Market Data

Market Trends

U.S. Stability = Global Investment

Global financial market volatility is boosting  investment in U.S. properties, encouraging many to focus on capital preservation and asset stability rather than yield. Rather than the flashy sales often reported, most international acquisitions are smaller assets  purchased through funds and domestic intermediaries. Yet the totals are impressive at more than $90 billion of commercial real estate purchases in 2015, accounting for  17 percent of the market volume. Due to the strength of the U.S. dollar, international buyers comprised 11 percent of all U.S. properties in the first half of 2016, according to Marcus & Millichap.

During 2016 to date, five major cities receive the lion's share of global investment -New York City, Los Angeles, San Francisco, Chicago, and Phoenix. Office and hotel properties have been the most popular acquisitions by volume, but multifamily and industrial properties comprised 57 percent of the direct transactions, Marcus & Millichap reports.

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“The growing presence of amenity-rich co-working options may spur owners of older properties to add social gathering places and tenant recreation areas to compete for tenants. Companies increasingly prefer amenity-rich, transit-oriented real estate to aid recruitment and are often seeking flexible lease terms and minimal cost and time commitments for space build-out.” — Avison Young 
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Tech Hubs and Spokes

The tough employment market is pushing tech industry expansion into secondary markets, where skilled labor and lower costs are attainable. The largest tech clusters - Silicon Valley, San Francisco Bay Area, Boston, and New York City - will remain centers of innovation. But job data shows tech companies flourishing in Nashville, Tenn., Austin, Texas, and Madison, Wis., according to JLL.

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Briefly Noted

 

Hospitality — Annual occupancy in U.S. hotels will move 30 basis points in 2016 to 65.8 percent — the highest annual rate on record — according to Marcus & Millichap. Compared to second quarter 2015, the average daily hotel room rate increased by 3.5 percent, STR reports. An intriguing variance was the exceptional performance of independent hotels, where Marcus & Millichap reports RevPAR rose 4 percent annually to date compared to an average of 3.1 percent.

 

Industrial — Despite global uncertainty, the U.S. industrial market continues its resilience. So far in 2016, reduced exports due to the higher dollar have been countered by increased imports, according to Reis. The industrial market statistics mirror the national U.S. economy, which show consistent advancement but slow growth. “Stakeholders are charting a new way forward with automation, supply chain transparency, new port labor contracts, technological advances, congressional support, and stabilizing fuel costs,” says Kevin Turner, SIOR, at Cushman & Wakefield in Irvine, Calif.

 

Multifamily — Even with 50,000 new apartments available each quarter during the past 18 months, the national vacancy rate is holding steady at 4.5 percent. In the second quarter, rents rose 1 percent. However, YOY growth rates indicate that increases in rents are slowing down, according to Reis.  

 

Office — The strongest momentum for office growth proceeds from secondary markets, while high costs are limiting primary market office growth, according to JLL. The factors driving this momentum: more robust job growth for cities with higher quality of life and lower cost of living; major population boost; and comparatively high yields for investors. “The clear winners are submarkets and buildings that can offer the ‘live, work, play’ dynamic,” says David Tennery, managing director at JLL in Atlanta.

 

Retail — Regional malls are recovering more quickly than neighborhood and community centers. The top retail performers are top-tier malls and grocery-anchored centers. According to Reis, the declining middle class is directly affecting sales at neighborhood and community centers, which show a national vacancy rate of 9.9 percent in 2Q 2016. The strongest retail markets are in New York City, California, and south Florida, boosted by a strong contingent of affluent consumers.

 

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