Grubb & Ellis Montana Commercial, LLC

Commercial Real Estate for Sale – Bozeman & Big Sky, Montana : Please contact Cam Holt 406.209.0127 or Ryan Springer 406.579.5586 at Grubb & Ellis | Montana Commercial, LLC.

Storage Unit for Sale – Big Sky, MT : Please Contact Cam Holt 406.209.0127 or Ryan Springer 406.579.5586 at Grubb & Ellis | Montana Commercial, LLC for more information.

Land for Sale – Bozeman, MT (N. 27th St.)-1-2a-3a-milligan : Please Contact Cam Holt 406.209.0127 or Ryan Springer 406.579.5586 at Grubb & Ellis | Montana Commercial, LLC for more information.

Good News in the Trenches            

October 23, 2009

Good News Friday has tended to focus on national economic indicators since the first issue was sent to our staff and clients on Friday, March 20^th, 2009. But not all states and localities recover at the same pace, so today’s note looks at conditions at a more granular level.

An interesting source comparing states and localities is the Adversity Index from Moody’s Economy.com and msnbc.com, which reports that 10 states are in recovery, all in the nation’s mid-section. To view an interactive map, click here, and then click on the map labeled Adversity Index. It’s a quick snapshot of current economic conditions at the state and metro levels.

Here are a few randomly selected local initiatives and trends that will create opportunities for commercial real estate in the months and years ahead.

• At the Expo Real conference held in Munich earlier this month, European investors expressed growing interest in U.S. commercial real estate, especially in Washington, D.C. Click here for a recent article from the Washington Business Journal.
• Pittsburgh, which lagged during the boom, has been surprisingly stable during the bust. The office vacancy rate is lower now than at year-end 2007 when the recession began. Credit minimal spec construction and deals by large corporate occupiers including Westinghouse Electric Company, Dick’s Sporting Goods and UPMC (University of Pittsburgh Medical Center). Click here to read Grubb & Ellis’ third quarter Pittsburgh Office Trends report.
• Leveraging Wichita’s strength in aviation technology, CIBOR (the Center of Innovation for Biomaterials in Orthopedic Research) was formed to create medical implants and other medical tools out of advanced composite materials. This will provide a big boost to the local economy in a few years. Click here for a recent article from The Wichita Eagle.
• Portland is “feeling a thaw” according to an article in the Portland Tribune, thanks to recent increases in temporary employment (a harbinger of permanent hiring), leasing by local retailers and even plastic surgery (yes, plastic surgery, for which clients pay mostly out-of-pocket).
• Elkhart County, Ind., one of the hardest-hit regions in the country, has seen unemployment decline from 18.9 percent in March to 16.0 percent in September thanks to a rebound in the RV industry. NBC Nightly News reported on the story this week; click here for the video (and a brief commercial).
• The BMW plant in Greenville, S.C. is undergoing a major expansion, adding 1.2 million square feet to the existing 2.65 million-square-foot facility and hiring 700 more workers. A majority of the vehicles built here are for export. Click here for a recent article from The Greenville News.

 Keep your eyes open for good news in your community. It’s there or it will be soon.

Robert Bach

SVP, Chief Economist

Grubb & Ellis

Commercial Land for Sale -Bozeman, MT : Please Contact Cam Holt 406.209.0127 or Ryan Springer 406.579.5586 at Grubb & Ellis | Montana Commercial, LLC.

Warehouse / Flex Space for Lease or Sale : Please Contact Cam Holt 406.209.0127 or Ryan Springer 406.579.5586 at Grubb & Ellis | Montana Commercial, LLC.

Commercial Investment Properties for Sale – Bozeman, MT : Please Contact Cam Holt 406.209.0127 or Ryan Springer 406.579.5586 at Grubb & Ellis | Montana Commercial, LLC.

October 16, 2009

Elephants and Gorillas

 One of the leading indicators of the recovery that we haven’t mentioned is the stock market, perhaps because it is so volatile and covered so thoroughly on a real-time basis. But, like the fabled elephant in the living room or the 500-pound gorilla, we can’t ignore it any longer because the Dow Jones Industrial Average crossed the psychologically important 10,000 threshold on Wednesday. Skeptics will note that the DJIA first crossed 10,000 in 1999, has crossed it 25 times since then and remains 29 percent below its all-time peak in October 2007. But the speed and magnitude of this latest rally merits a sigh of relief at the very least – up 54 percent as of yesterday from its low point on March 9^th. The rally has boosted the market for initial public offerings and bond issuance – important sources of capital for many debt-starved companies. Rising equity prices also have helped support business and consumer confidence, which is reflected in two other economic releases this week: 

• Initial claims for unemployment benefits fell by 10,000 to 514,000 for the week ending October 10^th. It was the lowest level since the holiday week of January 3^rd according to the Bureau of Labor Statistics.
• The Census Bureau reported that retail sales overall declined 1.5 percent in September, payback for the 2.2 percent increase in August due to the cash-for-clunkers program. But sales excluding autos and gas, called core retail sales, increased 0.4 percent in September, led by general merchandise stores (up 0.9 percent), food and beverage stores (up 0.7 percent) and clothing and accessories stores (up 0.5 percent). Along with a recent report from the ICSC on chain store sales, this report raises hopes for stable to slightly higher sales in the upcoming holiday season.

 Have a great weekend.

 Robert Bach

SVP, Chief Economist

Grubb & Ellis

Second Derivative (ugh!)

 October 9, 2009

Smart Money called “second derivative” one of those “needlessly nerdy financial words.” In the context of the recession, it means that conditions are still getting worse but at a slowing rate – a prelude to bottoming out. A number of economic indicators have seen improvement in their second derivatives and some are signaling expansion. But because commercial real estate is a lagging indicator, we haven’t seen second derivative improvement… until now.

Preliminary third quarter data from Grubb & Ellis show an abatement in the pace of deterioration compared with the past two quarters. The national office vacancy rate appears to be about 50 basis points higher than in the second quarter, which would take it to just above 17 percent. By comparison, vacancy in the first and second quarters increased by 80 and 100 basis points, respectively. Negative net absorption and sublease space also appear to be moderating. What could explain this slowdown in the rate of decline? One theory is that panicked employers “over-fired” after the credit markets froze in September 2008. The faster deterioration in the leasing market during the first and second quarters likely reflected this panic. Now that the recession appears to be ending, tenants may feel less of a need to further slash their space requirements, although we won’t see positive absorption until job growth returns.

 A couple of other notable data releases this week:

•  The Labor Department reported that initial jobless claims fell 33,000 to 521,000 last week, beating analyst expectations. The decline, which was the fourth in the past five weeks, brought the four-week moving average to its lowest level since January 17^th. Continuing claims for the previous week slipped by 72,000 to 6.04 million.
• Chain store sales rose 0.1 percent in September according to ICSC, the first increase since July 2008. The increase was driven more by calendar and weather effects than by underlying strength in spending, but we’ll take what we can get.

Robert Bach

SVP, Chief Economist

Grubb & Ellis