Features

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 …

NEW YORK CITY — At a seasonally adjusted annual rate of $563.3 billion, new construction starts in November fell 5 percent from the previous month, according to Dodge Data & Analytics. The decline represented a partial pullback after the 13 percent increase reported for total construction in October, as nonresidential building lost some momentum following its improved October pace. Decreased activity was also reported for housing in November, while the nonbuilding construction sector, consisting of public works, electric utilities and gas plants, held steady. During the first eleven months of 2015, total construction starts on an unadjusted basis were $597.9 billion, up 8 percent from the same period a year ago. The November statistics lowered the Dodge Index to 119, compared to 125 in October. November was still above the lackluster activity reported for August and September, when the Dodge Index averaged 114. “The pattern of construction starts on a month-to-month basis is rarely smooth, and October and November do show improvement after the subdued activity in late summer,” says Robert Murray, chief economist for Dodge Data & Analytics. “The construction expansion, while often hesitant, should be able to continue in coming months as the result of several factors.” Nonresidential building …

Wednesday’s decision by the Federal Open Market Committee (FOMC) — the branch of the Federal Reserve Board that determines monetary policy — to raise the benchmark federal funds rate for the first time in almost 10 years raises an important question: What impact will this increase have on commercial real estate? The rate hike will have a “minimal impact,” predicts Jeffrey Rinkov, CEO of commercial real estate brokerage firm Lee & Associates. “Based on a strengthening and stabilizing economy, I believe this was a logical move by the Fed,” says Rinkov. “While the Fed is driven by data, I think this signifies its belief that the economy can operate in an environment with a normalizing monetary policy. Relevant to real estate investment, long-term interest rates should remain at historical low levels, which will continue to incentivize investment.” Prior to Wednesday, the Fed kept the federal funds rate — an overnight interbank lending rate — in a band between zero and 0.25 percent since December 2008, when it lowered rates in the midst of the Great Recession. On Wednesday, Federal Reserve Board Chairwoman Janet Yellen announced that the FOMC had voted to raise the federal funds rate by a quarter percentage point …

Publicly traded REITs have consistently traded at a discount to net asset value (NAV) since the beginning of April, according to SNL Financial. As of Dec. 14, the SNL U.S. REIT Equity Index was trading at a 6.4 percent discount to NAV. In the retail REIT sector, Inland Real Estate Corp. (NYSE: IRC) traded at a 12.3 percent discount to NAV as of Dec. 14. In fact, IRC has been trading at a discount to NAV since early February of this year the data shows. Against that backdrop, IRC announced Tuesday that it had entered into a definitive agreement to be acquired by real estate funds managed by New York City-based DRA Advisors LLC (DRA) for approximately $2.3 billion, including the assumption of existing debt. IRC owns and operates open-air neighborhood, community and power shopping centers located in the central and southeastern United States. As of Sept. 30, IRC owned interests in 135 shopping centers (or retail assets) containing approximately 15 million square feet of leasable space. Under the terms of the agreement, DRA-managed funds will acquire all issued and outstanding common stock of IRC for $10.60 per share in cash. Following the completion of the acquisition, Oak Brook, Ill.-based …

REBusinessOnline.com is conducting a brief online survey of brokers, lenders and the owner/developer/manager community to gauge market expectations for 2016, and we welcome your participation. This survey should only take a few minutes to complete. The results will appear as a news feature story in the January 2016 issues of the regional publications. Questions cover a variety of topics, ranging from the outlook for investment sales and leasing activity in 2016 to development and lending opportunities to interest rates. Note: We prefer to attribute comments we quote from open-ended responses, however you may respond anonymously if you prefer. To take our 2016 broker survey, please click here To take our 2016 developer/owner/manager survey, please click here To take our 2016 lender survey, please click here Thanks for your participation!   Matt Valley Editorial Director of Regional Real Estate Publications France Media, Inc.

New construction starts in October advanced 13 percent to a seasonally adjusted annual rate of $591.1 billion, according to Dodge Data & Analytics. Much of October’s gain for total construction was due to a sharp rebound by nonresidential building, with additional support coming from a moderate upturn for housing as the result of further strengthening by multifamily housing. During the first 10 months of 2015, total construction starts on an unadjusted basis were $551.9 billion, up 10 percent from the same period a year ago. October’s data raised the Dodge Index to 125, compared to 111 in September. “The healthy increase for construction starts in October alleviates concern about a stalling expansion that may have arisen with the sluggish activity in August and September,” stated Robert Murray, chief economist for Dodge Data & Analytics. Nonresidential building in October jumped 32 percent to $200.7 billion after a weak September. The commercial building categories as a group soared 49 percent in October. Store construction surged 56 percent, pushed upward by the $561 million expansion and renovation of the Westfield Century City Mall in Los Angeles. Office construction advanced 45 percent, helped by the start of two large data center projects — the …