the real report, q1 ending, 2011
TRANSCRIPT
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8/4/2019 The Real Report, Q1 Ending, 2011
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this issu
Building Spotlight
Executive Summary
Market Asesment
Broker Inormation
SSUE
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
SSUE
Q22010
SSUE
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
Size: 36,000 Square Feet
35 Tesla - Sale
Mission Viejo
Buyer:JP Morgan Chase
Size: 52,091 Square Feet
20532 El Toro Road - Sale
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Vacant Space by Submarket
3
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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
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Seal Beach - Sale
Buyer: AIG Global
Size: 280,6113 Square Feet
Irvine - Lease
Tenant: Epicor Software
Size: 68,235 Square Feet
More Notable Market
Transactions:
Brea - Lease
Tenant: Bank of America
Size: 637,000 Square Feet
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.