Commercial Property News - October 2008 - (Page 12)

MARKET INTELLIGENCE DATA/ANALYSIS Visit www.cpnonline.com/datacenter for additional market data. EYE ON INVESTMENT 50 40 30 Basis-Point Change (national cap-rate performance) Office Standstill The overall commercial market continued to struggle in July, as year-to-date sales volume came in a hefty 70 percent lower than 2007’s tally. July’s office sales, specifically, plummeted 80 percent year-over-year to $3.6 billion as $2.1 billion worth of suburban assets and $1.5 billion in central business district assets sold. Identifying trends by using scarce summer data in a down cycle can be risky, but signs indicate that transaction activity will swing upward, including an increase in signed contracts and a slowdown in month-to-month sales declines. *based on properties and portfolios of $5 million and greater Source: Real Capital Analytics Inc. www.rcanalytics.com • 866-732-5328 3-Month Change 12-Month Change 20 10 0 -10 -20 Apartment Apartment Office CBD Garden Mid-/High-Rise Office Suburban Retail Warehouse Q2 2008 6.7% Cap Rates 6.2% 6.2% 6.9% 6.9% 7.5% (national office data as of Q2 2008*) Absorption (000s SF) 2007 National 88,851 East 27,260 Midwest 16,262 South 22,196 West 23,133 Vacancy 2007 National 14.8% East 13.4% Midwest 17.3% South 16.5% West 13.5% 2008 F (8,478) (5,559) (641) 4,130 (6,409) 2008 F 16.5% 15.0% 18.3% 18.3% 15.4% 2009 F 47,298 15,185 5,722 10,961 15,429 2009 F 16.8% 15.3% 18.6% 18.9% 15.7% 2010 F 118,533 35,825 15,868 29,686 37,154 2010 F 15.9% 14.4% 17.8% 18.2% 14.4% LEASING OUTLOOK Demand Downturn Midyear data on national office fundamentals points to a dour 2008, thanks to a combination of declining employment, extremely low absorption, higher vacancies and slower rentalrate growth. By year-end, demand is likely to be in the red and absorption is expected to post a loss of roughly 8.5 million square feet. Absorption should improve in 2009 and 2010, given the severely constrained supply pipeline and improving economic conditions, but look for vacancy rates to remain elevated until demand surpasses 2007 levels again. Office markets in the South and West, currently facing the most dramatic occupancy changes, will show stronger recovery in the latter years of the forecast than will the less volatile regions. *monthly chart cycles among office, multi-family and industrial Source: PPR • www.ppr.info • 617-426-4446 DIRECTIONS Steep Declines IN DEVELOPMENT 120 (change in U.S. construction starts) U.S. commercial real estate construction starts declined by 100 double digits in the second quarter of 2008 across major property types. Warehouse and apartment starts pulled back 80 more than 50 percent from the same period a year ago. Ongoing liquidity challenges prevent developers from obtaining 60 financing, while economic uncertainty is curbing prospective tenants’ willingness to commit to new projects. The decline 40 in starts has an upside, though, as the lack of new supply is expected to keep commercial real estate’s down cycle relative20 ly mild. Moreover, if the financing strain lasts longer than expected, the recovery in fundamentals, currently expected 0 to begin in 2010, could be much stronger than forecast. Source: PPR/Reed Construction Data www.ppr.info • 617-426-4446 3 Months Ending Jun-07 3 Months Ending Jun-08 Apartment (000s of Units) Change -52.1% Office (MSF) -20.3% Retail (MSF) -40.2% Industrial (MSF) -66.6% Hotel (MSF) -30.6% 12 Commercial Property News • October 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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CPN - October 2008 Contents Starting Line Industrial Data/Analysis Conferences Chicago Market Profile Finance International Title Insurance Brokerage Corporate Report

Commercial Property News - October 2008

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