Browse Tag: Colliers International

Borders Ann Arbor HQ Books $10.5 Million Refinance

borders-hqNew York-based real estate investment banking firm Chesterfield Faring has announced a refinance of the Wickfield Center of Ann Arbor, MI, former corporate headquarters of the bankrupt and liquidated national bookseller chain Borders.

The refinance is in support of a bustling market in the former HQ’s space. The two-building complex, sporting a total of 330,000 square feet of rentable space, was sold to Hughes Properties earlier this year by Colliers International, who has been retained to list the available rental space.  The South Ann Arbor property has major tenants in Gold Star Mortgage, who is renting 68,000 sq. ft.  Colliers itself also rented 16,000 sq. ft to Prime Research, a strategic communication research firm.

The Prime Research lease appears to be part an parcel of a technology trend that some say felled Borders, a once mighty-bookseller.  In the Ann Arbor News, Brendan Cavender of Colliers International Ann Arbor who listed the building and represented PRIME in the deal said the new office’s footprint will cover about 85 percent of the second floor and Cavender said that another tenant is in final negotiations for the remaining office space.

“This is really a great development for the whole area,” Cavender said.

“The technology companies here are fueling growth in the retail and restaurant spaces as the new young employees move into the space. With Barracuda, Menlo, Google, and now Prime Research, you have a real density here of tech companies.”

Another Technology Vs. Traditional Retail Story?

The store closings of Borders in 2011 caused pain among fans of the bookstore business, a low-margin gentleman’s game that depends utterly on customer experience and a near-irrational expressions of customer loyalty.  The emotional investment of customers into Borders in its earliest days in Ann Arbor was the store-floor half of a love story that went all the way to the top management.  How did technology figure in its arc?

Technological innovation at Borders  – albeit of a decidedly pre-internet type – was strong.  Its inventory control system, developed in the 1970s and based on 3″ square cards was innovative and powerful enough to produce a spin-off business (Book Inventory Systems) that sold to independent bookstores around the world until 1994.

But it was a fateful decision about technology and internet retail in specific, some say, that sealed the fate of the global chain.

Most brick-and-mortar retailers had to make a decision in the very earliest part of the 21st century: was internet a distraction or was it a synergy?  Borders, like so many retail businesses faced a struggle with their own online presence, and in 2001 made the decision to outsource their online retail to Amazon.com.  That surrender to its most dangerous competitor was a disaster for Borders and a huge coup for Amazon. The highly personalized customer experience Amazon could deliver appealed to Borders customers far more than Borders expected.  The program would end in 2007 with Borders scrambling to reclaim their online heritage, but by then, industry observers say, it was too late.

 

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Economic Risks Look Set to Stall the U.S. Office Market Recovery

Thank you to Ross Moore, Chief Economist at Colliers International for contributing this blog post today.

The U.S. office market looks set to finish the year on a more cautious note than earlier in 2011 and halt what had been a modest recovery characterized by a measured degree of optimism and a series of occupancy gains. A clear deceleration in economic activity and a near absence of job creation, however, has cast a shadow over the office space market. With the economy possibly coming close to stall speed, the outlook for the office space market has once again been called into question.

The lack of job creation of any significance lingers as a particular concern. Many metro areas are still far from firing on all cylinders, reflected by only lackluster growth in total non-farm employment: August data showed year-over-year growth of just under one percent. More encouraging, however, is office-using employment, which for the year ending August was up 1.5 percent, but two of the last three months were characterized by job losses in this key sector suggesting the annual growth rate is sure to come down in the coming months. Indeed, for the first eight months of 2011, monthly office-using job creation averaged 29,000, compared with 16,500 per month in the same period in 2010.

Despite these modestly favorable office job numbers, the outlook for the office space market is far from assured. Uncertainty is now a key feature of the business landscape. This is causing many business leaders to place expansion on hold or at least to scale back planned growth. Significantly higher energy costs are a distinct possibility, further monetary easing is in question and any additional fiscal stimulus is unlikely due to the policy paralysis that is characterized by the leadership in Washington. Combined with the ongoing European sovereign debt crisis, the brakes are now being applied to what was only a nascent economic recovery. The global economy, which had been a key source of growth, has clearly come off the boil and calls into question the vitality of U.S. exports which was one of just of a few bright spots.

Year-to-date data confirms our view that the U.S. office market landscape will continue to be uneven in nature and unusually volatile. Manhattan, Washington, San Francisco and Boston have led the country on the road back to a more normal market, however, Dallas, Denver, Houston, Philadelphia, Raleigh, San Diego, San Jose, Seattle and West Los Angeles are also showing encouraging signs. Beyond this relatively short list of cities, many markets have seen little pick-up leasing activity and continue to be characterized by a clear excess of space and no pricing power on the part of landlords. Any substantial increase in office rents is unlikely to occur in 2011, or 2012, and perhaps even into 2013.

The U.S. national office vacancy rate did nudge marginally lower during the first six months of the year, shifting 20 basis points to the downside. At midyear, office vacancies registered 15.26 percent and are on track to finish the year at or near 15.00 percent. During the first half, downtown vacancies decreased eight basis points to register 14.05 percent. Suburban vacancy rates pushed lower, falling 24 basis points to 15.91 percent. Over the past 12 months, the U.S. national office vacancy rate has fallen 41 basis points.

The keys to reading the U.S. office market correctly are still job growth, energy prices, monetary and fiscal policy and stable financial markets. Currently none of these variables can be predicted with any degree of certainty. For the near term, and quite possible the medium term, job growth will likely remain sluggish, energy prices elevated, monetary policy loose (although QE3 is unlikely), fiscal spending increasingly restrictive, and financial markets volatile. As a backdrop to office space demand, these signs are not altogether encouraging. For most landlords, attracting new tenants will be a challenge with little or no pricing power. Tenants, on the other hand, will enjoy at least another twelve months where they are clearly in the driver’s seat.   This is not to suggest the recovery will never materialize, but with the domestic and global economy gearing-down, the new macro-economic environment has pushed the timing back to 2012 and quite possibly 2013. Not an overly optimistic outlook, but in all probability, realistic.

 

 

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