Features

NORTHBROOK, ILL. — Cap rates for the single-tenant bank ground lease sector descended to a new historic low of 4.35 percent in the first quarter of 2015, according to The Boulder Group’s latest Net Lease Bank Ground Lease Report. The compression of cap rates signifies a 40 basis point decrease since the first quarter of 2014 and represents the lowest cap rate across all net lease sectors that The Boulder Group tracks. The bank ground lease sector comprises both national and regional banks that leases their land from a third party. Investor demand for bank ground lease properties remains strong, as banks are one of the few single-tenant net lease properties offering long-term, absolute net leases and rental escalations in the primary lease terms. Additionally, many private and 1031 investors look to this sector for safe and stable returns, as 90 percent of bank ground leases are leased to investment grade-rated companies. While overall demand has increased over the past year for net lease properties, the supply of bank ground leases has decreased by 30 percent since the first quarter of 2014. The shortage can be attributed to the limited retail expansion plans for banking institutions. The lack of new …

CALABASAS, CALIF. — Combined with minimal construction, rising demand for self storage space from consumers is driving the sector’s decrease in vacancy and increase in rental rates in 2015, according to Marcus & Millichap’s semi-annual Self Storage Research report. Construction has been anemic in the self storage sector, mostly due to the increasing land prices as a result of the competition for multifamily development sites. Additionally, the report cites that permitting and entitlements for self storage pose a challenge for developers because municipalities are seeking more potent sources for fees and tax revenue. As of this writing, approximately 3 million square feet of self storage space is under construction, according to the report. A large chunk of that development is underway in Phoenix and New York City’s Brooklyn and Queens boroughs. Marcus & Millichap expects self storage development in 2015 to total 4.4 million square feet, a decline from the 5.2 million square feet delivered in 2014. Real disposable income, a key metric for the report that takes inflation into account, increased 0.4 percent from January to February, according to the U.S. Bureau of Economic Analysis. Real disposable income has risen by 0.4 percent month-to-month going back to October 2014, …

NEW YORK — The retail real estate sector is experiencing an uptick in performance much like the rest of the U.S. economy, but with a murkier future due to a wave a maturing CMBS loans and continued uncertainty of retail’s future in an increasingly online marketplace, according to data analytics firm Trepp LLC. The delinquency rate for CMBS retail loans 30 days or more past due dropped 22 basis points to 5.38 percent in February, which compares favorably with other property types. The delinquency rate for office loans, for example, was 6.15 percent. The delinquency rate on CMBS retail loans is now down 286 basis points below the peak set in March 2012. However, part of the reason retail leads the march downward on delinquency rates, the report says, is that lenders were not as patient with retail during the economic recovery, choosing to foreclose on borrowers more quickly than in other sectors. “Retail delinquencies recovered more rapidly than other major property types, as special servicers were faster to cut their losses and foreclose on distressed retail properties, as opposed to the ‘extend and pretend’ approach taken with a lot of large office and multifamily loans during the slow recovery,” the report says. …

WASHINGTON, D.C. — Even in the face of economic turbulence in the general U.S. economy caused by cold weather and labor issues in West Coast ports, the country’s industrial sector remained unfazed and continued its growth during the first quarter of 2015, according to a report from real estate services firm DTZ. The U.S. industrial sector saw net absorption of 38.8 million square feet — almost identical to the previous quarter’s number, and a 20.5 percent year-over-year increase. “Since 1993 — the first year DTZ started tracking quarterly data — there has never been stronger demand as there is currently,” DTZ writes in the report. “Over the past four quarters, more than 169 million square feet of industrial space have been absorbed.” Vacancy, meanwhile, continued its years-long free-fall, hitting 7.6 percent. That’s 10 basis points down from fourth-quarter 2014, 60 basis points lower than the same time last year, and 110 basis points below the 25-year average of 8.7 percent. Asking rents increased to $5.35 per square foot triple net and are now 4 percent higher than in the first quarter of 2014, despite delivery of 35.8 million square feet of new space. There is 107.3 million square feet of …

ANNAPOLIS, Md. — The occupancy rate in the U.S. seniors housing sector — which includes both independent and assisted living — registered 90.2 percent during the first quarter of 2015, down 20 basis points from the prior quarter, according to the National Investment Center for Seniors Housing & Care (NIC). Still, the occupancy rate is 3.3 percentage points above its cyclical low of 86.9 percent reached during the first quarter of 2010. All statistics are based on data from 31 top markets in the U.S. At majority independent living properties, the occupancy rate was unchanged at 91.2 percent, maintaining the highest rate since late 2007. Annual rent growth for majority independent living accelerated to 2.7 percent, the fastest rate since late 2009. “Majority independent living properties have benefited from relatively moderate levels of new units being delivered into the market,” says Chuck Harry, managing director and director of research for Annapolis-based NIC. “Strong occupancy levels have started to put upward pressure on rent growth.” Meanwhile, the occupancy rate at majority assisted living properties came in at 88.7 percent during the first quarter of 2015, down 60 basis points from 89.3 percent at the close of 2014 and 20 basis points …

Total U.S. nonfarm payroll employment rose by 126,000 in March, according to the Bureau of Labor Statistics (BLS), ending a string of 12 consecutive months of job gains above 200,000 and falling well short of the 245,000 jobs projected by Bloomberg’s survey of economists. The BLS also revised its figures downward by a combined 69,000 jobs in January and February. Ryan Severino, senior economist and director of research at Reis, says that despite the tepid job growth figure for March — which is still subject to revision — the overall trend is positive for commercial real estate. “The ongoing increases in hiring for business and professional services are a good sign. These tend to be higher-value jobs that create demand for commercial real estate over the long run,” says Severino. “Year to date, job creation per month is above last year, which was the best year for the labor market in terms of jobs created since 1999.” During the first quarter of 2015, nonfarm payroll employment has increased an average of 197,000 monthly, up from 193,000 during the same period a year ago. In March, the largest job gains by sector were professional and business services (+40,000), followed by education …

WASHINGTON, D.C. — Although net absorption slowed in the first quarter of 2015, demand for office space remained consistently strong enough to push rents upward in over 70 percent of the country, according to commercial real estate services firm DTZ. The U.S. office market absorbed 10.6 million square feet of office space in the first quarter of 2015, down 5 percent from the same quarter one year ago. Despite the deceleration, net absorption has remained positive for 20 consecutive quarters. The U.S. vacancy rate tightened by 10 basis points from the previous quarter to 14.4 percent in the first quarter of 2015. Out of the 80 metros tracked by DTZ, 60 reported occupancy gains, while 20 reported occupancy losses. Kevin Thorpe, DTZ’s chief economist for the Americas, says that the slowdown in absorption was expected and can mostly be explained by seasonal factors. “For six years in a row, absorption levels have been weakest in the first quarter of the year,” says Thorpe. “The weakness is simply a function of weather, budget cycles, and other seasonal data quirks. It has never amounted to a sustained down trend. Looking past seasonal volatility, job growth in most office-using sectors is as robust …