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Top real estate stories of 2009

Cory Schouten
December 29, 2009
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For many in the real estate business, the most exciting part of this week’s New Year’s Eve celebration is that 2009 is finally history.

A major downturn in commercial real estate was inevitable and bound to lag the housing bust. But the depths have surprised even seasoned industry veterans. Development deals fell apart, financing evaporated, under-water building owners found themselves in a standoff with vulture buyers. Banks extended loans in hopes lost equity will soon reappear.

Call it the year of living pessimistically. Or the year of living on a shoestring budget if you’re a broker or developer.

Let’s wrap it up with a subjective and unscientific countdown of the Top 10 stories of the year as covered by IBJ’s Real Estate Weekly. But first: Here’s to a better market next year!

10. Airport vicinity buzzing with activity

Real Estate Weekly in 2009 covered several developments surrounding the Indianapolis International Airport. A group of investors, some of whom were key players in assembling the land for the massive Ameriplex development, say they intend to develop their own business park on land that airport master plans identify as the site of a future runway and that is surrounded by airport-owned property. The AirPark Commerce Center would be developed on two 17-acre parcels due south of the airport’s midfield terminal on the south side of Interstate 70.

Separately, a local hotel developer planned to build an all-suite hotel near the airport. General Hotels Corp. planned to break ground early in 2010 on a 155-room Embassy Suites at the 1,500-acre Ameriplex-Indianapolis business park.

And finally, the Hendricks County Convention and Visitors Bureau offered up to 18 acres in Plainfield and a potentially lucrative government incentive package for the development of a 200-room hotel with meeting space at the intersection of Interstate 70 and Highway 267.

9. Groups move to protect historic downtown buildings

Buildings on Monument Circle and its immediate vicinity would be protected from demolition and inappropriate alteration under plans being drawn to create a new downtown historic district, Real Estate Weekly reported in June. The Indianapolis Historic Preservation Commission, a unit of city government, is working on creation of the Monument Circle-Downtown Historic District using $15,000 in funding from the Central Indiana Community Foundation’s Efroymson Family Fund.

Historic Landmarks Foundation of Indiana, a statewide not-for-profit that works to preserve historic buildings, pushed for creation of the district to protect what agency President Marsh Davis calls “the most dense and historic commercial center in our state.” Among the buildings in the district is the Illinois Building, at the southeast corner of Illinois and Market streets, which recently was considered at risk for demolition by Historic Landmarks. The long-vacant Consolidated Building, in the 100 block of North Pennsylvania Street, also would be protected by the historic district.

8. Industrial holds up better than other segments

The city’s industrial real estate segment didn’t escape the bumpy ride caused by the national recession, but it withstood the turbulence better than other sectors.

The industrial market here saw net absorption of more than 1.4 million square feet in the third quarter, bringing the year's total to more than 2.4 million, according to statistics released by the local office of Colliers Turley Martin Tucker. And it’s positioned to add to its total between now and the end of the year. Four or five big deals in the works could add another 2 million square feet to the 2009 deal total, said Luke Wessel, a Colliers principal specializing in the industrial market.

But the industrial sector isn’t without its challenges. Chip Barnes, an industrial specialist with NAI Olympia Partners, told IBJ in October that landlords were cutting rents and striking short term deals to keep tenants and attract new ones. Rents are 10 to 15 percent less than they were a year ago. And in the local bulk warehouse market, vacancy grew from 13.25 percent at the beginning of the year to 15.3 percent at the end of September.

7. Former car dealerships hit market

The owners of car dealerships slated for closure by Chrysler and General Motors faced a tough environment for unloading their real estate, but an expected onslaught of such properties had at least one company preparing to grab a slice of the business. CB Richard Ellis formed an Automobile Dealership Services group to dispose of some of the thousands of dealerships that are expected to close as car manufacturers restructure. Brokers say no one tracks the number of empty car dealerships for sale nationally, but four or five were up for sale in the Indianapolis area.

A car lot’s potential for redevelopment is largely a function of location, said Abbe Hohmann, senior vice president in the local office of Colliers Turley Martin Tucker. But parcel size also plays a role. Hohmann said developers are typically looking for a 12- to 15-acre parcel, which is on the high end for a car dealership. Remediation also is important in the sale of former dealerships because buyers typically want to clear the sites for redevelopment.
 
6. Ramp removal sparks interest in Market Street

Four properties for sale along a two-block stretch of East Market Street downtown are likely to offer the first signs of what’s in store for an area real estate brokers think will get a boost from the recent removal of the Market Street interstate ramp, Real Estate Weekly reported in November. The soaring ramp, erected in the early 1970s, was considered both a physical and psychological barrier to the redevelopment of properties in its shadow. The $22 million project to remove the ramp and improve the surrounding infrastructure wrapped up in late October when Market Street reopened between East and Cruse streets.

Cars and pedestrians now have access to the area for the first time since the project started in spring of 2008. Among the changes visitors will notice are broad sidewalks, historic streetlights, landscaping and the numerous for-sale signs that dot the two blocks between East Street and College Avenue. Here’s what’s for sale: the 29,000-square-foot Modern Photo Offset Supply building at 536 E. Market St., a 8,300-square-foot building formerly occupied by the United Brotherhood of Carpenters and Joiners of America Local 60 at 531 E. Market, a 4,500-square-foot building owned and occupied by Circle City Pizza at 627 E. Market St., and a 32-foot-by-105-foot vacant lot at the southwest corner of Market Street and Park Avenue.

5. Waiting for a wave of foreclosures

The crush of residential property foreclosures may have slowed, but local brokers expect a wave of retail, office and industrial property defaults in the coming months. Many of the foreclosures are expected to come in early 2010, as owners struggle to refinance debt and payoff substantial loans. Retail, office and industrial property owners are at risk, especially if they took out short-term loans in the flush times three years ago. Equity has evaporated and refinancing could be close to impossible.

Steve LaMotte, a senior vice president with CB Richard Ellis, predicted in May that problem could be especially troubling for the owners of multi-family housing, who expected to be able to refinance loans made in the late 1990s. He said he expects to see a wave of apartment complex foreclosures, starting with Class C properties. But LaMotte expects to see higher quality apartment complexes default in 2010 and 2011, too, as investors struggle to meet loan covenants or refinance debt payments.

4. Give me a discount!

It’s not just residential home sellers facing increasingly brazen buyers these days. As the economy recedes, commercial brokers at IBJ’s Real Estate Power Breakfast in May said a growing number of office, industrial and retail tenants were requesting steep rent reductions to cope with losses. “They're in trouble and you feel for them,” said Danny Marr, a partner and principle broker with Veritas Realty LLC. “Unfortunately, you've still got mortgage payments to make. So you do what you can, when you can.”

John Robinson, executive vice president of Jones Lang LaSalle, said not a week goes by without office tenants making demands at the 1.2-million square foot Keystone at the Crossing complex.

Some firms threaten to move out, while others warn that they may miss monthly rent payments. Robinson says the issue poses a dilemma for landlords, who must analyze each request. “What do you do?” he asked. “Do you come back and say, ‘Were you overpaying me when you were making a lot of money?’ No, you really weren’t; they were just paying the rent.”

Landlords should ask for additional information when tenants start pushing for discounts, Marr said. Some national tenants now send form letters to landlords across the country seeking rent relief, he said. In those situations, it makes sense to request financial data to see if a discount is warranted, Marr said.

For property managers who do want to help, Robinson said it’s often tricky to decide who gets a discount and who doesn’t. If one tenant successfully negotiates a price break, others will likely try to do the same, he said. “If you give somebody a discount, then they hear it at the water fountain,” and soon others start asking for one, he said. “It’s a real pickle.”

3. Departures rattle office market

Plans by Safeco Corp. and Eli Lilly and Co. to vacate hundreds of thousands of square feet of downtown office space would pump up vacancy rates in the central business district to levels not seen in more than a decade, Real Estate Weekly reported in August. But in both cases an abundance of parking and an environment ripe for deal-making could help fill the space.

Both properties, along with the largely vacant M&I Plaza office building downtown, were in the running to attract a 100,000-square-foot user that expects to make a decision soon, said Jon Owens, a senior vice president with the local office of St. Louis-based Colliers Turley Martin Tucker.

Safeco vacated its 380,000 square feet at 500 N. Meridian, in favor of space it owns at 96th Street near Interstate 465. Meanwhile, Lilly evaluated whether to leave its 465,000-square-foot Faris campus—three office buildings and a 1,550-space parking garage just south of Union Station.

The departure of both Safeco and Lilly would push the vacancy rate for the central business district past 20 percent—the most since the early 1990s. Vacancy rates in the suburbs already exceed 20 percent.


2. Branching out for survival

Plenty of real estate professionals had to find part-time side jobs or tackle new types of deals during the downturn. Real estate companies also had to diversify; for instance, many developers turned to property management.

Kosene & Kosene, a company that made a name for itself developing retail space and condominiums, launched one of the most dramatic transformation attempts. Kosene started a full-service residential real estate brokerage. The company hired four residential real estate agents and said it plans to add 10 a year in each of the next five years. If the company achieves that goal it would have between 50 and 60 agents, a number that today would place it among the dozen largest agencies in the city.

1. Outlook remains pessimistic

Senior real estate executives remain pessimistic about the prospects for the Indiana market in 2010, although they see signs of improvement in the investment and residential sectors. Among the revelations in a 32-page report from the local chapter of the Urban Land Institute: Developers are most concerned these days about job growth. Last year, the group said energy and materials costs were top concerns.

The consensus is that the retail, office, industrial and hospitality real estate sectors still are in decline, while residential has either bottomed or is showing signs of improvement.

The industry insiders ranked various parts of the business from “abysmal” to “excellent”. No area achieved more than 25 percent “excellent” ratings. Land development fared worst: About 95 percent of those surveyed rated the outlook for land development at “fair” or worse.
 

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  • Helping iSlutsky out..
    Here is the link, correct:
    Link here to the story...
    2009's Ten most Notable Events in Canadian Land Development
  • Woops.. Forgot the link..
    http://blog.buzzbuzzhome.com/2009/12/2009s-nine-most-notable-events-in.html
  • Top 10 Real Estate Notables from Canada
    What a wild a crazy year the land development and real-estate industry has seen in Canada. The past year has seen a lot of highs and lows, mixed with confusion in the market place. Below is the Top 10 Most Notable Stories of 2009, as per BuzzBuzzHome.

    2009's Ten most Notable Events in Canadian Land Development

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