October 2008

An interesting read with *straight in your face* forecast about 2009 real estate from the CoStar Group.

Two economists delivering different forecasts in recent days both referred to a “minefield effect” in which investors and their lenders — seeing the damage the economic meltdown has done to their colleagues’ portfolios — freeze in their tracks, afraid to make a move.

“In 2005 through 2007, we were walking through the valley, admiring the mountains and the streams, when suddenly we saw somebody blow up,” said Dr. Peter Linneman, chief economist at NAI Global, during a webcast of his quarterly Global Economic Outlook Oct. 17. “Everybody just stops and stares at their feet and starts sweating.”
Based on survey responses and interviews with more than 700 real estate, finance and consulting professionals, the report notes that, while commercial real estate largely escaped the housing and stock market crash, there may be no escaping the explosive devices strewn through the general economy: the credit crisis, a broken financial system, a potentially deep recession, mounting national debt, rising unemployment, consumer fear, higher energy costs and global geopolitical uncertainty.

“There’s a whole minefield of issues out there,” noted ULI Senior Fellow Stephen Blank, who introduced the Emerging Trends report with author Jonathan Miller, partner with NY-based Miller Ryan LLC.

Coral Gables, FL-based Blumberg Capital Partners joined the dire chorus, echoing the others in warning that property prices may erode as much as 20% in 2009 as debt matures and refinancing options continue to evaporate.

Investors who bought property since 2005 are now finding they overpaid and are overleveraged, with few avenues to refinance, said Philip Blumberg, Chairman/CEO and chief investment strategist.

“Unfortunately, too many of those buyers had unrealistic expectations: the economy would continue growing unabated, capital flows would remain at unrealistic levels, pricing of commercial office buildings would continue growing, new buyers would continue emerging and credit would always be plentiful.”

http://www.costar.com/News/Article.aspx?id=41A9DE2D4E098EDEFBB56A05FBBB79A3

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Luxury mall in New York will open despite the current economic slump.

While the center is opening in a highly uncertain economic climate, real estate professionals say they do not expect this to harm its long-term prospects.

The Arches is an outdoor mall with covered walkways in this Suffolk County community, 35 miles east of New York City and 35 miles west of an existing Tanger outlet center in Riverhead. It is near the Long Island Expressway, Southern State Parkway and Sagtikos Parkway, and will provide free shuttle bus service to and from the Deer Park station of the Long Island Rail Road.

The center is meant to resemble a Tuscan village and features arches in the design of the buildings and in the covered walkways.

http://www.nytimes.com/2008/10/22/realestate/commercial/22outlet.html

Let’s see how this goes in the next few years.

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WestJet to increase Hawaii Flights.

The Canadian airline plans to ramp up to 23 flights a week on Boeing 737 aircraft from Vancouver to Honolulu, Kahului and Kona, from Nov. 1 through April 30. It will then re-evaluate demand before deciding whether to go back to its current seven flights a week or boost capacity through the typically slower summer season, said Sean Durfy, WestJet president and chief executive officer.

“We’re still growing and we’re going to make Hawaii a big destination for Canadians,” he said. “We’re expanding when most airlines are shrinking capacity.”

The Canadian market has been Hawaii’s most promising visitor segment, with 234,452 tourists this year through August, an increase of 8.6 percent from a year earlier. Canada is the state’s third-largest tourism market after the mainland and Japan, though it represents only 5 percent of total air arrivals to Hawaii.

http://www.starbulletin.com/business/20081022_WestJet_to_increase_Hawaii_flights.html

The visitor market has been experiencing the downside effect tremendously. Definitely need the help.

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A friend of mine forwarded me this message.

Here is something from the UK:
Following the problems in the sub-prime lending market in America and the run on Northern Rock in the UK, uncertainty has now hit Japan.

In the last 7 days Origami Bank has folded, Sumo Bank has gone belly up and Bonsai Bank announced plans to cut some of its branches.

Yesterday, it was announced that Karaoke Bank is up for sale and will likely go for a song, while today shares in Kamikaze Bank were suspended after they nose-dived.

While Samurai Bank is soldiering on following sharp cutbacks, Ninja Bank is reported to have taken a hit, but they remain in the black.

Furthermore, 500 staff at Karate Bank got the chop and analysts report that there is something fishy going on at Sushi Bank where it is feared that staff may get a raw deal.

Yes, it’s a joke…

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Hilo Hattie at the Beach will be opening July 2009 (tentatively) at the Royal Hawaiian Center next to the Cheesecake Factory.

Hilo Hattie executives said Thursday that the company has renegotiated its lease for a new flagship store in Waikiki.

The company, which filed for Chapter 11 bankruptcy protection earlier this month, reached an agreement over an amended lease for the 29,000-square-foot space at the Royal Hawaiian Center with landlord Kamehameha Schools, Hilo Hattie CEO Ted Nelson said in a news release.

The new store, to be called Hilo Hattie at the Beach, will introduce a new contemporary concept for the 45-year-old Hawaiian-themed retailer and feature an expanded selection of apparel and other products from new and current vendors, the company said.

http://pacific.bizjournals.com/pacific/stories/2008/10/20/daily50.html

Let’s hope it moves in the right direction.

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Not to get confused with the environmental tech that’s trying to find ground here…

A Brisbane, Australia, company that holds about one-third of the ownership in ‘Aiea-based Hawaii Biotech Inc. says it wants to invest more money into the local company and has recently raised funds to do so.
Advertisement

Avantogen Ltd. issued a statement yesterday saying it believed Hawaii Biotech has a good future and that it intended to buy additional shares with proceeds from a private placement offering of $1 million Australian dollars, or about $680,000 U.S. dollars.

http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=/20081022/BUSINESS/810220362

Seriously, the awareness is more evident these days from both the environmental and biotechnological sectors. University of Hawaii at Manoa is already trying to improve their STEM fields – science, technology, engineering and math. Good forward step.

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From the New York Times:

High-profile Seattle-area companies like Microsoft and Amazon were adding thousands of jobs, trade with Asia was strong and Boeing was selling thousands of commercial jets. Deemed the best office market in the country in some nationwide reports, the city was attracting real estate investors hungry to buy office buildings and build new projects. It seemed as if nothing could go wrong.

“Out here in Seattle, we were living in a bubble, immune from the rest of the country,” said Bruce Blume, founder of a real estate development firm, the Blume Company.

Such enthusiasm started deflating this year. Starbucks, based here, is slashing more than 7 percent of its global work force and closing hundreds of stores. Weyerhaeuser, the former lumber giant, trimmed 1,000 jobs and sold off divisions. Boeing workers went on strike, and home builders and mortgage companies shed staff. Starting next month, Alaska Airlines, also based in Seattle, is getting rid of 1,000 positions.

http://www.nytimes.com/2008/10/22/business/22seattle.html

As you can see, this is a world financial crisis and no stability in what business you are dealing with.

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As we march into the last quarter of 2008, U.S. retailers are scrambling to brighten the holiday season.

Neiman Marcus’ trees have been sparkling since mid-September, and Wal-Mart began opening its Christmas shops last week. But that hardly means many are in a holiday spirit: It’s all part of an effort to extend a holiday shopping season that some analysts say could have the slowest sales growth since the 1991 recession.

http://plainvanillashell.com/article.asp?ID=10993

There’s absolutely no irony to this as everyone is trying to cope the financial stress and anxiety. Some smart operators are already cutting 15 – 30 minutes of their staff time card to accommodate the cost for extra marketing efforts.

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Found 2 interesting articles about Guam’s real estate:

Ken Corp. buys 55% ownership of Hotel Nikko Guam

“Ken Corp. subsidiaries also have purchased the Hyatt Regency Guam, the Hilton Guam Resort & Spa, the Pacific Islands Club on Guam and the former Palace Hotel, which the company converted into the Sheraton Laguna Guam Resort.”

http://guampdn.com/article/20081021/NEWS01/810210308

Never heard about these guys but looks like they are busy hotel hunting. If you click the link above and go to the article, you’ll find more detailed information on the right side of the page. To learn more about Ken Corporation, see here.

Investment slides: South Korea economic woes affect Guam

“Captain last month told the Rotary Club of Tumon Bay that the sale of high-end homes — those costing $500,000 or more — has suffered because developers were counting on Koreans to buy them. Only five of those homes sold during the first half of this year, he said, with dozens more on the market but unsold.”

http://guampdn.com/article/20081021/NEWS01/810210303

Not a good indication. Also, Korea won has significantly dropped this year and that might hinder them from spending. Although everyone is looking forward for the visa-waiver program, the reality is if it’s expensive, people will not spend.

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