Father of Transporation Economics

http://bit.ly/AS1to

Mr. Meyer’s insights help us understand why rail’s share of American freight traffic increased substantially after deregulation in 1980. In 1958, when Mr. Meyer was writing, Congress reduced their obligations to maintain unprofitable passenger lines. In 1980, the Staggers Rail Act radically reduced the rate-setting authority of the Interstate Commerce Commission. Today, rail carries 38 percent of freight in the United States, but only 8 percent of freight in Europe. While the bulk of the difference in rail freight between the United States and Europe can be explained by innate differences like longer distances and less coastline in America, one estimate is that rail’s share of European freight would approximately double if Europeans adopted different policies.

3rd Quarter Bank of America, Merrill Lynch Industrial Transcript

Here it is:

I am getting better in terms of speaking. It really helps writing out all your points ahead of time. It was more like reading from a script rather than a top of mind speech.

The day after I found out about a 350K SF investment sale at below replacement cost that happened at the beginning of the month. That is something I should have known, its kinda a big deal.

I also should have mentioned the Pannatoni investment sale, that is going to be big news, but if it happens in the next week or so, it will be old news by the time of next quarters call.

Oh well.

October Article is out

SB Sun:

Market may be turning

For industrial brokers and landlords alike, small signs of improvement may be beginning to form on the horizon.

For the third quarter of 2009, the industrial vacancy rate continued to increase, from 15.1 percent last quarter to 15.4 percent, currently the smallest quarterly increase in vacant space in two years.

Warehouse and distribution centers are the industrial backbone of the Inland Empire and as home construction, foreign imports and manufacturing have stalled, demand for industrial real estate has been at an all-time low.

The market uncertainty is difficult for young brokers who are just getting started.
"It is a tough time for brokers like me who are new to the business" says Kosha Arabi, an aspiring industrial real estate broker.

"Landlords and tenants are more interested in advice and consultation than in doing a deal, and it becomes a great time to build relationships."

Industrial construction over the past two years has added more than 35 million square feet of space to the market, much of it empty speculative space. In addition, companies continue to consolidate their operations or go out of business. Over the past two years occupied industrial space has shrunk by more than 12 million square feet.

Blackstone Said to Drop Plans to Sell Beverly Hills Properties

Article is here: The reason I am mentioning it is because it is Bloomberg, and Colliers GLA is making news.

Landlords without immediate pressure to repay debt can afford to hold onto assets in hopes of getting higher prices when the market recovers. Blackstone also has been an active seller. The firm or its acquisition targets sold more than $25 billion of assets from 2005 to 2007.

Hilton had occupied the Beverly Hills headquarters, at 9336 and 9346 Civic Center Drive, since 1985 after moving from the Beverly Hilton Hotel. The lodging company, which changed its name to Hilton Worldwide, moved its head office to McLean, Virginia, this year.

Asking rents for the best-located, most desirable space in Beverly Hills fell 10 percent in the third quarter from a year earlier to $48.60 a square foot per year, according to Colliers. Landlords are offering 15 percent less than that in first-year leases to attract tenants, said Michael Soto, research analyst for Colliers International.

Clean Trucks Program: Cleans Jobs Out?

LABJ:

The program seeks to eliminate old polluting trucks from the ports. The program in October 2008 banned trucks made before 1989. But on Jan. 1, a more stringent ban extends to all trucks made before 1994 and those that have an engine made before 2004.

It’s unclear how many trucks will be sidelined as a result, but the number is a big one. The ports earlier estimated that as many as 12,000 trucks would fall into that criteria, but last week the L.A. port estimated 4,000 to 6,000 trucks would be banned Jan. 1.

A new diesel truck costs about $100,000, while retrofitting a truck with a new engine costs about $10,000 to $15,000. Many small trucking firms, already scraping by on low margins, paying off existing trucks and whacked by the downturn in business at the ports, say it’s not worth it to load up on debt to stay in the industry.

As with most things, the costs will be often be known and immediate, but the benefits will be hard to measure and not for some time. The dirty trucks will end up in Mexico or some other place, the drivers will find new work or move out of the state.

Hopefully, other ports across the country adopt the standards imposed here in Southern California, then at least the playing field will be even.

Trade & Industrial Development

There is a magazine for this: Here

Has a section on manufacturing, that I liked:

The Power of Manufacturing

John Engler

A widespread misperception exists in our country that we have lost our manufacturing base – that manufacturing has migrated to other countries while we have evolved into something called a “service economy.” In reality, the United States was and remains the world’s largest manufacturer in terms of the dollar value of manufactured products. Manufacturing remains the core driver of innovation and economic growth.

Without question, a substantial portion of our low-tech manufacturing has shifted overseas. China, in particular, has aggressively expanded into the manufacture of consumer products that today flood discount stores from coast to coast.

But the United States still dominates the more advanced industries – capital equipment, aerospace, machine tools, computer technology, robots, pharmaceuticals, chemicals, missiles, heavy earthmoving equipment, etc. You see the “Made in China” label on your child’s stuffed toy; you don’t see the “Made in USA” label on the satellite spinning overhead.

It is true that manufacturing is no longer the job creator it was a generation ago. This is largely because of quantum leaps in manufacturing productivity that always translate into fewer jobs. But by and large, they are more advanced jobs that offer excellent pay and benefits. In fact, one of the biggest problems facing our manufacturers today is the scarcity of qualified manufacturing workers.

America is the world's largest manufacturer based on value of goods (still) and Los Angeles County is the nation's top manufacturing center (still).

Southern California has the nation's largest industrial base, and a good chunk of that is still manufacturing, what used to be the backbone of the country.

Census FT900 Imports / Exports for August

Here is the most current issue of the Census Bureaus & BEA joint venture on the balance of trade.


The recession continues to dampen both imports and exports. Imports are especially troubling, down 28.6 percent over the previous year.

Automotive vechicles and parts posted the only increase, mainly due to the Cash for Clunkers program.

LA Basin Report Finished

The crown jewel of industrial reports, the Los Angeles Basin industrial report, is now finished.

It can be found here:

Los Angeles County suffered the worst losses this quarter, with Central Los Angeles posting the worst quarter ever, -2.4 million SF given back. San Gabriel Valley continued to lose space as well, giving back 962K. Most of these space givebacks were in the City of Industry, which is the industrial heart of the San Gabriel Valley.

Both Central Los Angeles and the San Gabriel Valley are under pressure from neighboring Inland Empire.

Vacancy Rate for LA County: 5.4%, up from 4.8% last quarter. Absorption was negative 4 million SF and rents have dropped to $0.54 NNN PSF for the region.

Inland Empire industrial rental rates have continued to fall, ending the quarter at $0.34 NNN, the lowest rental rate in the Basin and and the lowest rates since 2004. An increasing amount of landlords are refusing to publish asking lease rates, preferring to leave them as negotiable. This makes my life harder, since nailing down negotiable rents requires a lot of footwork.

The vacancy rate increased to 15.4%, only slightly higher than 15.1% that was posted last quarter. There is a pretty good chance that absorption will be positive next quarter if leasing and sales activity remains high in the West Inland Empire. I would say that the chance of a declining vacancy rate for the West Inland Empire next quarter is 50 - 50. The pace of givebacks is decreasing and firms are starting to take space. Will be interesting, keeping my fingers crossed.

Orange County is also humming along. Absorption was only negative 411K, but leasing activity remains low and Orange County is not immune from tenants moving to cheaper markets. Rents remained constant at $0.67, the highest in the Basin.

Third Quarter Reports Now Avail!

Click above to access the third quarter reports for the Inland Empire, San Gabriel Valley and Central Los Angeles industrial markets.

Surprising twists and turns. Who knew the Inland Empire industrial market would do better than the infill San Gabriel Valley and Central Los Angeles industrial markets?

I did not predict that one, I assumed that recovery would happen inside out, from the South Bay to the East Inland Empire, a series of demand dominoes emanating from the port.

I did not think that the epicenter of recovery would be Ontario / Fontana. That drops in price would change the entire demand equation.

Social Networking For Commercial Real Estate 101

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