Market Data

Market Trends(2)

This Is Your Brain on E-mail

A University of London study done for Hewlett Packard revealed that infomania — addiction to e-mail and texting — can lower your IQ twice as much as smoking pot. In addition, e-mail constantly introduces new stimuli, raising levels of noradrenalin and dopamine, making complex thinking such as decision making and problem solving harder to accomplish. “Once you’ve processed 30 or 40 e-mails, you’ve ruined your brain chemistry for higher level tasks that are going to create value,” says David Rock, author of Your Brain at Work, one of top 10 business books of 2009. “Start [your day] with the tougher work that requires a more-focused, quiet mind. Tackle thinking tasks early and tasks that are relatively ‘interesting’ (which means your brain will go there easily) such as checking your e-mails later when you are tired.”

Worth Quoting

“One by-product of elevated unemployment is rising college enrollment, which is spurring demand for student housing. Cap rates for student housing increased 50 basis points in 2009, while the average price rose 5 percent. Both measurements outperformed those for traditional apartments.”
— Marcus & Millichap

Briefly Noted

Hospitality — The lodging market is expected to turn positive in 2011, after flat occupancy and decreasing average daily rates and revenues per available room this year, according to STR’s yearly forecast. Demand from high-end business travelers has boosted the market recently and that is expected to continue.

Industrial — The bottoming out of packaged-goods inventories and the increase in global trade volumes are two good signs that the industrial market may recover a few quarters ahead of the office market, according to Jones Lang LaSalle. However, until sublease space subsides and occupancy stabilizes, rent growth will hold off until 2011.

Office — Three New York submarkets maintained office vacancy rates below 10 percent while Phoenix recorded the highest 4Q09 vacancy at 26.6 percent, according to Grubb & Ellis. Vacancy, rental rates, and net absorption softened more gradually at year-end 2009, and if job loss continues to abide an office recovery could start by midyear.

Multifamily — Demand for apartments is expected to outstrip supply by mid-2011, with shortages continuing until 2014, according to the National Association of Home Builders. Market rents are likely to increase 8 percent to 10 percent per year between 2011 and 2012 and 4 percent to 7 percent through 2015.

Retail — In 4Q09 the overall availability rate rose to 12.5 percent, only 20 basis points over 3Q09, according to CB Richard Ellis. Although 180 bps above 4Q08, retail availability has increased at a much slower pace for the last three quarters. In addition, neighborhood and community centers had the lowest increase in availability rates in two years — another sign of impending recovery.

Independent luxury hotels such as the Graves 601 Hotel in Minneapolis are seeking shelter under the brand-name recognition of Starwood, Hyatt, and Wyndam, according to Travel Weekly. The Graves, along with other luxury independents in San Diego, China, and Mexico, recently rebranded under the larger chains’ luxury flags. Part of the appeal to chains is the independents’ uniqueness — unlike their less-expensive brands that follow the cookie-cutter approach. Even Marriott, known for its strict brand standards, hopes to add 25 to 30 existing luxury hotels to its newly created Autograph collection. The first seven include independent properties in New Mexico, Florida, Georgia, and North Carolina.

REITs Earn Top Returns for Decade

10-year period ending Dec. 31, 2009
Equity
2000 investment
2009 return
U.S. REITs
$10,000
$27,454
Russell 2000
$10,000
$14,127
S&P 500
$10,000
$9,090
Nasdaq Composite
$10,000
$5,577
Source: National Association of Real Estate Investment Trusts

Land Grab

Good land was a great deal in 2009, according to participants at the Knowledge@Wharton global real estate conference. And smaller investors may still benefit, said Barry Sternlicht, chairman and CEO of Starwood Capital. His company paid $20,000 each for 70 land lots in February 2009; in December they were receiving offers of $100,000 each. “We’re kind of in shock,” he said. “There are pockets of significant shortage of finished lots in certain zip codes. The demographics are far better than people think.” Permitted land close to infrastructure is hard to come by and the deals are too small for large companies. But, he added, "If you are a young entrepreneur, it’s an interesting place to go — 50 lots at $10,000 each is $500,000."

Top 5 Multifamily Investment Markets

  1. Washington, D.C.
  2. San Diego
  3. New York City
  4. Minneapolis-St. Paul
  5. Philadelphia

Source: Marcus & Millichap

Real Power to the People

Step on a Pavegen Systems rubber slab and it lights up, converting human kinetic energy into electricity. Five slabs placed near an information kiosk in an outdoor mall could produce enough energy to light up the kiosk. Other potential uses are pedestrian lighting at street crossings or in stairwells. Check out www.pavegensystems.com for more applications and investor opportunities.

Condomania has hit Orange County, Calif., as 10 of 13 office and industrial condominiums have sold in the Von Karman Center and the Valencia Business Center since August 2009. Marketed by individual brokers through the online platform AuctionPoint.com, the properties sold in an average of five weeks at an average $149 psf. Shown is an 8,462-sf Von Karman office condo that garnered in 23 bids and sold for $1.35 million or $160 psf.

Residential Realities

Expect a changing housing market in the next 10 years reports “Housing in America: The Next Decade,” new research from the Urban Land Institute. “The old normal” of people building equity through big suburban homes will not return after this recession, the report says. Instead, compact communities, urban settings, and mixed-use developments will attract everyone from retiring baby boomers to their tech-savvy children and grandchildren. Findings include:

  • Home appreciation will slow to 1 percent to 2 percent annually in the next decade.
  • The U.S. homeownership rate will decline from 67 percent today to 62 percent by 2019.
  • Good news for multifamily: The 86 million Generation Yers have far less interest in home-ownership than previous generations. Spooked by the recession, they may rent for many years, choosing walkable urban communities that emphasize net-zero energy and green buildings.
  • A population of 40 million that often prefers multigenerational households, immigrants have the greatest interest in large homes in neighborhoods with strong communities.

Expansion-Minded: Retailers Adding Stores in 2010

Discounters Restaurants Other

Dollar General
600 stores

Aldi
25 stores

Costco
23 stores

99 Cents Only
12 stores

Nordstrom Rack
12 stores

McDonald’s
150 restaurants

Chipotle
130 restaurants

Sonic Burger
125 restaurants

Panera Bread
105 restaurants

Pizza Fusion
75 restaurants

Zara
450 stores

Rue 21
100 stores

Edible Arrangements
87 stores

Boost Mobile
50 stores

Lowe’s
45 stores

Source: Advertising Age

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