via GLOBAL PERSPECTIVES.
Friday, November 5, 2010
International Rents Have Bottomed out and Recovered, See Table/Chart
Industrial Property Investor Demand & Rents Recovering Globally
Edited: Lisa Benston
Input: Boothe Global Perspectives Click here
Industrial markets across the globe are now in recovery mode, albeit at very different stages, with Asia leading the rental recovery according to a new MarketView report from CB Richard Ellis Group, Inc.
CBRE’s first global analysis of both the occupational and investor aspects of the industrial logistics sector, shows that Tokyo has emerged as the most expensive location in the world for distribution/logistics centres, followed by London and Sao Paulo in Brazil.
“The contraction in demand for industrial and logistics properties in 2008 and 2009 led to a more than10% decline in our Global Rent Index, bringing rents back to 2003-2005 levels,” said Raymond Torto, CBRE’s Global Chief Economist. “The US and EMEA had the most significant reduction in rents during the period, with declines of 14% and 12%, respectively, while the Pacific Region and Asia weathered the storm better with rental declines of 5% in both regions.”
The decline in industrial rents eased throughout EMEA, the Americas and the Pacific region in 2Q 2010. Rent growth is now well underway across Asia, with rents having increased by over 6% since the end of 2009.
Ben Boothe stated: “We identified the trend of growth in China and India early, and have repeatedly pointed out the emerging growth of Latin America. This report confirms predictions of Boothe’s Global Perspectives,http://www.bootheglobalperspectives.com/ and shows that the USA is relatively weak, as compared to much of the world in economic growth, primarily because US banks are not lending.
Dr. Torto added: “Given the strengthening demand and production levels in the world’s emerging markets we anticipate that global industrial rents for prime logistics properties will stabilize and gradually begin to increase before year-end.”
Boothe & Associates link for appraisal Appraisers, , confirmed another trend. Rental rates are increasing fastest in properties that have utilized renewable energies, or have lowered energy costs due to wind turbines, solar water heating, solar panels and other technologies. Wind-Inc. http://www.wind-inc.com/ has emerged as a leader in new commercial end use supplier of turbines and solar water heating products.
The Global Industrial MarketView presents an econometrically based forecast of modest annual rental growth of 0.8% in Q4 2010, and expects the bottoming out of rents in EMEA and the Americas will lead to stronger global rental growth of 1.5% in 2011. Contraction in the availability of suitable properties in prime locations along with a global strengthening in consumer spending should lead to rental growth of 2.9% in 2012, according to report’s projections.
The analysis covers 55 of the leading industrial and logistics markets across the world. It shows that, as of 2Q 2010, Tokyo was the most expensive industrial market with an average rental of US$22/sq ft, followed by London (US$19.51/sq ft), Sao Paulo (US$13.01/sq ft) and Singapore (US$11.37/sq ft).
Five of the top 10 most expensive markets are in the Asia Pacific region, with four in the EMEA. Only one market in the Americas, Sao Paulo, features in the top 10, with Los Angeles ranking as the most expensive US market at 18th position with a rental of $6.81/sq ft, followed by Phoenix at 25th position with a rental of US $5.40/sq ft and Chicago, which ranks in 35th position with a rental of US $4.48/sq ft . As you can see, the USA is far down the list.
Most Expensive Global Industrial & Logistics Rental Locations 2Q 2010
London, England, San Paulo, Brazil, Tokyo, Japan
CBRE Executive Director, Global Research and Consulting, Mr. Kevin Stanley noted that a two-tier industrial and logistics market had now developed, with emerging economies expected to strengthen at rates well above those of developed markets.
“Underpinned by their large consumer markets, countries such as India and Brazil are expected to record economic growth in 2011 almost twice that of the world’s developed economies – redefining the importance of these countries in the future global industrial and logistics sector,” said Mr. Stanley.
“The strengthening of trade between countries such as India, China and Brazil has protected the industrial and logistics markets in these areas from the downturn that has affected EMEA and the US.”
Additional factors that could influence the logistics market and the demand for industrial real estate in the future include consumer sentiment, increased saving patterns, tighter credit restrictions and the curbing of speculative development. Mr. Stanley added: “While the demand for property may remain weak in some regions such as the US and EMEA, stable and growing demand levels and limited supply in Asia, Pacific, Latin America and Canada will underpin rental growth in prime locations.”
The report also highlights that the expectation of future rental growth coupled with a contraction in the supply of high specification industrial and logistics properties is being reflected in capital values and prime yields.
Mr. Joshua Charles, Regional Director, Industrial, Logistics & Investments – Australia & New Zealand commented: “Investor sentiment improved notably at a global level throughout the first six months of 2010, with over US$16 billion invested in the industrial sector – a strong 49% increase from the same period in 2009. It appears capital markets are moving ahead of the fundamentals in some regions of the world.”
Investor appetite was particularly strong in EMEA, with industrial sales increasing by 90% over this period, while the investment in US industrial properties increased by 40%. This stronger buyer appetite underpinned a 37 basis points tightening in Global Industrial Yields index in 2Q 2010.
Land values are another focus of the report. While uncertainty in global financial markets has had a particularly significant impact on land values in developed markets, values in emerging economies have increased by between 2% and 29% for prime, serviced industrial sites between 1H 2009 and 1H 2010.
In Latin America, values have increased by as much 60% in Panama City in advance of the completion of the Panama Canal widening.
“The potential lack of suitable development opportunities in the advanced economies could become a serious issue in some key markets. The modern logistics operator has unique requirements that are failing to be accommodated in secondary properties in these areas,” said Mr. Charles. “We are beginning to see that there is now an increasing differential between new modern facilities and the abundance of vacant, poor quality accommodation that, despite low rental levels, are not of interest to modern occupiers.”
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Major U.S. Banks, How Strong are They?
Where is our banker? We need him now? That is a question millions of Americans are asking Bank of America, Wells Fargo Bank, Citi, Chase, all of the big boys. The government and taxpayers have invested billions to save and help the banking industry. But the bankers, they have disappeared, or are spending their energies, seemingly on ways to increase interest rates, increase service fees, or increase foreclosures and legal attacks on American consumers.
It would seem that the “Big Banks”, at least most of them, have lost total contact, loyalty and connection or sense of responsibility to their communities.
While public reports from banks indicate record profits, many insiders, including board members of major banks, and banking experts from throughout the nation have been a source of rumors, whispers, and alarming reports that some of the largest banking giants in the USA may be in financial trouble, and some on the verge of failure. These institutions diversified aggressively into Wall Street investments, and the game of new instruments of large investment pooling. Much of that industry is suspect and major European banks are hinting that substantial legal actions against America’s largest banking houses, brought by Europe’s largest banks may occur, because
- Of the corruption and poor documentation
- Poor investment quality, that reflects upon management and board leadership
- Abnormal default rates among the largest banks of the USA.
- Furthermore, legal rulings showing that some banks were hiring agents to sign as many as 2000 foreclosure legal “review of documentation” papers per day, when in fact no one actually knew what was in these foreclosure documents
That practice and disclosure has caused a freeze by courts of foreclosure activities of America’s largest banks. Ultimately, the banks may have to absorb huge losses, reducing their capital even more. Plus fraud of the ACH system, in massive and record numbers and abuses in the Credit Card industry, which is still raping consumers with 29%+ interest rates, has brought about a record number of customers who are opting out of the “credit system” and letting the credit card companies eat the losses. The policies of “Big Banking” and “Big Credit Card” business, are in turn is causing record bankruptcies, which is putting even greater pressure on the very same big banks, that helped create the problems.
Our outlook. Some of the largest big banks in America will fail. If this happens, perhaps they will spin off their assets to smaller local banks. Wells Fargo has already indicated that it will be closing many of it’s banks and branches and many Wells Fargo people are quietly and desperately seeking new employment. This is sad, because we know some good bankers with Wells Fargo.
Recently we did a national survey and found that approximately 25% of the financial institutions scattered around the USA have been quietly closed in the last 18 months. That is a huge disclosure, and suggests that the community bankers were right all along when they suggested that the national interstate banking system, was “flooding” local communities with banks, hoping to gain control of the market. Interesting that most of the closings have been from the “Big Boys”, because the locally owned community banks, were simply better managed, and more responsive to community banking needs.
We have noted that agricultural banks, that loaned money to local customers and who gained the trust and loyalty of their local markets are stronger than ever. Perhaps the community banks will become the center of America’s economic recovery and a foundation for economic stability after a desperate fight for survival in light of the monopolization and concentrations of the past 25 years that they have had to deal with. Ben Boothe recently was featured in the Fort Worth Star Telegram for his question: “Where have all the bankers gone?” His article about community banking and the fiduciary responsibility that banks should have to their communities, created a huge outpouring of response from readers in the Southwestern USA. (see article on banking at this link: (third or 4th article). http://www.bootheglobalperspectives.com/
Our advice to you. If your banks have taken federal loans and assistance, and if your banks do not give you personal service, and if your banker will not entertain your credit and banking needs, you need to find a good locally owned community bank that has good management and good capital. Get off of the sinking ship.
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Saneh T. Boothe, came to the USA from Iran. She noticed that women around the world are often forced to wear a veil or head covering, or risk beatings, jail, even worse. She has stood up for logic, common sense, intelligent thinking and women’s rights ever since. She became an American Citizen and believes her contribution to the USA for our freedoms here is to encourage better concepts of food production, to save water, energy, and lower food costs. You need to get on board this train and encourage this concept for your community, your business. Create a “community garden” for your employees or senior citizens. Teach your young people how to plant and grow. This is a winner in every way. See: Cornucopia Enterprises, or Cornucopia Greenhouses at: Greenhouses, New Mexico
And by the way, invite her to speak to your group. She will make them better citizens, better Americans and help your people to appreciate our nation and our way of life. Call: 800 583 6655
Give us a call sometime: Boothe & Associates, 9800 Verna Tr , N. Fort Worth, TX 76108 817-738-9595 , or 800 583 6655 or 505-454-1823