Market Data

Market Trends

International Buyers Seek Apartments

In the past 15 months, international real estate investors have sought security in the U.S. multifamily market, according to Jones Lang LaSalle. Canadian investors have spent close to $3.2 billion in the U.S. multifamily market, followed by Swiss ($698 million), Israeli ($407 million), British ($291 million), and Kuwaiti investors ($272 million). Overall, international acquisitions totaled more than $300 million in each of these markets: Dallas, Houston, New York, Chicago, and South Florida.

Corporate Conundrum

Corporate real estate executives are finding new challenges in today’s post-recession climate, according to a new Jones Lang LaSalle survey on today’s corporate realities. How commercial real estate performs is now under greater scrutiny by chief executives, according to the 600 global executives surveyed. The top demands being placed on commercial real estate execs include

• reducing direct real estate costs;

• increasing use of existing building portfolios;

• reducing portfolio operational costs; and

• challenging presumed space needs.

But continuing to deliver cost savings through building portfolio management is a difficult task. In the coming years, commercial real estate teams will require new skills to meet new C-suite expectations:

• challenging the status quo through forward thinking;

• presenting real estate options and scenarios;

• understanding of the broader business climate; and

• providing data and insights.

This focus on broader business skills “will need to be addressed through a … fundamental rethinking of the form and function of the CRE team,” the report says. To read more, download “Risks Ahead,” at joneslanglasalle.com.

“Industrial rents have passed the inflection point…effective rents are forecasted to rise 25 percent during the next four years (2013–2016).” — Prologis Research

Briefly Noted

Industrial — E-commerce, expected to increase 62 percent by 2016, is affecting the industrial market in a positive way, according to CBRE. Same-day pickup and online delivery options are requiring more urban infill industrial development and more e-commerce distribution centers in UPS and FedEx hub markets. Many e-commerce industrial users are choosing build-to-suit over leasing existing facilities.

Hospitality — Secondary markets are underserved by boutique hotels, both chain and independent properties, said a panel of hospitality experts at the Bisnow Lodging Investment Summit. Markets such as Pittsburgh and Cleveland “have every full-service brand there, but what’s really missing is a boutique hotel to play off of that,” said Tom Riley, a Kimpton Hotels vice president.

Multifamily — Institutional investors are seeking three locales for new multifamily acquisitions: “downtown urban, inter-urban in the 7- to 10-mile range from CBDs, and suburban,” according to Jack Kern, chief investment research officer at Continental Realty Advisors, at the NMHC’s 2013 Apartment Strategies/Finance Conference. Kern suggests watching occupancy patterns, which indicate where opportunities exist, according to a report in MHNonline.

Office — Private investors account for more than half of the medical office investment transactions in the last 12 months, dominating the $1 million to $10 million MOB segment, according to Marcus & Millichap. Cap rates for these deals average 8.2 percent. REITs dominate the higher-priced arena of better-located, hospital-affiliated MOBs, with cap rates ranging from 6 to 7 percent.

Retail — Bank ground leases maintained a 225-basis-point premium over general retail net leased properties in the past year and cap rates have compressed 85 bps to 5 percent, the lowest level since 2004, according to the Boulder Group. Low prices, low default rates, and no landlord duties make these assets popular with 1031 and fixed-income investors.