Watergate Towers Final Chapter...

Almost 1 year ago I posted the sad saga of Emeryville California's Watergate Towers, the marquee East Bay office complex that became a victim of the financial crisis, and fell into foreclosure in February of 2010. I closed that post by writing "Final chapter on this one isn't written yet --"

Well it looks like we can now close the book, because Watergate Towers has brand new ownership (and it isn't the bank). As widely reported in the Bay Area media, three of the four buildings in the Watergate office complex have been purchased by a joint venture between LBA Realty and Starwood Capital Group.

No surprise that the estimated purchase price of $130 Million represents a steep (+ / - 40%) discount from the original purchase price paid by a Hines backed investment group back in 2006. (Hopefully they can fix the elevators now)...
Some previous posts on the Watergate Towers saga:
July - 2009
November - 2009
February - 2010
September - 2010

Commercial Real Estate Back to "Normal..."

Commercial Real Estate is coming back strong. Sales volumes increased from $22 billion of transactions in Q1 2010 to nearly $36 billion of transactions by Q4 2010, according to commercial real estate information company CoStar Group. In an article posted on the Costar website (click HERE for the article), industry experts are forecasting sales volume increases of 20% to 25% for 2011, and calling these volume levels sustainable.

At the local level, Bay Area commercial brokers and property managers are reporting a significant increase in tours (potential tenants touring space) over the past 45 days. And (unlike most of last year), deals are actually moving forward and closing.

Factory Orders Up - Office Furniture Mfgs Up

New factory orders increased 0.7% in November, reversing an identical 0.7% drop in October. Not coincidentally all of the "major" office furniture manufacturers reported sales increases for their most recently reported quarters:

• Steelcase: + 9% year over year revenue growth for Q311
• Herman Miller: +19.9% year over year revenue growth for Q211
• Knoll: + 12% year over year growth for Q311
• HNI (parent of Allsteel): Forecast + 10-12% for Q410

Look for pricing to begin returning to normal (read that as prices will go up), as factory capacity starts to fill, and the cut-throat discounting that has been present for the past two years starts to recede.

Top Interior Design Products of 2010

What would the start of a new year be without a review of what happened last year... With that in mind here are the Top Interior Design Product Picks of 2010, courtesy of Contract Magazine.

View the complete list: (HERE).

Allsteel's Stride - a Top 10 Selection

Slowing China's Inflation - Speeds U.S. Inflation

Article yesterday on Bloomberg.com about how the Chinese government has taken steps to slow down its overheated economy. Specifically the government is limiting bank lending, which immediately led to a slowdown in manufacturing (China's Purchasing Manager's Index shrank from 55.2 to 53.9 surprising most analysts).  

Good for China, but the direct impact on the U.S. (specifically the office furniture industry) will be a continued rise in the cost of imported office furniture. We've seen prices on imported furniture rise steadily since mid 2009 due primarily to transportation cost increases. Now add increased financing costs and a slow down in production, and I expect to see at least two wholesale price increases from our import  vendors in 2012.

Commercial Real Estate Forecasters Calling for Growth in Bay Area

Commercial real estate forecasters are calling for a strong South Bay and San Francisco renaissance over the next couple years, with some saying San Francisco could return to its 2007 peak employment levels as soon as 2013.

Published reports in the The Registry (an SF Bay Area real estate monthly magazine) have forecasters calling for  "San Francisco, and to a lesser extent San Jose, [to] lead the U.S. economic recovery, with San Francisco regaining its peak 2007 employment levels no later than 2013 and San Jose not far behind, driven by business demand for its technology. But Oakland, a perennial laggard, will stay true to form, not recovering until San Francisco and San Jose are in full bloom and begin to send overflow demand its way sometime in 2014 and beyond."  Click: (HERE) to read the complete article.

In a separate story (also from the The Registry), Ken Rosen, chairman of Berkeley-based Rosen Consulting Group and Rosen Real Estate Securities, stated "Silicon Valley, which created nearly 10,000 jobs in the first three quarters, adding 1.1 percent to its employment base, is the strongest geography in Northern California and one of the strongest in the nation".  Click: (HERE) to read the complete article.

Anecdotal reports from various office furniture manufacturers and dealers confirm that activity has picked up significantly in the South Bay and San Francisco (specifically the SOMA area). I can tell you that the East Bay is still lagging, as it struggles to replace the mortgage and residential real estate and construction businesses that drove growth through the mid 2000's.

Law suit filed claiming LEED Program is a Fraud

A law-suit was filed last week against the United States Green Building Council (USGBC), claiming that the USGBC LEED certification program is a fraud. The suit was filed by Henry Gifford, a New York City building energy consultant.

The suit centers around the USGBC's claims that LEED-certified buildings use 25 to 30 percent less energy than buildings that are not LEED certified. The suit alleges these claims are fraudulent misrepresentations. The claimants are seeking Class-Action status.

Ouch... this law-suit, in conjunction with the roll out of CAL-GREEN at the start of 2011, could mean a bumpy road ahead for the entire LEED concept.