{"id":1004068134,"date":"2013-03-06T08:03:42","date_gmt":"2013-03-06T16:03:42","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004068134"},"modified":"2022-12-08T18:21:48","modified_gmt":"2022-12-09T02:21:48","slug":"potential-impact-of-sequestration-on-cre","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/potential-impact-of-sequestration-on-cre\/","title":{"rendered":"Potential Impact of Sequestration on CRE"},"content":{"rendered":"<p><em>By Keith Loria, Contributing Editor<\/em><\/p>\n<div id=\"attachment_100406\" style=\"width: 115px\" class=\"wp-caption alignleft\"><a href=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/03\/John-Guinee-Headshot.jpg\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-100406\" data-attachment-id=\"1004068336\" data-permalink=\"https:\/\/www.commercialsearch.com\/news\/potential-impact-of-sequestration-on-cre\/john-guinee-headshot\/\" data-orig-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/03\/John-Guinee-Headshot.jpg\" data-orig-size=\"105,110\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;0&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;}\" data-image-title=\"John Guinee Headshot\" data-image-description=\"\" data-image-caption=\"\" data-large-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/03\/John-Guinee-Headshot.jpg?w=105\" class=\"size-full wp-image-1004068336\" title=\"John Guinee Headshot\" src=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/03\/John-Guinee-Headshot.jpg\" alt=\"\" width=\"105\" height=\"110\" \/><\/a><p id=\"caption-attachment-100406\" class=\"wp-caption-text\">John Guinee<\/p><\/div>\n<p>Now that the March 1 sequestration deadline has come and gone without any solution to the budget crisis, John Guinee, a REIT analyst with Stifel Nicolaus, is expecting significant rent cuts by major Washington, D.C., office players.<\/p>\n<p>\u201cIn any market throughout the country, whenever an industry is in growth mode, tenants take more space than they need in anticipation of growth and they aren\u2019t very price sensitive. When an industry is in contraction mode, they give back that extra space, try to give back even more space, and become very price sensitive,\u201d Guinee told <em>Commercial Property Executive<\/em>. \u201cThe D.C. marketplace, in my mind, is going through the bad part of that cycle.\u201d<\/p>\n<p>In his opinion, Wall Street is not taking the implications of the $85 billion in automatic government spending cuts seriously\u00a0enough and with the contraction in spending will come a downsizing of the industry.<\/p>\n<p>According to Guinee, the impact of the government rent cuts will be significant and there will be big drops in net effective rents to fill up space. The reason this didn\u2019t happen last year, he explained, was because there were not enough tenants in the market and the landlords just sat firm. Now, he expects names with commodity products like First Potomac and Vornado to make aggressive cuts in rents to bring in tenants.<\/p>\n<p>\u201cWhat happened in D.C. is because of big government and big spending in 2009 and 2010. You had the classic take more space than I need and D.C. was the best market in the country,\u201d Guinee said.\u00a0 \u201cIn 2011, things slowed down considerably. The leasing community until the budget resolution ended up as it did that year was clearly in denial that there was an issue, and landlords were the same.\u201d<\/p>\n<p>This action caused a state of flux in the industry and according to Guinee, the percentage of short-term rentals in the past 18 months were at historic highs, with very few relocations. Now, with D.C. experiencing a 15 percent vacancy in the office market, resulting in 70 million square feet of available space, he expects landlords to go into \u201caction mode,\u201d where concessions will go up and base rates will go down.<\/p>\n<p>Vornado, Corporate Office, First Potomac and\u00a0Washington Real Estate Investment Trust\u00a0will most likely be the worst-performing REIT names this quarter due to their exposure to the city, according to Guinee. Conversely, he names Highwoods Properties Inc., Cousins Properties Inc., Parkway Properties Inc.\u00a0and Kilroy Realty Corp., as those expected to do well.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Now that the March 1 sequestration deadline has come and gone without any solution to the budget crisis, John Guinee, a REIT analyst with Stifel Nicolaus, is expecting significant rent cuts by major Washington, D.C., office players.<\/p>\n","protected":false},"author":451,"featured_media":1004068336,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1004068134","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - 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