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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.


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.


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.

2002's Most Expensive Hotels Sales
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


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.

Office Property Loans
Average Amount Per Square Foot
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.


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.

Counties Posting the Greatest Population Increase 1990-2000
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

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