Archive for the ‘Development’ Category

Solar Panels Powering More U.S. Homes

Monday, March 21st, 2011

The year 2010 saw 956 megawatts worth of solar panels installed in the United States, providing a cumulative capacity of 2.6 gigawatts – enough to power 500,000 homes. Even though the Solar Energy Industries Association (SEIA) says solar is a fast-growing business, it still provides less than one percent of the nation’s electrical capacity.  In 2010, solar panels were a $6 billion business, a significant increase over the $3.6 billion reported in 2009.  Despite the growth in dollar volume, the global share of American photovoltaic installations fell in 2010, to just five percent of the world’s total from 6.5 percent in 2009.  Although demand is growing in the United States, other countries are adopting solar to the point where they are leaving the United States in the dust.

Not surprisingly, sunny California leads the nation in solar installations.  In second place was Jersey, followed by Florida, Arizona, Nevada, Colorado and Pennsylvania.  The six states accounted for 76 percent of solar capacity installed in 2010.

President Barack Obama is an enthusiastic supporter of renewable energy sources, and Congress extended their federal tax credits, originally set to expire at the end of last year, through 2011.  “This remarkable growth puts the solar industry’s goal of powering 2 million homes annually by 2015 within reach,” Rhone Resch, SEIA president and CEO, said.  According to Resch, “Achieving such amazing growth during the economic downturn shows that smart polices combined with American ingenuity adds up to a great return on investment for the public.  The bottom line is that the solar energy industry is creating tens of thousands of new American jobs each year.”

“Another doubling of U.S. installations in 2011 is likely, even in the absence of a substantial mid-year price decline,” said Shayle Kann, GTM Research’s managing director of solar research.  A Treasury Department grant program, which repays 30 percent of the cost of installing solar panels, boosted the number of projects. The price of installing photovoltaic systems fell by 10 percent for commercial and eight percent for residential consumers last year.  Other countries are cutting their subsidies this year, possibly leading to an Italy, the more suppliers are going to price more competitively in new markets, like the U.S., ultimately growing the market,” Kann said.

In addition to the United States, the leading nations that are adopting solar energy include Germany (9,785 megawatts); Spain (3,386 megawatts); Japan (2,633 megawatts); Italy (1,167 megawatts); the Czech Republic (465 megawatts); Belgium (363 megawatts); China (305 megawatts); France (272 megawatts); and India (120 megawatts).

“The Terminator” Wants to Create Green Solutions

Tuesday, March 15th, 2011

Former California Governor Arnold Schwarzenegger recently called for the end of false debate over climate science, saying that we should not assume that China will create green technologies that Americans can adopt and to admit that global warming will impact the globe in coming years. In a speech at the APRA-E Energy Innovation Summit in Washington, D.C.,  Schwarzenegger said that changing to a green economy, fixing the environment and ending the political stalemate over carbon legislation are well within the power of today’s technology.

“We want a new era of energy independence, a new era of green technology and green jobs, a new era of better health from a cleaner environment, and a new era of American inventiveness,” Schwarzenegger said.

Schwarzenegger connected the green economy of the future to the current unrest in the Mideast. He said that the overthrow of foreign dictators seemed impossible a month ago but now seems inevitable.  At the same time, he believes that defeatism about the ability of a green revolution to transform America will soon look incongruous.  The former California governor also pointed to the recent volatility in oil prices resulting from upheaval in the Middle Eastern as a clear example of why the United States needs to wean itself off foreign oil.  “Why should a dried-up desert country with a crazy dictator like Libya play havoc with America’s energy future?” Schwarzenegger asked.

Schwarzenegger pointed out that California offers a model for tech companies that can help vitalize the economy and cut greenhouse gases, while helping the country reduce its imports of oil. As governor, he signed a global-warming law that mandates reductions in greenhouse gases; California also has a renewable-energy mandate that has resulted in almost 20 percent of electricity coming from renewable sources.

He lamented the national discussion on clean energy, saying too much of it is stuck in the debate over the science of global warming.  Instead, people should focus on immediate benefits from investing in green technologies, including improved health, economic growth, consumer savings from efficiency, and reduced dependence on foreign oil.

“Think about what it means that in the Central Valley of California, one in six children has to walk around with an inhaler.  I know we can change the debate and win the debate,” he said.  “We can’t talk about global warming, because people can’t relate to that.”  Instead of creating “forward-looking policies” for energy use, elected officials are debating the science of global warming.  “There is a disconnect between what is happening and what is being debated,” Schwarzenegger concluded.

CMBS Stages a Comeback

Monday, March 14th, 2011

CMBS activity came back strongly during February with more than $6.5 billion in new securitization reported. Additionally, Freddie Mac brought two multifamily-backed offerings totaling $1.86 billion to market.  February’s level of activity is almost two-thirds of all CMBS deals offered in 2010.  The level resembles 2007, when commercial mortgage-backed securities offerings were at their peak.  Because of CMBS’ resurgence, the commercial real estate market is both bullish and fretful.  The rising volume in CMBS loan origination is a welcome sign that liquidity is returning to the markets.  The fact that a relatively large amount was created during the year’s shortest month is raising worries that the still delicate condition of commercial real estate is being sustained by too-eager lenders.

“I think it is clear that CMBS is coming back — something that is probably positive in the short-term as far as jump-starting the investment marketplace and helping to establish a new baseline for pricing while, hopefully, alleviating some of the distress issues out there. But is it a good thing in the long run?” asks Garrick Brown, Northern California research director of Cassidy Turley BT Commercial asked.

“As the number of participants in CMBS lending continues to increase, the competition to originate loans eligible for new CMBS deals will be fierce,” said John O’Callahan, capital markets strategist for CoStar Group.  “Insurance companies, GSEs (government-sponsored enterprises), and even the healthier large banks will lend on the best properties in desirable markets, while CMBS originators will compete among themselves for the leftovers. They will have to cast a wider net across all markets to garner the volumes anticipated in 2011.”

Just 15 months after the initial CMBS issuance, structural, leverage and issuance amount trends have quickly changed, according to Standard & Poor’s. The ‘CMBS 2.0’ market started with the pricing of three single-borrower transactions with relatively simple structures in late 2009; more recent deals have been more complex, more highly leveraged and with significantly higher opening balances.  “Most recently, three $1.2 billion plus conduit/fusion deals were issued this month, each of which included an average of 10 principal and interest bonds and two interest-only classes.  Compared with late-2009 issuances, the newer multi-borrower deals have higher leverage, less debt service coverage and somewhat looser underwriting,” says Standard & Poor’s analyst James Manzi.

Despite the good news from February, Trepp LLC, a provider of commercial mortgage-backed securities (CMBS) and commercial mortgage information, analytics and technology to the global securities and investment management industry, found that the CMBS delinquency rate rose 9.34 percent in January. The value of delinquent loans exceeds $61.4 billion.  “While the rate continues to head higher, optimists can point to the fact that the rate of increase is significantly smaller than it was in the prior two months,” said Manus Clancy, managing director of Trepp LLC.  “Pessimists can counter that the jump comes despite the fact that new issues continue to make their way into the calculation and servicers continue to resolve troubled loans.”

The re-emergence of CMBS does not mean a return to the go-go years of 2004-2007. If $35 billion is issued in 2011, it will total just 15 percent of the peak.  Additionally, the revised underwriting criteria are far more conservative and issuances are smaller and geared toward low-risk assets.  Significantly, originators are more frequently required to retain stakes in the offering.  The CMBS market is expected to steadily climb this year and could see additional issuance in 2012, perhaps rising to $100 billion by 2013.  This would still be less than half the peak level of 2007, but a substantial amount, bringing desirable liquidity to the commercial real estate market.

Better Building Initiative Will Green Commercial Buildings

Tuesday, February 15th, 2011

President Barack Obama recently visited Penn State University to introduce his Better Buildings Initiative, an incentive program intended to stimulate energy-efficient retrofits to existing commercial buildings.  The initiative is also designed to create jobs in the construction and manufacturing industries.

Despite the long-term economic benefits of energy efficiency, many building owners often run into difficulty raising capital to make improvements.  To resolve this problem – with the aim of increasing commercial building efficiency by 20 percent by 2020 – the Obama initiative proposes loan guarantees and corporate tax credits for commercial building owners who retrofit their portfolios.  Additionally, it will reward local and state governments for taking leadership in requiring enhanced building performance.  Business and political leaders and industry groups agree that the initiative will create green jobs in the design, construction, and manufacturing industries.

Although several items on the president’s ambitious list require legislative action, federal agencies can take preliminary steps using existing authority, said Lane Burt, director of technical policy at the U.S. Green Building Council (USGBC). A pilot program guaranteeing loans for building owners could “run through existing programs at the Department of Energy,” he said.  Although tax credits for green upgrades will need Congressional approval, existing tax incentives like the Commercial Building Tax Deduction (CBTD) could be used almost immediately.  “The deduction was designed for energy-efficient new construction,” said Burt, so it can be difficult to claim the deduction for retrofits.  Burt said the Internal Revenue Service will clarify its guidance on using the CBTD for improvements, potentially helping more building owners deduct as much as $1.80/ft2 from their gross income on tax forms.

The White House highlights five points that comprise the building efficiency plan.  It didn’t say how much the program will cost, but at least four of the programs are likely to require new or expanded outlays, including: turning tax deductions for commercial building retrofits into tax breaks, a move the administration said “could result in a ten-fold increase in commercial retrofit take up”; boosting access to Small Business Administration loans; introducing Race to Green, modeled after the Race to the Top education program that would reward states and municipalities that encourage retrofits; and expanding job-training programs in energy auditing and building operations.

“That’s money that could be spent growing those businesses and hiring new workers,” Obama said.  The president argued that the U.S. needs to “out-educate” and “out-innovate” the rest of the world.  “In America, innovation isn’t just how we change our lives; it’s how we make a living,” he said.

Two groups that applauded news of the initiative are The National Multi Housing Council (NMHC) and the National Apartment Association (NAA). The organizations released the following statement about the Better Buildings Initiative. “We commend the Obama Administration for its focus on energy efficiency in commercial properties, including apartments, and for taking an incentive-based approach to achieving meaningful reductions in our building energy usage.  Energy consumption and energy policy are priority issues for the apartment sector.  The plan announced today includes several items long advocated by NMHC/NAA, most notably reforming the existing building efficiency tax incentives.  Many apartment firms have voluntarily established energy efficiency and green building programs throughout their portfolios, but many more have been stymied by the lack of sufficient tax incentives and financing for building retrofits.”

Santa Delivered Coal to New Homebuilders

Tuesday, February 8th, 2011

New-home construction fell 4.3 percent in December compared with November to its lowest level in more than a year to a seasonally adjusted rate of 529,000 starts for 2010.  December saw the lowest level of new home starts since October of 2009, according to Department of Commerce statistics.  Starts ended the year 8.2 percent below December of 2009 and the chance that the numbers will rise anytime soon is highly unlikely.

December’s poor showing reflects a decline in single-family housing starts, which comprise the lion’s share of new residential construction, with construction falling nine percent to 417,000 units, the lowest level since May of 2009.  Demand for new housing is a victim of the recession and the large supply of existing homes on the market.  The high number of foreclosures also has impacted new residential construction.  Stricter lending standards and the fear of unemployment are also slowing new home sales.  Sales were boosted for a time last year when the federal government offered a first-time homebuyer tax credit.  Once that incentive expired, sales declined.

Another reason behind the slow pace of new home sales is likely the surplus of foreclosed homes that are on the market at extremely attractive prices.  Prices in 20 major metropolitan areas declined during the same time period, according to the Standard & Poor’s Case-Shiller Home Price Index.  The index is only 3.3 percent above its nadir, which it reached in April 2009 and has fallen 1.6 percent from a year ago.  There are several areas, however, where prices have stabilized and are not reflected in the Case-Schiller Index.

The slowdown in new home construction also raises the issue of what is happening to the acres of developed land that are shovel-ready?  In some cases, new builders are buying the vacant lots from banks and developing lower-cost housing than the original concept.  Builders are buying lots at 50 percent their original prices from lenders who want to move distressed construction loans off their books.  Developments are being revived in markets such as Florida, California, Las Vegas, Utah and the suburbs of Washington, D.C., according to Brad Hunter, chief economist for Metrostudy, a Houston-based housing researcher.  “This is a natural progression of the cycle,” Hunter said.  “Projects fail, the price of the asset drops until it reaches a point where it’s profitable for someone else to pick it up and remarket it.  They reposition the project and then what was formerly infeasible, is feasible.”

Developers are building smaller, more efficient homes that cost less to build, according to Tom Dallape, principal at the Hoffman Company, an Irvine, CA-based brokerage advisory company.  “They’re tailoring them to the market,” he said. “The average new house used to be 3,000 square feet.  Today, it’s 2,100.”

In another example, a homebuilder sold 1,300 acres of land and more than 1,500 homes sites — property once valued at $110 million for just $12.7 million. That amounts to just 12 cents on the dollar and is symptomatic of the level of financial pain banks must endure to stabilize themselves in a insecure economy.

Gridlocked Chicago: There’s Some Disagreement

Tuesday, February 1st, 2011

Gridlocked Chicago:  There’s Some DisagreementChicago is # 1!  Unfortunately, this is not good news because the Windy City has been ranked by one study as having the worst traffic congestion in the nation.   The news was one finding of the Urban Mobility Report (UMR),  conducted by the Texas Transportation Institute, the United States’ largest university-affiliated transportation research agency.  Earlier TTI studies had ranked Chicago in second or third place.  Washington, D.C., and its suburbs currently occupy second place.

The study of 2009 driving conditions found that Chicago’s roadways have increasing gridlock, at virtually any hour of the day.  In addition to the normal time it takes to get from Point A to Point B by car, commuters in metropolitan Chicago and northwest Indiana spent 70 extra hours behind the wheel in 2009, according to the study.  Chicago’s earlier record was 64 hours of extra driving reported in 2008; 55 hours in 1999; and 18 hours in 1982.  The national average of time wasted stuck in traffic was a more manageable 34 hours.  The fact that Chicago is a nationwide shipping hub and has some of the nation’s heaviest truck traffic – plus two of the top bottleneck areas – also impacts congestion.  Additionally, Illinois has approximately 10.4 million registered vehicles, and a population of around 12.9 million, according to 2009 Census Bureau statistics

“In terms of the delay for each auto commuter, Chicago now tips the scales at No. 1, where in the last report, Los Angeles was locked in that spot,” said David Schrank, one of the report’s authors.  The average cost to each commuter is $1,738.  Nationally, traffic congestion cost $115 billion in 2009; additionally, consumers drove 4.8 billion additional hours and had to purchase an extra 3.9 billion gallons of gas.

Alter NOW finds that the report has its detractors:  Smart Growth America takes issue with some of the UMR’s findings.  “It assumes, for example, that everyone should be able to speed as rapidly down the highway during rush hour as they could in the middle of the night.  American taxpayers will never stand for being asked to turn over their wallets and their neighborhoods in order to build that kind of highway capacity“.

A June 30, 2010 study by IBM actually disputes the rankings, placing Los Angeles, New York and Houston as the U.S. cities with the worst traffic.  Topping the international list of cities notorious for congestion are Beijing, Mexico City, Johannesburg, Moscow and New Delhi.  Chicago doesn’t appear on IBM’s 20-city list.

Another mid-year 2010 study by Seattle-based INRIX, places Chicago in third place nationally.  “Between 5 and 6 p.m. Thursday is now the most-congested travel hour of the week in the Chicago area,” according to the INRIX National Traffic Scorecard.  “Last year, it was the 5-6 p.m. hour on Fridays.  The reason for the change?  It could be that more people are working part-time or ‘flex-time’, and Friday is a frequent day for flex-timers to take off or work from home,” said Chicago traffic expert Joe Schwieterman of DePaul University.  “Chicago doesn’t have a long-term plan to do much about congestion, we’re adding some lanes to the Tri-State, some work on I-80, but there’s not the construction in the works to relieve some of the worst bottlenecks“.

Will Mayor Daley’s Successor Be Hit With Economic Reality When Contemplating Landmark Public Improvements?

Wednesday, January 12th, 2011

Will Mayor Daley’s Successor Be Hit With Economic Reality When Contemplating Landmark Public Improvements?As Chicago’s longest serving mayor leaves his post in May of 2011, Richard M. Daley leaves a legacy that includes the iconic Bean in Millennium Park to the flower-filled planters that ornament 85 miles of the city’s streets.  Whoever fills his post will find that budget shortfalls resulting from the Great Recession will collide with reality; the bottom line is that it will be difficult for whoever succeeds Mayor Daley to extend his vision to beautify Chicago.

Writing in the Chicago Tribune, architectural columnist Blair Kamin says that “This was a mayor with a passion to build.  By combining the roles of chief politician and chief planner, Daley became the ultimate shaper of Chicago’s cityscape.  There was no denying his authority over the cityscape — just as there is no denying the deep anxiety his departure has spawned among the city’s architects and builders.  Chicago, they worry, will go from being a city in overdrive to a city on hold.”

“I hope the intensity remains,” said Chicago developer Dan McCaffery, who is planning to turn the 580-acre former U.S. Steel plant on the southeast lakefront into a mixed-use community. “People in City Hall knew that when the mayor had endorsed something, it was aggressively pursued. You could feel the difference.  It was palpable.”  “Any new mayor has got to realize that being a green city has become a part of Chicago as much as hot dogs,” said Ben Helphand, president of the Friends of the Bloomingdale Trail, which is pushing to develop an elevated park, nearly three miles long, on a long-disused railroad spur on the city’s Northwest Side.

A 2010 survey conducted by the Trust for Public Land revealed that Chicago has a mere 4.2 acres of parkland per every 1,000 residents, according to Erma Tranter, president of the advocacy group Friends of the Parks.  “We do not have sufficient park space for a healthy community,” Tranter said.  “It’s an absolutely critical issue in neighborhoods where children don’t have places to play.  That correlates to obesity, health problems and higher costs for future health issues.  There are children who are bombarded with all these electronic games.  They don’t have land anywhere near for them to go to.”

“Daley’s done a great job and he led the city very strongly. But if we’re going to move where we need to be, we need to engage the community in a different way,” said Peter Nicholson, executive director of the Foresight Design Initiative, a nonprofit devoted to sustainability issues. “It can’t be command and control.”

Chicago’s Hyatt Center Sells at a 6.1 Cap Rate

Tuesday, December 28th, 2010

Chicago’s Hyatt Center Sells at a 6.1 Cap RateThe $625 million sale of the 49-story Hyatt Center at 71 South Wacker Drive is proof that the market is still strong for high-credit trophy buildings; the price represents a 6.1 percent cap rate.  The purchaser is Southern California-based Irvine Companies, which plans to close the deal as quickly as possible.

The $419 PSF sales price is even higher than the anticipated $390 PSF when Pritzker Realty Group LLC initially decided to sell the approximately 1,500,000 SF office tower last summer.  The Hyatt Center’s sale reflects a national trend where office building deals rose 124 percent in October to $2.1 billion, according to Real Capital Analytics, Inc (RCA).  “Office investors focus on visible assets in major markets has resulted in stronger price pressures,” according to the RCA report.

The Hyatt Center was built in 2005 and has an A-list group of tenants that includes the Hyatt Hotels Corporation, law firm Mayer Brown LLP, and investment bank Goldman Sachs Group, Inc.

Half of Companies Plan to Hire New Employees in 2011

Tuesday, December 28th, 2010

Half of Companies Plan to Hire New Employees in 2011Approximately half – 47 percent – of American companies whose sales range from $25 million to $2 billion say they will hire more employees in 2011, according to a Bank of America survey of chief financial officers (CFOs).  The new number represents a significant uptick over the 28 percent who planned to hire new employees one year ago.  The news is not all good – 61 percent of companies who do not plan to hire said there is still reduced demand for their products or services.  The survey of 800 firms covered a broad range of industries throughout the United States.

The CFOs are unsure that the economic recovery will last, as well as being concerned about the impact of the healthcare reform law that Congress passed in March of 2010.  Their caution is evident in the fact that – on a scale of one to 100 – the CFOs gave the economy a rank of 47.  This represents a slight increase over the 44 level recorded last year.  An addition 64 percent expect their companies’ revenue will grow in 2011; 55 percent anticipate margin growth.

Despite the challenging economic climate, many CFOs have growing confidence that their companies have weathered the worst of the storm and are poised for expansion,” Laura Whitley, Bank of America’s global commercial products executive, said.  “Although concerns about the economy remain, the increase in CFOs who expect to hire employees could be crucial to improving the nation’s unemployment rate.  It’s exciting to see a more positive mood.”  Yet, she noted, the recovery has been slower than expected.  “When talking with businesses we hear it all the time.”

The Suburbs Are Anything But Family Friendly

Monday, December 6th, 2010

The Suburbs Are Anything But Family FriendlyOne of the biggest albums of the year is “The Suburbs” by the Canadian group, Arcade Fire, which exposes the dark side of urban sprawl.  The band, fronted by the husband and wife duo of Win Butler and Régine Chassagne have created a concept album as emblematic of our generation as The Wall was for the post-Vietnam War boomers.  Try these lyrics from one of their best songs, Sprawl 2:

Cause on the surface the city lights shine
They’re calling at me, come and find your kind
Sometimes I wonder if the world’s so small
That we can never get away from the sprawl

So, why did an indie band from Canada resonate so profoundly with us?  Putting aside the cultural war that’s always waged when you raise the issue of the burbs, we now find lots of evidence that growing up in the suburbs may not be the most advantageous environment for children according to Seattle-based Carla Saulter, writing in Grist magazine.  “We Americans tend to believe that a healthy environment in which to raise children is a large, single-family home in a quiet suburban community,” according to Saulter.  “Many of us are convinced that trading the polluted, crowded city for greener pastures (also known as the large backyards that usually come along with suburban homes) is the right decision for our children.  Unfortunately, the farther we move from urban centers, the more auto-dependent, resource-intensive, and by extension, environmentally detrimental our lives become.  Auto-dependence is bad for our children; it’s also very, very bad for the planet.”

Saulter says that living in a sprawling, auto-centric community where parents have no option but to drive their children to the grocery store or to the local playground is not doing the planet any favors.  “Environmentally responsible parenting is about more than cloth diapers and BPA-free thermoses.  It means drastically reducing the amount we consume and pollute.  It means letting go of the belief that the best way to raise children is in a 2,500 SF, two-car home with a half-acre lawn, and instead embracing a different version of ‘family friendly’, dense, diverse and transit-rich,” Saulter said.

People who live in a dense community typically live in smaller spaces, which require less energy to heat and cool.  These smaller spaces occupy less land, which means there is room for additional homes – and perhaps even forests and farmland.  “As more people are living in close proximity to each other, more resources can be shared,” according to Saulter.  “Neighborhood parks replace large backyards; coffee shops and community centers replace home offices and playrooms; public libraries replace extensive personal libraries; and nearby theaters replace media rooms.  Other resources, like power and sewer lines, can also be delivered more efficiently to densely populated communities.”

According to “The City in 2050:  Creating Blueprints for Change”, a study by the Urban Land Institute, only 25 percent of car rides in the United States have the purpose of commuting to and from work.  The remainder is spent running errands or transporting children to and from school or to activities.  The United States currently boasts a car-ownership rate of approximately 80 cars for every 100 persons; by 2030; that is expected to soar to one car per person.  Additionally, long-term trends predict a 48 percent increase in driving by 2030, though high gas prices might temper that to some extent.

Saulter recommends reading David Owen‘s “Green Metropolis:  Why Living Smaller, Living Closer, and Driving Less are the Keys to Sustainability”.