This issue

Welcome to Commercial Real Estate Deal

by Andy and David Farbman

Welcome to the first issue of Commercial Real Estate Deal, a quarterly analysis of vital commercial real estate news. The team at NAI Farbman will go beyond the real estate headlines to bring you the information you need to guide your commercial real estate decisions. We'll bring you news and views on specific industries such as health care and automotive spanning the local, national and international markets. Since you are a valued professional contact, we thought we'd send you the inaugural edition of Commercial Real Estate Deal. We'd love to hear your feedback, and we invite you to tell us if there are specific issues that you'd like us to cover.

All the best,

Andy and David Farbman
 

Health Care - State Courts Get Tough on Tax Exemptions

Trying to generate tax savings for your health care business? Good luck. Since 2002, the Michigan state judiciary has been making it harder for pay-for-service health care entities to receive tax exemptions on property taxes. However, the Michigan Tax Tribunal has given preference to "public health" entities that work to improve overall community health. But the standard for determining public health has been set quite high. For example, a medical group in Cadillac was denied tax exemptions because they are a traditional pay-for-service facility that offered occasional free clinics to the public. For more info on health care property tax exemptions, contact Laney Cavazos at NAI Farbman.
 

Automotive - Overcapacity Spells Trouble

Lower-than-expected summer sales and a glut of vehicles on dealer lots are challenging Detroit's Big Three domestic automakers and could have implications for the automotive real estate market. Stiff competition from Europe and especially from Asia is forcing the Big Three to consider idling plants and beefing up incentives in order to reduce inventories. General Motors and Ford Motor Company are in particularly bad shape with respect to overcapacity, while DaimlerChrysler's new lineup of vehicles are selling briskly at current production volumes. "Overcapacity at the Big Three has a multiplier effect," said Michael Kalil, COO of The Farbman Group. "A single plant closing, even a temporary one, can cause suppliers and tool and die shops to lose huge revenues. Some smaller suppliers could even face bankruptcy."
 

National Market - Commercial Real Estate on the Rebound

The national commercial real estate market is rebounding at a steady clip in Q2 2004, according to recently published reports. Looking at the big picture, data from the U.S. Bureau of Economic Analysis shows that for Q2 2004, private domestic investment grew at a healthy 12.3 percent over Q1 2004. A recent report from CoStar Group illustrated that the U.S. industrial market absorbed 28.4 million square feet in Q2 2004, the biggest improvement since before September 11, 2001. Another CoStar report shows that the vacancy rate for office space is down to 14.4 percent nationally after the absorption of 27.3 million square feet of space in Q2. According to data from Reis, Inc., vacancies were down in the retail sector for both shopping malls and strip malls, while rents went up into the neighborhood of $20 per square foot triple net.
 

Global View - International Trade Benefits Everyone

Michigan companies can grow their businesses by expanding into foreign markets, while foreign businesses can access the lucrative North American market by setting up in Michigan. Southeast Michigan, located within the nation's largest Foreign Trade Zone is at the nexus of U.S./Canadian trade and is one of the top export regions in North America. On the other hand, Michigan businesses have a variety of tools at their disposal through the Michigan Economic Development Corporation to expand into global markets.
 

Finance - Interest Rates Rise, But Money Still Plentiful

Several recent market reports indicate that the fundamentals of the commercial real estate industry are sound and the future looks good, but rising interest rates are causing concern among some investors. Industrial occupancy is up in most markets according to ProLogis U.S. Property Market Review. Meanwhile loan originations rose to nearly $21 billion in Q1 2004, in spite of higher interest rates. "Interest rates are higher now than they were at the same time last year but are still much lower than at any point from 2000 to 2002. Many people don't realize for instance that the 5-year treasury rate is still greater than 2% less than it was for the same time period in 2000. These are still tremendous opportunities to attain good fixed and floating rates" said David Farbman of NAI Farbman.
 

Technology - NYC Skyscraper Uses Technology to Go Green

Redevelopment in lower Manhattan is grabbing many national headlines, but One Bryant Park in midtown Manhattan is making big technical waves. The $1 billion, 945 foot-tall skyscraper will house the New York City headquarters of Bank of America and promises to be one of the most environmentally-friendly high-rises ever built. The design of One Bryant Park makes use of steel, glass and aluminum to allow ample amounts of natural light to illuminate the interior of the building. Sophisticated under-floor displacement HVAC systems, an onsite 4.6 megawatt cogeneration electrical plant, and a water system that captures and cleans rainwater and runoff will help the building reduce its environmental impact and operating costs. One Bryant Park is a joint project of Bank of America and The Durst Organization and was designed by Cook+Fox Architects of New York. "This type of construction is the wave of the future," said Andy Farbman of NAI Farbman. "It'll be years, if not decades, before green technologies like those of One Bryant Park make their way to Main Street, USA. When they do, property managers may have to drastically renovate or rebuild their class A space to stay competitive with these technological trends."
 

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