Are Absentee Landlords
Good for the Industry?
Can landlords manage office properties remotely without leaving tenants feeling neglected? Samuel Zell, chairman and chief executive of Equity Office Properties Trust, thinks so, touting the concept at a conference last week.
Over the past two years, Equity Office has consolidated the 18 separate property-management teams that oversaw the 55 office properties it owns in the Boston market into a single, centralized operation. The effort eliminates onsite building-management personnel, freeing up office space and prompting staff to focus on a specific management function for properties in the region.
Equity Office, which plans to unveil the new management program next week, says it reduced by 15,000 square feet the amount of space it occupied in its own buildings in Boston and has saved 16% in labor and administrative costs.
The management program, which the Chicago-based real-estate investment trust plans to roll out nationwide, will "provide us on an ongoing basis with the lowest cost of operations in the business," says Mr. Zell. Putting the system in place in Boston caused "an enormous amount of brain damage" but has been "wildly successful."
Youthful Makeover
A former assisted-living facility near downtown Denver is getting a major face-lift.
Waterton Associates LLC, which recently purchased the facility known as Park Avenue Tower for $14 million, is spending another $3 million to transform the 152-unit, 21-story housing project for seniors into 158-unit apartment complex aimed at young urban professionals. The Chicago-based real-estate investment firm is adding six penthouse units on the top floor, where seniors once ate their meals in the dining hall, as well as a recreation facility, outdoor pool and spa. About three-fourths of the units will be one-bedroom apartments.
"For single people who want to live downtown, this is perfect," says David Schwartz, managing member of Waterton. He adds that the tower also will undergo a name change by the time it opens next spring.
But some wonder about the tower's leasing prospects, given that more than 4,200 rental units are currently under construction or are planned in the downtown Denver area, according to the Downtown Denver Partnership Inc., a nonprofit business group. Atlanta-based REIT Post Properties Inc. is in the midst of building 464 rental units -- the second phase of its 974-unit Post Uptown Square development -- not far from Waterton's property.
With the sluggish economy in Denver, "a number of rental projects slated and coming online and vacancies rising, there's some worry now that the rental market is saturated," says Steve Gordon of Denver's Community Planning & Development Agency.
But Mr. Schwartz isn't worried. The tower offers views of the Rockies and downtown that other developments in the area do not, he boasts. Moreover, "our one-bedroom units will be at least $100 less than the competition and the two-bedrooms $200 less than the competition," he says. "The market will be soft for a couple of years, but we're able to get it priced in such a way to make it work."
Mr. Schwartz says the project needs to bring in an average rent of $1.25 a square foot to make a profit, whereas new apartments in the area are renting for between $1.75 to $2 a square foot.
Aloha, Shoppers
It's a case of good news and bad news for the retail industry in Hawaii.
First, the bad news: Retail spending in the Honolulu area fell nearly 7% to $6.98 million in the first half of the year from the year-earlier period. Now, the good news: Despite the drop in spending, the vacancy rate for retail properties on the island of Oahu fell to about 5% at the end of last month from about 6% a year earlier, according to a report released by Colliers Monroe Friedlander Inc., a Honolulu-based real-estate brokerage firm.
The reason, says Mike Hamasu, research director at Colliers Monroe Friedlander, is that many landlords preferred to give up a bit of rental income in order to fill their properties. As a result, the monthly average asking rent for retail property on Oahu fell to $2.61 a square foot last month, from $2.75 a square foot.
There are a few more signs of good news for retailers and property owners, adds Mr. Hamasu. The number of airline passengers arriving in Honolulu has been on the rise, as have hotel occupancy rates.
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