Market forecast
Best Investment Picks, 2010-2012
By Anthony M. Graziano, CRE, FRICS, MAI |
The following market investment forecast is based on a survey of Integra Realty Resources advisers in 58 cities. In previous midyear updates, trends were identified by asset classes; however, in 2010 asset classes are performing as different levels in different cities. Therefore, cities are classified by “when” the market’s investment potential should return in the next three years. Specific demand patterns are noted for each market.
2010 Investment Picks
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Market
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| Austin, Texas |
Strong job growth and in-migration add to purchasing power |
| Baltimore |
Base Re-Alignment and Closure (BRAC) finally paying big dividends, market is very active |
| Boston |
Diversification in life sciences, finance, and technology driving new demand |
| Chicago |
Office transactions resuming as finance retrenches; high replacement costs and lack of downtown land support pricing; suburban distribution hubs growing fast |
| Cincinnati/Dayton |
Fortune 100 partners injecting massive capital in downtown; healthcare, university, and R&D firing on all cylinders |
| Dallas-Fort Worth |
FIRE, energy, and corporate relocations looking positive |
| Houston |
Prices remain stable buoyed by energy and port commerce driving industrial and office demand. |
| Indianapolis |
Reported leasing activity strongest in the past three years; life sciences emerging as a major sector |
| Louisville, Ky. |
Highly bifurcated market, with both very good and very bad sectors; transportation and healthcare leading the way, automotive revival will benefit market |
| Memphis, Tenn. |
Major transport carriers growing and strong rail presence; pricing on new product at 25% to 35% of replacement cost; buyers today could see huge upside |
| Miami |
Displaced lodging sector is seeking buyers, but tourism is expected to strengthen with improving economy. |
| Orlando, Fla. |
Multifamily sector is getting active. |
| Philadelphia |
Good risk-adjusted returns in a stable Northeast hub |
| Pittsburgh |
Core MSA activity is hot, demand for multifamily and lodging is evident; pricing never falls off the cliff but it also never rockets to the moon. |
| Raleigh, N.C. |
Good regional real estate plays, ahead of Charlotte and miles ahead of Winston-Salem-Durham |
| Richmond, Va. |
Fortune 500 office vacancies increasing, but good quality and cost of living favors multifamily; Tourism increasing but lodging is struggling |
| San Francisco |
Notorious for rent spikes after a recession; tech is back and biotech is emerging strong |
| Tampa Bay, Fla. |
All sectors are suffering, and like Miami and Orlando - good pricing will drive investment |
| Washington, D.C. |
Federal government is not getting smaller, massive re-alignments in key sectors buoying demand |
2011 Investment Picks
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Market
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| Columbia, S.C. |
Conservative market with Boeing and Jaszfa making big capital investments |
| Detroit |
High supply of skilled labor; devastated real estate and land market; demand is nascent, but battery technology and recovering automotive sector signals recovery |
| Kansas City |
CBD development ground to a halt; prior local market cycles indicate a 3 to 5 year spike is possible; Longer term hold probably required |
| Las Vegas |
Hotels, state, and county all beginning layoffs; gaming market has been decimated. |
| Los Angeles |
Institutional investors still bidding up multifamily pricing in rent controlled, underbuilt markets, sensing rent spikes into 2012; other asset classes still in flux as demand wanes |
| Minneapolis/St. Paul |
Biomedical remains strong and growing, area tourism and construction still uncertain; lodging market is struggling but could represent a good opportunity |
| Naples, Fla. |
Distressed assets are starting to come out of the pipeline; bring cash, competition will be fierce. |
| Nashville, Tenn. |
Staid market immune to wild price swings; asking prices benchmarked to solid fundamentals |
| Portland, Ore. |
High barriers to entry within the urban growth boundary have supported pricing; environmental constraints limit land availability and technology/manufacturing contribute to demand |
| Sacramento, Calif. |
Expect a wave of discounted land deals, fundamental demand is unclear; class B and C assets at 1990s pricing |
| Salt Lake City |
Energy and tourism, coupled with strong occupancy in most asset classes continues to support the region |
| San Diego |
25%+ population growth by 2020 indicates new demand in all asset classes; labor costs will remain low and quality of life remains high |
| Wilmington, Del. |
Closing of GM and Chrysler assembly plants has been devastating; asset pricing is in flux, but fundamental demand remains unclear |
2012 Investment Picks
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Market
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| Coastal New Jersey |
Gaming markets in Atlantic City losing their shirt, government aggressively cutting costs and payrolls; tourism buoyed by "stay-cation" trends, but construction and housing must rebound |
| Cleveland |
Pricing is still correcting, but no major trends point to a reversal of economic fortune in the immediate future |
| Columbus, Ohio |
Continues to suffer high office vacancy with high dependence on FIRE, services, and government, all of which rely on a general economy kick-start |
| Hartford/Providence, Conn. |
Downtown office vacancies over 20% and climbing; no clarity on future fundamentals; core economy lacks a breakout superstar industry |
| Northern New Jersey |
Port commerce is down, industrial demand is floundering, and office markets are surviving. |
| Phoenix |
Wealth ratio remains healthy by any standard, so fundamental demand will return; it's just a matter of time |
Source: 2010 Integra analyst survey