Joe Sciolla
has been a commercial real estate
broker for over 30 years in Boston,
the last 15 years with CresaPartners.
His business practice focuses on
providing exclusive tenant representation
and corporate advisory services
to local as well as national companies.
Prior to joining Cresa he was managing
director of Cushman Wakefield’s
Boston office for eight years. He
is a graduate of Harvard University
has been involved in over $4 billion
worth of real estate transactions.
He is a member of the Boston Commercial
Brokers Association and is a guest
lecturer at the Northeastern University
School of Entrepreneurship.

About
CresaPartners

CresaPartners is
a Boston-based international corporate
real estate advisory firm that exclusively
represents tenants and specializes
in the delivery of fully integrated
real estate services including transaction
and project management, strategic
planning, workforce and location
planning, subleases and dispositions,
portfolio/lease administration,
capital markets, sustainability,
and industrial/supply chain and
facilities management. With more
than 55 offices, CresaPartners is
the largest tenant representation
firm in North America. Through its
alliance with Savills, one of the
world’s largest commercial real
estate service firms, CresaPartners
covers more than 255 locations in
40 countries.

Boston SF: What is the current
state of the commercial real estate market
nationwide and in Greater Boston in particular?

Joe Sciolla: Most major metro
areas in the United States have higher
unemployment rates than Boston and are
facing greater hurdles on the road toward
commercial real estate recovery. In contrast,
the Bay Area (especially Palo Alto and
parts of Silicon Valley and San Francisco)
and New York City are among the nation’s
hottest markets. Throughout the country,
the same macro forces are at work, presenting
obstacles toward a quicker recovery: the
global economy and bank crisis, debt crisis,
stock market volatility and fears of a
double-dip recession.

In Boston, moderate job growth, corporate
consolidations, downsizing and a cautious
mindset continue to be major trends. Vacancy
and rents are flat for the most part while
construction is slowly picking up. Demand
for office space in the Back Bay – and
Class A, high-rise tower space in particular
– remained strong. One dynamic we are
beginning to see are tenants from East
Cambridge migrating to less expensive
space in the lower floors of towers in
the Financial District.

According to our most recent market research,
the Boston office market experienced slightly
more velocity in the third quarter of
2011, and absorption remained positive
at 195,000 rentable square feet. Total
vacant (versus available) Class A space
decreased slightly to 15.8 percent and
will likely show a further decline when
the fourth-quarter numbers are in, tied
to a shortage of large, continuous blocks
of space (80,000 square feet and larger).
Overall average asking rents increased
slightly to $37.50 per square foot. Looking
ahead, we expect that rents will remain
flat through 2012 with the exception of
the Class A downtown high-rise portion
of tower space.

Boston SF: Are the urban and
suburban markets in lockstep or heading
in different directions? How about Class
A space versus older properties?

Joe Sciolla: While Boston is faring
better than the suburbs, East Cambridge
is the tightest and most expensive submarket.
Select towns along Route 128 and in the
Metrowest (Natick, Framingham, Waltham,
Burlington) are becoming tighter for Class
A space, though most submarkets still
have vacancy of at least 20 percent. Overall,
most markets are still hurting with significant
amounts of inventory, some of which is
obsolete and may never be filled.

An ongoing trend is a “flight to
quality” to superior Class A space.
Companies can generally still find good
value and better amenities if they explore
options in the marketplace.

Boston SF: What noteworthy
trends did you observe in the past 12
months?

Joe Sciolla: Most companies are
renewing and/or restructuring their leases
as opposed to relocating, which is generally
more expensive and disruptive. For the
most part, it has remained a tenant’s
market, though select landlords (especially
those with monopolies in mini business
parks) are trying to push the envelope.

Small to mid-sized deals (in the 12,000-square-foot
to 15,000-square-foot range) are the most
prevalent. A positive trend is that more
financing is becoming available, though
some banks are still at risk for default.

Overall, companies are doing more with
less, looking into workplace optimization
strategies, as advanced technology and
cultural evolution change the dynamics
of the workplace. This has created a need
to work with experienced project managers
who will help a company reconfigure its
space, build more efficient workstations,
help with shared space, etc.

Boston SF: What is your forecast
for the Greater Boston commercial real
estate market in 2012?

Joe Sciolla: It will continue
to be a tenant’s market throughout 2012,
with a full market recovery not expected
until jobs reach their pre-recession levels,
probably in three years. Some companies
in Boston and Cambridge may consider migrating
to the suburbs, where there are more options
and space is less expensive.

Boston will remain a popular hub for
the healthcare and education sectors and
leading-edge technology, new media, and
life sciences companies. However, Boston
is no longer home to many corporate headquarters,
and service industries such as the legal
community continue to shrink.

Boston SF: Given the current
state of the market and where it’s headed,
what opportunities exist for tenants of
commercial, industrial and office space?

Joe Sciolla: Tenants are still
in the driver’s seat and can exercise
their leverage in securing very favorable
terms, including free rent and generous
tenant-improvement allowances. In general,
early lease renewal is a win-win for tenants
as well as landlords, who would prefer
to maintain credit-worthy tenants. Companies
looking to upgrade their facilities should
explore alternative workplace strategies
and see if landlords will contribute to
the costs of such projects.

Companies can save significantly when
they consider upfront project management
and other ongoing corporate services such
as facilities management and workforce
and location planning (WLP can help
companies decide the age-old question:
Should I stay or should I go?).

Companies with a global portfolio should
make sure they partner with a real estate
service provider that has an international
affiliate.

Boston SF: Are there any pitfalls
that such commercial space-users must
be especially wary of today?

Joe Sciolla: Macro forces (cited
above) will add to ongoing market uncertainty,
as will the political climate. While tenants
with strong, long-term business plans
should consider “seizing the moment,”
corporate space users in general should
be cautious, resist the hype that may
coming from some bullish landlords, and
work with advisors and full-service firms
that put their interests first.

Boston SF: What is the one
thing that will have the greatest effect
on the commercial real estate market in
the months ahead?

Joe Sciolla: Jobs. Jobs. Jobs!

Article source: http://bostonsf.com/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=64F6083F933F486B8AFABD77F009203E

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


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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