Emerging Trends in Real Estate 2012 - Urban Land Institute

More documents

Recommendations

Info

8 7 6 5 4 3 2 1 Boston 0 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 6.60 for mutual fund firms and other asset managers spark concern in the Financial District, whereas the Back Bay outperforms: Liberty Mutual erects a new tax break–subsidized building to expand operations. Most other office projects stay on drawing boards without greater leasing velocity, and development “proves difficult anyway because of barriers to entry.” Any new building activity will concentrate around the seaport and Fan Pier along the harbor. The apartment market performs exceptionally well, and condo prices have remained surprisingly buoyant. New multifamily residences being built near Fenway Park between the Back Bay and Longwood Medical Center along Boylston Street cater to doctors and medical personnel. The corridor steadily evolves from semi-suburban to urban density. Housing prices increase again after suffering only modest declines in the downturn. Following the lead of other cities looking to ramp up their economies, local leaders push a $2 billion expansion of the convention center, already the Exhibit 3-7 U.S. Apartment Buy/Hold/Sell Recommendations by Metro Area Los Angeles Seattle San Diego Boston New York City Washington, D.C. Denver Houston Dallas/Fort Worth Miami Phoenix Chicago Atlanta Philadelphia Source: Emerging Trends in Real Estate 2012 survey. Buy Hold Sell San Francisco 77.78 11.11 11.11 70.92 19.86 9.22 70.64 20.64 8.73 70.00 21.67 8.33 67.72 19.69 12.60 67.54 17.54 14.91 61.18 15.79 23.03 60.98 24.39 14.63 60.36 26.13 13.51 54.76 26.98 18.25 54.21 36.45 9.35 45.90 31.97 22.13 45.22 37.39 17.39 36.30 37.67 26.03 35.42 51.04 13.54 0% 20% 40% 60% 80% 100% 8 7 6 5 4 3 2 1 0 '94 '96 '98 Seattle '00 '02 largest in the Northeast upon opening just seven years ago, but still too small to attract big-league meetings. Seattle (6). “Starting to fire on all cylinders,” Seattle bounces back thanks to its diversified new age corporate base, including Amazon, Microsoft, and Google, as well as other formidable employers like Boeing, Costco, and Nordstrom. Even Facebook and Sales Force move into town, tapping a wellspring of local brainpower drawn to the attractive Northwest gateway for high-paying tech jobs. Landlords gain confidence: some job growth resumes, office absorption ramps up, and institutional investor appetites for multifamily and office space appear “insatiable.” New office buildings, delivered during the dismal 2008 and 2009 period, lease up; in 2012, the downtown vacancy rate could drop into the low teens, and rents probably will increase. “It’s a complete turnaround. Institutions may pull the trigger on new office development soon. The window is open.” Apartment vacancies sink below 5 percent in and around downtown, and work begins on new highrise and mid-rise projects. Developers can achieve higher rents in these 24- hour, close-in districts. The always-tight industrial market—the survey’s numberone buy for warehouses—remains “steady-eddy” in low-yield, low-volatility suspension. Some big-box retail centers '04 '06 '08 '10 '12 6.60 34 Emerging Trends in Real Estate ® 2012
Chapter 3: Markets to Watch took some hits, and empty store sites have been hard to fill. Suburbs fare less well, too, especially farther away from the Seattle core: “They’re off investor and tenant radar screens.” Bellevue holds up, but its velocity of recovery lags downtown. By 2016, a $2 billion tunnel under the city— “the Big Dig West,” one of the nation’s most ambitious infrastructure projects— will replace a rusting harborside viaduct. The project promises to transform the downtown waterfront with parks and housing, as well as new vistas of Puget Sound and surrounding mountains from existing office and apartment buildings. This city gets better and better. San Jose (7). Just south of the San Francisco gateway, San Jose does not skip a beat despite competition from the City by the Bay’s downtown tech surge. The elite of microchips and digital worlds continues to congregate in and around Silicon Valley’s research and development bastion. “That’s one place in the country where office parks still work.” Houston (8). The U.S. energy capital profits from lasting high oil prices and expands off a Texas-sized service-sector employment engine. It is one place where work-starved Americans have a better-than-decent chance to find a job, and a modest cost of living, including inexpensive housing, stretches what 8 7 6 5 4 3 2 1 Houston 0 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 6.46 wages can buy. Developers prepare to restart after an unaccustomed hiatus in an ever-expanding metropolis. After the crash, local construction lenders doused development. As a result, constrained building activity and the influx of population combine to tighten residential markets. For 2012, single-family housing “actually shows signs of life” thanks to low interest rates, and apartment developers will “vie to get projects out of the ground.” Exxon Mobil shakes up the office market, announcing plans to consolidate operations in a new suburban campus. “They will leave a void downtown, but in Texas we can grow out of any problems.” Panama Canal expansion should help increase port traffic and buoy warehouse demand. Houston’s Gulf Coast location provides access to population centers to the east, north, and west, but the harbor will require dredging and new dock facilities to accommodate deep-hulled ships. Los Angeles (9). Despite fashionable, “in-high-gear” California bashing—dysfunctional state government, broken tax structure, overblown business regulation, and outrageous cost of living—can you bet against a huge self-sustaining economy that has high-paying industries like entertainment, aerospace, and financial services, as well as the nation’s largest port Do you ignore the attractive quality of life and embedded 8 7 6 5 4 3 2 1 0 '94 Los Angeles '96 '98 '00 '02 '04 '06 '08 '10 6.30 '12 affluence that supports service industries and the retail sector Should investors shy away from southern California and Los Angeles Most Emerging Trends respondents firmly reject the critics. “It will come back,” one says, and, notably, the metropolitan area ranks as the nation’s number-two apartment and industrial investment market in this year’s survey. Relatively sky-high housing costs (even after major declines) keep apartments full and rents up: regional multifamily investments rate perennial best-bet status. L.A.–Long Beach industrial spaces, which handle one-third of U.S. container traffic, “have recovered nicely”; cap rates return to 2006–2007 levels. Inland Empire warehouses should continue to rebound, too—as long as new construction remains tamped down. Even if Asian shippers divert more goods through the Panama Canal—eating into West Coast market shares—port volumes should continue to increase because of overall anticipated growth in import/ export activity. Business center hotels also do well, and housing prices start to climb back after precipitous declines: the closer to the coast, the better for value upticks. The bad news is concentrated in the office sector, where markets remain exceedingly soft. Vacancies range from the mid- to high teens in a tenant’s market featuring rich concession packages. Companies show no signs of stepping up hiring enough to improve occupancies significantly during 2012, although lack of new construction will help absorption trends. Devastated by the mortgage industry breakdown, Orange County (14) regroups, buttressed by its position just south of the L.A.–Long Beach gateway. San Diego (10). The increasingly suburbia-oriented office market goes off many investors’ radar screens. Mid-teens vacancy rates across most submarkets and soft rents favor tenants, who actively engage in trading up to better space at cheaper lease terms. The city’s hard-toget-to, off-global-pathway status deters Emerging Trends in Real Estate ® 2012 35
Page 1 and 2: Emerging Trends in Real Estate ® 2
Page 3 and 4: Emerging Trends in Real Estate ® C
Page 5: Executive Summary F or 2012, U.S. r
Page 8 and 9: Exhibit 1-1 Importance of Various I
Page 10 and 11: Exhibit 1-3 Index Returns: Real Est
Page 12 and 13: gateway cities at or near market bo
Page 14 and 15: Exhibit 1-8 Firm Profitability Fore
Page 16 and 17: occasional build-to-suits, the odd
Page 19 and 20: chapter 2 Real Estate Capital Flows
Page 21 and 22: Chapter 2: Capital Flows Exhibit 2-
Page 27 and 28: Chapter 2: Capital Flows and deleve
Page 29: Chapter 2: Capital Flows Exhibit 2-
Page 32 and 33: Exhibit 3-1 Investment Prospects fo
Page 34 and 35: Exhibit 3-5 Metro Area Investment P
Page 36 and 37: Edmonton 6.24 Vancouver 6.61 Calgar
Page 40 and 41: 8 7 6 5 4 3 2 1 0 '94 '96 '98 '00 S
Page 42 and 43: caught fire, too: condos turned to
Page 44 and 45: the urban growth track for the next
Page 47 and 48: chapter 4 Property Types in Perspec
Page 49 and 50: Chapter 4: Property Types in Perspe
Page 61: Chapter 4: Property Types in Perspe
Page 64 and 65: y exports of oil from Alberta oil s
Page 66 and 67: markets to build synergistic reside
Page 68 and 69: Exhibit 5-9 Prospects for Capitaliz
Page 70 and 71: Exhibit 5-13 Canadian Office Buy/Ho
Page 72 and 73: and environmental regulations will
Page 74 and 75: conditioned by all the condo units
Page 76 and 77: esources business leads to new deve
Page 79 and 80: chapter 6 Emerging Trends in Latin
Page 81 and 82: Chapter 6: Latin America Exhibit 6-
Page 83 and 84: DLC Management Corp. Adam Ifshin DL
Page 85 and 86: The Sorbara Group Edward Sorbara Pa
Page 88:
Emerging Trends in Real Estate ® 2
show all

Emerging Trends in Real Estate 2012 - Urban Land Institute

Create successful ePaper yourself

Delete template?

Save as template?