RERC Real Estate Report - REDI-net.com
RERC Real Estate Report - REDI-net.com
RERC Real Estate Report - REDI-net.com
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<strong>RERC</strong> © REAL ESTATE REPORT - THE NATIONAL REAL ESTATE AUTHORITY<br />
16 WWW.<strong>RERC</strong>.COM<br />
SNAPSHOT OF REAL ESTATE MARKET PERFORMANCE – 4Q 2011<br />
WINTER 2012 | VOL 40 | NO 4<br />
PERFORMANCE INDICATOR RECENT DATA IMPACT ON COMMERCIAL REAL ESTATE<br />
Vacancy Rates<br />
Rental Rates<br />
(<strong>RERC</strong>’s surveyed rent growth<br />
expectations)<br />
<strong>Real</strong> <strong>Estate</strong> Returns<br />
Capitalization Rates<br />
Percent<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
Going-In Cap Rates vs. Unemployment<br />
Sources: <strong>RERC</strong>, BLS, NBER, 4Q 2011.<br />
Office: 17.3%<br />
Industrial: 9.6%<br />
Retail: 11.0%<br />
Apartment: 5.2%<br />
Hotel: 49.0% (occupancy)<br />
Office: 2.4% to 3.2%<br />
Industrial: 2.0% to 2.7%<br />
Retail: 2.1% to 2.3%<br />
Apartment: 3.2%<br />
Hotel: 3.5%<br />
<strong>RERC</strong> Required Returns:<br />
Office: 8.1% to 9.3%<br />
Industrial: 8.6% to 9.6%<br />
Retail: 7.9% to 8.7%<br />
Apartment: 7.6%<br />
Hotel: 10.6%<br />
<strong>RERC</strong> Required Cap Rates:<br />
Office: 6.6% to 7.6%<br />
Industrial: 7.0% to 8.0%<br />
Retail: 6.4% to 7.1%<br />
Apartment: 5.8%<br />
Hotel: 8.2%<br />
Unemployment<br />
Going-In Cap Rate<br />
Recession<br />
4Q 1981<br />
4Q 1982<br />
4Q 1983<br />
4Q 1984<br />
4Q 1985<br />
4Q 1986<br />
4Q 1987<br />
4Q 1988<br />
4Q 1989<br />
4Q 1990<br />
4Q 1991<br />
4Q 1992<br />
4Q 1993<br />
4Q 1994<br />
4Q 1995<br />
4Q 1996<br />
4Q 1997<br />
4Q 1998<br />
4Q 1999<br />
4Q 2000<br />
4Q 2001<br />
4Q 2002<br />
4Q 2003<br />
4Q 2004<br />
4Q 2005<br />
4Q 2006<br />
4Q 2007<br />
4Q 2008<br />
4Q 2009<br />
4Q 2010<br />
4Q 2011<br />
NCREIF <strong>Real</strong>ized Returns:<br />
Office: 12.4% to 15.4%<br />
Industrial: 9.3% to 16.1%<br />
Retail: 12.7% to 14.7%<br />
Apartment: 15.5%<br />
Hotel: 11.8%<br />
NCREIF Implied Cap Rates:<br />
Office: 5.5% to 6.5%<br />
Industrial: 6.5% to 7.1%<br />
Retail: 6.6% to 6.9%<br />
Apartment: 5.5%<br />
Hotel: 6.9%<br />
According to Reis, Inc., vacancy for the retail sector remained<br />
unchanged during fourth quarter 2011. In contrast, the office and<br />
apartment sectors’ vacancy rates decreased. The industrial warehouse<br />
sector vacancy rate declined during fourth quarter, according<br />
to the CoStar group. Smith Travel Research reported that hotel<br />
occupancy decreased <strong>com</strong>pared to third quarter.<br />
<strong>RERC</strong>’s fourth quarter 2011 expected rental rate expectations<br />
were higher for the two office sectors, industrial warehouse sector,<br />
neighborhood/<strong>com</strong>munity retail sector, and hotel sector. In contrast,<br />
expected rental rates declined for the industrial R&D and flex sectors<br />
and retail power center sector. The expected rental rate for the<br />
regional retail mall and apartment sectors remained unchanged.<br />
<strong>RERC</strong>’s required returns for the office and industrial sectors were flat,<br />
while those for the apartment and retail sectors decreased during<br />
fourth quarter 2011. NCREIF’s realized returns for all of the property<br />
sectors declined during fourth quarter.<br />
<strong>RERC</strong>’s required going-in cap rate for the office sector increased,<br />
while the required going-in cap rates for the industrial, apartment,<br />
and hotel sectors declined during fourth quarter 2011. NCREIF’s<br />
implied cap rates for all of the property sectors declined during<br />
fourth quarter.<br />
© 2012 REAL ESTATE RESEARCH CORPORATION. ALL RIGHTS RESERVED.<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
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