CIP Blog

Its been a while since I have been to New Orleans.  It is safe to say I have matured since I was last there.  Bourbon Street used to be a great place to have fun in college.  Now its just disgusting.  Seriously there should be an age limit just to walk down the street!  

New Orleans-2010 CCIM Mid Year Meetings

But if you are going to NOLA to eat…you have plenty of choices.  I had to privilege of eating at Drago’s, Red Fish Grill and the Pelican Club (twice).  All were fantastic, as expected.

The reason for the excursion was the CCIM Mid-Year meetings.  As the president of the Knoxville chapter I had the opportunity to sit down with several hundred CCIM leaders to discuss the direction of the commercial market as well as the how the CCIM Institute is growing.

If you are not familiar with CCIM; a Certified Commercial Investment Member (CCIM) is a recognized expert in the disciplines of commercial and investment real estate. A CCIM is an invaluable resource to anyone in commercial real estate.  If you are on this side of real estate it is imperative that you work with a professional with these four letters behind their name.

As you might imagine this economic cycle has been hard on commercial real estate, and the CCIM Institute is no different.  In his “State of the Union” CCIM President Richard Juge said that the institute has stayed above the projected budget and should break even for the year.

What is exciting is CCIM’s growth in technology and education.  For the past few years CCIM has improved its training and education plans to meet the needs of its candidates and designees.  That will continue over the next few years.   You can get many of the details from the CCIM website www.ccim.com (which is about to get a make over).  Many have considered the CCIM designation to be the equivalent of a graduate degree in commercial real estate; if anything it will be a more difficult and informative degree in the coming years.

The most impressive display of the weekend was the update on CCIMREDEX. This real estate exchange platform is the most comprehensive commercial real estate web site in the world.  The list of features is much to long to list here but the best description came from one of its creators Todd Kuhlmann.  He said REDEX is like the I-Phone; on its own there is not much to it…but when you add in all the apps it can practically run the world.   REDEX allows you to list a property and then send it out to all the other listing services you subscribe to with one touch of a button.  It can run demographic reports, create marketing flyers, create postcards to mail with just a few clicks of a button and even create flash-enabled web sites for your property.  I haven’t even come close to scratching the surface of what the platform can do.

If you are interested, and a CCIM member, REDEX training will be held in Knoxville on July 22nd.  I suggest you attend.

I would be remiss if I did not congratulate the three Knoxville realtors who earned their CCIM designations this week.  Solange Velas (Southland Realtors), Bill Beecher (Wood Properties) and Joyce Anderson (Caldwell Banker/Wallace & Wallace) all passed their final exam and earned the pin.   This is no easy feat; each broker completed more than 160 hours of education, a detailed portfolio (some are over 500 pages long) and passed a 6 hours final exam.  Congrats.

Justin Cazana, CCIM

Knoxville Real Estate

The Knoxville market has been an interesting place the last couple of months.   I just returned from the Knoxville Area Association of Realtors (KAAR) Trade Show and found many residential realtors content with the market’s direction, not thrilled just content.  Of course they are residential realtors, not commercial.  Commercial tends to lag about 12 to 18 months behind the residential market.  That is what happened on the way down, will it happen on the way up?

There is good news from the lenders side.  From several developers and mortgage brokers I have talked to institutional lenders are loosening the strings and getting more aggressive.  Most of that is for permenant financing.  Banks however are very tight fisted with the money on commercial deals and that may not change anytime soon.

On the leasing and sales side of the market it really depends on who you talk too.  Many brokers say they are working hard and showing space but not many deals are closing.  

If you talk to Spery Van Ness/RM Moore you will get a different story.  In today’s Property Scope put out by the Knoxville News Sentinel you can read about the success RM Moore has had in the first quarter of 2010. 

http://blogs.knoxnews.com/flory/2010/04/local_brokerage_sees_jump_in_c.html

Looking for some good news in commercial real estate? Sperry Van Ness/R.M. Moore is happy to oblige.

The local brokerage firm said this week that its sales and leasing transactions were up 450 percent in the first quarter, compared to the same period in 2009, while volume was up 863 percent.

“We feel it is a great sign of the economy recovering and heading in the right direction,” firm president Roger Moore said in a news release. “Our leasing activity in both retail and office has been excellent in the first quarter with over 150,000 square feet leased.”

As far as businesses coming to Knoxville, the city contiues to be one of the top locations for business, although the city did call a few spots in the release of yesterday’ s Forbes Best Places for Business and Careers. 

From the Knoxville News Sentinel:

Metropolitan Knoxville dropped to No. 56 on Forbes’ 2010 list of the Best Places for Business and Careers.

That’s down from No. 43 on the 2009 list and a high-riding No. 10 in 2008.

Plummeting 46 spots in two years, that’s the bad news. The good news is that Knoxville still ranks higher than 144 of the 200 largest metros in the country.

It’s all relative.

Forbes considered a dozen metrics for its 12th annual rankings, including the cost of doing business, projected job growth, cost of living, income growth, educational attainment, crime and others.

 The leaders on the metro list are mostly “Midwestern and Western cities, areas with reasonable business costs, strong economic outlooks and a solid quality of life,” the Forbes story says.

Des Moines, Iowa is No. 1, followed by Provo, Utah; Raleigh, N.C.; Fort Collins, Colo.; and Lincoln, Neb.

Knoxville’s overall ranking was hurt by lower rankings in the cost of doing business, income growth and job growth categories. The sharpest decline was in income growth, falling to No. 193 from No. 142 in 2009.

The cost of doing business (labor, energy, taxes and office space) ranking in 2010 is No. 27, compared to No. 19 last year. The job growth ranking (five-year annualized figures) for this year is No. 116 compared to No. 92 in 2009.

As I mentioned, the news wasn’t all bad. Knoxville showed improvement in some metrics. The city’s ranking for educational attainment (share of population with a bachelor’s degree or higher) rose 11 spots to No. 84 from No. 95 on the 2009 list.

Metro Knoxville’s crime rate, sensational crime stories notwithstanding, also is better. Knoxville’s ranking (crimes per 100,000 people) improved to No. 117 from No. 126 last year.

The Knoxville area’s cost of living ranking (based on cost of housing, utilities, transportation and other costs) also improved, rising to No. 76 this year from No. 83 in 2009.

And, finally, Forbes expects Knoxville to generate more jobs than it did last year. The city’s projected job growth ranking rose to No. 126 from No. 142.

I think Roger Harris put it best when he writes is all about your perspective.   Being one of the top 60 cities in the country for business is a great accomplishment.  Also, these surveys can be cyclical.  If Tennessee or Knoxville has a bad year in recruitment or another rated metric it can significantly effect the rankings.

Knoxville is still getting shots a quite a few big projects.  From what I have been told the Knoxville Area Chamber Partnership has been inundated with requests for information from major companies.  And I expect to see the trend continuing in the near future. 

If you have any questions pleaes feel free to contact me at 865-584-3967 or jcazana@ciprop.com.

www.ciprop.com

With office vacancy rates climbing and rental rates dropping this is a great time for tenants to take advantage of lowering their office costs and locking in those rates long term. However, it is an even greater opportunity to lock in future expansion needs now and without adding office rent costs to their bottom line.

In most major cities in the United States, the available office spaces today are in larger blocks ranging in sizes from ten thousand square feet and above. Larger institutional tenants previously occupied most of these spaces. While a recovery appears to be underway, institutional office users tend to come in late in a recovery and leave early when times get tough. Independent firms represent the largest users of smaller spaces under six thousand square feet on average. These firms tend to grow first in hard times, particularly as new firms are established from personnel that have decided to start their own businesses rather than find work at other firms in this difficult jobs market.  

According to Hans Hansson of TCN Worldwide (http://blog.starboardnet.com/), today, it is absolutely cheaper to rent space in offices over ten thousand square feet rather than five thousand square feet. In fact, with the great sublease opportunities today many firms could pay the same rent for ten thousand square feet as they could at five thousand. Take for instance, Hasson’s market in San Francisco. There are some attractive subleases today in the twelve thousand square foot range that are offering spaces as low as $12.00 per square foot for Class A office space for a two to four year sublease. If you needed six thousand square feet of Class A office space you would be paying at lease $26.00 to $30.00 per square foot for similar quality space.  A similar deal was done here in Knoxville with Edison Financial subleasing almost an entire floor from ALCOA in the Riverview Tower a few months ago.

There is a drawback though. If you have too much extra space your firm could appear to be “swimming” in it. This could be resolved by offering to sublease space to other firms which could allow you to defer additional rent costs. Or you can take out some of the existing workstation areas and give your current employees more room to work. Either way, the cost savings could be so high that it is worth it.

It takes sometime to put together deals like this but landlords are very flexible in these types of economic environments.