Seattle ranks third in the nation in forecast retail investment for 2012. Reports cited strong growth in the Puget Sound area’s tech sector — notably by online retailer Amazon.com ¬— as a factor in improving store traffic and earnings for downtown retailers.

Seattle jumped seven spots from No. 10 in the Marcus & Millichaps rankings, based on retail sales and employment projections. Predictions say the Puget Sound area will gain 52,000 workers this year, compared to a gain of 44,000 workers last year, with area payrolls increasing 3.1 percent.

Meanwhile retail vacancies are projected to fall to 5.8 percent, with a 1 percent rise in average asking rents to $21.54 a square foot and a 1.6 percent increase in average effective rents to $18.93 per square foot. New construction will add another 360,000 square feet of retail space to the market.

Low interest rates and attractive net operating income will create a large pool of investors for top single tenant retail properties. Well-located strip shopping centers with a stable roster of tenants will also attract buyers.

Amazon sources close to the situation have told us that the company is planning on rolling out a retail store in Seattle within the next few months. This project is a test to gauge the market and see if a chain of stores would be profitable. They intend on going with the small boutique route with the main emphasis on books from their growing line of Amazon Exclusives and selling their e-readers and tablets.

Seattle is where Amazon’s main headquarters is based and is known as a fairly tech savvy market. It is a perfect launch location to get some hands on experience in the retail sphere. Amazaon appears to be going the boutique route and stocking the shelves with only high margin and high-end items. Their intention is to mainly hustle their entire line of Kindle e-Readers and the Kindle Fire. They also will be stocking a ton of accessories such as cases, screen protectors, and USB adapters. GoodEReader) READ MORE…

In 2012, conditions borrowing conditions should continue on their slow ascent.

Our annual Borrower Trends Survey, had more than 300 respondents this year, including both borrowers and lenders. Overall, borrowers are expecting to take out more loans and lenders are anticipating placing more debt. That, in turn, should lead to a further rise in investment sales volumes.

The biggest question remains the CMBS sector. In 2011, more than $35 billion in new issuance occurred. That was more than 2007, 2008 and 2009 combined. But it fell short of what some expected when the year began, thanks to some problems in the summer that led to a slow end to the year. In 2012, expectations are for issuance to rise to perhaps $50 billion. That would put the industry roughly on par with 2002, when $54.03 billion in issuance occurred. But it is a far cry from 2006 and 2007 when $202.69 billion and $230.17 billion in issuance took place, respectively. So there remains a big financing gap in the market.

On the other hand, life insurance companies, historically the most diligent commercial real estate lenders, had a record year in 2011. In the first three quarters alone, life companies placed $34.66 billion—a 71 percent jump from 2010 and a number greater than any previous full year figure. Life insurance firms have their sights set on placing another $45 billion to $50 billion in debt in 2012.

Commercial banks, the largest source of financing for the sector, also are in solid shape. Many firms anticipate placing more debt in 2012 than in 2011 and are increasingly willing to take on higher levels of risk.

Lastly, mezzanine financing is increasingly returning to the picture. That means borrowers facing lower loan-to-value ratios on senior debt (60 percent to 70 percent today vs. 75 percent to 85 percent at the market’s peak) will have options in building capital stacks that go beyond trying to raise additional equity.

Questions remain, however. How long will low interest rates last? Will austerity measures and government budget cutting slow the economy? How will the European sovereign debt crisis affect capital markets? Will commercial real estate fundamentals improve further? And there is the ever-present issue of Fannie Mae and Freddie Mac. Reform of those institutions would alter the financing picture for multifamily properties.

In the end, the picture for 2012 is one of a slow recovery. It will build on 2011, but don’t expect any miracles. (NREI) READ MORE…

Sam’s Club CEO Brian Cornell has resigned the post, and parent Wal-Mart has named Rosalind Brewer as the 610-store warehouse chain’s new chief executive. Brewer, who currently heads Wal-Mart stores in the Northeast, will be the first woman to lead one of the retailer’s major business units.  (WSJ) READ MORE…

Fisher Plaza, a 294,488-square-foot, five-story office building in Seattle, has sold to Hines Global REIT for $160 million in cash (approximately $543 per sq. ft) . The seller, Fisher Communications, initially wanted to sell the building in early 2008 but quickly suspended its efforts due to the economic downturn. It resumed its search for a buyer in March 2011. Fisher has signed a new 12-year lease at the plaza that allows it to remain in its 120,000-square-foot corporate headquarters, according to CoStar.

Average US retail capitalization rates declined in the third quarter after a temporary increase in the second quarter. Cap rates during the quarter were at the lowest levels since the end of 2008.  The data is from the CBRE Valuation & Advisory Services (VAS) database from 2003 through Q3 2011.

In the West average retail cap rate dropped to 7.81%.

READ THE FULL REPORT HERE

Downtown Tacoma’s Rhodes Center is for sale, again.

The state-owned office complex, which the government bought in 1996 and tried to sell in 2008, is headed for the open market with an asking price of $25 million. It’s the priciest of a handful of properties the state is trying to shed to help reduce the projected budget deficit.

The complex is two office buildings and a parking garage, all connected by skybridge, along South 11th Street between Market and Broadway. 

However, many of the state tenants in the Rhodes don’t have traditional 10-year commercial leases. Many of the state leases are two-year renewables, tied to the state’s budgeting process.

The Rhodes Center comprises the former Rhodes Department Store on Broadway, built in 1903; a building on Market Street and a 1969 parking garage.  After Rhodes left downtown for the Tacoma Mall, the building became the University of Puget Sound Law School.

UPS then sold the building to Seattle University, which moved the law school to Seattle. The state bought the building in 1996, renovated it in 1999, and tried to sell it to the Tacoma Housing Authority in 2008.

That sale ultimately didn’t close because of THA’s concerns about deferred maintenance.

According the the State, The Market Street building needs a new roof; dozens of heat pumps replaced; and the lights use bulbs that aren’t made anymore.

Ground floor retail space on Broadway has been vacant for years, though the Sundance Cafe recently opened.  (Tacoma News Tribune)  READ MORE

ISSAQUAH — Records show that Klahanie Shopping Center, 4580 Klahanie Drive S.E., sold last week for $22 million (±$328.87 per SF).  Gerrity Group of Solana Beach, Calif. bought the QFC-anchored center from Hogate Properties of Seattle.

Klahanie Shoping Center is approximately 66,895 square feet and sits on just over 7 acres.  According to CoStar, the center was 97% occupied at the time of the sale.

Seattle is the country’s sixth strongest commercial real estate market, according to the Emerging Trends in Real Estate report by the Urban Land Institute and Pricewaterhouse Coopers.

The report is based on surveys of 950 real estate professionals. Release of the rankings is a big day in the industry, and this year’s results were warmly embraced yesterday by a standing-room only crowd of more than 500 people in Seattle. 

Washington, D.C., is the top market, followed by Austin, San Francisco, New York and Boston. Following Seattle are San Jose, Calif., Houston, Los Angeles and San Diego. Most other areas of the country are a different story, according to Emerging Trends, which predicts real estate faces a “long grind” before recovery.

“We think [commercial real estate] is out of the water,” said Charles DiRocco of PwC. “We are breathing, but we are concerned about taking another dip.” One survey respondent said Seattle is “starting to fire on all cylinders.” That’s a turnaround from last year’s Emerging Trends, which summed up Seattle as “crawling out, but running on empty.”

Seattle has the top industrial and retail markets, the second best office market and ranks No. 3 for apartments. The weaknesses are the prospects for building houses and hotels; Seattle ranks seventh for both. Survey respondents said Seattle is blessed to have Amazon, Microsoft and Google, along with “other formidable employers” such as Boeing, Costco and Nordstrom. Emerging Trends also is high on the region’s infrastructure projects, including the tunnel that will replace the Alaskan Way Viaduct and transform the waterfront. “This city gets better and better,” states the report.

The Seattle panel talked about challenges and threats to the Puget Sound market. Jim Gallagher of Cornerstone Real Estate in Santa Monica, Calif., said foreign investors view Seattle as a secondary market and favor San Francisco and Los Angeles. Apartment developer Brian Fritz of AvalonBay Communities worries about an oversupply of new apartments. Douglas Howe, president of the Seattle office development firm Touchstone, said Seattle will see build-to-suit projects start next year but won’t see speculative development for five years.

Seattle’s strength is being “a talent magnet” among high-tech and other creative companies, Howe said. “I think we’ve got a good 10 years in front of us.” Gallagher predicts growth will continue in the region’s urban cores. Employers know that to attract talent they must be in lively, walkable areas where people want to live. “Increasingly convenience counts as more people shy away from car-dependent places,” the report states.  (Daily Journal of Commerce)

Retail Caps Rates Investment Way Up

Average US retail capitalization rates were effectively flat in Q2 2011 at 8.14% (after we revised Q1 from 7.79% to 8.16%). It is unclear what impact the recent global bond market turmoil will have on real estate as of this writing. We expect some upward pressure on cap rates, at least in the short term. The data is from the CBRE Valuation & Advisory Services (VAS) database from 2003 through Q2 2011.

CBRE Retail Vaulation Group measured increases in the East, Midwest and West, and a decrease in the south. Average rates remain near Q4 2008 levels. The highest quality institutional quality retail centers and net leased investments (such as Walgreens, McDonalds, etc.) continue to achieve significantly lower cap rates than market averages.

The data points used are confirmed closed transactions, adjusted for assumed financing, and reflect overall market trends. Contact a local CBRE appraiser for a detailed overview of a specific market.

US Retail :: Cap Rate Trend – Quarterly Average

Source: CBRE