While the changes over the last five years have inevitably created volatile market conditions for owners and developers of life science real estate, the best assets in the prime biotech clusters of the U.S., including Boston/Cambridge, New York, the San Francisco Bay Area, San Diego and the Research Triangle of North Carolina, appear to have withstood the recession and unsteady recovery fairly well, especially as compared with the larger office and flex space property markets.

According to CoStar data, the number of office/flex sales transactions involving biotech, lab and RD space actually saw five quarters of growth between mid-2010 and mid-2011, when the downturn was falling hard on most office landlords. Like other property types, the number of deals has fallen slightly over the last two or three quarters, reflecting the uncertainty of the broader U.S. and global economy, the slowed pace of capital markets and uncertainty of future government financing for biotech research and development.

J.P. Morgan bought the buildings from Canyon Capital Realty Advisors LLC, which manages a portfolio for the California Public Employees Retirement Systems (CalPERS), at a quite compressed actual capitalization rate of about 4.7%. About 30% of the 502,000-square-foot Wharfside and 400,000 Berry St buildings are leased to various life sciences tenants.

On the leasing front, San Francisco-based BioMed Realty Trust Inc. is seeing healthy activity, signing a new long-term pact with a private biotech company which it declined to identify for 220,000 square feet at its Pacific Research Center campus in Newark, CA, in San Francisco’s East Bay.

BioMed Realty has emerged as a major player in recent years to compete with life science real estate industry leaders Alexandria Real Estate Equities Inc. (NYSE: ARE) and HCP Inc. (NYSE: HCP). BioMed Realty last month agreed to acquire the 287,000-square-foot Cambridge Place in Cambridge for $119 million, bringing the REIT’s holdings in the nation’s top bio-cluster to about 3 million square feet.

However, biotech and lab property owners are facing secular changes in their tenants’ industry since the Great Recession.

Cost reduction has been a major driver in location considerations over the last five years, while major biotech companies have been downsizing and returning space to the market for sublease. The big pharmaceutical companies have been consolidating, with more mergers expected, resulting in a downsizing of property requirements in many cases. Life science companies ranging from well-established industry leaders to startups have delayed leasing or expansion decisions in the face of the thus-far tepid recovery.

Another major factor affecting U.S. investment is global competition. Foreign direct investment in new pharmaceutical RD, life science office and manufacturing locations has shifted since the downturn, according to a recent study by Jones Lang LaSalle. The U.S. still led by far with $112 billion in investment between the study period of 2003-10, more than double that of Ireland, the nearest rival, according to JLL. China, India and Singapore have emerged as key markets since 2007 due to the quest for manufacturing cost reduction and Asia’s own growing domestic market for sales and RD, however, JLL reported. Brazil, Canada and Switzerland also made major gains in market share in the last half-decade.

That said, demand has been propped up by limited deliveries of new biotech space, which have been flat since late 2008. Existing properties have seen positive net absorption for five of the last six quarters, reaching a high of almost 657,300 square feet in fourth-quarter 2011, the highest level since second-quarter 2008, according to CoStar data.

Since reaching a five-year high of about 18% nationally in late 2009 following a flurry of new supply deliveries, the vacancy rate has slowly drifted down, reaching to 16.6% in the fourth quarter 2011 The availability rate, which reached a decade high of 23.6% in mid-2010 as landlords prepared for tenant departures, has fallen recently to below 21%.

The numbers are more volatile for quality assets in specific regions of the cluster-driven sector. For example, in the three submarkets that make up the Cambridge market in Boston, the vacancy rate fell to as low as 6.5% in early 2011 from a high of 21% four years ago and currently stands at 8.8%.

And now, there’s rising competition from developers in other parts of the country trying to get in on the action, including such previously overlooked markets as southern Florida and central New Jersey.

In Miami, Wexford Science Technology is developing the University of Miami Life Science Technology Park in the city’s fledgling Health District. The 252,000-square-foot first-phase building is currently 63% occupied about six months after opening, with tenants including Advanced Pharma CR, LLC, Community Blood Centers of Florida, the University of Miami Tissue Bank, Spain-based technology firm Ándago and medical device firm DayaMed taking up residence near the university. UMLSTP’s master plan includes five buildings comprising between 1.6 and 2 million square feet of space at build out.

In Port St. Lucie, FL, the Tradition Center for Innovation (TCI) recently opened a new 100,000-square-foot facility for Vaccine Gene Therapy Institute (VGTI) Florida in TCI’s 150-acre research complex. Martin Health System, are scheduled to begin work on its 82-bed acute care and clinical trials hospital at the complex this month, and Mann Research Center will begin work on an MOB in August.

But the economic slowdown and other factors have exacted a toll on the industry from Wall Street analysts. Moody’s Investors Service last November its outlook for the U.S. life science industry to stable from positive due to slower-than-expected growth and uncertainty over U.S. and European funding for academic research, which has caused researchers and manufacturers to reduce spending, combined with relatively flat demand from pharmaceutical customers, which represent 25% of industry revenue.

“Regardless of how the US government actually funds science research, academic customers will be cautious with their spending until there is clarity around 2012 and 2013 budgets,” said Moody’s Vice President and Senior Analyst Jessica Gladstone.

Article source: http://www.costar.com/News/Article/Biotech-Lab-Property-Owners-Holding-Their-Own-Despite-Shifting-Landscape-for-Tenants/136484

Just like their brethren to the south, monthly sales of new and existing homes in the Bay area surged in December, fueled by a record percentage of sales to investors according to real estate information provider DataQuick, but the lower prices they paid for their purchases helped push overall prices down.

A total of 7,494 new and resale homes were sold in December in the nine county Bay Area, which includes Alameda, Contra Costa, Marin, Napa, Santa Clara, San Francisco, San Mateo, Solano and Sonoma Counties. That was 18.6 percent higher than the 6,317 home sales in November and 4.4 percent higher than the 7,178 sales posted in December of 2010.

Home sales typically increase 9.9 percent from November to December in the Bay area with sales varying from a low of 5,065 in 2007 to a high of 12,349 in 2003 with a monthly average of 8,643 sales.

John Walsh, president of DataQuick, stated, “We’ll remember 2011 as much for what didn’t happen as for what did. People put discretionary buying and selling on hold, except at the very top of the market. The spectacular gains in affordability, based on the combination of lower prices and ultra-low interest rates, was largely theoretical for many people because it was so hard to get a mortgage. That, combined with negative equity and economic uncertainty, kept people away.”

The median sales price for new and resale homes and condos in December fell 3.5 percent to $351,500, down from $363,500 in November. The median price was 6.3 percent lower than in December of 2010, when the median price stood at $375,000. It was the 15th consecutive month that home prices have declined year-over-year.

By comparison, the lowest median price posted during the current real estate cycle was $290,000 in March 2009, while the peak median price was $665,000 in June/July 2007.

Distressed home sales accounted for 49.6 percent of the Bay Area’s re-sale market last month, up from 45.9 percent in November. Foreclosure re-sales accounted for 28.6 percent of all existing home sales in December, up from 26.5 percent in November, while short sales made up about 21.0 percent of the Bay Area’s existing homes sales last month, down from 21.3 percent in November.

Foreclosure re-sales peaked at 52.0 percent in February 2009 while the rate of foreclosure re-sales has been about ten percent over the last 15 years.

Cash buyers accounted for 27.4 percent of the homes sold for the month, up from 27.1 percent in November, paying a median price of $215,000 for their purchases.

Absentee buyers, usually investors and vacation home buyers, accounted for a record 23.8 percent of all sales, up from 21.7 percent in November, paying a median price of $225,000 for the homes they purchased which was down from $250,000 in November. Sales of homes priced under $300,000, the primary market for investors, were 15.2 percent higher than they were a year ago.

Tags: Bay Area, DataQuick, home sales, home prices, spring selling season, median sales price, new homes, re-sale homes

Source:
Dataquick

Article source: http://loanrateupdate.com/mortgages/investors-help-push-bay-area-sales-higher-prices-lower

SAN FRANCISCO, Aug 22, 2011 (BUSINESS WIRE) –
Luxury home values rose in Los Angeles and San Francisco in the second
quarter of 2011 compared to the first quarter, but declined in San
Diego, according to the First Republic Prestige Home Index(TM) by First
Republic Bank, a leading private bank and wealth management company.

In the quarter ended June 30, 2011, the Index indicated the following:

–
Los Angeles area values climbed 1.7% from the first quarter of 2011
and increased 1.8% from the second quarter a year ago. The average
luxury home in Los Angeles is now $2.0 million.

–
San Diego area values decreased 1.2% from the first quarter and fell
6.0% year-over-year. The average luxury home in San Diego is now $1.6
million.

–
San Francisco Bay Area values rose 0.6% from the first quarter and
were 3.1% lower compared to a year ago. The average luxury home in San
Francisco is now $2.5 million.

“Luxury home prices were largely stable in the second quarter of 2011,”
said Katherine
August-deWilde, President and Chief Operating Officer of First
Republic Bank. “Certain communities in California, particularly those in
and around the Silicon Valley and parts of San Francisco, showed robust
activity. Real estate agents are now reporting that economic uncertainty
and stock market volatility are impacting some buyers, despite the
all-time low mortgage interest rates.”

First Republic Bank produces the Prestige Home Index each quarter with
Fiserv CSW Inc., a leading provider of automated property valuation
services and home price metrics to U.S. financial institutions.
Historical results of the Index, which has tracked luxury homes since
1985, are accessible at
www.firstrepublic.com .
First Republic Bank is an active lender in the luxury home market for
both primary residences and vacation homes.

Los Angeles Area Values

Los Angeles values rose 1.8% in the second quarter of 2011 from the same
period a year ago. The gain was the first on a year-over-year basis in
the past 14 quarters.

“The upper end of the market is very strong for well-priced homes,” said
David Mossler of Teles Properties in Beverly Hills. “There are four to
five buyers for every house. There is very little quality supply. I just
sold homes for $7.8 million and $8.6 million to all-cash buyers. If a
home is properly priced, demand is very strong. But the home has to be
well-priced.”

Charles Pence of Pence Hathorn Silver in Santa Monica said that prices
are varying widely by community. “More than ever before, we have highly
attractive micro markets with strong activity and price gains, but the
surrounding markets can often be flat. This market is driven more by a
lack of inventory than anything else. We’ve had some big sales in terms
of price. It is hard to predict what someone will pay for something now
at the upper end.”

Armen Sarkissian of Prudential California Realty in Pasadena said
pricing strategy is key for sellers. “If the price is right, people will
buy. There are a lot of buyers for $6 million to $7 million homes, but
they are scrutinizing every deal. Because buyers are also concerned
about purchasing a depreciating asset, the price has to be below the
comparable sales in the past three to six months.”

San Diego Area Values

In San Diego, prices continued a downward trend. On a year-over-year
basis, second quarter prices fell 6% compared to the second quarter of
2010.

Mo Loghavi of Prudential California Realty in La Jolla said he expects
prices to drop further. “People in the $1.5 million to $5 million want
to continue downsizing, but there are no trade-up buyers. We still have
another 12 to 14 months of inventory. By the end of 2012, we will see a
little more movement, but I haven’t seen the light at the end of the
tunnel for the luxury market.”

Farid Khayamian of RE/MAX Associates in La Jolla also said prices may
continue to weaken. “In San Diego County, we have roughly 23 months of
inventory for homes over $2 million,” he said. “Average supply is about
six months. Too much supply and not enough demand for higher end homes
will cause prices to soften. Low prices and high inventory are
encouraging many investors to make all-cash purchases.”

San Francisco Bay Area Values

San Francisco Bay Area values reversed course in the second quarter,
rising 0.6% after falling 4.3 percent in the first quarter of 2011. The
strong tech sector in Silicon Valley strengthened the market.

Ken DeLeon of Keller Williams Realty in Palo Alto said the market is
very strong. “Palo Alto is still really hot,” he said. “Palo Alto is
actually over 2006 prices. Interest is as good as I’ve seen it in 10
years. There was a home in Palo Alto that had 32 offers in the past
week. Palo Alto is leading the pack in the surrounding communities. I
expect to see Atherton, Menlo Park and Los Altos picking up by spring.”

In San Francisco, the market appeared to be slowing. “The second quarter
was starting to look better,” said Joel Goodrich of TRI Coldwell Bank in
San Francisco. “We had less inventory and more sales, but that was
before the recent stock market volatility. In the second quarter,
investor confidence was up in San Francisco, with the high tech boom in
Silicon Valley and parts of the city. I’m still very bullish on San
Francisco and the Bay Area over the next one to five years, assuming a
return to normal economic cycles.”

In Marin County, the luxury market was mixed. “In the mid-range, the
market is active,” said Pat Montag of McGuire Real Estate in Tiburon. “I
was surprised by the three recent listings that went into escrow in
Tiburon and Belvedere between $3 million and $7 million. For homes over
$15 million, we’re seeing some significant reductions, but many home
were overpriced.”

About The First Republic Prestige Home Index

The First Republic Prestige Home Index(TM) is the first statistical model
of its kind customized to measure changes in homes valued at more than
$1 million in key California urban markets. Some common features of
luxury homes in the Index: 3,000 to 6,000 square feet, three to six
bedrooms, and three to six bathrooms. San Francisco Bay Area properties
include a cross-section of luxury homes in Alamo, Atherton, Belvedere,
Danville, Healdsburg, Hillsborough, Lafayette, Los Altos, Los Gatos,
Mill Valley, Moraga, Orinda, Palo Alto, Piedmont, Portola Valley, Ross,
St. Helena, San Francisco, Saratoga, Sonoma, Tiburon and Woodside.
Properties in Los Angeles represent a cross-section of luxury homes in
Arcadia, Beverly Hills, Calabasas, La Canada Flintridge, Encino, Los
Angeles, Malibu, Marina del Rey, North Hollywood, Pacific Palisades,
Pasadena, Playa del Rey, Santa Monica, Studio City and the West Los
Angeles enclaves of Bel Air, Brentwood and Westwood. San Diego
properties represent a cross-section of luxury homes in Carlsbad,
Coronado, Del Mar, Encinitas, La Jolla, La Mesa, Poway, Rancho Santa Fe,
San Diego and Solana Beach. In producing the Index, Fiserv CSW Inc.
draws upon its economic database and years of experience in tracking
single-family home values; collects and cross-checks data from multiple
sources; achieves a weighted balance of validation elements such as
repeat sales, comparable sales, and physical home characteristics; and
combines this with First Republic’s extensive local market knowledge.

About First Republic Bank

First Republic Bank


/quotes/zigman/2803861/quotes/nls/frc FRC
-0.88%



and its subsidiaries provide private
banking, private business banking and private wealth management. Founded
in 1985, First Republic specializes in exceptional, relationship-based
service offered through preferred banking or wealth management offices
primarily in San Francisco, Palo Alto, Los Angeles, Santa Barbara,
Newport Beach, San Diego, Portland, Boston, Greenwich and New York City.
First Republic offers a complete line of banking products for
individuals and businesses, including deposit services, as well as
residential, commercial and personal loans. First Republic is a
component of the SP Total Market Index, the 5000 Total Market Index(SM),
the Russell 1000(R), Russell 3000(R) and Russell Global indices and six Dow
Jones indices.

About First Republic Private Wealth Management

First Republic Private Wealth Management is the investment management,
trust and brokerage group of First Republic Bank. First Republic Private
Wealth Management offers objective advice and fully customized solutions
with the same level of exceptional client service that has been the
hallmark of First Republic Bank for more than 25 years. First Republic
has the flexibility to provide individuals, families, businesses,
endowments, schools and non-profit organizations with appropriate
choices that responsibly meet a client’s specific investment objectives.
Securities Products and Services are offered by First Republic
Securities Company, Member FINRA/SIPC.

SOURCE: First Republic Bank

        Blue Marlin Partners
        Greg Berardi, 415-239-7826
        greg@bluemarlinpartners.com

Copyright Business Wire 2011

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Article source: http://www.marketwatch.com/story/luxury-home-values-stable-in-second-quarter-of-2011-2011-08-22?reflink=MW_news_stmp

Bay Area home sales dipped more than usual between June and July, falling 13.9 percent, compared to an average decline of 6.8 percent for the Northern California market, the report shows. Sales dropped most sharply in the high-end real estate market, with $500,000-plus transactions down 25.4 percent on a month-over-month basis.

Luxury home sales were strong during the early summer in Marin County, San Francisco and the Napa Valley, Coldwell Banker reported. John Walsh, DataQuick president, attributes the fall-off in this sector to overall economic uncertainty caused by the debt ceiling debate.

While high-end buyers sat on the sidelines, first-time homeowners accounted for more sales in July than June, as measured by the proportion of government-insured Federal Housing Authority loans used to finance purchases. FHA loans, often secured by first-time buyers, were used in 22.4 percent of all Bay Area July purchases, compared to 20.6 percent in June.

San Francisco is not a budget housing market, with a median sales price of $550,000, according to the National Housing Conference. However, the annual income needed to finance a median-priced home in San Francisco declined 7 percent between 2010 and 2011, NHC recently reported. 

Article source: http://www.upack.com/press/article/real-estate-news/first-timers-drove-san-franciscos-housing-market-in-july-800578613

I realize everyone is glued to the stock ticker today, watching their personal net worth fall yet again; I know this because every time I wired up to do a live shot on CNBC today, my “hit” was “killed” at the last minute because the Dow dropped again.

But it is precisely on days like this that we have to focus on how it all affects housing; stocks may fill our 401K’s, but our homes are (or were) our single greatest investment.

The drop in the stock market was preceded by a huge drop in mortgage interest rates, and it will likely be followed by one as well. The overnight average last night on the 30-year fixed hit 4.35 percent on Bankrate.com. Economic uncertainty pushes Treasury yields down, which in turn pushes mortgage rates down. Tomorrow we get the jobs report, and my guess is that it won’t be particularly stellar either.

So I was all set to talk on TV today about how mortgage rates, even this low, won’t help the housing recovery significantly (sure, higher rates would hurt) because a) we’ve been at historically low rates for quite some time now, and b) rates are not the most important decision-making factor for consumers today. We had a great conversation about this yesterday on the blog, so I took it further to ask some mortgage professionals.

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