Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/475894
8 March | April | 2015 Commercial Investment Real Estate T RE N D S M A RK E T Despite posting higher than average cap rates between 8 and 9 percent, these markets benef t from local economies that are building momentum. Current property pricing does not yet ref ect performance gains. 1 Detroit 2 Cleveland 3 Pittsburgh 4 Indianapolis 5 Cincinnati Source: Marcus & Millichap Multifamily High-Yield Investment Markets Briefl y Noted Hospitality — In 2014, "The market was dominated by the sale of select-service hotels," said Suzanne Mellen, HVS senior managing director, at the Americas Lodging Investment Summit in January. That activity also kept price growth per key at around 4 percent. Hotel transactions increased 22 percent last year, with hotels above $10 million showing the biggest price increase: 25 percent YOY. Hotels selling in the $2.4 million to $10 million price range showed price per key amounts still well below 2008 peak levels, Mellen said. Industrial — There is still plenty of upside in the industrial market, according to CBRE, which sees rents rising 4 to 5 percent this year and reaching full recovery in late 2016. Although this will be a strong year for new development, supply will still lag behind demand by more than 20 msf. Multifamily — "Apartment values now measure 13 percent above the 2007 peak and overall cap rates have decreased over the past year to 5.7 percent," says Marcus & Millichap's 2015 National Apartment Report. With class A acquisitions priced at a premium to replacement costs, new development and class B renovations offer a better value for investors. Offi ce — JLL foresees a 25 percent increase in absorption for 2015, according to its 4Q14 offi ce report. However construction is happening in 38 of the 48 markets tracked, much of it speculative and almost half of it projects with no lease commitments. In late 2016, the market could shift from undersupply to oversupply, JLL warns. Retail — "In 2014, private investors accounted for 60 percent of net lease retail transactions, a signifi cant increase when compared to 42 percent in 2013," according to the 4Q14 Boulder Group Net Lease Market Report. "Private buyers continue to dominate the net lease market in the low cap rate environment as institutions cannot typically pay the cap rate premiums due to yield restrictions." ə ɓ 4Q14 3Q14 4Q13 3Q13 Primary markets Secondary markets 37% 63% 30% 70% 44% 56% 51% 49% Suburban Offi ce Transactions on a psf basis Suburban office volume (as a percentage of total office transactions) 1 Value-Add 2 Core 3 Opportunistic Source: 2015 Pension Real Estate Association Investment Intentions Survey 2015's Top Investment Strategies 1 2 3 Big Numbers, Small Size C-stores account for 33.9% of all U.S. retail outlets Convenience stores Drug- stores Super- markets/ centers Dollar stores 152,794 41,799 41,529 26,572 Source: Chain Store Age