commercial real estate market survey 2014-03-05

8/12/2019 Commercial Real Estate Market Survey 2014-03-05

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FEBRUARY 2014

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THE NATIONAL ASSOCIATION OF REALTORS®, “The Voice for Real Estate,” is America’s largest tradeassociation, representing 1.0 million members involved in all aspects of the residential and commercial real

estate industries..

Although the information presented in this survey 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.

Copyright © 2014 NATIONAL ASSOCIATION OF REALTORS®. Reproduction, reprinting or retransmission

in any form is prohibited without written permission. For questions regarding this matter please e-mail

[email protected].

The REALTORS® Commercial Real Estate Market Survey measures quarterly activity in the commercial

real estate markets. The survey collects data* from commercial REALTORS®. The survey is designed

to provide an overview of market performance, sales and rental transactions, along with current

economic challenges and future expectations.

2NATIONAL ASSOCIATION of REALTORS® | RESEARCH DIVISION | www.realtors.org/research




FEBRUARY 2014

NOTE: In February 2014, NAR invited a random sample of 49,820 REALTORS® with an interest in

commercial real estate to fill an on-line survey. A total of 461 responses were received, for an overall

response rate of 0.9 percent.

Survey Highlights

• REALTOR® commercial markets maintained momentum in sales and leasing activity.

• Sixty-six percent of commercial REALTORS® closed a sales transaction.

• Sales volume rose 8 percent from a year ago. • Sales prices increased 1 percent on a year -over-year basis.

• Cap rates averaged 8.7 percent during the fourth quarter

• Leasing activity advanced 0.4 percent from the previous quarter, virtually flat. • Rental rates increased 0.3 percent compared with the previous quarter.

• Concession levels declined 4.0 percent on a quarterly basis. • Pricing gap topped the list of current challenges, followed by shortage of inventory. • The estimated average transaction slid from $1.3 million to $1.2 million from the priorquarter.

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

New Construction Business Opportunity

Source: National Association of Realtors®



4

REALTORS ® Commercial Activity – 2013.Q4

Sales Volume Compared with Previous Quarter Up 4%

Sales Volume Compared with Previous Year Up 8%

Sales Prices Compared with Previous Quarter Down 0.4%

Sales Prices Compared with Previous Year Up 1%

Expected Inventory Availability for the Next 12 Months Up 0.1%

Rental Volume Compared with Previous Quarter Up 0.4%

Rental Rates Compared with Previous Quarter Up 0.3%

Level of Rent Concessions Compared with Previous Quarter Down 4%

Volume of New Construction Compared with Previous Quarter Up 2%

Direction of Business Opportunities Compared with Previous Quarter Up 5%

NATIONAL ASSOCIATION of REALTORS® | RESEARCH DIVISION | www.realtors.org/research

FEBRUARY 2014

-15%

-10%

-5%

0%

5%

10%

15%

20%

PercentChange,Quarterly

REALTOR® Commercial Leasing Trends (% Chg Quarterly)

Rental Volume Rental Rates Rent Concessions

Source: National Association of Realto




FEBRUARY 2014

State-level data may register large fluctuations from one period to the next due to small sample sizes in some states.

Blank values may be due to missing data or a state-level sample size smaller than 5.

66

34

Sales transaction (%)

Yes

No

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

2 0 0 8 . Q 4

2 0 0 9 . Q 1

2 0 0 9 . Q 2

2 0 0 9 . Q 3

2 0 0 9 . Q 4

2 0 1 0 . Q 1

2 0 1 0 . Q 2

2 0 1 0 . Q 3

2 0 1 0 . Q 4

2 0 1 1 . Q 1

2 0 1 1 . Q 2

2 0 1 1 . Q 3

2 0 1 1 . Q 4

2 0 1 2 . Q 1

2 0 1 2 . Q 2

2 0 1 2 . Q 3

2 0 1 2 . Q 4

2 0 1 3 . Q 1

2 0 1 3 . Q 2

2 0 1 3 . Q 3

2 0 1 3 . Q 4

PercentChange,annualy

REALTORS® Commercial Sales (% Chg YoY)

Sales Volume Sales Prices





FEBRUARY 2014



2013.Q4 Cap Rates

Office 8

Industrial 8

Retail 8

Multifamily 7

Hotel 8

Development 11

%

%

%

%

%

%

%

%

%

%

%

REALTORS® Commercial Cap RatesOffice Industrial Retail

Multifamily Hotel Development


0%

10%

20%

30%

40%50%

60%

70%

80%

90%

100%

2013.Q4 2013.Q3

REALTORS ® Most PressingChallenges

Other

Pricing Gap:Buyers vs Seller

National Econom

Local Economy

Financing

Distress

Inventory




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2013.Q4 Vacancy Rates

Office 17

Industrial 14

Retail 16

Multifamily 6

Hotel 21

%

%

%

%

%

%

%

REALTORS® Commercial Vacancy Rates

Office Industrial Retail Multifamily Hotel





FEBRUARY 2014



0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

2013.Q4 2013.Q3

Average Rental Space Demanded During

Last Transaction

Under 2,500 sf

2,500 - 4,999 sf

5,000 - 7,499 sf

7,500 - 9,999 sf

10,000 - 49,999 sf

50,000 - 100,000 sf

Over 100,000 sf

0

50

5

0

5

0

5

0

5

Average lease term during last

transaction (%)



The REALTORS® Commercial Real Estate Quarterly Market Survey asks participants to comment on

current conditions in their markets. Below are a few of the comments about the latest quarter environmen

2014 shall prove to be the sleeping giant stretching his legs !!

2014 should be better than 2013 and 2013 was great

2014 WILL BE A GREAT YEAR

All changes UP & Down so often one never knows what is nx!

Am too busy with residential have cut back on commercial

Apartments being overbuilt

Available industrial property is shrinking

Biggest business challenges in order: 1)Limited inventory, 2)Pricing gap between buyers and sellers, 3)Financing

Buyers are still hesitant to buy because of the uncertainty in the future economically and politically. Obama has changed

America and is doing everything he can to destroy it.

Cap rate compression is slowing transactions.

Cap rates are being supressed. Buyers investors are still looking for higher cap rate than offered. Inventory is low.

Cautiously optimistic...

Cautiously recovering

Class A space is in demand Class B-C space is lagging far behind and hard to market

Collecting commissions on leases is tenuous

Combine commercial MLS with at an affordable price - more commercial training.

Demand for investment property on the rise, especially multifamily and retail centers.

Federal government has to stop trying to beat small businessmen into the ground. Regulations & taxes are driving us all

nuts.

Financing at crisis stage for under $ 1.5. mil transactions / readily acceptable for larger sales

General market sluggish. Specific projects are driving market


FEBRUARY 2014



The REALTORS® Commercial Real Estate Quarterly Market Survey Comments—continued.

10

Good market but very precarious. Any little thing could make it turnable.

Government based and stagnant. Private sector has contracted. Population and job growth very slow.

Great market however a major gap between new construction vs cost a current inventory 25-40 difference so new

construction are owner user with site preference

Have someone in commercial real estate actually write the questions so they are commercial based and make sense.IE Avg

Sf rental space demanded during your last transaction. Possibly > what was the size in SF of your last lease transaction

I am not on board with so many peoples' blind optimism.

I believe the business market needs to be closely watched.

I have had two commercial contracts fall through, one for financing the other, zoning.

Industrial inventory is the lowest since the recession as existing buildings have been sold or leased. We are expecting

increased prices in good markets/locations due to limited supply and increased demand.

INDUSTRIAL SMALL ERNTALS ARE FILLING UP AND TENANTS ARE KEEPING THEIR RENT CURRENT.

It appears to be leveling out such that supply and demand will create stability

It is getting better

Its dog eat dog out there.

Lack of construction for the last 6 years has inventory at a very low level

Land sales for new housing improving local businesses are beginning to expand investment property conventional

financing is still a problem

Last Year was my best year in commercial real estate. This year looks very strong.

Leasing in Downtown Topeka is tough, too many tenants go to West and the lack of parking makes it difficult. We deal wi

the State and if we don't cut rates we sit vacant. Tough to get a return on your investment, hope there are no new buildin

in the works as it will kill those who have already invested in building and who are continually investing millions in the up

keep of their buildings. You need deep pockets to be in this business in Topeka as the competition will kill you.

Less distressed properties than 1-3 years ago.

Local economic development offices compete with industrial land owners reducing marketability of private property.


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11

Local economy is down dealing with the job market that hurts us in this area

Local young start-ups with great ideas and products need assistance in slow market. Property Owners overvalue their

holdings and are extremely greedy making it impossible to have a respectable ROI for new young entrepreneurs, or even

seasoned professionals. While the demand is there from young entrepreneurs, the economy has not firmed up and

protracted vacancies remain because owners continue to overvalue lease rates or purchase price.

Main Issue Financing

Many times too much emphasis is placed upon a CAP rate and since this rate has so many moving parts in calculating, it is

becoming irrelevant. There needs to be an attempt to create a more workable comparison system.

Market across the property types continues to strengthen. Concern over overbuilding in multi-family as many projects will

come on stream in Spring. Office is undervalued and demand is strong. Expect rental rate increases of 5% year end.

Concessions are gone from desirable locations.

Market is picking up and may continue to get better thru 2014.

Market is pretty level as has been for sometime now, some improvement seems to be happening. Mostly pent-up demand

due to unstable national economy.

Market is stabilizing. Energy is absorbing industrial inventory and creating jobs. Jobs are helping to stabilize the residentia

market and have a positive effect through all commercial sectors.

More demand from buyers this year than all of last year

More potential purchasers than one year ago.

Most development transactions from 2nd-4th Quarter 2013 will close by end of 2014.

Most of our market is about the same as last year but down in vacancy rates in most of the commercial areas as much of t

inventory is being worked to get out the door. Some properties have been available for more then 8 - 10 months. Still somconcern as to local economy and state spending.

Need Jobs!

Not fully recovered. Most buyers are investors who looking for bargain.

Office still very high vacancy


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12

Office space in oversupply. More and more employees work from home or a remote location. many medical professionals

are on hold and some are becoming members of large health care conglomerates. Education is strong and manufacturing

making a comeback with numerous local manufacturers expanding. Upscale apartments still in short supply. Residential

single-family development starting to pick up. Lots are scarce and land/development costs have risen.

Offices Class A > low demand. Offices Class B- > lots of interest

Our Commercial RE market is saddled with a weak local economy, the highest unemployment in the nation, and the least

business-friendly economic climate (high taxes, lots of regulation and fees) thanks to our politicians.

Our market continues to move ahead of the national economy. Mostly riding the tide of increased investment in the

extractive minerals industries. 2013 was a record year for my commercial team of myself and 4 associates. Our total

volume of sales and lease activity was $56 Million. Up from $41M and $43M in 2012 and 2011, respectively. My

commercial team dominates the market activity statewide. We've been the #1 commercial company by volume for the las

6 years, according to the Wyoming Business Report.

Our market is beginning to warm up, tenants are becoming more optimistic about the market and offering longer term

leases closer to asking rents.

Overall market in 2013 was better than 2012

People cannot seem to get financing. Homes are basically priced too high to sell.

Please include Farms and Ranches. Land is a commercial real estate activity.

Prices have been increasing as values have increased. Rents are also increasing across the board. I do mostly appraisal

assignments.

Progressing but with challenges remaining.

Rates are getting stronger, however action is slowing

Republicans blocked the President's Roads and Bridges Bill which slowed our economic recovery and puts us at high risk of

loss of commerce through road and bridge failure. We need to support and grow our middle class through rebuilding our

infrastructure and blocking business from moving jobs and money offshore.

Residential has come more rapidly we are anticipating commercial to improve through the year

Retail strip centers and large multi's are strong in the market.

Rural market are still falling, no recovery seen in rural America yet.


FEBRUARY 2014




13

Sale prices rebounding. Serious sellers are dropping prices and making deals; non-serious sellers are getting out of the

market. Access to financing is improving substantially, but still a lot of unqualified buyers and tenants out looking. Owner

getting more desperate to lease space. Zoning restrictions remain an unexpected challenge for a lot of deals.

Secondary resort driven market is greatly affected by lack of conventional small business capital available, workforce

staffing challenges

Sellers want higher list prices and lease rates while buyers and prospective tenants have the notion that they can get a gre

deal at this time.

Shortage of good properties for purchase.

Should have higher inventory this year, financing will still be a problem

Shrinking inventory. Pricing on the upswing. Lack of motivated sellers to correctly price for a sale.

Small business remains scared of government action (Obama Care) and inaction (shutdowns & budget deficits)

Small lift in market last year seems to have vanished. Consumer confidence in the market is the same as start of last year

Small town market adversely effected by aircraft industry layoffs in Wichita. Downtown retail losing businesses, not beingreplaced, growth of service businesses in former retail store fronts. Restaurant activity declining as well. More businesses

going out than coming in. City ventured into industrial park venture at wrong time, can't secure solid leads or get initial

investors to follow through. High property taxes cripple the state overall.

Stable with a hint of a small uptick plausible.

Staten Island NY is going to change with the impending "Wheel" and "Retail" development

Strong Listing Market

Stronger sales and leasing compared to a year ago

Texas market is good and getting better

The feeling is that the market is tentative. Confidence continues to be low.

The last quarter of 2013 showed a drop in confidence compared to the first quarters in 2013 in my practice. I primarily wo

with vacant lands and the availability of existing vacant buildings has decreased the demand for land.

The local investor is moving based on a regional development evaluation and using in-house market analysis. Meaning the

global market in not a motivation nor a limitation due to on hand liquidity.


FEBRUARY 2014




14

The market appeared strong in Q4 2013 but slowed a bit beginning Q1 2014. As of 1/28/2014 activity is strong but not ba

to Q4 2013.

The market place is experiencing growing pains - the void in new construction/redevelopment is being felt as users are

attempting to find quality expansion space for their companies staff/need in this refreshed economic period. The general

attitude is one of desire, vs demand.

There are a few hot spots and vacant building are lots next to the hot spots. Everything else will be +/-5 to 7 year holds an

many may not sale for 10-20 years

There is a lot of commercial space for sale and for lease, but its mostly very small or very large, not much in medium sizes.

There is a real lack of commercial activity in the market.

There was a lull in market activity from early Oct. to late Jan. - Political unease???

Trends are towards coming back in warehouse & manufacturing

Vacancy in large facilities remains high. The area is dealing with a number of properties that will only accommodate big

operations. However owners are trying to subdivide spaces to accommodate multiple tenants. Thank you.

We are a tertiary market in the far east Bay Area. We have not yet seen the return of tenants, or owner users that signify a

stable market environment.

We are at a critical stage in our economy, both local and national. Florida and Tampa Bay have relatively low

unemployment rates, but that is somewhat distorted by those not currently counted who are no longer looking for work. W

need more industry and manufacturing jobs to sustain long term growth, rather than just tourist and servie jobs. More Job

= Growth = Increasing Property Values

We are in a great housing land development area, multifamily and single family homes, retail is hot.

We are in a tertiary market and commercial market remains fairly stagnant seemingly due to the Seller / Buyer price gapand lack of available capital.

When interest rates increase, prices will decrease and so will demand unless the economy gets better. Small business is

getting killed by taxation and federal government health care requirements.

Wilmington continues to lose jobs. Housing is mostly retirees. No true market fundamentals. Multifamily over built

Within the last 6 months inquires for commercial have increased we have a lack of newer desirable facilities in our area.


FEBRUARY 2014



NATIONAL ASSOCIATION OF REALTORS ® RESEARCH DIVISION

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 Outlook

• Commercial Real Estate Lending Survey

• Commercial Member Profile

• CCIM Quarterly Market Trends

• Expectations & Market Realities in Real Estate 2014 (Deloitte, RERC, NAR)

If you have questions or comments regarding this report or any other commercial real

estate research, contact George Ratiu, Director, Quantitative & Commercial Research, at

[email protected].

To find out about other CRE research products:

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commercial real estate market survey 2014-03-05

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