Download - 2Q16 NGKF US Capital Markets Report
CAPITAL MARKETS REPORTFor the Intelligent Investor
2Q16 UNITED STATES Todd P. HershmanAssociate Director [email protected]
Jonathan MazurManaging Director, [email protected]
22Q16 CAPITAL MARKETS REPORT
2Q16 UNITED STATES CAPITAL MARKETS REPORT
3 Market Summary
4 Executive Overview5 Economic Dashboard6 Global Yields7 Top Regional Buyers8 Pricing Heat Map - Office9 18-Hour Cities
10 Investment Activity Index - United States Overall Rankings11 Investment Activity Index - Top 10 Cities12 Investment Activity Index - Ranking Matrix
13 Capital Markets Analysis
14 Global Capital15 Global Outbound United States Capital16 International Capital Distribution - United States17 International Capital Investment - United States18 Buyer Distribution19 Total Sales Volume - Major Metropolitan Cities20 Office Trends - Average Price Per Square Foot21 Office Trends - Average Cap Rates22 Multihousing Trends - Primary vs. Secondary Markets23 Multihousing Trends - Primary Market Pricing Matrix24 Retail Trends - Primary vs. Secondary Markets25 Retail Trends - Urbanization in Premier Markets26 Hospitality Trends27 Industrial Trends28 Healthcare Trends29 Development Site Trends
30 Debt Market Statistics
31 CMBS Issuance32 CMBS Volume by Property Type33 Debt Market Update34 Commercial Mortgage Maturities
MARKET SUMMARY
42Q16 CAPITAL MARKETS REPORT
4
Commercial and multihousing mortgage
debt outstanding is expected to
reach $2.9 trillion in 2016; more than
three percent higher than at the end of
2015.
MBA projects originations of commercial
and multihousing mortgages will total
$500 billion in 2016, roughly flat from the
$504 billion originated in 2015 and down
slightly from the record-high $508 billion
originated in 2007.
More than $1 trillion of commercial real
estate debt is scheduled to mature
between 2018-2019.
Market LegislationFinancing
EXECUTIVE OVERVIEW
Following back-to-back historic years,
demand for quality product remains
strong despite slowing overall volume.
International capital continues to be
prevalent in the United States market
with future investment mandates
potentially shifting away from Europe.
Cap rates in some markets have
moved from compression to expansion.
There are currently twenty five markets
averaging at least $200 per square foot
for office buildings, with eight averaging
at least $400 per square foot.
FIRPTA reform enacted to ease
restrictions, allowing for additional foreign
investment into the United States.
PATH Act regulations will limit tax-free
REIT spinoffs beyond traditional real
estate companies.
New Credit Risk Retention Rule takes
effect December 24th, 2016.
EB5 extended, but is set to expire in
September.
52Q16 CAPITAL MARKETS REPORT
5
ECONOMIC DASHBOARD
Source: Federal Reserve Bank of St. Louis, Newmark Grubb Knight Frank
* Consumer Price Index Inflation for 2016 is based on May data release.
The Fed has been reducing its projection of the funds rate for the past four years as growth expectations have been tempered.
GDP Unemployment Rate CPI Inflation Federal Funds Rate
2.40
%
5.60
%
1.65
%
4.25
%
2.40
%
5.60
%
1.69
%
4.00
%
2.20
%
5.35
%
2.00
%
3.75
%
2.15
%
5.10
%
0.17
%
3.75
%
2.00
%
4.80
%
1.07
%
3.00
%
June '12 June '13 June '14 June '15 June '16
62Q16 CAPITAL MARKETS REPORT
-2.00%
-0.50%
1.00%
2.50%
4.00%
5.50%United States All Property Type Cap Rate Average = 5.2%
Singapore Australia
China
232
Bps
GLOBAL YIELDS10-Year Government Bonds vs. United States Cap Rates
Source: Newmark Grubb Knight Frank Research, Trading Economics
International Capital continues to flock to U.S. commercial real estate as cap rates offer significant upside to their local bond yields.
SwitzerlandJapan
GermanyFrance
United Kingdom Canada
United States
South Korea
578
Bps
544
Bps
534
Bps
504
Bps 43
6 B
ps
417
Bps
376
Bps
374
Bps
329
Bps
320
Bps
72Q16 CAPITAL MARKETS REPORT
TOP REGIONAL BUYERSAll Property Types; 12-Month Totals
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
West
Company $ Volume
Blackstone $10.5B
Invesco $1.9B
TIAA $1.7B
Sun Communities $1.7B
CPP Investment Board $1.6B
Southwest Midwest Southeast Mid-Atlantic Northeast
Company $ Volume
Blackstone $3.1B
Starwood Capital Group $2.5B
China Life Insurance $1.1B
Global Logistics Properties $1.1B
CPP Investment Board $977M
Company $ Volume
Blackstone $1.6B
ADIA $864M
PSP Investments $859M
601W Companies $842M
Lone Star $749M
Company $ Volume
Starwood Capital Group $3.7B
Blackstone $1.7B
CPP Investment Board $1.2B
ADIA $1.1B
PSP Investments $1.1B
Company $ Volume
Lone Star Funds $4.5B
Blackstone $2.5B
UDR $900M
China Life Insurance $799M
Global Logistics Properties $799M
Company $ Volume
Blackstone $10.9B
Ivanhoé Cambridge $6.4B
Qatar Investment Authority $3.8B
SL Green $2.9B
RXR Realty $2.8B
Blackstone continues to be one of the top two investors in each region following their large portfolio purchases from Hines and RioCan.
82Q16 CAPITAL MARKETS REPORT
8
Price Per Square FootPRICING HEAT MAP - OFFICE
Greater than $400 $201-$400 $100-$200 $100-$200
There are currently twenty five markets averaging at least $200 per square foot for office buildings.
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
Office sales in eight United
States metropolitan markets
currently average more than $400
PSF: Manhattan, San Francisco,
San Jose, Los Angeles, Boston,
Washington D.C., Miami and
Seattle.
California has six markets averaging
at least $200 per square foot for
office buildings: San Francisco, San
Jose, Los Angeles, Orange County,
San Diego and East/North Bay.
92Q16 CAPITAL MARKETS REPORT
Office Rental Growth
(Past 12 Months)
Investment Sales Vol Growth
(Past 12 Months, All Types)
Austin 6.1% 6.0%
Atlanta 6.1% 15.6%
Charlotte 4.2% 4.7%
Denver 7.3% 28.1%
Nashville 12.0% 2.6%
Portland 10.2% 28.0%
Seattle 5.2% 29.5%
.
.
..
.
.
.
PEOPLE GRAVITATE, COMPANIES FOLLOW, CITIES PROSPER18-Hour Cities
AUSTINTotal Net Migration (Past 24 Months): 81,4532016 Population Growth Projections: 3% NASHVILLE
Total Net Migration (Past 24 Months): 49,9492016 Population Growth Projections: 1.4%
ATLANTATotal Net Migration (Past 24 Months): 111,9652016 Population Growth Projections: 1.9%
CHARLOTTETotal Net Migration (Past 24 Months): 63,8312016 Population Growth Projections: 1.9%
SEATTLETotal Net Migration (Past 24 Months): 63,8892016 Population Growth Projections: 1.4%
PORTLANDTotal Net Migration (Past 24 Months): 35,7152016 Population Growth Projections: 1.3%
DENVERTotal Net Migration (Past 24 Months): 68,5342016 Population Growth Projections: 1.6%
NEW TECHNOLOGY
Atlanta, Austin, Seattle
Austin, Seattle
Austin, Charlotte, Denver,
Portland, Seattle
Nashville
Nashville
Nashville
Austin
Denver, Portland, Seattle
Atlanta, Seattle
Austin, Charlotte, Denver,
Portland, Seattle
Total Net Migration - People(Past 24 Months)
LEGEND
UNITED STATES POPULATION
GROWTH = 0.77%
102Q16 CAPITAL MARKETS REPORT
RANK CITY1 New York City
2 San Francisco
3 Los Angeles
4 Boston
5 Washington D.C.
6 Chicago
7 San Jose
8 Seattle
9 Miami
10 Dallas/Fort Worth
RANK CITY11 San Diego
12 Austin
13 Orange County
14 Denver
15 Portland
16 Phoenix
17 Atlanta
18 Houston
19 Philadelphia
20 Northern New Jersey
RANK CITY21 Nashville
22 Baltimore
23 Charlotte
24 Orlando
25 Tampa/St. Petersburg
26 Sacramento
27 Las Vegas
28 Honolulu/Hawaii
29 Inland Empire
30 Raleigh/Durham
RANK CITY31 Salt Lake City
32 Westchester/Fairfield
33 San Antonio
34 Detroit
35 Kansas City
36 Minneapolis/St. Paul
37 Pittsburgh
38 Columbus
39 Jacksonville
40 New Orleans
INVESTMENT ACTIVITY INDEXUnited States Overall Rankings
Source: NGKF Research, U.S. Bureau of Labor Statistics, U.S. Census Bureau, Real Capital Analytics, Costar, National Association of Realtors
Markets showing the most strength are those influenced by technology companies and their youthful, creative employee base.
112Q16 CAPITAL MARKETS REPORT
Investment Sales VolumeRank Billions
New York City 1 $56.1Los Angeles 2 $27.8Chicago 3 $19.8Boston 4 $19.0Dallas/Fort Worth 5 $18.1Atlanta 6 $15.2Seattle 7 $14.3San Francisco 8 $13.0Denver 9 $12.6Phoenix 10 $12.1
Multihousing Cap RatesRank Cap
New York City 1 3.6%San Francisco 2 3.8%Los Angeles 3 4.2%San Jose 3 4.2%Boston 5 4.5%Northern New Jersey 5 4.5%Miami 7 4.6%San Diego 7 4.6%Sacramento 7 4.6%Chicago 10 4.8%
Office Absorption (2Q)Rank MSF
Minneapolis/St. Paul 1 .90San Jose 2 .87Dallas/Fort Worth 3 .85Chicago 4 .75Kansas City 4 .75San Francisco 6 .61Salt Lake City 7 .60St. Louis 8 .59Los Angeles 9 .58Washington, D.C. 10 .56
Office Cap RatesRank Cap
San Francisco 1 4.3%New York City 2 4.4%Boston 3 4.9%Washington, D.C. 3 4.9%Seattle 5 5.1%San Jose 6 5.2%Miami 7 5.3%Los Angeles 8 5.4%Orange County 9 5.5%San Diego 10 5.7%
Office SF Under Construction Rank MSF
New York City 1 11.9Dallas/Fort Worth 2 11.1San Jose 3 8.05Seattle 4 7.72Washington, D.C. 5 7.52Chicago 6 7.25Houston 7 6.80San Francisco 8 5.35Boston 9 4.82Denver 10 4.31
Median Home Price (YoY % Change)Rank %
Detroit 1 17.4%Tampa/St. Petersburg 2 14.6%Portland 3 12.9%Orlando 4 11.6%New Orleans 5 10.0%Nashville 6 9.8%Dallas/Fort Worth 7 9.1%Denver 7 9.1%Seattle 9 8.7%San Diego 10 8.6%
New Housing Units (YTD)Rank # of Units
Dallas/Fort Worth 1 21.9KHouston 2 19.2KAtlanta 3 15.9KWashington, D.C. 4 10.9KPhoenix 5 10.8KNashville 6 9.7KAustin 7 8.8KSeattle 8 8.7KOrlando 9 8.6KMiami 10 8.4K
Hotel Cap Rates Rank Cap
New York City 1 4.7%Honolulu 2 5.0%Miami 3 5.8%Las Vegas 4 6.0%San Francisco 5 6.1%Washington, D.C. 5 6.1%Boston 7 6.6%San Diego 8 6.7%Orange County 8 6.7%Salt Lake City 10 6.8%
Retail Cap RatesRank Cap
New York City 1 4.0%Miami 2 4.2%San Francisco 3 4.4%Washington, D.C. 4 5.0%Orange County 4 5.0%Los Angeles 6 5.3%San Diego 6 5.3%San Jose 8 5.4%Inland Empire 8 5.4%Boston 10 5.5%
Retail RentsRank $
New York City 1 $86.10San Francisco 2 $37.92Honolulu 3 $34.32Miami 4 $32.62San Jose 5 $30.49Los Angeles 6 $27.51Washington, D.C. 7 $26.13Orange County 8 $25.29Westchester/Fairfield 9 $23.18San Diego 10 $22.41
Office Rents Rank $
New York City 1 $75.92San Francisco 2 $54.71San Jose 3 $40.46Los Angeles 4 $36.86Washington, D.C. 5 $36.21Boston 6 $35.69Miami 7 $32.98Austin 8 $32.19Seattle 9 $31.69San Diego 10 $31.17
Office $/SFRank $/SF
New York City 1 $1,062San Francisco 2 $805Boston 3 $715San Jose 4 $650Washington, D.C. 5 $610Los Angeles 6 $535Seattle 7 $469Miami 8 $405Memphis 9 $387Austin 10 $350
Hotel $/Unit Rank $/Room
New York City 1 $658KSan Jose 2 $501KSan Francisco 3 $485KWashington, D.C. 4 $481KBoston 5 $479KMiami 6 $449KHonolulu 7 $348KOrange County 8 $308KPhiladelphia 9 $289KPortland 10 $287K
Retail $/SFRank $/SF
New York City 1 $2,630Miami 2 $1,507Washington, D.C. 3 $1,102San Francisco 4 $908Los Angeles 5 $824Honolulu 6 $796Boston 7 $582Chicago 8 $525San Jose 9 $441Nashville 10 $414
INVESTMENT ACTIVITY INDEXTop 10 Cities by Metric
Source: NGKF Research, U.S. Bureau of Labor Statistics, U.S. Census Bureau, Real Capital Analytics, Costar, National Association of Realtors
Retail Absorption (2Q)Rank MSF
Dallas/Fort Worth 1 1.60Chicago 2 .96Tampa 3 .82Phoenix 4 .77Los Angeles 4 .69Denver 6 .68Baltimore 7 .64Cleveland 8 .55Atlanta 9 .54San Antonio 10 .52
122Q16 CAPITAL MARKETS REPORT
INVESTMENT ACTIVITY INDEXRanking Matrix
Rank Property Type Sales (All)
Office Caps
Office$/SF
RetailCaps
Retail$/SF
HotelCaps
Hotel$/Unit
Multihousing Caps
OfficeU/C SF
OfficeAbsorption
RetailAbsorption
Home Sale% Change
New Housing
UnitsOfficeRents
RetailRents
Source: NGKF Research, U.S. Bureau of Labor Statistics, U.S. Census Bureau, Real Capital Analytics, Costar, National Association of RealtorsRANKED CITY #1-10 RANKED CITY #11-20
RANKED CITY #21-
30RANKED CITY #31-
40
New York City 1
San Francisco 2
Los Angeles 3
Boston 4
Washington, D.C. 5
Chicago 6
San Jose 7
Seattle 8
Miami 9
Dallas/Fort Worth 10
San Diego 11
Austin 12
Orange County, CA 13
Denver 14
Portland, OR 15
Phoenix 16
Atlanta 17
Houston 18
Philadelphia 19
Northern New Jersey 20
Nashville 21
Baltimore 22
Charlotte 23
Orlando 24
Tampa/St. Petersburg 25
Sacramento 26
Las Vegas 27
Honolulu/Hawaii 28
Inland Empire 29
Raleigh/Durham 30
Salt Lake City 31
Westchester/Fairfield 32
San Antonio 33
Detroit 34
Kansas City 35
Minneapolis/St. Paul 36
Pittsburgh 37
Columbus 38
Jacksonville 39
New Orleans 40
CAPITAL MARKETS ANALYSIS
142Q16 CAPITAL MARKETS REPORT
GLOBAL CAPITAL12-Month Totals; All Property Types
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
There has been $315 billion of capital invested around the world over the past twelve months.
United States
Canada
Hong Kong
China
United Kingdom
Singapore
Germany
Qatar
South Korea
$57.9
$42.3
$36.6
$28.4
$20.8
$19.6
$16.8
$9.4
$9.1
Top Countries of Origin
Bill
ions
London
Manhattan
Sydney
Paris
Shanghai
Los Angeles
Madrid
Berlin
Singapore
$26.0
$24.5
$7.5
$7.1
$6.7
$5.7
$5.6
$5.6
$4.7
Top Market Destinations
Bill
ions
152Q16 CAPITAL MARKETS REPORT
15
Invested in LATIN AMERICA over the past 12 months,
more than half of the capital invested a year earlier.
$521.0M
Invested in the NORDICS over the past 12 months.(Blackstone - top investor,
$1.1B).
$2.7B
Invested in AUSTRALIA over the past 12 months.
(Blackstone-lead investor,$1.7B).
$4.2B
Invested in CHINA overthe past 12 months following more than $8.0B between 2013-2015.
$1.0B
Invested over the past year in the UNITED KINGDOM and GERMANY
with significant investments fromBlackstone and Simon Property Group.
$24.0B
Invested in CANADA over thepast 12 months with
84% going to Toronto.
$650.0M
GLOBAL OUTBOUND UNITED STATES CAPITAL
The U.K. will likely see a capital investment decline in the short-term, potentially leading to additional post-Brexit activity in the U.S.
162Q16 CAPITAL MARKETS REPORT
INTERNATIONAL CAPITAL DISTRIBUTIONUnited States; Year-to-Date; All Property Types
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
INVESTED CAPITAL $500+ MILLION
Caisse de DepotAnbang Insurance GroupBrookfield AMGIC (Government of Singapore)Qatar Investment AuthorityCPP Investment BoardChina Life InsuranceADIAPSP InvestmentsAllianzUnion InvestmentNorges Bank
CanadaChinaCanadaSingaporeQatarCanadaChinaUAECanadaGermanyGermanyNorway
$1 B+
China Investment CorpMirae AssetChelsfieldOlyan GroupJamestownGlobal HoldingsHNA GroupChina Oceanwide HoldingsFimalacInvestcorpGLL RE Partners
ChinaSouth KoreaUnited KingdomSaudi ArabiaGermanyIsraelChinaChinaFranceBahrainGermany
$500 M - $999 M
China 31.3%
Canada 23.8%Germany 10.8%
South Korea 5.6%
Saudi Arabia 3.3%
UK 3.1%
Israel 3.0%
Qatar 2.8%
Other 16.3%
InternationalInvestment
Of the Chinese firms that have made United States investments in 2016, half were new entrants to the market.
172Q16 CAPITAL MARKETS REPORT
.
Miami 3.3%
Boston3.3%
D.C. Metro3.9%
New York City28.1%
INTERNATIONAL CAPITAL INVESTMENTUnited States; Year-to-Date; All Property Types
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
RANK 2016 - YTD VOLUME (B)
1 China $10.7
2 Canada $8.09
3 Germany $3.66
4 South Korea $1.89
5 Saudi Arabia $1.11
Global Total $34.0
Origin of Capital Top Five Countries by Year
RANK 2015$81.5B
2014$47.4B
2013$37.5B
1 Canada Canada Canada
2 Singapore China China
3 China Norway Singapore
4 Norway Japan Israel
5 UAE Germany Germany
RANK 2012$27.9B
2011$24.6B
2010$12.3B
1 Canada Canada Canada
2 Germany Switzerland Israel
3 Switzerland Germany UK
4 UK Israel China
5 Israel South Korea Germany
Chicago6.9%
Other Cities22.6%
Seattle2.2%
Dallas1.3%
Atlanta1.3%
Phoenix2.5%
56.4% of the foreign capital invested in US real estate during the first two quarters of 2016 went into properties located within the six major markets.
San Diego3.9%
Austin1.7%
Orange County2.5%
Denver1.0%San Francisco
8.3%
Los Angeles5.9%
182Q16 CAPITAL MARKETS REPORT
BUYER DISTRIBUTIONUnited States; By Year and Market Tier
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
2012 2013 2014 2015 2016-YTD0%
20%
40%
60%
80%
100%
15.0% 18.9% 18.2%12.9% 8.4%
41.4%41.5% 42.9%
40.7%42.3%
28.5% 24.2% 22.7%
25.2% 29.3%
6.5% 5.3% 5.5%4.3%
8.0%
8.6% 10.1% 10.7%16.9%
12.0%
Public/REITs Private Institutional User/Other International
Primary Secondary Tertiary0%
20%
40%
60%
80%
100%
6.2% 9.5% 12.1%
38.0%
45.5%47.2%
30.6%
30.9% 19.4%
9.6%
5.8%9.9%
15.7%8.4% 11.4%
Public/REITs Private Institutional User/Other International
International Capital continues to prefer gateway markets, while REITs invested more heavily in secondary and tertiary markets despite an overall decline in activity.
192Q16 CAPITAL MARKETS REPORT
Man
hatta
n
Los
Ang
eles
Chi
cago
D.C
. Met
ro
Bos
ton
Dal
las
Atla
nta
Sea
ttle
San
Fra
ncis
co
*NY
C B
orou
ghs
Den
ver
Pho
enix
Nor
ther
n N
J
San
Jos
e
San
Die
go
Hou
ston
Mia
mi
Ora
nge
Cou
nty
Eas
t Bay
Aus
tin
$0
$10
$20
$30
$40
$50
$60
$56.
0
$27.
7
$19.
7
$20.
7
$19.
0
$17.
4
$15.
0
$14.
3
$13.
7
$12.
5
$12.
5
$12.
1
$10.
7
$10.
5
$10.
1
$8.8
$8.0
$8.0
$7.2
$7.0
$59.
7
$29.
3
$21.
4
$20.
5
$16.
2
$18.
7
$16.
0
$12.
4 $16.
3
$13.
3
$9.8
$9.7
$9.0 $11.
2
$7.7
$13.
2
$8.2
$7.2
$7.2
$5.5
Current One Year Ago
Bill
ions
* Includes Brooklyn, Queens, Bronx, Staten Island and Long Island
TOTAL SALES VOLUMEMajor Metropolitan Cities; 12-Month Totals; All Property Types
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
Bay Area = $31.4 Billion
New York City = $68.5 Billion
Total sales volume in the United States is 4.9% lower than one year ago with declining activity in more than half of the top 20 markets.
202Q16 CAPITAL MARKETS REPORT
OFFICE TRENDSAverage Price Per Square Foot; Institutional Quality
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016$150
$200
$250
$300
$350
$400
$314
$186
$349
United States 10-Year Average
[10-Year Average = $280 PSF]
Prices in major markets continued to climb in the second quarter, albeit at a slower pace than previous quarters.
Man
hatta
n
San
Fra
ncis
co
Bos
ton
San
Jos
e
Was
hing
ton
D.C
.
Los
Ang
eles
Sea
ttle
Mia
mi
Aus
tin
Uni
ted
Sta
tes
San
Die
go
Por
tland
Den
ver
Ora
nge
Cou
nty
Chi
cago
$0
$250
$500
$750
$1,000
$1,250
$1,0
62
$805
$715
$650
$610
$535
$469
$405
$350
$349
$326
$319
$307
$305
$258
212Q16 CAPITAL MARKETS REPORT
OFFICE TRENDSAverage Cap Rate; Institutional Quality
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20164%
5%
6%
7%
8%
5.0%
7.6%
5.7%
United States 10-Year Average
[10-Year Average = 5.8%]
Cap rates in some United States cities have begun to expand after several years of compression.
Man
hatta
n
San
Fra
ncis
co
Was
hing
ton,
DC
Bos
ton
Sea
ttle
San
Jos
e
Mia
mi
Los
Ang
eles
Ora
nge
Cou
nty
Uni
ted
Sta
tes
San
Die
go
Den
ver
Atla
nta
Chi
cago
0%
2%
4%
6%
4.4%
4.4%
4.9%
4.9% 5.
1% 5.2% 5.3% 5.4% 5.5% 5.
7%
5.7% 5.8% 5.9% 6.0%
222Q16 CAPITAL MARKETS REPORT
MULTIHOUSING TRENDSUnited States: Primary and Secondary Markets
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
On a price per unit basis, secondary markets have grown 11.9%, year-over-year compared to 2.3% in primary markets.
2006
2Q06
3Q06
4Q06
2007
2Q07
3Q07
4Q07
2008
2Q08
3Q08
4Q08
2009
2Q09
3Q09
4Q09
2010
2Q10
3Q10
4Q10
2011
2Q11
3Q11
4Q11
2012
2Q12
3Q12
4Q12
2013
2Q13
3Q13
4Q13
2014
2Q14
3Q14
4Q14
2015
2Q15
3Q15
4Q15
2016
2Q16
4%
5%
6%
7%
4.5%
5.3%
Primary Markets Secondary Markets
Cap Rates
2006
2Q06
3Q06
4Q06
2007
2Q07
3Q07
4Q07
2008
2Q08
3Q08
4Q08
2009
2Q09
3Q09
4Q09
2010
2Q10
3Q10
4Q10
2011
2Q11
3Q11
4Q11
2012
2Q12
3Q12
4Q12
2013
2Q13
3Q13
4Q13
2014
2Q14
3Q14
4Q14
2015
2Q15
3Q15
4Q15
2016
2Q16
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$306,916
$143,284
Primary Markets Secondary Markets
Price Per Unit
232Q16 CAPITAL MARKETS REPORT
MULTIHOUSING TRENDSPrimary Market Pricing Matrix
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
Cap rates in the six major markets continue to compress year-over-year, while per unit pricing remains relatively flat.
3.5% 4.0% 4.5% 5.0% 5.5%$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
Manhattan
Boston
Washington DC
Chicago
San Francisco
Los Angeles
Manhattan
Boston
Washington DC
Chicago
San Francisco
Los Angeles
Cap Rate
Pric
e Pe
r Uni
t
2Q16
2Q15
242Q16 CAPITAL MARKETS REPORT
RETAIL TRENDSUnited States: Primary Markets vs. Secondary Markets
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
2006
2Q06
3Q06
4Q06
2007
2Q07
3Q07
4Q07
2008
2Q08
3Q08
4Q08
2009
2Q09
3Q09
4Q09
2010
2Q10
3Q10
4Q10
2011
2Q11
3Q11
4Q11
2012
2Q12
3Q12
4Q12
2013
2Q13
3Q13
4Q13
2014
2Q14
3Q14
4Q14
2015
2Q15
3Q15
4Q15
2016
2Q
16
4%
5%
6%
7%
8%
9%
5.3%
5.9%
Primary Markets Secondary Markets
Cap Rates
2006
2Q06
3Q06
4Q06
2007
2Q07
3Q07
4Q07
2008
2Q08
3Q08
4Q08
2009
2Q09
3Q09
4Q09
2010
2Q10
3Q10
4Q10
2011
2Q11
3Q11
4Q11
2012
2Q12
3Q12
4Q12
2013
2Q13
3Q13
4Q13
2014
2Q14
3Q14
4Q14
2015
2Q15
3Q15
4Q15
2016
2Q16
$0
$100
$200
$300
$400
$500
$600
$469.15
$228.60
Primary Markets Secondary Markets
Price Per Square Foot
Year-over-year cap rates in primary markets have expanded by 40 basis points, while yields in secondary markets have compressed 10 basis points.
252Q16 CAPITAL MARKETS REPORT
BOSTON LOS ANGELES MANHATTAN
RETAIL TRENDSUrbanization In Premier Markets
MIAMI SAN FRANCISCO
The retail landscape in Boston is
expanding. Landlords are starting to want
more unique retailers as well as pop-up
tenants to add to the experience of the
property.
$590$/SF
22.2%3-YEAR $/SF
GROWTH
Downtown Los Angeles has over 300,000
square feet of retail space now under
construction, creating new opportunities
for tenants and landlords.
$713$/SF
22.3%3-YEAR $/SF
GROWTH
Manhattan has had a recent burst of
activity in casual dining restaurants. With
the demand of new eateries, landlords are
trying to appeal to both office and
residential tenants.
$2,419$/SF
46.8%3-YEAR $/SF
GROWTH
The influx of Millennials to Downtown Miami
has brought many restaurants and retailers
to the area; forecasting great opportunities
in the future.
$1,060$/SF
61.8%3-YEAR $/SF
GROWTH
San Francisco real estate has become
popular for both domestic and international
buyers; rents continue to climb while
interest rates remain relatively low.
$908$/SF
43.7%3-YEAR $/SF
GROWTH
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
262Q16 CAPITAL MARKETS REPORT
Source: Newmark Grubb Knight Frank Research, Smith Travel Research
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-YTD
-20%
-15%
-10%
-5%
0%
5%
10%
2.9%
RevPAR Percentage Change
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-YTD
$70
$80
$90
$100
$110
$120
$130
50%
55%
60%
65%
70%
$121.19
65.5%
ADR Occupancy
HOSPITALITY TRENDSUnited States
*Data is annualized, 2016 is trailing 12 months as of May.
United States RevPAR continues to increase albeit at a slower acceleration than last year.
272Q16 CAPITAL MARKETS REPORT
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics, AAPA survey
INDUSTRIAL TRENDSUnited States
Pricing remains in a range just below the historical peak with recent volume tied to portfolio sales and activity near the primary markets (LA, NY, Seattle).
Los
Ang
eles
Long
Bea
ch
New
Yor
k/Je
rsey
Sav
anna
h
Sea
ttle
Ham
pton
Roa
ds
Oak
land
Hou
ston
Cha
rlest
on
Hon
olul
u
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
8,160,458.0
7,192,066.0
6,371,720.0
3,737,402.03,529,446.0
2,549,271.02,277,521.02,130,544.01,973,204.0
1,213,129.0
Largest United States Container Ports (TEU’s)
Mill
ions
2006
2Q06
3Q06
4Q06
2007
2Q07
3Q07
4Q07
2008
2Q08
3Q08
4Q08
2009
2Q09
3Q09
4Q09
2010
2Q10
3Q10
4Q10
2011
2Q11
3Q11
4Q11
2012
2Q12
3Q12
4Q12
2013
2Q13
3Q13
4Q13
2014
2Q14
3Q14
4Q14
2015
2Q15
3Q15
4Q15
2016
2Q16
$0
$50
$100
$150
$200
$250
$181
$107
Primary Markets Secondary Markets
Price Per Square Foot
282Q16 CAPITAL MARKETS REPORT
HEALTHCARE TRENDSMedical Office Building Spotlight
Source: Newmark Knight Frank Research, Real Capital Analytics
Cap rates fell to 7.0% in 2Q16 while
the average price per square foot
increased to $250.
Medical office building transactions
exceeded $11 billion in 2015, a 13%
increase year-over-year.
Healthcare has been the largest and
fastest growing component of the
national GDP, expected to comprise
a 20% share of production by 2022
Healthcare occupations are
projected to have the fastest
employment growth between 2014
and 2024, adding 2.3 million jobs, or
roughly 1 in 4 new jobs.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016$0
$50
$100
$150
$200
$250
$300
2%
3%
4%
5%
6%
7%
8%
9%
Price Per Square Foot Cap Rates
2007 2012 2017 202216.0%
17.0%
18.0%
19.0%
20.0%
21.0%
0
1
2
3
4
5
6
$2.298
$2.807
$3.660
$5.009
16.4%
17.9%
18.4%
19.9%
Expenditures (Trillions) % of GDP
Medical office has proven more resilient than most asset types with an average vacancy rate of 10% since 2007.
292Q16 CAPITAL MARKETS REPORT
DEVELOPMENT SITE TRENDSSales Volume: Primary Markets vs. Secondary Markets
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016$0
$1,000,000,000
$2,000,000,000
$3,000,000,000
$4,000,000,000
$5,000,000,000
$6,000,000,000
$7,000,000,000
$8,000,000,000
$0
$1,000,000,000
$2,000,000,000
$3,000,000,000
$4,000,000,000
Primary Markets Secondary Markets
Resistance to pricing as well as a healthy pipeline of development activity has led to a pullback in sales volume.
DEBT MARKET STATISTICS
312Q16 CAPITAL MARKETS REPORT
CMBS ISSUANCEUnited States
Source: Newmark Grubb Knight Frank Research, Commercial Mortgage Alert
CMBS ISSUANCE
Early projections called for the
market to reach nearly $125 billion for the
year. However, those forecasts
have been adjusted to
approximately $70 billion after a volatile first
half of the year.
CMBS issuance totaled $30.7 billion through the first half of 2016, down 43.7% compared to $54.5 billion through the first half of 2015.
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-YTD$0
$50
$100
$150
$200
$250
$92.6
$166.5
$198.4
$228.6
$12.1$2.7
$11.6
$32.7
$48.4
$86.1$94.1
$101.0
$30.7
Bill
ions
322Q16 CAPITAL MARKETS REPORT
CMBS VOLUMETop Markets by Property Type
Source: Newmark Grubb Knight Frank Research, Trepp
The office and multihousing sectors continue to attract the highest volume of CMBS loans, with gateway markets the preferred destination.
Office Multihousing Retail Hotel Industrial
New York$2.5 B
Los Angeles$1.1 B
New York$628 M
New York$195 M
San Diego$22 M
San Francisco$476 M
Denver$924 M
Las Vegas$359 M
Los Angeles$129 M
Des Moines$18 M
Boston$454 M
San Francisco$675 M
Boston$202 M
New York$125 M
Anchorage$16 M
San Diego$424 M
Dallas$533 M
Norfolk$175 M
Houston$100 M
Miami$13 M
Washington, D.C.$265 M
Chicago$430 M
Washington, D.C.$104 M
Nashville$80 M
Columbia (SC)$12 M
332Q16 CAPITAL MARKETS REPORT
Source: Newmark Grubb Knight Frank Research, Mortgage Bankers Association
DEBT MARKET UPDATECommercial and Multihousing Mortgage Debt Outstanding
Commercial banks increased their
mortgage debt over the past year.
They continue to hold the largest
share of the outstanding commercial
and multihousing mortgage debt,
currently at $1.1 trillion, an increase
of $118.6 billion, or 12.0%, year-
over-year.
Multihousing mortgage debt
outstanding grew by $18.2 billion
quarter-over-quarter, with Agency
and GSE increasing their debt
outstanding by $11.3 billion, or
2.5%.
Current One Year Ago
Total commercial and multihousing debt outstanding rose to $2.86 trillion, up 1.7% quarter-over-quarter.
Banks 38.6%
CMBS 17.6%
Life Insurance 13.9%
Others 13.4%
Agency & GSE 16.5%
Banks 36.7%
CMBS 19.9%
Life Insurance 13.5%
Others 14.2%
Agency &
GSE 15.7%
342Q16 CAPITAL MARKETS REPORT
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024$0
$50
$100
$150
$200
$250
$300
$350
$400
$187$159
$133 $135 $151 $171 $188 $181$149
$106$72
$78$96
$104$136
$48$38
$35$27
$33
$12
$27
$24$24
$26
$27
$27 $27$28
$29
$27
$25$25
$84$85
$90
$100
$106 $103$94
$86
$75
$65$57
Bank CMBS Insurance Companies Other
COMMERCIAL MORTGAGE MATURITIESUnited States
Source: Newmark Grubb Knight Frank Research, Trepp with Federal Reserve Flow of Funds Data
2016
Bank: $133BCMBS: $104BInsurance: $26BOther*: $90B
*Includes Fannie Mae, Freddie Mac, bridge loansand hard money loans
Over the next 24 months, there will be approximately $750 million of commercial mortgages maturing.
www.ngkf.com
New York CityHEADQUARTERS125 Park AvenueNew York, NY 10017212.372.2000
Todd P. HershmanAssociate Director [email protected]
Jonathan MazurManaging Director, [email protected]
All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Grubb Knight Frank (NGKF) has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NGKF. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient’s choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NGKF, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.
Newmark Grubb Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents.
Newmark Grubb Knight Frank Research Reports are also available at www.ngkf.com/research
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