Market Data

Market Trends(1)

Briefly Noted

Hospitality — Instead of trying to time the market, investors should consider a short-term hold strategy for hotel assets, according to Stephen R. Hennis, director of STR Analytics. On average, between 2002 and 2006 investors who purchased hotel assets and sold them within two years of purchase reaped more than 30 percent annual appreciation regardless of when they bought.

Industrial — More than 60 percent of all markets tracked reported an increase in leasing in 1Q10, says Cushman & Wakefield. Orange County, Calif., Atlanta, Jacksonville, Fla., and Greater Los Angeles all had increases of more than 1 million sf over 1Q09.

Multifamily — “The biggest threat to the multi-housing sector remains rising interest rates,” says CB Richard Ellis’ 2010 capital markets multifamily report. A year-end 10-Year Treasury yield between 4.7 percent and 5.2 percent “coupled with stagnant job growth in some markets could have alarming short-term consequences on values.”Office — Office sales prices have held steady since year-end 2009, averaging $167 psf in 1Q10, according to Cassidy Turley. In March, cap rates averaged 7.7 percent in primary markets and 8.1 percent in secondary markets. Office sales volume should hit $15.2 billion for 2010.

Retail — In a CB Richard Ellis survey conducted in April, 92 percent of retailers expect to expand their new store openings this year anywhere from 5 percent to 200 percent. Of the retailers anticipating expansion, 66 percent required stores smaller than 10,000 sf. Nearly all 100 retail executives surveyed expected rents to fall or remain flat through year-end.

Worth Quoting

“I’m not a big believer in demand for new [medical office] buildings right now. Primary-care physicians will increase because of healthcare reform, which will be a boon for community strip centers and small offices, but they will not be the type of tenant that we can recruit to new offices.”

— Malcolm Sina, president and CEO of The Dasco Cos., a medical office real estate firm, speaking at BOMA International’s 2010 MOB conference

Green Certification to Increase

By 2020, 53 billion sf of space worldwide will hold some type of green building certification, up from 6 billion sf this year, according to a Pike Research report. Of that space, 80 percent will be commercial buildings, up from 73 percent currently. The majority of green certifications will be held by existing buildings instead of new construction, the report says. In contrast, most residential certifications will be new construction. “Green building techniques are increasingly becoming the standard within the architecture and construction industries,” says Pike Research analyst Eric Bloom. He adds that the three major drivers behind green building certifications are “environmental responsibility, reducing operating expenses through energy efficiency, and regulatory requirements that mandate energy efficiency and certifications.”

Kids’ Stores Outgrow Outlet Malls

The recent baby boom is translating into a retail expansion of children’s clothing stores. Atlanta-based Carter’s, which also owns the OshKosh B’gosh brand, is moving beyond the outlet malls into strip and lifestyle centers, according to an Atlanta Journal-Constitution report. It plans to add 45 new stores this year and 55 in 2011. Its competitor, Children’s Place, announced on CNBC plans to open 65 new stores in the Midwest. It also has created a new prototype store that costs 40 percent less to build, according to CEO Jane Elfers, allowing it to enter smaller towns and strip malls.

Distressed Advice

“Many ‘non-professional’ investors that are overpaying for [distressed] assets in the traditional manner (i.e., buying loans or REO) will not look at 363 bankruptcies or UCC foreclosures as they don’t want to overcome the learning curve.”

-Myths and Realities of Investing in Distressed Commercial Real Estate Assets and Mortgages, CB Richard Ellis


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