As the haunting sound of the Vuvuzela becomes a distant memory, is this the calm before the storm? Is a breakup of the Eurozone looming on the horizon?

Well, on the one hand yes and the other no, that is if you are to believe either of two authoritative reports published over the last week. Christopher Smallwood of Capital Economics argues the case for the breakup arguing it would be hugely liberating for Europe, fostering faster growth. Allowing   its weakest members, the PIGs (Portugal, Ireland, Italy, Greece and Spain) "to be able to grow more vigorously again as exchange rate movements restored their competitive edge." The alternative he argues is "many years, perhaps decades, of depression and deflation."

On the other hand Mark Cliffe at ING Financial Markets argues that the consequences of the disintegration of the Euro would make the collapse of Lehman Brothers look like a tea party.

Who to believe? As ever there is substance in both points of view and certainly there seems to be a greater than evens prospect of one or more countries leaving the Euro over the next three years as countries continue to struggle with debt burdens and decreasing output.

What does this mean for property? Well who knows. As we drift into the European summer what is clear is that the smart money will continue to chase prime  AAA rated product in world financial centres where prime buildings are in short supply, continuing to push up rents and drive down yields. Whilst in the more financially "unstable" countries the market will continue to bump along the bottom.

Time to pick up that bucket and spade and contemplate a fine summer and let the future take care of itself.

-Paul Danks

Based in London, Paul Danks is NAI Global’s Senior Vice President of Corporate Services working with clients across Europe, the Middle East and Africa.

Either some of the credit rating people are utilising one of Bolivia’s more controversial agricultural byproducts or I do not fully understand how credit rating truly functions. Bolivia, led by a far-left, bitter, anti-capitalism President, just received an upgrade in its credit rating from B- to B with the added recommendation of a positive outlook. Hellooo!? Have you heard of ALBA? Are you aware of what is happening in Venezuela, Bolivia’s economic and political soul mate? I do not think that the folks at S&P are paying attention to current events; President Evo Morales has nationalised the hydrocarbons sector, the country’s telephone company and is threatening (promising?) to wrest other companies and “strategic” sectors from the hands of those evil, conspiring free marketers that attract investment and create jobs. Talk about counter-intuitive logic.

To be fair, here is what S&P analyst Richard Francis said provoked his thoughtful response, “The upgrade reflects the continued sharp movement in Bolivia’s external indicators because of current account surpluses, rising international reserves, declining external debt and improved fiscal performance over the past four years.” Great. OK, enough of being fair. My response is that Mr. Francis is ignoring some other very important factors and is stretching to make Viagra out of Coca leaf. Let’s start with the declining debt. This was partly due to debt forgiveness since Bolivia is one of South America’s poorest countries. Additionally, its GDP (3.4% growth in 2009 and predicted to be 4% in 2010) was and is driven largely by mining investments and the export of raw materials such as metals and minerals. For its sources of revenue, it has a very narrow band of products and almost no manufacturing base for export. And that little glory will last only as long as there is demand for the few raw materials they can offer and or when President Morales begins to micro- and macro-manage the entire economy, just as his compadre in Venezuela is doing. On the international markets, Bolivia could not even issue debt and was relegated to doing so only in-country. As for the debt that they already had, that was set to mature in 2005 (the year Morales become President); the maturity date was recast as far out as 30 years. For many of the debt holders they won’t even be alive when the payout comes, if it comes. And if they wish to receive the cash sooner, then they will have to convince some other sucker to buy the bonds, but no doubt, at a deep discount. (Hey, that is the kind of investment I like; masochistic. Take my money and kick me in the butt.) Combine this with the fact that President Morales states that he is targeting energy companies for intervention - following in the footsteps of his best bud and fellow Marxist party animal Hugo Chavez, President of Venezuela, which country attracted -3% in FDI last year (the lowest in the region) and is experiencing inflation at 35% - those poor Bolivians are looking at a Pot truly Pourri. This is like setting up a reverse set of dominoes; all falling backwards.

But, then again, perhaps I do not understand how credit rating functions... No.

-David Berger

Based in Miami, David Berger is Managing Director for Latin America & The Caribbean region at NAI Global.

Los Angeles developers have unveiled plans for 900 new multifamily units, some already under construction, indicating that multifamily building has remained strong while other sectors have stalled during the recession.

The various building projects underway in Southern California are kicking up some optimism. A 21-unit condominium project by California Landmark is the result of one of the first construction loans for multifamily developing by Wells Fargo Bank since 2008. This and other projects are also benefiting from the enthusiasm of nearly all parties eager to return to building. Subcontractors are keen on resuming work, rekindling longstanding relationships with developers and focusing their best resources on these new projects.

The largest number of units declared by a single developer is 486 by Amcal Multi-Housing Inc. Their eight separate projects will be granted $112.4 million in funding by local, federal and state agencies, as well as the American Recovery and Reinvestment Act.  The multifamily market has shown that it has maintained momentum despite the economic downturn, and the size and scope of these projects are only increasing.

With an ever increasing number of “green” commercial properties populating the national landscape, many real estate brokers are developing the expertise necessary to discuss the impact of energy efficiency with their clients.

By 2013, McGraw-Hill Construction estimates today’s overall green building market to more than double, reaching between $96 -$140 billion for residential and nonresidential buildings. Booz Allen Hamilton projects that green building will support 7.9 million U.S. jobs, and pump $554 million into the American economy from 2009-2013.

Factors that have been driving the growth of green building include a substantial increase in the level of government incentives, heightened awareness and demand for green construction, and improvements in sustainable materials.

Look for green building growth in education, government, industrial, office, healthcare, hospitality and retail sectors.

To effectively market a green building, brokers can identify how the building’s energy efficient system can benefit a prospective purchaser. If the target market is an owner-occupant for a retail or industrial building, the analysis may include a discounted cash flow analysis of potential electrical cost savings over the expected occupancy of the building. If the target market is an investor in a multi-tenanted office building, the analysis may include the concept that the occupancy rate for these properties can be expected to be higher over time, as prospective tenants would look favorably upon decreased electrical costs.

“Leadership in Energy & Environmental Design” (LEED) is a green building certification program developed by the U.S. Green Building Council (USGBC). It provides third-party verification that a building was designed and built using strategies intended to improve performance in metrics such as energy savings, water efficiency, CO2 emissions reduction, improved indoor environmental quality, and the stewardship of resources and sensitivity to their impacts.

The Green Building Certification Institute (GBCI) was established by USGBC to provide a series of exams whereby individuals become accredited for their knowledge of the LEED rating system. The two designations are the LEED Accredited Professional (LEED AP) and the LEED Green Associate (LEED GA) designation. The LEED GA certification helps to demonstrate dedication to building practices in line with green standards, but it does not obligate the holder to have direct involvement in LEED projects. This title could be useful in marketing the green expertise of professionals such as real estate brokers.

-Jonathan Fischer, MAI

Jonathan Fischer, MAI, is a Managing Director in NAI Global’s New York City office and works with investors and financial institutions as a member of NAI’s Special Asset Solutions group.

CSC Sugar to Use Facility to Refine and Produce Liquid Sugar for Food Industry

CSC Sugar has leased the Bar Mill building in the Keystone Industrial Port Complex (KIPC) in Fairless Hills, Pennsylvania. CSC Sugar will use the industrial property to import raw sugar in bulk via ship and rail, and refine the sugar into a liquid product called Sugaright that will be provided to food manufacturers as an additive in beverages, gums, candies and other foodstuffs.

The 161,000 square foot facility sits on the former US Steel mill site, and is part of the KIPC’s efforts to rehab the property for multiple heavy industrial and manufacturing use. CSC Sugar signed a five year lease on the property and the KIPC was represented by Rick Leighton, Senior Vice President of Corporate Services, NAI Global, as well as a team from local firm NAI Mertz (Jeff Licht, Adam Lashner and Fred Meyers).

The KIPC is located in Fairless Hills, Pennsylvania, along the Delaware River, with access to Routes 1, 95, 295, New Jersey and Pennsylvania Turnpikes, rail and a deepwater port.

According to news from the UN Economic Commission on Latin America and the Caribbean, FDI is roaring back into the region after last year having dropped by 42% (US$76.7 billion) over the previous year (US$131.9 billion). Investors are confident that the region is indeed healthy and rebounding where it needs to. The commission foresees an increase in FDI of between 40-50% and should surpass US$100 billion. This would be at least a 20% increase over the region’s FDI in 2009, but still below the US$131.9 billion record achieved in 2008. Although the Commission attributes the increased FDI to improved monetary policies that boost domestic demand and higher commodity prices, I attribute it also to the political and economic stability and their institutionalisation within most countries in the region, the diversification of industry within the region’s larger and some medium–sized economies (e.g. Brazil, Mexico, Chile, Colombia, Argentina, Costa Rica) and slightly improved fiscal and investment policies. If truth be told, most of the companies now increasing or beginning their investment in the region had their sights set on it even during the deepest point of the economic crisis. They could not tactically or financially divert investment funds to Latin America.

Unfortunately, the Caribbean region, hit hardest in 2009 with a 45% drop in FDI, will receive little of the 2010 FDI. As I commented in previous blogs, this region is very dependent upon tourism and hospitality. That sector has been hit hard and investment for its development and expansion are largely on hold until investors begin to see a marked recovery. We expect to see tourism begin to rebound in mid-2011.

Mexico also experienced a sharp drop in FDI - about 45% - in 2009 and is forecasted to increase by 75% in 2010, compared to last year. However, it is important to note that little of that will be directed to the resort and tourist sector. As with the Caribbean, Mexico also needs to experience a sharp increase in tourist numbers.

-David Berger

Based in Miami, David Berger is Managing Director for Latin America & The Caribbean region at NAI Global.

Lenders and servicers continue to be inundated with properties entering special servicing, expanding from multi-family housing to office, retail and other commercial assets. As we originally anticipated, 2012 will be the major year for defaults in commercial properties, especially office properties throughout the United States. Momentum has slowed as servicers are bogged with the influx of properties. 

As a result, we’re witnessing slowdowns in the workout process. A negotiation that would take three to four months is now taking five to seven months to get the same response because of the backlog. We also find that borrowers are hiring more professional workout advisers like ourselves to handle these accounts for them because they realize that representing themselves in front of a lender puts them at a great disadvantage.  They find that their attorneys can’t have the communications early on with their lender that typically need to take place, usually only speaking with the lender’s counsel  which automatically turns the process toward litigation instead of a resolution.

We’re finding that our business has become increasingly active, and the deals are growing to be more complex. A number of brokers seem to be trying to marry a buyer with an owner, when they should be focusing on contacting the banks through the owner resulting in an exclusive negotiation instead of the bank trying to control the process. When the bank assumes control, lenders will bring in multiple buyers and bidders, complicating what could have been a quick and painless transaction.

We believe as the market evolves, it will become more liquid and more refinancing proceeds will become available for clients but at a much lower reset for valuations. Price recognition also is coming to bear and a number of markets are beginning to see bottom. I believe there will never be a better opportunity to buy assets as the market begins to recover in the next two years as more loans go into default and enter into maturity.

-Larry Selevan

Lawrence Selevan is Chairman and CEO of NAI Chesterfield Capital Advisers, a joint venture with NAI Global providing borrowers with restructuring advisory services.

“The key for the real estate sector is job growth, as a recovery without jobs does not fill buildings,” Dr. Linneman noted.  “We anticipate that the next three years will continue to see average job growth of 250,000 jobs per month, for a three-year job increase of at least 9 million jobs by early 2013.”

“That is robust job growth, but it is important to remember that our forecast would leave us with almost the same number of jobs in mid-2013 as existed at the beginning of September 2008,” said Dr. Linneman. “Even with a robust recovery adding 9 million jobs over the next three years, we will still have an anemic unemployment rate of 7%. Hence, we expect a robust rebound to mediocrity.”

A Robust Rebound to Mediocrity?, NAI Global’s white paper, reviews payroll history and trends, providing an economist’s view of the recovery’s impact on the jobs market today and tomorrow.

This latest white paper follows Capital Markets Show First Signs of Recovery, Dr. Linneman’s treatise on the impact of how a rise and recovery in asset prices will lead to investors becoming more active, how capital markets will start to show recovery and the impact on the commercial real estate industry. NAI Global’s white papers and research resources are available for free download at www.naiglobal.com under Publications/Articles & White Papers.

Dr. Linneman is also Professor of Real Estate, Finance and Public Policy at the Wharton School of Business, University of Pennsylvania, and Principal, Linneman Associates.

For the first time in more than two years, office vacancy rates in Manhattan are on the decline. Vacancy rates dropped from 11.6% in the first quarter to just 10.8% at the end of the second quarter as nearly 7 million square feet of space was leased across the market.

There are still millions of square feet available, and buyers/tenants currently have the upper hand in sale/lease negotiations. With an uncertain economic recovery ahead, it is unknown if this drop in vacancy rates signals the start of the end of a difficult market, or if a double-dip recession will further delay a recovery market-wide.

With the likely demise of the Palm OS for smart phones, there remain four major robust players in the smart phone market: Blackberry, iPhone, Android and Microsoft.  And even the Palm may make a comeback if purchased by Lenovo or another offshore company.  This is incredible and a great boon to all of us with so many choices and new features and new capabilities and new colors and best of all, price competitiveness.  Holy moly and thanks to the techie gods in the Cloud for the good times we live in.

First, the iPhone continues to improve and be cool, now capturing about 28% of the market.  But storm clouds are a brewing for the control freaks at Apple as everyone else is taking aim (and make sure your thumb doesn’t cover the antenna).  And is it now true that you can actually make a phone call with the iPhone instead of it just looking cool?

Second, Android is storming onto the scene with more rapid updates than Apple can match and very cool applications open to thousands of other developers, not just those who wear the Apple jump suits.  And did I say how cool Android is across the board?

Third, there remains the Blackberry by Rim who still has 35% of the market and is now forced to compete even harder.  More power to them. Rumor has it that we will soon hear of new products to compete with the iPad?  Whoa.

Fourth, and there is the “dark” horse, Microsoft OS on the horizon with its gigantic suite of resources and developing applications in SharePoint, Office, Bing, et al.  I said dark horse, not Darth Vader.

So who ya gonna dance with?  The cute young thing with the iPhone?  The sexy new kid on the block with sporty Androids sprouting up everywhere?  The sleek experienced vixen who carries a Blackberry pad device in their briefcase?  Or just maybe the barracuda MS OS – or is it a cougar – who is ready to devour all newbies in their quest for dominance?

For real estate, the world is finally turning in our favor for technology!  Imagine our brokers equipped with iPhones (that work); Android devices that can actually read leases and search the world; Blackberries that are smart iPads that can read PDF documents; and being in a world connected through Microsoft?  All are possible in the coming brave new world of technology.

-Warren Bailey

Warren Bailey is NAI Global’s Vice President of Corporate Technology.