Northern California commercial office landlord Equity Office has inked two new lease transactions at Skyway Landing in San Carlos, California.

Wells Fargo Insurance Services has taken 40,257 square feet at 959 Skyway Road – the building’s entire second floor – and will relocate from its current quarters in Redwood City. Wells Fargo was represented by Marcus Wood of Cassidy Turley/BT Commercial, while Equity’s in-house Peninsula leasing team of Vahe Soghomonian and Rick Buziak along with the Cornish & Carey listing team of Jack Troedson, Kristoph Lodge and Graham Woodall represented the landlord.

In adition, information infrastructure software firm MarkLogic Corp. has extended its existing lease at 999 Skyway and nearly doubled its occupancy by expanding into an additional 18,630 square feet, making for a total of 40,268 square feet. Derek Johnson and Chris Holland of Jones Lang LaSalle represented MarkLogic, while Soghomonian represented the landlord.

The 247,000-square-foot Skyway Landing was built in 2000 and sits on 12.6 acres.

KBS Real Estate Investment Trust II has just expanded its portfolio by more than a million square feet. The REIT has closed on the purchase of the 1.3 million-square-foot, 60-story 300 North LaSalle office building in Chicago.

Located on the north bank of the Chicago River in the River North submarket, the property was completed in March 2009 and is currently 93 percent leased. Its tenants include law firm Kirkland & Ellis, L.L.P., which occupies 687,857 square feet and management consulting firm Boston Consulting Group, which occupies 124,253 square feet.

The transaction boosts KBS-purchased commercial real estate to more than 3.5 million square feet thus far in 2010. That square footage includes properties in Dallas, St. Louis, San Diego, Portland and Herndon, Va.

The seller was represented by Glenn Whitmore, Jamie Fink and Jeff Bramson of the New York and Chicago offices of Holliday Fenoglio Fowler, while Mike Kavanau of the Chicago office of Holliday Fenoglio Fowler assisted with acquisition financing.

KBS was founded in 1992 by Peter Bren and Charles Schreiber, Jr. Since that time, it has completed transactional activity exceeding $17.6 billion via 19 separate accounts, six commingled funds and four non-traded REITs.

In Michigan, Southfield’s loss will be Detroit’s gain now that Blue Cross Blue Shield of Michigan has committed to relocating to the 5.5 million-square-foot mixed-use GM Renaissance Center. The nonprofit healthcare insurance carrier will occupy approximately 435,200 square feet of the complex’s 2.3 million square feet of office space, bringing the office segment’s occupancy level up to 90 percent.

Blue Cross will lease the space from General Motors, owner of the Renaissance Center since the company acquired it to serve as the company’s global headquarters in 1996. The complex, which recently underwent a sweeping $500 million renovation, encompasses a 1,300-room Marriott Hotel encircled by four 39-story office towers. A five-story podium beneath the five buildings houses 165,000 square feet of retail space. As a result of the recent upgrade, the property also features a five-story glass winter garden, a 1,100-seat food court and a suspended glass walkway connecting the four office facilities. It will share the tenant roster with a bevy of businesses including Deloitte, national law firm Dykema Gossett PLLC, Hewlett Packard, insurance broker and strategic risk advisor Marsh Inc. and Urban Science Applications Inc., which maintains its global headquarters at Renaissance Center.

In 2011, Blue Cross will commence a phased relocation of approximately 3,000 employees from its current digs about 15 miles away in a four-building complex in Southfield at 11 Mile Road, which the organization plans to sell. The move to Renaissance Center will allow Blue Cross to form a multi-structure Detroit campus, as it already occupies office space at 500 and 600 Lafayette Boulevard and 441 East Jefferson Avenue.

The Renaissance Center lease agreement has its pluses–and minuses. Blue Cross anticipates that it will, over the long-term, save about $30 million in real estate costs. However, as the company’s office needs decreased last year with the acceptance of voluntary separation packages by numerous employees, it will be occupying 400,000 square feet less than it occupies currently, thereby potentially leaving a sizeable and much dreaded office vacancy in Greater Detroit. While the area’s office vacancy rate is leveling off, according to a second quarter report by real estate services firm Grubb & Ellis Co., it is still at a staggeringly high 25.2 percent.

Courtesy Flickr Creative Commons jaaron

July’s Beige Book–Summary of Commentary on Current Economic Conditions by Federal Reserve District, to give its more formal name–characterized the current economy in a less-than-stellar way on Wednesday. “Reports… suggest that economic activity continued to be weak going into the summer, but… the pace of decline has moderated since the last report or that activity has begun to stabilize.”

That kind of language is all too reminiscent of this time last year, when getting weaker not as fast as last month (or last quarter, or last year) was about all the good news the economy had. Similarly, real estate was mostly weak, according to the Beige Book. Residential was soft in most districts but there were signs of improvement. Commercial, on the other hand, weakened in two-thirds of the districts and was simply slow in the others.

It’s more of the same for CRE, in other words. “Office vacancy rates continued to climb in the Atlanta, Boston, Kansas City, Minneapolis, Philadelphia, Richmond, and San Francisco Districts, as well as in Manhattan, resulting in sizable leasing concessions and/or declines in asking rents,” noted the report. “Significant weakness in the retail leasing sector was reported for the Boston, Minneapolis, and New York Districts, and industrial vacancy increased in the Atlanta, Dallas, Minneapolis, and St. Louis Districts.”

Double Dip? Freddie Mac Economist Doubts It

Does the weakening this summer point to part two of the Great Recession? Speaking on Wednesday morning at the Lending the Way Housing and Economic Outlook, Frank E. Nothaft, chief economist of Freddie Mac, said no. “It might not feel like a recovery yet, but it’s under way,” he asserted at the event, which was held in suburban Chicago by Fifth Third Mortgage Co., a subsidiary of Fifth Third Bank, and attended by CPE.

Nothaft posited that the odds of a double-dip recession are only about 20 percent at this juncture. But it’s going to be a slow recovery even so, with unemployment–the key component in making things as miserable as they are in the current economy–only creeping down in the next two years. He agreed with estimates that put unemployment between 7 percent and 8 percent by the end of 2012.

Housing will see a slow recovery, too, after a big bump in the road this year because of the expiration of the homebuyer tax credit, which Nothaft nevertheless saw a necessary stimulus for the market. “Home sales will be better a year from now,” he predicted.

Saved From the Depression 2.0? Maybe.

TARP in its many forms, stress tests, aggressive maneuvers by the Federal Reserve, the stimulus bill and all the other elements of the massive bailout in the wake of the Panic of 2008–did they prevent a second Great Depression? Politicos in the Bush and then the Obama administrations found it in their interest to say so, but not everyone was, or is, persuaded.

Alan S. Blinder, a economics professor at Princeton University, and Mark Zandi, chief economist at Moody’s Analytics, asserted in a paper published on Wednesday that without government intervention in its various forms, the 2010 gross domestic product would be down 6.5 percent, and 16.5 million jobs would have been lost by now, rather than 8 million, all of which sounds very Depression-like.

Blinder and Zandi cite complicated econometric models for their conclusions, which other economists will now review and argue about. Other papers will probably be generated asserting opposite conclusions about the bailout. Ultimately, history will have to render a verdict about the efficacy of the bailouts, and then historians will argue about it too.

Wall Street, perhaps unnerved by the Beige Book or the weak durable goods report, dropped on Wednesday. The Dow Jones Industrial Average lost 39.81 points, or 0.38 percent, while the S&P 500 was down 0.69 percent and the Nasdaq declined 1.04 percent.

In Aurora, Colo., The Children’s Hospital has commenced construction of a new 350,000-square-foot tower at its facility less than ten miles west of Denver. The $230 million expansion project will address a demand that has been on the rise since 2007 when the hospital opened its new location at the 227-acre Anschutz Medical Campus, a recently developed education, research and patient care complex.

According to officials, Children’s Hospital has experienced an annual increase in inpatient admissions of 10 percent or more over the last three years. “When we first moved to the Anschutz Medical Campus in September 2007, we wondered if our patients would follow us,” Jim Shmerling, President and CEO of The Children’s Hospital Colorado, told CPE. “The response has been a resounding, ‘yes!’ Here we are three years later, about to build another ten floors, about five years ahead of schedule.”

Phipps/McCarthy is handling construction of the East Tower, which will ultimately accommodate the addition of 500 patient beds. The new 10-story building, designed by ZGF Architects and H+L Architecture, will meet standards for LEED certification.

Children’s Hospital is hardly alone in its quest to provide additional space to address demand–demand that is only going to increase with the 32 million uninsured Americans that will become insured in a few years as a result of healthcare reform. Turner Construction Company broke ground this week on a $161 million, 216,000-square-foot patient tower at the Inova Fairfax Hospital campus in Falls Church, Va. In June, the U.S. Department of Veterans Affairs kicked off development of a 1.5 million-square-foot replacement medical center in New Orleans, and in May, work commenced on the $750 million, 1.2 million-square-foot Wishard Memorial Hospital replacement hospital in Indianapolis, Ind.

The new tower at Children’s Hospital in Aurora will open in late 2012, bringing the hospital’s total footprint at the Anschutz campus to nearly 1.8 million square feet.

Rosemont, Ill.-based ACG Equities has made a 100 percent equity purchase of Atlanta’s Vinings Main mixed-use commercial and residential condominium development, which fell into foreclosure last December. The $24 million acquisition was the first allocation from the firm’s Midwest-based $150 million private equity fund.

ACQ principal and Atlanta office managing director David Lang said that the company will in the future seek to acquire value-oriented income-producing developments as well as residential properties.

Vinings Main was built in 2008 at a pricetag of $57 million. It has 34,000 square feet of condominium space, 17,000 square feet of retail space and a 461-space parking deck. Retail tenants include the Social Vinings restaurant.

ACG operates as a sponsor and operator specializing in value-added commercial property acquisitions and dispositions for private investors and equity funds. In addition to its headquarters, it also has offices in the Atlanta, Denver and Minneapolis markets and plans to open a Washington, DC area office.

Having reached an agreement with Paramus, N.J.-headquartered REIT Vornado Realty Trust and Los Angeles-based Geyser Holdings, MGM Resorts International has taken the next step in the planned disposition of assets at The Borgata Hotel Casino & Spa. The Las Vegas-based global hospitality company will sell four long-term ground leases and the corresponding underlying real property parcels at the Atlantic City gaming property to the partners for $73 million.

With ownership of land leases and underlying land at The Borgata, Vornado and Geyser will have a tidy income stream from the seven-year-old hotel and gaming property, which offers 2,000 guestrooms, a 161,000-square-foot casino floor and a 54,000-square-foot spa. The Borgata also features a 2,400-seat event center, a 1,000-seat theater and retail and restaurant space.

While MGM Resorts will be relinquishing ownership of the 11.3 acres of real property parcels that come with the ground-leases at The Borgata, it will continue to possess a substantial chunk of Atlantic City land–developable land–in its portfolio. The company still owns 85 acres in the famous gaming town, and approximately 70 of those acres are located across from The Borgata. While Atlantic City, like most gaming markets across the country, has yet to fully recover from the ramifications of the economic downturn, the city is heading in a direction that will call for new development.

“Atlantic City is making an effort to diversify its entertainment offerings, and they’re trying to evolve into a travel destination, similar to the evolution Las Vegas had in the 1990s”, Jacob Oberman, Director of Gaming Research & Analysis with real estate services firm CB Richard Ellis’s Global Gaming Group, told CPE. “The market is evolving and Atlantic City has to compete with surrounding states.” If relying on Las Vegas as a model, Atlantic City’s transformation could reach fruition in the early 2020s. “Over the course of a 10-year period, Las Vegas evolved from a gaming city into a tourist city.”

Implementing its plan to expand its Cambridge, Massachusetts footprint, Microsoft has signed a lease for 113,000 square feet of first-class office space at One Cambridge Center. Occupancy at the six-floor parcel is slated for late summer 2010.

The lease is part of the expansion of Microsoft’s New England Research & Development Center in Kendall Square. Cambridge Center’s owner and developer is Boston Properties, Inc.

“We’re delighted that Microsoft is expanding our presence here,” Microsoft New England Research & Development Center senior director Sara Spalding said. “We’re pleased to take this step toward our goal of creating a campus in Cambridge that can attract the best tech talent that this region has to offer and to further contribute to the region’s vibrant tech community.”

Jones Lang LaSalle senior vice presidents John Osten and Peter Bekarian, along with associate Molly Heath, negotiated the long-term lease for Microsoft. Boston Properties was represented by senior vice president David Provost and vice president Philip Dorman.

Courtesy Flickr Creative Commons user lauren keith

The S&P/Case-Shiller Home Price Index for both the 10 top and 20 top U.S. metro markets registered upticks in May compared with April. The 10-city index was up 1.2 percent and the 20-city index rose 1.3 percent. Compared with last year, the 10- and 20-city indices were up 5.4 percent and the 4.6 percent.

In fact, among the 20 cities tracked by the report, 19 saw month-to-month increases. Only Las Vegas, still the poster-child for the housing bubble, saw a continued erosion of values from April to May, edging down 0.5 percent. Since May 2009, Vegas home values have dropped 6.5 percent, which also happens to be the largest year-over-year decline among the 20 cities, though places such as Charlotte, NC, Chicago, New York, Seattle and Tampa also lost value during the same period as well.

The monthly uptick (except for Vegas) seems like welcome news for a housing industry that’s been battered for a long time, but on the other hand the indices are three-month moving averages, so the May figure reflects a period when sales inspired by the federal homebuyer tax credit were still ongoing. Sales are now down, taking with them the upward pressure on prices inspired by the tax credit.

Consumers Feeling Worse

Consumers are feeling testy this summer, with the Conference Board’s Consumer Confidence Index dropping to 50.4 from a revised reading of 54.3 in June. Companies might be having good quarters in 2010, but that hasn’t been the case for consumers, and they’re voicing their discontent to pollsters.

The Conference Board’s Present Situation Index, which has been in the basement quite a while, dropped to 26.1 from 26.8. The Expectations Index also saw a significant slide, down to 66.6 from 72.7 in June.

The most immediate effect (besides how the stock market seemed to react) will probably be on retailers trying to move back-to-school merch. “Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves,” said Lynn Franco, director of the Conference Board Consumer Research Center, in a statement on Monday. “Given consumers’ heightened level of anxiety, along with their pessimistic income outlook and lackluster job growth, retailers are very likely to face a challenging back-to-school season.”

Good News for Apartment Landlords

According to MPF Research in Dallas, the number of occupied U.S. apartments increased by 215,000 during 1H10, at least in the 64 largest metro markets. The company pegged the overall national vacancy rate at 6.6 percent at the end of the first quarter of this year, compared to 8.2 percent at the end of 2009.

What gives? Household formation seems to be on the mend, with some people in their 20s now getting jobs (just not as many as everyone would like). There’s also continued fallout from residential foreclosure, since the foreclosed have to live somewhere, and for-sale housing probably isn’t an option in most cases.

Wall Street bounced around like the needle of a seismograph during an earthquake on Monday, with the end results mixed. The Dow Jones Industrial Average eked out a gain of 12.26 points, 0.12 percent. The S&P 500 and the Nasdaq, on the other hand, were down 0.1 percent and 0.36 percent, respectively.

The walls of building number 149 at the former Frankford Arsenal in Philadelphia have come down, making way for The Shopping Center at the Arsenal. Hankin Management Co. is behind the 500,000-square-foot retail project, which carries a development price tag of $50 million.

It was the War of 1812 that led to the original development of the Frankford Arsenal in 1816, and today, the site is still home to a bevy of historic buildings, a great number of which will remain as the property undergoes redevelopment. After serving predominantly as a small arms production facility during the Civil War, World War I and World War II, the U.S. Department of Defense shuttered the arsenal in 1977. Hankin acquired the property in 1983 and reinvented it in 1984 as the Arsenal Business Center, which now houses two charter schools and approximately 1.4 million square feet of office and light industrial space in over 100 buildings.

The structure that was recently demolished is the first of 40 buildings–once utilized for military research, heavy manufacturing, munitions manufacturing and munitions storage–that will be removed from the northern section of the former arsenal to accommodate the new shopping destination. Once completed, The Shopping Center at the Arsenal will occupy 40 acres and will feature a wide range of both large and small retail shops and a broad selection of restaurants. With a location easily accessible by rail and bus transportation, I-95 and the Betsy Ross and Tacony-Palmyra bridges, the new retail property will be well positioned to attract not only Philadelphians, but shoppers from neighboring suburbs and the State of New Jersey as well.

With a 9.3 percent vacancy rate in the first quarter, Philadelphia’s retail market fared better than most major metropolitan markets during the recession, according to a mid-year report by Marcus & Millichap Real Estate Investment Services. “A combination of relatively low vacancy, a steady and recovering local economy, and modest construction of retail space has made Philadelphia one of the best performing retail markets in the country,” the report notes. While the vacancy rate is expected to reach 9.9 percent this year, “vigorous economic recovery” in Philadelphia is expected to take hold later this year and into 2011.

The Shopping Center at the Arsenal will certainly benefit from the impending recovery of the Philadelphia retail market, but it has a couple of other advantages that the developer believes will help facilitate the property’s success. “We think demand for The Shopping Center will be quite strong,” Mark Hankin, president of Hankin Management, told CPE. “It is in a good area with a large, strong population within five miles, and there aren’t a lot of shopping centers with half-a-million square feet that have just about everything you would want in one center. And the retail options will be unique compared to what is in the city.” Hankin also pointed out that many retail destinations in the area do not provide the easy access from a variety of points that the Arsenal project will offer.

Development of the Shopping Center at the Arsenal will result in 250 temporary construction jobs and, upon its scheduled completion for the holiday season in 2011, approximately 1,000 permanent retail positions. Once the center opens its doors, a portion of the rent payments will benefit the historic buildings in the southern section of the site. “It will give us continuous cash flow to help maintain these historic buildings,” Hankin said.