Market Data

Market Trends(27)

Briefly Noted

  • Hospitality — More than half of hotel investors surveyed plan to hold their assets for the short term, according to Jones Lang LaSalle Hotels’ year-end Hotel Investor Sentiment Survey. Interest in buying declined to 32 percent, the second lowest rate in seven years, with San Francisco and Boston the most favored acquisition markets, followed by the Pacific Northwest and Washington, D.C.
  • Industrial — Net absorption goes negative this year for the first time since 2001, according to Grubb & Ellis, which forecasts -25 million sf by year-end. That, along with 95 million sf of new product, should push the year-end vacancy rate to 9.4 percent.
  • Office — Nearly 2.4 million sf of shadow space entered the New York City office market in the last three months of 2008, almost half of it from the financial services industry, according to FirstService Williams Commercial Real Estate.
  • Multifamily — San Diego and Northern New Jersey experienced the tightest 4Q08 rental markets, while Jacksonville and Orlando, Fla., registered the highest vacancy rates at 9.9 percent and 8.5 percent, according to the National Association of Realtors, which predicts the national vacancy rate will stay close to 6 percent in 2009.
  • Retail — Walgreens plans to open 495 stores in 2009, the most of any major retailer, according to CoStar Group. In all, retailers expect to open 1,913 stores this year after closing 3,494 stores in 2008 — about 200 less than they opened that year.

What’s It Listed At?

Multifamily Properties Price
Citadel
Bonita Springs, FL
“gated community …
23 condo units”
$2,674,000; $116,260/unit
Master leaseback available
ID# 15451342
Lahaina Realty
Fullerton Terrace
Buena Park, CA
12 units, 13,200 sf
100% occupied
$2,950,000; $245,833/unit
NOI: $177,000
ID#: 16010707
Prudential Commercial
Independence Park
Clinton, PA (mobile home community)
93 spaces
82% occupied
$2,900,000; $31,182/unit
NOI: $274,303
ID#: 15961386
CB Richard Ellis
Sentinel Pointe Apartments
San Antonio, TX
94 units, 89,996 sf
6 buildings
$2,850,000; $30,319/unit
NOI: $223,347
ID#: 15848086
Investment Realty Co.

Source: CCIMNet/LoopNet

Retail Space Around the World

Countries Gross Leasable Area Per 1,000
Inhabitants (in square meters)
United States 2,276
Canada 1,219
Brazil 409
European Union 226
Mexico 223

Source: ICSC Research Review

Worth Quoting

“Certainly what I have learned from my father … is I’m actually looking at the real estate. If you go down Fifth Avenue, if you look on the east side of the street versus the west side of the street, there’s a substantial difference in retail rent. Is that because of the sun lines? Is that because … there’s more commercial spaces that don’t have retail? For whatever reasons, you can’t just say, ‘Fifth Avenue.’ … A 75 percent difference in rent can mean a lot to a tenant, but it could also mean a lot to the traffic flowing. So you have to look into the variables in much more detail.”

— Excerpt from “The Son Also Rises,” a Knowledge@Wharton interview with Donald Trump Jr., executive vice president of development and acquisitions at Trump Organization

Miles Less Traveled

Top 5 states with the largest decline in vehicle miles traveled

State Total VMT Change, 12/06 to 9/08 (%) Total VMT Change, 2002–2006 (%) Total VMT Change, 1991–2002 (%)
Maine -5.2 2.2 24.3
Illinois -5.0 1.4 23.4
Mississippi -4.9 13.9 46.3
Florida -4.4 14.2 57.4
New Hampshire -4.4 8.2 26.6
National Total -2.7 5.6 31.4

Source: Brookings Institution

Decrease in Driving Affects Development

From December 2006 to September 2008, Americans drove 90 billion fewer miles, the largest annualized drop in vehicle miles traveled since World War II, according to “The Road…Less Traveled,” a Brookings Institution report. But Americans’ driving started plateauing in 2004 and began dropping in 2007, before higher gas prices took hold. The report concludes that U.S. driving may have hit a permanent plateau or decline, which, while good for the environment, may be bad for federal and state governments that depend heavily on gas taxes to fund surface transportation. In terms of real estate development, a decrease in driving may lead to “more demand for development less reliant on the automobile and could signal a continued reinvigoration of this nation’s cities and inner suburbs,” the report says.

National Strip Shopping Center Snapshot

Statistic (average) 4Q08 4Q07
Internal rate of return 8.49% 8.34%
Overall cap rate 7.49% 7.24%
Market rent change 2.33% 2.86%
Marketing time 6.39 months 6.25 months

Source: PricewaterhouseCoopers 4Q08 Korpacz Real Estate Investor Survey

Climate Change Changes Attitudes

Everyone talking about the weather is old school: New school is taking climate change into consideration as a business strategy –- and opportunity, according to a PricewaterhouseCoopers report. Information from the S&P 500 Carbon Disclosure Project Report 2008 indicates that 71 percent of companies interviewed think commercial opportunities will come from climate change. In construction and manufacturing, 100 percent of companies viewed climate change as an opportunity. Already, companies are developing strategies to profit from climate change: One scientific products company has doubled its research funding, anticipating future revenues of at least $2 billion from products that are energy efficient or reduce greenhouse gas emissions.

Changing Perceptions

Real Estate-Related Industries Percentage of Companies that See Climate Change as a Commercial Opportunity
Construction and building products 100.0
Manufacturing 100.0
Transportation and logistics 75.0
Financial services 70.5
Hospitality, leisure, and business services 70.0
Retail and consumer 61.5

Source: S&P 500 Carbon Disclosure Project Report, 2008

Top Restaurant Trends, 2009

Top Menu Trend: Locally Grown Produce

Fastest Sales
Growth States (%)
Top Restaurant States
by Volume (in billions)
1. Texas 4.0 1. California $56.2
2. Nevada 3.5 2. Texas $35.0
3. Colorado 3.4 3. New YorK $27.8
4. New Mexico 3.3 4. Florida $27.0
5. Arizona 3.2 5. Illinois $18.8
Industry Segment Growth (%)
Quick service 4.0
Eat and drink 2.2
Full service 1.0

Source: National Restaurant Association

Canadian Office Trends

Vacancies, 3Q08

City CBD (%) Suburban (%)
Calgary 3.1 6.9
Montreal 7.9 13.1
Toronto 4.3 9.5
Vancouver 2.5 7.2

Source: Grubb & Ellis

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