Market Data

Market Trends

Maybe the Worst Is Over?

While the number of stores closed in 2012 increased by 9.6 percent over 2011, the amount of retail square footage lost to the market decreased by 28.8 percent, according to the International Council of Shopping Centers/PNC Research’s January report. In 2012, 46.5 msf of retail space closed, compared with 65.3 msf in 2011. The amount of 2012 space closed was more in line with the 46.7 msf of space closed in 2010, perhaps indicating that retail is right-sizing itself due to smaller stores and better locations.

Industrial Digs Up Best Five-Year Return

The Pension Real Estate Association forecasters see the industrial sector providing five-year returns of 8.5 percent annually, the highest of all property sectors, according to its 1Q13 Consensus Forecast survey of the NCREIF Property Index. In addition, while multifamily returns are forecast to reach 9 percent this year, they decline going forward to provide a five-year average of 8.1 percent annually. Office and retail follow with five-year average returns of 8.0 percent and 7.9 percent respectively. PREA firms surveyed include 28 large investment and adviser commercial real estate companies.

"The growth trajectory should accelerate in 2014 with GDP growth ranging between 3 percent and 4 percent. Finally, after four years of sluggish growth, a very healthy U.S. economy is poised to emerge." Kevin Thorpe, chief economist, Cassidy Turley

Briefly Noted

Hospitality — Sequestration’s automatic spending cuts are slashing federal travel budgets, one of hospitality’s most lucrative segments, says HotelNewsNow.com. In 2011, local, state, and federal employees spent $30 billion in travel, according to the U.S. Travel Association.

Industrial — Net industrial absorption is expected to jump from 18.4 msf in 1Q13 to 34.7 msf by year-end, according to Cassidy Turley’s U.S. Macro Forecast. Asking rents are projected to increase from $5.03 to $5.12.

Multifamily — The robust apartment market has two more years of improving fundamentals, according to Wells Fargo Securities 4Q12 Commercial Real Estate Chartbook, and little to fear from the current uptick in the rental home market. “The talk of a permanent shift toward renting homes instead of buying them is considerably overblown,” the report states, predicting a return to homeownership as the economy improves.

Office — While 1.7 million office-using jobs were lost in the recession, 1.8 million have been gained, primarily in professional and business services, according to Jones Lang LaSalle and the Bureau of Labor Statistics. Of the jobs added in February, 42 percent were office jobs, with PBS comprising about 75 percent, followed by temporary help services and financial services.

Retail — In 4Q12, shopping centers posted a net operating income psf gain of 4.3 percent over 4Q11, according to the National Council of Real Estate Investment Fiduciaries and the International Council of Shopping Centers. Power centers posted a 7.7 percent YOY NOI gain, followed by super-regional malls at 4.6 percent, and neighborhood and community centers at 3.8 percent. Regional malls had the lowest gain at 0.4 percent.

Suburban Bargains

Office tenants willing to locate in the suburbs of some of today’s hot markets face more space options and much lower rents than CBD locations. In addition, suburban rents are not rising as quickly as downtown rents, according to CBRE.

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