Commercial real estate is a dynamic industry. Keep up with Spaces’ monthly recaps of the most valuable industry articles we’ve recently come across, focused on news in Ohio, Michigan and Pennsylvania. 

Retail Real Estate Strategies Driven by Market Shift

Retail real estate strategies have been dramatically altered by the trend toward e-commerce.

As discussed in February’s Real Estate News Brief, e-commerce has driven new demand for the industrial sector. A recent article from the National Real Estate Investor dove into some of the specifics.

Retailers are seeking distribution centers that can serve both in-store customers, as well as online buyers. Coveted traits for these multichannel spaces include large parking lots, HVAC necessities and sufficient mezzanine areas. Due to the popularity of overnight shipping, and same day delivery, retailers also want to purchase distribution centers that are as close to the final customer as possible. This means that demand for warehouse space near metropolitan areas has increased dramatically.

As a direct result, rents continue to heighten, and are expected to continue to do so, for such facilities.

Stressing About Distressed Assets?

CoStar discussed the state of the commercial real estate market, in terms of distressed property value, in a March 27 article.

CoStar emphasized that the current market for distressed properties is favorable for those selling assets, as opposed to buying.

The real estate market’s path to recovery has impacted pricing of distressed assets, now at or above market values. Experts predict (and recommend) that banks will sell their existing inventory in the coming months.

The speed of market recovery differs by region, and therefore, affects the performance of distressed sales. In New York and California, distressed sales decreased in 2012. However, distressed sales increased in Illinois, Pennsylvania, South Carolina, Colorado, New Jersey, Missouri and Maryland.

Markets are prime for selling distressed assets during the early stages of recovery. This currently includes the Midwest region.

What’s Trending in Lending?

Greg Warsek, Senior VP and Senior Regional Manager for the Chicago market at Associated Bank, recently discussed the link between the state of the real estate market and available financing with REJournals.com.

Warsek said that due to a strengthened real estate market, commercial real estate loans are now easier to obtain. In the past, a building owner was required to have existing, committed tenants prior to qualifying for a loan. But, with a solid market in place, banks are now more lenient with this rule.

However, Warsek said that banks still like to see prior experience. He calls this “execution risk.” If a borrower has experience in a certain sector, then a bank can expect a higher chance of success. Warsek said that they also evaluate personal character, as well as financials.

Sequestration Takes Effect, Real Estate Market Experts Forecast Impact

The upturn in the real estate market may soon be stunted by the U.S. government sequestration, which officially went into effect on March 1.

The cuts ($85.4 billion) will reduce defense spending by 7.9% and will also reduce domestic discretionary spending by 5.3%. Medicare will also be hit hard, among other programs.

The World Property Channel expects the budget cuts to “be a blow to US commercial real estate.” From office building use to building construction, the government usually allocates an immense budget to commercial real estate spending. Those who work in the construction and office markets will be impacted the most, predicted The World Property Channel.

News Wrap Up In Our Region

JLL released the Great Lakes Skyline Reviews during March, in which our lead researchers examined the premier office buildings in the top metro areas across our region, and the United States. Skyline reviews include:

• Assessments of occupied, direct available, sublease available and future available space
• Current inventory, direct vacancy rates, 2012 absorption and average asking rents
• Top deals from the past year
• Expert predictions for how the city’s Skyline will change in 2013
• And more

Get a sneak peak of your city’s Skyline Review here, and click through to download the full report.

Congratulations to JLL’s Todd Hughes and Dan Wendorf on making Baltimore Business Journal’s list of “top real estate deals of 2012.” Hughes and Wendorf represented Kenco in the 692,000 square foot deal deemed “industrial winner.” Wendorf is based in JLL’s Columbus office.

In addition, Wendorf provided insight into the Columbus industrial market in an article for Heartland Real Estate Business. A few key points:

• Though many real estate experts in the industrial market across the U.S. expected a slowdown in late 2012 and into 2013, the opposite has been true in Columbus. Specifically, Columbus continues to be an attractive logistics market, retail, and a growing e-commerce market.
• Growth is expected to continue among both big-box and mid-size tenants.
• Columbus finds itself in a favorable position, which it hasn’t seen for several years, after four straight quarters of positive absorption and declining vacancy. Industrial opportunities abound for landlords, tenants and developers alike.

Cincinnati

• The West Chester building, located at 9310 LeSaint Drive, sold for $1.5 million to Transportation Marketing Services. The new owner is seeking tenants for the 185,000 square foot industrial property.
• Chambers Street Properties purchased the interests (100%) in three Blue Ash office buildings in Cincinnati. The three buildings, which span 542,000 square feet, were originally owned in partnership by Chambers and Duke Reality Corporation.

Cleveland

• Park Place Office Building sold to USA Management and Development Inc. for $1 million. The property, located in Mentor at 7756- 7784 Reynolds Road, spans 21,120 square feet.
• Covelli Enterprises has plans to open a new Panera restaurant in Boardman on Market Street. As a Panera franchise, the new restaurant will be Covelli’s 250^th location.

Columbus

• Supported by a state tax credit, Navarre Corporation’s SpeedFC will expand current Columbus facilities by 500,000 square feet. SpeedFC plans to break ground next door to its neighboring facility at 107 Heritage Drive, with intentions to generate 250 new positions in the fall.
• Bob Evans sold its Columbus headquarters at 3766 S. High Street to New Mill Capital, LLC., with intentions to open new headquarters in New Albany this fall.

Detroit

• Faurecia North America Inc. intends to begin construction within 60 days at Oakland Technology Park on its new 300,000 square foot headquarters. Total cost of the project is expected to reach approximately $30 million.
• Borders Group Inc. former headquarters at 100 Phoenix Drive will soon be the office of Gold Star Mortgage Financial Group Corp.  The financial group plans to utilize the 70,000 square foot space with an additional 250 new employees in the coming year.  

Pittsburgh

• The U.S. Steel Tower, located downtown, currently has 158,264 square feet of available space. More space is expected to become available soon. This is a hot commodity in Pittsburgh, which is one of the country’s tightest office markets.
• Centurion Investments LLC purchased the 410,389 square foot Turnpike Distribution Center for $20 million. The distribution center was only on the market for a few months before being sold. 

Please feel free to add any relevant industry news we might have missed in the comment section below.

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