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Real Estate News

Read some of the latest news from the Commercial Real Estate Industry

 

U.S. Economy Shrinks for First Time Since 2011; Pent Demand Suggests Temporary Setback

June 2014 -- (Bloomberg) - Less is more for the U.S. economy, which suffered its first contraction since 2011 last quarter.

Gross domestic product fell at a 1 percent annualized rate, worse than the most pessimistic forecast in a Bloomberg survey of economists, revised Commerce Department figures showed today in Washington. The good news: Much of the decline was due to less inventory building that economists say can't last. As a result, some are boosting second-quarter growth forecasts, with Morgan Stanley projecting a 4.2 percent gain.

Stockpiles grew at less than half the pace than in the final three months of 2013, lopping 1.6 percentage points off GDP while businesses cut back on investment. Demand picked up entering the second quarter, giving weight to the Federal Reserve's view that the economy is recovering.  "Inventories are going to be a much smaller drag, and business fixed investment contracted but is probably going to grow in the second quarter," said Guy Berger, U.S. economist at RBS Securities Inc. in Stamford, Connecticut. What's more, "the labor market is in good shape and is moving in the right direction," he said.

Fewer Americans than forecast filed applications for unemployment benefits last week, figures from the Labor Department in Washington showed today. Jobless claims fell by 27,000 to 300,000 in the week ended May 24 and leading up to the Memorial Day holiday.  The median forecast of 50 economists surveyed by Bloomberg called for 318,000 claims. The four-week average declined to the lowest level since August 2007, before the last recession began.

 


 

Price Momentum Continues to Build for Commercial Real Estate

May 2014 -- (CoStar) - Latest CoStar Commercial Repeat Sale Analysis Finds Property Pricing Benefitting from Broad Recovery in Market Fundamentals 

This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides more evidence of two broad trends in the commercial real estate investment market: the continued strong demand for top quality institutional-grade assets by big investors, and widening investor demand for mid- and lower-quality commercial property as the pricing recovery extended to smaller markets and secondary property types. 

Based on an analysis of 1,028 repeat sales in February 2014 and more than 125,000 repeat sales since 1996, the CCRSI found commercial real estate prices registered broad gains during that month. The two broadest measures of aggregate pricing for commercial properties within the CCRSI-the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index-gained 1.1% and 1.7%, both reached double-digit growth over the previous 12-month period. The value-weighted U.S. Composite Index, which is more heavily influenced by high-value property sales that have seen prices skyrocket over the last two years, has risen to levels not seen since early 2008, reaching to within 5% of its pre-recession peak. 

Meanwhile, the equal-weighted U.S. Composite Index, which is more heavily influenced by the more-numerous lower-value trades, remained 22.3% below its prior peak. However, pricing for lower-end properties appears to be gaining momentum. The index made its strongest annual gain in February 2014 since the current recovery began, advancing by 15.7% over the last 12 months as investors continued to expand their buying activity in non-prime markets.  The momentum shift to lower quality and smaller properties also appeared in the recent growth of the General Commercial segment, which grew by a similar 15.7% over the previous year, while its counterpart, the Investment Grade Index, advanced by an equally strong 15% over the same period. 

In reporting on commercial property pricing trends, CoStar's CCRSI made note of the continued positive net absorption across the three major property types - office, retail and industrial - which totaled 378.2 million square feet, a 15.3% increase from the prior 12-month period. Consistent with recent pricing trends, net absorption within the General Commercial segment rose 48% during the same period, compared with a 5% annual gain for the same period in the Investment Grade segment. 

In keeping with the pattern set in previous years, the number of properties trading hands over the first three months of year is typically one-third lower than year-end sale volume. However, despite the slowdown, the CCRSI noted that transaction activity through February 2014 suggests that the year as a whole will be very active for commercial real estate investment. Having racked up a composite pair volume of nearly $10 billion through the first two months of the year, 2014 has already exceeded first quarter 2013 totals."

 

When It Comes To CRE, Banks Prefer to Lend, Not Lease

February 2014 -- (CoStar) - CRE Expected To Be a Top Driver of Loan Growth in 2014 Even as Banks Continue To Shrink Their Footprints

As 2014 kicks off, many U.S. bankers say it's high time to start growing everybody's portfolios - except for their own, that is.  While projecting significant growth in CRE lending this year in most markets, banks continue to downsize their branch retail networks and streamline headquarters space. 

SunTrust Bank's chairman and CEO William Henry Rogers, told his CRE loan originators: "Keep growing, I'll tell you when to stop," Rogers told analysts this past week on his fourth quarter earnings conference call.   Rogers said he's going to let his loan originators run a little bit for the next couple of years, and then the bank will take stock of its total portfolio size.  "The good news is other parts of our business are growing as well. So its percent of the pie will also be determined by how big the pie gets," Rogers said. 

At the same time, Aleem Gillani, CFO of SunTrust Bank, on the same conference call said the bank is still rightsizing its own operations. The bank wants to cut $50 million a quarter in overhead out of its expense base. 

 


NAR predicts modest growth in commercial real estate markets for '14

January 2014 -- (Business Journals) - Commercial real estate leasing patterns are showing steady but modest growth, according to the National Association of Realtors. Jobs are the key driver for commercial real estate, and the accumulation of 7 million net new jobs from the low point a few years ago is steadily showing up as demand for leasing and purchases of properties," said Lawrence Yun, NAR's chief economist, in a statement. But the difficulty of accessing loans remains a hindrance to a faster recovery.

 


Commercial Real Estate Growth to Slow in 2014, Analyst Says

January 2014 -- (NAREIT) - After exhibiting an "incredible" pace of recovery since 2009, growth in the commercial real estate sector will likely slow during the coming year, according to Bob O'Brien, U.S. leader for real estate services at Deloitte & Touche LLP.

 If you take a look at capital markets activity, (the) improvement in fundamentals, transaction activity, all of it has been very strong over the past few years. We think the industry has really hit its stride, so although we're still predicting improvement in 2014, we just think that the pace of improvement slows down a bit," O'Brien said in a video interview with REIT.com at REITWorld 2013: NAREIT's Annual Convention for All Things REIT at the San Francisco Marriott Marquis.

 O'Brien pointed out that the commercial real estate market is responding to the demand for new product.  "We're finally starting to see some additions to supply, and we're starting to see an uptick in development activity," he said.  At the same time, he added, concerns persist about the potential impact on interest rates as the Federal Reserve tapers its bond purchases, as well as the outlook for modest economic growth."

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