Features

The demand for medical office space will likely remain strong in 2016 and beyond due to an increase in healthcare spending and an aging population, according to a new research report from Colliers International. “We expect healthcare costs will continue to rise as the Affordable Care Act (ACA) has enrolled millions of Americans who are actively using the coverage they are now paying for,” writes Michael Roessle, Colliers’ U.S. director of office research, in a white paper on the state of the healthcare real estate market. The number of newly insured totals 17 million people, according to the RAND Corp., a research organization based in Santa Monica, Calif. “This, combined with the projections in growth of the population 65 years and older, leads to the estimate of a near doubling of healthcare spending — from $3 trillion in 2014 to $5.5 trillion in 2024,” adds Roessle. Healthcare expenditures currently account for approximately 17.4 percent of U.S. gross domestic product. That figure is projected to reach 18.5 percent by 2020 (see line graph). The retail sector is expected to benefit as medical clinics, urgent care centers and other outpatient facilities lease space in shopping centers where more traditional retail tenants have …

PORTSMOUTH, N.H. — The U.S. hotel construction pipeline ended 2015 at its highest year-end total since 2008, with 4,413 projects and 546,135 rooms in the pipeline, according to Lodging Econometrics (LE). Still, this total was below the 2007 cyclical high of 5,438 projects and 718,387 rooms. The Portsmouth-based hotel research and consulting firm defines the construction pipeline as a combination of projects currently under construction, projects expected to begin construction within the next 12 months or those that are in the early planning stages. “On average, it takes about two years for a typical project to open as a new hotel after it has been announced into the construction pipeline,” says Patrick Ford, president of Lodging Econometrics. “The recent pipeline acceleration will not be fully felt for at least another two years.” According to LE, there were 1,312 projects under construction at the end of 2015, up 226 projects or 21 percent on a year-over-year basis. The total number of projects scheduled to begin construction in the next 12 months increased by 575 to 1,926, up 43 percent year over year. Projects in the early planning stages totaled 1,175, a decrease of 33 projects, or 3 percent, year over year. LE forecasts …

Following three straight months of improvement, the delinquency rate for loans in U.S. commercial mortgage-backed securities (CMBS) ended 2015 modestly higher, according to data analytics firm Trepp LLC. The CMBS delinquency rate for loans 30 days or more past due increased four basis points to 5.17 percent in December. Still, the delinquency rate was 58 basis points lower than the 2014 year-end level of 5.75 percent. The percentage of loans seriously delinquent (60 or more days past due, in foreclosure, REO, or non-performing balloons) in December was 5 percent, two basis points lower than the prior month. More than $1.6 billion in loans became newly delinquent in December, which put 32 basis points of upward pressure on the delinquency rate. About $450 million in loans were cured last month, which helped push delinquencies lower by nine basis points. CMBS loans that were previously delinquent but paid off with a loss or at par totaled almost $1.1 billion in December. Lodging Sector Shines Hotel CMBS loans posted a 2.82 percent delinquency rate in December, up seven basis points from the prior month but still the lowest delinquency rate among all major property types (see table). Year-over-year, the delinquency rate for the …

In an environment marked by robust development and tenuously low interest rates, now is a time of action for owners of seniors housing properties, according to the 2016 Seniors Housing Market Outlook from Senior Living Investment Brokerage. Bradley Clousing, a managing director with the Glen Ellyn, Ill.-based brokerage firm, says that short-term owners need to sell while the prices remain high, and long-term owners need to lock in interest rates on their debt before the inevitable rate increases arrive. Owners looking to reposition properties need to proceed cautiously, he says, as interest rates will change bottom-line numbers in the near future. “Build margin and room for an increasing interest rate environment,” said Clousing. “Interest rates cannot remain at this level indefinitely.” For the seniors housing market, 2015 was a banner year for mergers and acquisitions. Several portfolio sales approached the $1 billion mark, with some even eclipsing that figure. A few acquisitions made major headlines during the year, including the purchase of skilled nursing operator Trilogy Health Services by a joint venture of Griffin-American Healthcare REIT III Inc. and NorthStar Healthcare Income Inc. for $1.1 billion and Capital One’s acquisition of GE Healthcare Financial Services for $9 billion. But the …

MCLEAN, VA. — Freddie Mac has become the nation’s leader in multifamily lending for the first time, with $47.3 billion in loan purchase and bond guarantee volume in 2015. The total is up 67 percent from Freddie Mac’s 2014 total of $28.3 billion. “We thank our dedicated seller/servicer network and loyal borrowers for enabling us to reach this historic volume milestone,” says David Brickman, executive vice president of Freddie Mac Multifamily. “I am very proud of the Freddie Mac team who worked tirelessly all year serving and supporting the market and ensuring that we were able to achieve this significant result.” In comparison, Fannie Mae’s volume was $42.3 billion. This is the first year that Freddie Mac’s volume topped that of Fannie Mae. Of the total new business volume, $17.3 billion was not subject to the Federal Housing Finance Agency loan purchase cap of $30 billion and included loans for affordable housing, smaller multifamily properties, seniors housing and manufactured housing communities. “We had very strong growth in our loan purchase business in 2015, and expect our volumes this year to align with the market’s overall growth,” says Brickman. Freddie Mac Multifamily purchases and securitizes mortgages on apartment buildings nationwide. The …

NORTHBROOK, ILL. — Cap rates in the fourth quarter of 2015 for the national single-tenant net lease retail sector remained unchanged from the previous quarter at their historic low rate of 6.25 percent. According to The Boulder Group, a Northbrook-based boutique investment real estate firm, cap rates for the office and industrial sector reached new historic lows of 7 percent and 7.4 percent, respectively. During 2015, cap rates for retail, office and industrial properties declined by 15, 35 and 26 basis points respectively as investor interest has increased due to the safe and stable returns this asset class generates, according to the report. Cap rates for all major sectors remained unchanged or declined in the fourth quarter. This can be attributed to the limited supply of product in a market with high demand despite a wide spread expectation of higher interest rates in the future. From the third quarter of 2015 to the fourth quarter of 2015, the overall supply of net lease assets decreased by more than 11 percent. Retail assets experienced the largest decline of 12.5 percent. Investor demand has continued for this asset class despite the decline in cap rates over the course of 2015. The increased …

Consistent demand, low supply and supportive economic trends continued to improve fundamentals in the U.S. retail market through the third quarter, according to the Q3 U.S. Retail MarketView report by CBRE. The national availability rate for all retail properties declined to 8 percent in the third quarter — a 10 basis point drop from the second quarter, standing only 100 basis points above its 2006 low. Demand for space from food services and drinking establishments, smaller-format grocers, and healthcare and medical users remains very strong, while sales volume at department stores and mid-market general merchandisers has come under pressure. These new tenants are driving demand and diversifying the tenant base of many malls and shopping centers, and enhancing the attraction of retail destinations, according to CBRE. Despite early indications of lower GDP growth in the third quarter, U.S. employment levels continued to grow steadily and the outlook for economic growth is favorable. The forecast for 2016 is consequently very positive, with retail sales growing at their fastest pace since 1999. The decline in gasoline prices, a tightening labor market and increasing upward pressure on wages and income are supporting U.S. consumer activity in the market today. Year-over-year growth in nominal …