Market Trends Online(10)

Office Transactions Down

When compared to last year, office investment activity was down 80 percent for the first half of 2008, according to Jones Lang LaSalle. Average values have declined more than 10 percent, and capitalization rates are up an average of 75 basis points. In leasing activity, Charlotte and Raleigh, N.C., as well as Dallas and Houston had the highest positive net absorption in 2Q08, along with Seattle and Washington, D.C. New York City and Denver had the largest 2Q occupancy declines.

Industrial Holding Strong

Increasing speculative development and slowing demand are causing a rise in the national industrial vacancy rate, up 70 basis points to 10.2 percent, according to Marcus & Millichap’s midyear industrial outlook. Nearly 70 percent of industrial product under construction is not leased. Developers will deliver 147 million sf this year with most of it opening in California’s Inland Empire, Phoenix, Houston, Dallas-Fort Worth, Chicago, and Atlanta. But demand for new product remains strong from both tenants and investors, with the latter avoiding secondary and tertiary markets in favor of primary locations. Secondary-market industrial prices have dropped to early 2006 levels, and the cap rate spread between primary markets and tertiary markets is 160 basis points, almost double last year’s spread.

Industrial Year-End Outlook

Markets with the lowest forecasted vacancies

MSA Vacancy (%) Completions (sf) Median Sales PSF
Los Angeles 4.1 4,800,000 $143.57
Orange County, CA 4.9 1,200,000 $179.42
Fort Lauderdale, FL 6.2 900,000 $110.50
Seattle 6.6 2,200,000 $115.36
Tampa, FL 7.2 2,080,000 $71.57

Source: Marcus & Millichap

Retail Shutdown

Highest concentration of brands announcing store closings

Sector Share of Store Closings
Clothing 48.4%
Housing 19.4%
Electronics 9.7%
Department Stores 9.7%
Sporting Goods, Hobby 6.5%
Miscellaneous 3.2%
Auto Supply 3.2%

Source: Torto Wheaton Research

Retail Forecast

Markets with the highest forecasted year-end vacancies

MSA Year-End Vacancy Rate (%) Year-End Asking Rent PSF, NNN
Dallas-Fort Worth 15.6 $15.70
San Antonio 15.1 $15.10
Riverside-San Bernardino, CA 13.8 $22.53
Cincinnati 13.3 $14.75
Indianapolis 12.8 $15.09

Source: Marcus & Millichap

Las Vegas Industrial Activity, 1Q08

Market Activity Unincorporated Clark County, NV City of Las Vegas City of Henderson, NV City of North Las Vegas
Inventory (sf in millions) 59.2 7.3 12.5 19.4
Under construction (sf in millions) 2.4 0.0 0.5 0.7
1Q08 vacancy rate (%) 5.7 7.5 9.0 7.9
1Q07 vacancy rate (%) 4.5 7.1 3.3 4.2

Source: Applied Analysis

Texas CBD Office Stats, 1Q08

Market Vacancy Rate (%) Net Absorption Under Construction (sf) Asking Rent Class A/B($psf)
Austin 15.5 (56,179) 78,720 33.64/26.27
Dallas 24.3 284,346 0 24.41/16.83
Fort Worth 5.1 4,214 358,679 29.03/19.14
Houston 10.1 215,732 2,066,871 37.34/24.53
San Antonio 12.6 (4,253) 59,740 22.40/17.76

Source: Grubb & Ellis

World’s Highest Warehouse Rents

Market Rent ($PSF Per Year)
London (Heathrow Airport) 27.64
Tokyo (Ariake) 24.51
Yokohama, Japan 18.89
Urayasu, Japan 18.89
Oslo, Norway 17.10
Dublin, Ireland 17.08
Hong Kong 16.92
Honolulu 15.72
Bristol, U.K. 15.35
Singapore 15.34

Source: Colliers International

Top 5 Factors for Business Success

Developers, owners, investors and asset managers most often chose the following factors as key to continued business success in today’s market:

1. Attracting new tenants
2. Retaining key employees
3. Managing the company’s portfolio of investments
4. Managing/reducing operating costs
5. Attracting new sources of capital/financing

Source: Grant Thornton’s 2008 Real Estate Survey