Market Data
Market Trends
Industrial
Strength Year
The
overall national industrial vacancy rate ended 2014 at 6.8 percent, the lowest
level since 1Q 2001, according to Cushman & Wakefield. The vacancy rate was
down 70 basis points YOY and 400 bps from its 10.8 percent peak in early 2010.
There was 340.3 million sf of industrial leasing activity in 2014, a rise of
3.6 percent over 2013. Markets seeing huge leasing gains include Atlanta, up
51.5 percent YOY, and central New Jersey with a 21.7 percent increase. “In almost every market, industrial property
demand continues to surpass supply,” says John Morris, leader of C&W industrial services. The
nation’s 159.1
msf of occupancy gains in 2014 was up 35.7 percent YOY, which, with low supply,
has resulted in healthy rent growth. At year-end, 105.1 msf of industrial
inventory was under construction in the U.S. “The industrial market is well positioned to
gain further momentum in 2015,” Morris adds. “The battle between major retailers to make optional a ‘last mile’ experience that could be nearly instantaneous for customers will
only accelerate in the coming year. Overall, industrial square feet are
replacing some retail space needs in the U.S. now, and for the foreseeable
future.”
“By a wide margin, the U.S. was voted the most stable and secure
country for investment, outstripping both second-place Germany by 55 percentage
points, and third-place U.K. by 60 percentage points.”
—Association
of Foreign Investors in Real Estate 23rd Annual Survey
Briefly
Noted
Hospitality
— In 2014, “The
market was dominated by the sale of select-service hotels,” said Suzanne Mellen, HVS senior managing
director, at the Americas Lodging Investment Summit in January. That activity
also kept price growth per key at around 4 percent. Hotel transactions
increased 22 percent last year, with hotels above $10 million showing the
biggest price increase: 25 percent YOY. Hotels selling in the $2.4 million to
$10 million price range showed price per key amounts still well below 2008 peak
levels, Mellen said.
Industrial
— There is still plenty of upside in the industrial market, according to CBRE,
which sees rents rising 4 to 5 percent this year and reaching full recovery in
late 2016. Although this will be a strong year for new development, supply will
still lag behind demand by more than 20 msf.
Multifamily
— “Apartment
values now measure 13 percent above the 2007 peak and overall cap rates have
decreased over the past year to 5.7 percent,” says Marcus & Millichap’s 2015 National Apartment Report. With class A
acquisitions priced at a premium to replacement costs, new development and
class B renovations offer a better value for investors.
Office —
JLL foresees a 25 percent increase in absorption for 2015, according to its
4Q14 office report. However construction is happening in 38 of the 48 markets
tracked, much of it speculative and almost half of it projects with no lease
commitments. In late 2016, the market could shift from undersupply to
oversupply, JLL warns.
Retail —
“In 2014,
private investors accounted for 60 percent of net lease retail transactions, a
significant increase when compared to 42 percent in 2013,” according to the 4Q14 Boulder Group Net Lease
Market Report. “Private
buyers continue to dominate the net lease market in the low cap rate
environment as institutions cannot typically pay the cap rate premiums due to
yield restrictions.”