Market Data

Market Trends(16)

Condo Conversion Sales Double

Apartment sales to condominium converters doubled in 2005, from $11.6 billion in 2004 to $23.9 billion in 2005, according to Real Capital Analytics. Of the top 20 conversion markets, Phoenix recorded the highest yearly increase: 1,384 percent. Phoenix converters spent $1.3 billion for 11,862 units in 2005, compared with $91.9 million in 2004 for 961 units. While Florida markets of Broward County, Orlando, Tampa, and Palm Beach posted triple-digit percentage increases in conversion sales, Miami saw a 29 percent drop from $1.7 billion to $1.2 billion. Other cooling markets include San Diego down 32 percent, Boston down 24 percent, and Las Vegas down 2 percent.

Co-Location Benefits Economy Hotel

Economy hotels located near luxury hotels have higher revenues per available room, according to a Cornell University Center for Hospitality Research report. A study of nearly 15,000 U.S. hotels found that economy and budget hotels benefit from locating near high concentrations of upscale and luxury hotels. However, luxury hotels located near midmarket hotels suffer reduced RevPAR rates.

What Do Workers Want?

Equitable treatment, including fair pay, benefits, and job security; a sense of achievement and organizational pride; and camaraderie are three universal employee wants that traverse age, nationality, gender, and work environment, says researcher David Sirota, co-author of The Enthusiastic Employee: How Companies Profit by Giving Workers What They Want. And it pays off for organizations that treat their employees accordingly, his research of 9,240 companies shows. In a comparison of similar companies within an industry sector, high-morale companies' share prices increased 10 percent more than their industry's average increase. Low-morale companies' share prices were 13 percent below their industry's average increase.

Industrial Boom Hits Midwest

After Los Angeles and Chicago, Indianapolis posted the largest increase in new industrial construction, with 4 million square feet coming online in 3Q05, according to CB Richard Ellis. Columbus, Ohio, and Cincinnati each reported 2 million sf of new industrial product and all three markets have 4 million sf to 5 million sf in the development pipeline through 2Q06. At 38.5 million sf, 3Q05 national industrial construction showed the largest single-quarter new construction gain in six years.


Briefly Noted

  • HOSPITALITY - 45 percent of all current condominium-hotel developments arelocated oceanside, with another 10 percent near theme parks and 9 percent near casinos; Florida is the most active condominium-hotel market with 46 percent of current projects, according to Lodging Econometrics.

  • INDUSTRIAL - Orlando and Jacksonville, Fla., Austin, Texas, and Columbia, S.C., will post 15 percent to 20 percent rental increases this year, along with other secondary and tertiary markets, according to Grubb & Ellis.
  • MULTIFAMILY - The transfer of investment cash from major to secondary markets by investors seeking higher capitalization rates and less condominium-conversion competition is benefiting Raleigh-Durham, N.C., Memphis, Tenn., Richmond and Norfolk, Va., and Atlanta, says Multifamily Executive.
  • OFFICE - Financial, health-care, and professional services will fuel this year's office market, with call and data centers making a comeback, according to Colliers top office trends.
  • RETAIL - High-quality restaurants may replace department stores as mall anchors as some eateries pull in $4 million to $5 million per year in business-as much as department stores- and increase consumers' shopping time by 30 minutes, according to Shopping Centers Today.

Houses Yes, Big Boxes No

Americans vote "yes" for single-family homes and grocery stores but oppose every other type of new real estate development in their communities, according to the Saint Consulting Group's land-use survey. One out of five families has taken action against new development projects with traffic and quality of life their main concerns.

Image credit: USDA NRCS

Property Values All Shook Up


Local historic designation of neighborhoods increases residential property values from 14 percent to 23 percent over properties in non-designated neighborhoods according to "Gracing the Land of Elvis and Beale Street: Historic Designation and Property Values in Memphis" in Real Estate Economics. The study of Memphis neighborhoods also found that new properties benefit as much or even more than older properties from being in a historic district.

Image: Graceland Mansion, Memphis

Office Condo Development May Slow

Nearly 60 percent of brokers surveyed gave future office condominium development a yellow light - proceed with caution - while more than 30 percent green-lighted future construction, according to a Grubb & Ellis/PNC Real Estate Finance report. Low interest rates and business owners' desire to control operating costs have fueled the recent office condominium boom. The uptick has followed the growth of service and small businesses and has been more active in small markets such as Grand Rapids, Mich., than in big cities. The niche sector also has been active in high-growth areas such as Phoenix and cities with an influx of foreign owners such as Miami. Other buyers see office condominiums as a way to invest in the booming real estate market. Another trend the report uncovered is creating office and retail condominiums on the first few floors of mixed-use projects.

Mexican Retail Offers Hot Opportunities

While the U.S. retail market may cool this year, Mexico's economic stability and underserved markets are spicing up prospects for U.S. real estate investors looking to diversify their retail portfolios. With nearly 106 million people, Mexico has about 1 sf of shopping center space per person compared with the U.S. rate of 20 sf per capita.

U.S. Retail Investment in Mexico

REAL ESTATE FUND
EXPECTED SHOPPING CENTER INVESTMENT
Chelsea Property Group $300 million through 2007
Hines Interests $200 million through 2007
Kimco Realty Corp. $350 million through 2005
Mexico Retail Properties
$600 million through 2010
O'Connor Capital Partners $150 million through 2007
Equity International Properties

$300 million through 2010

Source: International Council of Shopping Centers Research Review

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