Tuesday, January 17, 2006

Mervyns movin' on

Mervyns has announced that it is closing its Crossroads Mall store for keeps come March. This is in addition to closing the Midvale store, which will be gone by the end of the month (Utah shouldn't feel alone. Mervyns is effectively shutting down its Midwest operations and COMPLETELY shutting down its Oregon and Washington operations. Lots of anchors going dark.). No word on what effect the Crossroads renovation has had on this decision or what effect this decision will have on the renovation.

A recent survey at Careerbuilder.com found that 35% of retail employees intend to leave their jobs during 2006. I don't think this is what they had in mind.

Thursday, January 12, 2006

The New Gorilla

Once upon a time, banks could not get into real estate development. Let's face it, capital is the name of the real estate game, and banks have better access to it. They could simply run everyone else off the table.

Now though, the Treasury Department (specifically the Comptroller of the Currency) thinks it would be just fine for banks to get into real estate development and has approved Bank of America's plan for a hotel and PNC Financial Services Group's plan for a hotel/condo/office tower complex.

20 years ago a lot of financial institutions got too cozy to a lot of speculative investments, including real estate developments. The result was massive bailouts and even more massive mergers. This will be worse. And watch out for banks simply buying up developers and creating in-house shops. Loss of competition, vertical integration. Do we actually have anti-trust laws in this country any more?

Office Mania Redux

As I've previously noted, we now have a lot of office towers planned for SLC (Whether they all get built is another matter. Anyone else remember the huge office towers originally planned for the Triad Center?). We're seeing similar figures nationwide. The U.S. office vacancy rate dropped from 16.3% at year-end 2004 to 14.7% at year-end 2005. The market absorbed 61.3 million sf for the year, the most since 2000, and rents rose 3.2%, the most in five years. The one notable difference between the national figures and Utah was that nationwide there was a relatively sane 35.4 million sf of new space completed, considerably more than 2004 but still considerably less than the 126.1 million sf completed in 2001, which was still part of the froth from the dot com boom. Utah, unfortunately, is already building at a dot com rate. Will 2006 end up being a repeat of 1986?

Whither housing?

A new study by McGraw-Hill Construction and Deloitte & Touche USA says the housing market will slow down rather than fall down. Of course, they're only looking at builders' new housing projections. The resale market is the thing to look at because, with all the creative financing, people are living for flip. If the builders undercut the resale market too much, we will see large numbers of people locked into unmanageable financing.

Things aren't entirely rosy for the builders, either. The single item that most affects their bottom line is availability of land, and land that is worth any kind of a damn is getting scarce. Out here in the desert, the real issue is water, because no land is worth a damn without water rights. I have yet to see any municipality around here seriously build water availability into its land use planning. Bad idea, ignoring forces of nature when you're working with real estate.

Speaking of...

...industries no one wants close by, Envirocare (the nuke waste people) is expanding its facility out at Clive and moving its admin offices to bigger digs in downtown SLC. Business appears to be booming.

I still think that hot stuff should stay back east where they generate it. Storing it directly upwind from the SLC Metro Area just ain't a good idea. Maybe the Goshutes would accept a refinery in place of radioactive waste.

Wildcats in Sigurd

Back in 2003 Wolverine Oil struck black gold near the central Utah town of Sigurd. Now Granite Energy has locked up 6,000 acres of O&G leases. More exploration companies are undoubtedly negotiating leases as I write this. More power to them, but beware the hype. The media keep making noise about a billion barrel field, but nothing close to that has been confirmed yet. If I had money to invest in oil, I'd be looking for a way to build a nice, big refinery. THAT'S where the choke point in the supply chain is. Of course, I wouldn't be averse to building it near Sigurd.

Wednesday, January 11, 2006

More 2006 IBC

As a follow-up on the wind load posting below, the 2006 IBC has also overhauled the seismic design provisions by incorporating the ASCE 7-05 provisions by reference.


Approximately two months after its largest investor (K Capital Partners LLC) demanded changes, OfficeMax has announced them: 110 stores in the US, 5 in Canada, and the building materials plant in Elma, WA get the ax. No word yet on which stores are closing, but that's a lot of dark anchors. Looks like it's time to dust off my skills at renegotiating leases for tenants and landlords who have big boxes close. Somehow I doubt this will be the last big box retailer who finds it "prudent" to scale back.

Monday, January 09, 2006

My Spam Box

If you read this blog (and who doesn't), you will notice that I consider the current real estate market to be a bubble ripe for popping. I've presented what I consider to be evidence to support this position. You, though, may consider me to be just some nattering nabob of negativism. Fine. Here follows evidence that I consider to irrefutably prove my point: for the last six months, the amount of spam I have received that promises easy financing has been larger than the amount of spam I have received hawking Viagra/Cialis/Levitra. This market is in deep kimchi.