View
214
Download
0
Tags:
Embed Size (px)
Citation preview
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 1CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 1
CBIA ECONOMIC SUMMIT & OUTLOOK 2009
prepared by
JONATHAN PUTNAM
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 2CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 2
1 “CAUTIOUS PESSIMISM”
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 3CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 3
FAST CHANGING LANDSCAPE
As of August, UCONN’s CCEA was predicting a soft landing for Connecticut with a short downturn:
“Connecticut will suffer mild job losses, especially compared to both previous contractions and compared to most other states. At the same time, the total output in the Connecticut economy will continue to grow — so Connecticut will not experience a recession. And by the end of the forecast period in 2010, this Outlook anticipates growth in the Connecticut economy to accelerate. This reasonably good outcome—a soft landing…”
By November, CCEA had a very different assessment.
“Connecticut’s economy is in a recession; the contraction began nearly a year ago, in third quarter 2007,. But to date the pain has been remarkably little. Connecticut has seen only modest job losses through this period, and its unemployment rate, 6.1%, is below the national rate, 6.5%. Despite the gathering economic storm clouds, the CCEA Economic Outlook forecasts total job losses of only 40,000 and a modest decline in the state’s economic output. Declining energy prices – the price of a barrel of oil has fallen nearly 60% since its peak – will mitigate the economic contraction.”
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 4CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 4
INSURANCE Healthcare companies stable Property Casualty/Wealth Management companies a mixed result The Hartford’s recent struggle is alarming
AEROSPACE - DEFENSE Connecticut’s high tech engineering and manufacturing sector has
been relatively healthy supported by the weak dollar, defense spending and growth overseas
FINANCIAL SERVICES Financial firms which had been riding high are in crisis mode
REGIONAL ECONOMIC DRIVERS
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 5CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 5
2 OFFICE OVERVIEW
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 6CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 6
HARTFORD CBD TRENDS
4Q 06 4Q08
Rents
4Q08
$25 to $60
Tenant Improvements
$22.59
4Q 06
$15 to $30
Operating Expenses
4Q08
4Q 06
$15.50
$17.00
PAST 24 MONTHS
Landlords’ bottom lines have been eroding….
Rents
Operating Expenses
NEXT 24 MONTHS
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 7CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 7
HARTFORD CBD RENTAL RATES VS. VACANCY
$13.50
$14.50
$15.50
$16.50
$17.50
$18.50
$19.50
$20.50
$21.50
$22.50
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Rental Rate Vacancy Rate
The space vacated by MetLife added about 400,000 rsf of class A space to the market This brought up the vacancy rate, but also brought up the direct average asking rental
rate
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 8CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 8
HARTFORD COUNTY LEASING ACTIVITY
Leasing activity remains steady, although lower than that seen in recent years
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 9CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 9
HARTFORD COUNTY ABSORPTION
Absorption is strongly negative throughout the county, due mainly to space vacated by MetLife in the CBD, The Hartford in Windsor and Vallasis (Advo) in Windsor
506,409
255,539
436,176
(685,303)
(531,440) (519,613)
(10,960)
(177,993)
183,145
(910,146)(1,000,000)
(800,000)
(600,000)
(400,000)
(200,000)
-
200,000
400,000
600,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 10CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 10
HARTFORD COUNTY CONSTRUCTION DELIVERIES VS. VACANCY
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
22.0%
24.0%
26.0%
Construction Deliveries Vacancy Rate
Low levels of construction activity relieve upward pressure on vacancy rates
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 11CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 11
NEW HAVEN COUNTY - RENTAL RATES VS. VACANCY
$13.50
$14.50
$15.50
$16.50
$17.50
$18.50
$19.50
$20.50
$21.50
$22.50
$23.50
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Rental Rate Vacancy Rate
Yale University is currently the most active player in the New Haven office market In the fourth quarter of 2008, they leased over 140,000 rsf of space in New Haven’s Science Park,
bringing down the overall vacancy rate
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 12CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 12
4 CONCLUSION
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 13CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 13
NATIONAL PERSPECTIVE
HARTFORD 18.3% | $22.91 – CBD Class A STAMFORD 15.5% | $47.46 – CBD Class A
LOS ANGELES 14.0% | $38.65 – CBD Class A
SAN FRANCISCO 11.4% | $50.75 – CBD Class A
SE A TTLE 10.6% | $38.83 – CBD Class A
BOS T ON 7.3% | $61.88 – CBD Class A
W ASHING T ON DC 10.8% | $55.74 – CBD Class A
MIDTOWN MANHATTAN
9.2% | $92.32 – Midtown Class A
CHICAGO 12.4% | $31.71 – CBD Class A
ATLANTA23.9% | $21.26 – CBD Class ADALLAS
21% | $23.71 – CBD Class A
DENVER11.4% | $32.47 – CBD Class A
Source: Cushman & Wakefield Research
Overall Class A Vacancy and Avg. Direct Asking Rent
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 14CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 14
MARKET SUMMARY
Investment activity had slowed dramatically– flight to quality and more conservative underwriting
Hartford Investment Market surprisingly active through 3rd qtr., despite financial upheaval
Credit - from the Latin verb credere: “to believe”. We are experiencing a monumental crisis of confidence
Capital expenditures under tight scrutiny. Tenants reluctant to move due to up front cost of relocation
Hartford and New Haven office markets will see moderate downturn Well capitalized Buyers and Tenants will dominate. Fortunes will be
made by the risk takers – OPPORTUNITY arises from chaos
2008 THIRD QUARTER OFFICE MARKET OVERIVEW | 15CBIA ECONOMIC SUMMIT & OUTLOOK 2009 | 15
C&W CONTACTS
C&W NEW ENGLAND RESEARCH SERVICES
C&W NEW ENGLANDTHOMAS L. COLLINSExecutive Managing Director, New England [email protected]
RICK CLEVELANDDirector, Research ServicesNew England [email protected]
ANTHEA STREZZEAssociate, Research ServicesNew England [email protected]
C&W Of Connecticut, Inc.280 Trumbull Street
22nd FloorHartford, CT 06103
T 860-249-0900F 860-522-3941
www.cushwake.com
C&W CONNECTICUTJONATHAN PUTNAMExecutive Director, [email protected]