Market Data

Market Trends

“As lenders find it more difficult to serve a narrow slice of the market in 2011, they’ll be forced to broaden the range of deals that they’ll finance in order to put their money to work, suggesting that there may be some hope for those who still struggle to find debt.”
— The Real Estate Roundtable Sentiment Survey, 1Q11

Retail Bull’s-Eye on Canada

Can you believe there’s not a Target in Canada? But not for long as the ubiquitous U.S. chain just bought 220 leases of Canadian retailer Zellers and plans to open about 100 of them by 2013. This deal may remake the Canadian retail scene, says the Financial Post, paving the way for a number of specialty retailers, such Pier One and Kohl’s, to expand north. And the prospect of these new faces is prompting Canadian shopping center owners to spruce up their formats in hopes of attracting U.S. retailers already very well known to the Canadian market. Canada’s consumer confidence rose 7.1 percent in January — the highest since late 2009 — signaling that Canadians are ready to shop. Other U.S. retailers gearing up expansion plans to meet that need by 2012 include Wal-Mart with 40 stores, Tanger Outlet Centers with 15 stores, and J. Crew and Marshalls, according to the Winnipeg Free Press. While Canada’s homegrown retailers will have to step up their game to compete, the other big losers may be U.S. retail locations close to the border.

Here's Where the Jobs Are

New Hotel Openings Chart

Briefly Noted

Hospitality – Midscale hotels with food and beverage is the only lodging sector to decline in number of rooms from December 2006 to November 2010, according to Smith Travel Research and HVS data, which reports a 6.9 percent drop. Luxury and upscale sectors posted the largest increase in room counts at 34.0 percent and 35.9 percent respectively, followed by midscale without food and beverage reporting a 21.1 percent increase.

Industrial – Last year delivered the lowest amount of new industrial space as a percentage of total inventory since 1960, according to CoStar. About 17 million sf started construction in 2010, almost 90 percent below the 10-year annual average of 136 million sf.

Multifamily – Secondary and tertiary markets should see increased investment activity this year as capitalization rate compression and limited supply of class A properties send investors searching for stronger yields in smaller markets, according to Marcus & Millichap. The returns on mid-tier properties in tertiary markets are particularly attractive for longer-hold investors.

Office – Strong acquisitions of medical office and single-tenant net-leased properties pushed nationwide suburban office properties to an 88 percent increase in sales volume in 2010, according to Real Capital Analytics. MOB sales totaled $3.1 billion, an 80 percent rise over 2009, and NNN office properties racked up $6.5 billion in sales, 125 percent over 2009 and almost one-third of all suburban office sales in 2010.

Retail – Challenges facing the single-tenant net-leased retail market this year include a tightening supply of product due to lack of development and strong sales in 2010, according to the Boulder Group. The number of retail properties added to the market declined 5.2 percent from 3Q10 to 4Q10, while cap rates fell from 8.1 percent to 8.0 percent over the same period.

Taking Charge

More than 4.7 million charging stations will be available to electric car owners in the U.S. by 2015, according to a recent study by Pike Research. That means commercial real estate owners and managers who deal with parking structures must take charge of installing stations for the 40 million electric cars that are expected to be on the road by 2030. National retailers such as Whole Foods, Best Buy, and Meijer have installed stations at stores in certain markets in the West and Southwest, according to USA Today. Some retailers provide free electric charges; however, at the Mall of America in Bloomington, Minn., customers pay $3 per hour for use. Car Charging Group, which installed and maintains the mall’s units, splits the revenues with the mall. Charging stations cost from $2,000 to $6,000 plus installation, according to CCG’s CEO Michael Farkas. Currently, federal tax credits offset about 50 percent of the costs.

Tertiary Market Office Transactions chart

Distressed Debt chart

Tenant Retention Trends

Worth Quoting

“Wells Fargo, which makes one out of three U.S. commercial loans, plans to hire about 240 commercial bankers this year, a 10 percent increase over current staff levels.”

— Financial Times, Feb. 1, 2011

Hotel Development Costs

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