CPN - September 2008 - (Page 10) MARKET INTELLIGENCE DATA/ANALYSIS Visit www.cpnonline.com/datacenter for additional market data. EYE ON INVESTMENT (percentage of $ value in property & portfolio sales*, 12 months ending Q2 2008) Office Slump Commercial real estate sales remained soft during the second quarter. While office topped all sectors with $30.4 billion in first-half sales, it posted the steepest year-over-year decline: 67 percent. Macklowe Properties’ $2.8 billion sale of the General Motors Building provided a jolt, but big-ticket transactions were the anomalies. While cap rates are up significantly for all property types, interest in higher-quality CBD office assets may be understating the true cap-rate rise in this sector. Meanwhile, apartments experienced the lowest, albeit still hefty, year-over-year decline, at 45 percent. The availability of debt from the likes of Fannie Mae and Freddie Mac has helped, but fiscal concerns surrounding the government-sponsored enterprises have not yet manifested themselves in statistical trends. *based on properties and portfolios of $5 million and greater Source: Real Capital Analytics Inc. • www.rcanalytics.com • 866-732-5328 CBD Office 18% 17% 24% 13% 4% 16% 8% Suburban Office Industrial Flex Retail Apartment Hotel (national multi-family data as of Q2 2008*) Absorption (Units) National East Midwest South West Vacancy National East Midwest South West 2007 83,434 27,837 10,619 25,585 19,393 2007 5.9% 5.4% 6.0% 7.9% 5.0% 2008 F 20,067 7,232 (1,140) 16,751 (2,775) 2008 F 6.8% 5.9% 6.5% 9.5% 5.8% 2009 F 100,457 20,147 10,513 42,435 27,362 2009 F 6.9% 6.1% 6.3% 9.7% 5.8% 2010 F 165,857 32,092 15,994 69,384 48,387 2010 F 6.2% 5.8% 5.8% 8.5% 5.1% LEASING OUTLOOK Fundamental Pressure National apartment fundamentals failed to display any demonstrable signs of improvement in the second quarter of 2008, as vacancies slipped another 10 basis points to 6.2 percent. However, even at the current level, vacancies are a far cry from the cyclical high of 7.4 percent reached in late 2003. This year, almost 141,000 units are expected to deliver across the 54 largest U.S. metropolitan areas tracked by PPR, and fundamentals will remain under pressure as a challenging economic backdrop hinders demand. Look for vacancies to approach the high-6 percent range by year-end before finding some stability in 2009. The supply pipeline, while a hindrance in the near term, will ease considerably by 2010 as a rebound in demand ensues, driving a recovery in fundamentals. *monthly chart cycles among office, multi-family and industrial Source: PPR • www.ppr.info • 617-426-4446 DIRECTIONS IN DEVELOPMENT 140 (change in U.S. construction starts, three-month totals) Cranes Under Control The United States is seeing declines in commercial con120 struction starts across all major property types as the ongoing credit crunch curtails developers’ ability to obtain financ- 100 ing and economic uncertainty curbs prospective tenants’ 80 willingness to commit to new projects. The falloff in starts is a major reason why PPR predicts that this down cycle 60 will be relatively mild. And if developers are unable to obtain profitable financing for an even longer period than 40 currently anticipated, further limiting new supply, the recov20 ery in fundamentals that is expected to begin in 2010 could prove even stronger than what is currently predicted. 0 Source: PPR/Reed Construction Data www.ppr.info • 617-426-4446 Period Ending May-07 Period Ending May-08 Apartment (000s of Units) Change -46.2% Office (MSF) -22.4% Retail (MSF) -46.6% Industrial (MSF) -75% Hotel (MSF) -6.3% 10 Commercial Property News • September 2008 • www.cpnonline.com http://www.cpnonline.com/datacenter http://www.rcanalytics.com http://www.ppr.info http://www.ppr.info http://www.cpnonline.com
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