National Trends on Retail Space - OKCREview

Vacancy rates remain high, but indicators show consumer recovery is sustainable according to OKCREview.com: "In retail, the holiday shopping season trends were positive even though not significantly evident in increased shopping center occupancy. Year-over-year growth in core retail sales has been steadily improving since May and growth was above 6% as of November—a good indicator that the consumer recovery is sustainable.

With the exception of 10 markets, retail markets are generally recording double-digit availability rates. San Francisco, New York City, Oakland, Long Island and Miami are among those maintaining the lowest (and single-digit) availability rates. Twenty markets saw improvement in availability rates compared to last quarter (another six were flat); of these, eight also recorded declines compared to one year ago (Columbus, Boston, Long Island, Atlanta, Oakland, Miami, Baltimore and Washington DC)."

No Double-Dip?

The emerging consensus seems to be that there will be no double-dip recession. Slow growth (very slow, apparently) will define the US economy for some time, so it's too early to break out the champagne. It will be a while before jobs are back, but things aren't going to be as bad as some folks thought not that long ago.

Some points in the consensus:

Colin Dyer, CEO, Jones Lange LaSalle
"We don't expect a double dip," CEO Colin Dyer told reporters in Asia on Friday. "Our sense is that the corporate clients that we deal with are liquid, they have amassed a lot of money, they are looking for ways to invest.”
http://www.realtor.org/RMODaily.nsf/pages/News2010091002?OpenDocument

Jean-Claude Trichet, President, European Central Bank
"I've already said on many occasions that I didn't foresee a double dip in Europe, and the latest results confirm it," Trichet told the French daily Le Figaro. http://www.automatedtrader.net/real-time-news/55575/ecb-trichet-strong-2q-confirms-no-double-dip-press

Guy Quaden ,Member of Governing Council, European Central Bank
"Euphoria is premature, but optimism about the economy is legitimate," De Tijd quoted the governor of the central bank saying. "We start from a positive, albeit weak, growth in the coming quarters. A double dip in Europe is unlikely. In any case, even less (likely) than in the United States," he continued. http://www.forexyard.com/en/news/UDPATE-1-ECBs-Quaden-sees-no-double-dip-in-Europe-2010-09-07T184152Z

Jeff Saut, Chief Investment Strategist, Raymond James & Associates
“You’re going to get slow economic growth, but no double dip,” Jeff Saut, who helps oversee about $235 billion as the chief investment strategist at Raymond James & Associates, speaking from St. Petersburg, told Bloomberg Television’s Susan Li. “There’s not a whole lot of downside” for stocks, he said. http://www.businessweek.com/news/2010-09-09/emerging-stocks-climb-for-first-time-in-3-days-on-economy-oil.html

Frank Nothaft, Chief Economist, Freddie Mac
Frank Nothaft, chief economist for mortgage investor Freddie Mac, sees what he calls "a very steady, quarter to quarter growth" pattern ahead, with no "double-dip" mini-recession hurting real estate, and only minor increases in interest rates.http://realtytimes.com/rtpages/20100322_realestateoutlook.htm

Legislation Proposes Federal Guarantees for Commercial Real Estate Loans

According to a report by Jessica Holzer of Dow Jones Newswires (as published here on NASDAQ.com), Rep. Walt Minnick (D., Idaho) expected to introduce a measure last Thursday with co-sponsors from both parties, while three senators were working on companion legislation in the upper chamber that would authorize the U.S. Treasury to provide as much as $15 billion to $25 billion in guarantees on new loans to the sector.

This would be welcome news for those who are anxious about the commercial real estate market.

Wasn't commercial real estate supposed to crash?

There seem to be two views on the economic horizon: 1) Things are going to get much worse; 2)Things are not going to get much worse.



New York Times Op-Ed Columnist Ross Douthat summarizes then dismisses the prevailing, former view well in a recent column (7/7/10 as published in Chattanooga Times Free Press.) Titled "The Pessimism Bubble and the Economy". His observation that " the Pew Research Center found that less than half of Americans expect that their children will enjoy a higher standard of living than their own" brings to the mind of anyone who lived through it similar comments during the last days of the Carter administration. Douthat observes this and other similarities between the current economic environment and that from the Carter era, and era punctuated by Carter's “malaise speech”, but followed by one of the longest periods of sustained growth in American history. Douthat concludes by labelling his column a "pep talk".

Financial News USA gives some credence to the latter view and more than a pep talk in an article Wasn't commercial real estate supposed to crash? - Financial News USA. The article cites voices that contradict the dire outlook from last spring's report from a Congressional Oversight Panel, which predicted -without qualification - that the commercial real estate market would crash in much the same way the residential market did, taking with it a number of small banks, the small-business credit markets, and indeed the entire US economy.

Markets have a way of absorbing dire long-term predictions, and the Financial News article analyzes how some of that absorbtion is taking place, and perhaps proving the Congressional Oversight Panel wrong.

Commercial mortgage lending beginning to "thaw"

Jim Collins with First Southern Mortgage, an independent commercial and investment mortgage banking firm, reports indications that life companies will begin lending again in 2009. As he put it, "Allocations will be below record 2007 levels, but at least the spigot is dripping again."

Collins says that the prevailing sentiment is that lenders will target high quality, conservative deals, looking for "good investments and not just to make loans." He marks it as the beginning of the "thaw" with money starting to flow.

Life companies have been hoarding cash in an effort to bolster their balance sheets and stave off acquisition, but that approach does not fit their basic business model. Their fundamental business requires that they invest money, and a big segment of that investment is commercial mortgages. The threat has not passed entirely, but some acquisition stability and the need to return to their basic business model has begun the thaw.

There are many opportunities to purchase investment property in the Chattanooga area. Owning real estate is a great way to invest in the local economy. Contact Benjamin Pitts today for more information.

Chattanooga wages outpace Chattanoooga inflation

According to a report by Dave Flessner in the Chattanooga Times-Free Press, wage gains for most Chattanooga workers stayed ahead of inflation last year. The article cites government figures from the U.S. Bureau of Economic Analysis which reported Monday that wages and benefits paid to the typical Chattanooga worker rose 3.7 percent during 2007 while consumer prices, on average, rose 2.6 percent.

Interestingly, the article in the paper included a more positive headline: "Area wages beat inflation for now." As it appeared online, the article had a negative title: "Chattanooga: Economy to pinch pocketbooks." Online, the headline mentions nothing about the positive news from the government report. The online headline touts only the follow-up point that the good might not last. In classic style, article emphasizes the cloud that the silver lining. The format for such reporting has become trite. "Good news, but there's bad news behind it."

Similarly, article emphasizes that Chattanooga wages trail the national average: "Despite the wage gain, however, Chattanooga’s average pay of $36,077 was 17.8 percent less than the U.S. average of $43,889 last year." The article also emphasizes that Chattanooga pay trails that of Atlanta, Huntsville, Nashville, Memphis and Knoxville.

What the article fails to point out is that Chattanooga's cost of living is also less than the US average by about the same percentage, and that Chattanooga cost of living is less than Atlanta, Huntsville, Nashville and Knoxville, and comparable to Memphis. According to data accumulated by AOL Real Estate, Chattanooga's cost of living is 82.5% of the nation's cost of living, or about 17.5% less than the US average. The cost of living for the other cities: Atlanta, 103.8%; Huntsville, 87.7%; Nashville, 89.5%; and Knoxville, 87.2%. Only Memphis at 81.2% has a lower cost than Chattanooga among those cities that the article sites as those which Chattanooga trails.

The article does note that Chattanooga’s wage shortfall may diminish as higher-paying manufacturers move into the region. Such manufacturers include Volkswagen of America, Alstom Power and other automotive and nuclear-power producers. The article quotes Mayor Ron Littlefield: “We’re certainly not immune to the recession, but Chattanooga should fare better than most communities.”

Chattanooga's prospects for beating the recession quicker than other parts of the country make Chattanooga real estate a great place to look for good real estate investments.

Pictures of the car VW will produce in Chattanooga

Car and Driver has pictures of the "mule" which, according to its report, represent the car that Volkwagen will produce in Chattanooga. The article analyzes some of the strategic points behind VW's Chattanooga plan. Chattanoogans should take comfort in some of the analysis, as it seems less dependent on demand for a single model, and more a part of VWs plans to gain market share against the Honda, Toyota, and Nissan.

VW's manufacturing site in Chattanooga is just east of downtown.

Click on the picture in the article to see more photos.

Pilgrim's Pride Files for Bankruptcy

According to the Chattanoogan.com, Pilgrim’s Pride Corporation, which has a plant in Chattanooga, voluntarily filed for relief under Chapter 11 of the U.S. Bankruptcy Code on Monday. Company officials said that does not mean that plants will close.

Opinion

No one wants the plant to close. The job loss would be too great. However, few would mind if the plant moved. It is at the southern edge of the central business district of Chattanooga in an area that has great potential, both in terms of residential and commercial development.

Aerial Views from Microsoft Live

• North
  
• East
• South
• West

Aerial View from Google
Street View from Google

For more information about commercial real estate in Chattanooga, contact Benjamin Pitts.

What's an auto job worth?

Peter Luke almost asks a good question, and almost answers the question he asks. But his question and his answer are fatally incomplete in several respects. His logic is not fatally flawed; it is entirely absent.

Mr. Luke authors the Michigan Political Report, a blog on mLive.com, a site about “everything Michigan.” Mr. Luke asks, “What's an auto job worth?”

What's an auto job worth?

In Tennessee, where officials offered Volkswagen an incentive package worth $577 million to build a 2,000-worker assembly plant near Chattanooga, each job is worth about $285,000.

Translate that to the 235,000 workers employed by GM, Ford and Chrysler and the total worth of those jobs nears $70 billion. So $25 billion in federal bridge loans would seem like a relative bargain to avert bankruptcy that auto experts say would wreck the industry.

States have been providing expensive financial help to car companies for years so opposition by southern members of Congress to federal help for the domestic industry is more than inconsistent.

U.S. Rep. Zach Wamp, a Republican from Tennessee, said last week that the Detroit Three had to learn its lesson "the hard way." But hailing Volkswagen's announcement, Wamp said back in July that it was his region's "destiny" to make "the vehicles of the future."

There are several problems with Mr. Luke’s question and the four paragraphs that follow. First, local and state tax incentives cannot be compared logically to a federal loan. Second, the federal “bridge loan” to the Detroit 3 appears to be a bridge only to the next loan. Third, executives from the Detroit 3 have thus far been unable to say what they would do with the government funds. Fourth, the Volkswagen incentives include tax credits spread out over 3 decades, and infrastructure improvements with benefits lasting several years to decades, while the federal funds would get the Detroit 3 to the next quarter. Fifth, Volkswagen is profitable and its stock value is strong while the Detroit 3 are unprofitable and out of cash with near worthless stock.

Local and State Tax Incentives

An analysis by the University of Tennessee Center for Business and Economic Research (page 8) included the sources for the $577.4 Million came, and reported that it came from various city, county, and state tax breaks, infrastructure improvements, job training, and direct incentives. Apparently, none of the $577 Million came from the federal government. The Detroit 3 are not asking for state and local funds. They are asking the federal government to fund their solution. Yet Mr. Luke criticizes Wamp’s opposition to federal money for Detroit by pointing Wamp’s implicit support for state and local money for Volkswagen.

The Chattanooga Times-Free Press indicated Sunday that the federal government is providing $24 Million in direct incentives to the Volkswagen package. (The TFP’s article states that the $24 Million is included in the $577 Million, but the summary of state and local incentives in the UT-CBER report, as well as other articles from the TFP would indicate that this statement is incorrect.) If Mr. Luke did his algebra correctly by applying the $24 Million in federal funds, he might justify Detroit 3 asking the federal government for $2.8 Billion, but at almost 10-times that amount, the $25 Billion is not the bargain he claims.

Mr. Luke asserts that because states have been providing financial help for the auto industry, it is “more than inconsistent” for southern members of Congress to oppose federal funding for the auto industry. To perceived inconsistency is to fail (or refuse) to understand the difference between state government and the federal government. Just because state governments have doesn’t mean the federal government should.

Mr. Luke says, “Michigan would have given Ford hundreds of millions in tax breaks to build the cars that are the foundation of that company's destiny right here instead of Mexico.” But he offers no explanation as to why Michigan did not give incentives like Tennessee did. He notes that the Ford plant in Wixom Michigan “awaits the wrecking ball”, while Ford invests $3 Billion dollars and creates 30,000 direct and indirect jobs in Mexico. On the basis of total jobs created, Michigan and Detroit should have invested $1.443 Billion in incentives to Ford to match the state and local incentives from Tennessee and Chattanooga to Volkswagen.

“Bridge” Loans, Plans, and Payout

“Bridge loan” typically refers to a loan that keeps a business above water for a short time until additional investment or sales allow profitable repayment of the loan. The loan provides a bridge until an anticipated investment or profits eliminate the need for that debt. From testimony before the US Senate by the top executives from GM, Ford, and Chrysler, one could only conclude that the “bridge loan” would only keep the Detroit 3 above water until the next loan. When questioned about whether the Detroit 3 would be back for more money, the executives would not and could not offer any denial, indicating that they expected to be back for more, later.

Further, the Detroit 3 were unable at the last hearing to tell the Senators what they would do with the money if they got it. Supposedly, they wanted a blank check. Volkswagen got no blank check. The sources and uses of the funds – job training, infrastructure improvements, and job tax credits – and the benefits they were estimated to pay back were clear. For example, VW is investing $1 Billion in its plant. Much of that money will make its way directly into the local and state economy through grading and construction contracts. The Detroit 3 apparently want a gift.

Finally, the tax breaks offered by local and state governments to Volkswagen are spread out over the next 30 years. Similarly, the local infrastructure improvements would carry forward for decades, and benefit any manufacturer that locates in the same industrial park as Volkswagen, even if Volkswagen leaves. Spreading tax credits over a thirty-year period and offering infrastructure improvements to Volkswagen is nothing like a loan to the Detroit 3 to cover operating expenses. The Detroit 3 cannot even say that the funds they seek will create a benefit beyond the next few months, except to say that they hope, without knowing how, that the federal funds will keep them from failing, or at least defer failure.

Conclusion

Do not misunderstand this response: the Detroit 3 are not necessarily the problem. Chattanooga and Tennessee would likely have been just as happy to land the Ford plant and its 30,000 direct and indirect jobs. (The Volkwagen plant is projected to create between 11,000 and 12,000 direct and indirect jobs.) Why didn’t Ford look in Tennessee? or in Michigan? Why is it that Volkswagen can put a plant in the US but Ford can’t? The answer has little to do with state and local incentives, or even federally funded “bridge loans”.

Mr. Luke may ultimately be right that the federal government should offer bridge loans to the Detroit 3. But even conceding that, Mr. Luke is wrong when he asserts that it is inconsistent to support state funding while opposing federal funding. 

Volkswagen Leases 30,000 SF in Downtown Chattanooga

According to a number of news outlets, Volkswagen Group of America has leased space in downtown Chattanoga. WTVC reports that VWGA announced today that it has signed a lease for approximately 30,000 square feet of office space at Chestnut Tower in downtown Chattanooga. The space will be used for the plant leadership, purchasing and other administrative support functions. Volkswagen will retain its office space on Discovery Drive, which will be reoriented to support positions more directly related to plant construction.

Other reports:
Chattanooga Times-Free Press
WDEF
The Chattanoogan

Chestnut Tower
Google Maps
Streetview Google Maps
Microsoft Maps Live
Microsoft Maps Live Birds Eye Aerial

Arts and Culture as an Economic Development Strategy

Earlier this week, the Michigan Municipal League in partnership with the Department of History, Arts, and Libraries (HAL) at the Detroit Area Library held a training seminar titled “Arts and Culture as an Economic Development Strategy” featuring keynote speaker Robert McNulty, the founder and president of Partners for Livable Communities.

McNulty used Pittsburgh, Pennsylvania and Chattanooga, Tennessee as examples of what happens to a community when money is invested in cultural activities. Both cities were turned around positively through the investment of capital, leadership, innovation, and hard work. He noted that culture and the arts are assets to help achieve the goals of a livable community, and libraries can assist because of their unique ability to change according to community needs.

For the complete story, check the Detroit Area Library Network site.

Crye-Leike scraps plans for office building in Huntsville, AL, acquires agency in Fayetteville, TN

According to the Huntsville Times, Crye-Leike Realtors has scrapped plans to construct a three-story office building on the former Copeland's restaurant site, blaming the economic downturn.
The property is now offered at $1.85 Million.

According to the article, written by Steve Byers, company spokesman Mike Machak estimated that Crye-Leike sales are off about 30 percent so far this year. The company reported 2007 sales of $5.7 billion.

The article also reports from Machak that the company recently acquired Farm and Home Real Estate in Fayetteville, Tennessee, and plans to convert the 14-agent firm into a Crye-Leike office by Dec. 1.

UPDATE 11/14/08: 

If you desire representation in considering a purchase of the the former Copeland's restaurant site, contact Herman Walldorf & Co., Inc., 

or you may contact the owner directly:

Rob Hatchett

Regional Vice-President

Crye-Leike

Office: 423-892-1515

rob.hatchett@crye-leike.com

For information about restaurant sites in the Chattanooga area, follow this link.

Chattanooga: Planners OK downtown theater plans

Jason Reynolds, reports for the Chattanooga Times Free Press that Regional planners on Monday approved rezoning plans for the downtown Chattanooga movie theater that will replace the Bijou, though not without questioning the readiness of the design. The new 12-screen Carmike Cinemas will be at Broad and Third Streets. The back of the theater, with emergency exit ramps, will face the Creative Discovery Museum, on Chestnut Street.

For the complete story, click here. For information about Chattanooga retail space, click here.

Summit and Bridgescale Buy VIPGift

VIPGift, LLC, a leading provider of corporate and consumer incentive programs and prepaid card solutions to clients across the United States, announced today that it has received a majority investment from Summit Partners, a private equity and venture capital firm that has raised more than $11 billion since inception, and Bridgescale Partners, a late-stage venture capital and private equity firm.

“Summit Partners targets privately held companies — such as VIPGift — that have bootstrapped their businesses to profitability and established leadership positions in their industry. VIPGift’s brand equity and reputation for great customer service is second to none in the incentive industry. We are pleased to partner with VIPGift and help the company to continue extending this leadership position,” said J.J. Kardwell, a Principal with Summit Partners.

“Bridgescale Partners invests in category leading private companies in rapidly growing markets. VIPGift is the leader in the fastest growing segment of the prepaid market, with a strong track record of product innovation and customer service,” said Rob Chaplinsky, a Managing Director with Bridgescale Partners.

Press release

Miscellaneous

New Details on the Volkswagen that Chattanooga Will Build

WDEF-TV

VW pushes unveiling of concept car from LA Auto Show ths month to Detroit Auto Show in January amidst contradictory reports about the car's platform

Motor Trend

Fannie Mae home inventory from foreclosures equal to owning all homes in Chattanooga

Reuters

Nathan Lindley To Operate New Restaurant At Warehouse Row

The Chattanoogan.

NOTE: Lindley was co-founder of the St. John's Restaurant.

For information about Chattanooga Commercial Real Estate follow this link.