Hiring to Increase in 2012 Says SelectLeaders Survey

Survey respondents were overwhelmingly positive about the potential for their personal careers and for their businesses in 2012, with 60 percent of respondents forecasting total cash compensation (base salary and bonus) to increase in 2012. SelectLeaders’ annual industry-wide survey of over 900 real estate professionals and employers delivered some interesting insights and perspectives on 2012, including how vacant senior positions have been replaced.
Thirty-seven percent of respondents reported that senior-level positions have not been replaced, while 27 percent replied that senior-level positions were replaced by employees with less experience. These insights were offered:

“Companies will continue to hire extremely well-qualified individuals for significantly less. The key for employers will be how they recognize and reward these executives.”

“I think that hiring of lower-level personnel will continue and may well increase. Such additions to staff should allow senior-level personnel to increase their productivity, generating more deals, income and activity.”

Compensation Trends
Fifty-four percent did not anticipate bonuses as of December, 2011. Also in 2011, 61 percent of salaries either, remained the same (36 percent) or decreased (25 percent).  One respondent explained:  “My company’s re-organization will create a15 percent reduction in total salary and a 10 percent reduction in force. Base salaries for remaining employees will rise for everyone in order to do more with less employees.”

 Hiring Predictions for 2012 
“The multi-family market continues to stay hot and is full steam ahead.”

“We may see some additional staff in development/construction added in 2012 for the first time in four years.”

“Lots of reorganization on the corporate real estate end.  New senior and mid-level positions require greater business acumen, planning skills and operational management experience.”

“Commercial real estate folks are hoping that banks start selling off their assets in 2012 so new jobs can be created for workouts, underwriting and asset management.”  Learn more about trends, benefits and salaries across 150 positions in the comprehensive 2011 NAIOP Compensation and Benefits Report by CEL & Associates.

Vacancy Remains Elevated But Continues to Tighten

The U.S. national office vacancy rate ended 2011 at 16 percent, with 65 of the 80 markets tracked registering positive net absorption.  In 2010, only 43 markets recorded positive net absorption.  Cassidy Turley’s 4Q11 office report indicates the technology-driven markets in the West were some of the strongest performers in 2011.  San Jose-Silicon Valley led the country at 4.7 million square feet while San Francisco came in with 2.6 million square feet.  Other markets that finished in the top 10 include New York City, Houston, Dallas, Austin, Philadelphia and the Washington, DC metro.

Other key highlights include:

• Vacancy has trended downwardsfor five consecutive quarters, but still remains 200 bps above its 20-year historical average of 14 percent.
• Office rents inched up seven cents in the fourth quarter of 2011 from the previous quarter to $21.50. Rents in the fourth quarter were up 0.8 percent from a year-ago.  2012 will be another year in which rents generally sit a low levels, with no real movement up or down.
• For the year (Jan. – Nov. 2011), office sales volumeis up 56 percent compared to 2010.
• National office cap rates inched up 10 bps in November compared to the previous month to 7.4 percent, but remain 150 bps below the peak of 8.9 percent in December of 2010.  As of the report’s publication date, there were more than $11 billion in pending deals expected to close over the next three months.

Investment Volumes to Hold Steady in 2012

Commercial property investment volumes rose by a better-than-expected 17.7 percent in the fourth quarter of 2011, says a report by Cushman & Wakefield. Foreign investors were the main driver of this, increasing activity by 16.2 percent over the year versus a 3.6 percent rise for domestic buyers.

Other highlights include:

• Investors have continued to show a strong interest in core markets, with the UK, Germany and France by far the most in demand, taking 61.4 percent of all investment for the year.
• Central Europe in particular had a good year – with volumes up 115.7 percent and a market share of 4.7 percent, its strongest on record, as investors adjusted their views on the real level of risk in these markets and also set about trying to find markets with stock and growth potential.
• Demand for retail has been good with investors seeing it as a defensive asset.  Supply of the right type of retail continues to run below demand and a lack of finance for large lots has also held activity back. The UK has regained its crown as Europe’s largest retail market – which Germany took for part of last year.  France was runner up to the UK as the region’s largest office market, taking over from Germany which fell back to number 3.

Michael Rhydderch, head of the European capital markets group at Cushman & Wakefield, noted:  “On the demand side, large pension and sovereign funds from around the world will remain hungry for prime assets in core markets, with North American and Far Eastern funds again dominant. Private equity will also be a key player this year at typically higher risk levels, while private individuals from Europe, Asia and the Middle East are likely to be strong across a range of risk levels. However, all players will need to look closely at which markets and sectors they are targeting; we expect there to be an adjustment to pricing and/or risk tolerance by many in order to meet their buying objectives.”

U.S. and Canadian Investment Outlook for 2012

According to Avison Young’s 2012 Forecast, investment opportunities remain available for investors who are willing to invest in non-coastal markets and in new-vintage commercial mortgage-backed securities (where spreads have widened significantly). However, low interest rates remain the domain of low loan-to-value borrowers in core markets with properties bearing little or no leasing risk.

In the United States, development should remain scarce in most markets and in all property types except apartments where development yields are cresting above going-in yields on purchases of existing product. Though the inflow of troubled assets was slowing approaching year-end 2011, there appears to be increasing velocity of loan sales and longer-term restructurings.  It is likely that the continued backlog of delinquent mortgages will remain a significant factor in 2012.

The prospects for 2012 are promising across Canada, with all markets poised to enjoy steady growth.  The last year saw strong activity in the office market sector and increasing entry of new U.S. retain chains into Canadian markets.  Vacancy rates are decreasing in most of Canada’s industrial markets with some areas anticipating the return of speculative development in 2012.  Many markets are experiencing a shift in the usage of industrial space away from manufacturing toward logistics and distribution.

Book Your Capitol Hill Appointments for CL&LR

NAIOP’s annual Capitol Hill Day is Thursday, February 9, at the conclusion of the Chapter Leadership & Legislative Retreat. NAIOP members will be meeting with Senators, Representatives and their staffs to discuss the issues most pressing to our association and industry. NAIOP will provide plentiful materials and education during the Retreat to prepare you for your meetings.
Now is the time to schedule your meetings on Capitol Hill. Please coordinate with members from your chapter who are participating at CL&LR to schedule meetings in Congressional and Senate offices. To assist you, refer to the following resource checklist:

• Send a letter requesting an appointment.
  • Contact information for House members
  • Contact information for Senate members
• Follow-up with a phone call to the member’s office directly or access the U.S. Capitol Switchboard at (202) 224-3121and ask to be connected to your senator’s and/or representative’s office and speak with their scheduler. If the elected official is not available during the meeting, ask to meet with the senior staff that is responsible for covering our priority issues:
  • Tax Extenders
  • Carried Interest
  • Transportation
• Notify NAIOP of your scheduled meetings.

Carried Interest Talks Raised Following Candidate Romney’s Comments

House Ways and Means Committee ranking member Sander Levin (D-Mich.) says he plans to reintroduce legislation that would close a so-called tax “loophole” on carried interest income, following on the heels of Republican presidential candidate Mitt Romeny’s comments that his tax rate is close to 15 percent, according to an article in Bloomberg BNA.

NAIOP strongly opposes this a tax from capital gains rates to ordinary income rates, believing that it will reduce incentives for entrepreneurs to undertake the risks inherent in development would have a pronounced negative impact on the real estate industry, and would lessen the flow of investment capital to the real estate industry.

The article says that Levin and many other Democrats have argued since 2007 that carried interest income should be treated just like ordinary income because it represents compensation for a service being provided, rather than a return on an investment. Most Republicans have sided with the finance industry and say changes to the current tax treatment of carried interest could have a significant impact on the ability of venture capitalists, certain real estate partnerships, and other financiers to fund new investments.

Ways and Means member Kevin Brady (R-Texas) told Bloomberg BNA he expects the effort to again fail, saying, “There is zero chance because tripling the tax rate on our Main Street real estate partnerships in this economy is exactly the wrong thing to do for jobs. Most of that provision doesn’t hit ‘those giant hedge funds,’ it hits traditional real estate partnerships that build our office buildings, our shopping centers, apartments and movie theaters and industrial parks. That would be a bad move for the economy.”

Vacant to Vibrant: Repurposing Commercial Real Estate

Vacant to Vibrant: Repurposing Commercial Real Estate
Presented by Jeffrey S. Rogers
President & COO, Integra Realty Resources, Inc.
Free Online Solution Series – Release date: January 24, 2012

Saddled with a vacant bookstore, consumer electronics store, auto dealership, multifamily project or other under-producing commercial space? Now is the time to get creative and get those buildings occupied. If you are a property owner, manager and broker, you’ll want to listen as Jeffrey Rogers, president & COO, Integra Realty Resources, Inc. discusses:

• How commercial real estate can be repurposed to fill a need in a community; and
• What attributes are necessary for a successful repurposing.

Download this free session and see how NAIOP’s Solutions Series connects you with relevant, valuable news and views on succeeding in today’s unpredictable industry conditions. Archives of all past Solutions Series programs are available in the NAIOP On Demand Bookstore.

NAIOP Silicon Valley BBQ

The 2011 NAIOP Silicon Valley BBQ was held September 21 at the home of Phil and Kelly Mahoney in Los Altos Hills. Over 250 commercial real estate professionals attended this year’s event.

Click here to see the event photos.

2011 Developer Hall of Fame

On May 5, 2011 NAIOP celebrated the induction of Ned Spieker to the NAIOP Silicon Valley Developer Hall of Fame. Videos and photos  from the dinner and award ceremony are now available on the NAIOP website at http://www.naiopsv.org/awards/spieker.html.

Capital Markets Panel Recording

Listen to a recording of the Capital Markets Panel Discussion held on March 16th at the Stanford Club.