Market Data

Market Trends

Retail — and Waistline — Expansion

How many burgers can America eat? Although it seems like there is a fast food or fast casual restaurant on every outpad in America, restaurant chains are gearing up for an expansive year, according to Chainlinks’ 2013 retail forecast. Of the 41,000 planned retail openings in 2013, 42 percent are restaurant-related. Five Guys alone hopes to open 500 new stores this year, with eight other food chains announcing plans to open 200 or more U.S. outlets and 17 more planning between 100 and 200 new units. Shopping center landlords don’t mind; they are looking to food and entertainment tenant mixes to drive traffic to brick-and-mortar centers. After all, you can’t eat a burger over the Internet — at least not yet.

Briefly Noted

Hospitality — Do hotel loyalty programs work? Not according to Deloitte’s October 2012 survey of 4,000 travelers. Nearly 50 percent of loyalty members’ annual hotel dollars were spent somewhere other than their preferred hotel. In fact, only 7.8 percent of participants always stay at the same hotel brand. The majority of respondents selected value, free parking, comfort, and location as a hotel brand’s most important attributes.

Industrial — A stronger housing market will boost industrial absorption this year, cutting the current vacancy rate by 70 bps by year-end, reports Cassidy Turley. In the last two years, industrial absorption has topped 205 msf, surpassing the 145 msf lost during the recession. While landlords have been reducing rental rates to lease space, rents are poised to grow 2 percent to 3 percent this year.

Multifamily — In the next 12 to 15 months, 30 U.S. cities will pass mandates requiring multifamily property owners with more than 10,000 sf to enter energy use data in the Environmental Protection Agency’s Portfolio Manager, a data resource that will be used to develop Energy Star ratings for apartment buildings, said EPA officials at the National Multi Housing Council’s fall tech conference.

Office — Despite — or because of — the fiscal cliff scenario, 4Q12 demand for office space nearly tripled over the previous quarter, with markets absorbing 20.1 msf, up from 7.1 msf in 3Q12, says Kevin Thorpe, chief economist for Cassidy Turley. It was the strongest demand for office space since 2007, with 65 of the 80 metros tracked showing occupancy gains.

Retail — Class B is back. “Class B [community, neighborhood, and strip shopping centers are] now generally back to reasonable vacancy levels and rental rate growth in at least the top 70 percent of major U.S. markets,” says Chainlinks Retail Advisors 2013 retail forecast. Just two years ago class B shopping centers were performing in only the top third of U.S. metros.

Net Lease Activity Up for 2013

More than half of the investors surveyed predict a 5 percent to 14 percent increase in net lease transactions this year, despite a continuing lack of product on the market, says the Boulder Group’s 4Q12 Net Lease Report. Overall supply declined 14.4 percent from 3Q12 due in part to tenants back filling vacant retail space instead of building new. With more investors than product, many properties are sold in off-market transactions, the report says, and in other cases, owners have refinanced at today’s lower interest rates and continue to hold assets. Since long-term credit-tenant leases are hard to come by, investors will most likely settle for properties with shorter leases but still located in top-tier markets.

Equity CrowdFunding Awaits SEC Rules

The Jumpstart Our Business StartUps, or JOBS, Act signed into law last April includes a change to the Securities Act of 1933 that will allow non-accredited investors to put $2,000 a year or 5 percent of their income or net worth into closely held ventures, including those purchasing commercial real estate. Currently such ventures are restricted to accredited investors — those making $200,000 a year for the past two years or having a net worth of $1 million. The implementation hold-up is the U.S. Securities and Exchange Commission, which missed its year-end deadline for issuing investor safeguard rules. The purpose of the rule change is to make it easier for small businesses to raise capital for their startup needs — including property.

Source: Bloomberg News

The Showroom Effect

Once again, the failure of a brick-and-mortar retailer to offer an experience instead of just product and price may be its death knell. Barnes & Noble turned in disappointing 2012 holiday sales, with same store sales down 8.2 percent. Already it is closing some of its 689 stores in markets such as Los Angeles, Chicago, Dallas-Fort Worth, New York, Philadelphia, Washington, D.C., and Seattle. Retail Traffic reports that 123 of its leases are scheduled to expire this year, with 136 in 2014, and 101 in 2015. The company’s 674 college stores appear safe from closure.

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