CPN - March 2009 - (Page 10) MARKET INTELLIGENCE DATA/ANALYSIS Visit www.cpnonline.com/datacenter for additional market data. EYE ON INVESTMENT ($143.7 billion in U.S. sales for 12 months ending Q4 2008) Bygone Are the Big Deals One-off deals accounted for almost 80 percent of 2008 transactions, compared with buyout-heavy 2007’s 50 percent. Both one-off transactions and portfolio sales barely beat 2003 levels. Megadeals have also scampered away from the headlines. The 53 trades that were each valued at more than $1 billion in 2007 made up 40 percent of the year’s sales volume. In 2008, just seven such transactions formed 8 percent of total sales volume. Major office, apartment, retail and industrial sales accounted for $131 billion last year—plus $10 billion owing to hotels—compared with 2007’s $515 billion. The 7,268 transactions that closed in 2008 also pale next to the previous year’s 18,423, a 61 percent drop. Source: Real Capital Analytics Inc. • www.rcanalytics.com • 866-732-5328 8% 19% 26% 18% 14% 10% 5% CBD Office Suburban Office Industrial Flex Retail Apartment Hotel Data is believed to be accurate but is not guaranteed, is subject to future revision and is based on properties & portfolios valued at $5 million and greater. (U.S. apartment conditions as of Q4 2008*) Absorption (Units) National East Midwest South West Vacancy National East Midwest South West 2007 81,716 27,748 11,193 25,092 17,684 2007 6.0% 5.4% 6.0% 7.9% 5.1% 2008 5,686 8,672 (955) 13,455 (15,485) 2008 7.0% 6.0% 6.4% 9.6% 6.4% 2009 F (77,044) (7,139) (16,394) (20,179) (33,332) 2009 F 8.3% 6.7% 7.4% 11.9% 8.0% 2010 F 3,007 2,836 (4,771) 3,371 1,570 2010 F 8.4% 6.7% 7.7% 12.0% 8.0% LEASING OUTLOOK Perfect Storm The U.S. apartment market is battling another perfect storm, which will ultimately drive vacancies to historic highs. The relationship between employment and absorption of marketrate apartments is fairly close, so occupancies are slipping in the wake of painful job cuts, and more job losses are on the way. Factor in a moderate amount of net completions in 2009, along with challenging levels of shadow supply, and it is easy to understand the near-term dilemma facing apartment landlords. Vacancies across the top U.S. real estate investment markets closed out 2008 at 7 percent, up 100 basis points from year-end 2007. The increase in 2009 will be a bit steeper— 130 basis points—and vacancies will top out at 8.5 percent in early 2010. Finally, 2009 will be the single worst year for absorption since at least 1982. *monthly chart cycles among office, multi-family and industrial Source: PPR • www.ppr.info • 617-426-4446 DIRECTIONS IN DEVELOPMENT 80 70 60 50 40 30 20 10 (change in U.S. construction starts) Lack of Confidence Though gross domestic product proved stronger than consensus expectations, it fell at a 3.8 percent annualized rate during the fourth quarter. Over the past two quarters, consumption has declined at a pace not seen in almost 30 years. As of the fourth quarter, it had fallen 1.3 percent year over year, the third-worst annual decline on record. The labor market, which lags behind the broader economy, will contract until the end of 2010, and the U.S. average unemployment rate will peak at 9.2 percent before all is said and done. Lacking investor confidence and near-term demand, developers have deferred new starts through 2009, particularly in those markets facing the most dramatic deterioration in absorption, vacancy and rent trends. Expect new starts for all property types to remain depressed for 12 to 18 months. Sources: PPR • www.ppr.info • 617-426-4446; PPR/Reed ConstructionTrak 3 Months Ending Nov-07 3 Months Ending Nov-08 Apartment (000s of Units) Change -23.3% 0 Office (MSF) -30.3% Retail (MSF) -14.0% Industrial (MSF) -64.1% Hotel (MSF) 5.7% 10 Commercial Property News • March 2009 • 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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