Enlarge image Dubai Developers Tap Retail Sweet Spot, Homes, Offices Fall

Visitors are seen in "Fashion Avenue" at the Dubai Mall retail center in Dubai.

Visitors are seen in "Fashion Avenue" at the Dubai Mall retail center in Dubai. Photographer: Gabriela Maj/Bloomberg

Enlarge image Dubai Developers Tap Retail Sweet Spot, Homes, Offices Fall

Emaar’s Dubai Mall had 54 million visitors in 2011, a 15 percent increase from the previous year, placing it ahead of Times Square and Niagra Falls, the company said in a statement last month.

Emaar’s Dubai Mall had 54 million visitors in 2011, a 15 percent increase from the previous year, placing it ahead of Times Square and Niagra Falls, the company said in a statement last month. Photographer: Gabriela Maj/Bloomberg

Enlarge image Dubai Developers Tap Retail Sweet Spot, Homes, Offices Fall

The site for Nakheel PJSC's Pointe development on the Palm Jumeirah artificial island is seen from the monorail off the coast of Dubai.

The site for Nakheel PJSC's Pointe development on the Palm Jumeirah artificial island is seen from the monorail off the coast of Dubai. Photographer: Gabriela Maj/Bloomberg

Enlarge image Dubai Developers Tap Retail Sweet Spot, Homes, Offices Fall

The Gold Souk section of the Dubai Mall, seen here, has been underperforming as shoppers don’t have to walk through it, resulting in low sales that forced Emaar to consider remedies.

The Gold Souk section of the Dubai Mall, seen here, has been underperforming as shoppers don’t have to walk through it, resulting in low sales that forced Emaar to consider remedies. Photographer: Gabriela Maj/Bloomberg

Enlarge image Dubai Developers Tap Retail Sweet Spot, Homes, Offices Fall

Shops around the large Aquarium in Dubai Mall tend to do better as tourists wander off to the nearby stores, after looking at the rare fish swimming in the giant tank, Gaffney said.

Shops around the large Aquarium in Dubai Mall tend to do better as tourists wander off to the nearby stores, after looking at the rare fish swimming in the giant tank, Gaffney said. Photographer: Gabriela Maj/Bloomberg

Dubai’s developers, battered by three years of falling prices for homes and offices, are seeking refuge in retail assets as shopping tourism powers the economy.

Nakheel PJSC, the government-owned company that restructured $16.1 billion of debt last year, is expanding its Dragon Mart shopping center and trying to raise funds for a cluster of restaurants and stores at the tip of its Palm Jumeirah artificial island. Dubai Mall owner Emaar Properties PJSC (EMAAR) is getting an increasing share of its earnings from shopping assets as home completions fall.

“Most developers are looking to build recurring revenues because there are so few property sales happening right now,” said Patrick Gaffney, an analyst at HSBC Bank Middle East Ltd. “The sectors that are doing best are retail and hotels because of strong tourist arrivals.”

Dubai’s malls and shops have become more attractive after home values fell by more than 65 percent from their 2008 peak while retail sales have been rising since 2009. Developers that don’t already generate significant revenue from shopping assets will struggle to get a foothold in the market because little is being built or sold and banks are reluctant to finance any type of development in the emirate, including retail, Gaffney said.

Retail revenue in the United Arab Emirates probably increased 5.3 percent last year to 113 billion dirhams ($31 billion) Business Monitor International estimated. That will probably rise to 120 billion dirhams this year and 157 billion dirhams by 2015, it said.

Biggest Mall Owner

Majid Al Futtaim Holding LLC (0115682D), the operator of Carrefour SA (CA) stores in the Middle East, is the largest owner of shopping malls in Dubai. The closely held developer this month raised $400 million selling Islamic bonds for the first time as part of a $1 billion program. Last month the company reported an 18 percent increase in revenue in its home market and said 2011 was its most successful year since being founded in 1992.

Majid Al Futtaim priced its $400 million, five-year Islamic bond, or sukuk, at a rate of 5.85 percent on Jan. 31. The yield rose 4 basis points since it started trading this month to 5.66 percent on Feb. 10. That compares with a 7.4 percent yield for Emaar’s 8.5 percent Islamic notes maturing in 2016. Emaar, Dubai’s second-biggest retail operator, also builds housing and offices.

Share of Income

Emaar reported that 41 percent of revenue and 68 percent of pretax profit came from hospitality properties and leased space including shopping malls in the first nine months of last year. That compares with 24 percent of revenue and 27 percent of profit a year earlier.S

Owning the Dubai Mall, the world’s largest with rentable space equivalent to 50 football fields, also helped the company when it used the asset as collateral to refinance 3.6 billion dirhams of debt at a lower price.

Retailers including American Eagle Outfitters Inc., Limited Brands Inc. and luxury watch seller Rivoli Group are opening shops in Dubai as consumer confidence rises. Macy’s Inc., the second-biggest U.S. department-store company, in January 2010 chose the Dubai Mall to open its first Bloomingdale’s store outside its home market.

Prospects aren’t as bright for developers that haven’t built up retail assets. Union Properties PJSC (UPP), which is mainly focused on homes and offices, this month reported a full-year loss of 1.57 billion dirhams. The company in January handed over ownership of properties including some in Limestone and The Index to settle 1.1 billion dirhams of debt.

Debt Due

Development PJSC, partly owned by Dubai Islamic Bank PJSC, has 234 million dirhams of debt coming due this year, compared with about 37.7 million dirhams of profit in 2011. The company had a loss of 2.9 billion dirhams the previous year.

“Even though retail is generally strong, especially at the large malls, we don’t expect many developers to build new ones because funding is tough and there is already a good amount of supply in the market,” Gaffney said. “The areas that will do best are smaller strip malls or supermarkets near housing developments.”

Shopping accounted for about 30 percent of Dubai’s gross domestic product last year, Standard Chartered Bank Plc economist Philippe Dauba-Pantanacce estimated. The Dubai Statistics Center said retail and wholesale trade rose by 9.3 percent and hotels and restaurants increased by 4.4 percent in 2010. It hasn’t yet released figures for last year.

New Shops, Restaurants

Nakheel is in talks with banks to raise at least 300 million dirhams for its first new project since the debt-ridden company received a government bailout in 2009. The Pointe at Palm Jumeirah, across the water from the Atlantis hotel, will include 120 restaurants, 75 shops and landscaped areas for visitors with a view of an offshore fountain.

“The retail sector is strategic for Nakheel,” Chairman Ali Rashed Lootah said at a press conference in January. He added that 60 percent of an extension to Nakheel’s Dragon Mart mall was booked by retailers within a week of its announcement. The company plans to add 1.7 million square feet of retail space and 5,000 parking spaces to the mall.

Even with a growing retail market, Nakheel may have difficulty raising the money after it received a government bailout and restructured debt, according to analysts including Ahmed Talhaoui, the Abu Dhabi-based head of investment and asset management at Royal Capital PJSC.

“Any issue would have to be at a very competitive yield and probably with a structure that gives some government guarantee,” Talhaoui said in a January interview.

Costly Debt

The yield on Nakheel’s 3.8 billion-dirham, 10 percent sukuk maturing in August 2016, fell 123 basis points, or 1.23 percentage points, so far this year to 16.86 percent on Feb. 10, according to data compiled by Bloomberg. That compares with an average yield of 4.45 percent for U.A.E Islamic bonds on Feb. 10, the HSBC/NASDAQ Dubai UAE US Dollar Sukuk Index shows.

Emaar, which opened Burj Khalifa, the world’s tallest tower, in 2010, derived about 23 percent of its 2011 income from retail rents and is now focusing almost exclusively in Dubai on growing sales at its malls, HSBC’s Gaffney said. Tourists visiting the Burj Khalifa’s observation deck can only get there by going through the Dubai Mall.

“Emaar was better positioned than others when the financial crisis hit,” said Gaffney. “They had already launched and sold so much in Dubai and didn’t have tons of unsold inventory coming on line. They also were focused on the construction of Burj Khalifa, Emaar Boulevard and Dubai Mall, rather than starting new projects.”

Malls, Hotels

Malls and hotels are the main value drivers for Emaar, whose projects span the Middle East, North Africa and Asia, Ahmed Badr said in a note on Oct. 27, when he was head of Middle East property research at Credit Suisse Group AG. He now works as an equity sales specialist with the bank.

Dubai, the second-largest of seven sheikhdoms that make up the United Arab Emirates, racked up $129 billion in debt transforming itself into a tourist and trade hub. While many developments were canceled, attractions including Burj Khalifa and resort hotels like the Atlantis help bring in visitors who shop for goods that aren’t available in much of the region.

“The local population is wealthy enough to be able to keep buying and the tourism growth was very strong in Dubai last year,” said David Macadam, head of retail for the Middle East and North Africa at Jones Lang LaSalle Inc. He said Dubai shopping is bolstered by visitors from the Gulf region, Europe, China, the Indian subcontinent and the rest of the Arab world.

Popular Destination

Dubai hotels reported an 11 percent increase in visitors in the nine months through September compared with a year earlier, according to the Department of Tourism and Commerce Marketing. Revolutions in Tunisia, Egypt and Libya and armed conflicts in Yemen and Syria mean that tourists in the region have fewer options for vacations.

Buyers spent $114 million in the first week of Dubai’s month-long shopping festival, a 53 percent increase over the year earlier period, according to Karim Beg, Visa Inc. (V)’s head of marketing for the Middle East and North Africa.

“Our marketing efforts have reached new markets in east Asia such as China and Japan and even though this strategy started only three years ago, we have seen its fruit already,” said Laila Suhail, chief executive officer of festival organizer Dubai Events & Promotions.

Dubai has 2.58 million square meters (27.8 million square feet) of mall-based retail space, according to a report by property broker Jones Lang LaSalle. About 173,000 square meters will be completed in the next two years, mostly in small shopping centers or strip malls, it said.

Reluctant Lenders

Banks wary of real-estate lending may make an exception if the business case for a project is clear and if adequate protection is put into place, said Raj Madha, an analyst at Rasmala Investment Bank Ltd.

Union Properties sold a building in the Umm Suqeim neighborhood for more than 140 million dirhams to supermarket operator Spinneys, Chairman Khalid Bin Kalban said in June 2010. Such transactions are rare in Dubai, where developers tend to hold onto shopping assets.

“It doesn’t make sense for owners to relinquish well- performing assets such as malls, which were great source of cash even during the crisis,” said Matthew Green, head of United Arab Emirates research at real-estate broker CB Richard Ellis Group Inc. “Also, when you look at mall owners they are generally companies that don’t have a pressing need to sell. Even if they wanted to sell, it won’t be prime assets.”

Skiing at the Mall

Majid Al Futtaim’s Mall of the Emirates, which contains an indoor ski slope, has a 99.8 percent occupancy rate, while the developer’s Deira City Center and Mirdif City Centre have rates of 98.8 percent and 96.9 percent respectively, according to the company’s prospectus.

Dubai’s mall vacancy rate stands at 20 percent, mainly because of smaller malls with low visitor numbers. Most big international brand retailers won’t open stores in small malls as they look for the most prestigious and high profile locations, Gaffney said.

After the sheikhdom first opened up its real-estate market to foreigners in 2005, developers focused on selling homes as speculation-driven investment drove up prices.

“At the time, it made more sense to sell land and residential units because it was less risky,” HSBC’s Gaffney said. Back then, developers couldn’t determine whether the location would be valuable by the time a shopping center was built, he said.

To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

Continued here:
Dubai’s Developers Reach for Retail Lifeline as Residential Market Suffers

The revitalization of Lansdowne Park will cost $7.6 million more than expected according to new reports released Thursday night.

The documents show the air rights to develop buildings in Lansdowne Park with condominiums and offices above retail space will cost Minto Developments — the developer that won the rights — $2.3 million less than expected.

The lower amount comes even after the city, which expected to bring in $10 million for those rights, held a bidding process.

Minto Developments won the rights to build an office building and condo buildings in the park. Minto was also the only developer to submit a bid to construct the office building.

Another Ottawa developer, Broccolini Construction, told CBC News his company wasn't interested in submitting a bid because they weren't comfortable with the city's terms of reference on the project.

Derek Howe of Broccolini Construction noted that Lansdowne is still unproven as a commercial site, so some developers weren't interested in building an office tower on speculation — without having any tenants on-board.

The other additional costs were an extra $2.5 million to move and renovate the Horticulture Building, and $2.8 million the city will have to borrow to deposit in its social-housing reserve fund, in lieu of actual affordable housing space at Lansdowne.

City staff who wrote the reports now advise officials to discuss the concerns with Minto, whose president and CEO Roger Greenberg is one of the heads of the Ottawa Sports and Entertainment Group (OSEG).

OSEG is the city's partner to redevelop Lansdowne.

The report and its recommendations will go to the city finance and economic development committee Feb. 16.

Go here to see the original:
Lansdowne Park costs $7.6M higher than expected

February 12, 2012, 7:09 PM EST

By Zainab Fattah

Feb. 13 (Bloomberg) -- Dubai’s developers, battered by three years of falling prices for homes and offices, are seeking refuge in retail assets as shopping tourism powers the economy.

Nakheel PJSC, the government-owned company that restructured $16.1 billion of debt last year, is expanding its Dragon Mart shopping center and trying to raise funds for a cluster of restaurants and stores at the tip of its Palm Jumeirah artificial island. Dubai Mall owner Emaar Properties PJSC is getting an increasing share of its earnings from shopping assets as home completions fall.

“Most developers are looking to build recurring revenues because there are so few property sales happening right now,” said Patrick Gaffney, an analyst at HSBC Bank Middle East Ltd. “The sectors that are doing best are retail and hotels because of strong tourist arrivals.”

Dubai’s malls and shops have become more attractive after home values fell by more than 65 percent from their 2008 peak while retail sales have been rising since 2009. Developers that don’t already generate significant revenue from shopping assets will struggle to get a foothold in the market because little is being built or sold and banks are reluctant to finance any type of development in the emirate, including retail, Gaffney said.

Retail revenue in the United Arab Emirates probably increased 5.3 percent last year to 113 billion dirhams ($31 billion) Business Monitor International estimated. That will probably rise to 120 billion dirhams this year and 157 billion dirhams by 2015, it said.

Biggest Mall Owner

Majid Al Futtaim Holding LLC, the operator of Carrefour SA stores in the Middle East, is the largest owner of shopping malls in Dubai. The closely held developer this month raised $400 million selling Islamic bonds for the first time as part of a $1 billion program. Last month the company reported an 18 percent increase in revenue in its home market and said 2011 was its most successful year since being founded in 1992.

Majid Al Futtaim priced its $400 million, five-year Islamic bond, or sukuk, at a rate of 5.85 percent on Jan. 31. The yield rose 4 basis points since it started trading this month to 5.66 percent on Feb. 10. That compares with a 7.4 percent yield for Emaar’s 8.5 percent Islamic notes maturing in 2016. Emaar, Dubai’s second-biggest retail operator, also builds housing and offices.

Share of Income

Emaar reported that 41 percent of revenue and 68 percent of pretax profit came from hospitality properties and leased space including shopping malls in the first nine months of last year. That compares with 24 percent of revenue and 27 percent of profit a year earlier.S

Owning the Dubai Mall, the world’s largest with rentable space equivalent to 50 football fields, also helped the company when it used the asset as collateral to refinance 3.6 billion dirhams of debt at a lower price.

Retailers including American Eagle Outfitters Inc., Limited Brands Inc. and luxury watch seller Rivoli Group are opening shops in Dubai as consumer confidence rises. Macy’s Inc., the second-biggest U.S. department-store company, in January 2010 chose the Dubai Mall to open its first Bloomingdale’s store outside its home market.

Prospects aren’t as bright for developers that haven’t built up retail assets. Union Properties PJSC, which is mainly focused on homes and offices, this month reported a full-year loss of 1.57 billion dirhams. The company in January handed over ownership of properties including some in Limestone and The Index to settle 1.1 billion dirhams of debt.

Debt Due

Development PJSC, partly owned by Dubai Islamic Bank PJSC, has 234 million dirhams of debt coming due this year, compared with about 37.7 million dirhams of profit in 2011. The company had a loss of 2.9 billion dirhams the previous year.

“Even though retail is generally strong, especially at the large malls, we don’t expect many developers to build new ones because funding is tough and there is already a good amount of supply in the market,” Gaffney said. “The areas that will do best are smaller strip malls or supermarkets near housing developments.”

Shopping accounted for about 30 percent of Dubai’s gross domestic product last year, Standard Chartered Bank Plc economist Philippe Dauba-Pantanacce estimated. The Dubai Statistics Center said retail and wholesale trade rose by 9.3 percent and hotels and restaurants increased by 4.4 percent in 2010. It hasn’t yet released figures for last year.

New Shops, Restaurants

Nakheel is in talks with banks to raise at least 300 million dirhams for its first new project since the debt-ridden company received a government bailout in 2009. The Pointe at Palm Jumeirah, across the water from the Atlantis hotel, will include 120 restaurants, 75 shops and landscaped areas for visitors with a view of an offshore fountain.

“The retail sector is strategic for Nakheel,” Chairman Ali Rashed Lootah said at a press conference in January. He added that 60 percent of an extension to Nakheel’s Dragon Mart mall was booked by retailers within a week of its announcement. The company plans to add 1.7 million square feet of retail space and 5,000 parking spaces to the mall.

Even with a growing retail market, Nakheel may have difficulty raising the money after it received a government bailout and restructured debt, according to analysts including Ahmed Talhaoui, the Abu Dhabi-based head of investment and asset management at Royal Capital PJSC.

“Any issue would have to be at a very competitive yield and probably with a structure that gives some government guarantee,” Talhaoui said in a January interview.

Costly Debt

The yield on Nakheel’s 3.8 billion-dirham, 10 percent sukuk maturing in August 2016, fell 123 basis points, or 1.23 percentage points, so far this year to 16.86 percent on Feb. 10, according to data compiled by Bloomberg. That compares with an average yield of 4.45 percent for U.A.E Islamic bonds on Feb. 10, the HSBC/NASDAQ Dubai UAE US Dollar Sukuk Index shows.

Emaar, which opened Burj Khalifa, the world’s tallest tower, in 2010, derived about 23 percent of its 2011 income from retail rents and is now focusing almost exclusively in Dubai on growing sales at its malls, HSBC’s Gaffney said. Tourists visiting the Burj Khalifa’s observation deck can only get there by going through the Dubai Mall.

“Emaar was better positioned than others when the financial crisis hit,” said Gaffney. “They had already launched and sold so much in Dubai and didn’t have tons of unsold inventory coming on line. They also were focused on the construction of Burj Khalifa, Emaar Boulevard and Dubai Mall, rather than starting new projects.”

Malls, Hotels

Malls and hotels are the main value drivers for Emaar, whose projects span the Middle East, North Africa and Asia, Ahmed Badr said in a note on Oct. 27, when he was head of Middle East property research at Credit Suisse Group AG. He now works as an equity sales specialist with the bank.

Dubai, the second-largest of seven sheikhdoms that make up the United Arab Emirates, racked up $129 billion in debt transforming itself into a tourist and trade hub. While many developments were canceled, attractions including Burj Khalifa and resort hotels like the Atlantis help bring in visitors who shop for goods that aren’t available in much of the region.

“The local population is wealthy enough to be able to keep buying and the tourism growth was very strong in Dubai last year,” said David Macadam, head of retail for the Middle East and North Africa at Jones Lang LaSalle Inc. He said Dubai shopping is bolstered by visitors from the Gulf region, Europe, China, the Indian subcontinent and the rest of the Arab world.

Popular Destination

Dubai hotels reported an 11 percent increase in visitors in the nine months through September compared with a year earlier, according to the Department of Tourism and Commerce Marketing. Revolutions in Tunisia, Egypt and Libya and armed conflicts in Yemen and Syria mean that tourists in the region have fewer options for vacations.

Buyers spent $114 million in the first week of Dubai’s month-long shopping festival, a 53 percent increase over the year earlier period, according to Karim Beg, Visa Inc.’s head of marketing for the Middle East and North Africa.

“Our marketing efforts have reached new markets in east Asia such as China and Japan and even though this strategy started only three years ago, we have seen its fruit already,” said Laila Suhail, chief executive officer of festival organizer Dubai Events & Promotions.

Dubai has 2.58 million square meters (27.8 million square feet) of mall-based retail space, according to a report by property broker Jones Lang LaSalle. About 173,000 square meters will be completed in the next two years, mostly in small shopping centers or strip malls, it said.

Reluctant Lenders

Banks wary of real-estate lending may make an exception if the business case for a project is clear and if adequate protection is put into place, said Raj Madha, an analyst at Rasmala Investment Bank Ltd.

Union Properties sold a building in the Umm Suqeim neighborhood for more than 140 million dirhams to supermarket operator Spinneys, Chairman Khalid Bin Kalban said in June 2010. Such transactions are rare in Dubai, where developers tend to hold onto shopping assets.

“It doesn’t make sense for owners to relinquish well- performing assets such as malls, which were great source of cash even during the crisis,” said Matthew Green, head of United Arab Emirates research at real-estate broker CB Richard Ellis Group Inc. “Also, when you look at mall owners they are generally companies that don’t have a pressing need to sell. Even if they wanted to sell, it won’t be prime assets.”

Skiing at the Mall

Majid Al Futtaim’s Mall of the Emirates, which contains an indoor ski slope, has a 99.8 percent occupancy rate, while the developer’s Deira City Center and Mirdif City Centre have rates of 98.8 percent and 96.9 percent respectively, according to the company’s prospectus.

Dubai’s mall vacancy rate stands at 20 percent, mainly because of smaller malls with low visitor numbers. Most big international brand retailers won’t open stores in small malls as they look for the most prestigious and high profile locations, Gaffney said.

After the sheikhdom first opened up its real-estate market to foreigners in 2005, developers focused on selling homes as speculation-driven investment drove up prices.

“At the time, it made more sense to sell land and residential units because it was less risky,” HSBC’s Gaffney said. Back then, developers couldn’t determine whether the location would be valuable by the time a shopping center was built, he said.

--Editors: Ross Larsen, Andrew Blackman.

To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

Read the original:
Dubai Developers Thrown Retail Lifeline as Property Sales Sink

Last Updated: February 10, 2012 05:01pm ET

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“Retailers in need of reinvention
will continue to downsize or
close stores that fail to meet
operational hurdles," says Rose.

(Mark Your Calendars: RealShare REAL ESTATE 2012, March 22nd in Los Angeles).

ENCINO, CA-Retail properties performed remarkably well and have a strong potential for an upside surprise despite setbacks to the US economy in the second half of 2011, GlobeSt.com has exclusively learned from a National Retail Report. The report, released by Marcus & Millichap, says that space absorption improved for the ninth consecutive quarter, while construction starts fell to their lowest levels in 20 years.

The report also adds that an anticipated rise in net absorption to 77 million square feet will surpass the 32 million square feet of new supply, tightening the US vacancy rate to 9.2% by year’s end.

“The retail sector’s strong performance defied pundits’ expectations,” says Hessam Nadji, managing director, research and advisory services for the firm. “Retail assets overcame a mid-year plunge, as well as a slide in consumer confidence and a modest contraction in per-capita disposable income.”

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Ultimately, Nadji says, core retail sales increased 6.5% by year’s end, with holiday sales growing by 3.8% over 2010. “Private-sector hiring totaled 1.8 million in 2011, with the addition of 466,000 jobs in 4Q,” he says. “Consumers are still under tremendous pressure, but have shown significant resilience amid the financial-market turmoil and recession talk of the past five to six months.”

All 44 markets tracked in the report’s National Retail Index are forecast to post job growth, vacancy declines and effective rent growth in 2012, with San Francisco, San Jose and Seattle ranking at the top of the index. Technology, tourism and strong outlooks for job and population gains will tighten space fundamentals in the five markets that led advancements with seven-spot gains in the national retail index this year, says the report. These include San Jose (#2) and Seattle (#3) with links to technology, strong incomes and low vacancy; Phoenix (#28) and Portland (#6), which advanced on high-tech manufacturing and retail sales; and Miami’s (#14) big decline in vacancy, aided by tourism and low supply.

“Fortress malls, luxury retail stores and well-located grocery-anchored shopping centers in gateway markets, parallel with wholesale clubs and off-price outlets have outperformed the sector,” says Bill Rose, national director of the firm’s national retail group. “Retailers in need of reinvention will continue to downsize or close stores that fail to meet operational hurdles. Limited expansion plans by other retailers must demonstrate substantial value in both market share and profitability to remain viable,” continues Rose.

Retail investment sales increased 32% from 2010 to nearly $61 billion, sparking a 40-basis-point-decline in cap rates to 7.9% on average, says the report. The biggest gains occurred in the $10-million to $20-million property segment, with transaction velocity increasing 98% on a year-over-year basis. Gateway investment markets of New York, Los Angeles, Chicago, Washington, DC, South Florida and Boston dominated sales activity, according to the NRR.

“Accommodative monetary policy will restrain interest rates for the coming year,” says William E. Hughes, senior vice president and managing director of Marcus & Millichap Capital Corp. Furthermore, global investors seeking safety in the midst of ongoing debt crises abroad will migrate to US government debt, which should keep yields low in the mid-term, he says. “CMBS retail loans totaling $1.5 billion will mature in 2012, but many may fail to refinance in the current lending environment because 81% have LTVs exceeding acceptable levels.”

According to Hughes, “Lending for lower-quality, but not distressed assets will ease until economic performance proves out in the first half of the year. While loan assumptions and seller financing will moderate, they will be enough to fill the financing gap.”

Rose adds that “Favorable risk-adjusted returns will be rewarded to those who invest in major mid-American ‘NFL cities,’ while cap rate compression will continue in major coastal MSAs…Clearly, there is no scarcity of liquidity, and real estate fundamentals will continue to spur increased investment sales and finance transactions.”

For more thought leadership from Marcus & Millichap Real Estate Investment Services, check out "StreetSmart," a blog by Hessam Nadji, the firm's managing director of research and advisory services. The blog provides Thought Leadership positions on a variety of commercial real estate-related issues. Click here to watch Nadji on CNBC's "Realty Check" program talking about multifamily and the housing crash. For more information on the Thought Leadership program, contact Scott Thompson at sthompson@alm.com.

Categories: West, Retail, Marcus & Millichap, Los Angeles

Read more:
Retail Property Sector Defies Expectations

21-01-2012 07:51 IT sector may drive demand for office space in 2012 Riding high on the growth in the IT/ITeS sector, demand for commercial office space will continue to grow in 2012, a survey by Fitch Ratings said. The rating agency, in its report titled "2012 Outlook: Indian Real Estate Sector", has hinted at a lower growth in the retail commercial space. "Though over supply of commercial space continues in some markets, the demand for office space (in 2012) is likely to be maintained at 2011 levels due to the anticipated growth in IT/ITeS, which accounts for a substantial demand for office space in India," said the report released here today. According to a survey by apex infotech outsourcing industry body Nasscom, IT/ITeS sector grew by 21 per cent in FY11 and this growth momentum will continue to 2012. "Similarly, the expectation of higher employment growth in the sector in Tier II cities will boost demand for commercial and residential space in these cities," the Fitch report said. However, the demand for new retail space from the organised retail sector is likely to be low as many players, who have grown substantially in the recent past, have sought to consolidate their positions, it said. The rating agency has forecast a negative outlook for the Indian real estate sector in 2012 due to weak overall demand and higher construction costs, which are likely to continue to squeeze margins. "The demand for the residential segment was affected due to higher prices and an increase in ...

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REAL ASSETZ - Video

18-01-2012 15:01 McCaffery Interests and US Steel have formed a joint venture, Chicago Lakeside Development LLC, to redevelop the largest tract of land in the City of Chicago- the former Southworks steel site in Southeast Chicago. The 500+ acre site is located on the shores of Lake Michigan just a short 10 miles from downtown. The award-winning Master Plan was created by Skidmore, Owings and Merrill in conjunction with Sasaki Associates and Antunovich Associates, and envisions 13575 new homes, 17500000 sf of retail and commercial space, a new high school, a 1500-slip marina, and 125 acres of new park lands to continue Daniel Burnham's vision for a public lakefront. The project is a certified LEED-Neighborhood Development and will incorporate innovative sustainable features such as a sophisticated stormwater management system to recharge the lake. The City of Chiago approved the Planned Development zoning and $98MM TIF for Phase I, a 76-acre parcel containing 800000 sf of retail, restaurants, office space and new residences. Construction is to commence upon the completion of the new Lake Shore Drive extension (US-41) in 2012 and will take 25-45 years to completely develop.

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Imagine - Chicago Lakeside Development - Video

06-02-2012 12:24 Want a home that's unique and thoroughly American? Daniel Boone Log Homes, based in Nashville but serving the nation plus Canada, offers design and construction of custom homes made from Eastern White Pine. With a staff of engineers, architects and builders, they can create your custom building whether it be a family home, vacation getaway or retail store or restaurant. Visit us http://www.yellowpages.com

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Daniel Boone Log Homes Nashville Custom Home Designs - Video

04-02-2012 09:32 Indiabulls Real Estate is one of the largest real estate company in India with development projects spread across high-end office and commercial complexes, premium residential developments, mega townships, retail spaces, hotel and resorts, state of the art special economic zones and infrastructure development. It has 31 ongoing projects totaling 61 million square feet, 2551 acres of SEZ development and additional land bank of 580 acres. Each project bears a stamp of thoughtful solutions and highest quality. The company has partnered with specialists from India and abroad working on various aspects including design, landscaping, engineering and structural strength of each of the developments. It further employs most advanced construction equipments and technologies that guarantees on time delivery like advanced jump start technology, advanced logistics and vertical transportation systems, wind tunnel engineering as also international quality construction grade steel and the highest strength M70 and M80 concrete. The company has more than 90% of its portfolio in Mumbai, Delhi (NCR) and Chennai markets with $ 900 million of land bought through government auctions. The main focus of Indiabulls Real Estate is construction and development of properties, project management, investment advisory and construction services. Indiabulls Real Estate has delivered a record 3.3 million sq ft developed space valued at $ 1.75 billion (within 4 years of inception). This is fastest and ...

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Indiabulls Real Estate - Video

07-02-2012 12:34 The Beverly Hills Resort Residences In Richmond Hill The most prestigious condominium address in Richmond Hill. Situated on Yonge Street and Sixteenth Avenue this striking development will be one of the largest development undertakings in the GTA. This magnificent addition to the Richmond Hill landscape will for the first time incorporate a European style "woonerf" street. A thoroughfare for both traffic and pedestrian without sidewalks. The Beverly Hills Resort Residences will feature, ground floor shops, four towers and associated podiums above. This remarkable complex will boast over 900 residential units plus the ground floor retail commercial space. The residential towers will be 18 to 28 storeys with the retail and commercial at grade facing Yonge Street. The Beverly Hills Resort Residences will have high end resort style amenities and will be lavishly appointed with a level of 5-star luxury and design that stands above the rest. Another unique aspect of this world class development is that these luxury condos will be affordable to the average consumer or first time buyer, and the builder will be capping the total down payment at only 15%, and spreading that over 5 payments over two years. Upon occupancy there will be an additional 5% due. With the occupancy tentatively set for June 30th, 2016. With this payment structure in place, affordability has become easier and more achievable. Finally ....... The long awaited Beverly Hills Resort Residences condos have ...

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THE BEVERLY HILLS RESORT RESIDENCES Real Estate Pre Construction suites Richmond Hill Vaughan - Video

03-02-2012 07:13 For Properties in Hiranandani Palace Gardens Chennai, Call Now: Realty Merchant 08652288515 / 07387414292 Mail Us at: sales@realtymerchant.com Visit Us at: http://www.realtymerchant.com Hiranandani Palace Gardens is 251-acre residential township in suburban Chennai. Entire project will be constructed over three phases, all building to a unique master plan. Phase 1 of Chennai Residential will feature a richly landscaped Grand Entrance Boulevard leading to elegant multi-storey residential towers and low-rise apartments set within manicured gardens. Pre-construction sales for Chennai Residential started in May 2007 and construction began in August 2007. Palace Gardens Chennai will offer 21.5 million square feet of residential space in a wide range of 1, 2, 3 and 4 bedroom apartments, penthouses and garden apartments designed to appeal to the employees of major companies located within the township's catchment area. Apartment design is guided by the principles of Vastu Shastra, the Hindu tradition of designing living environments in harmony with the physical and metaphysical forces. Palace Gardens is planned to be a vibrant community, offering world-class commercial space, parks and gardens, schools, retail shops, recreational and health care facilities, convenient transportation links, and extensive local employment opportunities. Hirco is also building a new business park (Chennai Commercial) adjacent to Chennai Residential that will offer over five million square feet of office ...

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Hiranandani Palace Gardens Chennai - Video