Brookfield Office Properties Inc USA (BPO), Jones Lang LaSalle Inc (JLL): A Landlord to Bet On As Commercial Properties Improve

Share prices of Brookfield Office Properties Inc USA (NYSE:BPO) have risen to as high as $17.20 on high volume since the company announced this March that the funds from operations (FFO) it generated in 2012 hit $650 million, an improvement from the 2011 FFO of $640 million. With this uptick, coupled with other bull factors, Brookfield now appears ready to test its 52-week high of $18.60.

The steady decline in the U.S. office vacancy rate is one of the indicators of the potential growth for Brookfield Office Properties Inc USA (NYSE:BPO) an owner, developer, and operator of commercial properties in major North American cities, in addition to similar holdings in Australia and the UK. As per the real estate research firm REIS, the U.S. office vacancy rate during the 2012 fourth quarter was around 17% percent. This office vacancy level was said to be the lowest in almost three years and could slip down further with job creation and the reduction of the unemployment rate.

Job growth to boost office space demand

Recent U.S. Labor Dept. statistics do point to the possibility that newly created jobs will boost the demand for office space. The agency reported that 236,000 new jobs were opened this February, trimming the country’s unemployment rate to a four-year low of 7.7%, down from January’s 7.9%.

Significantly, too, Brookfield has properties in cities where office space demand is strongest. Among these are the high growth markets for the company such as New York, Houston, Boston, and Seattle. Occupancy rates of Brookfield properties (NYSE:BPO) as of 2012 stood at 93% in New York and 87% in Houston.

Incoming tenants in NYC

It is also noteworthy that Brookfield Office Properties Inc USA (NYSE:BPO) seems unlikely to be encumbered by some tenants reportedly leaving its NYC property, the former World Financial Center in Lower Manhattan. The company is renovating this complex into the Brookfield Place to the tune of $250 million.

This March, the research firm GfK signed a 16-year lease for the entire fourth floor of the 1 World Financial Center building with Jones Lang LaSalle Inc (NYSE:JLL) completing the agreement as Brookfield’s agent. Brookfield named JLL last year as exclusive leasing agent for the office complex. Already, Brookfield Office Properties Inc USA (NYSE:BPO) also signed eight leases at the dining terrace being constructed at Brookfield Place as part of the complex’s renovation.

In addition to its partnership with Brookfield, Jones Lang LaSalle Inc (NYSE:JLL) recently got a new appointment as leasing agent for LakePointe Office Park’s seven office buildings in Charlotte, NC. These recent contracts should help Jones Lang LaSalle Inc (NYSE:JLL) further improve its performance. During the 2012 fourth quarter, the company reported $117.1 million adjusted earnings, up from the $113.6 million of a year earlier. Adjusted earnings per share amounted to $2.60, up from $2.56, but a penny short of the $2.61 market expectations.

Brookfield wins downtown LA

Brookfield appears to have edged its major competitor, MPG Office Trust (NYSE:MPG) , in Los Angeles where the former has 5.7 million square feet, 88% of which are occupied as of last year. MPG was reported to be selling its 72-story US Bank Tower in LA to Overseas Union Enterprise Ltd., a Singapore developer which is shelling out some $367 million for the deal. MPG, said to be struggling with debt, will reportedly use part of the sales proceeds for its loan obligations.

The MPG building, the tallest in California, was estimated to have a 60% occupancy rate, and Overseas Union may have to do extensive remodeling. One real estate analyst said its cylindrical structure doesn’t make for an efficient office layout.

In contrast to MPG’s Los Angeles retreat, Brookfield last year successfully renovated a downtown LA shopping mall for $40 million. This Fig@7th development, which was awarded the Downtowners of Distinction for the financial district, has the popular retailer City Target as its anchor tenant.

More launching pads

Moving forward this 2013, Brookfield Office Properties Inc USA (NYSE:BPO) has set up launching pads outside the U.S. to further bolster its value to shareholders. The company’s Brookfield Place flagship in Perth, which opened in summer 2012, is now 100% leased. The second tower of the company, Bay Adelaide Centre in Toronto, is currently still under development and is already 60% pre-leased, three years prior to completion.

This, included with the gains Brookfield has achieved, should make the company one sound landlord to invest in with the steadily rising fortunes of the commercial properties market.

The article A Landlord to Bet On As Commercial Properties Improve originally appeared on and is written by Arturo Cuevas.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.