Market Data

Market Trends

Resurgence of  Suburban Office

  • Demographics Support Suburban Demand: Nearly 66% of all households  are located in the suburbs.
  • Suburbs Evolve for Millennials:  Many suburban offices are transforming  their environments through walkable  spaces, entertainment, and retail and restaurant options.
  • Suburban Absorption Strengthens: Vacancy is lower than the national rate  at 15 percent vs. 16 percent, and net absorption has been vigorous.
  • Cap Rates and Pricing Reflect Upside: First-year returns up to 100 basis points higher show the potential for higher net operating incomes. 
    Source: Marcus & Millichap

Private Equity Dominates U.S. Hotel Investors (Source: JLL)
Top Markets for Office Refleting Job Growth (Source: CBRE Research)

Store Capital Corp. Basks in Berkshire Hathaway's Stock Investment*

“From the inception of Store Capital Corp. [in 2011], a substantial majority of our real estate investments have been centered on tenants who are involved in providing services. This is fully intentional. Service providers that require human interaction are less likely to be disrupted by alternate modes of delivery.”

- Christopher Volk, president and CEO of Store Capital Corp.

* Berkshire Hathaway recently invested $377 million in shares of common stock for Store Capital Corp., a net lease REIT.


L.A. Tops Manhattan in U.S. Investment Markets (Source: Real Capital Analytics)
Top 10 Rankings for Life Sciences Destinations (Source: JLL Life Sciences Outlook)
H1 2017 CMBS Bounces Back to $31.7B (Source: Trepp)

Briefly Noted

Hospitality — Showing the industry is poised for a comeback, a variety of international investors continue to snap up U.S. hotel properties, while capital is flowing at an increasing pace into public REITs. REITs acquired 16 percent of hotel sales as of May 2017 compared to 6 percent as of May 2016, according to JLL. Experts elevated their forecast of RevPAR growth from 2.5 percent to 3 percent for year-end 2017. Best of all, hotels are competing aggressively and competitively with alternative choices, such as Airbnb, JLL reports.

Industrial — The fortunes of the industrial sector keep rising — with expected absorption of more than 200 msf and addition of 2 million jobs — due to rapid expansion of online retail and improvements in the U.S. manufacturing sector. Major seaport markets, such as Seattle, Los Angeles, and Orange County, are reaping the greatest benefits and lowest vacancy rates, according to Marcus & Millichap. Investors are finding the best return on investment in smaller markets, with a cap rate spread of 350 basis points between primary and tertiary markets.

Multifamily — Overall, Reis predicts 2017 is the year when supply growth will offset the demand for multifamily, leading to higher vacancies. But rents showed resilience in July for multifamily when the lifestyle rent segment gained 0.6 percent,  surpassing the rent-by-necessity rent increase of 0.5 percent for the second consecutive month, according to Yardi Matrix. This increase in lifestyle comes after a downturn for many months and the comeback of renters in markets such as Boston, Seattle, Atlanta, and Sacramento, Calif. Occupancy rates are falling significantly in high-supply markets like Portland, Ore., and Austin, Texas.

Office — Continuing its ho-hum pace during the last seven years, national office vacancies were 16 percent nationwide in second quarter 2017 compared to 16.1 percent in 2016. During the last expansion, office vacancies decreased from a high of 17 percent to a low of 12.5 percent in 2007, while the vacancy high was 17.6 percent in 2010 for this cycle. Overall, tenants are leasing far fewer square feet per employee compared to previous cycles, according to Reis. The lowest vacancy rates are occurring in New York City at 8.8 percent; Washington, D.C., at 9.2 percent; and San Francisco at 10.2 percent.

Retail — The most competitive retailers are strong when they focus on targeting consumers across multiple channels. CBRE Research predicts brick-and-mortar stores will become the hub for the delivery and return of products. Despite its resilience, prime retail rents plummeted by 4.6 percent, primarily resulting from declines in Philadelphia, New York City, and Miami. 

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CIRE Nov/Dec 2017 Issue Cover

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