IRVINE, CALIF. — Commercial real estate markets are starting to show signs of stabilization following years of run-up and appreciation, according to Auction.com’s second-quarter 2015 commercial real estate market monitor report. While CRE deal volume increased in the first quarter, volume declined 14.6 percent in the second quarter to $112.4 billion, but remains 24 percent higher than a year ago. The second quarter dip marked the first time since 2008 that total deal volume dropped on a quarter-over-quarter basis. “It’s unclear whether the second-quarter drop in sales volume is the beginning of a slowdown in the CRE market, or simply an adjustment from an unusually strong first quarter,” says Rick Sharga, Auction.com’s executive vice president. “What’s clear is that all of the major CRE sectors continue to perform far better than they did a year ago, and may be strong enough to withstand a potential decline in international investment activity due to the economic issues in China and Europe.” Europe continues to struggle with high unemployment and low growth, leading the European Central Bank to start its own quantitative easing program to spur lending and growth. This has depressed European interest rates when compared to U.S. rates, which have risen …
U.S. office demand gained momentum in the second quarter of 2015 as net absorption increased 40 percent year-over-year, according to the latest quarterly U.S. office occupancy report from CBRE. This further tightened market conditions for renters and pushed second-quarter 2015 downtown (10.6 percent) and suburban (15.1 percent) vacancy toward its previous lows in 2007 of 9.7 percent and 13.9 percent, respectively. “Market conditions in the U.S. are owner-favorable in most downtown and suburban areas,” reads the report. Downtown office property is particularly hot, with asking rents surpassing their 2008 peak in the first quarter of 2015 and setting a new historical high of $42.70 in the most recent quarter. Suburban rents increased more slowly and remain 3 percent below 2008 levels. The report also states that San Jose, Seattle, Austin, Orlando, Fort Lauderdale and Phoenix are generating the strongest rates of new demand relative to the size of their respective markets, making conditions more competitive. The U.S. gross average asking rent increased by 1.1 percent quarter-over-quarter, and by 3.6 percent year-over-year in the second quarter, surpassing its 2008 peak. Double-digit year-over-year rent increases occurred in downtown San Francisco, downtown Manhattan, Seattle, Houston the Boston suburb of Cambridge. Major leasing activity …
Single-tenant retail sales volume remains incredibly strong, totaling more than $9.4 billion in transactions through the first half of 2015. At this rate, the sector will have no problem significantly outpacing the $15.24 billion reported last year, according to Stan Johnson’s Net Lease Outlook, which tracks the U.S. single-tenant retail market. According to the report, transaction volume was the highest in the West and Northeast, where sales for the first half of 2015 have already exceeded $2 billion in each region. The Stan Johnson report only tracks significant investment sales (assets priced at $2.5 million or greater). Retail cap rates have been trending downward for several years across the nation, but the greatest compression has occurred in the West. Average cap rates in the West currently are the lowest of all regions at 5.54 percent, representing a 1.24 percentage point drop in the last three-and-a-half years. Overall, single-tenant retail cap rates are fairly consistent across all regions, with the spread being less than one percentage point. Sales prices per square foot vary more widely from region to region. While most areas of the country are at or near the national average of $264 per square foot, the Northeast has seen …
WASHINGTON, D.C. — The August jobs report “gives cover” to the Federal Reserve to finally raise short-term interest rates by a quarter of a percent during its policy meeting on Wednesday and Thursday of this week, says Robert Bach, director of research for the Americas at Newmark Grubb Knight Frank. “Whether they choose to walk through that door, or dawdle for a while on this side, remains to be seen.” The U.S. economy added a modest 173,000 jobs in August, according to the U.S Bureau of Labor Statistics (BLS). What’s more, job gains have averaged 221,000 over the past three months and 247,000 over the past 12 months. “There will never be a perfect time for the Fed to begin the long process of returning monetary policy to its pre-crisis equilibrium, but doing so will give them more leverage to combat the next recession, whenever it occurs,” emphasizes Bach. The Federal Reserve’s target for the fed funds rate — the interest rate at which banks and other depository institutions lend to each other on an overnight basis — has been between 0 and 0.25 percent since December 2008. A quarter-point increase would move that target to between 0.25 percent and 0.50 …
WASHINGTON, D.C. — Delinquency rates for commercial and multifamily mortgage loans continued to decline in the second quarter of 2015, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report. “As commercial property incomes and values continue to climb, and financing remains plentiful, loan performance continues to improve as well,” said Jamie Woodwell, MBA’s vice president of commercial real estate research. “Commercial and multifamily mortgage delinquency rates were down broadly in the second quarter, with highlights including the lowest 90-plus-day delinquency rate on bank-held multifamily loans since the series began in 1993, and 60-plus-day delinquency rates below 0.06 percent for loans held by life companies, Fannie Mae and Freddie Mac.” The MBA analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae, and Freddie Mac. Together these groups hold more than 80 percent of outstanding commercial/multifamily mortgage debt. Delinquency rates for each group at the end of the second quarter based on the unpaid principal balance of loans were: Banks and thrifts (90 or more days delinquent or in non-accrual): 0.9 percent, a decrease of 13 basis points from the first quarter of 2015 Life company portfolios (60 …
Despite recent volatility in the international stock markets, commercial real estate performance remains high, according to a recent report by Marcus & Millichap. The recent devaluation of China’s currency, coupled with the collapse of the Shanghai Stock Exchange, struck U.S. equity markets, driving down the S&P 500 by nearly 10 percent in one week and pushing the S&P’s Volatility Index to its highest level since 2011. Commercial real estate, however, the report says, continues to outperform due to increased investment, a tightening unemployment rate and generational trends. According to Marcus & Millichap’s special report, the U.S. economy has added nearly 1.5 million jobs through June of this year, and falling gas prices and rising wage pressure will continue to increase discretionary income. Additionally, rising consumption and emergence of Internet retail will boost industrial demand for storage and supply-chain management in major hubs and local markets. Vacancy rate nationwide for industrial properties has reached its tightest level since 2000, according to the report, contracting to 6.9 percent on steady quarterly absorption in excess of 50 million square feet. Office vacancy, too, edged lower to 15.3 percent in the second quarter, as the sector benefited from still-limited construction. The retail vacancy …
Capitalization rates within the single-tenant, net lease dollar store sector — which includes Dollar General, Dollar Tree and Family Dollar — compressed 50 basis points nationally from the second quarter of 2014 to the second quarter of 2015, according to the “Net Lease Dollar Store Report” produced by The Boulder Group. Median asking cap rates at Dollar General stores nationally compressed 25 basis points, falling from 6.75 percent to 6.5 percent, during the 12-month period; Dollar Tree saw median asking cap rates decrease 10 basis points, from 7 percent to 6.9 percent; and median asking cap rates at Family Dollar stores fell 100 basis points, from 7.5 percent to 6.5 percent. The significant decrease in cap rates for Family Dollar can be attributed to its recent lease structure change, according to The Boulder Group. Previously, leases for newly constructed Family Dollar stores were structured as a double net lease for a period of 10 years and did not contain rental escalations in the primary term. The new standard lease for newly constructed Family Dollar properties is a triple net lease for a period of 15 years and contains rental escalations every three years, or in the eleventh lease year of the primary …
ATLANTA — Gwinnett County in metro Atlanta is flush with opportunity for commercial real estate investors and developers. The county boasts the most diversified demographic makeup in the entire Southeast and is one of the 20 most populous counties in the United States, with 890,000 residents. The county has grown by 250,000 in the past 10 years. Within the county is Gwinnett Place, a district situated off Pleasant Hill and I-85 that supports 2.5 million square feet of Class A office space, 15.7 million square feet of industrial space and 7.7 million square feet of retail space. Anchored by the once-bustling Gwinnett Place Mall, the district’s retail market has a 93 percent occupancy rate. The mall was recently taken out of receivership and the new owner — Moonbeam Capital — is positioning the mall for a major turnaround. The office market’s occupancy rate currently hovers at 81 percent, but the county is home to two companies in the Fortune 500 — AGCO Corp. and Asbury Automotive — as well as regional mainstays like Waffle House. NCR Corp. is still headquartered in Duluth, but the tech firm, also in the Fortune 500, announced its plans in January to move its headquarters …
Investor demand and sales transaction volume for healthcare real estate have reached historic heights, according to an analysis of deal velocity in the first half of 2015 conducted by Brown Gibbons Lang & Co., a Cleveland-based investment banking and advisory firm. The details are contained in the firm’s “Healthcare & Life Sciences Insider” report.
The U.S. consumer has “underspent” in the current economic expansion, according to a new research report released by Cushman & Wakefield. However, consumer confidence continues to trend upward, pointing to faster growth in household spending and solid demand for retail, industrial, and hospitality real estate. In the 72 months since June 2009, when the economic expansion officially began, inflation-adjusted consumer spending has increased 14 percent, or 2.2 percent per year. In the four previous economic expansions (beginning in 1975, 1982, 1991 and 2001), consumer spending increased an average of 3.5 percent per year over the same 72-month period. The consumer is a critical aspect of U.S. economic growth, accounting for approximately 68 percent of gross domestic product (GDP). According to Cushman & Wakefield, if growth in consumer spending in the current cycle matched the average of the preceding four expansions, U.S. GDP growth during the expansion would have averaged a respectable 3 percent per year instead of the weaker 2.1 percent per-year growth the economy has actually recorded. Among the report’s findings: Consumer spending has accelerated over the past 18 months after three years of tepid growth. An important driver has been an improvement in confidence. The overall level …