Clubhouse conversation at our recent Bushwood Invitational golf event centered around market recovery. Although many executives I spoke with said that their company’s revenue is ahead of projection, they described a nagging uncertainty among tenants and investors.

This was evident in Jones Lang LaSalle’s recent Investor Sentiment Survey. When asked to describe their mood about the CRE landscape and business prospects, 76% of investors said conditions were either “mixed” or “challenging.” This response leads me to believe that others feel the same way I do.

Looking back to the local picture, our employment outlook has been only marginally better than the nation’s. However, we are finally starting to see job growth. It will take time to make a significant impact on the jobs lost from the recent downturn – and frankly, we never really recovered all the jobs lost from the 2001 recession.

The financial institutions have begun to free capital but buyers and sellers still struggle to close the bid-ask gap. Investors only seem interested in opposite ends of the spectrum: core trophy assets with high occupancy or distressed properties.

Leasing activity is off the floor but we still have a long way to go. Boston’s net absorption is positive for the first time since the end of 2007, and Greater Boston’s is in the black for the third consecutive quarter. Many tenants have left the sidelines to take advantage of low rents before they begin to rise, and landlords have been willing to look two years out to do deals that stabilize their buildings.

This trend, however, may be short lived as investors anchor their occupancy with “early renewals” and start believing that rental rates in the future will be better than what they can lease space for in today’s market. We look forward to meaningful job growth over the next 24 months with the hope that these “reach forward” deals have not tapped the market dry of tenants needing space in 2011-2012.

In golf vernacular we still have a difficult lie but there’s an opening between the trees and the green is in sight.

- David

from Jennifer Cronan
Construction Manager and LEED Coordinator
Jones Lang LaSalle

I’m currently wrapping up my maternity leave, and will be returning to work in a few weeks. During my time at home I’ve been watching more TV than I’d like to admit between feedings and other demands of my new baby girl. 

The other night a short segment on Entertainment Tonight showed thirteen year old Brianna Hendrickson winning the grand prize in a National Texting Competition for correctly texting a “complicated phrase” in under 60 seconds.

A texting competition? Really? This made me laugh out loud, and think about the widespread use of texting in our real estate industry. The construction business thrives on the communication that it creates between project managers, contractors, and owners. It’s a 24/7 real-time tool, and in most cases it moves things along at a pace we couldn’t have imagined 20 years ago.

This new “skill” that we have all developed has helped us move forward in many ways. I recently bought and sold a home and the communication between us and our realtor was about 80% by text. This transaction was smooth and easy for all parties involved.

I imagine that little Miss Texting, Brianna, will have a leg up on her co-workers, just as a speedy typist is more effective in today’s workplace. I’m sure that soon a new technology will surpass texting in efficiency and user-friendliness. Let’s see what the future holds.

-Jen

Over the last few years the Capital Markets have faced trying times. Despite this, Multifamily has proven to be one of the safest investments, and continues to be the asset of choice for a cross-section of investors.

Why? The obvious reason is the bursting of the housing bubble. Fewer people can afford homes creating an increased demand for apartments. In markets like Boston and San Francisco, characterized by already low home affordability, students, young professionals, previous homeowners and empty nesters are all finding their way to the renter pool.

According to Reis, since 2006 apartments in Boston have traded at an average cap rate of 6% compared to the 5 year average office cap rate of 7%. At the height of the market in 2006 & 2007, office product yielded cap rates almost 50 bps better than Multifamily. Overall, however, Multifamily has shown more stability with cap rates never fluctuating more than 150 bps.

Fueled by a solid first half of 2010, investment momentum in this sector continues to accelerate. With extremely favorable available financing, fairly limited supply, increasing rents and lower average cap rates than other product types, investors are aggressively hunting core and opportunistic projects in large metro areas.

One example of this is UDR’s recent acquisition of six apartment communities in Massachusetts, Southern California and Baltimore for $455.1 million representing one of the largest portfolio deals of the last couple years. Each individual property sold for between $215,000 and $270,000 per unit with the exception of one in Boston’s Back Bay that traded at an unprecedented $613,000 per unit. 

Multifamily has weathered the storm. Although it isn’t immune to declining rents and increased vacancy in a down market, it does bounce back to a strong and balanced market quicker than other product types and offers lower risk. Let’s face it, people always need a place to sleep. Over the long haul they offer a safer investment.

- Brandon

from Geoff Homer
Research Analyst
Jones Lang LaSalle

Notable sale transactions this year, with the exception of One Brigham Circle and 10 Brookline Place West, have been anemic. These two each sold in the $100 million range. Additionally, a number of investors placed bids on the Hancock Tower, which is reported to command over $900 million.

In the burbs activity has been centered on owner-occupier transactions. The availability of vacant and distressed buildings that can be acquired for significant discounts has spurred a renewed interest in buying. Tenants evaluating lease versus own strategies are unquestionably realizing the benefits of ownership.

In Westborough, eClinicalWorks purchased 2 Technology Drive for $4.6 million, or $45 PSF which is a 70% discount to the previous sale. The company was in the market for new HQ space and recognized that as a private company in this environment buying made economic sense. Also in Westborough, Kraft Group subsidiary Rand Whitney Container bought a 200,000 square foot industrial building at 125 Fisher Street for just over $3.7 million or $19 PSF.

A REO transaction in Chelmsford occurred when Hittite Microwave Corporation purchased 2 Elizabeth Drive for $3.3 million or $31 PSF. In 2006 the property sold for $12.1 million to an investor.

Looking ahead, well-capitalized users of single-tenant buildings need to consider the proposed FASB lease accounting rule changes. This will require companies to record the full value of leases on their balance sheets as a liability. Due to the myriad complications of carrying a lease as a liability on your balance sheet, it might make more sense from a business perspective to buy.

from Brian Morrissey
Vice President
Jones Lang LaSalle

I was talking with a client a few weeks ago about how notable Massachusetts companies continue to get acquired by out of state entities. Gillette, Fleet, and John Hancock to name a few. These companies continue to move employees out of state, and the loss of those big names makes it seem like the days of the large Massachusetts-headquartered companies are a thing of the past which doesn’t bode well for local real estate. 

Curious about the actual statistics, I pulled up the Fortune 500 list from 2000: 12 companies in the state were on the list with two in the top 100. 

As I pulled up the 2010 list, I thought I’d see a 60-70% reduction over 10 years. Instead, I found 13 Massachusetts companies with three in the top 100. 

The basic numbers point to a decided shift toward the life science industry. Three of the four new additions to the list are medical device and biotechnology companies such as Boston Scientific, Biogen, & Genzyme. The potential Genzyme acquisition by Sanofi-Aventis SA, however, could bring us back to even.

While it remains unnerving to see manufacturing jobs leaving the northeast, it is somewhat reassuring to see the old Commonwealth namesakes are being replaced by new ones.

- Brian

from Matt Giffune
Assistant Vice President
Jones Lang LaSalle

Do you enjoy working from home? I certainly do. It’s not because I can avoid the business attire or the $4 cup of coffee on the way to the office. Instead, it’s about the efficiencies I and my employer gain from it.  

It is ironic that telecommuting is something that I enjoy considering my existence as a broker is predicated on people working in offices. Nonetheless, the advantages of working remotely are undeniable. Employers are able to reduce money spent on office space and all that goes with it, while employees can save time and money by avoiding the commute. Not to mention the cost reduction associated with energy consumption, gasoline, traffic-related injuries, absenteeism, turnover, day care, and meals. Worker productivity and morale are also optimized.   

According to the Telework Research Network, more than 20 million people work from home at least once a week – up 75% from 2005. Eight out of ten people say that they would work from home if they could. The trend is growing. While the federal government relies on legislation to increase telecommuting among its workers, private sector employers must be able to seize market share and competitive advantage by implementing comprehensive telecommuting strategies.  Aligning the telecommuting strategy with the organization’s overall real estate strategy may provide the best bang for the buck, especially in the global market place.

What’s that sound? Sorry, gotta run. My coffee’s ready.

- Matt

from Tina Snyder
Assistant Vice President
Jones Lang LaSalle

As marketing professionals we’re always thinking about the next best ways to reach our target audience. Lately social media is the rage. I’ve wondered if it’s relevant in commercial real estate or business-to-business marketing. With the demographics of Facebook expanding to include corporate executives and decision makers, it seems that social media is a no brainer. One area we’ve now made a priority is using Facebook to market commercial properties.

As we embark on integrating it into property marketing plans our first thought was “What are we going to post about a property that doesn’t come across as hard sell or already appear in other deliverables?”

Facebook isn’t LinkedIn, where being corporate is expected. Here it’s about comaraderie. Creating a persona, a buzz, and ultimately generating business. The bonus is that there is no cost other than time spent on developing content and driving traffic to the page.

When thinking about Facebook posts for commercial properties, it’s important to approach it not as the telling of information but rather sharing exciting news, showcasing offerings and creating a sense of intrigue. Think about how you can engage the reader to remain a loyal follower and in turn share the page with friends.

The thickness of glass windows is probably not what someone is looking for on Facebook. Just make sure that there’s a link to the website and voila, vital information about the property is at one’s fingertips. Posts about what’s happening in and around a property that highlight activity, location and amenities are what readers get excited about.

We’re using Facebook in our marketing program for Liberty Wharf, Boston’s newest waterfront development. The list of people who “like” the page is growing. It isn’t important that we speak about availabilities and docks of Brazilian wood. Instead we are showcasing the amazing transformation that has occurred turning the former Jimmy’s Harborside site into a new mixed-use destination. We’re also sharing construction photos, announcements about the project’s amazing amenities that will soon be the hot spots of the Seaport District, posts showing the ownership’s enthusiasm for the development, concerts and exhibits adjacent to the site.

We are enhancing the Liberty Wharf brand in real time with the use of Facebook, building anticipation for the opening so that readers will spread the word about the sleekest new development in town.

- Tina

from Tim Martin
Property Manager
Jones Lang LaSalle

Dan Pufunt, our national President of Property Management recently proclaimed, “Property Management Is Cool!”   He was referring to the country’s recent infatuation with sustainable building and Property Managers’ role on the forefront of implementing many of these strategies.  Boston is no different.  Just look to the small wind turbines on City Hall and The Museum of Science. 

According to the most recent Energy Information Administration’s survey published in 2003, there were 4.9 million commercial buildings in the US, totaling 71.6 billion square feet, and spending over $50 billion on electricity alone.  Representing such a large cost, everyone has a shared interest in reducing this cost.   The green building industry has surged to meet this need along with our many other sustainable needs.  Available solutions range from simple “I should have thought of that” ideas like the popular timed light switches; to complex computer programs that constantly monitor building equipment and optimize efficiency.  Both meet the goal of reducing energy consumption, and as a result, cost. 

Recognizing tightening capital improvement budgets, there are likely immediate ways to reduce your electric consumption and cost, with little to no cost to you. I would encourage anyone to better understand their electricity consumption and costs.  A great source of this information is your Property Manager.  Managers monitor consumption and cost of all utilities and are always looking for ways to increase efficiency.  Remember, what we do is cool!  We want you to be in the know too!

-Tim