Market Data
Market Trends
The Great Retail Class
Divide
According to Cassidy
Turley’s Spring Retail Report, national credit tenants rule the roost today and
their rule is class A shopping centers or nothing at all. Class B centers
should be upgrading to compete with class A, but even that is not a sure thing.
“Increasingly, [national credit] tenants are willing to hold out until either
new product becomes available, or they are going to other markets where they
can find the class A space they need, rather than staying put in one geographic
area,” the report says. “As for class C product, there will continue to be only
minimal relief as far as occupancy growth goes and certainly nothing in the way
of overall rental rate growth.”
“During the fourth quarter
[2013], commercial and multifamily mortgage debt outstanding reached a new
high, erasing the declines caused by the recession.”
— Jamie Woodwell, vice
president of commercial real estate research, Mortgage Bankers Association
Office Sector to Rebound
in 2014
“Office Sector Primed for
Dynamic Performance in 2014,” is a headline from Marcus & Millichap’s
National Office Report, which issues a strong forecast, not only for the office
market but the economy in general. A strengthening housing market supporting
robust retail sales and a forecast of 3 percent GDP growth have companies
moving off the sidelines to hire and expand their office space. In turn,
investors are looking for higher risk deals in smaller markets and new
development opportunities in low-vacancy markets. Most of the development
action this year will happen in 15 markets, each with more than 1 msf of new
construction scheduled to come online.
Briefly Noted
Hospitality — Major-market
hotel occupancy is forecast to grow by 4 percent this year, according to
TravelClick, with smaller markets seeing larger increases, including Tampa,
Fla., 14 percent; Denver close to 11 percent; and Atlanta, San Francisco, San Diego,
at or near 9 percent growth. That outlook is boosting hotel prices, according
to a Hotel News Now report: From 2012 to 2013, the number of U.S. hotels
transacting at a price of $1 million per room grew from five to more than 20.
Industrial — Net absorption
for this year could surpass 250 msf, according to the NAIOP Industrial Space
Demand Forecast. The report projects a quarterly demand of 62.7 msf, due to
pent-up demand and increased construction and retail spending from a strong
housing rebound. Given an improving job market and economy, 2015 should follow
the same trend with quarterly absorption averaging between 58.5 and 64.5
msf.
Multifamily — While the
outlook for all seniors housing sectors is positive, the independent living
sector is attracting the most attention from multifamily investors, as
transaction velocity increased more than 50 percent last year, according to
Marcus & Millichap. Median sales price was $135,400 per unit with cap rates
in the high 6 percent range.
Office — A 2.8 percent
office-using job growth and tightening space availability should push tenant
demand for office space to 135 msf this year, more than double the 56 msf
scheduled to come online, says Marcus & Millichap. This sets up a strong
scenario for a 120 bp drop in the national vacancy rate and a 3.5 percent rise
in asking rents.
Retail — The flight to
quality is playing out in neighborhood strip centers where overall vacancy is
around 10 percent but class A vacancy is closer to 6 percent, according to
Cassidy Turley. Neighborhood centers will make the most gains this year, helped
along somewhat by their tenant mix of grocery, drug, restaurant and retail
services — retail categories least affected by ecommerce.
Foreign Investment Grows
Offshore investors, mostly
from China, continue to flood the U.S. real estate market with capital,
according to speakers at the Akerman U.S. Real Estate Summit. Inbound
investment is up 40 percent and doesn’t appear to be slowing, said Tim Gifford,
senior vice president of international capital markets at CBRE. Global
transaction volume for 2013 was $1.1 trillion, the highest volume since 2007,
according to E&Y. About 18 percent of that amount accounts for cross-border
transactions, with the U.S. remaining the strongest market for international
capital.
Source: Hotel News Now