Transcript
NATIONAL ASSOCIATION OF REALTORS® | RESEARCH DIVISION
COMMERCIAL REAL ESTATE
OUTLOOK
These developments stem from rising consumers’ wealth. Consumers have been paying off debt over the past few years, while cutting back on discretionary spending. At the same time, household wealth tied to financial assets has been rising steadily post-recession, with the Dow recently crossing the 15,000 threshold. Household wealth tied to housing has seen a noticeable improvement in 2012 and the first quarter of 2013. Sale of existing homes rose 9.8 percent in the first quarter of this year, following the 9.0 percent rise in 2012. Due to very tight inventories, multiple bids have returned to the market, and price escalation clauses are pushing home prices up. Based on NAR data, the median sales price of existing homes jumped 11.2 percent in the first quarter of the year. GDP (% Annual Chg.) 3.1 2.4 2.0
Economic Growth Supports Commercial Markets in Second Quarter
George Ratiu
Manager, Quantitative & Commercial Research
The economic kept a steady pace of growth over the past few months, as consumers and businesses seemed committed to moving forward. Gross domestic product rose 2.4 percent in the first quarter of the year. Riding the moderate temperature of a mild winter, consumers opened up their wallets at the fastest pace since the fourth quarter 2010. Consumer spending increased 3.4 percent in the first quarter, lifted by a 9.1 rise in auto purchases, coupled with an equal advance in sales of recreational goods and vehicles. With aging vehicles and with manufacturers rolling out technologically advanced and more fuel efficient new models, consumers are finding new cars attractive. Sales of cars in April totaled 651,644 units, a 3.1 percent increase year-over-year. Sales of light-duty trucks, which include SUVs, advanced 14.7 percent, benefiting from the soaring popularity of car-based cross-over vehicles, which recorded the strongest yearly gain in April, at 16.5 percent. Pick-up trucks also recorded solid sales growth, with the Ford F-Series leading the sales charts, followed by the Chevrolet Silverado. Consumers also increased their expenditures of services—including health care, transportation, food services and lodging—by 3.1 percent, the strongest gain since the second quarter of 2005. In a sign of a broader improvement in sentiment, spending on financial services and insurance rose 7.6 percent in the first quarter, a pace not seen since the fourth quarter of 2004.
1.3
0.4
2012.Q1 2012.Q2 2012.Q3 2012.Q4 2013.Q1
Source: BEA
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COMMERCIAL REAL ESTATE
OUTLOOK
(continued from page 1) Employment figures also point to a steady pace of growth. Payroll jobs advanced by 644,000 during the first quarter, with gains distributed fairly evenly across industries. On a yearly basis, professional and business services, education and health and construction recorded noticeable growth. The unemployment rate declined from 7.6 percent to 7.5 percent in March. Businesses have also increased investments in equipment and jobs. Business spending gained 2.1 percent in the first quarter of the year, focused on capital, equipment and software. With international trade remaining favorable, and adding the increased domestic oil production, which led to diminishing need to import it, the balance of trade narrowed in the first quarter from $43.6 billion to $38.8 billion.
% Chg YoY
Government spending continued its decline, shrinking 5.0 percent in the first quarter, driven by budget cuts at federal, state and local levels. At the federal level, both defense and nondefense cuts added to a 8.7 percent decrease in spending. State and local governments slashed spending by 2.4 percent. Though negative to the economy over the short term, lowering the federal budget deficit will likely help long-term economic prospects.
The outlook for the remainder of 2013 is for GDP to grow at a 2.0 percent annual rate. Payroll employment is expected to rise 1.5 percent, as the unemployment rate remains around 7.5 percent. Commercial Real Estate Following on the solid 24 percent yearly gains in 2012, commercial investments notched a strong first quarter. Sales of major properties totaled $72.8 billion in the first quarter, a 35 percent rise from a year ago, according to Real Capital Analytics. Portfolio transactions made up a large portion of the volume, especially due to the sale of Archstone apartment properties to Equity Residential and Avalon Bay. Individual property sales comprised $40 billion, a 7.8 percent gain from the same quarter last year. (continued on page 3)
Model Ford F - Series PU Chevrolet Silverado PU Honda Accord Toyota Camry Dodge Ram PU Ford Fusion Honda CR-V Honda Civic Ford Escape Hyundai Elantra Toyota Corolla / Matrix Ford Focus Chevrolet Cruze Nissan Altima Chevrolet Malibu Chevrolet Equinox Toyota Prius Toyota RAV4 Hyundai Sonata Ford Explorer
Source: www.motorintelligence.com
Units 59,030 39,395 -5.2 33,538 31,710 -13.9 31,409 26,722 26,519 26,453 25,826 24,445 -2.1 24,273 22,557 22,032 21,991 21,734 -0.8 20,965 19,889 -21 18,541 16,077 -21.7 15,440
24.4 28.1
48.7 23.7 12.2 8.3 52 45.2
16.1 21 35.4
14.7
22
9.6
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COMMERCIAL REAL ESTATE
OUTLOOK
(continued from page 2) Prices for commercial properties were up slightly in the first quarter. Cap rates inched up slightly, to an average 7.5 percent nationally across all property types, mostly due to a redirect in investments towards secondary and tertiary markets. The rise of secondary and tertiary markets which began during 2012 has intensified during the first quarter of this year. Faced with lower inventories of top properties in major metropolitan areas, investors have been searching for the higher yields of performing properties in smaller markets. During the first quarter, in terms of nominal volume, New York and Washington, DC metro areas dominated the landscape, with close to $20 billion in combined sales. However, on a year-over-year basis, the first quarter recorded 16 individual markets with triple digit gains in sales, most of them secondary markets. Jacksonville posted the strongest sales gains, up 625.2 percent, boosted by apartment and office sales. Sales in the Virginia and Maryland suburbs of DC also jumped 295.3 percent and 199.1 percent, respectively. The surge in sales were driven by large office and apartment property (Archstone portfolio sale) transactions in both markets. Other markets with noticeable investment surges were East Bay, Westchester, Kansas City, San Antonio, St. Louis, and Long Island. The bifurcation in capital availability along property values continued in 2012 and the first part of 2013. As data from Real Capital Analytics indicates, for deals valued at $2.5 million and above, CMBS issuers and government agencies remained dominant players in secondary and tertiary markets, followed by national banks, insurance companies and regional banks. Meanwhile, based on data from the 2013 REALTORS® Commercial Real Estate Lending Survey, for transactions below the $2.0 million mark, private investors, local and regional banks continued to serve as the main conduits for capital liquidity.
2011
Annual Growth Rate, % Real GDP Nonfarm Payroll Employment Consumer Prices Level Consumer Confidence Percent Unemployment Fed Funds Rate 3-Month T-bill Rate Corporate Aaa Bond Yield 10-Year Gov’t Bond 30-Year Gov’t Bond 1.8 1.2 3.1 58 8.9 0.1 0.1 4.6 2.8 3.9
2012
2.1 1.4 2.1 69 8.1 0.1 0.1 3.7 1.8 2.9
2013
2.0 1.5 1.9 72 7.5 0.1 0.1 4.0 2.1 3.2
2014
2.9 1.8 3.2 83 7.2 0.1 0.2 4.7 2.7 3.9
Source: National Association of REALTORS®
NATIONAL OFFICE INDUSTRIAL RETAIL APARTMENT
2.57% 1.92% 2.50% 3.72% 2.57%
Source: National Council of Real Estate Investment Fiduciaries
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COMMERCIAL REAL ESTATE
OUTLOOK
2014 II 2014 III 2014 IV
15.6% 9,122 8,919 4,123 0.7% 15.6% 11,175 7,393 4,131 0.7% 15.6% 9,599 6,736 4,137 0.7%
2013 II 2013 III 2013 IV 2014 I Vacancy Rate Net Absorption ('000 sq. ft.) Completions ('000 sq. ft.) Inventory ('000,000 sq. ft.) Rent Growth
15.7% 9,844 6,635 4,095 0.6% 15.6% 9,209 5,500 4,100 0.7% 15.6% 8,574 5,011 4,105 0.7% 15.6% 12,153 8,852 4,114 0.7%
2013
15.7% 31,723 23,731 4,105 2.6%
2014
15.6% 42,049 31,900 4,137 2.8%
2013 II 2013 III 2013 IV 2014 I
Vacancy Rate Net Absorption ('000 sq. ft.) Completions ('000 sq. ft.) Inventory ('000,000 sq. ft.) Rent Growth
9.4% 19,278 14,507 8,441 0.6% 9.4% 34,273 9,479 8,450 0.6% 9.3% 32,131 9,021 8,459 0.7% 9.0% 20,058 18,943 8,478 0.6%
2014 II 2014 III 2014 IV
8.9% 18,052 20,150 8,498 0.7% 8.9% 32,092 13,166 8,511 0.7% 8.8%
2013
9.4%
2014
8.9%
30,086 107,102 100,288 12,529 8,524 0.6% 46,645 8,459 2.4% 64,788 8,524 2.6%
2013 II 2013 III 2013 IV 2014 I
2014 II 2014 III 2014 IV
10.2%
4,164 2,884 2,043 0.6%
2013
10.5%
12,495 7,285 2,039 1.4%
2014
10.1%
17,350 12,769 2,049 2.2%
Vacancy Rate Net Absorption ('000 sq. ft.)
Completions ('000 sq. ft.) Inventory ('000,000 sq. ft.) Rent Growth
10.5%
2,990 1,645 2,036 0.4%
10.5%
2,866 1,848 2,037 0.4%
10.4%
3,738 1,887 2,039 0.4%
10.3%
6,246 3,337 2,039 0.5%
10.0%
2,776 3,240 2,045 0.5%
9.9%
4,164 3,308 2,049 0.6%
2013 II 2013 III 2013 IV 2014 I Vacancy Rate Net Absorption (Units) Completions (Units) Inventory (Units in millions) Rent Growth
3.9% 63,554 37,155 3.9% 74,606 33,929 3.8% 77,370 36,005 4.0% 53,629 36,339
2014 II 2014 III 2014 IV
4.1% 56,067 46,158 4.1% 65,817 42,150 4.2%
2013
3.9%
2014
4.1%
68,255 276,320 243,768 44,729 136,342 169,376
9.9
1.1%
10.0
1.2%
10.0
1.3%
10.1
1.1%
10.1
1.2%
10.1
1.2%
10.2
1.1%
10.0
4.6%
10.2
4.6%
Source: National Association of REALTORS® / Reis, Inc.
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COMMERCIAL REAL ESTATE
OUTLOOK
Retail
11.3 14.0 6.7 6.6 15.1 6.6 13.9 9.8 11.7 9.4 13.8 10.4 13.5 14.9 15.5 10.9 15.1 13.2 15.8 11.9 11.5
4.1 10.4 12.1 11.4 13.7 9.5 12.0 14.7 13.0 11.2 11.5 12.8 8.9 12.5 5.3
Source: NAR, Reis, Inc.
Office
NM GA TX MD AL MA NY NJ SC NC TN IL OH OH CO SC OH TX OH CO MI DC CT FL TX NC SC CT TX IN FL MO TN NV KY AR NY 17.5 20.4 16.6 16.8 12.3 14.0 14.6 22.3 16.2 17.1 15.3 18.2 19.8 20.9 19.4 17.5 17.6 23.1 26.4 17.5 25.9 9.4 20.6 19.7 16.7 20.8 19.4 20.4 14.3 19.8 20.5 17.5 15.2 25.7 14.8 12.0 13.3
Industrial
14.0 12.2 12.7 18.6
Multifamily
3.8 6.1 4.5 3.5 5.5 3.4 3.0 2.7 4.8 5.0 2.8 3.6 3.7 3.0 4.4 6.6 4.8 5.3 4.1 3.6 3.8 3.7 4.1 3.8 5.0 6.3 4.6 2.8 6.5 4.9 6.9 4.4 5.2 5.5 5.2 5.5 3.1
Albuquerque Atlanta Austin Baltimore Birmingham Boston Buffalo Central New Jersey Charleston Charlotte Chattanooga Chicago Cincinnati Cleveland Colorado Springs Columbia Columbus Dallas Dayton Denver Detroit District of Columbia Fairfield County Fort Lauderdale Fort Worth Greensboro/Winston-Salem Greenville Hartford Houston Indianapolis Jacksonville Kansas City Knoxville Las Vegas Lexington Little Rock Long Island
12.7 9.2 8.3 8.6
9.0 12.6
8.2 11.7
9.5 10.9
7.9 9.6 7.5 10.1
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COMMERCIAL REAL ESTATE
OUTLOOK
Retail
6.0 10.1 12.4 7.1 12.3 11.0 8.6 12.6 11.4 9.8 5.4 6.6 14.0 8.7 5.3 13.4 11.6 9.3 11.0 7.7 8.3 13.2 9.1 9.1 12.8 12.5 12.2 11.3 9.9 6.4 3.6 6.0 6.8 12.1
Source: NAR, Reis, Inc.
Office
CA KY TN FL WI MN TN CT LA NY VA NJ CA OK NE CA FL FL PA AZ PA OR RI NC VA NY CA UT TX CA CA CA CA WA MO 15.6 15.4 23.4 16.8 19.3 17.6 13.3 17.6 12.6 9.9 14.8 19.0 18.2 16.3 15.6 17.4 18.4 19.3 14.3 25.6 15.4 14.8 16.4 15.1 14.7 16.4 20.7 17.1 18.2 23.7 15.9 13.2 18.5 13.7 18.1
Industrial
4.1 14.9 5.8 7.6 8.3
Multifamily
3.2 4.3 8.0 3.6 3.3 2.3 3.8 2.0 6.1 2.2 3.8 3.4 2.5 5.5 3.2 3.0 4.8 4.7 3.2 5.3 2.9 2.7 3.0 4.0 4.5 2.8 3.2 3.5 6.1 3.3 2.3 3.0 2.9 3.8 4.9
Los Angeles Louisville Memphis Miami Milwaukee Minneapolis Nashville New Haven New Orleans New York Norfolk/Hampton Roads Northern New Jersey Oakland-East Bay Oklahoma City Omaha Orange County Orlando Palm Beach Philadelphia Phoenix Pittsburgh Portland Providence Raleigh-Durham Richmond Rochester Sacramento Salt Lake City San Antonio San Bernardino/Riverside San Diego San Francisco San Jose Seattle St. Louis
9.1
3.9 11.5 7.0 10.2 11.0 9.3 8.0 15.9 14.6 12.6 7.6 6.8 7.1 11.3 16.3 6.3 6.6
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COMMERCIAL REAL ESTATE
OUTLOOK
Retail
9.1 6.7 15.0 11.8 11.6 9.5 16.4 8.9 8.2 12.7
Source: NAR, Reis, Inc.
Office
MD VA NY WA FL AZ OK CA NY KS 14.8 15.9 15.4 17.0 21.1 15.9 17.2 16.2 18.2 15.8
Industrial
10.7 10.3
Multifamily
3.5 3.2 2.6 3.8 4.7 5.2 5.4 3.0 3.1 4.5
Suburban Maryland Suburban Virginia Syracuse Tacoma Tampa-St. Petersburg Tucson Tulsa Ventura County Westchester Wichita
8.1
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COMMERCIAL REAL ESTATE
OUTLOOK
Average Price ($/Sq. Ft.)
$206 $89 $445 $152 $165 $223 7.2% 7.5% 7.5% 7.8% 7.8% 6.8%
Office Sales
Billions
$40 $30 $20 $10 $-
Region
Mid-Atlantic Midwest Northeast Southeast Southwest West 12Q1 12Q2 12Q3 12Q4 13Q1 Industrial Sales
OFFICE Average Cap Rate
Billions
$20 $15 $10
Region
Mid-Atlantic Midwest Northeast Southeast Southwest West 12Q1 12Q2 12Q3 12Q4 13Q1 Retail Sales
INDUSTRIAL Average Cap Rate
7.8% 8.5% 8.0% 8.2% 7.5% 6.5%
Average Price ($/Sq. Ft.)
$50 $33 $69 $37 $46 $118
$5
$-
Billions
$25 $20 $15 $10 $5 $-
Region
Mid-Atlantic Midwest Northeast Southeast Southwest West 12Q1 12Q2 12Q3 12Q4 13Q1 Apartment Sales
RETAIL Average Cap Rate
7.4% 7.2% 6.4% 7.7% 7.5% 6.9%
Average Price ($/Sq. Ft.)
$123 $128 $251 $113 $146 $218
Region
Billions
MULTI-FAMILY Average Cap Rate
6.5% 6.8% 5.8% 7.0% 6.4% 5.6%
Average Price ($/Unit)
$180,344 $80,523 $196,472 $80,167 $92,835 $148,387
Note: Data as of 5/21/2013 Source: Real Capital Analytics
$40 $30 $20 $10 $-
12Q1 12Q2 12Q3 12Q4 13Q1
Mid-Atlantic Midwest Northeast Southeast Southwest West
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COMMERCIAL REAL ESTATE
OUTLOOK
The Research Division of the National Association of REALTORS® monitors and analyzes monthly and quarterly economic indicators, including retail sales, industrial production, producer price index, gross domestic product and employment data which impact commercial markets over time. In addition, the Research Division provides several products covering commercial real estate: • • • Commercial Real Estate Quarterly Market Survey Commercial Real Estate Lending Survey Commercial Member Profile
If you have questions or comments regarding this report or any other commercial real estate research, please contact George Ratiu, Manager, Quantitative & Commercial Research, at
[email protected]. Although the information presented in this report has been obtained from reliable sources, NAR does not guarantee its accuracy, and such information may be incomplete. This report is for information purposes only. All opinions, assumptions and estimates constitute NAR’s judgment as of the date of this publication and are subject to change and evolving events. Actual results may vary from forecast results. For more information, please visit us:
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