RCMI
-
Upload
william-thompson -
Category
Documents
-
view
221 -
download
2
description
Transcript of RCMI
![Page 1: RCMI](https://reader030.fdocuments.in/reader030/viewer/2022020722/568c35b71a28ab02359556a6/html5/thumbnails/1.jpg)
Commercial Market Insights For the RE/MAX Commercial Practitioner and our Clients
National OverviewFourth Quarter 2009
Sponsored By:
Office • Industrial • Apartments • Retail
![Page 2: RCMI](https://reader030.fdocuments.in/reader030/viewer/2022020722/568c35b71a28ab02359556a6/html5/thumbnails/2.jpg)
Produced by Real Estate Research Corporation (RERC) for RE/MAX Commercial. Copyright© March 2010, Real Estate Research Corporation.
Economic Environment
With the second consecutive quarter of positive economic growth now apparent, it is likely that the recession will be declared technically over. Although there will be much more distress and many more obstacles on the long jour-ney toward recovery, it is also important to remember that the U.S. economy made huge strides in 2009. We moved from negative gross domestic product (GDP) growth early in the year to positive growth of 2.2 percent in third quarter and an estimated 5.9 percent growth in fourth quarter. The residential real estate market is seeing some stabilization, despite the huge drops in existing home sales in Decem-ber 2009 and in new home sales in January 2010. Perhaps the most encouraging indication of strengthening economic activity is that the Federal Reserve is starting to wind down some of the pro-grams created to support the financial markets, as planned.
However, a deepening federal deficit, high unemployment, slow consumer and business spending, increasing pressure on state and local govern-ments, and more bank failures with constrained lending are some of the major concerns weighing down the in-vestment environment for commercial real estate. It will take much determi-nation in 2010 for investors to meet and overcome these struggles in the economy, along with the real estate-related hurdles of increasing vacancy and declining rents. But those willing to dig deep and gather the strength and resources needed to stay in the game may very well find the opportunities facing them well worth the challenges they will encounter.
What Does This Mean forCommercial Real Estate?
Although economic activity continues at a “depressed level,” as stated by the Federal Reserve in the Jan. 13, 2010
Beige Book, we are starting to see some improvement. Con-sumer spending and auto sales were somewhat improved at the end of fourth quarter 2009. Even the manufacturing sector has seen some strength, with the Institute for Supply Management’s (ISM’s) Manufacturing Index increasing to a reading of 58.4 in January 2010, the highest in more than 5 years, and the sixth month in a row with a reading above 50.
However, commercial real estate activity remains weak, which is expected since commercial real estate lags the rest of the investment market. Until confidence returns on the part of businesses and consumers, we will see little job growth – the critical component needed for commercial real estate usage – and the industry will continue to suffer.
National Overview
National Transaction Breakdown12-Month Trailing Averages (01/01/09 - 12/31/09)
Office Industrial Retail Apartment< $2 MillionVolume (Mil) $1,364 $2,453 $2,553 $1,127
Size Weighted Avg. ($ per sf/unit) $88 $49 $84 $47,457
Price Weighted Avg. ($ per sf/unit) $122 $79 $126 $72,342
Median ($ per sf/unit) $92 $57 $86 $52,083
$2 - $5 MillionVolume (Mil) $1,723 $2,704 $2,921 $2,265
Size Weighted Avg. ($ per sf/unit) $110 $55 $131 $58,135
Price Weighted Avg. ($ per sf/unit) $190 $95 $233 $108,773
Median ($ per sf/unit) $161 $73 $196 $83,368
> $5 MillionVolume (Mil) $14,611 $5,547 $12,583 $12,445
Size Weighted Avg. ($ per sf/unit) $188 $58 $154 $86,047
Price Weighted Avg. ($ per sf/unit) $322 $109 $298 $168,811
Median ($ per sf/unit) $179 $71 $154 $85,158
All TransactionsVolume (Mil) $17,698 $10,704 $18,057 $15,836
Size Weighted Avg. ($ per sf/unit) $163 $55 $135 $76,383
Price Weighted Avg. ($ per sf/unit) $293 $99 $263 $153,361
Median ($ per sf/unit) $112 $62 $110 $68,000 Source: RERC.
![Page 3: RCMI](https://reader030.fdocuments.in/reader030/viewer/2022020722/568c35b71a28ab02359556a6/html5/thumbnails/3.jpg)
Produced by Real Estate Research Corporation (RERC) for RE/MAX Commercial. Copyright© March 2010, Real Estate Research Corporation.
Transaction Analysis
In fourth quarter 2009, 12-month trail-ing transaction volume in the office and industrial sectors continued to decrease. In contrast, retail property sector volume increased slightly, while apartment sales volume remained un-changed.
Quarter-to-quarter, the office sec-tor was the only property type where transaction volume decreased; quar-terly transaction volume for the rest of the property types either increased or remained unchanged. On a 12-month trailing basis, the aver-age price of office and industrial prop-erties continued to decrease from third quarter 2009. Comparatively, the aver-age price of retail and apartment prop-erties increased during fourth quarter 2009. This is the first average price in-crease for retail and apartment proper-ties in the past year.
The 12-month trailing weighted aver-age capitalization rates continued to increase for all four property types. These rates have been steadily increas-ing since fourth quarter 2008.
In contrast, RERC’s quarterly weighted average capitalization rates continued to show mixed results across all the property types during fourth quar-ter 2009. Rates for the industrial and apartment sectors decreased by 50 and 20 basis points, respectively. The capi-talization rate for the retail property sector increased by 60 basis points, while the capitalization rate for the of-fice sector remained unchanged from third quarter 2009.
For more information about RERC’s re-search, go to http://store.rerc.com.
Capitalization Rates (All Transactions)Office Industrial Retail Apartment
12-Month Trailing Averages (01/01/09 - 12/31/09)Range (%) 4.5 - 11.6 5.9 - 13.1 4.7 - 13.3 3.4 - 12.8
Weighted Avg. (%) 7.5 8.4 7.6 7.0
Median (%) 8.0 8.1 7.5 7.0
Current Quarter Rates (10/01/09 - 12/31/09)Range (%) 5.3 - 10.5 6.8 - 10.6 5.8 - 10.6 5.9 - 10.1
Weighted Avg. (%) 8.1 8.7 8.0 6.9
Median (%) 7.9 9.0 7.6 7.6 Source: RERC.
National Transaction BreakdownCurrent Quarter Rates (10/1/09 - 12/31/09)
Office Industrial Retail Apartment< $2 MillionVolume (Mil) $286 $613 $580 $266
Size Weighted Avg. ($ per sf/unit) $85 $49 $82 $48,179
Price Weighted Avg. ($ per sf/unit) $118 $75 $124 $71,818
Median ($ per sf/unit) $94 $57 $86 $53,673
$2 - $5 MillionVolume (Mil) $347 $631 $675 $553
Size Weighted Avg. ($ per sf/unit) $96 $49 $116 $52,551
Price Weighted Avg. ($ per sf/unit) $176 $83 $225 $106,640
Median ($ per sf/unit) $143 $72 $174 $85,000
> $5 MillionVolume (Mil) $2,601 $1,430 $5,914 $4,789
Size Weighted Avg. ($ per sf/unit) $155 $47 $170 $97,408
Price Weighted Avg. ($ per sf/unit) $264 $90 $321 $223,707
Median ($ per sf/unit) $159 $64 $154 $89,172
All TransactionsVolume (Mil) $3,235 $2,673 $7,169 $5,608
Size Weighted Avg. ($ per sf/unit) $136 $48 $150 $86,005
Price Weighted Avg. ($ per sf/unit) $242 $85 $296 $204,966
Median ($ per sf/unit) $105 $60 $113 $68,133 Source: RERC.
![Page 4: RCMI](https://reader030.fdocuments.in/reader030/viewer/2022020722/568c35b71a28ab02359556a6/html5/thumbnails/4.jpg)
Produced by Real Estate Research Corporation (RERC) for RE/MAX Commercial. Copyright© March 2010, Real Estate Research Corporation.
Office:
• With continued high unemployment and low demand for office properties, vacancy rates have risen to levels not seen since 1994. In spite of this, office properties may offer some of the best investment options, due to foreclosures and short sales.
• RERC’s 12-month trailing transaction analysis for fourth quar-ter 2009 showed a continued decline in office volume and pricing. The 12-month trailing volume declined more than 25 percent. The 12-month trailing weighted average and median capitalization rates increased to 7.5 percent and 8.0 percent, respectively.
• The office vacancy rate increased 20 basis points to 16.3 percent in fourth quarter 2009, according to CBRE Econometric Advisors. This is the eighth consecutive quarterly increase in vacancy. The net ask-ing rent average for office properties has been declining since first quarter 2009. However, net absorption posted its first positive quar-ter since fourth quarter 2008.
Industrial:
• According to the Federal Reserve’s Jan. 13, 2010 Beige Book, manufactur-ing activity improved in half the districts during the recent reporting pe-riod. The remaining districts saw mixed or weak activity. Industrial pro-duction has remained positive since July 2009 and should continue to be positive in the future due to lower prices and greater stability.
• During fourth quarter 2009, the industrial market experienced declining prices and increasing capitalization rates on a 12-month trailing basis. There was no significant change in volume in the current quarter, but on a 12-month trailing basis, volume declined by more than 17 percent as compared to the previous quarter. The 12-month trailing size- and price-weighted average prices per square foot declined, while the weighted av-erage and median capitalization rates increased by 30 basis points and 10 basis points, respectively.
• According to CBRE Econometric Advisors, the availability rate for the industrial property sector increased 40 basis points to 13.9 percent during fourth quarter 2009, the highest rate since CBRE Econometric Advisors began tracking it in 1989. Net absorption of industrial space continued to decrease.
5%
6%
7%
8%
9%
10%
5%
6%
7%
8%
9%
10%NationalWest
Midwest
South
East
4Q093Q092Q091Q094Q08
RERC Weighted Average Capitalization Rate (12-Month Trailing Average)
$50
$100
$150
$200
$250
$300
$350
$50
$100
$150
$200
$250
$300
$350NationalWest
Midwest
South
East
4Q093Q092Q091Q094Q08
RERC Size-Weighted Average PPSF(12-Month Trailing Average)
5%
6%
7%
8%
9%
10%
5%
6%
7%
8%
9%
10%NationalWest
Midwest
South
East
4Q093Q092Q091Q094Q08
RERC Weighted Average Capitalization Rate(12-Month Trailing Average)
$25
$45
$65
$85
$105
$125
$25
$45
$65
$85
$105
$125NationalWest
Midwest
South
East
4Q093Q092Q091Q094Q08
RERC Size-Weighted Average PPSF(12-Month Trailing Average)
![Page 5: RCMI](https://reader030.fdocuments.in/reader030/viewer/2022020722/568c35b71a28ab02359556a6/html5/thumbnails/5.jpg)
Produced by Real Estate Research Corporation (RERC) for RE/MAX Commercial. Copyright© March 2010, Real Estate Research Corporation.
Retail:
• The outlook for the retail sector does not look promising due to continued high unemployment and low consumer spending. Poor business perfor-mance and too much space available are also negatively impacting the retail sector. In general, the retail environment remains very weak.
• RERC’s current quarter and 12-month trailing transaction analysis contin-
ued to show retail market volume increasing during fourth quarter 2009. The volume of transactions increased by nearly 5 percent on a 12-month trailing basis and by 40 percent on a current quarter basis. The 12-month trailing weighted average and median capitalization rates increased to 7.6 percent and 7.5 percent, respectively.
• According to CBRE Econometric Advisors, the availability rate for the retail sector increased 20 basis points during third quarter 2009. The availability rate has not been this high since CBRE Econometric Advisors started tracking this rate in 1989. The net asking rent for retail properties declined for the third consecutive quarter, and net absorption was nega-tive for the fifth consecutive quarter.
Apartment:
• The apartment sector remains the most reliable property type in which to invest among the office, industrial, apartment, and retail sectors due to lower rent and the continued need for alternative housing. The number of people who were homeowners and have become renters will continue to increase over the next few years.
• RERC’s 12-month trailing volume for the apartment sector did
not change significantly in fourth quarter 2009 from the previous quarter, while the current quarter volume actually increased by 60 percent. The 12-month trailing size- and price-weighted averages increased, compared with the median price per apartment unit, which decreased from the previous quarter. The 12-month trailing weighted average and median capitalization rates increased by 30 basis points each.
• As with the other property types, the vacancy rate for the apart-ment sector has continued to rise throughout 2009. The vacancy rate increased to 8.0 percent in fourth quarter 2009, which is up 10 basis points from third quarter 2009, according to Reis, Inc., and is the highest vacancy level on record in the near-30-year history of Reis apartment research. Net absorption was only mildly positive, given that more than 28,000 new apartment units were added to the inventory.
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%NationalWest
Midwest
South
East
4Q093Q092Q091Q094Q08
RERC Weighted Average Capitalization Rate(12-Month Trailing Average)
$25
$75
$125
$175
$225
$25
$75
$125
$175
$225NationalWest
Midwest
South
East
4Q093Q092Q091Q094Q08
RERC Size-Weighted Average PPSF(12-Month Trailing Average)
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%NationalWest
MidwestSouthEast
4Q093Q092Q091Q094Q08
RERC Weighted Average Capitalization Rate(12-Month Trailing Average)
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000NationalWest
Midwest
South
East
4Q093Q092Q091Q094Q08
RERC Size-Weighted Average PPU(12-Month Trailing Average)