Download - 2015 NAR Commercial Report
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THE COMMERCIAL OUTLOOK
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Commercial Real Estate DemandA Function of Jobs and Growth
• Commercial Sales Drivers: Jobs and GDP. – Expanding After Some Difficult Years. – Sales and Prices Increasing – Capital Increasingly Available.
• Foreign Interest in U.S. Properties Continues.
• New Construction—Slow Recovery. • Rents Increasing.
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SIOR Member Survey on Activity
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Commercial Real EstateNew Construction--Recovering
Total Construc-on Put in Place Millions of Dollars, Monthly
0
200000
400000
600000
800000
2002 -‐ Jan2004 -‐ Jan2006 -‐ Jan2008 -‐ Jan2010 -‐ Jan2012 -‐ Jan2014 -‐ Jan
Commercial Real Estate Price Index, 1987 = 100 Source: Federal Reserve Board
0
65
130
195
260
2000 -‐ Q1
2000 -‐ Q4
2001 -‐ Q3
2002 -‐ Q2
2003 -‐ Q1
2003 -‐ Q4
2004 -‐ Q3
2005 -‐ Q2
2006 -‐ Q1
2006 -‐ Q4
2007 -‐ Q3
2008 -‐ Q2
2009 -‐ Q1
2009 -‐ Q4
2010 -‐ Q3
2011 -‐ Q2
2012 -‐ Q1
2012 -‐ Q4
2013 -‐ Q3
2014 -‐ Q2
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Commercial Sector Forecast
Commercial Sales —Follows Residential, May Lag
Commercial Sales in Billions Actual and Projected
Source: Urban Land Ins-tute
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
430420
400
355
299
233
147
67
174
571
423
362
212
130
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Commercial Real Estate SalesSales Volume Recovering
Quarterly Commercial Sales
$ -‐ 0
$ 40,000,000,000
$ 80,000,000,000
$ 120,000,000,000
$ 160,000,000,000
'01
01Q3
'02
02Q3
'03
03Q3
'04
04Q3
'05
05Q3
'06
06Q3
'07
07Q3
'08
08Q3
'09
09Q3
'10
10Q3
'11
11Q3
'12
12Q3
'13
13Q3
Offices Industrial Retail Apartments Hotel
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Commercial Real Estate Forecast
OFFICE2014 2015 2016
Vacancy Rate 16.2% 15.7% 15.6%
Net Absorption ('000 sq. ft.) 35,586 48,841 55,026
Completions ('000 sq. ft.) 27,073 42,154 44,460
Rent Growth 2.6% 3.3% 3.6%
INDUSTRIAL2014 2015 2016
Vacancy Rate 8.9% 8.5% 8.1%
Net Absorption ('000 sq. ft.) 110,652 102,463 105,780
Completions ('000 sq. ft.) 81,009 71,349 62,097
Rent Growth 2.4% 2.9% 3.1%
RETAIL2014 2015 2016
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REALTORS® Report Commercial Sales IncreasePercen
t Change, year-‐o
ver-‐y
ear
-‐40%
-‐30%
-‐20%
-‐10%
0%
10%
20%
2008.Q4
2009.Q1
2009.Q2
2009.Q3
2009.Q4
2010.Q1
2010.Q2
2010.Q3
2010.Q4
2011.Q1
2011.Q2
2011.Q3
2011.Q4
2012.Q1
2012.Q2
2012.Q3
2012.Q4
2013.Q1
2013.Q2
2013.Q3
2013.Q4
2014.Q1
2014.Q2
2014.Q3
Sales Volume Sales Prices
Source: NaYonal AssociaYon of Realtors®
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New Construction and Leasing Favorable% Change, Quarter-‐over-‐q
uarter
-‐30%
-‐23%
-‐15%
-‐8%
0%
8%
2009.Q2
2009.Q3
2009.Q4
2010.Q1
2010.Q2
2010.Q3
2010.Q4
2011.Q1
2011.Q2
2011.Q3
2011.Q4
2012.Q1
2012.Q2
2012.Q3
2012.Q4
2013.Q1
2013.Q2
2013.Q3
2013.Q4
2014.Q1
2014.Q2
2014.Q3
New ConstrucYon Leasing Volume
Source: NaYonal AssociaYon of Realtors®
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Trends in Leasing Volumes, Rates, Concessions
REALTOR® Commercial Leasing Trends
Percen
t Change, Quarterly
-‐14%
-‐11%
-‐7%
-‐4%
0%
4%
7%
11%
14%
2008.Q4
2009.Q1
2009.Q2
2009.Q3
2009.Q4
2010.Q1
2010.Q2
2010.Q3
2010.Q4
2011.Q1
2011.Q2
2011.Q3
2011.Q4
2012.Q1
2012.Q2
2012.Q3
2012.Q4
2013.Q1
2013.Q2
2013.Q3
2013.Q4
2014.Q1
2014.Q2
2014.Q3
Leasing Volume Leasing Rates Lease Concessions
Source: NaYonal AssociaYon of Realtors®
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Commercial Vacancy Rates Reported Down
REALTORS® Commercial Vacancy Rates
0.0%
7.5%
15.0%
22.5%
30.0%
2010.Q1 2010.Q2 2010.Q3 2010.Q4 2011.Q1 2011.Q2 2011.Q3 2011.Q4 2012.Q1 2012.Q2 2012.Q3 2012.Q4 2013.Q1 2013.Q2 2013.Q3 2013.Q4 2014.Q1 2014.Q2 2014.Q3
Office Industrial Retail MulYfamily Hotel
Source: NaYonal AssociaYon of Realtors®
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Capitalization Rates as Reported by REALTORS®
REALTORS® Commercial Capitaliza-on Rates
5.0%
6.5%
8.0%
9.5%
11.0%
2010.Q1 2010.Q2 2010.Q3 2010.Q4 2011.Q1 2011.Q2 2011.Q3 2011.Q4 2012.Q1 2012.Q2 2012.Q3 2012.Q4 2013.Q1 2013.Q2 2013.Q3 2013.Q4 2014.Q1 2014.Q2 2014.Q3
Office Industrial Retail MulYfamily Hotel
Source: NaYonal AssociaYon of Realtors®
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REALTORS® Reported Improved Credit Conditions
Change in Lending Condi-ons over Past Year
0%
25%
50%
75%
100%
2011 2012 2013 2014
Tightened SignificantlyTightened SomewhatNot ChangedEased SomewhatEased Significantly
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Providing the Financing
Providing The Financing for Commercial Real Estate 2012-‐2014
Other 14%
Private Investors 14%
SBA 11%
Regional Banks 19%
NaYonal Banks 8%
Local Financial InsYtuYons 34%
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Apartment Vacancy Rates—Low Relative to Experience
Apartments: Average Vacancy Rates Source: Urban Land Ins-tute
Avg Vacancy Rates, 2003-‐13 Avg Vacancy Rates, Past 19 Years Vacancy Rate 2013 Forecasted Vacancy Rates, 2014-‐16
5.2
4.9
5.3
5.7
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Rental Rate Changes
Apartments: Rental Rate Changes Source: Urban Land Ins-tute
RR Change 2003-‐13 RR Change Past 18 Yrs RR Change 2013 Forecasted RR Change 2014-‐16
2.4
2.2
2.7
2.1
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Apartment Fundamentals
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Apartment Rents
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Industrial Space Tends to be Warehouses, Flex Space
Industrial: Average Vacancy Rates Source: Urban Land Ins-tute
Avg Vacancy Rates, 2003-‐13 Avg Vacancy Rates, Past 20 years Vacancy Rate, 2013 Forecasted Vacancy Rates, 2014-‐16
10.4
11.3
10.3
11.9
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Rental Rate Changes Upswing as Economy Expands
Industrial: Rental Rate Changes Source: Urban Land Ins-tute
RR Change 2003-‐13 RR Change, Past 20 Yrs RR Change 2013 Forecasted RR Change 2014-‐16
3.53.6
1.3
-‐0.4
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Industrial Fundamentals
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Industrial Fundamentals
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Commercial Office Buildings Vacancies Projected to Decline
Offices: Average Vacancy Rates Source: Urban Land Ins-tute
Avg Vacancy Rates, 2003-‐13 Avg Vacancy Rate, Pst 20 Years Vacancy Rate, 2013 Forecasted Vacancy Rates, 2014-‐16
13.7
14.9
14.1
14.9
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Commercial OfficesProjected Rental Rate Changes
Offices: Rental Rate Changes Source: Urban Land Ins-tute
RR Change 2003-‐13 RR change, Past 20 Years RR Change 2013 Forecasted RR Change 2014-‐16
3.5
2.52.4
1.0
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Commercial OfficesProjected Rental Rate Changes
Offices: Rental Rate Changes Source: Urban Land Ins-tute
RR Change 2003-‐13 RR change, Past 20 Years RR Change 2013 Forecasted RR Change 2014-‐16
3.5
2.52.4
1.0
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Commercial Office Fundamentals
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Commercial Office Rents
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Retail: Vacancy Rates
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Retail: Rental Rate Changes
Retail: Rental Rate Changes Source: Urban Land Ins-tute
RR Change 2003-‐13 RR Change, Past 20 Years RR Change 2013 Forecasted RR Change 2014-‐16
2.5
-‐0.2
1.5
0.1
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Retail: Vacancy Rates
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Retail: Rental Rate Changes
Retail: Rental Rate Changes Source: Urban Land Ins-tute
RR Change 2003-‐13 RR Change, Past 20 Years RR Change 2013 Forecasted RR Change 2014-‐16
2.5
-‐0.2
1.5
0.1
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Retail Fundamentals
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Retail Rents
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CONCLUSIONS
• Expanding Economy • Expanding Commercial Sales. • Significant Uncertainties • Overall Trends: Positive