Posts Tagged ‘energy’

Caterpillar, Boeing Defy the Odds With Strong Sales

Monday, August 16th, 2010

Some companies are posting 90 percent growth.  One company that is holding its own despite the shaky economy is Peoria, IL-based Caterpillar, Inc., which reported an enviable quarterly profit thanks to growth in emerging markets.  The world’s largest manufacturer of construction and mining equipment is benefiting from growing mining and energy operations with orders outpacing shipments to dealers.  Additionally, Caterpillar plans to increase production during the second half of 2010 and has hired 3,650 new employees this year — 1,250 in the United States and 2,400 overseas.

Caterpillar, which laid off 30,000 employees globally from late 2008 through 2009, is being cautious, saying it still has “significant economic concerns.”  Eli Lustgarten, an economist with Longbow Research, notes that “Construction in developed countries is not doing well, particularly in the United States.”  Caterpillar is well aware that its second-quarter profit of $707 million was derived from sales which rose 116 percent in Latin America and 62 percent in the Asia/Pacific region.

Another company that is prospering is Boeing, which has delivered 191 Next Generation 737s so far this year, including 95 in the second quarter.  Chicago-based Boeing has delivered 222 airplanes in 2010.  Demand for single aisle planes comes not only from growth markets, but also for replacing older aircraft such as the 737 Classics, A320s, and McDonnell Douglas MD-80/90s.  The demand for single-aisle airplanes remained strong even during 2009, according to Boeing.  The growth of low-cost carriers, emerging intra-China demand, and a large need for replacement airplanes will keep the demand for single-aisle airplanes strong into the future.

“The world market is doing much better than last year, but there are still challenges,” said Randy Tinseth, vice president of marketing, Boeing Commercial Airplanes.  “Looking at 2010, we see a world economy that continues to recover.  We expect the world economy to grow above the long-term trend this year.  As a result, both passenger and cargo travel will grow this year.”

Suburban Office Vacancies Rise

Tuesday, July 15th, 2008

According to a recent Crain’s Chicago Business article, suburban office vacancy rates shot up to 13.1 percent during the second quarter of 2008.  That is the highest level in more than two years. According to the commercial real estate services firm, Transwestern Commercial Real Estate, the vacancy rate is at its highest level since the first quarter of 2006, when it rose to 13.7 percent.  There’s no doubt that demand for suburban office space is in lockstep with job growth or loss; we’re not seeing any job growth in the suburbs right now.

Class A landlords are more likely to accept lower rent deals right now than was true in the last year, but this can be risky.  This has the effect of also reducing the building’s value, because this is a function of the in-place income stream.  Sometimes, it is better to pass on a low rent deal and simply “assume” accepting a higher rent to protect the building’s value.

The sales market has been robust over the past several years, so protecting value has been a priority.  With credit now being largely unavailable, building owners are no longer in the sale market because buyers are unwilling or unable to pay top dollar.  Because we don’t know when the office market will stabilize and since selling isn’t viable at present, landlords may take that lower rent to boost occupancy.

A respectable number of transactions will be completed this year, but only because there is so much low-cost sublease space available.  Additionally, some industries are likely to make positive contributions to the suburban office scene.  Companies providing goods or services to hospitals, physician practices and the senior-housing market are experiencing growth, as are data-center operations and some engineering firms, especially those working with energy production or conservation.