The long standing value paradigm in this industry has always been “Location, Location, Location”. Perhaps that is beginning to change to “Q3”, a term coined by Stewart Title Chief Economist, Ted Jones in a recent presentation he made in Portland, Oregon here recently. Q3 is shorthand for the new Paradigm, “Location Quality, Property Quality, and Tenant Quality”.
Case in point, The Mortgage Bankers Association (MBA) had a brand new 10 story Leed Gold Certified Building constructed just a few blocks from the White House in Washington DC. The MBA paid approximately $79 Million in 2008 for this trophy asset and occupied about half of it. Their inability to lease the rest of the building forced them to sell it to the Costar Group in February 2010 for $41 Million, or a $37.7 Million dollar loss in just over a year. Continue reading
Last week Bill Gross, who runs the world’s largest bond fund at Pacific Investment Management Co., sold all government related U.S. debt from PIMCO’s $237 billion Total Return Fund. You may be thinking, “Why is this tidbit of news important to us?” Good question. When someone who is as knowledgeable about the bond market as Mr. Gross decides to get out of U.S. bonds there’s a good chance that something significant is about to happen. Gross is betting that the discontinuation of the Federal Reserve’s Quantitative Easing program (QE2) in June will have a negative overall impact on the bond market.
That’s back up for a minute and explain some things. QE2 is the Federal Reserve program of buying U.S. government debt instruments for the purpose of stimulating the economy. In a period of only 28 months the Federal Reserve has become the largest owner of U.S. Treasury Bonds ($972 billion as of December) surpassing both China and Japan who took decades to accumulate their bond holdings. Yesterday, Mr. Bernanke, Chairman of the Federal Reserve confirmed that the Fed will discontinue QE2 as planned by the end of June.
I am Craig Johnson, CCIM, RECS, a Broker for Northwest Equities Investment Real Estate Services, Inc., specializing in leasing, sales, and consulting of office, industrial, and retail properties in Clark County, Washington. I am a Washington and Oregon licensed broker with 27 years of real estate experience and I look forward to sharing my knowledge of commercial real estate with you.