Analysts predicted that the CMBS loan delinquencies would level off this year but that has not been the case. Since February, Trepp reports have showed a increased in delinquencies from 9.52% to 10.34% reported in July. Manus Clancy of Trepp LLC said that they had forecasted that loans made in 2007 would mature this year and cause in inflation in the delinquency numbers. He was correct but misinterpreted how long it would last due to our economy. Now, Clancy feels that it will take a few more months for the rate to plateau and eventually start to decline. This has a lot to do with the unemployment rate staying extremely high. Multi-family, hotels, and industrial properties remain the highest property types for delinquent loans. All three of these major property types have a rate of over 11% as of July. The only property type that has actually seen improvement over the last month is retail, which has dropped to 8.03%. Although these analyses do not show promising numbers, the end of the year is expected to result decreasing rates of delinquencies. All of these numbers are directly affected by our overall economy, and without increased job growth, these numbers will continue to rise.
Things are looking up for the Phoenix office market. The second quarter of 2012 saw the vacancy rate decline to 20.3%, a decrease over the first quarter this year. Although the national average dropped to 12.1%, Phoenix had a positive net absorption of 907,843 square feet. This shows a great trend for developers and office property owners in Arizona. Only two office buildings were completed last quarter totaling just less than 50,000 square feet, but developers are seeing an opportunity as the quarter ended with almost 400,000 square feet of office space under construction.
EverBank out of Jacksonville, Florida has announced that it will purchase GE Capital’s Real Estate Lending department for $2.5-billion. Although the deal still has to be approved by regulatory committees, both companies board of directors have approved the acquisition. The department consisted of 108 employees in 14 separate locations, who will now be working for EverBank when the deal is expected to close later this year.
With a current balance of $2.44 billion in performing loans and $3.1 billion in servicing rights on existing loans, EverBank hopes to grow the business further while keeping all of the current employees. Many of the loans are secured by commercial real estate and the portfolio has an average loan size of $2.6 million.
Professor Mark Stapp of the Masters of Real Estate Development Program describes how our local economy was affected by one of the biggest recessions. In order for Arizona, and more specifically the Greater Phoenix market to grow and prosper like it once did, changes are going to have to be made.
Overdevelopment was one of the biggest factors in our recent housing crisis. Developers across the nation saw the overwhelming absorption of housing and people moving to the Valley. These statistics that were huge indicators for developers, allowed for the surge of new development, causing too many homes to be built by too many builders.
Professor Stapp hopes that the recent crisis will trigger new thinking among developers and even Arizona residents. Stapp says that “real estate is a service business, and developers have to deliver what the customers want.” He believes the Arizona market will drastically change from the common cookie-cutter homes to more unique, smaller, custom housing.
Another promising factor is that federal loans will start becoming available to those who filed bankruptcy during the recent financial crisis. After years of not being able to obtain a loan on new, smaller, affordable housing, residents of Arizona in the coming years will now have access to loans. This is a great indicator along with housing prices rising 25% in the last year, that Arizona will begin to prosper once again.
As Tempe begins to fill the empty space along Mill Avenue, small start-ups are finding it more difficult to join this market. Loco Patron and AllState recentely announced they were moving into the Tempe Gateway Building. In addition, another 10-story office building is beginning construction at the Hayden Ferry Lakeside development.
A new hotel is slated for development in dowtown Tempe with an opening expected late next year or in early 2014.
Construction is expected to start soon on a 173-room hotel Residence Inn by Marriott hotel on Forest Avenue. The project will be located on the east side of Mill Avenue, adjacent to the Tempe City Hall parking garage at the southeast corner of Fifth Street and Forest.
An 11-acre redevelopment site for a planned hotel and condominiums in downtown Scottsdale was sold last week at a trustee sale for $30 million.
Scottsdale Canal Development LLC, which started assembling the property along the Arizona Canal in 2006, had planned a 240-room Solis Scottsdale hotel and 140 condos on a site that now includes a SRP substation.
Read more: http://www.azcentral.com/community/scottsdale/articles/2012/05/01/20120501scottsdale-solis-hotel-condo-site-downtown-goes-30-million.html?utm_source=newsletter&utm_medium=AZ-CRE-REPORT&utm_campaign=GPEConnect#ixzz1uCcdwBkg