BOSTON — Two icons of the commercial real estate industry continue to be optimistic about the U.S. economy, telling their fellow industry leaders that even secondary and tertiary markets have reason to view the future with confidence. Ray Torto, Ph.D., CRE, the Harvard University lecturer who recently retired as global chief economist of CBRE, and Doug Poutasse, CRE, EVP, head of strategy and research at Bentall Kennedy, made the remarks to the audience of Counselors of Real Estate at the organization’s annual convention in Boston. Torto said that while there is chatter about overpricing, that should not be an issue because the U.S. is experiencing a stable, growing economy. He also noted that foreign investors continue to look favorably at the U.S. “They are taking a longer view, a more than the traditional five-to-seven year outlook,” said Torto. “When looking at major markets, I don’t worry so much about price, either – New York is not going to overbuild its apartment market any time soon,” said Poutasse. He cautioned, however, about potential overbuilding in the luxury housing market – at price points of three to $20 million. “Workforce housing” continues to be both a need and a driver in many …
The combination of continued solid employment growth and low inflation/interest rates has created a “sweet spot” for commercial real estate, concludes Robert Bach, director of research for the Americas at brokerage firm Newmark Grubb Knight Frank (NGKF). “The economy is strong enough to generate sustained leasing activity for all property types, but still has enough slack to permit the Federal Reserve to maintain low interest rates — a key factor supporting the surge of investor demand for commercial real estate assets,” according to Bach. The veteran economist’s insights were outlined in a research note following last Friday’s news that employers added 214,000 net new payroll jobs in October, according to the Bureau of Labor Statistics (BLS). The increase, which marked the ninth consecutive monthly gain above 200,000 new jobs, was in line with economists’ expectations. Additionally, the BLS revised the August and September totals higher by a combined 31,000 jobs. The average monthly increase year-to-date through October is 229,000, up from 194,000 in 2013. The unemployment rate fell one-tenth of a point to 5.8 percent, its lowest level since July 2008, but the tightening is not translating into higher wages, according to Bach. “Wage growth remains slow — a negative …
WASHINGTON, D.C. — Third-quarter 2014 commercial and multifamily mortgage loan originations were 16 percent higher than during the same period last year and 18 percent higher than the second quarter of 2014, according to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations. “Commercial real estate borrowing and lending continued at a strong clip in the third quarter,” says Jamie Woodwell, MBA’s vice president of commercial real estate research. “Low [interest] rates coupled with growth in property incomes, property values and sales transactions have pushed year-to-date commercial and multifamily mortgage originations five percent above last year’s pace.” Industrial, Multifamily Sectors Lead the Way The 16 percent overall increase in commercial/multifamily lending volumes, when compared to the third quarter of 2013, was driven by an increase in originations for industrial and multifamily properties. The increase included a 41 percent increase in the dollar volume of loans for multifamily properties, a 22 percent increase for industrial properties, an 11 percent increase for office properties, an 11 percent increase for retail properties, a 4 percent increase in hotel property loans, and a 43 percent decrease in healthcare property loans. Among investor types, the dollar volume of loans originated for government-sponsored …
WASHINGTON — An Energy Star score for multifamily properties is now available to enable owners and operators of multifamily properties — with 20 or more units — to quantify energy performance. The U.S. Environmental Protection Agency’s (EPA) Energy Star score gives property owners and managers the ability to quantify and compare the energy performance of their multifamily housing properties against similar properties, and provides information to help prioritize energy efficiency efforts to ultimately save money. Energy performance has a major impact on the quality and affordability of multifamily housing, according to Chrissa Pagitsas, director of Fannie Mae Multifamily Green Initiative. “Rising utility rates create financial risk for owners of multifamily properties and reduce affordability for tenants,” notes Pagitsas. “Unfortunately, there has been very little information and key metrics available to the multifamily industry regarding the energy performance of multifamily properties, until now.” Since 2011, Washington-based Fannie Mae has been the primary sponsor of EPA’s development of this score by sharing expertise and collecting the data necessary to develop the score with its Multifamily Energy and Water Market Research Survey. Numerous multifamily owners, property managers, and consultants provided data for the survey. “Fannie Mae and the U.S. Environmental Protection Agency are working …
ROSEMONT, ILL. — U.S. industrial vacancy rates are at their lowest in more than a decade, according to third-quarter research findings from Rosemont, Ill.-based Cushman & Wakefield. The commercial real estate services firm’s latest report shows that significant space absorption and historically low supply is driving strong rent growth in most major industrial hubs. “Continued economic recovery, the evolution of e-commerce and a resurgence in domestic manufacturing have infused resiliency into the market for industrial space,” says John Morris, leader of Industrial Services for the Americas at Cushman & Wakefield. “Our sector continues to expand faster than other property classes, fueled by shifting consumer demand and retail service paradigms, and global growth dynamics.” During the third quarter, the overall national industrial vacancy rate dropped to 7 percent, 80 basis points lower than one year ago. Three of the 38 markets tracked by Cushman & Wakefield recorded vacancy rates under 4 percent, including California’s San Francisco Peninsula (3.5 percent), Greater Los Angeles (3.8 percent) and Orange County (3.8 percent). The full report can be found by clicking here. “Robust demand has led to 255.2 million square feet of leasing activity year-to-date, which is about the same level as a year ago …
A strengthening national economy and housing market are benefiting all segments of seniors housing, according to Marcus & Millichap’s National Seniors Housing Research Report for the second half of 2014. In some segments, such as independent living and continuing care retirement communities, occupancies and rents are expected to grow strongly through the end of the year. In the newly improving economy, retirees are using equity —which was previously tied up in their homes due to the soft housing market following the recession — toward entrance-fee continuing care retirement communities or other seniors housing options, the report says. The improving economy has been enormously beneficial to baby boomers, according to Marcus & Millichap. Boomers’ parents are the primary users of assisted living facilities. “Equipped with refilled retirement accounts, this group will feel more comfortable with the expenditure for seniors housing when the need arises,” the M&M research team wrote. This increased demand is spurring development activity. In states where barriers to entry are reduced, construction is underway, whereas states with tougher permitting and entitlement processes lag. Investment Sales Trends Smaller owners of seniors housing properties are being priced out of the market, according to Marcus & Millichap. Simultaneously, the strong demand …
The Atlanta office market’s decline in vacancies continued in the third quarter of 2014, with the quarter ending at 17.9 percent, according to a report by Cushman & Wakefield. This rate is the first drop below 18 percent since the first quarter of 2009. These gains in office occupancy represent a 130 basis point decrease in vacancy from the end of 2013 and a 150 basis point decrease year-over-year. The research presented by Cushman & Wakefield showed healthy absorption totaling more than 450,000 square feet during the third quarter of 2014, giving the Atlanta market 11 consecutive quarters of net occupancy gains. This quarterly absorption brings the total year-to-date to 1.7 million square feet, an increase of 54 percent compared to the pace during the same period in 2013. “Atlanta is seeing consistent momentum in terms of tenant activity and absorption,” says Logan Menne, the research manager of Cushman & Wakefield. “As vacancy continues to tighten, the supply of existing available options is becoming more and more limited. Additionally, due to the increased demand from tenants in the Atlanta market, many landlords are beginning to increase asking rents, particularly in high-demand submarkets like Buckhead and Central Perimeter.” Several large lease …
The global flow of capital for commercial real estate investment reached $788 billion during the 12-month period ending June 30, 2014, a 17.2 percent increase over the prior year, according to Cushman & Wakefield’s annual Winning in Growth Cities report. The commercial real estate services firm unveiled the findings at EXPO REAL 2014 in Munich, an annual international trade fair for commercial real estate investors. For the report, Cushman & Wakefield tracked commercial property acquisitions of $5 million or more. According to the report, New York is the world’s largest real estate investment market for the fourth consecutive year. Investment volume in the city rose 10.9 percent to $55.4 billion in the trailing 12 months from the second quarter 2014. This equates to 7 percent of the global market share. Second-place London closes the gap on New York with a 40.5 percent increase in investment activity. London is also the largest global market for cross-border investors, which drove the market higher with a 39 percent increase compared to 11 percent growth among domestic buyers. Tokyo reclaims third position in the ranking from Los Angeles with a strong 30.4 percent investment increase. Los Angeles drops to fourth place with $33.1 billion, …
According to new reports published by The Boulder Group and Marcus & Millichap, net-leased properties remain attractive to investors, keeping cap rate at very low levels. Cap rates in the third quarter of 2014 for the single tenant net-leased retail sector remained at their historic low rate of 6.5 percent from the second quarter. Cap rates for the office sector compressed by 37 basis points to 7.4 percent, while cap rates in the industrial sector rose by three basis points to 8 percent. There were no major factors contributing to the leveling of retail cap rates as supply and demand remained near levels from the previous quarter. During the third quarter, the Ten-Year Treasury Yield fell to its lowest point of the year (2.55) in late August. But by the end of the quarter, treasury rates rose and ended at levels similar to the end of the second quarter. With little movement in the capital markets, retail cap rates have flattened as buyers cannot meet acceptable return thresholds at lower cap rates because of the low interest rate environment. During the third quarter, the supply of office and industrial properties increased significantly by 30 percent and 21 percent, respectively. According …
DALLAS — The nation’s apartment market continued to gain strength in the third quarter of 2014, according to early release figures from Axiometrics, a Dallas-based apartment market research company. Annualized rent growth reached 4 percent for the first time in almost two years, while quarterly effective rent growth increased over the third quarter of 2013. Occupancy also increased, to 95.1 percent, higher than the 95 percent mark reached last year, which had been the highest since the first quarter of 2001. Landlords Continue Pushing Rents Effective rent growth increased by 1.6 percent over the second quarter of 2014 on a quarter-by-quarter basis, an improvement on the 1.2 percent quarterly growth of the July-September period last year. Each quarter this year has seen improved rent growth from the same quarter last year. “That 1.6 percent growth is great for the summer season,” says Jay Denton, Axiometrics senior vice president. “The quarterly numbers this year show a stronger apartment market than we anticipated at the start of the year.” While effective rent growth for the third quarter was lower than the 2.7 percent rate measured in the second quarter, the decrease between the second (2.7 percent) and third quarters (1.6 percent) is …