COCIE News - Context

by Catherine Erney
Xceligent
February 2007 In Contract

This is the second in a two-part series dealing with using data on the CDX to create statistical reports. All of this information is covered in depth in the COCIE for the Advanced User class. As promised, we are covering exporting data for creating custom vacancy and absorption reports this month. Last month's article covered current vacancy rates, absorption in the most recently closed quarter and year-to-date and standard geographies. As we saw last month, those reports can be created in the CDX as easily as choosing a set of properties and selecting a report.

Before we get into the nitty-gritty of exporting data, we should define some terms.

Vacancy rate -- the portion of a property that is physically vacant. It is expressed as a percentage, typically a two digit number, as 15%. Whether the space is offered as a primary lease or a sublease, whether someone is paying rent is immaterial, the question is whether the space is physically occupied right now. Calculate the vacancy rate by dividing the vacant SF in a submarket or building by the base SF, or total size, of the submarket or building.

Gross leasing activity -- the square footage of all of the leasing activity in a marketplace at any given time. If Tenant A moves out of Building A & into building B -- occupying 100,000 SF in Building B, that creates 100,000 SF of gross leasing activity.

Central Ohio CIE (as of 1-12-07)
Members - 524
Companies - 178
Total properties - 11,793
Total listings - 3,738
Total available SF - 46 M SF
Industrial - 27 M SF
Office - 10 M SF
Retail - 9 M SF
Business Opportunities for sale - 120

New Companies (11/17/06 - 1/12/07)
Carriage Trade Realty, Inc.
First Intercontinental Realty
Gary Dean/HER Circleville
Hadler Realty
Real Property Analysts
Shockey & Company
TransOhio Realty Company

Leasehold Improvements & Brownfields cleanup

Two tax provisions of interest to commercial real estate professionals were passed in the closing days of the 109th Congress and signed by President Bush Dec. 20. Rules permitting a 15-year cost recovery period for leasehold improvements were made retroactive to Jan. 1, 2006, and the tax deduction for brownfields cleanup expenditures was renewed, also as of Jan. 1, 2006. Both provisions will expire again on December 31, 2007 (unless extended again.)

Net absorption -- the net result of all of the tenant movement in a marketplace during a given period of time. If
Tenant A moves out of Building A and into Building B, occupying 100,000 SF in Building A and leaving a 100,000 SF vacancy in building B, the net result is 0 SF of net absorption. Think of it as the difference between your gross salary and your actual take-home pay. The bigger number sounds nice, but the net is what you can count on when you go to the store.

Absorption is also defined as the change in occupancy from quarter to quarter or from year to year. This is a simple formula for calculating absorption:
Quarter 1: Base SF minus Vacant SF = Occupied SF.
Quarter 2: Base SF minus Vacant SF = Occupied SF.
Occupied SF Quarter 1 minus Occupied SF Quarter 2 = Net Absorption.

For the purpose of this exercise, let's pretend we've been asked to calculate historical vacancy and absorption for retail space on High Street in Clintonville.

First, you would create your building set. Under Custom Searches, choose the "Property Listing" search. Then, select "retail" as the property type, be sure to choose "All Properties" rather than "For Lease and Sale" ; put "High" in street name, "43202,43214" in Zip code and finally, be sure to choose "Existing" properties only, eliminating "Under Construction and "Planned" properties from the search. Run your search. If you've set your criteria as I have outlined, your result should be 37 properties. At this point, you might go through and cherry pick properties. Perhaps you only want to look at retail with apartments over, or want to eliminate retail that was a residential conversion. Once you have your target list of properties, create a Saved Results Set. Now you can come back to this same set of properties again without having to remember the steps you took to collect them. If you want to add a property to the set, all you have to do is plug the address in the "Property/Listing" search.

Now, let's examine the current vacancy rate for retail properties on High Street in Clintonville.

The current vacancy rate is 16%. If we want to compare that to one or two years ago, all we have to do is export the data. From your desk top, run the saved result set, "Select all" records -- and export the data using the button in the upper right quadrant of your screen.

Now that you have historical data for this set of buildings, you can slice and dice it any way you choose. I think it's interesting that the vacancy rate for these properties was 19.4% at the end of first quarter 2006. As the vacancy dropped to the current rate of 16%, 10,542 SF of positive net absorption has occurred.

Feel free to call on us if you need help with a project like this one. As opposed to many of the research projects that used to fall on my desk, this is one that talks hard but walks easy. In other words, it sounds much more daunting than it is. Because we drive the market and scrub the data at the end of each quarter, you can count on the data to calculate valid statistics.