Posts Tagged ‘stimulus package’

Federal Presence Strengthens Washington, D.C.’s Office Market

Tuesday, September 7th, 2010

Washington, D.C.’s 10.4 percent office vacancy rate is far below the 17.3 percent national average.  Washington, D.C.’s commercial real estate market – including its Virginia and Maryland suburbs – continues to be the nation’s most stable with vacancy rates far below the national average.  The area’s vacancy rate stood at 10.4 percent at the end of the first quarter, far below the 17.3 percent national average, according to Reis, a New York-based real estate research firm.  Effective rents have fared well through the Great Recession, sliding just five percent from their 2009 peak high of $41.43 PSF.

“There is a tremendous amount of domestic capital looking to invest in D.C. for obvious reasons,” said John Kevill, managing director in Jones Lang LaSalle’s Washington, D.C. office.  “Aside from its solid fundamentals, investor demand is being stoked by the area’s dominant industry, the federal government.  The office market is benefitting from continued government spending in areas such as healthcare, the war on terror and the economic stimulus package.  That activity is really differentiating our economy from virtually every other economy in the country, which is why we are seeing an increase in transactional velocity”

As an example, Jones Lang LaSalle at present is listing twice the number of for-sale properties than just one year ago.  A key selling point for an office building in Landover, MD, is a 10-year lease just signed with the General Services Administration (GSA) on behalf of the Department of Defense.  The two-story Class B office building recently sold for a cap rate of 8.4 percent; the purchaser was the Government Properties Income Trust.  Real Capital Analytics reports that cap rates for Maryland office properties averaged 9.4 percent over the past year.

Economic Free Fall Slows During Second Quarter of 2009

Friday, August 7th, 2009

Finally, there’s encouraging news on the economic front.  The economy declined just one percent during the second quarter of 2009, a rosier report than was expected.  It is the strongest signal so far that the longest recession since the end of World War II is easing its grip.

In a report issued by the Department of Commerce covering the quarter from April through June, the one percent drop in the GDP stands in stark contrast to the 6.4 percent free fall thatpromoting_sustainable_economic_growth characterized the first quarter of 2009.  That was the biggest decline in almost 30 years.  The economy shrank for four straight quarters for the first time since 1947, evidence of how severely the recession has hurt consumers and companies.

“The recession looks to  have largely bottomed in the spring,” said Joel Naroff, president of Naroff Economic Advisors.  “Businesses have made most of the adjustments they needed to make, and that will set up the economy to resume growing in the summer.”

Fed Chairman Ben Bernanke believes the recession will end towards the end of the year.  The Obama administration’s stimulus program that combines tax cuts with government spending enhanced second quarter economic activity.  Economists believe the stimulus will have a greater impact through the second half of the year, and even in 2010.

The job market is expected to remain weak.  The current 9.5 percent unemployment rate marks a 26-year high, and the Fed expects it to top 10 percent by year’s end.  Companies will remain cautious about hiring until they are convinced that the recession is officially in the past.

2nd Quarter 2008 Economic Update

Friday, August 1st, 2008

The 2nd quarter of 2008 ended with a slight economic rebound – an extremely lethargic one – that raises new fears of a recession.  The Commerce Department reported that the GDP increased at an annual rate of just 1.9 percent from April through June.  Although an improvement over the feeble 0.9 percent reported during the 1st quarter, the number was not as positive as the 2.4 percent increase that economists had predicted.

While any improvement is a welcome sign, the increase also indicates the fragile nature of the economy.  The numbers indicate that the recent income-tax rebate stimulus package did not work the magic that the government expected.  This news only leads to fears that the economy will remain unstable for the rest of the year, further curtailing capital expenditures by corporations and lengthening the credit crunch.

According to the federal government’s annualized revisions, the GDP actually contracted by 0.2 percent during the last three months of 2007.  That reflects the negative impact of the ongoing housing slump – the worst in 26 years – and cautious consumer spending because people are wary of purchasing big-ticket items just now.

It’s true that consumer spending rose 1.5 percent during the 2nd quarter, an improvement over the 0.9 percent reported during the 1st quarter.  This was the best showing since the 3rd quarter of 2007, when the economy was still performing strongly despite the housing slump.