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CT Commercial Real Estate Conference

CT Commercial Real Estate Conference. An Overview of Office Values in Fairfield Coun ty. Agenda. Market Overview Vacancy Analysis Value Analysis What the future brings Questions & Discussions Send me your email for a copy of the link to the statistics . Here is my Email.

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CT Commercial Real Estate Conference

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  1. CT Commercial Real Estate Conference An Overview of Office Values in Fairfield County Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  2. Agenda • Market Overview • Vacancy Analysis • Value Analysis • What the future brings • Questions & Discussions • Send me your email for a copy of the link to the statistics Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  3. Here is my Email • Jgage@cresllc.com Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  4. Summary of the StatisticsData Provided by Jones Lang LaSalle Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  5. So what’s happening? • There is not as much gross leasing activity • 1.2 mm sq. ft. vs. 3-4 mm sq. ft. • There is plenty of new space on the market • Speculative development • Renovated development • Tenants are staying where they are Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  6. Why is demand off? Leases still expire 5-10 yrs. • 10% of the market should be in play for a move each year • Tenants have no confidence in their businesses • Employment is down, so few companies are expanding • Technology is supporting the virtual office environment • Higher operating efficiency Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  7. What were/are the significant deals? • GeRe leaves 695 East Main Street empty • Purdue Pharma subleases back space it leased to UBS in the Purdue building • Sun Products purchases the Unilever soap products line and relocates to Wilton • UBS holds onto space it had on the market for sublease • Starwood is looking to come to CT • GE continues to shrink and consolidate • Hospitals take more space Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  8. Value = f(net rent, leverage, return on equity) • Net rents are trending down • Loan to value ratios are trending down • Interest rates are trending up • Cap rates are trending up • Equity is sitting on the sideline……waiting for higher returns Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  9. Components of Gross Net Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  10. Market shift in value comparison Two Years Ago This Year Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  11. Market shift in value comparison (cont.) Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  12. Why are net rents trending down? • Demand is down • There is not much movement in the market • Tenants are staying put • Short term renewals • Companies are not in a growth mode • Buildings with above market rents can afford to drop prices • The buildings that have space want to fill it • Concessions are high • Effective rents are lower Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  13. Real question from a landlord Question:Where should I be making deals on my empty space? Answer: 20% less than what you would do to keep a tenant Why?... “That’s what other landlords are doing to take your tenants away and that’s what you need to do to take theirs.” Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  14. What is different about this time vs. last time? • There is little new development and no overbuilding • Rents were in a steep incline before the drop • Some property was selling at above replacement cost • Other property was selling based on speculative income • Values were escalated without regard to basic fundamentals Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  15. Projections/Conclusions • More space will come on the market • Prices will continue to drop • The good stuff will lease first • Buildings will trade at a discount to replacement cost until supply diminishes • Rents will stabilize at a number that justifies new construction, 9-11% cap on cost. Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

  16. Special Thanks to • Jovani Rampersad and Stacey Cassidy who helped with the Statistics • Jones Lang LaSalle who kept an open mind • Glen Larson UCONN MBA who fixed my slides! • Thank you for your participation in today's events!! Jeffrey H. Gage jgage@cresllc.com Competitive Real Estate Strategies

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