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/504576
8 May | June | 2015 Commercial Investment Real Estate T RE N D S M A RK E T Briefl y Noted Hospitality — The hotel sector saw the most signifi cant cap rate declines of any property sector in 2014, according to CBRE's 2H2014 Cap Rate Survey. Suburban luxury hotels assets recorded the largest cap rate compression, with a drop of 69 bps from 7.35 to 6.66 percent. Next was the lodging CBD economy sector, which compressed 43 bps, from 8.69 to 8.26 percent. Industrial — "E-commerce is transforming warehouses into the retail stores of the future," according to Cushman & Wakefi eld's North American Industrial Real Estate Forecast 2015–2017, which predicts U.S. warehouse vacancy to tighten from 6.7 percent to 6.3 percent by year-end. Warehouse rents will jump 5 percent this year and 10 percent by 2017, with the national average forecast at $5.34 psf by year-end, up from $5.06 psf. Offi ce — Investors are moving outside of CBDs in search of better prices and cap rates on offi ce assets, according to Marcus & Millichap's 2015 National Offi ce Report. "Measured on a psf basis, prices for CBD assets are more than double that of suburban offi ce assets, and cap rates are 120 bps lower," the report says. Most suburban investment activity is in major markets, but Atlanta, Houston, and Dallas/Fort Worth are also attracting buyers. Multifamily — For 2015, new apartment construction is "likely to rise 76 percent above the historical average, to roughly 211,000 units. This would represent the highest level of new completions in a calendar year since the 1990s," says Ryan Severino, Reis senior economist and director of research. Despite this supply increase, rents will rise 3.7 percent and vacancy will only increase 60 bps, to 4.9 percent by year-end, due to continuing strong demand. Retail — U.S. malls are alive and well, according to International Council of Shopping Centers. Overall, mall occupancy stands at 94 percent nationally, and net operating income increased 17.5 percent in 2014. Despite retail's new omni-channel environment, 78 percent of consumers prefer brick-and-mortar stores to online shopping, spending an average of $1,710 per month in physical stores compared with $247 per month online, ICSC reports. Source: ULI/Real Capital Analytics Hotels Attract Investor Interest T e hospitality sector saw a 22 percent jump in transaction activity in 2014, according to the CBRE 2H2014 Cap Rate Survey, ref ecting a growing interest in lodging assets. Limited- service properties jumped 67 percent in transactions, compared to 5 percent for full-service hotels, a reversal of earlier investment trends. Also changing was the location of preferred assets: Suburban hotels showed a greater cap rate compression across all categories, when compared with CBD locations. Las Vegas, Charlotte, N.C., Albuquerque, N.M., and Kansas City, Mo., showed the greatest cap rate compression in 2014. CBRE expects almost two-thirds of the markets to experience downward movement this year, with the greatest declines occurring in Austin, Texas; Baltimore; Kansas City; Las Vegas, Nashville, Tenn., Portland, Ore., and Seattle. Commercial Real Estate Sales Volume One-year growth rate, as of June 30, 2014 Major Markets Secondary Markets Tertiary Markets $154 billion $140 billion $80 billion p72% YOY Net Lease Retail Prices 2014 average Auto parts stores Fast casual Drugstores Quick service $198 psf, L6.2% YOY $367 psf, K 7% $196 psf, K 12% $607 psf, K 11% Dollar stores $159 psf, K 5% Source: Marcus & Millichap XiXinXing/Thinkstock