cap Rates 6.5%-8%
• Capital Gains Taxes at 15%
• Low interest rates
• “Grind”
• Add Value with Facelift / Increase Rents
• Scrape and Start Over
Tenant Decisions
• What will the actual cost be over the term of the
lease?
• Will a better location or image increase cash flow?
• What will be the relocation expense?
• What are the TI costs to remodel vs. new build outs?
• Who is paying for the Tenant Improvements?
• Can I sublease my space to allow my company to
move into a better space and location?
• Lease vs. Own analysis
• How will these decisions affect our bottom line?
Summary
• Quality tenants will continue to move into high profile,
Class A space
• New designed, high efficient buildings will be very
successful, due to the affordability for tenants
• Value-add projects are risky, but can be the best way
to create wealth
Thank You!
Retail
Paul Scott
NAR Forecast
Consumer
Confidence
Capitalization Rates
Retail Lease Rates
Northwest Boulevard
22,000 CPD - $24-$26
Highway 41 Corridor
15,000 CPD - $21-$24
Northwest Boulevard
22,000 CPD - $24-$26
Highway 95
28,000 CPD - $15-$18
Highway 41 Corridor
15,000 CPD - $21-$24
Northwest Boulevard
22,000 CPD - $24-$26
Highway 95
28,000 CPD - $15-$18
Highway 41 Corridor
15,000 CPD - $21-$24
Northwest Boulevard
22,000 CPD - $24-$26
Rents
Forecast
• Lower Vacancy Rates
• Higher Rents
Investments
Mike King
“30,000 ft. View”
• Strong Fundamentals
• Values Supported
• Financing Spreads
Local Trends Review
• CAP Rates Rising
• Debt Markets Changing
• Consumer Spending
• Housing Market Effects
• Continued Development
Forecast & Trends
• LEED Certified “Green Building”
Buildings are #1 user of energy resources.
McGraw-Hill Estimates:
• 8-9% Decrease in Operating Costs
• 7.5% Increase in Building Value
• 6.6% Return on Investment
• 3.5% Occupancy Increase
• 3% Rent Increase
Forecast & Trends
• LEED Certified “Green Building”
• Economic Stimulus Package
• Capital Gains Tax Changes
• Commercial Forecast
“A National Perspective”
Rick Davidson
President & COO
In the News
“House of Cards”
“Oil hits a new high point”
“Stocks surge on FED news”
“Malls, Offices may Slump
although less Steeply than
Homes”
“Fear Stalks a Market”
“Trouble Ahead – but no
Subprime”
“Six months after the first
rate cut”
“Slower growth, but no
recession - forecast”
“U.S. employers slash 63,000
jobs in February”
International Overview
Fastest Growing Occupancy
Cost Markets
Singapore
82.6%
Moscow, Russia
64.5%
Mumbai, India
55.0%
Manila, Philippines
51.8%
Oslo, Norway
51.8%
Asia GDP Growth
China
11%
Philippines
6%
Singapore
7%
India
8%
Viet Nam
8%
AsiaPac
Tokyo
Tight Supply
Prime rents rise 53.6% YTD
Hong Kong
Rapid rental growth in CBD
Sydney
Positive Absorption
Flight to Quality
Latin America
Buenos Aires
Vacancy & absorption at normal levels
CAP rates recovering
Panama City
Improving economy
Vacancy declines 10%
Mexico City
36% decline in vacancy rate
2 million SF new delivered by „08
EMEA
London
Office vacancy at 5 year low (3.6%)
West End most expensive lease market in world
($329/SF)
Frankfurt, Paris, Stockholm, Madrid
Increased demand
Rental growth continues to rise
Domestic Overview
Office
Vacancy (12.8%)
Rents (5-6%)
Absorption
Supply
Industrial
Vacancy (9.5%)
Rents (3.5%)
Absorption
Supply
Retail
Vacancy (7.5%)
Rents
Absorption
Supply
Multi-Family
Vacancy (5.6%)
Rents
Absorption
Supply
Capital Markets
Capital Markets
$1 Trillion in Sales