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The morning after
The Bay Area's dramatic office market decline is nearly over. But it will be a long slog until full recovery five or six years out.
The Bay Area's dramatic office market decline is nearly over. But it will be a long slog until full recovery five or six years out.
By Steven Brull
March 2003
亚博赞助欧冠机构投资者杂志
Cruise along Highway 101, midway between San Francisco and San Jose, and the region's real estate debacle is hard to miss. Start with the three new class-A office buildings, the former headquarters of bankrupt Internet service provider Excite@Home, that sit vacant in Redwood City.
业务对TMG合作伙伴来说，中点技术公园的所有者开发商，13栋建筑，1300万平方米的综合体，在红木市蔓延超过45亩。这是80％的空缺。租金现金流是如此贫血，在1月初，借入1.5亿美元的TMG合作伙伴的CréditLyonnais，将未指明的债务交换，并与海湾地区开发商联合合资。这笔交易给银行减少了物业收入，但TMG合作伙伴首席执行官Michael Covarrubias更喜欢看到光明的一面。“如果银行不舒服，他们更喜欢丧工，”他说。“CréditLyonnais认为它具有质量资产的股份，可以重新定位赚钱。”CréditLyonnais拒绝发表评论。
During the past three years, commercial property values from Stamford to Seattle have fallen in a downturn that has left few markets unscathed. None has suffered more than the Bay Area's. With 227 million square feet of office space in the region, which encompasses San Francisco, the East Bay, the Peninsula and Silicon Valley, the Bay Area ranks as the fourth-largest office market in the country, behind New York, Chicago and Los AngelesOrange County.
After ballooning from 1.6 percent in the first quarter of 2000 to 14.8 percent at the end of 2001, vacancy rates in San Francisco's central business district rose to 19.5 percent at the end of 2002. By contrast, at the nadir of the 1990'92 recession, San Francisco vacancy rates reached 12 percent. Rents dropped by about 10 percent last year after plummeting nearly 50 percent the year before. In 2003 they are likely to fall a further 5 to 10 percent, analysts say.
一些当地房地产经纪人宣称看到希望的迹象。“这令我们发现的一些均衡，”旧金山的顶级经纪人，纽约弗朗西亚/ ESG的顶级经纪人说，上个月同意与洛杉矶基本的CB理查德埃利斯合并。“这是因为租金率，虽然仍然向下培训，但却阻止了他们的戏剧性下降并开始稳定。”
But the particular weaknesses of the Bay Area market -- a painful hangover from the dot-com bust, high unemployment and sluggish job growth -- portend a protracted recovery. John Herold, a senior analyst at Green Street Advisors in Newport Beach, California, reckons it could take five or six years before the region stabilizes at a 10 to 12 percent vacancy rate. That would be twice as long as is expected nationwide.
“在前一个周期中，开发人员通过在规范上建造了麻烦，”Covarrubias说。“这次，我们没有建立许多规范建筑，但我们为规范公司建造。”
In the Bay Area over the past year, 5 million square feet of new space went on the market. Close to 40 percent of new buildings remain vacant in San Francisco and Silicon Valley, while just over half of new offices in the East Bay are empty, as are 78 percent of those in the Peninsula. In San Francisco itself about 8.5 million square feet of space came on the market over the past decade, including projects due to be completed in the next two months, reports Colin Yasukochi, research director at Grubb & Ellis Co., a Northbrook, Illinoisbased full-service real estate company. He estimates that it cost about $2.5 billion to build the space, which might be worth one third to one half that today.
New and renewing tenants benefit from lower rents, of course. But in this shakeout in values, the losers far outnumber the winners. Bay Area developers and landlords, real estate investment trusts with a presence in the region and lenders have all been hurt by the steep decline in property values. Among the hardest-hit REITs is the nation's biggest, Chicago-based Equity Office Properties Trust, which has 20 percent of its office space in San Francisco. The REIT has seen its share price fall 17 percent during the past year.
西方任务属性,其口号是“我们Build the Buildings for High-Tech Companies that Build the Internet," is a Cupertino, Californiabased REIT whose 7 million square feet of commercial research and development space is all in Silicon Valley. Its shares tumbled 20 percent over the past year. Although Mission West's funds from operations inched up to $117 million in 2002 from $115 million the year before, investors focused on the REIT's occupancy rate, which fell to 84 percent from 97 percent.
最脆弱的当地贷款人是区域银行。例如，Palo Altobased Greater Bancorp在湾区商业房地产中占地47亿美元贷款的一半。去年，该银行报告了56％的核心净收入跃升，达到12.43亿美元，从一次性收益和2001年制定的智能赌注令人愉快的赌注，以较低的价格购买抵押贷款支持和再融资。该战略已经运行其课程，旨在夏洛特委员会，洛杉矶杰弗里斯＆Co.的高级银行和节俭分析师。她认为，银行的房地产信贷损失将达到今年的约1.58亿美元，而去年5980万美元。过去一年，银行的股票已陷入37％。Gryer Gay Bancorp Ceo David Kalkbrenner表示，他的银行对借款人和当地市场的了解降低了风险。“我们通过非常小心的人来管理风险，不仅是与交易进行业务。我们的房地产中有超过50％的人占用。”
Not surprisingly, the real estate loan portfolios of Bank of America Corp. and Wells Fargo & Co. are more diversified than those of most regional lenders. "There is an increasing trend of bad loans but it's very, very mild so far," says Tanya Azarchs, senior bank rating analyst at Standard & Poor's.
从房东的角度来看，市场在痛苦的水平下触底。平均空缺率为20％，高于全国平均水平的16％。租金在旧金山市中心的一流空间下降至每平方英尺约30美元，硅谷26美元，分别于2000年第四季度达到67.90美元至51.73美元。
A weak regional economy will continue to depress commercial real estate values. At the end of last year, regional unemployment was at its highest levels since the early '90s recession -- 6.1 percent in San Francisco County and 7.5 percent in Silicon Valley's Santa Clara County. The region's industrial companies must grapple with the maturation of the PC industry and the increasing outsourcing of manufacturing to Asia.
"We'll need to see a real recovery in technology spending and capital expenditures to see companies like Cisco Systems and others growing and needing more space," says Steve Sakwa, a REIT analyst with Merrill Lynch & Co. "That's several years out."
另一个否定：湾区住宅房地产价格仍然很高，由低利率和资本从股票到房地产的流动推动。高价价格倾向于抑制办公空间的需求，因为它们使该地区对考虑扩展或搬迁的公司的吸引力。
To be sure, the Bay Area isn't the only region suffering from a commercial real estate downturn. Vacancy rates in high-tech hubs such as suburban Boston, Seattle and Austin, Texas, are also running above 20 percent, as they are in overbuilt markets like Atlanta and Dallas. But the Bay Area experience may be the most extreme. As the epicenter of the late-1990s technology bubble, the region attracted tens of billions of dollars in venture capital, propelling real estate values, along with Nasdaq stocks, to absurd levels. In October 2000, Commerce One, a business-to-business e-commerce firm, paid $115 per square foot for 13th-floor space at One Market Plaza in downtown San Francisco. Today the space might rent for half that, and Commerce One, which lost $590 million last year, is looking to buy out its lease. Overall commercial property values reached their peak in the second quarter of 2000, when average asking rental rates in the city's central business district hit $78.21 a square foot.
Even as the bubble expanded, developers thought they were being prudent by avoiding the mistakes of the late 1980s and early '90s, when many enjoyed easy access to capital and built on spec. This time around there was much less speculative development, and builders insisted that tenants have high-quality credit or pay higher deposits. Lenders also demanded that developers put more skin in the game. They tightened loan-to-equity rates to 70 percent, from 80 percent, and required that developers use cash-generating properties to support new projects.
Still, the dot-com frenzy got the best of almost everyone. Venture-backed start-ups demanded ever-larger tracts of space, much of it to be held in reserve for future growth. Developers believed that their dot-com tenants were creditworthy -- after all, their cash was real, at least until they started to go belly up.
不可避免的结果：空置空间的巨大露天。根据Insignia / ESG的数据，市场上市场上市的500万平方英尺的新办公空间推动了4560万平方英尺，占总量的18.75％。在过去的20年中，旧金山每年的平均空间平均吸收了100万平方英尺;2000年，这一数字增长超过400万平方英尺。
Downtown San Francisco fared somewhat better than Silicon Valley because its economy is more diversified. But it has plenty of high-profile disasters, including Equity Office Property's Foundry Square. The REIT and its partner, Wilson/Equity Office, originally planned to construct four office buildings with a total of 1.2 million square feet two blocks south of Market Street, the busy boulevard that bisects the business district into north and south.
2000年底，Sun Microsystems签署了四个铸造广场建筑中的两座租约，据报道，每平方英尺超过50美元，大约460,000平方英尺的空间，年租金超过2300万美元。去年，随着自由跌倒的业务，Sun支付了8500万美元的eop，以从一个物业中提取自由，尚未建造，拥有327,000平方英尺的空间。但阳光仍然租赁在130,000平方英尺的建筑上，即接近完成。如果公司决定释放那个空间，尽可能多，这可能会在整个街道上的复杂新开业的500,000平方英尺的建筑物上造成严重破坏，建在规格和85％的空置。
“由于太阳的收购，我们将在总体上做得很好，但一些租金将比我们想象的要低得多，”股权办公楼的股权（CEO）主席（兼首席执行官）说，“Richard Kincaid说。
Some analysts suggest that EOP is downplaying the severity of its problems. For instance, the REIT reported that funds from operations rose to $1.51 billion in 2002, up from $1.18 billion a year earlier. But analysts point out that some 10 percent of these funds resulted from termination fees, a nonrecurring event. EOP calculates that funds from operations will decline to between $2.80 and $3.00 a share in 2003, down from $3.21 in 2002. "Everyone at Equity is surprisingly optimistic, but I can't imagine it's going to turn out as well as they expect," says Rob Haines, a real estate analyst at Credit Sights in New York City. "They are particularly leveraged in the Bay Area, and their whole business depends on job growth."
Yet economists project that any improvement in employment levels in the hard-hit Bay Area would lag behind a nationwide upturn by about a year because of the region's dependence on the struggling technology sector. History, however, offers developers reason for hope. The Bay Area enjoys superb economic fundamentals, including a highly educated workforce, an attractive quality of life and a culture of entrepreneurship and innovation. "We've not yet identified the next new thing," says TMG Partners' Covarrubias. "But when it occurs, it always comes faster and sooner than people expect."
Sounds like a developer.
By Steven Brull
March 2003
亚博赞助欧冠机构投资者杂志
Cruise along Highway 101, midway between San Francisco and San Jose, and the region's real estate debacle is hard to miss. Start with the three new class-A office buildings, the former headquarters of bankrupt Internet service provider Excite@Home, that sit vacant in Redwood City.
业务对TMG合作伙伴来说，中点技术公园的所有者开发商，13栋建筑，1300万平方米的综合体，在红木市蔓延超过45亩。这是80％的空缺。租金现金流是如此贫血，在1月初，借入1.5亿美元的TMG合作伙伴的CréditLyonnais，将未指明的债务交换，并与海湾地区开发商联合合资。这笔交易给银行减少了物业收入，但TMG合作伙伴首席执行官Michael Covarrubias更喜欢看到光明的一面。“如果银行不舒服，他们更喜欢丧工，”他说。“CréditLyonnais认为它具有质量资产的股份，可以重新定位赚钱。”CréditLyonnais拒绝发表评论。
During the past three years, commercial property values from Stamford to Seattle have fallen in a downturn that has left few markets unscathed. None has suffered more than the Bay Area's. With 227 million square feet of office space in the region, which encompasses San Francisco, the East Bay, the Peninsula and Silicon Valley, the Bay Area ranks as the fourth-largest office market in the country, behind New York, Chicago and Los AngelesOrange County.
After ballooning from 1.6 percent in the first quarter of 2000 to 14.8 percent at the end of 2001, vacancy rates in San Francisco's central business district rose to 19.5 percent at the end of 2002. By contrast, at the nadir of the 1990'92 recession, San Francisco vacancy rates reached 12 percent. Rents dropped by about 10 percent last year after plummeting nearly 50 percent the year before. In 2003 they are likely to fall a further 5 to 10 percent, analysts say.
一些当地房地产经纪人宣称看到希望的迹象。“这令我们发现的一些均衡，”旧金山的顶级经纪人，纽约弗朗西亚/ ESG的顶级经纪人说，上个月同意与洛杉矶基本的CB理查德埃利斯合并。“这是因为租金率，虽然仍然向下培训，但却阻止了他们的戏剧性下降并开始稳定。”
But the particular weaknesses of the Bay Area market -- a painful hangover from the dot-com bust, high unemployment and sluggish job growth -- portend a protracted recovery. John Herold, a senior analyst at Green Street Advisors in Newport Beach, California, reckons it could take five or six years before the region stabilizes at a 10 to 12 percent vacancy rate. That would be twice as long as is expected nationwide.
“在前一个周期中，开发人员通过在规范上建造了麻烦，”Covarrubias说。“这次，我们没有建立许多规范建筑，但我们为规范公司建造。”
In the Bay Area over the past year, 5 million square feet of new space went on the market. Close to 40 percent of new buildings remain vacant in San Francisco and Silicon Valley, while just over half of new offices in the East Bay are empty, as are 78 percent of those in the Peninsula. In San Francisco itself about 8.5 million square feet of space came on the market over the past decade, including projects due to be completed in the next two months, reports Colin Yasukochi, research director at Grubb & Ellis Co., a Northbrook, Illinoisbased full-service real estate company. He estimates that it cost about $2.5 billion to build the space, which might be worth one third to one half that today.
New and renewing tenants benefit from lower rents, of course. But in this shakeout in values, the losers far outnumber the winners. Bay Area developers and landlords, real estate investment trusts with a presence in the region and lenders have all been hurt by the steep decline in property values. Among the hardest-hit REITs is the nation's biggest, Chicago-based Equity Office Properties Trust, which has 20 percent of its office space in San Francisco. The REIT has seen its share price fall 17 percent during the past year.
西方任务属性,其口号是“我们Build the Buildings for High-Tech Companies that Build the Internet," is a Cupertino, Californiabased REIT whose 7 million square feet of commercial research and development space is all in Silicon Valley. Its shares tumbled 20 percent over the past year. Although Mission West's funds from operations inched up to $117 million in 2002 from $115 million the year before, investors focused on the REIT's occupancy rate, which fell to 84 percent from 97 percent.
最脆弱的当地贷款人是区域银行。例如，Palo Altobased Greater Bancorp在湾区商业房地产中占地47亿美元贷款的一半。去年，该银行报告了56％的核心净收入跃升，达到12.43亿美元，从一次性收益和2001年制定的智能赌注令人愉快的赌注，以较低的价格购买抵押贷款支持和再融资。该战略已经运行其课程，旨在夏洛特委员会，洛杉矶杰弗里斯＆Co.的高级银行和节俭分析师。她认为，银行的房地产信贷损失将达到今年的约1.58亿美元，而去年5980万美元。过去一年，银行的股票已陷入37％。Gryer Gay Bancorp Ceo David Kalkbrenner表示，他的银行对借款人和当地市场的了解降低了风险。“我们通过非常小心的人来管理风险，不仅是与交易进行业务。我们的房地产中有超过50％的人占用。”
Not surprisingly, the real estate loan portfolios of Bank of America Corp. and Wells Fargo & Co. are more diversified than those of most regional lenders. "There is an increasing trend of bad loans but it's very, very mild so far," says Tanya Azarchs, senior bank rating analyst at Standard & Poor's.
从房东的角度来看，市场在痛苦的水平下触底。平均空缺率为20％，高于全国平均水平的16％。租金在旧金山市中心的一流空间下降至每平方英尺约30美元，硅谷26美元，分别于2000年第四季度达到67.90美元至51.73美元。
A weak regional economy will continue to depress commercial real estate values. At the end of last year, regional unemployment was at its highest levels since the early '90s recession -- 6.1 percent in San Francisco County and 7.5 percent in Silicon Valley's Santa Clara County. The region's industrial companies must grapple with the maturation of the PC industry and the increasing outsourcing of manufacturing to Asia.
"We'll need to see a real recovery in technology spending and capital expenditures to see companies like Cisco Systems and others growing and needing more space," says Steve Sakwa, a REIT analyst with Merrill Lynch & Co. "That's several years out."
另一个否定：湾区住宅房地产价格仍然很高，由低利率和资本从股票到房地产的流动推动。高价价格倾向于抑制办公空间的需求，因为它们使该地区对考虑扩展或搬迁的公司的吸引力。
To be sure, the Bay Area isn't the only region suffering from a commercial real estate downturn. Vacancy rates in high-tech hubs such as suburban Boston, Seattle and Austin, Texas, are also running above 20 percent, as they are in overbuilt markets like Atlanta and Dallas. But the Bay Area experience may be the most extreme. As the epicenter of the late-1990s technology bubble, the region attracted tens of billions of dollars in venture capital, propelling real estate values, along with Nasdaq stocks, to absurd levels. In October 2000, Commerce One, a business-to-business e-commerce firm, paid $115 per square foot for 13th-floor space at One Market Plaza in downtown San Francisco. Today the space might rent for half that, and Commerce One, which lost $590 million last year, is looking to buy out its lease. Overall commercial property values reached their peak in the second quarter of 2000, when average asking rental rates in the city's central business district hit $78.21 a square foot.
Even as the bubble expanded, developers thought they were being prudent by avoiding the mistakes of the late 1980s and early '90s, when many enjoyed easy access to capital and built on spec. This time around there was much less speculative development, and builders insisted that tenants have high-quality credit or pay higher deposits. Lenders also demanded that developers put more skin in the game. They tightened loan-to-equity rates to 70 percent, from 80 percent, and required that developers use cash-generating properties to support new projects.
Still, the dot-com frenzy got the best of almost everyone. Venture-backed start-ups demanded ever-larger tracts of space, much of it to be held in reserve for future growth. Developers believed that their dot-com tenants were creditworthy -- after all, their cash was real, at least until they started to go belly up.
不可避免的结果：空置空间的巨大露天。根据Insignia / ESG的数据，市场上市场上市的500万平方英尺的新办公空间推动了4560万平方英尺，占总量的18.75％。在过去的20年中，旧金山每年的平均空间平均吸收了100万平方英尺;2000年，这一数字增长超过400万平方英尺。
Downtown San Francisco fared somewhat better than Silicon Valley because its economy is more diversified. But it has plenty of high-profile disasters, including Equity Office Property's Foundry Square. The REIT and its partner, Wilson/Equity Office, originally planned to construct four office buildings with a total of 1.2 million square feet two blocks south of Market Street, the busy boulevard that bisects the business district into north and south.
2000年底，Sun Microsystems签署了四个铸造广场建筑中的两座租约，据报道，每平方英尺超过50美元，大约460,000平方英尺的空间，年租金超过2300万美元。去年，随着自由跌倒的业务，Sun支付了8500万美元的eop，以从一个物业中提取自由，尚未建造，拥有327,000平方英尺的空间。但阳光仍然租赁在130,000平方英尺的建筑上，即接近完成。如果公司决定释放那个空间，尽可能多，这可能会在整个街道上的复杂新开业的500,000平方英尺的建筑物上造成严重破坏，建在规格和85％的空置。
“由于太阳的收购，我们将在总体上做得很好，但一些租金将比我们想象的要低得多，”股权办公楼的股权（CEO）主席（兼首席执行官）说，“Richard Kincaid说。
Some analysts suggest that EOP is downplaying the severity of its problems. For instance, the REIT reported that funds from operations rose to $1.51 billion in 2002, up from $1.18 billion a year earlier. But analysts point out that some 10 percent of these funds resulted from termination fees, a nonrecurring event. EOP calculates that funds from operations will decline to between $2.80 and $3.00 a share in 2003, down from $3.21 in 2002. "Everyone at Equity is surprisingly optimistic, but I can't imagine it's going to turn out as well as they expect," says Rob Haines, a real estate analyst at Credit Sights in New York City. "They are particularly leveraged in the Bay Area, and their whole business depends on job growth."
Yet economists project that any improvement in employment levels in the hard-hit Bay Area would lag behind a nationwide upturn by about a year because of the region's dependence on the struggling technology sector. History, however, offers developers reason for hope. The Bay Area enjoys superb economic fundamentals, including a highly educated workforce, an attractive quality of life and a culture of entrepreneurship and innovation. "We've not yet identified the next new thing," says TMG Partners' Covarrubias. "But when it occurs, it always comes faster and sooner than people expect."
Sounds like a developer.