the real report, q1 ending, 2011

8/4/2019 The Real Report, Q1 Ending, 2011

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this issu

Building Spotlight

Executive Summary

Market Asesment

Broker Inormation

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Q12008

A GUIDE FOR DECISION MAKING

BY: SCOTT JOHNSTONE

The national economy grew at a 1.8 percent annual-

ized rate in the rst quarter according to the advance

estimate o gross domestic product rom the Bureau

o Economic Analysis. Consumer spending made the

biggest contribution, adding 1.9 percentage points,

although this was below the 2.8-point contribution

made by consumers in the ourth quarter. Inventory

additions and business spending on equipment and

sotware also contributed to growth. Late last year,

many economists raised their GDP orecasts in re-

sponse to the $858 billion package o tax cut exten-

sions and new tax cuts passed by Congress in Decem-

ber. But recently many have lowered their orecasts

due to rising energy prices and the uncertain outlook

or the Middle East, Japan and the Europe. The Em-

ployment Situation report, which the Bureau o Labor

Statistics will release Friday, May 6, will be even more

important than usual because it will reveal whether

the drags on economic the growth are aecting the

labor market, which is a major driver o demand or

commercial real estate.

ORANGE COUNTY OFFICE MARKET

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Q22010

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Q12008

MacArthur Court

EXECUTIVE SUMMARY: Who is Driving the Bus?

Jobs: The unemployment rate in O

County was 8.9% in February 2011

below the year-ago estimate o 9.7%

compares with an unadjusted unem

ment rate o 12.3% or Caliornia and

or the nation during the same time pe

According to the State o Caliornia Em

ment Development Department, Or

County increased overall by 16,300 pa

jobs rom February 2010 to February

the largest gains were 6,500 in leisure

hospitality and 5,400 in proessional &

ness services. However, during that

period, Orange County lost 2,000 jo

trade, transportation, and utilities. C

man University is orecasting that 2

jobs will be added in Orange Coun

2011.

PROJECT SPOTLIGHT:

MacArthur Court

Newport Beach, CA

92660

Twin 15-story travertinemarble towers and three

low-rise buildings providea premier environmentwith ample surace and

structure parking, two-story travertine lobbies,

palm-lined pedestrianwalkways and beautiul

landscaping.

Five buildings totaling690,000 sq/t

Easy access to the 405 and55 Freeways and 73 TollRoadAmple surace and struc-ture parkingSeconds to John WayneAirport

On-site ca and bankswith ATM

On-site convenience storeand auto detailingRental Rates:

$1.95 - $2.45 FSG

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Q12011NDING


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Big Picture:The Orange County oce maket contin-

ued to convey signs o recovery in the rst quarter o

2011. Both vacancy and availability decreased rom

the previous quarter, and net absorption displayed

positive numbers or three consecurive quarters,

producing a total o over 1.23 million square eet o

positive absorption since the third quarter o 2010.

Demand, though, still weak by historical standards,

picked o a renewed interest in states transactions.

While these are positive indications, stability will

need to be sustained in coming quarters to be con-

sidered recovery.

Summary: We are beginning to see a decrease in the

amount o available space being added per quarter,

as well as an overall increase in investment sales ac-

tivity. As we enter into 2011, positive absorption con-

tinues, and with ew new deliveries in the pipeline to

apply upward pressure on vacancy, the market has

begun to stabilize. We orsee a continued increase in

investment activity in the coming quarters as lenders

dispose o distressed assets. Lease rates are expected

to remain sot or the near uture, and concessions

in the orms o ree rent, reduced parking ees, relo-

cation unds and tenant improvement allowances

should continue in order to incentivize tenants to

act immediately. We should also see an increase in

leasing activity as many short-term deals come up

or renewal. As job creation continues and consumer

condence stabilizes, the oce market will continue

to recover.

p2

The Next Shoe to Drop: The dollar volume o direct

investment in commercial properties soared by 77

percent in the rst quarter o 2011 compared with

the rst quarter o 2010. Last year, the market was

depicted by a barbell with investors ocusing on core

properties in primary, supply constrained markets at

one end, and distressed assets priced or a quick sale

at the other end. Attracted by higher yields, investors

now are taking a resh look at properties in secondary

markets and properties below the trophy threshold.

Source: Real Capital Analytics

Outstanding levels of distressed assets were essen-

tially fat in the rst quarter compared with the ourth

quarter o 2010 on the heels o a 4 percent decline be-

tween the third and ourth quarters o last year. This

suggests that the level o distress may be topping out.

Source: Real Capital Analytics

First quarter returns for direct property ownership

totaled 3.36 percent, the ourth consecutive quarterly

increase o the current recovery cycle. The return in-

cluded two components: 1.52 percent rom income

and 1.84 percent rom appreciation. Source: NCREIF

Publicly traded REITs returned 6.8 percent in the rst

quarter, beating the 5.4 percent return posted by the

S&P 500. Sources: NAREIT, Bloomberg

This is a pretty good perormance or an asset class

that, 24 months ago, was called the next shoe to

drop.

Notable Market Transactions:

Costa Mesa

Tenant: Hyundai

Size: 147,712 Square Feet

3200 Park Center Dr. - Lease

Laguna Hills

Buyer: Owen Commercial


35 Tesla - Sale

Mission Viejo

Buyer:JP Morgan Chase


20532 El Toro Road - Sale


3/5

p2

Vacant Space by Submarket

3


4/5

4

Seasonall y Adjusted

Total

1998 65,308

1999 46,042

40,000

60,000

80,0002000 43,608

2001 24,925

2002 (10,042)

-40,000-20,000

0,

housan

ds ,

2004 27,758

2005 34,250

2006 27,983

-120,000-100,000

-80,000- ,

8 9 0 1 2 3 4 5 6 7 8 9 0 1 2

2007 (5,658)

2008 (33,825)

2009 (109,842)

19

19

20

20

20

20

20

20

20

20

20

20

201

201

201

Source: U.S. Bureau of Labor Statistics

,

2011 11,904

2012 37,177

Yearly Job Change, Orange County

Vacancy Rates by Submarket

Net Absorbtion Square Footage by Submarket


5/5

Seal Beach - Sale

Buyer: AIG Global


Irvine - Lease

Tenant: Epicor Software


More Notable Market

Transactions:

Brea - Lease

Tenant: Bank of America


1310 Old Ranch Parkway

275 Valencia Ave

5

TEAM EXPERIENCE

TEAM CAPABILITIES

Employee Location Optimization

Construction Management

Lease Administration

Market Data & Analysis

Property Analysis

Lease Negotiations

Lease Renegotiation

Multimarket Corporate Representation

Property Analysis + Space Optimization

Architectural Review

Relocation Analysis

Site Aquisition

Deal Announcement:

The Johnstone-Puccinelli-Lantgen Team, this week again successully represented

Sunstone Hotel Investors, a public hotel REIT, in the expansion o their corpo-

rate headquarters in Aliso Viejo, Caliornia. The eight year lease transaction takes

Suntones oces to 24,546 square eet and allows or their continued success and

growth in the hotel ownership market place. Thank you Sunstone or your continued

support. May 2, 2011

18101 Von Karman Ave.

With over 25 years in the business, we pride ourselves as market makers, providin

our clients the most udpated and in-depth perspective on todays marketplace. Ouexperience and historical knowledge allows our clients to make smarter decision

resulting in more prot and cost saving opportunities.

The combination o a sole proprietors mentality and attention to detail mixewith institutional experience truly makes us a single source solution or all o youCorporate Real Estate needs.

The inormation contained herein was obtained rom third parties, and has not been independently veried by the real estate brokers. Buyers/tenants should have the experts o their choice inspthe property and veriy all inormation. Real estate brokers are not qualied to act as or select experts with respect to legal, tax, environmental, building construction, soils-drainage or other sumatters.

the real report, q1 ending, 2011

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