Emerging Trends in Real Estate 2012 - Urban Land Institute

chapter 4
Property Types
in Perspective
“Get used to the new norm: rents stay about where they are—
not getting worse, but not getting much better.”
For 2012, investment and development prospects continue
to advance across all major property sectors,
led by apartments, which this year register the highest
ratings for any category in Emerging Trends history (exhibit
4-1). Unfortunately, this general improvement in sentiment does
not portend easy times. Investors should anticipate that “slow,
choppy demand will gradually absorb space, while landlords
struggle in every category except multifamily.” Developers may
lick their chops over apartment opportunities—finally they can
break ground on something—but anemic demand drivers in
other sectors turn off construction lenders. Retail, office, and
hotels score “sickly” poor to modestly poor development ratings
in the survey.
Exhibit 4-1
Prospects for Major Commercial Property Types
in 2012
Apartment 6.74
Industrial/Distribution
Hotel
Office
Investment Prospects
5.49
5.36
5.10
Slow Progress
Beyond Multifamily
Besides apartments, interviewees prefer downtown office buildings
in 24-hour cities, warehouse properties producing cash
flow in prominent port and airport gateways; full-service hotels
in the major markets; limited-service hotels without food and
beverage (Courtyard by Marriott, Hilton Garden Inn concepts);
and neighborhood shopping centers serving stable infill suburban
communities. Sentiment diminishes for power centers
(because of concerns about big-box tenants) and malls: owners
will not sell the best fortress malls (if you don’t have one, you’re
out of luck), and most other regional centers face a shaky future.
Suburban offices score the lowest investment marks; commodity
buildings in campus settings isolated from urban amenities
receive a big thumbs down.
Retail
Apartment
Industrial/Distribution
Hotel
Office
4.75
1
abysmal
Development Prospects
6.61
4.38
3.67
2.97
Retail 3.14
Source: Emerging Trends in Real Estate 2012 survey.
Note: Based on U.S. respondents only.
5
fair
9
excellent
Emerging Trends in Real Estate ® 2012
43