APARTMENT COMPLETIONS — NEEDED OR NOT
Apartment completions will decline nationally for the second straight year in 2003, according to Marcus & Millichap. Some markets, however, are seeing new product, even as vacancies rise. Atlanta, which had an 11.5% vacancy rate in apartments in the first quarter, will lead the nation with 12,500 units delivered in 2003.
STABILIZING INDUSTRIAL VACANCIES
The industrial vacancy rate appears to be stabilizing at 9.5%, well below the peak of 13.7% set in 1992 following the last recession. The industrial vacancy rate is not expected to improve through the end of 2003, as rents are under downward pressure.
PRICIEST HOTEL DEALS
Laguna Beach Resorts picked up the Montage Resort & Spa for more than a pretty penny last year. At $730,000 per room, the purchase was the most expensive hotel acquisition in 2002. The sale of the Monarch Hotel in Washington, D.C., was a distant second at $353,000 per room.
| Hotel | Total Rooms | Price Per Room | Buyer |
|---|---|---|---|
| Montage Resort and Spa | 260 | $730,000 | Laguna Beach Resorts Laguna Beach, Calif. |
| Monarch Hotel | 416 | $353,000 | Legacy Hotels REIT Washington, D.C. |
| Box Tree Inn | 13 | $307,000 | 252 East 49 (LLC) New York, N.Y. |
| Hotel Wales | 87 | $276,000 | DLJ Capital RECP II New York, N.Y. |
| Hyatt Regency | 837 | $275,000 | Blackstone Group Lahaina, Hawaii |
| Source: HVS International | |||
LENDERS ON THE LOOKOUT
The amount of money loaned per square foot for office properties declined sharply last year as lenders hedged against a softer leasing environment, and owners took advantage of low interest rates by refinancing properties and cutting debt loads. The average loan amount in 2002 equaled about $94 per sq. ft., down from about $103 in 2001. Interest rates also continued to fall. Although market conditions have deteriorated over the past few years, the annual net cash flow continued to increase due to rent escalations built into leases signed in the late 1990s.
| 1999 | 2000 | 2001 | 2002 | |
|---|---|---|---|---|
| Average Mortgage Rate | 8.23% | 8.11% | 7.42% | 7.08% |
| Loan Amount | $84 | $96 | $103 | $94 |
| Annual Net Cash Flow | $10.88 | $12.24 | $13.00 | $13.79 |
| Average Debt-Service | 1.43 | 1.31 | 1.46 | 1.80 |
| Coverage Ratio | ||||
| Source: CoStar Group Inc. | ||||
REAL ESTATE GEMS
Emerging “edge counties” — defined as a center of economic activity with large office parks that are close to a major city — often attract households with substantial assets, which translates into an above-average appreciation of real estate prices. Douglas, Colo. — the fastest-growing county in the U.S. — saw a 191% population surge over the past decade.
| County | 2000 Census Population | % Increase 1990-2000 | Nearby Metro |
|---|---|---|---|
| Douglas, Colo. | 175,800 | 191.0% | Denver |
| Loudon, Va. | 169,600 | 96.9% | Washington, D.C. |
| Williamson, TX | 250,000 | 79.1% | Austin |
| Hamilton, Ind. | 182,700 | 67.7% | Indianapolis |
| Delaware, Ohio | 110,000 | 64.3% | Columbus |
| Cherokee, Ga. | 141,900 | 57.3% | Atlanta |
| Williamson Tenn. | 126,600 | 56.3% | Nashville |
| Shelby, Ala. | 143,300 | 44.2% | Birmingham |
| McHenry, Ill. | 260,100 | 41.9% | Chicago |
| Warren, Ohio | 158,400 | 39.0% | Cincinnati |
| Source: Census 2000 and Peter Francese analysis | |||