creo 2013 november

8/13/2019 CREO 2013 November

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COMMERCIAL REAL ESTATOUTLOOGeorge Ratiu

Director, Quantitative & Commercial Research

While we are still grappling with the delaysfrom Octobers government shutdown, the

estimates for third quarter economic outputshow much of the same. Gross domestic

product rose at an annual rate of 2.9percent in the third quarter, on the heels of a2.5 percent rise in the second quarter.While the acceleration in the economic paceis welcome, most of it was boosted byinventory adjustment.

All main GDP componentsconsumers,businesses, government and tradewerepositive contributors to third quarter growth.Consumer spending gained 1.5 percent,

driven by a 4.3 percent rise in consumptionof goods. As the period benefited fromsummer season activitiesincluding traveland home shoppingconsumers boostedtheir spending on durable goods, includingcars (up 6.6 percent), furniture and homefurnishings (up 12.0 percent), andrecreational vehicles and goods (up 11.5percent). In keeping with the summertrends, consumers also spent more on foodand beverages, up 2.7 percent. Consumer

spending on services rose a more modest0.1 percent, as transportation and recreationincreased.

Meanwhile, businesses approachedinvestments with a cautious outlook in thethird quarter, as the specter of budgetwrangling in Washington and the possibilityof a government shutdown loomed large.Nonresidential fixed investments rose at anannual rate of 1.6 percent.

In a positive development, businessspending on buildings jumped 12.3 percenin the third quarter, on the heels of a 17.6percent gain during the second quarter.The noticeable advances point to astrengthening pipeline of commercialdevelopments, as market fundamentalscontinue to improve.

Business investments in intellectualproperty productsa new categoryintroduced by BEA last quarter, whichcomprises software, R&D, entertainment,and literatureincreased 2.2 percent in ththird quarter, mostly boosted by investmenin software products and R&D.

Businesses cut back on their equipment

spending, which made the bulk ofinvestments over the past three years.Business spending on informationprocessing declined 3.9 percent, whilespending on transportation equipmentdecreased 4.1 percent, respectively.Spending on industrial equipment rose at aannual rate of 17.5 percent during the thirdquarter.

(continued on page 2)

Economic Output Rises 2.9% in Third Quarter

NATIONAL ASSOCIATION OF REALTORS| RESEARCH DIVISIO

2.8

0.1

1.2

2.52.9

2012.Q3 2012.Q4 2013.Q1 2013.Q2 2013.Q

GDP (% Annual Chg)

Source:


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ntinued from page 1)

e past few quarters have witnessed a broad slowdownglobal economies rates of growth. Against this trend,

U.S. economy posted a positive trade balance in therd quarter. Exports increased 4.6 percent, whileports rose 1.9 percent, leading to a trade surplus of4.8 billion for the period. The increase in internationalde provides for continued strengthening in industrialctor fundamentals, with warehouses seeing markedults.

vernment spending posted a modest increase in therd quarter, as spending at state and local governmentels rose after years of cutbacks. With stronger balanceeets, state and local governments increased theirending by an annual rate of 1.5 percent. Federalvernment spending continued declining, as the processsequestration marched on, posting a 1.7 percent slide

he third quarter.

e economic picture of the third quarter highlightedveral other moderately positive sections. Existing

me sales rose 13.0 percent during the period,companied by a 12.8 percent rise in median prices.e Institute for Supply Management indexes fornufacturing and services advanced at a 2.0 percente. Consumer confidence climbed 24.6 percent in therd quarter, as employment remained positive.

yroll employment grew by a net 490,000 jobs during3-month period, as the service firms added 422,000

w jobs. The professional and business servicesustry was one of the main drivers of growth, with9,000 jobs, followed by retail trade with 101,600 news. Education and health accounted for 79,000 news, with leisure and hospitality adding another 59,000.e October data showed employment growthintaining momentum, as employers added 204,000

w jobs. The unemployment rate declined from 7.6rcent in the second quarter to 7.3 percent in the thirdarter.

COMMERCIAL REAL ESTAT

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ATIONAL ASSOCIATION of REALTORS| RESEARCH DIVISION | www.realtors.org/research-and-statistics

However, the outlook for the last quarter of 2013 does nbear much glee. With the knowledge of the governmentshutdown in the rearview mirror, and a retail seasonalready eyeing steep discounts, the GDP outlook for all 2013 projects an annual growth rate of only 1.7 percent.

Commercial Real Estate

Sales of major properties (over $2.5M) advanced 26percent on a yearly basis during the third quarter of thisyear, totaling $89.7 billion, based on Real CapitalAnalytics (RCA) data. Several property types attractedstellar investor interest, registering double- or triple-digitgrowth rates. Sales of retail assets rose 104 percent frothe same period in 2012, while industrial sales volumeadvanced 70 percent. Based on National Association oREALTORS data, sales of properties at the lower end the price range (mostly below $2.5 million) increased 11percent on a yearly basis. Based on three quarters worof data, total sales volume is expected to surpass 2012s

$300 billion.

(continued on page 3)

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9

14

2007-Jan

2007-May

2007-Sep

2008-Jan

2008-May

2008-Sep

2009-Jan

2009-May

2009-Sep

2010-Jan

2010-May

2010-Sep

2011-Jan

2011-May

2011-Sep

2012-Jan

2012-May

2012-Sep

2013-Jan

2013-May

2013-Sep

Payroll Employment (MoM Chg, '000s)

Unemployment Rate

Source


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2013 IV 2014 I 2014 II 2014 III 2014 IV 2015 I 2015 II 2013 2014 20

ncy Rate 15.6% 15.6% 15.5% 15.5% 15.4% 15.5% 15.4% 15.7% 15.5% 15.4

Absorption

0 sq. ft.) 13,423 13,449 10,561 12,069 10,066 14,466 11,359 32,187 46,144 49,6

pletions ('000 sq. ft.) 11,745 9,882 9,957 8,254 7,520 11,673 11,761 27,314 35,613 42,0

ntory ('000,000 sq. ft.) 4,111 4,120 4,131 4,139 4,147 4,158 4,170 4,111 4,147 4,1

Growth 0.6% 0.6% 0.6% 0.6% 0.7% 0.7% 0.7% 2.4% 2.5% 3.0

2013 IV 2014 I 2014 II 2014 III 2014 IV 2015 I 2015 II 2013 2014 20

ncy Rate 9.2% 9.0% 8.9% 8.7% 8.6% 8.6% 8.5% 9.3% 8.8% 8.4

Absorption

0 sq. ft.) 22,316 20,983 18,884 33,572 31,474 21,494 19,344 97,027 104,913 107,

pletions ('000 sq. ft.) 9,475 19,608 20,857 13,628 12,969 20,030 21,306 48,996 67,061 68,5

ntory ('000,000 sq. ft.) 8,433 8,453 8,474 8,488 8,501 8,521 8,542 8,433 8,501 8,5

Growth 0.7% 0.6% 0.6% 0.6% 0.7% 0.6% 0.7% 2.3% 2.5% 2.6

2013 IV 2014 I 2014 II 2014 III 2014 IV 2015 I 2015 II 2013 2014 20ncy Rate 10.4% 10.3% 10.2% 10.0% 9.9% 10.0% 9.9% 10.5% 10.1% 9.9

Absorption

0 sq. ft.) 3,059 4,161 4,342 4,161 5,428 8,166 5,444 10,968 18,093 22,6

pletions ('000 sq. ft.) 1,508 3,505 3,028 3,402 3,474 4,581 3,958 6,008 13,409 17,5

ntory ('000,000 sq. ft.) 2,035 2,036 2,039 2,042 2,046 2,050 2,054 2,035 2,046 2,0

Growth 0.4% 0.5% 0.5% 0.6% 0.6% 0.5% 0.6% 1.4% 2.2% 2.3

2013 IV 2014 I 2014 II 2014 III 2014 IV 2015 I 2015 II 2013 2014 20

ncy Rate 3.9% 4.0% 4.0% 4.0% 4.0% 4.1% 4.2% 4.1% 4.0% 4.2

Absorption (Units) 79,787 47,091 49,005 56,658 58,571 22,756 23,699 239,443 211,325 102,

pletions (Units) 43,284 35,170 44,672 40,793 43,289 24,608 31,257 123,518 163,924 114,

ntory

ts in millions) 10.1 10.1 10.1 10.2 10.2 10.2 10.3 10.1 10.2 10

Growth 1.4% 1.2% 1.1% 1.0% 1.0% 0.9% 0.9% 4.0% 4.3% 3.5

ce: National Association of REALTORS / Reis, Inc.


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5ATIONAL ASSOCIATION of REALTORS| RESEARCH DIVISION | www.realtors.org/research-and-statistics

ce: NAR, Reis, Inc. Office Industrial Retail Multifamiquerque NM 17.8 11.5 4.2

nta GA 20.1 14.3 13.8 6.0

tin TX 16.1 11.2 6.4 4.4

more MD 16.4 12.2 6.9 3.4

mingham AL 12.9 15.0 5.4

on MA 13.9 18.8 6.6 3.7

alo NY 14.4 13.8 2.6

tral New Jersey NJ 21.3 10.0 2.7

rleston SC 14.9 10.8 4.5

rlotte NC 17.7 13.0 10.0 5.0

ttanooga TN 16.4 15.6 4.2

ago IL 18.6 9.4 11.1 3.5

innati OH 20.6 8.7 13.1 3.3

eland OH 23.8 9.0 15.3 3.1

rado Springs CO 19.3 15.7 3.8

mbia SC 17.9 11.4 6.6

mbus OH 18.6 9.5 15.8 4.6

as TX 22.9 12.6 13.3 5.0

ton OH 26.5 16.2 5.5ver CO 17.3 8.2 11.6 3.6

oit MI 25.7 12.2 11.9 3.7

rict of Columbia DC 9.9 4.9

field County CT 22.3 3.9 4.6

Lauderdale FL 19.7 9.1 10.6 3.9

Worth TX 16.4 10.9 12.0 5.1

ensboro/Winston-Salem NC 20.6 11.5 6.0

enville SC 19.2 13.7 4.4

ford CT 21.5 9.6 2.7ston TX 14.1 8.0 12.0 6.4

anapolis IN 18.8 9.8 14.8 5.6

sonville FL 20.5 8.5 13.1 6.6

sas City MO 17.3 10.4 11.1 4.2

xville TN 14.0 10.6 4.7

Vegas NV 26.0 12.4 5.3

ngton KY 15.6 8.7 5.4

e Rock AR 12.0 12.9 6.6

g Island NY 13.9 5.2 3.3


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ce: NAR, Reis, Inc. Office Industrial Retail MultifamiAngeles CA 16.0 4.0 6.0 3.1

sville KY 16.1 9.8 4.5

mphis TN 23.7 15.1 12.0 7.9

mi FL 16.7 6.0 7.1 3.8

waukee WI 18.5 12.9 3.2

neapolis MN 17.2 7.6 10.8 2.1

hville TN 12.7 8.5 8.2 4.2

w Haven CT 17.6 12.4 1.9

w Orleans LA 13.5 11.7 6.0w York NY 9.8 2.2

folk/Hampton Roads VA 15.4 9.9 4.2

thern New Jersey NJ 18.5 5.3 3.6

and-East Bay CA 17.7 9.3 6.4 2.4

homa City OK 16.7 13.9 5.4

aha NE 15.8 8.9 3.0

nge County CA 17.0 3.9 5.5 3.0

ndo FL 18.3 11.7 12.5 5.0

m Beach FL 18.9 6.8 12.1 5.4adelphia PA 13.9 10.3 9.6 3.5

enix AZ 25.5 11.4 10.8 5.3

burgh PA 16.1 9.5 8.0 2.9

land OR 13.4 8.1 8.1 3.1

vidence RI 15.6 12.7 2.9

igh-Durham NC 15.0 15.9 9.2 4.0

mond VA 14.5 14.6 9.3 4.5

hester NY 16.4 12.4 2.8

amento CA 21.3 12.6 12.5 3.2Lake City UT 17.2 12.3 3.8

Antonio TX 17.9 7.5 11.3 5.7

Bernardino/Riverside CA 23.9 6.8 9.9 3.2

Diego CA 16.2 7.1 6.2 2.1

Francisco CA 13.0 11.1 4.0 3.1

Jose CA 17.8 16.8 5.8 2.8

tle WA 13.4 6.3 6.7 4.2

ouis MO 17.8 7.0 12.5 4.9


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ce: NAR, Reis, Inc. Office Industrial Retail Multifamiurban Maryland MD 15.2 10.9 9.0 3.7

urban Virginia VA 17.3 10.5 6.5 3.2

cuse NY 16.4 14.6 2.0

oma WA 15.5 11.9 3.9

pa-St. Petersburg FL 22.1 7.9 11.9 4.3

on AZ 15.2 9.7 4.9

a OK 16.9 16.3 5.6

tura County CA 17.2 8.6 2.8

tchester NY 19.0 7.7 3.0hita KS 17.6 13.0 4.1


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OFFICE

Region Average Cap Rate Average Price ($/Sq. FtMid-Atlantic 6.4% $269

Midwest 7.5% $115

Northeast 6.0% $425

Southeast 8.1% $126

Southwest 7.3% $176

West 6.6% $301

INDUSTRIALRegion Average Cap Rate Average Price ($/Sq. FtMid-Atlantic 7.5% $51

Midwest 7.4% $39

Northeast 7.6% $89

Southeast 8.3% $51

Southwest 7.5% $68

West 7.6% $103

RETAIL

Region Average Cap Rate Average Price ($/Sq. FtMid-Atlantic 6.8% $137

Midwest 7.6% $117

Northeast 6.2% $293

Southeast 7.6% $147

Southwest 7.2% $144

West 6.7% $215

MULTI-FAMILY

Region Average Cap Rate Average Price ($/Unit)Mid-Atlantic 6.9% $133,837Midwest 7.7% $74,230

Northeast 5.4% $185,699

Southeast 7.1% $75,717

Southwest 7.2% $85,052

West 5.5% $160,862

Note: Data as of 10/23/20Source: Real Capital Analyt


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The Research Division of the National Association of REALTORS monitors andanalyzes monthly and quarterly economic indicators, including retail sales, industrialproduction, producer price index, gross domestic product and employment data whicimpact commercial markets over time. In addition, the Research Division providesseveral products covering commercial real estate:

Commercial Real Estate Quarterly Market Survey

Commercial Real Estate Lending Survey

Commercial Member Profile

CCIM Quarterly Market Trends

If you have questions or comments regarding this report or any other commercial reaestate research, please contact George Ratiu, Director, Quantitative & CommercialResearch, at [email protected].

Although the information presented in this report has been obtained from reliablesources, NAR does not guarantee its accuracy, and such information may beincomplete. This report is for information purposes only. All opinions, assumptions anestimates constitute NARs judgment as of the date of this publication and are subjec

to change and evolving events. Actual results may vary from forecast results.

For more information, please visit us:

Copyright 2013 NATIONAL ASSOCIATION OF REALTORS. Reproduction,reprinting or retransmission in any form is prohibited without written permission. Forquestions regarding this matter please e-mail [email protected].

0 New Jersey Avenue, NW Washington, DC 200012020

0.874.6500 www.REALTOR.org


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