Market Data

Market Trends

Libor – What Is It?

The recent debacle involving manipulation of the London Interbank Offered Rate caused many to wonder what exactly it is. This benchmark interest rate used throughout the world’s financial systems is determined by the British Bankers Association, according to Every day at 11 a.m., 20 of the world’s largest banks submit interest rate data involving 10 currencies for 15 different loan terms. “The BBA then throws out the top 25 percent of quotes and the bottom 25 percent, and takes the average of the remainder,” says Wharton finance professor Richard J. Herring. “This makes it seem highly unlikely that any one bank could manipulate the rate, but on closer inspection, it is possible.”

While less accurate than other benchmarks, Libor has persisted out of tradition and the fact that it incorporates risk into its assessment. “[Libor] is intended to reveal the banks’ real cost of money, incorporating all the market’s up-to-the-minute assessments of the risk of lending to the participating banks. In contrast, a U.S. Treasury bond rate, while set more transparently, does not include default risk. …so the two rates reflect a different set of concerns,” reports Knowledge@Wharton. Find out what alternatives might replace Libor by reading “The Libor Mess: How Did It Happen — and What Lies Ahead?” at

Smaller Markets Attract Global Cash

Foreign investors plunked down $317 million for commercial real estate property in Phoenix during second quarter 2012, as well as spending $318 million in Boston and $384 million in Minneapolis, according to Jones Lang LaSalle Capital Markets Research. Those three cities rank last in the top 10 U.S. markets for cross-border acquisitions, behind Seattle, Dallas, and Miami and the major markets. Nearly 35 percent of the total $40 billion 2Q12 deals were cross-border transactions.

“Core U.S. real estate throughout primary and many secondary cities remained very attractive to both domestic and foreign investors, based on absolute initial yields on offer, and their spread over record-low Treasury rates,” says Josh Gelormini, vice president of JLL’s Americas Research. “The U.S. is also benefiting from a safe haven strategy, as other global markets appear on shakier ground, particularly given the ongoing Eurozone crisis.”

2012’s Top Fast-Casual Chains

1. Smashburger 145 units
Adding 50 to 70 locations in Chicago, Houston, Dallas, Los Angeles, Minneapolis, San Francisco, Boston, and Washington, D.C.

2. Zoës Kitchen 54 units
New locations to open in Dallas-Fort Worth, Texas; Raleigh-Cary, N.C.; and Columbus, Ga.

3. Firehouse Subs 494 units
Adding 429 locations in Iowa, Louisiana, Massachusetts, Michigan, Minnesota, Nebraska, Ohio, Pennsylvania, and Texas.

Briefly Noted

Hospitality — Hotel investors have shifted away from luxury acquisitions to focus on “strong upscale brands in solid markets,” says Stephen R. Hennis, director of STR Analytics. While New York, Washington, D.C., and San Francisco remain favored locations, Boston, Atlanta, and Nashville, Tenn., have also attracted investor attention.

Industrial — “As of mid-2012, the industrial sector has leased more space during this recovery than it shed during the recession,” says Cassidy Turley’s chief economist, Kevin Thorpe. With 2Q12 net absorption at 19.8 msf, highest demand was in the Midwest and South, which accounted for 88 percent of overall absorption.

Office — Despite a hiring slowdown, office leasing for the first half of 2012 remained on par with last year, with positive office net absorption occurring in 64 of the 80 metros tracked by Cassidy Turley. And with new office construction more than 60 percent below the historical norm, supply/demand factors have continued to push the national vacancy rate lower and rents slightly higher for several consecutive quarters.

Multifamily — Improving fundamentals for class B and C properties and secondary markets have kept investors interested in apartments according to Marcus & Millichap, with 2Q12 investment sales rising 38.6 percent over 2Q11.

Retail — More than 1,100 retail outlets closed in 2Q12, a reduction of 10.3 msf,
and more than double the number of stores closed in 1Q11, according to a joint International Council of Shopping Centers and PNC Research report.

Whole Foods Profits Fuel Expansion

A healthy 32 percent rise over last year’s second-quarter profits and a branding as America’s healthiest grocery store has Whole Foods moving toward 1,000 stores, up from its current 369. Twenty-five new stores will be open by year-end and 12 additional leases have been signed, according to


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