commercial real estate market survey 2012-10-25

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OCTOBER 2012

Download this report from:

www.realtor.org/reports/commercial-real-estate-market-survey

Copyright © 2012 NATIONAL ASSOCIATION OF REALTORS ®. Reproduction, reprinting or retransmissionin any form is prohibited without written permission. For questions regarding this matter please [email protected].

THE NATIONAL ASSOCIATION OF REALTORS ®, “The Voice for Real Estate,” is America’s largest tradeassociation, representing 1.0 million members involved in all aspects of the residential and commercial realestate industries..

Although the information presented in this survey has been obtained from reliable sources, NAR does notguarantee its accuracy, and such information may be incomplete. This report is for information purposesonly.

The REALTORS ® Commercial Real Estate Market Survey measures quarterly activity in the commercialreal estate markets. The survey collects data* from commercial REALTORS ®. The survey is designedto provide an overview of market performance, sales and rental transactions, along with currenteconomic challenges and future expectations.

2NATIONAL ASSOCIATION of REALTORS ® | RESEARCH DIVISION | www.realtors.org/research

NOTE: In October 2012, NAR invited a random sample of 45,000 REALTORS® with an interest incommercial real estate to fill an on-line survey. A total of 352 responses were received, for an overallresponse rate of 0.8 percent.



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2012.Q3 Cap RatesOffice 8.3%Industrial 8.8%Retail 8.0%

Multifamily 7.9%Hotel 8.9%Development 10.3%

2012.Q3 Vacancy RatesOffice 19.3%Industrial 18.1%Retail 17.4%

Multifamily 8.8%Hotel 18.6%

NATIONAL ASSOCIATION of REALTORS ® | RESEARCH DIVISION | www.realtors.org/research

OCTOBER 2012

65%

35%

Did you complete a sales transaction?

Yes

No

1%

1%

6%

17%

19%

23%

33%

Over $10 M

Between $5 M and $10 M

$2 M and $5 M

Between $1 M and $2 M

Between $500K and $1 M

Between $250K and $500K

Under $250K

Dollar amount of last transaction

0% 20% 40% 60% 80% 100%

12.Q3

12.Q2

REALTORS ® Most Pressing Challenges

Inventory

Distress

Financing

Local Economy

National Economy

Pricing Gap: Buyers vs Sellers

Other




OCTOBER 2012

%

%

%

%

%

%

%

%

0 - 12 months 12 months 24 months 36 months 48 months 60 + months 60 months

Average lease term during last transaction

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2.Q3

2.Q2

Average Rental Space Demanded During Last Transaction

Over 100,000 sq ft

50,000 - 100,000 sq f

10,000 - 49,999 sq ft

7,500 - 9,999 sq feet5,000 - 7,499 sq feet

2,500 - 4,999 sq feet

Under 2,500 sq feet



The REALTORS ® Commercial Real Estate Quarterly Market Survey asks participants to comment oncurrent conditions in their markets. Below are a few of the comments about the latest quarter environment.

A lot of leasing activity. Development land has begun to trade.

Although financing remains our market's biggest current challenge, available inventory has recently also become animportant challenge.

Banks dribble out and control inventory, $ are not at level to entice buyers who lack incentive to go to risk. No urgency or opportunity to own, yet. Buyers have lost; equity, credit rating for bailing with last purchases, don't see up side or appreciation, banks still tight.

Because we are a retirement community we are experiencing a lot of medical related leasing and sales to doctors and surgery centers.

Business is great. Not enough time in the day.

Buyers are slow to realize even foreclosure and short sale properties have increased in pricing and Banks are not as flexibleas 12 -24 months ago,

Commercial land is available but loans are not. The decline in bank approval has cash buyers only and depreciating market value. Property with buildings has to be 100% occupancy and priced below market value for banks to approve loans.

Affective values have to be 10% cap or better for qualification for loans. Investors need to consider 1031 exchanges wheninvesting in commercial accounts.

Construction development is at a standstill. Vacancy rates have stayed consistent over last 6 months, improved slightly froma year ago. Local economy finding stability along with employment is key to better scenarios and has not done so at thistime.

Continued gridlock in Washington is causing problems with accessing financing. BASEL III is a huge concern for local community bank lenders and will dry up mortgage market.

CRE is stagnant awaiting the presidential elections

Current Market Trends are in a downward spiral, due to limited financing and REO's on the market that limit prices. Cash isKing and financing of commercial properties are nil.

Definitely improving, but banks continue to be the problem with their lending restrictions.

Downtown Tucson is in it's own economic zone, with outside student housing investments and restaurant investmentsdriving development.

Encouraging, looking forward to the election being over.


OCTOBER 2012



The REALTORS® Commercial Real Estate Quarterly Market Survey Comments —continued.

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EPA has to cut back. Government to big to controlling.

Everyone holding their breath until elections. Several indicators that businesses will close if Obama wins, several that new small businesses (1,200-2,500sf) will lease or buy if he loses. In my 40+ years that's new.

Everyone waiting for the election results

For the first time since 2007 we have several land deals under contract for 1st quarter 2013 closing. The intended use is for new retail development.

Gov't contracts are again driving the market. Lay-offs cause a decline & lack of financing creates problems for sellers.

Hope it gets better after the election

Hope that the market goes up this coming year

Houston is booming

Huge surplus of commercial and REO

Human being investors and most lessees are on the sideline pending the outcome of the election. If Obama is reelected, I fear the economy and the real estate investment market will crater under the weight of taxes and regulation fears.

I have the largest commercial inventory in Oxford County and out of approximately 28+- listings since 2003 I have had lessthan 6 commercial sales. Any sales that have had happened over and above that have been through foreclosures and auctions for less than 25% of the value because of extremely poor economy! No one in National seems to know this and how bad it really is!

I see a definite increase in listings and consumer interest.

I specialize in the Bed & Breakfast market. The number of buyers is up, the inventory is declining due to commercial

financing difficulties (some will see as residential properties instead). Buyers are still challenged with financing options.

If the election turns out OK, we're off to the races. If not, move to Australia

In general there is a strong interest from investors for multi-family and hotels in South Florida.

Industrial sales & leasing are up. Retail and office inventory greater than demand. More inquiries from potential new investors in real estate.

Inventory is down properties are leasing and selling


OCTOBER 2012




9

Money holding back till after the election.

Mostly buyers and some sellers are waiting for after elections.

MULTI FAMILY-LACK OF INVVENTORY TO 100 UNITS LOTS OF OFFICE TO LEASE LOTS OF INDUSTRIAL TO SELL SLEASING -STRONG

My business is down 80% from 2007.

Need for more manufacturing space - no spec development due to financing

Need to get resolution to deficit issue. NAR is not looking adequately at the national interest.

New Immigration laws at the local level has harm the local economy big time!

No sense being pessimistic, wouldn't work anyway...

Office market is tightening, however rates are still flat.

Office, Industrial, Land both C&R are very stagnant, huge inventory of unadvertised REO's with banks now being our largest

competitor, some activity in retail with vacancies running as high as 25- 60%. Most local leases are 25 to 40% below average for 1-3 years with hopes of increases later. Earlier this year I closed a medical lease for 10 years with rent increases from $6. to $8 per sq.ft. existing space with $250M built out and owner financed for 5 years. Most all sales and leases are plug and play with many concessions and copious attention to every detail. Banks are still on the side line for most loans.Even at discounted sales prices many loans require 25-40% down. There is no confidence in a long term forecast of theeconomy, with many regional and national corporations sitting on huge cash reserves. Most of my commercial sales and leases are in the medical industry for the past four years. As appraiser, consultant and realtor for +35 years, I see slow growth for the next five years under present conditions.

Our area is the Texas City/Houston Refining Complex and the market is rising due to the new exploration and processing of Oil Shale. When the national economy improves next spring under our new President, things should vastly improve !!!!!!!!

Our market is small and heavily influenced by a nearby university. Student housing land is in huge demand. There is littleconstruction of new office space which could mean rent appreciation in the future. Industrial vacancies and cap rates are all up over the last couple of years due to several large companies leaving the area.

People are waiting until after the election to make decisions.

Property inventory is either overpriced, or landlords/owners are not willing to sell performing assets, because they can earnmore income than putting dollars in the banking system

Remains flat with small leases dominating


OCTOBER 2012




10

Retail is the most challenged segment. Industrial is very hot....office is coming along.

SBA funding is available but the local banks do not want to participate. Key Bank is the strongest player here in Mid Coast Maine

Shortage of industrial listings. Office and retail plentiful.

Slow economic diversification - electronic data and telecommunication centers. Up to 11 industrial banks will establish LasVegas centers pending grant of bank charters. Financial services and call centers growing slowly. HP building, a second of five 400,000 square feet buildings, under construction in Switch Electronic Data Storage Center complex. 18 banks lendingon it. SBA financing active for growing owner occupied building users. Very active subleasing for office and retail. Industrial and distribution centers expected to recover over next 12 months, but many business decisions on hold until after theelection.

slow with perceived hesitation until the elections

Slowly appreciating

Slowly, but steadily improving.

Stagnant job market

Still slow due to weak financing market, cash buyers are still making deals, pricing vs actual value still creating availableunits on the market

Still very depressed and stagnant. lack of credit and capital to start-up or relocate businesses.

The 2013 Commercial Market will be historically negative

The Agriculture ie: Vineyard Market is going of the shelf!

The challenges increase. Often "offers" are reduced after acceptance! The market is bi-polar!

The down market has stopped, and we are currently flat with some upward trending in sight.

THE HOUSE MARKET SEEMS TO BE IMPROVING MAY 2%,FINANCING IS THE MOST IMPORTANT THING NOW,PLUS BUYERS ABILITY TO BUY

The lack of new construction has caused some of the concessions to burn off for class A product only. Still some distressed product available below replacement cost


OCTOBER 2012




11

The market appears to be slowly recovering. Financing is still an issue. Smart buyers are snatching up properties now, but many investors are still on the fence.

The market is static but down considerably from 3 years ago. Financing, seller expectations, and buyer "bottom feeding" arekeeping sales numbers down.

The new development market is stopped unless you are a large national discount retailer. Local activity has stopped for thelast 8 months. It appears that everyone is waiting for the results of the presidential election.

There are more buyers looking into commercial properties.

There are more foreign buyers looking for investment properties.

Things are looking better...expect to see things moving after the November elections

Things have improved in a major way across our market

Three times the work for a third the pay

Uncertainty on National scene, especially elections has slowed actual deals. Interest there but everyone un easy. Also

guidelines to banks makes even a qualified buyer to get accepted.

Unless there is a change at the national level, the timberland and farmland markets will continue to free -fall in this area.

Unsettled due to uncertainty of gov't market

Very challenging, financing almost does not exist. the only buyers qualifying for SBA. and CDC. are the ones who does not need the loan. Most seller want all cash. and 99.99% of buyers are looking for financing. average time for obtaining SBA.loans is 7 months for well qualified buyers. average time for selling a commercial property or business Acquisition use to beabout 4 to 6 months. in current market average time to complete a transaction is 12 to 16 months.

We have lots of investors wanting to purchase income properties, but inventory is minimal, since a current owner has tohave a strong reason to sell and give up a monthly cash infusion.

We need a change in Washington.. everyone is very unsure of what direction this country is going.

We're still seeing a lot of mixed results, which is making it tough for the guys currently on the fence.

What I find the most challenging is educating clients. Lessees think values are down more than they are and don't realize theinventory is down.

Would love to see more inventory accessible to investors!


OCTOBER 2012



NATIONAL ASSOCIATION OF REALTORS ® RESEARCH DIVISION

The Research Division of the NATIONAL ASSOCIATIONof REALTORS ® produces the Commercial Real Estate

Outlook, a quarterly report forecasting commercial marketfundamentals. The Research Division also issues theannual Commercial Member Profile, detailing the businessand demographic characteristics of commercial members.

Additionally, NAR Research examines how changes in theeconomy affect the commercial real estate business, andevaluates regulatory and legislative policy proposals for their impact on REALTORS ®, their clients and America’s

property owners.

If you have questions or comments regarding this report or any other commercial real estate research, contactGeorge Ratiu, Manager, Quantitative & CommercialResearch, at [email protected].

To find out about other products from NAR’s ResearchDivision, visit www.REALTOR.org/research-and-statistics.

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OCTOBER 2012

commercial real estate market survey 2012-10-25

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