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Fundamentals for Small-Cap Properties Kept Weakening in January

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Feb 23, 2010 - CRE News

Fundamentals for small-capitalization properties have continued to deteriorate, according to Boxwood Means Inc., with key metrics such as rents and tenant demand weakening last month.

National rents were down across the board in January when compared to a year ago. The declines range from 3.34% to $18.94/sf for medical-office buildings, to 8.23% to $7.17/sf for industrial properties. Office properties in general saw a 4.04% decline in rents to $17.57/sf, while retail properties have seen a 6.31% drop to $17.55/sf.

When compared to a month earlier, rent declines ranged from 0.2% for medical offices to 0.74% for industrial.

Boxwood Means is a Stamford, CT, research firm that focuses on small-cap properties, which it defines as those with less than 50,000 square feet. It compiles property-level operating and sales data through a partnership with LoopNet Inc.

It also compiles Days on Market, a calculation of how long it takes to rent vacant space that it uses as a gauge for tenant demand. It said the metric is at its highest level in nine months, meaning space is languishing on the market.

Despite the bad news in the data, Boxwood Means noted that declines in rents and demand are no longer as steep as they were in previous months. But it cautioned that fundamentals would continue to weaken until the national jobs picture improved and consumer confidence rose. Today, the Conference Board reported that consumer confidence had fallen sharply this month.

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The Future of the Workplace: No Office

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The Case for a "Job-Full" Recovery

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Fidelity Viewpoints (excerpts)
By Lisa Emsbo-Mattingly, Director of Economic Analysis
February 19, 2010

"I find the leading indicators extremely optimistic for job growth. The best long-term indicator of employment is corporate profitability, which became more robust as 2009 progressed. (See chart below.) At the same time, the U.S. economy grew at an annualized rate of 5.7% in the fourth quarter of 2009, the fastest pace in six years, according to the U.S. Commerce Department. As corporate profits continue to recover in 2010—and I expect they will—this can translate into job creation."

"Temporary hiring is a reliable leading indicator of future permanent hiring. At this stage of the economic recovery, corporations are still averse to hiring full time. But demand for temp workers surged in the second half of last year. During the previous two business cycles, temp hiring eventually led to permanent hiring. The Conference Board's index of employment trends is rising at the fastest six-month pace since 1994."

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SBA Chief on Increasing Small Businesses' Access to Capital

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Karen MillsPhoenix Business Journal Friday, February 26, 2010 (Excerpts) - Karen Mills was sworn in as head of the U.S. Small Business Administration last April, just as the economic stimulus bill was starting to revive the SBA’s lending programs. Now she is pushing President Barack Obama’s jobs plan, which calls for increased lending to small businesses, tax breaks for hiring and business investment, and programs to help innovative businesses grow.

Mills sat down Feb. 18 with Kent Hoover, the Washington Bureau chief of American City Business Journals, to talk about increasing small businesses’ access to capital...

...We have a program called 504. It’s for owner-occupied real estate, if you expand and create jobs. Temporarily, let’s use 504 to do owner-occupied real estate refinancing -- not the bad stuff, not the speculative portfolios that have been accumulated; but owner-occupied, and you haven’t gone into default. It’s probably less risky than funding an expansion. It looks like we can do it for zero subsidy; we’ll charge a fee to take on the risk, and we’ll need a little administrative oversight. We think we can do $7 billion to $10 billion at very little or no cost to taxpayers.

We have the infrastructure to do that right now. We know the demand is going to be there. (end)

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Are Virtual Offices The Perfect Storm Solution?

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Officing Today February 9, 2010: The US has been experiencing plenty bad weather this winter season. A storm watch alert has been issued in Southern California, where reports of mudslides and flooding dominate the local news. The nation’s capital had 20 inches of snowfall over the weekend, and is expecting more of the same today. These conditions have required schools and offices to shut down in the area.

In other parts of the country, though, many people living in areas with harsh winter weather are finding that virtual offices are the perfect storm solution. Virtual office clients are able to manage their businesses much more easily in winter weather than those who work in traditional office set-ups.

Radio Iowa’s Dar Danielson reported in December that Iowans with virtual offices were not affected by the winter weather problems that other people trying to get to work were facing. A virtual office client interviewed for the piece advised that, simply put, a virtual office “allows you to work whenever and wherever you need to.”

Another virtual office client interviewed pointed out other perks of this alternative workplace solution: “She says it gives a tremendous amount of flexibility, as it allows people to work out of their homes and during their own hours, but still have access to the information they need.” The client highlighted the fact that a blizzard earlier in the season had less of an impact on her business, since her employees are able to work without having to come to an office building.

As the winter storms continue to rage on, it is likely that more businesses will find that they can’t afford not to be using a virtual office set-up.

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