Industrial Real Estate Market News 4th Qtr 2009 - False Start or Starting Block?

False Start or Starting Block?

There were clearly no winners in 2009. Net absorption broke negative records, activity faltered and availability topped the 20 percent mark. At the close of the fourth quarter, however, it appears market conditions may be improving and the weather may be clearing for the 2010 season.

While net absorption in the fourth quarter remained negative, at –377,952 square feet it was a vast improvement over the previous four quarters. Of the 12 metro Atlanta submarkets, four closed the quarter with positive net absorption. The Fulton Industrial District was the clear winner for the fourth quarter, thanks to a massive build-to-suit for Kraft Foods. Net absorption in this submarket reached 942,095 square feet – a clear reversal of its third quarter performance of -1.7 million in net absorption. After recording a second consecutive quarter of positive net absorption, Area 60 (city of Atlanta South of I-20) even posted positive net absorption for the year.

Activity hit new lows during the first part of 2009, but in the closing quarter of the year, it bested the previous four quarters coming in at 9,488,628 square feet. What’s more, of the 497 deals reported, only 18 were in excess of 100,000 square feet. The I-85 North corridor, the beneficiary of six of those large deals, outpaced all other metro submarkets with 1,843,189 square feet of activity.

The vacancy rate climbed for four consecutive quarters, finally breaking the 20 percent level in the third quarter stopping at 20.2 percent. Although the fourth quarter saw an increase to 20.3 percent, that increase was a meager one-tenth of a percent – far less than the one percent average increase seen the four previous quarters. Spec construction wasn’t a contender in 2009; a whopping 79.5 percent of the 2.5 million square feet added to inventory in 2009 was build-to-suit.

In comparison to the rest of 2009, the fourth quarter seemed to gain momentum. An improvement in net absorption, a modest increase in activity and stabilization of the availability rate are all indications of a comeback. The question now . . . was the fourth quarter a false start or are we on the starting block? We’re hoping for the latter and pacing ourselves for the marathon ahead. Here’s to a New Year and a new playing field.


Sim F. Doughtie, CCIM, SIOR, MCR
President

1031 Tax Update (IRS disaster relief)

From our friends at Atlanta Deferred Exchange, Inc. (ADE):

The following counties in Georgia qualify for IRS disaster relief following the recent floods: Bartow, Catoosa, DeKalb, Fulton, Gwinnett, Heard, Newton, Rockdale and Walker counties. If a taxpayer who is living in one of these counties is doing a tax deferred exchange with a relinquished sale that took place before September 18, 2009 and their 45-day identification period falls between September 18th and December 17th, they should be entitled to a 120-day extension. For example, if the taxpayer closed on their relinquished sale on September 12, 2009, their 45-day identification deadline would be October 27, 2009 (which is between September 18th and December 17th). Therefore, they would be entitled to a 120-day extension which falls on February 24, 2010. It is also our understanding that the taxpayer would then get their pre-requisite additional 135 days (45 days plus 135 days equals 180 days) to complete the transaction. Of course, they would have to file an extension because you get 180 days or the date your tax return is due, whichever comes first, and April 15th would have come sooner. But if they do file an extension, it is possible they would have up until July 9, 2010 to complete the exchange. If the taxpayer's 180-day deadline falls between September 18th and December 17th, they would also get a 120-day extension from their original 180-day deadline. What is somewhat unclear is if the 45-day identification period has ended before September 18th and the 180-day acquisition period falls after December 17th as to whether or not the taxpayer would get an extension of 120 days from their original 180-day deadline. To view a copy of the IRS Notice visit: http://www.irs.gov/newsroom/article/0,,id=213657,00.html

To view Revenue Procedure 2007-56 (see Section 17) which addresses time sensitive acts, visit http://www.irs.gov/irb/2007-34_IRB/ar13.htmlA strict interpretation of this guidance would lead one to believe that you would also get a 120- day extension in this circumstance. If the taxpayer's 180-day deadline falls between September 18th and December 17th and they have decided not to complete the exchange, it might be beneficial to consider taking the 120-day extension. Under this approach, the taxpayer would not receive their proceeds from the qualified intermediary until after the beginning of the new tax year and based on the installment sale reporting approach, the tax recognized on this disbursement would not have to be reported until the 2010 tax year - just something to consider. As always, our goal is to bring you accurate and timely information that will help you make better decisions.

All the best,Ron Raitz
For more information please contact Ron Raitz, President of ADE. Email: rraitz@ade1031.com

Forbes magazine says Georgia is the No. 6

Forbes magazine says Georgia is the No. 6 state for doing business.

The magazine ranks all 50 states based on costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life. Business costs, which include labor, energy and taxes are weighted the most heavily.

Source: Atlanta Business Cronicle http://atlanta.bizjournals.com/atlanta/stories/2009/09/21/daily86.html

Mild" decline shows up in Moody's commercial property index

"Mild" decline shows up in Moody's commercial property index


After two consecutive months of 7% drops in commercial real estate values, June experienced a "mild" 1% decline, Real Estate Analytics said. "This month is not unexpectedly bad news like the two previous months," said Neal Elkin, the firm's president. Still, the Moody's/REAL National All Property Type Aggregate Index for June marked a 35.5% plunge in prices during the past two years...article

Source: GlobeSt written by Paul Bubny

No meaningful CRE recovery until 2010?

The National Association of Realtors said the commercial real estate market slowed to its lowest level in 15 years during the second quarter. "The reduction in commercial real estate activity is expected to last at least through the first quarter of 2010. Any meaningful recovery is not likely to occur before the second half of next year," NAR chief economist Lawrence Yun said. Reuters (8/19) Full article

International Farmer's Market Sold as Investment Sale

Al McConkey, Sally Tennant and Robert Aaron sold the International Farmer's Market located at 5193 Peachtree Industrial in Chamblee. The 5.94 acres may have redevelopment plans in the future.