This Issue - Thursday, November 2, 2006 |
Commercial Real Estate Deal |
What's powering the American economy today? In the postwar era it was manufacturing and automotive. In the 1980s and 1990s it was PCs, the Internet and high-tech. A recent BusinessWeek article made a strong argument that the health care sector is currently the engine powering the country's economic growth. Many a corporate executive, labor leader or rank-and-file worker has complained about ever-spiraling health care costs over the past few years, but in spite of it all, the health care economy has added 1.7 million new jobs, according to BusinessWeek. In Michigan, health care and related life sciences are a growing industry. Unlike the manufacturing sector, where for years high-wage American jobs have been moving to lower-wage countries, it's very difficult, if not impossible, to send health care jobs overseas. You can't outsource a nurse to India, for example. Though it is possible to outsource back office and laboratory functions. In any event, the result is that most, if not all, of the jobs created by the health care sector are here to stay. For a state like Michigan, hard-hit by a shrinking manufacturing base, health care is the right medicine for growth. The downside, of course, is the massive amount of federal, state and corporate government spending required to keep health care costs affordable for consumers. This has a negative effect on the nation's competitiveness on the global stage and should not be ignored. Nevertheless, we see a bright future for the health care sector and NAI Farbman will continue to offer solutions for clients working in this exciting growth industry. All the best, Mark Yagerlener |
Residential Real Estate - Exotic Mortgages Under Fire |
When residential real estate markets boomed, many borrowers relied on unconventional loans to finance or refinance their homes. These high-risk financing vehicles, such as interest-only and no-down-payment loans, are coming back to bite homeowners now that interest rates have gone up and residential properties aren't selling and appreciating as they had been. Now federal regulators such as the Office of the Comptroller of the Currency (OCC) are stepping in with new rules governing these exotic financing tools. The forthcoming rules would change the calculus used by lenders in order to give a more realistic picture of a mortgage applicant's ability to pay back a loan. "Part of the reason that we have seen the housing bubble pop is that mortgage lenders were being too lenient in doling out cash to mortgage applicants," said Andy Farbman of NAI Farbman. "Consequently, people got in over their head. When people hit hard times, it was impossible for them to stay afloat." |
Office Space - Rental Rates Rising Fast |
The price per square foot of office space is rising quickly throughout the United States, according to a recent Wall Street Journal report. Data released to The Journal indicates that Q3 2006 office rents grew at their highest rate since 2000, while vacancies kept going down. "This is not surprising given that, nationally speaking, economic activity continues to expand," said Andy Gutman of NAI Farbman. "However, these third quarter numbers don't take into effect recently announced and forthcoming job cuts, particularly in Michigan and the Midwest. These cuts will likely place downward pressure on rents and office space absorption." For several years prior to '06, rental rates had been low and vacancy rates high. "That trend could reappear as quickly as it went away," added Gutman. |
Multi-Family Dwellings - Multi-Family Shows Strength |
The multi-family housing market, which includes condominiums, apartments and duplexes , houses more than 23 million Americans. Occupancy rates are currently in the 90-percent range nationally, and around 96 percent in the Midwest. "Due to the underlying weakness in single family dwellings right now, it is indeed possible that multi-family occupancy rates may track even higher, if people are forced by hard economic conditions to move from single family to multi-family dwellings," said Andy Gutman of NAI Farbman. "On the other hand, the luxury loft segment has a considerable amount of new product in the pipeline, which may serve to lower occupancy rates, at least in the short-to-mid term." |
Recreation - Detroit River Tourism Takes Off |
On a typical summer morning, fishing boats form a line along the American bank of the Detroit River from Lake St. Clair all the way south to Lake Erie. On these mornings, you can almost tiptoe across the length of the Detroit River from boat to boat without getting your feet wet. As Crain's Detroit Business reports, what was once a well-kept secret is about to explode. The region will host a major televised bass fishing tournament in 2007, which will bring national attention to the big-time fishing of the Detroit River. Meanwhile, major environmental quality improvements have been made to the Detroit River watershed, including the establishment in 2001 of the Detroit River International Wildlife Refuge, an 18-mile stretch of federally-protected coastline. "All of this conservation activity is adding new spark to quality of life in the area, which in turn is spurring new development," said Andy Farbman of NAI Farbman. "Other investments in recreation on the riverfront, including the Detroit Riverwalk, Tricentennial State Park and the forthcoming Detroit/Wayne County Port Authority public dock at Hart Plaza, are all adding to the ambiance of the riverfront. Add to that things like the International Wildlife Refuge, and it's clear that eco- and recreation-based tourism are expected to be an important part of the region's economy going forward." |
NAI Farbman publishes this e-newsletter to convey general information about real estate and not for the purpose of providing advice. The information you obtain from this e-newsletter is not, nor is it intended to be, real estate advice. You should consult an attorney for individual legal advice regarding your own situation. This e-newsletter and its contents do not create a professional relationship between NAI Farbman and any subscriber to this e-newsletter. Electronic mail ("E-mail") sent to NAI Farbman, or any of its brokers, agents, partners or employees will not create an professional relationship and will not be treated as confidential. Please do not send confidential information unless and until a formal relationship has been established. The links to other publicly available web sites are provided as a convenience. We make no claims, promises or guarantees about accuracy, completeness or adequacy of the information at those sites. For coverage comments or news tips, e-mail us or call (248) 353-0500. NAI Farbman |