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CCIM Institute Market Forecast – Through the Looking Glass January 23, 2013

Posted by Erik Swanson in Articles, Investment Tools, Research/Data.
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Click HERE or on the image above to be directed to the full article.

Office. The office sector’s vacancy declined to 17.1 percent in 3Q12 from 17.4 percent a year earlier, according to Reis. Absorption was positive throughout the year, although asking and effective rents increased only slightly (approximately 35 cents to 50 cents per square foot on average). The total volume of office properties declined to $60.2 million on a 12-month trailing basis in 3Q12, which was lower than a year ago and compared to the previous quarter’s volume, according to RERC’s transaction analysis. The size-weighted average price dropped to $177 psf on a 12-month trailing basis.

Industrial. The industrial sector’s availability rate fell to 13.1 percent during 3Q12, which is the ninth consecutive quarter in which the industrial availability rate has declined, according to CBRE. Total sales volume of industrial properties increased slightly to more than $30.7 million in 3Q12, higher than a year ago and the previous quarter’s sales on a 12-month trailing basis, per RERC’s transaction analysis. In addition, the size-weighted average price of industrial space increased to $55 psf on a 12-month trailing basis.

Retail. The retail sector’s vacancy remained at 10.8 percent in 3Q12, down only 20 basis points from 3Q11. Asking and effective rents for neighborhood and community centers were flat, increasing an average of only 8 cents psf over the year, according to Reis. However, this is the first year since the recession began that absorption was positive during each quarter. RERC’s transaction analysis shows that 12-month trailing total retail sales volume decreased to $40.5 million in 3Q12, which was down from YOY volume and from prior-quarter volume. The size-weighted average price of retail space decreased to $136 psf in 3Q12.

As for the future, the relative safety of commercial real estate as an asset class is likely to continue to be critical for investors in the year ahead. Real estate is tangible and transparent, and it offers reasonable returns as an investment alternative, particularly in periods of volatility, which we expect as long as the challenges in the national economy continue.

Apartments. Although fundamentals continue to improve for the multifamily sector, volume and price declined in 3Q12. The vacancy rate for the apartment sector declined to 4.6 percent during 3Q12 compared to 5.6 percent a year ago, according to Reis. Net absorption began to slow, but asking and effective rents increased $35 to $40 per unit during the year. According to RERC’s transaction analysis, total transaction volume for the apartment sector decreased to nearly $56.8 million in 3Q12 on a 12-month trailing basis, which was higher than year-ago volume, but less than 2Q12 volume. The size-weighted average price per apartment unit increased to $90,848 on a 12-month trailing basis, which was higher than the year-ago average price but lower than the 2Q12 price.

Hotels. Third-quarter 2012 hotel sector occupancy rose to 64.2 percent, a 2.5-percent YOY increase, according to Smith Travel Research. The average daily rate was up 5.4 percent to $106.60, and revenue per available room increased 8.0 percent to $68.43. However, RERC’s transaction analysis indicates that total sales volume for the hotel sector declined to more than $12.3 million on a 12-month trailing basis in 3Q12, which was lower than both year-ago volume and prior-quarter volume. The price for hotel rooms also declined compared to both year-ago and previous-quarter pricing, with a size-weighted average price per unit of $89,832 on a 12-month trailing basis in 3Q12.

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