Tag Archives: economic problems

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Retail Overview: Big Boxes, Big Decisions

 

As a building owner of a vacant big box (or perhaps soon-to-be-vacant), there are a lot of factors that affect the return on your investment and the success of your asset.

From our experience in working with owners as they analyze their asset, we have found that one common denominator applies to every situation — the owner must be armed with specific market information so that they can make educated decisions.

Market intelligence or market analytics play a key role in nearly every building sale or lease. While it is important to know the vacancy rate in the market, it is even more important to drill down to specifics about your product type and market area.

Following are some questions you can ask yourself about your building or asset:

>> How many vacant big boxes are in the immediate trade area (what is my competition)?

>> Are the big boxes of the same product type? Neighborhood, vs. power center, vs. anchored, vs. unanchored?

>>  What is the average length of time these boxes are on the market before they lease or sell?

>> What deals have been completed recently which are similar? What was the rental rate, or concessions such as free rent or TI dollars?

>> Who would be the typical tenants to lease or buy the space? Are they already in the area?

>> Will the other tenants in my shopping center be able to stay open if the anchor space is vacant? If so, for how long?

Chances are you do not know all of these answers, or even know where you can get this information. However, we believe that these answers are critical to a successful outcome for your asset. Whether you want to lease and hold it as an investment, or whether you want to sell it as is, the information you gather to make that decision is critical.

Velocity Retail Group has allocated significant resources over the past two years to create a structured research vehicle aimed specifically at big box owners. We have drilled down to specific product types within cities, market areas and regional areas. Additionally, understanding absorption, vacancy and new construction are critical factors to any real estate decision.

Over the past year, we have been asked to present our information to various economic, industry and governmental groups throughout the Valley. The feedback we receive from these presentations has been extremely positive. In order to help share this information in a format that communicates the analytics succinctly we have created a video podcast series for our clients.

Click on the video at the bottom of this article to watch the eight-minute market overview recapping 2012.

Dave Cheatham is Managing Principal of Velocity Retail Group. He is an authority on retail real estate in the disciplines of brokerage, project leasing, development, consulting and advisory services. He is a senior advisor to merchants, entrepreneurs, investors and senior retail executives throughout the industry.

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68-Unit Apartment Community in Mesa Sells for $4M

 

 

Cassidy Turley completed the sale of Country Club Greens, a 68-unit apartment community on 2.4 acres at 350 W. 13th Place in Mesa for $4M.

The buyer was Clear Sky Capital CCG L.P. of  Phoenix and the seller was California Bank & Trust. Executive Vice Presidents David Fogler and Steven Nicoluzakis with Cassidy Turley Arizona’s Multi-Family Group brokered the transaction.

Built in 1986, the property has nine one bed/one bath and 59 two bed/two bath fully remodeled rental units that include new energy efficient appliances and upgraded kitchen and bathroom cabinets.

The complex also has a swimming pool and spa and on-site leasing office. Country Club Greens is located one mile south of the Loop 202 on Country Club.

In other news, Cassidy Turley completed a 2,800 SF lease for Voxpop, the shopper marketing radio network, at 2141 E. Camelback Rd.. Justin Himelstein and Jason France with Cassidy Turley Arizona’s Office Tenant Representation group represented Voxpop.

The marketing company relocated from an office at University and 35th St. to the Camelback Corridor submarket. Judith Tucker with Camroad Properties represented the landlord, Two Corners Financial Group, LLC.

Voxpop began in 2003 in Mexico and is the largest in-store marketing radio network reaching more than 40M people in more than 1,800 stores. In 2009 the company expanded its operations in the U.S.

The company currently has partnerships with retailers in Arizona, Texas and California, including Arizona-based Bashas’, AJ’s Fine Foods and Food City locations. Voxpop is a strategic messaging company that started by providing background music for stores and grew into providing targeted advertising and marketing messages for grocery customers.

The client list includes national companies such as Nestle, Coca-Cola, Tyson, General Mills and Kraft.

Roy Vallee, Chairman & CEO of Avnet - AZ Business Magazine Jan/Feb 2011

CEO Series: Roy Vallee

Long-time member talks technology, dealing with global economic problems, adapting to the changing world of technology, and more.

Roy Vallee
Title: Chairman and CEO
Company: Avnet

How you would you assess the current state of your industry?
Things are going pretty well for technology. Calendar 2010 will be a very good year by historical standards for our electronics business and our IT business. And in 2011, I would say things are going to normalize and grow at the secular growth rate for the industries. For us that’s good news because secular growth is kind of 1-1/2 to 2 times overall economic growth, so things are pretty good in technology.

You had a great first quarter. What do you think that portends for the economy in 2011?
Well, I’m not 100 percent sure, of course, but I think a couple of things are clear. Technology is leading this recovery. We’re growing a lot faster than the overall economy, certainly certain segments of the economy. So, I’m very pleased about that. And I think it also does indicate that we are at least in the early stages of a macro-economic recovery, even if it’s a gradual one … and hopefully that cyclical recovery will continue through 2011 and beyond.

Could this improvement possibly be a blip?
I think from an IT spending perspective that the possibility of it being a blip is there, but let’s maybe define blip. … Corporate psychology is such that it’s ready to invest in IT projects after it’s done swapping out the old hardware. I would also like to point out, though, that a significant part of our business is electronic components and a portion of those find their way into a variety of consumer goods, and that part of our business is quite strong, as well. So it’s not just corporate spending that’s driving our growth.

How is Avnet dealing with the various Global economic problems?
We deal in a variety of markets. Some of them are actually quite exciting right now; obviously places like China, India, Brazil, other parts of Asia Pacific, parts of Eastern Europe. There are parts of our business growing very rapidly these days. So the way we deal with that is we gear up and try to support the market that is there. In the areas where the developed countries have been hard-hit by the economic downturn and credit crunch, we simply dial the resources down. … we basically size our business to the amount of opportunity that exists on a local level.

In December, Avnet celebrated 50 years on the New York Stock Exchange. What do you think that says about your company?
It says a lot of things. First and foremost, adaptability: there have been a lot of economic cycles, there’s been changes in technology, there’s been changes in our industry structure at the fundamental value proposition of distributors like Avnet; there’s been globalization. So, the company being (on the NYSE) 50 years says we’re highly adaptable as an organization. … I think another thing it speaks to … is what I would call financial conservatism or fiscal discipline. And I think the third thing … is the culture. We’ve got a culture that is very grounded in our core values.

    Vital Stats



  • Joined Avnet in 1977
  • Appointed president of Hamilton/Avnet Computer in 1989
  • Elected to Avnet’s board of directors in 1991
  • In July 1998, he was elected chairman of the board and chief executive officer
  • Named to the Twelfth District Economic Advisory Council for the Federal Reserve Bank of San Francisco in 2010
  • Member of the Arizona Commerce Authority board of directors
  • Member of the boards of directors for Teradyne and Synopsys
  • Inductee of the CRN Industry Hall of Fame
  • Participates in Greater Phoenix Leadership

Arizona Business Magazine Jan/Feb 2011

Dark Days: Recession in Arizona

The Recession In Arizona And The Nation Could Drag On For Another Year

Winters in Arizona may be sunnier than other places, but the economy in the Grand Canyon State has cooled faster than almost every state. Analysts expect 2009 to bring even more bad economic news, and it is likely that the monthly reports on job growth and unemployment will be downright chilling for some time to come.

As in all downturns in the past 50 years, Arizona’s economy will track the national business cycle. There are no forces inherent in the makeup of the state’s economy that would propel Arizona into an independent turnaround. Arizona will recover at approximately the same time as the country as a whole.

And, entering 2009, a rebound for the national economy is nowhere in sight. The National Bureau of Economic Research recently decreed that we have been in recession since the end of 2007. Now that a start date has been identified, it is only natural to wonder how long recessions typically last. The answer is that the average post-World War II recession has been 10 months from peak to trough. This information is perhaps useful for trivia buffs, but in the current environment, the 10-month average is not much of a guideline. This recession has already persisted past 10 months, and may be well on its way to setting a post-war record for length. The recession will certainly be 18 months at a minimum, and could persist for as long as 24 months. Or more.

The list of economic problems facing the country and Arizona continues to grow. Until recently, exports and non-residential building were actually expanding at a double-digit pace, keeping the Gross Domestic Product growth figures in the positive region. As the global economy slows, exports will decrease, probably early in 2009. Arizona has important manufacturing exports, especially in high technology, that will be affected.

Non-residential building (commercial, office, and warehousing) will grind to a halt in 2009 as current projects are completed. When the economy is losing jobs and sales are falling, there is no need for additional offices, retail space or warehouses.

During the first half of 2008, consumers in Arizona and the nation continued to spend, and that bolstered growth. New unemployment claims were mounting during this period, but conditions would have been worse if consumers were not contributing to the economy. The credit crunch hit in the second half of 2008. Combined with a chaotic stock market and continually falling home values, consumer willingness — and ability — to spend hit the breaking point. Arizona retail sales were down sharply in 2008, with auto sales and restaurant and bar sales both off by 25 percent. Consumer spending is expected to fall more during the early months of 2009.

Compared to other states, Arizona’s labor markets are in the deep freeze. Employment in the state is down by more than 75,000 jobs compared to last year at this time. Arizona is just one of 37 states now losing jobs, but conditions are worse here. Arizona ranks 49th among all states in job growth. Only Rhode Island is losing jobs more rapidly. Unemployment rates nationally and in Arizona are destined to increase into the 7 percent or possibly 8 percent range before recovery begins.

And recovery will come, as it always does in business cycles, although this one will be deeper and longer than has been seen since the 1930s. Housing inventory will eventually be worked off, and foreclosures will begin to slow. Home prices will stabilize. The nation adds three million new residents per year, and the pent-up demand created by family formation and population growth will start to translate into new sales.

Arizona benefits from high levels of domestic migration. Even if migration slows temporarily in the down period, the basic attractions of Arizona remain powerful in the longer term.

One of these attractions for many decades has been affordable housing. During the housing boom, home prices in Phoenix increased faster than in many peer metropolitan areas, and Phoenix became less competitive to relocators. Although falling values have caused dismay to Arizona home owners, the resulting new lower prices actually create an environment for ultimate growth.

The table shows housing affordability as measured by the National Association of Homebuilders. Higher numbers indicate housing is more affordable. At the end of the previous recession (third quarter of 2001) Phoenix had an affordability value of 70, which means 70 percent of homes were affordable to families at the median Phoenix income. Phoenix housing was more affordable than the nation and the peer metro areas shown. Two years later, at the peak of the boom, Phoenix was less affordable than Denver, Riverside, Calif., and the nation as a whole. But the most recent values, for third quarter 2008, show Phoenix affordability up by 75 percent over the 2005 figure, and more affordable than the other metro areasandthe nation. The Phoenix housing advantage has been restored.

There is one final optimistic observation to be made, one which is familiar to Arizona economy-watchers. When recovery does begin, Arizona invariably rebounds much stronger than the nation, and more vigorously than most other states. What analysts are still debating is whether this rebound will come in 2009 or is delayed until early in 2010.