A record number of Americans are applying for unemployed insurance as new jobless claims soared to a more than 26-year high, according to government data released Thursday.

Meanwhile, productivity soared at the end of last year as companies cut the number of hours worked faster than output declined, a reflection of the massive number of layoffs.

The Labor Department reported Thursday that the number of laid-off workers seeking jobless benefits rose last week to a seasonally adjusted 626,000, from the previous week's upwardly revised figure of 591,000. The latest total is far more than analysts' expectations of 583,000.

That's also the highest since October 1982, when the economy was in a steep recession, though the work force has grown by about half since then.

Source:  MSNBC.com, Jobless Claims Soar in Grim Labor Market

Fundamentals in the national self-storage market have remained healthy compared to most other property sectors, including the retail, office and industrial sectors. Asking rents have remained relatively stable at 93 cents per square foot, down only one cent from the third quarter of 2007.

But as we move into ’09, self-storage fundamentals are expected to soften as the single-family housing market continues to deteriorate. Demand for nearly half of the nation’s self-storage units comes from the single-family home transient moving sector—those people moving from one house to another. Consequently, the tremendous downshift in housing sales and new construction impacted self-storage occupancy levels.

In the third quarter of ’07, occupancy was 90 percent, though it dropped 300 basis points in the third quarter of ’08 to 87 percent. Improvement in nationwide self-storage fundamentals hinges upon the length and breadth of the U.S. recession and global economic crisis.

Supply and Demand

Demand has subsided for self-storage units in light of the economic crisis. The investment community believed self-storage was recession-proof, which held true because of the previous limited supply of units. From 1995 to 2005, the number of storage facilities nearly doubled nationwide; however, an onslaught of development changed self-storage market dynamics.

Additionally, in the current economic environment, leasing self-storage space is considered a discretionary expense versus a necessity. When people lose their jobs and houses are foreclosed, storage isn’t a “must-have” or necessity. Instead, individuals must start reducing expenses and storage will be one of those discretionary items that will be cut.

Nationwide, most self-storage owners are experiencing increases in late pays, liens and lower auction proceeds. The prices people are willing to pay now for the items stored at auction are not as high. As a result, owner revenues are reduced as people make late payments. Owners also have more overlocked units and lien sales because self-storage tenants have decided their stored goods are not worth the monthly payment in many cases.

As a result, tenant concessions and delinquencies have increased in the self-storage market, a trend that is expected to continue this year. Currently, public and private self-storage owners are offering tenant concessions at their facilities. Compared to a year ago, when only 30 percent of national owners offered concessions, concessions have increased to 70 percent at national facilities, according to a white paper recently released by Merrill Lynch.

Publicly traded REITs and large owners are outperforming the self-storage market due to their professional management, economies of scale, extensive advertising campaigns and quality of employees. Whereas the national occupancy rate currently stands at 87 percent, occupancy for larger, public self-storage facilities is around 90 percent.

Buyers and Sellers

Despite the slowdown in overall commercial real estate transaction velocity, there are still buyers in the self-storage investment sales market. Overall transaction velocity in the self-storage market dropped 30 percent in the past 12 months while the broader investment market is down 65 to 70 percent with respect to transaction velocity.

Nonetheless, the most active buyers are private investor clients who can more easily access acquisition financing from local and/or regional banks and life insurance companies, while institutional activity has virtually subsided. Many REITs and institutions are digesting the self-storage product they developed or acquired during the frothy years of 2004 through 2006, and are now focusing on operations. For large portfolio sales, there are very few lenders willing to provide acquisition financing.

Now is a great time to be an opportunistic investor in the self-storage market because there is more selection and properties are underwritten on fundamental economics and actual net operating income (NOI), not on pro forma and projections that properties were selling for a few years ago. Investors can achieve low double-digit cash-on-cash returns. Properties selling right now are operating deals clearly underwritten with appropriate reserves, increases in taxes, escalations in insurance with external management and expenses that are optimized for the new buyer.

Between 2003 and 2006, all the risk in a self-storage transaction was borne by the buyer because of the ample liquidity in the capital markets. Whatever the seller wanted, the buyer had to acquiesce. The risk has now shifted to the seller because of the global financial crisis, which has caused yield requirements to increase and resulted in fewer buyers in the market. Many buyers are sitting on the sidelines, believing there is more downside in pricing. As a result, sellers have to be more flexible to deal with fewer buyers in order to close transactions.

The Money Game

Assumable financing has emerged to play a larger role in the investment sales market, and seller financing is making properties very attractive. Nonetheless, financing remains a challenge. Since local and regional banks are primarily providing financing for properties, brokers and the investors they represent should have sound banking relationships. From 2004 to 2007 virtually any investor—no matter how little experience he had in operating self-storage facilities—could obtain acquisition financing; but today lenders are looking for owners with experience, or ones who agree to hire professional management companies.

The gap between buyer and seller expectations remains relatively far apart. It’s imperative that you utilize a third-party representation when entering into a transaction. A third-party intermediary is necessary to navigate the difficult lending environment, obtain optimal underwriting, overcome objections in the current market and find the upside potential that may or may not be obvious.

In the previous years, many brokers became accustomed to order-taking, placing their listings on the Internet and selling them in a relatively short time period. Since that is not happening today, we will see the cream rise to the top and the best brokers will be successful as we move into the new year.

Strong Markets

Although investment sales activity has slowed, the stronger self-storage markets are in the Midwest and Northeast. Solid markets include Boston; Buffalo, N.Y.; Northern California; Seattle and Washington, D.C. Well-located, primary market class-A quality construction are still sought after among private investors, and these assets are commanding cap rates of 7.75 percent.

For class-B and C product, cap rates remain in the 9 to 10 percent range, depending on the asset’s location. In addition, a few years ago, there was little spread between the A, B and C product in terms of cap rates and pricing. Now that gap has become much wider. There is much less risk in well-managed, prime, class-A product versus older, privately run and managed facilities that are in secondary and tertiary locations. We expect to see some pockets of softening in markets that were hit hardest by the single-family housing market fallout, including Riverside-San Bernardino, Calif.; Miami and Phoenix.

The success of the self-storage market is tied to consumer confidence and the single-family housing market. To the extent that the housing market improves will determine how quickly self-storage fundamentals will shore up. By all accounts, we have about another year. As the Troubled Assets Relief Program (TARP) and other government bailout programs to infuse some liquidity into the national economy, and as Fannie Mae and Freddie Mac’s operations continue to be streamlined, the more confidence will return to the market.

Steve Ekovich is the national director of the National Self-Storage Group of Marcus & Millichap Real Estate Investment Services. For more information, call 925.953.1716; visit www.marcusmillichap.com.

Thousands of Americans who've lost their jobs during the recession are now in dire need of affordable health care. Here are some tips from health insurance experts to finding it:

• If your spouse has a separate plan, act quickly to get on it.
• Ask about your COBRA rights. With some exceptions, laid-off workers can continue their coverage for 18 months by paying its full cost. (Congress is considering a temporary, 65 percent premium subsidy.)
• If COBRA coverage isn't an affordable option, explore non-group plans. Make sure that any coverage meets the requirements to protect you against preexisting condition exclusions in the future. State rules vary.
• Check out public insurance programs such as Medicaid and SCHIP, and community clinics. If you're not eligible now, you might be later. Local health and social services departments may be helpful resources.
• When paying out-of-pocket for care, try to negotiate lower charges with doctors and hospitals.

Source:  The Washington Post.com,  If You Lose Your Coverage...

President Barack Obama is making good on one campaign promise: health care for lower-income children.

The House was expected to approve the expansion of a children's health insurance program Wednesday and deliver it to Obama for his quick signature. The bill passed the Senate last week.

Over the next four years, up to 13 million children could be covered under the program run by the Health and Human Services Department and state governments.

The bill calls for spending an additional $32.8 billion on the State Children's Health Insurance Program. To cover the increase in spending, lawmakers approved boosting the federal excise tax on a pack of cigarettes by 62 cents, to $1.01 a pack.

The legislation would allow states to offer a dental benefit through the program for children whose private health insurance does not cover dental care.

Source:  The Associated Press,  House Set to Pass Kids' Health Bill

Marcus & Millichap has named Michael Mele, vice president of investments, as the firm’s top self-storage agent for 2008.

In 2008 alone, Mele and his team closed 24 separate transactions, comprising 36 properties involving 16 different buyers. His group achieved $95 million in closed deals, totaling one-third of the firm’s National Self Storage Group, which closed on more than 100 self-storage facilities and $275 million throughout the year.

Mele joined Marcus & Millichap in 1999 to specialize in the sale of self-storage facilities. He gained entrance into the firm’s prestigious Seven-Figure Club in 2004, was inducted as a senior investment associate in 2005, and earned the firm’s National Achievement Award six consecutive times. He currently serves as a senior director in the National Self Storage Group.

In addition, Mele has received sales recognition awards annually since joining the firm and has closed more than $450 million in self-storage properties.

With more than 60 offices and 1,300 investment professionals nationwide, and sales in excess of $20.5 billion last year, Encino, Calif.-based Marcus & Millichap is a prominent commercial real estate brokerage focused exclusively on real estate investments. For more information, visit www.marcusmillichap.com.

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America's banking institutions haven't halted all lending, according to a letter to the editors of The Wall Street Journal. It appeared in the Feb. 2 issue and was submitted by Ed Yingling, president and chief executive of the American Bankers Association in Washington, D.C.

The letter stated that loan demand has declined, "which is typical in a recession, as consumers, many of whom are concerned about job security, choose to hold onto their cars and homes and businesses. With fewer customers, businesses have a reduced need to finance inventory, buy equipment or expand operations. As the economy weakens, fewer businesses and individuals qualify for loans.

“Nevertheless, banks have continued to lend. Bank lending actually increased in 2008, although as the recession deepened at the end of the year, lending probably decreased marginally. Because banks now provide less than one-third of the credit in the economy, it is a challenge for them to offset the decline in volume from nonbank lenders. Ignoring the bigger economic picture and the cause-and-effect relationship between a recession and borrower behavior misses a critical point. Banks want to lend. It’s what they’re in business to do and what they will continue to do.”

Source:  Nation's Building News,American Banker Association Says Banks Continue to Lend

We all know customer service is a key component to retaining tenants and attracting new ones. Whether it’s over the phone or in person, treating customers like royalty is essential in the self-storage industry’s competitive environment.

Today’s self-storage managers are security guards, salespeople, maintenance crew and remodelers, tenant problem-solvers, software experts and even the marketing staff. “The role has evolved into what I now call a ‘professional sales and marketing person,'” says Mel Holsinger, president of Tucson, Ariz.-based Professional Self Storage Management.

And with the economic crisis, it’s even more critical for self-storage managers to be at the top of their game. “Managers are no longer hired for their ability to care-take the property,” says Linnea Appleby, president of PDQ Management Solutions Inc., Sarasota, Fla. “We look for candidates that bring a business attitude and strong sales skills to the facility. We ask: Is the person a good representation of our company and image?”

While most owners are looking for managers with some background in sales and business, a positive attitude and willingness to learn and adapt to new situations is essential. “Managers need to become totally immersed in continuing education and be willing to embrace it with a positive attitude,” says Holsinger, who also predicts more managers with college degrees will enter the self-storage industry in the near future. “They will want and demand higher compensation and benefits, and they will want to work for companies that recognize their talents and will continue to challenge them to do better in their overall store performance.”

When looking to hire a quality manager, self-storage owners should look at other industries that have similar traits as self-storage. “We look for managers who understand that our business is dealing with all kinds of people and they must have an outgoing, positive attitude,” Holsinger says.

Look for good habits, skills and behaviors, Appleby advises. “We can teach the business to anyone willing to learn, but they must have the underlying personal traits be successful.”

Can IT best practices and retail-specific technology applications help U.S. retailers weather the recession? 

Retailers spend just 2.9 percent of revenue on IT, according to recent survey data. Contrast that with the finance and banking category, which spends 7.7 percent of revenue on IT.

Across every industry, however, CEOs and business leaders have made it clear about what they want from IT now: Acquire and retain customers; manage customer relationships; and drive innovative new-market offerings, according to the combined State of the CIO and Forrester Research data (which surveyed 600 top business executives).

Retailers are spending their time and money mostly on five areas: merchandise assortment and space planning, allocation and optimization; regular price, promotion and markdown optimization; in-store systems such as point of sale (POS), kiosks and mobile technologies aimed at improving the customer experience; cross-channel merchandising that improves channel visibility and connectivity; and business intelligence (BI) that facilitates action.

Source:  NetworkWorld,  Can Technology Help Retailers Survive '09?

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