Download - MULTIFAMILY MARKET OVERVIEW | JULY 2012
| 1C U S H M A N & W A K E F I E L D
M U L T I F A M I L Y M A R K E T O V E R V I E W | J U L Y 2 0 1 2
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U S M U L T I F A M I L Y M A R K E T O V E R V I E W | 3C U S H M A N & W A K E F I E L D
1
Housing Trends
Source: PPR, Cushman & Wakefield Capital Markets Group
Multi-Family Permits*
PPR 54
Single-Family Permits*
YTDPrevious Year
5-YearAnnual Avg
10-YearAnnual Avg
*As of May 2, 2012
Home Price Index (Base Year=1993)
YTD
YTD YTDPrevious Year
5-YearAnnual Avg
10-YearAnnual Avg
Multifamily construction is on the rise. With yields on existing inventory in core markets tighter than ever, investors are turning to new construction for investment.
Single-family permits fell slightly in March, but they were 27% above their YOY level, the strongest year-over-year comparison since in the early spring 2010. April permits increased 1.9% month-over-month.
Home price index has begun to tick up slowly as median home prices increased YOY.
HOUSING TRENDS
•Multifamily construction is on the rise. With yields on existing inventory in core markets tighter than ever, investors are turning to new construction for investment.
• Single-family permits fell slightly in March, but they were 27% above their YOY level, the strongest year-over-year comparison since in the early spring 2010. April permits increased 1.9% month-over-month.
•Home price index has begun to tick up slowly as median home prices increased YOY.
Source: PPR, Cushman & Wakefield Capital Markets Group
U S M U L T I F A M I L Y M A R K E T O V E R V I E W | 4C U S H M A N & W A K E F I E L D
2Inventories Have Peaked
Number of Vacant homes for sale, ths.
Source: Moody’s Economy.com, Cushman & Wakefield Capital Markets Group
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
The number of vacant homes for sale peaked in 2008. As of the first quarter of 2012, this number has dropped below 2006 year-end levels.
The last five quarters have seen steady drops in the number of vacant homes for sale as most of the distressed properties have worked their way through the system.
As these distressed vacant homes exit the inventory, median home prices have begun to rise.
INVENTORIES HAVE PEAKED
•The number of vacant homes for sale peaked in 2008. As of the first quarter of 2012, this number has dropped below 2006 year-end levels.
•The last five quarters have seen steady drops in the number of vacant homes for sale as most of the distressed properties have worked their way through the system.
•As these distressed vacant homes exit the inventory, median home prices have begun to rise.
Source: Moody’s Economy.com, Cushman & Wakefield Capital Markets Group
U S M U L T I F A M I L Y M A R K E T O V E R V I E W | 5C U S H M A N & W A K E F I E L D
3Housing Is More Affordable
Source: Moody’s Economy.com, Cushman & Wakefield Capital Markets Group
80
100
120
140
160
180
200
220
198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012
Com
posi
te H
ousi
ng A
fford
abili
ty In
dex,
(In
dex,
SA)
Housing is at its most affordable as interest rates are still low and job and income growth continues.
However, tighter underwriting guidelines and uncertain home values make purchasing homes challenging to most prospective home buyers.
HOUSING IS MORE AFFORDABLE
•Housing is at its most affordable as interest rates are still low and job and income growth continues.
•However, tighter underwriting guidelines and uncertain home values make purchasing homes challenging to most prospective home buyers.
Source: Moody’s Economy.com, Cushman & Wakefield Capital Markets Group
U S M U L T I F A M I L Y M A R K E T O V E R V I E W | 6C U S H M A N & W A K E F I E L D
4Household Formation Rate and Change in Population Age 20-34
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,00019
8819
8919
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
0820
0920
1020
1120
1220
1320
1420
15
Year
ove
r Yea
r Cha
nge
(000
s)
Change in Population Age 20-34Household Formations
Fore
cast
Source: Moody’s Economy.com, Cushman & Wakefield Capital Markets Group
1988 – 2015
As the number of 20-34 year old’s(prime renter cohort) has increased in the last few years, demand for rental housing has been robust.
In addition to the increase in prime renter cohort, households that were foreclosed on have turned to renting.
HOUSEHOLD FORMATION RATE & CHANGE IN POPULATION AGE 20-341988-2015
•As the number of 20-34 year old’s(prime renter cohort) has increased in the last few years, demand for rental housing has been robust.
• In addition to the increase in prime renter cohort, households that were foreclosed on have turned to renting.
Source: Moody’s Economy.com, Cushman & Wakefield Capital Markets Group
U S M U L T I F A M I L Y M A R K E T O V E R V I E W | 7C U S H M A N & W A K E F I E L D
5US Share of Investment in Apartment
Foreign10%
Equity Fund12%
Institutional13%
Private11%
Public33%
User/Other21%
[Dollar volume change from prior year]
[+108%]
[+96%]
[+372%]
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
[+20%]
[-37%]
PROPERTY BY CAPITAL SOURCE 2012Q1
Closed deals $5M+, including partial interest and entity level sales.
Public buyers were the most active buyers at 33% of total apartment investors in the first quarter of 2012.
Top buyers included:– UDR Inc. in JV with MetLife
purchased a portfolio of Manhattan properties in New York’s Upper West Side for $630M from the JV of Chetrit Group and Stellar Management.
[+151%]
US SHARE OF INVESTMENT IN APARTMENT PROPERTY BY CAPITAL SOURCE 2012Q1
• Public buyers were the most active buyers at 33% of total apartment investors in the first quarter of 2012.
•Top buyers included: UDR Inc. in JV with MetLife purchased a portfolio of Manhattan properties in New York’s Upper West Side for $630M from the JV of ChetritGroup and Stellar Management.
Closed deals $5M+, including partial interest and entity level sales.
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
U S M U L T I F A M I L Y M A R K E T O V E R V I E W | 8C U S H M A N & W A K E F I E L D
0Top Apartment Investment Markets
$0 $3 $6 $9 $12
NYC Boroughs
Chicago
Seattle
DC VA burbs
Houston
Phoenix
Atlanta
Dallas
Los Angeles
Manhattan
Sales Volume (Billions)
2012Q1 2011 2010 2009 2008 2007 2006 2005
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
BY SALES VOLUME 2005 – 2012Q1
Closed deals $5M+, including partial interest and entity level sales.
Apartment sales volume totaled $10.8B in the first quarter of 2012, 31% higher YOY.
The top ten apartment investment sales markets accounted for 50% of total sales transactions in the first quarter of 2012.
Manhattan deal volume for the first quarter is almost half of it’s total year 2011 volume. Manhattan rents have risen to all time highs.
TOP APARTMENT INVESTMENT MARKETSBY SALES VOLUME 2005-2012Q1
•Apartment sales volume totaled $10.8B in the first quarter of 2012, 31% higher YOY.
•The top ten apartment investment sales markets accounted for 50% of total sales transactions in the first quarter of 2012.
•Manhattan deal volume for the first quarter is almost half of it’s total year 2011 volume. Manhattan rents have risen to all time highs.
Closed deals $5M+, including partial interest and entity level sales.Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
U S M U L T I F A M I L Y M A R K E T O V E R V I E W | 9C U S H M A N & W A K E F I E L D
1Top Apartment Investment Markets
0% 2% 4% 6% 8% 10% 12%
NYC Boroughs
Chicago
Seattle
DC VA burbs
Houston
Phoenix
Atlanta
Dallas
Los Angeles
Manhattan
Weighted Average Capitalization Rate
2012Q1 2011 2010 2009 2008 2007 2006 2005
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
AVERAGE CAPITALIZATION RATE, 2005 – 2012Q1
Closed deals $5M+, not including partial interest sales.
Apartment cap rates edged up slightly by 10bp to 5.9%, however, this is more of a moderation of the cap rates.
Cap rates in the prime markets of Manhattan and Los Angeles continued to tighten. This has given rise to renewed interest in construction, which is restrained in these markets due to the lack of buildable sites.
TOP APARTMENT INVESTMENT MARKETSAVERAGE CAPITALIZATION RATE, 2005-2012Q1
•Apartment cap rates edged up slightly by 10bp to 5.9%, however, this is more of a moderation of the cap rates.
•Cap rates in the prime markets of Manhattan and Los Angeles continued to tighten. This has given rise to renewed interest in construction, which is restrained in these markets due to the lack of buildable sites.
Closed deals $5M+, not including partial interest sales.
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
U S M U L T I F A M I L Y M A R K E T O V E R V I E W | 1 0C U S H M A N & W A K E F I E L D
2Top Apartment Investment Markets
$0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550
NYC Boroughs
Chicago
Seattle
DC VA burbs
Houston
Phoenix
Atlanta
Dallas
Los Angeles
Manhattan
Average Sales Price per Unit (000s)
2012Q1 2011 2010 2009 2008 2007 2006 2005
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
AVERAGE SALES PRICE PER UNIT, 2005 – 2012Q1
Closed deals $5M+, including partial interest and entity level sales.
Apartments continue to be most expensive to purchase in Manhattan where 13 properties traded for $500,000+ per unit in the first quarter of 2012. However, the vacancy rate is below 2% and the rents are the highest nation.
TOP APARTMENT INVESTMENT MARKETSAVERAGE SALES PRICE PER UNIT, 2005-2012Q1
•Apartments continue to be most expensive to purchase in Manhattan where 13 properties traded for $500,000+ per unit in the first quarter of 2012. However, the vacancy rate is below 2% and the rents are the highest nation.
Closed deals $5M+, including partial interest and entity level sales.
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
U S M U L T I F A M I L Y M A R K E T O V E R V I E W | 1 1C U S H M A N & W A K E F I E L D
9
Source: Reis, Cushman & Wakefield Capital Markets Group
$500
$1,000
$1,500
$2,000
$2,500
$3,000
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Q1
Mon
thly
Effe
ctiv
e R
ent
New York City Los Angeles Atlanta PhoenixDallas DC VA burbs Houston Seattle
APARTMENT RENTAL RATES AS OF END OF PERIOD, 1997 – 2012Q1Top Apartment Investment Markets
Apartment rents continue to climb throughout the nation. Effective rents increased 0.6% QOQ in the first quarter of 2012. YOY rents increased 2.7%.
New York City rents grew the most YOY at 3.3%, followed by Dallas and Seattle at 3.1% each.
TOP APARTMENT INVESTMENT MARKETSAPARTMENT RENTAL RATES AS OF END OF PERIOD, 1997-2012Q1
•Apartment rents continue to climb throughout the nation. Effective rents increased 0.6% QOQ in the first quarter of 2012. YOY rents increased 2.7%.
•New York City rents grew the most YOY at 3.3%, followed by Dallas and Seattle at 3.1% each.
Source: Reis, Cushman & Wakefield Capital Markets Group
U S M U L T I F A M I L Y M A R K E T O V E R V I E W | 1 2C U S H M A N & W A K E F I E L D
10
Source: Reis, Cushman & Wakefield Capital Markets Group
0%
2%
4%
6%
8%
10%
12%
14%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Q1
Vaca
ncy
Rat
e
New York Los Angeles Atlanta PhoenixDallas DC VA Suburbs Houston Seattle
APARTMENT VACANCY RATES AS OF END OF PERIOD, 1997 – 2012Q1Top Apartment Investment Markets
The national apartment vacancy rate dropped 30bp QOQ and 132bp YOY.
New York City vacancy rates are the lowest in the nation at 1.97%. Phoenix had the steepest drop in vacancy from their 2009 high, dropping 580bp to it’s current 6.7% vacancy rate.
TOP APARTMENT INVESTMENT MARKETSAPARTMENT VACANCY RATES AS OF END OF PERIOD, 1997-2012Q1
•The national apartment vacancy rate dropped 30bp QOQ and 132bp YOY.
•New York City vacancy rates are the lowest in the nation at 1.97%. Phoenix had the steepest drop in vacancy from their 2009 high, dropping 580bp to it’s current 6.7% vacancy rate.
Source: Reis, Cushman & Wakefield Capital Markets Group
U S M U L T I F A M I L Y M A R K E T O V E R V I E W | 1 3C U S H M A N & W A K E F I E L D
11
BostonChicagoDallas DC VA Suburbs
Houston
Los AngelesNew York City
Phoenix
Seattle
Atlanta
US
85.0%
87.5%
90.0%
92.5%
95.0%
97.5%
100.0%
$500 $750 $1,000 $1,250 $1,500 $1,750 $2,000 $2,250 $2,500 $2,750 $3,000
Occ
upan
cy R
ate
Overall Asking Rent
Monthly Effective Rent vs. Occupancy Rate
YEAR-OVER-YEAR CHANGE IN ASKING RENT AND VACANCY RATE
TOP US APARTMENT MARKETS
BostonChicago
DallasDC VA Suburbs
Houston
Los Angeles
Phoenix
Seattle
Atlanta
US
85.0%
87.5%
90.0%
92.5%
95.0%
97.5%
100.0%
$500 $750 $1,000 $1,250 $1,500 $1,750
Occ
upan
cy R
ate
Overall Asking Rent
BostonChicagoDallas DC VA Suburbs
Houston
Los Angeles New York City
Phoenix
Seattle
Atlanta
US
85.0%
87.5%
90.0%
92.5%
95.0%
97.5%
100.0%
$500 $750 $1,000 $1,250 $1,500 $1,750 $2,000 $2,250 $2,500 $2,750 $3,000
Occ
upan
cy R
ate
Overall Asking Rent
Boston
ChicagoDallas
DC VA Suburbs
Houston
Los Angeles
Phoenix
Seattle
Atlanta
US
85.0%
87.5%
90.0%
92.5%
95.0%
97.5%
100.0%
$500 $750 $1,000 $1,250 $1,500 $1,750
Occ
upan
cy R
ate
Overall Asking Rent
2011Q12012Q1
2011Q42012Q1
Source: Reis, Cushman & Wakefield Capital Markets Group
QUARTERLY CHANGE IN ASKING RENT AND VACANCY RATE
National occupancy and rental rates experienced significant momentum YOY as the demand for rental properties increased. Core apartment markets of NY, Boston, LA and DC are significantly above national rent and occupancy levels. Secondary markets Phoenix, Houston and Atlanta experienced large movements in occupancy, but are all below national levels.
Although it seems that occupancy is at its maximum levels, QOQ levels increased, although by a small margin. All markets experienced QOQ increases in momentum, although Boston rents slipped 0.4%.
MONTHLY EFFECTIVE RENT VS. OCCUPANCY RATETOP US APARTMENT MARKETS
•National occupancy and rental rates experienced significant momentum YOY as the demand for rental properties increased. Core apartment markets of NY, Boston, LA and DC are significantly above national rent and occupancy levels. Secondary markets Phoenix, Houston and Atlanta experienced large movements in occupancy, but are all below national levels.
•Although it seems that occupancy is at its maximum levels, QOQ levels increased, although by a small margin. All markets experienced QOQ increases in momentum, although Boston rents slipped 0.4%.
Source: Reis, Cushman & Wakefield Capital Markets Group
US IN
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U S I N V E S T M E N T M A R K E T O V E R V I E W | 1 5C U S H M A N & W A K E F I E L D
1
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
Investment Sales Volumes
$64 $78 $100$159
$228 $253 $244
$110$45
$96$148
$30
$17$23
$25
$60
$76$81
$149
$35
$10
$29
$46
$14
$3
$11 $32
$116
$27.6
$9
$0
$100
$200
$300
$400
$500
$600
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Q1
$ B
illio
ns
Individual Asset Sales Portfolio (Non-privatization) Privatizations
Closed deals $5M+, including partial interest and entity level sales. Not including dev sites.
Sales volume for the first quarter 2012 totaled $44.2B, 41% higher YOY.
Portfolio sales comprised 1/3 of total sales volume.
C&W’s outlook forecasts total 2012 sales to increase 25% YOY.
INVESTMENT SALES VOLUMES
• Sales volume for the first quarter 2012 totaled $44.2B, 41% higher YOY.
• Portfolio sales comprised 1/3 of total sales volume.
•C&W’s outlook forecasts total 2012 sales to increase 25% YOY.
Closed deals $5M+, including partial interest and entity level sales. Not including dev sites.
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
U S I N V E S T M E N T M A R K E T O V E R V I E W | 1 6C U S H M A N & W A K E F I E L D
6US Capitalization Rates by Core Property Type
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
7.6%
6.5%
7.2%
5.8%
5.6%
7.4%
6.2%
6.4%
5.9%
5.8%
2% 3% 4% 5% 6% 7% 8% 9%
Industrial
Hotel
Retail
Apartment
Office
Weighted Average Capitalization Rate2012Q1
2011Q4
2011Q3
2011Q2
2011Q1
AVERAGE BY QUARTER, 2011Q1-2012Q1
Closed deals $5M+, does not include partial interest sales.
7.8%
6.8%
7.6%
6.3%
7.0%
7.8%
7.6%
7.3%
6.5%
7.1%
2% 3% 4% 5% 6% 7% 8% 9%
Industrial
Hotel
Retail
Apartment
Office
Un-Weighted Average Capitalization Rate2012Q1
2011Q4
2011Q3
2011Q2
2011Q1
US CAPITALIZATION RATES BY CORE PROPERTY TYPEAVERAGE BY QUARTER, 2011Q1-2012Q1
Closed deals $5M+, does not include partial interest sales.
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
U S I N V E S T M E N T M A R K E T O V E R V I E W | 1 7C U S H M A N & W A K E F I E L D
9
Source: NCREIF, Cushman & Wakefield Capital Markets Group
Strong Equity Capital Flows
Over a 1 and 10-year investment period, real estate outperformed both the bond and stock markets, driving more capital into real estate investments.
-5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
1-year
3-year
5-year
10-year
Annualized Returns
NAREIT Equity REIT Index NCREIF Property Index Barclays Capital Government Bond S&P 500 Index
ALTERNATIVE INVESTMENT RETURNS AS OF 2012Q1STRONG EQUITY CAPITAL FLOWSALTERNATIVE INVESTMENT RETURNS AS OF 2012Q1
Over a 1 and 10-year investment period, real estate outperformed both the bond and stock markets, driving more capital into real estate investments.
Source: NCREIF, Cushman & Wakefield Capital Markets Group
U S I N V E S T M E N T M A R K E T O V E R V I E W | 1 8C U S H M A N & W A K E F I E L D
10Private Equity Annual Returns by Property Type
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Rol
ling
4-qu
arte
r Ret
urn
Apartment Hotel Industrial CBD Office Suburban Office Retail
Source: NCREIF, Cushman & Wakefield Capital Markets Group
1982-2012Q1PRIVATE EQUITY ANNUAL RETURNS BY PROPERTY TYPE1982-2012Q1
Source: NCREIF, Cushman & Wakefield Capital Markets Group
U S I N V E S T M E N T M A R K E T O V E R V I E W | 1 9C U S H M A N & W A K E F I E L D
11Cap Rate Spreads to 10-year Treasuries
Source: NCREIF, Moody’s Economy.com, Cushman & Wakefield Capital Markets Group
1983-2012Q1
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Current Value Cap Rate 10-yr Treasury Yield Spread
CAP RATE SPREADS TO 10-YEAR TREASURIES1983-2012Q1
Source: NCREIF, Moody’s Economy.com, Cushman & Wakefield Capital Markets Group
U S I N V E S T M E N T M A R K E T O V E R V I E W | 2 0C U S H M A N & W A K E F I E L D
2
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
$0
$10
$20
$30
$40
$50
$60
$70
2011Q1 2011Q2 2011Q3 2011Q4 2012Q1
Sale
s Vo
lum
e (in
$bi
llion
s)
Office Apartment Retail Hotel Industrial All Property Types
Quarterly Investment Volume, 2011-2012Q1
Closed deals $5M+, including partial interest and entity level sales. Not including dev sites.
Sales of office properties totaled $13.7B in the first quarter of 2012, a 33% increase over the first quarter 2011.
Apartment sales increased 31% YOY with total sales volume of $10.8B.
Retail sales doubled in the first quarter 2012 from their previous year level to $11.4B.
Sales of industrial properties totaled $4.7B in the first quarter of 2012, 36% increase over the first quarter 2011.
Hotel sales decreased 3% YOY to $3.5B
QUARTERLY INVESTMENT VOLUME, 20112012Q1
• Sales of office properties totaled $13.7B in the first quarter of 2012, a 33% increase over the first quarter 2011.
•Apartment sales increased 31% YOY with total sales volume of $10.8B.
•Retail sales doubled in the first quarter 2012 from their previous year level to $11.4B.
• Sales of industrial properties totaled $4.7B in the first quarter of 2012, 36% increase over the first quarter 2011.
•Hotel sales decreased 3% YOY to $3.5B
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
U S I N V E S T M E N T M A R K E T O V E R V I E W | 2 1C U S H M A N & W A K E F I E L D
3US Annual Sales Volumes by Core Property Type
$30.2
$19.0
$38.1
$49.7
$61.3
$4.7
$3.5
$11.4
$10.8
$13.8
$0 $25 $50 $75 $100 $125 $150 $175 $200 $225
Industrial
Hotel
Retail
Apartment
Office
Dollar Volume (billions)
2012Q1 2011 2010 2009 2008 2007 2006 2005 2004
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
2004-2012Q1, $BILLIONS
Closed deals $5M+, including partial interest and entity level sales..
Sales volume across all property types increased YOY with the exception of hotel.
US ANNUAL SALES VOLUMES BY CORE PROPERTY TYPE2004-2012Q1, $BILLIONS
• Sales volume across all property types increased YOY with the exception of hotel.
Closed deals $5M+, including partial interest and entity level sales..
Source: Real Capital Analytics Inc., Cushman & Wakefield Capital Markets Group
U S I N V E S T M E N T M A R K E T O V E R V I E W | 2 2C U S H M A N & W A K E F I E L D
• Sales volume for the first quarter 2012 totaled $44.2B, up 41% on a year over year basis.•Global geopolitical and economic uncertainty continues making investor cautious despite abundant debt and equity
capital allocated to the sector.• Investors are refocusing on top markets and assets and pursuing select secondary markets and assets with durable
cash flows.•Rent growth is under close scrutiny in all cases. Many markets have rent growth which starts at 0% the first year,
thus deferring previously underwritten rent growth by 12-18 months.• Exit cap rates are experiencing upward pressure.•Major office markets continued to dominate in the first quarter of 2012, with the top six markets (Manhattan,
Boston, Chicago, Washington DC ,San Francisco and Los Angeles) accounting for approximately 51% of total office sales volume.
•Cap rates compressed further for top assets in top markets due to low interest rate levels, but are flattening. There is potential for some cap rate compression in late 2012 in secondary markets where renewed CMBS lending should increase activity.
2ND HALF 2012 OUTLOOK•Continued RE market bifurcation, with prices on core assets in secondary markets firming in the second half of 2012.•An uptick in recapitalizations and distressed asset sales 2012-2014.•Higher risk RE strategies to become more popular year end.
REAL ESTATE MARKET THEMES & TRENDS
US D
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U S D E B T O V E R V I E W | 2 4C U S H M A N & W A K E F I E L D
1
Commercial/Multifamily Mortgage BankersOrigination Index
Source: Mortgage Bankers Association
68
11098
145
100
137 144
188
109
172 172
207
153
215
283
318
205
253 258
328
280
352
247
275
132 130116
5440
60 53 6145
61 70
114
83
126138 129
113
0
50
100
150
200
250
300
350
400
2002
Q1
2002
Q2
2002
Q3
2002
Q4
2003
Q1
2003
Q2
2003
Q3
2003
Q4
2004
Q1
2004
Q2
2004
Q3
2004
Q4
2005
Q1
2005
Q2
2005
Q3
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Q4
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Q1
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Q3
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Q4
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Q1
2007
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Q4
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Q1
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Q2
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Q3
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
2001 quarterly average=100
COMMERCIAL/MULTIFAMILY MORTGAGE BANKERSORIGINATION INDEX
Source: Mortgage Bankers Association
U S D E B T O V E R V I E W | 2 5C U S H M A N & W A K E F I E L D
2
Commercial/Multifamily Mortgage BankersOrigination Forecast
Source: Mortgage Bankers Association
COMMERCIAL/MULTIFAMILY MORTGAGE BANKERSORIGINATION FORECAST
Source: Mortgage Bankers Association
U S D E B T O V E R V I E W | 2 6C U S H M A N & W A K E F I E L D
5Commercial Real Estate Maturities
Source: Trepp
BY INVESTOR TYPE
Commercial Real Estate Maturities Set to Peak in 2013
0
50
100
150
200
250
300
350
400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
$Bill
ions
Banks CMBS Life Cos Other
COMMERCIAL REAL ESTATE MATURITIESBY INVESTOR TYPE
Commercial Real Estate Maturities Set to Peak in 2013
Source: Trepp
BRETT POLACHEKDirectorMultifamily Advisory Group | Capital MarketsCushman & Wakefield of Arizona, Inc.2555 East Camelback RoadSuite 300Phoenix, Arizona [email protected] (602) 229-5989
JIM CREWSSenior DirectorMultifamily Advisory Group | Capital MarketsCushman & Wakefield of Arizona, Inc.2555 East Camelback RoadSuite 300Phoenix, Arizona [email protected] (602) 229-5992
TARA LEWISAssociateMultifamily Advisory Group | Capital MarketsCushman & Wakefield of Arizona, Inc.2555 East Camelback RoadSuite 300Phoenix, Arizona [email protected] (602) 229-5921