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Defense Commercial Real Estate Overview 2008

Defense Commercial Real Estate Overview 2008

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    Defense Commercial Real Estate Overview 2008 Defense Commercial Real Estate Overview 2008 Infographic Transcript

    • Detroit, Michigan The Detroit market met its share of challenges in 2008. Medical expansion continued to drive office demand and the automotive sector appeared to settle from much of the volatility it experienced in 2006 and 2007. Retail, formerly the most resilient commercial real estate sector, encountered many setbacks and obstacles. The office market has largely been buoyed by the medical sector growth, but this segment is expected to slow as major projects wind down. The automotive and service sectors continued the process of shuffle and retain with tenants still on the offense seeking heavily incentivized deals from landlords. These favorable tenant packages are expected to level off in 2009 with the market remaining tenant friendly into 2010. Speculative industrial development is down from 2007 and will likely remain down until the economy begins to see steady growth over three to four consecutive quarters. Existing speculative Contact developments have increased market pressure by offering NAI Farbman aggressive rates on new first generation product. The Airport +1 248 353 0500 District is likely to be the most active sector in 2009 with regional officials pushing the Aerotropolis vision between Ann Arbor and Detroit. Additional private sector buy-in combined with abundant low cost land provides this submarket the potential to be Detroit’s industrial strength for the next five to eight years. Power Centers continued to lure inline tenants from neighborhood centers giving a modest gain in occupancy where neighborhood centers suffered. This trend is expected to continue as inline prices decrease and tenants upgrade for prime space at competitive Metropolitan Area rates. This will put increased pressure on neighborhood centers Economic Overview where inline leasing prices will continue to slip. In addition to these challenges, vacancy is expected to increase as 2008 restaurants fight saturation and decreased volume, as people Population 4,489,048 continue to tighten their purse strings. New retail developments 2013 Estimated have also slowed and current projects are experiencing delays. Population 4,540,294 The investment market has slowed considerably in the past year Employment with increased lender scrutiny and limited debt available to buyers. Population 2,205,526 Transactions with quality, non-recourse assumable debt have been highly attractive and should continue to be throughout Household 2009. Increased available debt is anticipated in 2009, but higher Average Income $70,183 equity and recourse requirements will continue to push cap rates Median up, keeping this a buyer’s market for the next 12-18 months. Household Income $62,952 With little new tenant expansion, even in retail, the market focus Total Population has been on tenant retention and luring tenants from lesser Median Age 38 properties. Although incentive packages have likely reached their maximum, retention pressure will continue its spill into renewals as the fight between landlords continues in all markets. Detroit At A Glance (Rent/SF/YR) Low High Effective Avg. Vacancy DOWNTOWN OFFICE New Construction (AAA) N/A N/A N/A N/A Class A (Prime) $ 19.75 $ 33.00 $ 23.25 15.0% Class B (Secondary) $ 9.00 $ 18.00 $ 14.50 22.0% SUBURBAN OFFICE New Construction (AAA) $ 20.00 $ 30.00 $ 25.50 N/A Class A (Prime) $ 15.00 $ 36.00 $ 23.50 14.0% Class B (Secondary) $ 9.00 $ 32.00 $ 19.25 20.0% INDUSTRIAL Bulk Warehouse $ 2.00 $ 11.00 $ 4.25 16.0% Manufacturing $ 1.00 $ 5.50 $ 3.25 18.0% High Tech/R&D $ 2.00 $ 22.00 $ 9.25 19.0% RETAIL Downtown $ 12.00 $ 40.00 $ 18.00 N/A Neighborhood Service Centers $ 9.00 $ 30.00 $ 13.25 15.0% Community Power Center $ 12.00 $ 40.00 $ 21.25 4.0% Regional Malls $ 18.00 $ 90.00 $ 26.00 14.0% DEVELOPMENT LAND Low High Office in CBD (per buildable SF) $ 20.00 $ 60.00 Land in Office Parks (per acre) $ 75,000.00 $ 225,000.00 Land in Industrial Parks (per acre) $ 50,000.00 $ 225,000.00 Office/Industrial Land - Non-park (per acre) $ 50,000.00 $ 300,000.00 Retail/Commercial Land (per acre) $ 75,000.00 $ 800,000.00 Residential (per acre) $ 5,000.00 $ 100,000.00