Market Data

Market Trends(10)

Residential Crossover

Although the majority of 1.3 million members of the National Association of Realtors specialize in residential real estate, many have secondary specialties in the commercial sector.

Percentage of NAR Members With Second Focus
Commercial brokerage 18%
Land development 18%
Commercial property management 11%
International 4%
Auction 2%
Commercial appraisal 1%

Source: 2007 NAR Member Profile

Industrial Snapshot: Minneapolis

Second-quarter 2007 was not kind to the Minneapolis-St.Paul industrial market. All three industrial classifications posted negative absorption, the greatest being bulk warehouse with -521,891 sf, according to Colliers Turley Martin Tucker. Office/warehouse experienced -183,098 sf absorption and office/showroom saw -75,475 sf absorpton, for a total of -790,464 sf. Partially caused by the addition of three new multitenant buildings with large vacancies, the negative absorption pushed the Twin Cities industrial vacancy rate to 11.6 percent, up 1.2 percent over 1Q07.

Briefly Noted

  • HOSPITALITY — The U.S. hotel industry generated a record $27 billion in profits last year, an almost 18 percent increase over 2005 profits, says Smith Travel Research.
  • INDUSTRIAL — San Antonio and Austin, Texas, Denver, and Albuquerque, N.M., showed the biggest vacancy drops over the past four quarters as nationally net absorption exceeded space completions by 14 million sf in 2Q07, reports Grubb & Ellis.
  • MULTIFAMILY — Condo converters represent less than 5 percent of the multifamily sales volume this year, compared with 35 percent in 2005, according to the National Association of REALTORS®.
  • OFFICE — National office sales topped $6.5 billion in April, with the tightest space markets — Manhattan, San Francisco, and Washington, D.C. — commanding the highest psf prices: $711, $435, and $416 respectively, says the 2Q07 Korpacz Real Estate Survey.
  • RETAIL — Institutional and foreign buyers have increased their retail acquisitions from public real estate investment trusts, purchasing primarily in the Northeast, Southern California, Phoenix, Ariz., and Atlanta, reports Jones Lang LaSalle.

What's Hot and What's Not

What’s Hot  What’s Not
Green building
Infrastructure investment
Emerging markets
Going private
Real estate derivatives
Land and building impairment
Large sf per person occupancy costs
Global warming
Limited domestic returns
Zero-down mortgages

Source: Global Real Estate Newsline, May 2007

Super-Small Market Review

Metro Area, Population Property Rating Long-Term
Employment
Growth (%)
Recent
Construction
Pace (%)
Billings, Mont., 98,271 Office Below average 2.06 2.96
Champaign-Urbana, Ill., 38,468 Industrial Above average 1.65 0.17
Elizabethtown, Ky., 23,450 Multifamily Average 2.48 3.88
Jackson, Mich., 34,879 Retail Far below average 0.71 0.62
Las Cruces, N.M., 82,671 Office Far above average 3.16 0.00
Pocatello, Idaho, 53,372 Industrial Above average 2.05 0.55

Source: Torto Wheaton Research, www.city-data.com

Corporate Relocation Trends

Corporations are on the move, according to a recent CoreNet Global survey. Of corporate end-users surveyed, nearly two-thirds reported at least 10 relocation projects in development, while one-fifth have more than 100 projects planned for the next 12 months. Access to customers and markets is the key location factor among corporate end-users, followed by cost savings and access to innovation. And while North America remains the primary location choice for corporations, companies are showing strong interest in the Asia-Pacific region and Eastern European countries for future locations.

Top 5 Largest Property Managers

Company Total SF Owned or Managed in 2006
1. Colliers International 212,814,433
2. CB Richard Ellis 130,989,021
3. Jones Lang LaSalle 110,000,000
4. Duke Realty Corp. 81,810,555
5. NAI Global 78,011,876

Source: Midwest Real Estate News

International Investment in the U.S. Rises

Foreign direct investors spent $161.5 billion to acquire or establish U.S. businesses in 2006, up from $91.4 billion in 2005, according to the U.S. Bureau of Economic Analysis. German investors tripled their U.S. investments, and Middle East investors more than doubled theirs.

Direct Foreign Investment in U.S. Businesses by Country (in millions)

Country 2005 2006*
Canada 13,640 12,012
France 5,608 19,682
Germany 7,239 22,683
Netherlands 2,609 5,463
Switzerland 2,332 14,625
United Kingdom 30,420 21,880
Other Europe 8,206 25,524
Latin America 5,042 9,130
Middle East 5,068 12,436
Asia and Pacific 10,924 17,526

*preliminary figures

Seeking Gender Parity

Of 169 publicly traded real estate investment trusts, only three have female chief executive officers, according to “Minding the Gap: Achieving Advancement and Parity for Women in Commercial Real Estate,” a Commercial Real Estate Women Network report. The study suggests multiple strategies for women and companies to overcome the imbalance in pay and advancement at senior-level industry positions. The report suggests that women seek more opportunities to invest in their companies and business projects, develop specializations or niche expertise to add value, and stay connected to the workplace while on leave. Companies can promote gender diversity by creating mixed-gender teams, supporting equal family leave benefits for men and women, and providing financial rewards for those who succeed in diverse settings. “Creating a diverse workforce is a responsibility that has to be shared by everyone who chooses to make a living in commercial real estate,” says Marianne Ajemian, 2007 CREW president. For information on the study, go to www.crewnetwork.org.

Mismatched Expectations

The jobs commercial real estate professionals are applying for don’t exactly match the industry jobs available, according to the spring 2007 SelectLeaders Job Barometer.

Top 5 Commercial Real Estate Jobs Available Top 5 Jobs Applied For
1. Property management 1. Acquisitions
2. Financial analysis 2. Financial analysis
3. Accounting 3. Development
4. Acquisitions 4. Finance
5. Originations/loans 5. Asset management

 

Global Cash Into Commercial Real Estate (in billions)

  2005 2006
Total transactions $495 $682
Cross-border $166 (34%) $288 (42%)
Interregional    $115 (23%) $201 (29%)

Source: Global Capital Flows: How They Affect Your Business

Specializing in historic properties throughout California, New Urban Properties added 625 Market St. to its $200-million portfolio of early 20th-century office buildings in San Francisco. Purchased for more than $25 million, the 14-story, 71,345-sf property built in 1907 and last renovated in 2001, is considered a class A historic property.

Value and Replacement Cost Projections

Property Forecast Value
Change % in the
Next 12 Months
Average Price as %
of Replacement Cost
CBD office     3.4 88
Suburban office 1.4 94
Regional mall 2.9 117
Power center -0.8 105
Strip center 1.4 107
Industrial flex/R&D 3.8 101
Warehouse 2.7 102
Multifamily 2.8 98

Source: Korpacz Real Estate Survey, 2Q07

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