Each Wednesday, The Wrap presents a compilation of recent
noteworthy commercial real estate stories from a variety of publications. Below
are five stories that caught our eyes in recent days.
• “New
Converts in U.S.: Hotels” by Melvin Backman of The Wall Street Journal.
Demand for hotels in heavy tourist areas is growing, and
developers are renovating pre-existing buildings to save time and money,
Backman reports.
Hotels were hit hard during the recession, but the sector
has rebounded and is now largely profitable, Backman notes.
Nationwide, hotel occupancy rose to 63.9 percent in August,
up from 58.8 percent in August 2010, according to PKF Hospitality Research.
Revenue per available room increased to $70.51 in August, versus $57.50 two
years ago.
“Most hotel conversions involve older offices or warehouses
because those buildings have some historic appeal and are often located in
prime neighborhoods near business and tourist centers,” Backman writes.
• “Commercial
Real Estate Prices on Upswing” by Charles Keenan of REIT.com.
Prices for lower-grade assets are rising, according to
CoStar’s Commercial Repeat-Sale Indices.
CoStar’s General Commercial Index, representing lower-tier
properties, had risen 12 percent through the first seven months of the year,
compared to CoStar’s Investment Grade Index, representing mostly high-end
properties, which only rose 5.7 percent.
“Investors are looking for better yield,” Ruijue Peng, a
researcher at CoStar, told REIT.com. “They are more comfortable reaching into
the secondary markets, such as Class-C, small buildings.”
• “Investor
Interest in U.S. Malls Spills Over into Smaller Markets” by Randyl Drummer
of CoStar.
Investors are accepting more risk as they look to acquire
mall properties in secondary markets and locations, Drummer reports.
One recent example was Westfield Group’s recent agreement to
sell seven non-core malls to Starwood Retail Group for $1.64 billion, Drummer
reports.
Retail market conditions are expected to tighten because of a
lack of new development over the next five years, according to a report by
Rosen Consulting Group. Bigger mall owners are looking to focus on their core
assets and are looking to unload non-core assets, Garrick Brown of Cassidy
Turley told CoStar.
• “Cousins
Properties Continues to Exit Retail” by Douglas Sams of the Atlanta
Business Chronicle.
As part of its strategy to focus on trophy office buildings
and mixed-use developments, Cousins Properties has sold another shopping center
and exited two retail joint ventures, Sams reports.
It sold a Kansas City, Mo., shopping center for $54 million
and sold its interests in two additional properties for $57 million, Sams
reports.
Cousins is focusing on building its office tower portfolio
in Houston, Dallas, Austin and Atlanta, Sams notes.
• “Why
the Commercial Real Estate Crash Never Came” by Nin-Hai Tseng of Fortune.
After the housing market crashed, many expected the
commercial real estate market to follow suit. Although prices across commercial
real estate declined almost 40 percent, the industry never saw an extreme crash
like the single-family market did, Tseng reports.
Joblessness and falling home prices hit consumers hard,
leading to missed mortgage payments and a wave of defaults, Tseng reports.
“There were defaults in the commercial space, but it didn’t
hit the heights seen in the single-family market,” Susan Wachter, real estate
and finance professor at the University of Pennsylvania, told Fortune.
“Commercial properties saw similar price declines, but unlike
residential properties, owners enjoyed continuous flow of income by way of
rents from tenants,” Tseng writes.