REAL ESTATE REPORT - REDI-net.com

REAL ESTATE REPORT 

Defying 

Expectations 

The National Real Estate Authority 

WINTER 2011 | VOL 39 | NO 4 

RERC® | Addressing the research needs of real estate professionals since 1931.

February 2011 

Dear Clients, Friends and Peers: 

The year 2011 is a milestone for the economy, the capital markets and commercial real estate, and further, it marks my 20-year anniversary 

with Real Estate Research Corporation (RERC). Throughout this time, RERC has stayed grounded to its founding 80 years ago by providing 

the core services of research, customized consulting, high-level valuation advice, and specific transaction analysis—all while maintaining 

the highest level of independence and integrity, and by watching out for each client’s best interests. 

We have been through a lot together during these past 20 years, including several recessions, several bubbles (and busts), two major real 

estate cycles, and the near-collapse of our financial system, and RERC has stayed at the forefront of these events through the RERC Real 

Estate Report. The report has changed over the years, both in appearance and function, but it has always been based on the collective 

survey responses of professionals in the industry and RERC’s independent analysis of their insights and data. In addition to serving as an 

unbiased voice for the institutional property market and providing clear commentary on how the economy affects the investment environment 

for commercial real estate, the RERC Real Estate Report provides investment criteria for 10 major property types, four regional 

markets, and 48 major metropolitan markets. 

Besides required capitalization rates, pre-tax yield rates, and buy-sell-hold recommendations, we 

now include investment conditions ratings, return vs. risk ratings, value vs. price ratings, and other 

data. The design of the RERC Real Estate Report has been modernized several times over the years 

(including a new layout beginning in this issue), and the method of delivery has been updated 

to include access to the reports and historical data through the RERC DataCenter. Thousands of 

professionals use RERC’s research each quarter to help make investment decisions, including pension 

funds, insurance companies, investment firms, public and private investors, foreign investors, 

banks, real estate and capital advisors, brokers, appraisal firms, real estate investment trusts (REITs), 

government entities, real estate attorneys, and others. 

One of the most recognized features about the RERC Real Estate Report is our traditional black cover with the front cover representing 

our theme for the quarter. Over the years, we have chosen many prescient themes, including “After the Fall” reflecting the investment 

environment after 9-11, and “Batten Down the Hatches” in fall 2007 just before the credit crisis began. Now, as the commercial real estate 

market recovers, the title and theme of our winter 2011 issue of the RERC Real Estate Report is “Defying Expectations.” While there are 

still many difficulties, including high vacancy rates and weak demand, particularly in the secondary and tertiary markets, commercial real 

estate is doing better as an asset class than anyone expected (average required pre-tax yield rate of 9.0 percent in fourth quarter 2010). 

One region that is defying expectations is the California office market, as demonstrated in an article authored by William L. Corbin, MAI, 

managing director in RERC’s Los Angeles office. Bill’s article analyzes the investment conditions and investor behavior unique to this market, 

and we invite you to read “2010 Investor Behavior as a Guide for 2011,” beginning on Page 32 of the RERC Real Estate Report. 

We would also like to thank the many commercial real estate experts who have shared your insight as you complete RERC’s investment 

surveys each quarter. Your views are critical to RERC getting the data “right,” and we appreciate your commitment and willingness to share 

your knowledge with the industry. 

Sincerely, 

Kenneth P. Riggs, Jr., CFA, CRE, FRICS, MAI 

President & CEO - Real Estate Research Corporation 

312.587.1900 

Jules H. Marling, III, CRE, FRICS, MAI 

Managing Director - Real Estate Research Corporation 

312.587.0351


T H E N AT I O N A L R E A L E S TAT E AU T H O R I T Y | W I N T E R 2011 | V O L 39 | NO 4 

© 2011 Real Estate Research Corporation. All rights reserved. Data and analysis herein may not be copied or transmitted in any form without express written consent of RERC.

RERC © REAL ESTATE REPORT - THE NATIONAL REAL ESTATE AUTHORITY 

IN THIS VOLUME 

1 RERC’S NATIONAL OVERVIEW 

Investment Environment .....................................................................................................................2-4 

How Is Commercial Real Estate Affected? ................................................................................ 4-8 

Summary .........................................................................................................................................................11 

Risk-Adjusted Return Analysis ......................................................................................................13-14 

Snapshot of Real Estate Space and Market Performance ..................................................15 

Economic Trends Charts .................................................................................................................16-17 

18 PROPERTY TYPE OVERVIEW 

Office, Industrial, Retail, Apartment, and Hotel Sectors 

24 INSTITUTIONAL ANALYSIS & REGIONAL CRITERIA 

Institutional Pre-Tax Yield Analysis ...................................................................................................24 

Institutional Going-In Capitalization Rate Analysis ............................................................... 25 

Institutional Terminal Capitalization Rate Analysis ................................................................ 25 

Regional Investment Criteria (Tiers 1-3) ................................................................................ 26-28 

29 REAL ESTATE EQUITY OVERVIEW 

Survey of Mortgage Quotes – John B. Levy & Company, Inc. ........................................ 30 

32 2010 INVESTOR BEHAVIOR AS A GUIDE FOR 2011 

By RERC Managing Director William L. Corbin, MAI 

37 METROPOLITAN INVESTMENT CRITERIA 

Survey and RERC Investment Criteria for 48 Major U.S. Markets 

62 SURVEY RESPONDENTS - WINTER 2011 

68 RERC SCOPE AND METHODOLOGY 

IV WWW.RERC.COM 

WINTER 2011 | VOL 39 | NO 4 

RERC EDITORIAL STAFF 

Publisher 

Kenneth P. Riggs, Jr. 

CFA, CRE, FRICS, MAI, CCIM 

Chief Advisor 


Lead Analyst 

Brian Velky, CFA 

Research Analysts 

Cliff Carlson Charles Gohr 

David Kelly Lindsey Kuhlmann 

Meredith Steffen Ye Thway 

Morgan Westpfahl 

Editor-in-Chief 

Barb Bush 

Data Management 

Scott Hamerlinck 

Ben Neil 

Daniel Warner 

Research Assistant 

Jeffrey Harms 

Layout & Design 

Jeff Carr 

Editorial and Production Committee 

Del H. Kendall, CRE, MAI 

Donald A. Burns, CRE, FRICS, MAI 

Gregory P. Kendall, CRE, MAI 

Kent D. Steele, CRE, FRICS, MAI 

William L. Corbin, MAI 

Steven W. Thompson, MAI 

Greg Philipp 

Kyle Corcoran 

Terri Cotter 

Nicole Hardy 

The RERC Real Estate Report is published four times a year by: Real Estate Research Corporation, 980 North Michigan Ave., Suite 1400, Chicago, IL 60611. Copyright © 2011 by Real Estate 

Research Corporation. All rights reserved. No part of this publication may be reproduced in any form, by microfilm, xerography, electronically, or otherwise, or incorporated into any information 

retrieval system, without the written permission of the copyright owner. 

Send subscription requests or address changes to Real Estate Research Corporation, Attention: Publications, 99 East Bremer Ave., Waverly, IA 50677, or call (319) 352-1500. Single copies 

and back issues, if available, are $225 regularly for hard copy and $200 for an electronic version (PDF). An annual subscription is $395 for the electronic version and $500 for a hard copy 

subscription. All are available at www.rerc.com. This publication is designed to provide accurate information in regard to the subject matter covered. It is sold with the understanding that 

the publisher is not engaged in rendering legal or accounting services. The publisher advises that no statement in this issue is to be construed as a recommendation to make any real estate 

investment or to buy or sell any security or as investment advice. The examples contained in the publication are intended for use as background on the real estate industry as a whole, not as 

support for any particular real estate investment or security. Although the RERC Real Estate Report uses only sources that it deems reliable and accurate, Real Estate Research Corporation 

does not warrant the accuracy of the information contained herein. 

© 2011 REAL ESTATE RESEARCH CORPORATION. ALL RIGHTS RESERVED.

WINTER 2011 | VOL 39 | NO 4 

RERC’S NATIONAL OVERVIEW 

DEFYING EXPECTATIONS 

With a full year of positive economic growth under our belts and 

stronger growth expected for 2011, the Dow Jones Industrial Average 

surpassing the mystical 12,000 mark, and more capital finally 

available to investors, we are reminded of how many hurdles the 

U.S. economy has already overcome since the Great Recession 

officially ended. While there are many other obstacles yet to cross, 

including debt that is “unsustainable” by everyone’s measure, a 

housing market that is still looking for bottom, and too few new 

jobs to drive the recovery, confidence seems to be creeping back 

(albeit tentatively). But with the recent crisis in Egypt and elsewhere 

in the Middle East, we are also being reminded how fragile 

the geopolitical climate is and how quickly the economic stability 

of the U.S. (and world) can be affected. 

The struggling economy makes it all the more astounding how 

well the institutional commercial real estate market is starting 

to perform. Required capitalization rates continue to compress, 

expected rental growth is increasing, and NCREIF returns are 

approximately 13 percent. Although there are still serious difficulties 

for some property types in many of the secondary and tertiary 

markets, high-quality institutional properties—particularly the 

office and apartment sectors—in the top-tier markets are meeting 

the challenges presented by this uncertain economy head-on and 

coming out on top. 

We shouldn’t be surprised, however. Investor psychology reminds 

us how difficult it is for investors to shift expectations. When things 

deteriorate as they did at the beginning of the recession, investors 

usually don’t recognize or believe things can become bad so 

quickly. And when things improve, as they are now, investors usually 

don’t recognize the shift for the better as soon as it occurs, 

either. But the facts speak for themselves. It isn’t just the prices of 

these top properties that are astounding (although they are), or 

the fact that there are multiple bidders competing for the buy (and 

they are). But when the World Bank pays $897 per square foot for 

the office building at 1225 Connecticut Ave. in Washington, D.C., or 

Boston Properties pays $930 million for the John Hancock Tower in 

Boston, or Google pays $538 per square foot for their headquarters 

building at 111 Eighth Ave. in New York, it is clear the market is 

moving. By all accounts, the commercial real estate market is defying 

expectations. 

© 2011 REAL ESTATE RESEARCH CORPORATION. ALL RIGHTS RESERVED. 


WWW.RERC.COM 1


INVESTMENT ENVIRONMENT 

Slightly Stronger Economic Growth Expected in 2011 

With the initial estimate of fourth quarter 2010 growth of gross 

domestic product (GDP) at 3.2 percent, according to the Bureau of 

Economic Analysis (BEA), the U.S. economy ended 2010 with a real 

GDP growth rate of 2.9 percent, slightly higher than the 2.6 percent 

growth in 2009. Although economic growth for fourth quarter was 

slightly lower than investor expectations and was more sluggish 

than any of us hoped for the year overall, it has been positive each 

quarter in 2010, and thus far, we have avoided the much-feared 

“double-dip.” More importantly, the economy seems to have 

acquired a little more steam as we move into 2011, and the Federal 

Reserve expects GDP to grow at a slightly higher pace of between 

3 percent and 4 percent in 2011. 

The International Monetary Fund (IMF) has issued a slightly rosier 

projection for the U.S. economy as well, reporting that they expect 

the U.S. economy to grow 3.0 percent in 2011 (this is up from their 

October 2010 projection of 2.3 percent). 

In addition, the Conference Board’s Leading Economic Index (LEI) 

rose during each of the past 6 months, increasing 3.3 percent during 

the 6-month span through December 2010 and 1.0 percent in 

the month of December alone. The LEI for the U.S. is now 112.4, the 

highest it has been since September 2007, when it stood at 137.4. 

According to many economists, the Federal Reserve’s recent 

expansion of their quantitative easing program (QE2) by buying 

$600 billion in treasuries through second quarter, along with 

their continued commitment to keeping interest rates low “for an 

extended period,” is helping to stimulate stock market returns and 

contributing to the “wealth effect” for households. 

2 WWW.RERC.COM 

Deficit Still Growing 

WINTER 2011 | VOL 39 | NO 4 

The Congressional Budget Office (CBO) announced that the federal 

budget will reach a new record of nearly $1.5 trillion in fiscal 

year (FY) 2011, and as a share of GDP, is expected to increase to 9.8 

percent in 2011. As a percentage of economic output, the 9.8-per- 

“It will take awhile longer for the economy to recover. Our 

current economic policies appear to cause an uncertain 

regulatory/tax picture for businesses.” 

cent deficit would be the second-largest in 65 years, behind only 

the 10-percent level in 2009. The increase in the deficit is generally 

due to the weak economy, along with the higher government 

spending and the tax cuts lawmakers have initiated to help stimulate 

economic growth. 

Treasury officials warned lawmakers that the U.S. could hit the $14.3 

trillion debt ceiling by the end of March 2011. Debt is expected to 

increase to $20.9 trillion by 2017 due to increased healthcare costs, 

an aging population, and soaring interest, predicts the CBO. The 

credit rating agencies repeated their warnings that the U.S. needed 

to reverse the direction of its debt if it hopes to keep its AAA rating. 

Hope for Employment? 

- Global Life Insurance/Investment Manager 

According to the Bureau of Labor Statistics (BLS), the unemployment 

rate declined to 9.4 percent in December 2010, with nonfarm 

payroll employment increasing by 103,000 during the month. 

Although this rate of growth barely keeps up with the addition of 

new entrants into the workforce each month, at least it is a positive 


WINTER 2011 | VOL 39 | NO 4 

number. The economy added 1.1 million jobs during the past year. 

It is important to note that the 9.4-percent unemployment rate is 

the lowest it has been in more than a year and a half, but government 

figures also indicate that the rate declined primarily because 

a record number of people stopped looking for work. This, combined 

with the layoffs still to come, and it appears that the nation’s 

jobless recovery is likely structural in nature and that long-term 

unemployment in the U.S. could come to resemble the long-term 

high unemployment rates in Europe. Watch for tens of thousands 

of state and local government workers, including police officers, 

teachers, and garbage collectors, to receive pink slips as revenues 

fail to meet budgets this year (10,000+ state workers projected 

to lose their jobs this year in New York alone, according to Gov- 

“It will be more than a year before we see sustainable 

economic growth. We have structural employment 

problems.” 

ernor Cuomo). Thousands more banking industry employees are 

expected to be losing jobs as well (up to 20 percent of expenses 

are expected to be cut over the next 3 years, primarily by eliminating 

staff and closing branches), according to some reports. 

Despite the weakness in the labor market, however, businesses are 

more optimistic than they have been for some time, which should 

bode well for future hiring. According to a recent survey conducted 

by the National Association for Business Economics (NABE), 42 percent 

of respondents expect to increase jobs in the next 6 months 

while only 7 percent of companies expect to shed jobs. In addition, 

NABE respondents noted that demand increased among each of 

the four industry groups surveyed, including goods-producing; 

services; finance, insurance, and real estate; and transportation, 

utilities, information, and communications. 

Are Consumers Back? 

- National Valuation Management and 

Consulting Firm 

Consumers opened their pocketbooks during the 2010 holiday 

season, with total retail sales from October through December 

2010 up 7.8 percent from the same period a year ago, according 

to the U.S. Census Bureau. This topped off a year of increases, with 

total retail sales for the entire year up 6.6 percent from 2009 figures, 

including non-store retail sales up 15.0 percent and auto and 

motor vehicle dealer sales up 14.7 percent in 2010 from the previous 

year’s sales. 

These purchases are good for manufacturing jobs. The manufacturing 

sector had expanded for 17 consecutive months as the 

year ended, according to the Institute for Supply Management 

(ISM) Manufacturing Business Survey. The January 2011 ISM report 



noted that manufacturing centered on strength in autos, metals, 

food, machinery, and computers and electronics increased, while 

those industries tied primarily to the housing industry continued 

to struggle. The report further noted that export goods outside 

the U.S. have benefitted from both global demand and the weak 

dollar, and these, along with new orders and production, provide 

momentum into first quarter 2011. 

However, consumers dipped into their savings to increase spending 

to a seasonally-adjusted 0.7 percent in December 2010, according 

to the Commerce Department. Personal income rose 0.4 percent 

from November, while the savings rate fell to 5.3 percent, 

down slightly from the previous month. Scrutiny into what consumers 

were purchasing indicated that high-income households 

were doing the majority of the spending, while “financial pressures 

on those of more modest means” continued, according to the 

Federal Reserve. 

In fact, the majority of consumers’ views of their financial situations 

have remained quite negative, according to the Thomson Reuters/ 

University of Michigan Survey of Consumers, as the Expectations 

Index worsened during the past year due primarily to stagnant 

incomes, weaker personal financial prospects, and the need for 

dipping into savings and retirement accounts. According to the 

Federal Reserve, Americans withdrew a net $311 billion from savings 

and investment accounts (or about 1.4 percent of their disposable 

income) over the past 2 years, which is deeper into their 

savings than any time in the past 60 years. In addition, personal 

bankruptcies nationwide increased to 1.53 million in 2010, a 9-percent 

increase from 2009 figures, according to the American Bankruptcy 

Institute. Filings were particularly heavy in the Pacific Southwest 

and the Southeast, with 2010 bankruptcies rising 25 percent 

in California and nearly 24 percent in Arizona. 

Hints of Inflation 

Although we are not seeing much inflation in the U.S.—the Consumer 

Price Index (CPI) for all urban consumers increased 0.5 percent 

in December 2010 on a seasonally-adjusted basis, and 1.5 

percent over the past 12 months—one of the global economic 

challenges discussed at the January 2011 World Economic Forum 

in Davos, Switzerland, was inflation. Increasing prices in some parts 

of the world are prompting concerns in the U.S., where we also 

have seen recent increases in the price of food, energy, and raw 

materials/commodities. 

But according to the Federal Reserve’s statement following 

their January meeting, “longer-term inflation expectations have 

remained stable, and measures of underlying inflation have been 

trending downward.” Others point out, however, that although 

high unemployment may help keep the cost of labor from increasing, 

higher raw material prices—wheat, coal, iron ore, and oil, to 

name a few—caused the CPI’s food index to increase 1.5 percent 

in 2010 and the energy index to increase 7.7 percent in 2010. 

WWW.RERC.COM 3


Housing Market Still Looking for Bottom 

Although the U.S. housing market had several bright moments 

during fourth quarter 2010, the majority of indicators indicated that 

the market has more pain ahead. Existing home sales increased 

12.3 percent from November to an annualized pace of 5.28 million 

units in December, the strongest monthly gain since 1999, according 

to the National Association of REALTORS® (NAR). 

In addition, new home sales jumped 17.5 percent in December to a 

seasonally-adjusted pace of 329,000 homes, the strongest monthly 

gain since the mid-1990s, according to the Commerce Department. 

However, these sales were due in great part to the 71.9-percent 

increase in the Western U.S. and the rush to take advantage of 

a homebuyer tax credit in California (which is not expected to continue). 

In fact, although new home sales in December were at their 

fastest pace since last spring, 2010 was the worst year on record for 

the homebuilding industry. 

Also, the S&P/Case-Shiller Composite 20-city home price index 

declined 1 percent in November from October, the fourth straight 

month-over-month drop. San Diego was the only city where 

prices increased, while the other 19 cities in the index posted 

monthly declines. In fact, nine of the 20 markets (Atlanta, Charlotte, 

“2012 will be stronger. We still have to burn off excess 

household debt, a housing market that has further to fall, 

expiration of fiscal stimulus, and we need an additional 

year to rebalance.” 


- Institutional Investment Advisor 

Chicago, Detroit, Las Vegas, Miami, Portland, Seattle, and Tampa) 

hit their lowest points since home values started dropping 4 years 

ago. Projections are for home prices to decline further in 2011. 

And then there is the foreclosure situation. According to Realty 

Trac Inc., banks took back more than 1 million homes in 2010. The 

top five states for foreclosures were Nevada, Arizona, Florida, California, 

and Utah. Foreclosure filings are expected to increase about 

20 percent in 2011. 

RERC Survey Respondents Encouraged by Economic Growth 

As shown in Exhibit 1, RERC’s institutional investment survey 

respondents saw the economy improve during fourth quarter 2010, 

and gave the economy a score of 5.3 on a scale of 1 to 10, with 10 

being high. According to respondents, the economy is performing 

at the same level as in second quarter 2010, before fears of a double-dip 

recession increased. Respondents’ views varied as to how 

long it would take for the economy to see sustainable growth, but 

the majority of respondents stated that sustainable growth is not 

WINTER 2011 | VOL 39 | NO 4 

expected to occur for another 9 to 12 months. Further, the number 

of respondents who stated that it would take more than a year for 

sustainable growth to occur doubled compared to the previous 

quarter, but the number of respondents who thought sustainable 

growth would occur in only 3 to 6 months also increased. 

RERC’s institutional investment survey respondents continued to 

rate job growth as the biggest risk to the economy during fourth 

quarter 2010, although they lowered this rating to 8.3 on a scale of 

1 to 10, with 10 being high, from a rating of 8.6 during third quarter. 

However, respondents were much more concerned about the 

deficit during fourth quarter than previously, rating it at 7.1 on the 

same scale, followed by fiscal policy at 6.8, credit availability at 5.4, 

oil prices at 5.2, interest rates at 5.0, and inflation at 4.8. 

As shown in Exhibit 2, RERC’s institutional investment survey 

respondents rated the availability of capital at 6.9 on a scale of 

1 to 10, with 10 being high, while the discipline of capital rating 

declined to 6.4 on the same scale. For the first time since the credit 

crisis and recession began, RERC’s institutional investment survey 

respondents rated the availability of capital higher than the discipline 

of capital (see Exhibit 3). 

Exhibit 1. Economy and Investment Ratings 

4Q 

2010 

3Q 

2010 

2Q 

2010 

1Q 

2010 

4Q 

2009 

3Q 

2009 

Economy 5.3 4.7 5.3 4.8 4.3 4.0 

Stocks 6.0 5.2 5.0 5.5 5.3 5.3 

Bonds 3.7 4.1 5.0 4.2 4.6 4.6 

Commercial Real Estate 6.1 5.6 5.6 5.2 4.5 4.7 

Cash 3.6 4.0 4.6 4.4 5.0 4.9 

Source: RERC, 4Q 2010. 

Ratings are based on a scale of 1 to 10, with 10 being high. 

Exhibit 2. Current Availability & Discipline of Capital 

10 

8 

6 

4 

2 

0 

6.9 6.4 

3Q10 = 6.0 3Q10 = 6.9 

Availibility 

Discipline 




10 

8 

6 

4 

2 

0

WINTER 2011 | VOL 39 | NO 4 

HOW IS COMMERCIAL REAL ESTATE AFFECTED? 

Commercial real estate activity was mixed during fourth quarter 

2010. Leasing markets exhibited increasing signs of recovery, 

although construction activity was quite limited. The bulk of new 

commercial real estate construction activity was related to healthcare, 

public infrastructure, and multifamily/apartment housing. 

2011 to Be Better Year for Banks 

Credit activity was mixed across the U.S. during fourth quarter 

2010, and while loan demand was stable in some areas, it remained 

soft or has been declining in other areas as we move into 2011. 

According to the Federal Reserve’s Summary of Commentary on 

Current Economic Conditions issued in January 2011, commercial 

and industrial loans have increased, albeit only slightly (0.46 percent 

at small banks, but about five times this much by large banks). 

However, most districts reported that credit quality has been 

improving, while credit standards were mixed. 

According to the Federal Reserve Flow of Funds, the level of commercial/multifamily 

mortgage debt outstanding decreased to $3.2 

trillion in third quarter 2010, a decrease of $42 billion (or 1.3 percent) 

from the previous quarter. Foresight Analytics reported that 

an estimated $1.4 trillion is set to come due between 2010 and 

2014, with the majority due in 2013. Multifamily mortgage debt 

increased to $847 billion in third quarter, however, an increase of 

$2.3 billion (or 0.3 percent) from the previous quarter. 

The delinquency rate for commercial mortgage-backed securities 

(CMBS) rose by 14 basis points in January 2011, despite new 

issuances and falling treasury spreads, reported Trepp, LLC. This 

brings the percentage of CMBS loans 30 or more days delinquent, 

in foreclosure, or owned by the lender to 9.34 percent, the highest 

in history, with the value of delinquent loans at approximately 

$61.4 billion. 



With respect to the conditions of the banks, there were 157 failed 

banks in 2010 (more than any year since 1992) but with $92.1 billion 

in total assets, which was a decrease of 45.7 percent from the 

$167.7 billion in assets that failed in 2009. According to the Federal 

Deposit Insurance Corporation (FDIC), nearly half of the failed 

banks were located in four states: California, Florida, Georgia, and 

Illinois. The FDIC’s list of troubled banks, or those whose weaknesses 

“threaten their continued financial viability,” increased to 

860 as of Sept. 30, 2010, the highest since 1993. 

The number of bank failures is expected to decline in 2011, however, 

and the banks have made progress as they prepare to 

undergo another stress test, including repaying funds borrowed 

through the Troubled Asset Relief Program (TARP), in the hope that 

their capital plans will be approved and they will receive the goahead 

to issue dividends. However, a recent analysis by The Wall 

Street Journal indicated that 98 mostly smaller banks that received 

Exhibit 3. Historical Availability & Discipline of Capital 

Rating 

10 

8 

6 

4 

2 

0 

4Q 2001 

4Q 2002 

Discipline 

Availability 

4Q 2003 

4Q 2004 

4Q 2005 

4Q 2006 

4Q 2007 



4Q 2008 

4Q 2009 

4Q 2010 

10 

WWW.RERC.COM 5 

8 

6 

4 

2 

0


TARP funds are in jeopardy of failing based on third quarter 2010 

reports (up from 86 banks in second quarter). 

RERC’s Investment Survey Results 

Respondents to RERC’s fourth quarter 2010 institutional investment 

survey overwhelmingly stated that lending activity was increasing. 

Life insurance companies were cited as the most active lenders, 

but lending by commercial banks increased over the previous 

quarter. Government-sponsored entities (GSEs), real estate investment 

trusts (REITs), savings institutions, CMBS, and private loans 

“Pension funds are buying good core assets that match 

their funding obligations.” 


- Major Investment Property Advisor 

were also active lenders as the year came to a close. One survey 

respondent noted that “availability of capital is there, but expected 

returns are affecting the flow/volume.” 

For the most part, respondents noted that sales activity is still slow, 

and that buyers of commercial real estate are concentrating on 

good quality core assets. Key buyers and sellers of commercial real 

estate included foreign investors, pension funds, public and private 

REITs, and life insurance companies. 

Despite the positive momentum in the stock market during fourth 

quarter 2010, RERC’s institutional investment survey respondents 

once again rated commercial real estate as the top investment 

option among the alternatives listed (refer to Exhibit 1). Their rating 

for commercial real estate increased to 6.1 on a scale of 1 to 

10, with 10 being high, while the rating for stocks increased to 6.0. 

The investment ratings for bonds and cash declined to 3.7 and 

3.6, respectively. One of RERC’s survey respondents stated that 

WINTER 2011 | VOL 39 | NO 4 

“expectations are high,” while another respondent noted “there is 

lots of money chasing yield.” 

RERC’s institutional investment survey respondents increased 

their buy/sell/hold recommendations during fourth quarter 2010 

over third quarter results. The hold recommendation, as shown in 

Exhibit 4, was rated highest, earning a rating of 7.1 on a scale of 1 

to 10, with 10 being high. However, as demand for high-quality 

institutional properties increased (along with prices), the sell recommendation 

also increased, jumping to 5.3 on the same scale. 

As demonstrated in Exhibit 5, the buy recommendation increased 

slightly from the previous quarter, but has held mostly steady (or 

may even be tipping downward) on a year-over-year basis. 

The apartment sector continued to receive the highest investment 

conditions rating among all the property types RERC rates 

on a regular basis, although the rating itself declined to 6.8 during 

fourth quarter 2010 from 7.3 in third quarter. On the other hand, 

Exhibit 4. Buy, Sell, Hold Recommendations. 

Is now a good time to buy, sell, or hold? 

Exhibit 5. RERC Historical Buy, Sell, Hold Recommendations 

Rating 

10 

8 

6 

4 

2 

0 

10 

8 

6 

4 

2 

0 

4Q 2001 

Hold 

Sell 

Buy 

4Q 2002 

6.4 5.3 7.1 

3Q10 = 6.3 3Q10 = 4.8 3Q10 = 6.6 

Buy 

4Q 2003 

4Q 2004 

Sell 



4Q 2005 

4Q 2006 

4Q 2007 



Hold 

4Q 2008 

4Q 2009 

4Q 2010 


10 

8 

6 

4 

2 

0 

10 

8 

6 

4 

2 

0

WINTER 2011 | VOL 39 | NO 4 

the industrial warehouse sector continued to receive the secondhighest 

rating, but the rating increased to 6.2 in fourth quarter from 

5.8 in third quarter. Other property types that received improved 

investment conditions ratings during fourth quarter (specific ratings 

are shown in the middle table on Page 12 include the central 

business district (CBD) office, regional retail mall, neighborhood/ 

community retail, and hotel sectors, indicating that the investment 

potential of these property types is increasing. Other property 

types whose fourth quarter investment conditions ratings fell 

from their third quarter ratings include the industrial research and 

development (R&D), industrial flex, and retail power center sectors, 

an indication that the investment potential of these sectors has 

deteriorated. 

RERC’s rating for commercial real estate return versus risk continued 

its upward trend, increasing to 5.6 on a scale of 1 to 10, with 10 

being high, during fourth quarter 2010 from 5.4 during third quarter. 

Exhibit 6 shows how the overall return versus risk has increased 

gradually over the past year, with return expectations higher than 

the amount of risk involved for the commercial real estate investment 

class. 

The property type with the biggest increase in return versus risk 

during fourth quarter 2010, was the hotel sector, which increased 

from a rating of 5.0 to 6.4, bringing it nearly in line with the rating 

for the apartment sector, which has had the highest return versus 

risk rating among the property types for some time (see Exhibit 

7). Although the rating for the retail sector increased to 5.0, the 

ratings for the office and industrial sectors declined to 4.8 and 5.4, 

respectively, indicating that returns for these two property types 

Exhibit 6. Historical Return/Risk and Value/Price Ratings 

Return vs. Risk 

4Q2010 3Q2010 2Q2010 1Q2010 4Q2009 

Office 4.8 5.0 4.7 4.8 4.8 

Industrial 5.4 5.9 5.8 5.6 5.1 

Retail 5.0 4.9 4.8 4.2 4.3 

Apartment 6.5 6.2 6.2 6.0 5.7 

Hotel 6.4 5.0 4.7 4.0 3.7 

Overall 5.6 5.4 5.1 5.1 4.9 

Value vs. Price 

Office 4.7 4.8 5.4 5.4 5.2 

Industrial 5.3 5.6 5.7 5.7 5.2 

Retail 5.3 4.8 5.3 4.9 5.4 

Apartment 5.5 5.2 5.2 5.5 5.7 

Hotel 6.1 5.3 5.3 5.1 4.3 

Overall 


5.1 5.1 5.1 5.4 5.0 




are declining while the amount of risk associated with them is 

increasing. 

RERC’s rating for commercial real estate value versus price remained 

at 5.1 on a scale of 1 to 10, with 10 being high, for the third consecutive 

quarter. This rating (see Exhibit 6) indicates the value of commercial 

real estate is only slightly higher than the price of product, 

and that this estimation has not changed for most of the year. 

During fourth quarter 2010, the value versus price rating for the 

hotel sector increased to 6.1 on the same scale. This rating for the 

hotel sector was the highest value versus price rating among all 

the property types, as shown in Exhibit 8, and indicated that the 

value of hotel properties is quite a bit higher than their price, particularly 

as it relates to the value versus price comparisons of the 

other property types. Several survey respondents noted this in 

“Avoid investing in suburban office properties because 

of weak leasing fundamentals and being located in 

secondary locations.” 

- Private Real Estate Fund Manager 

words as well as their numeric ratings, stating that “hotel properties 

are cheap!” The apartment sector rating also increased, receiving 

the second highest value versus price rating, with a score of 5.5 

during fourth quarter. The value versus price rating for the retail 

sector followed closely, with a rating of 5.3. The value versus price 

ratings for the office and industrial sectors declined to 4.7 and 5.3, 

respectively. 

RERC’s required return expectations for the institutional commercial 

real estate market continued to compress during fourth quarter 

Exhibit 7. Return vs. Risk 

Rating 

7.0 

6.5 

6.0 

5.5 

5.0 

4.5 

4.0 

3.5 

3.0 

2.5 

4Q 2009 

1Q 2010 

2Q 2010 

Industrial 

Office 

Overall 


Ratings are based on a scale of 1 to 10 , with 10 being high. 

3Q 2010 

Hotel 

Apartment 

Retail 

4Q 2010 

7.0 

6.5 

6.0 

5.5 

5.0 

4.5 

4.0 

3.5 

3.0 

2.5 

WWW.RERC.COM 7


2010 (refer to Page 9). The required pre-tax yield rate for the hotel 

sector remained the highest at 10.5 percent, while the pre-tax yield 

rate for the apartment sector was the lowest at 8.0 percent. Likewise, 

the required going-in and terminal capitalization rates for the 

hotel sector continued to receive the highest percentages, and the 

capitalization rates for the apartment sector received the lowest 

percentages. Interestingly, with the hotel sector’s required goingin 

capitalization rate average remaining at 9.0 percent, and the 

required terminal capitalization rate for the hotel sector falling 30 

basis points to 9.1 percent, the rates were almost equal, indicating 

that the amount of risk for this sector is only slightly higher in the 

future than what it is currently. 

In addition, RERC’s expected rental growth increased during 

fourth quarter 2010 for the retail, hotel, and apartment sectors, but 

expense growth also increased for these sectors. In fact, expected 

“Look for apartments, self storage, and hospitality 

properties in supply-constrained markets which have 

exceptional human capital.” 

expense growth outpaced anticipated rental growth for the retail 

sector, which can be expected at this juncture, as retail stores reinvent 

and remodel to better accommodate changing consumer 

purchasing preferences. Expected rental growth for the office sector 

was positive while rental growth for the industrial sector was 

negative, but there was also little change in expected expense 

growth for these sectors. 


- Leading Life Insurance and Investment 

Management Firm 

Compounded Annual Rates of Return as of 12/31/2010 

WINTER 2011 | VOL 39 | NO 4 

Although the economy remains uncertain and many individuals 

continue to struggle on a day-to-day and month-to-month basis, 

the performance of the various asset classes, as reported in Exhibit 

9, shows that investors are finally starting to regain some of the 

wealth they lost during the recession. With the stock market coming 

back, it is particularly interesting that the National Association 

of Real Estate Investment Trusts (NAREIT) Index offered the highest 

returns during 2010 among the investment alternatives that RERC 

regularly monitors, with a return of 27.95 percent. However, institutional 

real estate, as represented by the National Council of Real 

Estate Investment Fiduciaries (NCREIF) Index, also offered a very 

solid return of 13.11 percent. Clearly, institutional commercial real 

estate returns are nearly as high as the returns offered through the 

major stock indices (but without the volatility), and still offer the 

stability and diversification investor portfolios require. 

Exhibit 8. Value vs. Price 

Rating 

6.5 

6.0 

5.5 

5.0 

4.5 

4.0 

4Q 2009 

1Q 2010 

2Q 2010 

Industrial 

Office 

Overall 



Exhibit 9. What Do the Financial Markets Tell Us? 

3Q 2010 

Hotel 

Apartment 

Retail 

Market Indices 1-Year 3-Year 5-Year 10-Year 15-Year 

Consumer Price Index 1 1.25% 1.33% 2.13% 2.35% 2.42% 

10-Year Treasury Bond2 3.22% 3.34% 3.89% 4.17% 4.76% 

Dow Jones Industrial Avg. 14.06% -1.61% 4.31% 3.15% 7.91% 

NASDAQ Composite3 16.91% 0.01% 3.76% 0.71% 6.36% 

NYSE Composite3 10.84% -6.49% 0.54% 1.38% 5.67% 

S&P 500 15.06% -2.86% 2.29% 1.41% 6.76% 

NCREIF Index 13.11% -4.18% 3.51% 7.38% 9.16% 

NAREIT Index (Equity REITs) 27.95% 0.65% 3.03% 10.76% 10.54% 

1 Based on the published data from the Bureau of Labor Statistics (Seasonally Adjusted). 

2 Based on Average End of Day T-Bond Rates. 

3 Based on Price Index, and does not include the dividend yield. 

Sources: BLS, Federal Reserve Board, S&P, Dow Jones, NCREIF, NAREIT, compiled by RERC. 

4Q 2010 


6.5 

6.0 

5.5 

5.0 

4.5 

4.0

WINTER 2011 | VOL 39 | NO 4 

Pre-tax Yield (IRR) (%) 


RERC Required Return Expectations 1 by Property Type – 4Q 2010 

Office Industrial Retail 

CBD Suburban Warehouse R&D Flex 

Regional 

Mall 

Power 

Center 


Neigh/ 

Comm 

Apartment Hotel 

Average 

All Types 

RERC 

Portfolio 

Index 

Range 7.3 - 10.0 8.0 - 11.0 7.8 - 10.0 8.0 - 10.5 8.0 - 10.8 7.0 - 10.0 7.1 - 10.3 7.1 - 11.0 6.0 - 10.0 9.0 - 12.0 6.0 - 12.0 6.0 - 12.0 

Average 2 8.3 9.3 8.7 9.2 9.3 8.6 8.9 8.8 

Weighted 

Average 3 8.9 8.8 8.7 

BPS Change 4 

-30 -20 -30 -30 -40 -50 -20 -50 

-20 -30 -50 

8.0 10.5 9.0 8.6 

-50 -30 -30 -40 

Going-In Cap Rate (%) 

Range 5.5 - 8.0 6.5 - 9.3 6.5 - 9.0 7.0 - 9.0 7.0 - 11.0 6.0 - 9.0 6.2 - 10.0 6.0 - 9.5 5.0 - 7.8 7.5 - 12.0 5.0 - 12.0 5.0 - 12.0 

Average2 6.7 7.7 7.5 8.1 8.6 7.2 7.7 7.4 

Weighted 

Average 

6.0 9.0 7.6 7.0 

3 7.3 7.6 7.3 

BPS Change 4 

-50 -30 -30 -20 40 -80 -20 0 

-30 -30 -40 

-50 0 -20 -40 

Terminal Cap Rate (%) 

Range 6.5 - 8.5 7.0 - 10.0 7.0 - 9.5 6.0 - 10.0 7.0 - 11.0 6.5 - 9.0 6.5 - 10.0 6.5 - 11.0 5.5 - 8.3 8.0 - 10.5 5.5 - 11.0 5.5 - 11.0 

Average2 7.4 8.4 8.0 8.5 8.9 7.5 8.3 8.0 

Weighted 

Average 

6.6 9.1 8.1 7.6 

3 8.0 8.1 7.8 

BPS Change 4 

-40 0 -30 -20 20 -50 0 -30 

-10 -30 -30 

-60 -30 -20 -40 

Rental Growth (%) 

Range 0.0 - 4.0 -1.0 - 4.0 -2.0 - 4.5 -2.0 - 5.0 -2.0 - 5.0 -1.0 - 3.0 -1.0 - 4.1 -1.0 - 3.5 0.0 - 5.0 0.0 - 5.0 -2.0 - 5.0 -2.0 - 5.0 

Average2 2.1 1.7 2 1.7 1.5 1.9 1.9 2.0 3.1 3.4 2.1 2.2 

BPS Change4 0 10 0 0 -20 30 30 20 20 130 20 10 

Expense Growth (%) 

Range 1.0 - 3.5 0.0 - 3.0 0.0 - 3.0 0.0 - 4.0 0.0 - 5.0 1.4 - 4.0 0.0 - 4.2 0.0 - 3.0 2.0 - 3.0 1.0 - 5.0 0.0 - 5.0 0.0 - 5.0 

Average2 2.7 2.7 2.6 2.7 2.8 2.7 2.8 2.6 2.8 2.9 2.7 2.7 

BPS Change4 0 0 0 0 20 30 20 0 10 20 10 10 

1 This survey was conducted in October, November and December 2010 and reflects expected returns for Fourth Quarter 2010 investments. 

2 Ranges and other data reflect the central tendencies of respondents: unusually high and low responses have been eliminated. 

3 Weighting based upon 4Q10 NCREIF Portfolio market values. 

4 Change (+/-) in basis points (BPS) from quarter immediately preceding current rate. 

Source: RERC Investment Survey. 

WWW.RERC.COM 9


RERC HISTORICAL CAPITALIZATION RATE AND YIELD RATES 

RERC Historical Required Pre-tax Yield Rates 

Percent 

10.5 

10.0 

9.5 

9.0 

8.5 

8.0 

4Q 2006 

1Q 2007 



2Q 2007 

3Q 2007 

4Q 2007 

1Q 2008 

2Q 2008 

3Q 2008 

4Q 2008 

1Q 2009 

2Q 2009 

3Q 2009 

4Q 2009 

1Q 2010 

2Q 2010 

3Q 2010 

4Q 2010 

RERC Historical Required Going-in Capitalization Rates 

Percent 

9.0 

8.5 

8.0 

7.5 

7.0 

6.5 

6.0 


4Q 2006 

1Q 2007 

2Q 2007 

3Q 2007 

4Q 2007 

1Q 2008 

2Q 2008 

3Q 2008 

4Q 2008 

1Q 2009 

2Q 2009 

3Q 2009 

4Q 2009 

1Q 2010 

2Q 2010 

3Q 2010 

4Q 2010 

10.5 

10.0 

9.5 

9.0 

8.5 

8.0 

9.0 

8.5 

8.0 

7.5 

7.0 

6.5 

6.0 

WINTER 2011 | VOL 39 | NO 4 

RERC Historical Spread Between Yield Rates and Cap Rates 

Basis Points 

185 

175 

165 

155 

145 

135 

125 

4Q 2006 

1Q 2007 


2Q 2007 

3Q 2007 

4Q 2007 

1Q 2008 

2Q 2008 

3Q 2008 

4Q 2008 

1Q 2009 

2Q 2009 

3Q 2009 

4Q 2009 

1Q 2010 

2Q 2010 

3Q 2010 

4Q 2010 

RERC Historical Spread Between Required Pre-tax Yield 

Rates and 10-Year Treasuries 

Basis Points 

800 

700 

600 

500 

400 

300 

Sources: RERC, Federal Reserve, 4Q 2010. 

4Q 2006 

1Q 2007 

2Q 2007 

3Q 2007 

4Q 2007 

1Q 2008 

2Q 2008 

3Q 2008 

4Q 2008 

1Q 2009 

2Q 2009 

3Q 2009 

4Q 2009 

1Q 2010 

2Q 2010 

3Q 2010 

4Q 2010 


185 

175 

165 

155 

145 

135 

125 

800 

700 

600 

500 

400 

300

WINTER 2011 | VOL 39 | NO 4 

SUMMARY 

As the economy continues to take a few steps forward and few 

steps back in its struggle to stabilize, commercial real estate is defying 

investor expectations. As a result, RERC anticipates: 

n Economic growth to continue at a moderate pace, and unemployment 

to remain high during 2011. 

n The administration and Federal Reserve to do all they can to 

encourage economic growth and keep interest rates low “for 

an extended period,” including extending tax cuts, reducing 

payroll taxes, or buying more treasuries. 

n Despite increasing commodity prices, inflation should remain 

low for the near term. 

n The housing market will remain depressed and home prices 

may decline further as foreclosures continue in 2011. 

n For the first time since the recession began, RERC survey 

respondents rated the availability of capital higher than 

discipline. 



n Lending will expand and more capital, including CMBS, will be 

available for investing in commercial real estate. 

n Interest rates will remain low for the foreseeable future. 

n Surging corporate profits and solid balance sheets will 

allow businesses to boost investment and hiring(if demand 

increases). 

n Expect more banking, business, and real estate mergers and 

acquisitions to occur in 2011. 

n Many characteristics of a trifurcated market will remain in 2011, 

as the division between top properties, distressed properties, 

and “the rest” continues (although there has been progress in 

moving distressed properties). 

n Required going-in capitalization rates further compressed 

during fourth quarter 2010, but are expected to begin to stabilize 

in 2011. 

WWW.RERC.COM 11



Expected Leasing Assumptions, Marketing & Holding, and Investment Recommendations – 4Q 2010 

Renewal 

Probability (%) 

Time to Release 

(months) 

Vacancy Loss 1 

(%) 

Marketing Time 

(months) 

Holding 

Period (years) 

WINTER 2011 | VOL 39 | NO 4 

Buy (%) Sell (%) Hold (%) 

Office - CBD 65.3 8.5 7.8 6.9 9.1 48 17 35 

Office - Suburban 63.3 9.5 8.9 7.7 8.3 22 37 41 

Industrial - Warehouse 66.6 8.4 7.3 6.8 8.8 59 0 41 

Industrial - R&D 63.6 9.1 8.3 7.7 8.9 19 31 50 

Industrial - Flex 63.9 9.5 9.0 8.1 9.2 20 36 44 

Retail - Regional Mall 67.9 8.6 8.6 7.6 9.5 45 14 41 

Retail - Power Center 65.9 9.7 8.1 7.0 9.5 30 22 48 

Retail - Neighborhood 66.5 8.2 7.8 7.4 9.0 52 12 36 

Apartment 59.6 2.3 7.3 4.5 7.8 54 21 25 

Hotel NA NA NA 6.6 8.1 62 14 24 

All Types 64.7 8.2 8.1 7.0 8.8 41 20 39 

1 Vacancy loss reflects a typical holding period, not the current level. 


Current Quarter Investment Conditions and Capitalization Techniques – 4Q 2010 

Investment Conditions 1 Income Approach 2 Cap Rate 3 

4Q 2010 3Q 2010 4Q 2009 4Q 2008 Direct Cap. DCF Before Reserves After Reserves 

Office - CBD 6.0 5.8 4.9 3.9 4.6 7.4 63% 37% 

Office - Suburban 4.1 4.1 3.6 3.1 4.8 7.2 66% 34% 

Industrial - Warehouse 6.2 5.8 4.5 4.5 5.2 7.2 56% 44% 

Industrial - R&D 4.4 4.5 3.7 3.0 5.2 7.3 55% 45% 

Industrial - Flex 4.4 4.8 3.9 2.7 5.1 7.4 54% 46% 

Retail - Regional Mall 5.1 4.8 4.0 2.9 4.2 7.8 52% 48% 

Retail - Power Center 4.4 4.8 3.3 2.7 4.5 7.4 52% 48% 

Retail - Neighborhood 5.6 5.1 4.1 3.4 4.9 7.6 60% 40% 

Apartment 6.8 7.3 5.6 5.3 6.6 6.7 22% 78% 

Hotel 5.6 4.9 2.6 2.7 5.7 7.4 23% 77% 

1 Investment Conditions rated on a scale of 1 = poor to 10 = excellent. 

2 Income Approach rated on a scale of 1 = Poor to 10 = most relevant. 

3 Percent of respondents who apply the cap rate before or after reserves. 


Required Real Estate Yields vis-à-vis Capital Market Returns – 4Q 2010 

4Q 2010 3Q 2010 4Q 2009 4Q 2008 4Q 2007 4Q 2006 

Real Estate Yield (%) 9.0 9.3 10.1 8.9 8.2 8.6 

Moody’s Baa Corporate (%) 5.8 5.9 6.3 8.7 6.5 6.3 

Moody’s Aaa Corporate (%) 4.8 4.6 5.2 6.0 5.6 5.4 

10-Year Treasuries (%) 2.7 2.9 3.4 3.5 4.3 4.6 

Yield Spread (percentage points) 

Moody’s Baa Corporate (%) 3.1 3.4 3.8 0.2 1.7 2.3 

Moody’s Aaa Corporate (%) 4.2 4.7 4.9 2.9 2.6 3.2 

10-Year Treasuries (%) 6.2 6.4 6.7 5.4 3.9 4.0 

Sources: RERC Investment Survey, Federal Reserve. 


WINTER 2011 | VOL 39 | NO 4 

RISK-ADJUSTED RETURN ANALYSIS 

Although the Great Recession has officially ended and we have 

entered the recovery phase, the economy is still very uncertain. The 

housing market remains weak, unemployment is much too high, 

and banks still have much distress to work through. The changes 

to the economy over the past few years have also affected investment 

strategies, particularly those applicable to commercial real 

estate. As we examine the state of the commercial real estate markets 

and risk, we need to look at what is happening to institutional 

portfolios. 

The capital returns in the National Council of Real Estate Investment 

Fiduciaries (NCREIF) performance index (NPI) provide evidence of 

commercial real estate value changes on a quarterly basis. In fourth 

quarter 2010, the NCREIF capital return was 3.02 percent. This is 

the highest return since second quarter 2007, and is the third consecutive 

positive quarterly appreciation since the bottom of the 

“trough” in first quarter 2010. According to Real Capital Analytics, 

there was a substantial increase in transaction volume in 2010 as 

compared to 2009 (more than double, though just 29 percent of 

peak 2007 volume), confirming that a recovery in commercial real 

estate market is well underway. Further, the division in commercial 

real estate is contributing to the high demand for well-leased, welllocated 

assets in top markets, versus lower demand for lower-tier 

properties in secondary markets. This results in lower investment 

rates and rising prices for the properties in high demand, and more 

risk and stubbornly higher rates for properties with less demand. 

In short, the increased activity is bringing investors back to the 

market, providing additional confidence that things are indeed 

improving for this asset class. As a result, institutional (top quality) 

properties, or those covered by the NPI, are displaying solid appreciation 

on a quarterly basis. 

It is also interesting to note that prior to the recession, huge gains 

were being made in the selling of properties as market values were 

steadily increasing. Investors essentially relied on the speculative 

capital gains from appreciation as part of their investment decision. 

The shock of the recession hopefully taught us that this approach 

is unsustainable, and primary reliance should be placed on assured 

income—income from leases and property revenues—that are 

not subject to the whims of economic ups and downs, but rely 

more on market fundamentals and cash flow. This fundamental 

shift in thinking alone will help to mitigate some investment risk, 

simply by placing greater importance on the property analysis 

prior to making a purchase decision. 

RERC’s One-Year Trailing Risk-Adjusted Return (RAR) Metric, which 

analyzes the property types and orders them in terms of their 

return relative to the risk taken, shows that apartments rank the 

highest this quarter. The apartment sector has become one of 

the most sought-after assets recently due to their stable income 

characteristics. Regional malls also rank high, which is somewhat 

surprising since one wouldn’t think consumers would be spending 



WWW.RERC.COM 13


in light of this slow recovery and continued uncertainty. However, 

recent reports confirm that retail sales improved during the holiday 

season of 2010. Central business district (CBD) office properties are 

also attracting attention (particularly well-leased office buildings in 

downtown developments), to the possible detriment of suburban 

office markets. Large quarterly changes are noted in the NCREIF 

1-Year Trailing Returns for all property types (please refer to the 

Fall 2010 issue of the RERC Real Estate Report for third quarter 2010 

returns). In fact the one-year NCREIF trailing return for apartments 

(18.21 percent) is 98 percent higher than in third quarter 2010 (9.21 

percent), highlighting current investor appetite for this asset class. 

Investment rates are declining further, as shown on Page 9 in this 

issue of the RERC Real Estate Report, with going-in capitalization 

rate expectations flat to 50 basis points down, varying by property 

type. The availability of debt financing and low interest rates 

has had a significant role in putting downward pressure on capitalization 

rates for top-quality assets. Additionally, the re-pricing of 

commercial real estate as a result of the credit crisis has helped 

to restore confidence to the capital markets. In the near term, the 

most risk is associated with the hotel and suburban office sectors, 

while performance for the neighborhood/community retail sector, 


WINTER 2011 | VOL 39 | NO 4 

regional malls, the CBD office sector, and the industrial property 

sector is expected is continue to improve with further economic 

stability. 

In the long term, the successful investment strategy will be a careful 

balance of managing income and leverage and actively seeking 

out opportunities that match the desired risk profile of a given 

portfolio. These waters may prove difficult to navigate as changes 

are constantly occurring and from multiple angles. Ups and downs 

will always occur, but the discerning commercial real estate investor 

will adjust to the changing realities, and each shift should produce 

the additional confidence necessary to succeed. 

Property Type 

1 Year Trailing Returns - 4Q 2010 

NCREIF 

Returns 

NCREIF 

St. Dev. 

RAR* 

Metric 

RERC 

Returns 

NCREIF 

vs. RERC 

Apartment 18.21% 11.77% 1.5 8.40% 9.81% 

Regional Mall 14.49% 10.88% 1.3 8.98% 5.52% 

Office - CBD 16.07% 13.91% 1.2 8.68% 7.40% 

All Property Types 13.11% 11.44% 1.1 9.38% 3.74% 

Industrial - R&D 11.93% 12.47% 1.0 9.58% 2.35% 

Power Center 10.94% 11.87% 0.9 9.35% 1.59% 

Neigh/Comm 9.88% 11.13% 0.9 9.35% 0.53% 

Industrial - Whse 9.78% 11.31% 0.9 9.10% 0.68% 

Office - Suburban 8.79% 11.99% 0.7 9.58% -0.79% 

Hotel 8.97% 13.65% 0.7 11.05% -2.08% 

*RAR = Risk-Adjusted Returns. 

Sources: RERC, NCREIF, 4Q 2010. 

Property Type 

10 Year Average Returns - 4Q 2010 

NCREIF 

Returns 

NCREIF 

St. Dev. 

RAR* 

Metric 

RERC 

Returns 

NCREIF 

vs. RERC 

Regional Mall 10.81% 10.88% 1.0 9.55% 1.26% 

Neigh/Comm 9.13% 11.13% 0.8 9.58% -0.45% 

Power Center 8.44% 11.87% 0.7 9.84% -1.40% 

All Property Types 7.38% 11.44% 0.6 9.90% -2.51% 

Apartment 7.43% 11.77% 0.6 9.15% -1.72% 

Industrial - Whse 7.00% 11.31% 0.6 9.47% -2.46% 

Office - CBD 7.92% 13.91% 0.6 9.46% -1.53% 

Office - Suburban 5.38% 11.99% 0.4 10.00% -4.61% 

Industrial - R&D 5.26% 12.47% 0.4 10.11% -4.85% 

Hotel 5.16% 13.65% 0.4 11.81% -6.65% 




WINTER 2011 | VOL 39 | NO 4 


SNAPSHOT OF REAL ESTATE MARKET PERFORMANCE – 4Q 2010 


PERFORMANCE INDICATOR RECENT DATA IMPACT ON COMMERCIAL REAL ESTATE 

Vacancy Rates 

Rental Rates 

(RERC’s surveyed rent growth 

expectations) 

Real Estate Returns 

Capitalization Rates 

12% 

10% 

8% 

6% 

4% 

2% 

0% 

Going-In Cap Rates vs. Unemployment 

4Q 1980 

4Q 1981 

4Q 1982 

4Q 1983 

Sources: RERC, BLS, NBER, 4Q 2010. 

Office: 17.6% 

Industrial: 14.3% 

Retail: 10.9% 

Apartment: 6.6% 

Hotel: 57.6% (occupancy) 

Office: 1.7% to 2.1% 

Industrial: 1.5% to 2.0% 

Retail: 1.9% to 2.0% 


Hotel: 3.4% 

RERC Required Returns: 

Office: 8.3% to 9.3% 


Retail: 8.6% to 8.9% 


Hotel: 10.5% 

RERC Required Cap Rates: 

Office: 6.7% to 7.7% 


Retail: 7.2% to 7.7% 


Hotel: 9.0% 

Unemployment 

Going-In Cap Rate 

Recession 

NCREIF Realized Returns: 

Office: 8.8% to 16.1% 


Retail: 9.9% to 14.5% 


Hotel: 9.0% 

NCREIF Implied Cap Rates: 

Office: 6.5% to 7.2% 


Retail: 7.0% to 7.7% 


Hotel: 6.6% 

4Q 1984 

4Q 1985 

4Q 1986 

4Q 1987 

4Q 1988 

4Q 1989 

4Q 1990 

4Q 1991 

4Q 1992 

4Q 1993 

4Q 1994 

4Q 1995 

4Q 1996 

4Q 1997 

4Q 1998 

4Q 1999 

4Q 2000 

4Q 2001 

4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 

4Q 2006 

4Q 2007 

4Q 2008 

4Q 2009 

4Q 2010 

12% 

10% 

8% 

6% 

4% 

2% 

0% 

According to Reis, Inc., vacancy for the office and retail sectors 

remained unchanged. In contrast, the apartment sector vacancy 

rate decreased. The industrial sector availability rate also fell during 

fourth quarter, according to CBRE-EA. Smith Travel Research 

reported that hotel occupancy increased during fourth quarter. 

RERC’s rental rate expectations were slightly higher for the office and 

retail sectors during fourth quarter 2010, while expected rents for 

the apartment and hotel sectors jumped significantly when compared 

to third quarter 2010. The rental rate expectation for the industrial 

sector fell slightly from the previous quarter. 

RERC’s required returns declined slightly for all property sectors 

during fourth quarter 2010. In comparison, NCREIF’s realized returns 

significantly improved during fourth quarter, as all property sectors 

showed positive returns. 

RERC’s required going-in cap rates declined during fourth quarter 

for all property sectors, with the exception of the hotel sector, where 

rates remained unchanged. NCREIF’s implied cap rates declined for 

the office and industrial sectors, while the rate for the hotel sector 

increased during fourth quarter. The apartment and retail cap rates 

remained unchanged compared to the previous quarter. 

WWW.RERC.COM 15


GDP 

Percent Change Quarter Ago 

Unemployment 

Consumer Price Index 

Percent Change Month Ago 

9 

7 

5 

3 

1 

-1 

-3 

-5 

-7 

4Q 2002 

0.6 

0.5 

0.4 

0.3 

0.2 

0.1 

0.0 

-0.1 

-0.2 

Dec-09 

Jan-10 

2Q 2003 

4Q 2003 

2Q 2004 

4Q 2004 

Source: Bureau of Economic Analysis. 

According to the Bureau of Economic Analysis, real gross domestic product (GDP) 

growth increased to 3.2 percent on an annualized basis in fourth quarter 2010. 

This growth was helped by strengthening demand from consumers and businesses. 

In addition, the final sales for domestic product jumped 7.1 percent - the largest 

quarterly gain since 1984, which bodes well for near-term growth. 

Percent 

12 

10 

8 

6 

4 

Nov-02 

Mar-03 

Jul-03 

Nov-03 

Mar-04 

The Consumer Price Index (CPI) rose 0.5 percent to 220.25 in December 2010. 

Compared to a year ago, the CPI was up 1.5 percent. Thanks to widespread exuberance 

in the commodities markets, headline inflation remained positive for the 

second consecutive reading. 


Jul-04 

Nov-04 

Mar-05 

Source: Bureau of Labor Statistics. 

Jul-05 

Nov-05 

Mar-06 

Jul-06 

Nov-06 

2Q 2005 

4Q 2005 

2Q 2006 

4Q 2006 

2Q 2007 

4Q 2007 

2Q 2008 

4Q 2008 

2Q 2009 

4Q 2009 

2Q 2010 

4Q 2010 

The unemployment rate fell to 9.4 percent in December. Although improving from 

November, the employment situation was still a disappointment as the numbers 

fell short of expectations. Employment is expected to increase in 2011, but more 

economic certainty and increased demand is needed. 

Mar-07 

Jul-07 

Nov-07 

Mar-08 

Jul-08 

Nov-08 

Mar-09 

Jul-09 

Nov-09 

Mar-10 

July-10 

Nov-10 

Feb-10 

Mar-10 

Apr-10 

May-10 

Jun-10 

July-10 

Aug-10 

Sep-10 

Oct-10 

Nov-10 

Dec-10 

9 

7 

5 

3 

1 

-1 

-3 

-5 

-7 

12 

10 

8 

6 

4 

0.6 

0.5 

0.4 

0.3 

0.2 

0.1 

0.0 

-0.1 

-0.2 

FOMC Policy Decisions 

Percent 

Retail Sales 

Year To Year Percent Change 

7 

6 

5 

4 

3 

2 

1 

0 

10 

8 

6 

4 

2 

0 

-2 

-4 

-6 

-8 

-10 

-12 

Jan-01 

Source: Federal Reserve 

Jun-01 

Nov-01 

May-02 

Nov-02 

Nov-07 

Jan-08 

Mar-08 

Discount Rate 

Fed Funds Rate 

WINTER 2011 | VOL 39 | NO 4 

May-03 

Oct-03 

May-04 

Nov-04 

Apr-05 

Nov-05 

May-06 

Oct-06 

May-07 

Oct-07 

Apr-08 

Dec-08 

Jun-09 

Oct-09 

Mar-10 

Sep-10 

Dec-10 

The Federal Open Market Committee (FOMC) was slightly more optimisitic about 

the economy at its December 2010 meeting. Recent data was stronger than 

expected and growth is expected to increase in the near term. However, the longterm 

outlook was little changed. The federal funds rate remained in the 0.0-percent 

to 0.25-percent range, and the discount rate remained at 0.75 percent. 

Manufacturing Utilization 

Percent 

85 

80 

75 

70 

65 

60 

Dec-00 

May-01 

Oct-01 

Mar-02 

Source: Federal Reserve. 

Source: Bureau of Labor Statistics. Source: Census Bureau. 

Aug-02 

Jan-03 

Jun-03 

Nov-03 

Apr-04 

Sep-04 

Feb-05 

Jul-05 

Dec-05 

May-06 

Oct-06 

Mar-07 

Aug-07 

Jan-08 

Jun-08 

Nov-08 

Apr-09 

Sep-09 

Feb-10 

Jul-10 

Dec-10 

In December 2010, factory output increased at a 2.4-percent annual rate, down 

from 6.5 percent in the third quarter. Manufacturing utilization rose slightly to 73.5 

percent. With strong demand and continued consumer spending, manufacturing 

utilization is expected to increase further. 

May-08 

Jul-08 

Sep-08 

Nov-08 

Jan-09 

Mar-09 

May-09 

Jul-09 

Sep-09 

Nov-09 

Jan-10 

Mar-10 

May-10 

Jul-10 

Sep-10 

Dec-10 

Although retail sales rose 0.6 percent in December, this was the weakest growth 

since July. However, holiday sales in total were strong and exceeded expectations. 

Growth is predicted to continue into early 2011 due to the release of pent-up 

demand and increased optimism. 


10 

8 

6 

4 

2 

0 

-2 

-4 

-6 

-8 

7 

6 

5 

4 

3 

2 

1 

0 

85 

80 

75 

70 

65 

60 

-10 

-12

WINTER 2011 | VOL 39 | NO 4 

Consumer Confidence 

Index 

After decreasing slightly in December, consumer confidence rose 7.2 points to 60.6 

in January 2011. This is only the second time the index exceeded 60 since 2008. 

This improvement might have been caused by tax cuts and improving labor market 

conditions. While moods are looking up, there is evidence that consumers believe 

the recession has not ended. 

S&P 500 

120 

100 

80 

60 

40 

20 

Dec-01 

May-02 

Oct-02 

Mar-03 

Aug-03 

Source: The Conference Board. 

Beginning of Month Adjusted Closing Price 

1600 

1500 

1400 

1300 

1200 

1100 

1000 

900 

800 

700 

600 

Source: S&P. 

Dec-02 

Apr-03 

Aug-03 

Dec-03 

Apr-04 

Index of Leading Indicators 

Jan-04 

Jun-04 

Nov-04 

Apr-05 

Sep-05 

Feb-06 

Jul-06 

Dec-06 

May-07 

Oct-07 

Mar-08 

Aug-08 

Jan-09 

Jun-09 

Nov-09 

Apr-10 

Sep-10 

Jan-11 

Aug-04 

Dec-04 

Apr-05 

Aug-05 

Dec-05 

Apr-06 

Aug-06 

Dec-06 

Apr-07 

Aug-07 

Dec-07 

Apr-08 

Aug-08 

Dec-08 

Apr-09 

Aug-09 

Dec-09 

Apr-10 

Aug-10 

Dec-10 

The S&P 500 ended December 2010 at 1,257.64, up 0.07 percent from November. 

Overall, the S&P 500 was less volatile during fourth quarter as it gradually 

increased. Stocks in general are becoming more popular, though they are still considered 

to be more risky than commercial real estate. 

Percent Change Month Ago 

1.6 

1.4 

1.2 

1.0 

0.8 

0.6 

0.4 

0.2 

0.0 

-0.2 

-0.4 

Source: The Conference Board. 

Jan-10 

Feb-10 

Mar-10 

Apr-10 

May-10 

Jun-10 

Jul-10 

Aug-10 

Sep-10 

Oct-10 

Nov-10 

Dec-10 

The Conference Board’s Index of Leading Indicators rose 1 percent in December 

2010, indicating that the pace of recovery should increase in 2011. Compared to 

a year ago, the index grew 5 percent, and is more broad-based than previously. 

Economic growth has accelerated in recent months, and consumer spending is 

expected to strengthen with help from reductions in payroll taxes. 


120 

100 

80 

60 

40 

20 

1600 

1500 

1400 

1300 

1200 

1100 

1000 

900 

800 

700 

600 

1.6 

1.4 

1.2 

1.0 

0.8 

0.6 

0.4 

0.2 

0.0 

-0.2 

-0.4 

Existing Home Sales 


Housing Affordability 

Index 

Source: NAR. 

190 

180 

170 

160 

150 

140 

130 

120 

110 

100 

Oct-07 

Dec-07 

Feb-08 

Apr-08 

The National Association of REALTORS® (NAR) Housing Affordability Index measures 

whether or not a typical family could qualify for a mortgage on a typical home. 

During fourth quarter 2010, the index increased until December, when it fell slightly 

to 185.3. However this still indicates that a typical family is more than able to afford 

a median-priced home. 

Millions 

8.0 

7.0 

6.0 

5.0 

4.0 

3.0 

Single Family Home Supply 

Jun-08 

Aug-08 

Oct-08 

Dec-08 

Feb-09 

Apr-09 

Jun-09 

Aug-09 

Oct-09 

Dec-09 

Feb-10 

Apr-10 

Jun-10 

Aug-10 

Oct-10 

Dec-10 

Dec-01 

Mar-02 

Jul-02 

Nov-02 

Mar-03 

Jul-03 

Nov-03 

Mar-04 

Jul-04 

Nov-04 

Mar-05 

Jul-05 

Nov-05 

Mar-06 

Jul-06 

Nov-06 

Mar-07 

Jul-07 

Nov-07 

Mar-08 

Jul-08 

Nov-08 

Mar-09 

Jul-09 

Nov-09 

Mar-10 

Jul-10 

Dec-10 

Source: NAR. 

Existing home sales jumped 12.3 percent in December 2010, at an annualized rate 

of 5.28 million units. This is the strongest monthly gain since 1999. However, compared 

to a year ago, sales are down 2.9 percent. Foreclosure processsing issues 

persist, threatening demand and creating uncertainty. Home prices are expected to 

decline further, before stabilizing in the second half of the year. 

Months 

13 

12 

11 

10 

Source: NAR. 

9 

8 

7 

6 

Nov-09 

Dec-09 

Jan-10 

Feb-10 

Mar-10 

Apr-10 

May-10 

Jun-10 

Jul-10 

Aug-10 

Sep-10 

Oct-10 

Nov-10 

Dec-10 

During fourth quarter, the monthly home supply continued to steadily decrease, 

with the December 2010 single-family home supply declining to 8.1 from the previous 

month. This remains considerably higher than the normal rate of around 6.0 

months, but demand for housing is expected to increase as job growth increases. 

190 

180 

170 

160 

150 

140 

130 

120 

110 

100 

8.0 

7.0 

6.0 

5.0 

4.0 

3.0 

13 

12 

11 

10 

WWW.RERC.COM 17 

9 

8 

7 

6


PROPERTY TYPES MARKET RECAP 

ALL PROPERTY TYPE AVERAGE 


12% 

10% 

8% 

6% 

Historical IRRs, Going-In Cap Rates, and Terminal Cap Rates 2000 - 2010 

4Q 2000 

4Q 2001 


4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 

4Q 2006 

4Q 2007 

Terminal Cap Rate 


Pre-Tax Yield 

4Q 2008 

4Q 2009 

4Q 2010 

8% 

6% 

WINTER 2011 | VOL 39 | NO 4 

12% 

10% 


WINTER 2011 | VOL 39 | NO 4 

OFFICE 

n The majority of RERC’s institutional investment survey 

respondents were somewhat pessimistic about the office sector 

during fourth quarter 2010, due to slow office-using job 

growth, high prices, poor long-term prospects, weak leasing 

fundamentals, and lack of demand, particularly in the suburban 

office sector. However, a few respondents reminded 

investors that the office sector could also be a good investment 

because of low prices and the availability of distressed 

properties. 

n RERC’s institutional investment survey respondents gave the 

central business district (CBD) office sector an investment conditions 

rating of 6.0 on a scale of 1 to 10, with 10 being high, 

during fourth quarter 2010, which was slightly higher than the 

third quarter rating. In contrast, the investment conditions rating 

for the suburban office sector remained unchanged at 4.1 

during fourth quarter, and retained the lowest rating of the 

property sectors RERC analyzes. 

n RERC’s required return expectations continued to fall during 

fourth quarter 2010, with the required pre-tax yield rate for 

the office sector overall declining to 8.9 percent. The overall 

required going-in capitalization rate fell to 7.3 percent, while 

the overall required terminal capitalization rate decreased to 

8.0 percent. 

n During fourth quarter 2010, the expected rental growth for 

the CBD office sector remained unchanged at 2.1 percent, 

while expected rental growth for the suburban office sector 

increased to 1.7 percent. Expected expense growth for each 

sector remained unchanged at 2.7 percent. 

n According to Reis, Inc., the vacancy rate for the office sector 

remained flat at 17.6 percent during fourth quarter 2010. In 

addition, net absorption increased 2.5 million square feet for 

the quarter, the first increase since the end of 2007. Asking 

and effective rents also increased during fourth quarter. 

RERC Risk & Return Analysis - 4Q 2010 

10-Year Average Returns 4-Quarter Rolling Returns 

CBD Suburban CBD Suburban 

NCREIF Returns 7.92% 5.38% 16.07% 8.79% 

NCREIF St. Dev. 13.91% 11.99% 13.91% 11.99% 

RAR* Metric 0.6 0.4 1.2 0.7 

RERC Returns 9.46% 10.00% 8.68% 9.58% 

NCREIF vs. RERC -1.53% -4.61% 7.40% -0.79% 


Sources: RERC, NCREIF. 



RERC Office Performance Cycle 

Real Difference* 

25% 

20% 

15% 

10% 

5% 

0% 

-5% 

-10% 

-15% 

-20% 

-25% 

-30% 

-35% 

-40% 

4Q 2000 

4Q 2001 

Market Equilibrium 

All Office 

Suburban Office 

CBD Office 

4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 

4Q 2006 

4Q 2007 


*Difference between NCREIF realized and RERC required returns. 

CBD Investment Criteria Trends 

12% 

10% 

8% 

6% 

4% 

4Q 2000 

4Q 2001 


4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 

Suburban Investment Criteria Trends 

12% 

10% 

8% 

6% 

4Q 2000 

4Q 2001 


4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 

4Q 2006 

4Q 2006 

4Q 2007 

4Q 2007 

4Q 2008 

4Q 2009 



Pre-Tax Yield 

4Q 2008 

4Q 2009 



Pre-Tax Yield 

4Q 2008 

4Q 2009 

4Q 2010 

4Q 2010 

4Q 2010 

25% 

20% 

15% 

10% 

5% 

0% 

-5% 

-10% 

-15% 

-20% 

-25% 

-30% 

-35% 

-40% 

12% 

10% 

8% 

6% 

4% 

12% 

10% 

8% 

6% 

WWW.RERC.COM 19


INDUSTRIAL 

n Some of RERC’s institutional investment survey respondents 

stated that the industrial sector was a good investment 

opportunity during fourth quarter 2010 because of reasonable 

pricing and attractive risk-adjusted returns, as job growth and 

trade increased. However, respondents also noted that due 

to weak leasing fundamentals and poor locations, particularly 

for the industrial flex and industrial research and development 

(R&D) sectors, the industrial sector overall continued to struggle, 

despite continued manufacturing growth. 

n RERC’s investment conditions rating for the industrial warehouse 

sector increased to 6.2 on a scale of 1 to 10, with 10 

being high, during fourth quarter 2010, making this the second 

highest investment conditions rating among the property 

types RERC analyzes. In contrast, the investment conditions 

ratings for the industrial flex and R&D sectors both fell 

to 4.4, indicating lower investment potential for these sectors. 

n RERC’s required pre-tax yield rate for the industrial warehouse 

and R&D sectors decreased to 8.7 percent and 9.2 percent, 

respectively, during fourth quarter 2010. Similarly, the required 

pre-tax yield rate for the industrial flex sector fell to 9.3 percent. 

The required going-in and terminal capitalization rates 

for the industrial warehouse and R&D sectors declined, while 

the required going-in and terminal capitalization rates for the 

industrial flex sector increased. 

n The expected rental and expense growth for the industrial 

warehouse and R&D sectors remained unchanged during 

fourth quarter 2010. In comparison, the expected rental 

growth for the industrial flex sector fell by 20 basis points, 

while the expected expense growth increased by 20 basis 

points. 

n According to CBRE-EA, the national industrial availability rate 

fell by 30 basis points to 14.3 percent during fourth quarter 

2010. Although availability remains high, low construction 

and an improving economy should further reduce availability 

going forward. 


RERC Risk & Return Analysis – 4Q 2010 


Warehouse R&D Warehouse R&D 

NCREIF Returns 7.00% 5.26% 9.78% 11.93% 

NCREIF St. Dev. 11.31% 12.47% 11.31% 12.47% 

RAR* Metric 0.6 0.4 0.9 1.0 

RERC Returns 9.47% 10.11% 9.10% 9.58% 

NCREIF vs. RERC -2.46% -4.85% 0.68% 2.35% 

*RAR = Risk-Adjusted Return. 


RERC Industrial Performance Cycle 


15% 

10% 

5% 

0% 

-5% 

-10% 

-15% 

-20% 

-25% 

-30% 

-35% 

4Q 2000 

4Q 2001 


All Industrial 

R & D 

Warehouse 

4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 

4Q 2006 



Warehouse Investment Criteria Trends 

12% 

10% 

8% 

6% 

4Q 2000 

4Q 2001 


4Q 2002 

4Q 2003 

4Q 2004 

R&D Investment Criteria Trends 

12% 

10% 

8% 

6% 

4Q 2000 

4Q 2001 


4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 

4Q 2005 

4Q 2006 

4Q 2006 

WINTER 2011 | VOL 39 | NO 4 

4Q 2007 

4Q 2007 

4Q 2007 

4Q 2008 

4Q 2009 



Pre-Tax Yield 

4Q 2008 

4Q 2009 



Pre-Tax Yield 

4Q 2008 

4Q 2009 

4Q 2010 

4Q 2010 

4Q 2010 

15% 

10% 

-10% 

-15% 

-20% 

-25% 

-30% 

-35% 


5% 

0% 

-5% 

12% 

10% 

8% 

6% 

12% 

10% 

8% 

6%

WINTER 2011 | VOL 39 | NO 4 

RETAIL 

n The retail sector received mixed reviews from RERC’s institutional 

investment survey respondents during fourth quarter 

2010. While some respondents stated that the retail sector is 

a good investment because of reasonable pricing, an equal 

number of respondents replied that the retail sector was 

quite risky because vacancy rates are still extremely high and 

demand remains low. 

n RERC’s investment conditions rating for the neighborhood/ 

community and regional mall retail sectors rose during fourth 

quarter 2010, indicating that the investment potential for these 

sectors has improved. However, the rating for the retail power 

center sector declined, indicating that respondents are less 

optimistic about investing in the retail power center sector. 

n RERC’s required pre-tax yield rate for the retail property sector 

overall decreased 50 basis points to 8.7 percent. The required 

going-in capitalization rate for the regional retail mall and retail 

power center sectors declined, while the rate for the neighborhood/community 

retail sector remained unchanged. 

n The expected rental growth for all three retail property sectors 

increased during fourth quarter 2010, as did the expected 

expense growth for the regional retail mall and retail power 

center sectors. The expected expense growth for the neighborhood/community 

retail sector remained unchanged from 

the previous quarter. 

n According to Reis, Inc., the vacancy rate for the retail sector 

remained unchanged at 10.9 percent during fourth quarter 

2010. In addition, the lowest number of completions was 

recorded since 1999, with only 594,000 square feet of neighborhood/community 

center space brought online during the 

quarter. Both asking and effective rents declined. 

NCREIF 

Returns 

NCREIF St. 

Dev. 

RERC Risk & Return Analysis – 4Q 2010 


Regional 

Mall 

Power 

Center 

Neigh/ 

Comm 

Regional 

Mall 

Power 

Center 


Neigh/ 

Comm 

10.81% 8.44% 9.13% 14.49% 10.94% 9.88% 

10.88% 11.87% 11.13% 10.88% 11.87% 11.13% 

RAR* Metric 1.0 0.7 0.8 1.3 0.9 0.9 

RERC 

Returns 

NCREIF vs. 

RERC 



9.55% 9.84% 9.58% 8.98% 9.35% 9.35% 

1.26% -1.40% -0.45% 5.52% 1.59% 0.53% 


RERC Retail Performance Cycle 


20% 

15% 

10% 

5% 

0% 

-5% 

-10% 

-15% 

-20% 

-25% 

-30% 

4Q 2000 

4Q 2001 


All Retail 

4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 

4Q 2006 

4Q 2007 



Regional Mall Investment Criteria Trends 

12% 

10% 

8% 

6% 

4Q 2000 

4Q 2001 


4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 

4Q 2006 

Power Center Investment Criteria Trends 

14% 

12% 

10% 

8% 

6% 

4Q 2000 

4Q 2001 


4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 

4Q 2006 

4Q 2007 

4Q 2007 

4Q 2008 

4Q 2009 



Pre-Tax Yield 

4Q 2008 

4Q 2009 



Pre-Tax Yield 

4Q 2008 

4Q 2009 

4Q 2010 

4Q 2010 

4Q 2010 

Neighborhood/Community Investment Criteria Trends 

12% 

10% 

8% 

6% 

4Q 2000 

4Q 2001 


4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 

4Q 2006 

4Q 2007 



Pre-Tax Yield 

4Q 2008 

4Q 2009 

4Q 2010 

20% 

15% 

10% 

5% 

0% 

-5% 

-10% 

-15% 

-20% 

-25% 

-30% 

12% 

10% 

8% 

6% 

14% 

12% 

10% 

8% 

6% 

12% 

10% 

8% 

6% 

WWW.RERC.COM 21


APARTMENT 

n RERC’s institutional investment survey respondents continued 

to recommend investing in the apartment market during 

fourth quarter 2010. Financing and capital availability for 

the sector is good, and vacancy rates are low. In addition, 

distressed apartment properties are available. However, a few 

respondents noted that high demand and tight supply are 

causing overpricing in some areas. 

n RERC’s investment conditions rating for the apartment sector 

declined to 6.8 on a scale of 1 to 10, with 10 being high, during 

fourth quarter 2010. Although the apartment sector continued 

to receive the highest rating compared to the other 

property sectors, survey respondents found the investment 

potential for the sector less attractive than during the previous 

quarter, when the rating was 7.3 on the same scale. 

n RERC’s required pre-tax yield rate for the apartment sector 

declined 50 basis points to 8.0 percent during fourth quarter 

2010. The required going-in capitalization rate for the apartment 

sector decreased 50 basis points to 6.0 percent, while 

the required terminal capitalization rate fell 60 basis points to 

6.6 percent. 

n Compared to the previous quarter, the expected rental 

growth for the apartment sector increased 20 basis points to 

3.1 percent, while the expected expense growth rose 10 basis 

points to 2.8 percent. 

n According to Reis, Inc., the national vacancy rate for the apartment 

sector dropped sharply to 6.6 percent in fourth quarter 

2010. In addition, occupied stock increased by nearly 58,000 

units for the quarter, with absorption for the year 2010 totaling 

over 227,000 units. Asking and effective rents continued to 

increase at approximately 0.5 percent. 




NCREIF Returns 7.43% 18.21% 

NCREIF St. Dev. 11.77% 11.77% 

RAR* Metric 0.6 1.5 

RERC Returns 9.15% 8.40% 

NCREIF vs. RERC -1.72% 9.81% 



RERC Apartment Performance Cycle 


15% 

10% 

5% 

0% 

-5% 

-10% 

-15% 

-20% 

-25% 

-30% 

-35% 

4Q 2000 

4Q 2001 


Apartment 

4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 



Apartment Investment Criteria Trends 

12% 

10% 

8% 

6% 

4% 

4Q 2000 

4Q 2001 


4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 

4Q 2006 

4Q 2006 

WINTER 2011 | VOL 39 | NO 4 

4Q 2007 

4Q 2007 

4Q 2008 

4Q 2009 



Pre-Tax Yield 

4Q 2008 

4Q 2009 

4Q 2010 

4Q 2010 

15% 

10% 

-10% 

-15% 

-20% 

-25% 

-30% 

-35% 


5% 

0% 

-5% 

12% 

10% 

8% 

6% 

4%

WINTER 2011 | VOL 39 | NO 4 

HOTEL 

n Many of RERC’s institutional investment survey respondents 

stated that the hotel sector was a good investment opportunity 

because of the anticipated up-tick in industry performance 

and the availability of distressed assets, which have been 

trading well during fourth quarter 2010. Although there are 

still problems with little to no financing available, respondents 

suggested that for those who did have available capital, now 

was the time to buy hotel properties cheap. 

n RERC’s institutional investment survey respondents rated the 

investment conditions for the hotel sector at 5.6 on a scale of 

1 to 10, with 10 being high, during fourth quarter 2010. The 

continued increase in the rating for the hotel sector shows the 

significant improvement in the investment potential for the 

sector. In fact, the hotel sector rating is tied with the rating for 

the neighborhood/community retail sector, and is now the 

third-highest rated among the various property types. 

n RERC’s required pre-tax yield rate for the hotel sector decreased 

30 basis points to 10.5 percent during fourth quarter 2010, 

although it still maintained the highest required pre-tax yield 

rate among the various property types. The required going-in 

capitalization rate for the hotel sector remained unchanged at 

9.0 percent, while the required terminal capitalization rate for 

the hotel sector fell 30 basis points to 9.1 percent, making the 

expectations for the going-in and terminal capitalization rates 

almost the same. This unusual development indicates that the 

amount of risk for the hotel sector is only slightly more in the 

future than what is perceived today. 

n RERC’s expected rental growth for the hotel sector increased 

to 3.4 percent, while the expected expense growth rose to 2.9 

percent during fourth quarter 2010. 

n According to Smith Travel Research, hotel sector occupancy 

increased 5.7 percent to 57.6 percent in December 2010. In 

contrast, the average daily rate (ADR) declined 0.1 percent to 

$98.08, while revenue per available room (RevPar) rose 5.5 percent 

to $56.47. 



NCREIF Returns 5.16% 8.97% 

NCREIF St. Dev. 13.65% 13.65% 

RAR* Metric 0.4 0.7 

RERC Returns 11.81% 11.05% 

NCREIF vs. RERC -6.65% -2.08% 





RERC Hotel Performance Cycle 


15% 

10% 

5% 

0% 

-5% 

-10% 

-15% 

-20% 

-25% 

-30% 

-35% 

-40% 

4Q 2000 

4Q 2001 


Hotel 

4Q 2002 

4Q 2003 

4Q 2004 



Hotel Investment Criteria Trends 

15% 

12% 

9% 

6% 

4Q 2000 

4Q 2001 


4Q 2002 

4Q 2003 

4Q 2004 

4Q 2005 

4Q 2005 

4Q 2006 

4Q 2006 

4Q 2007 

4Q 2007 

4Q 2008 

4Q 2009 



Pre-Tax Yield 

4Q 2008 

4Q 2009 

4Q 2010 

4Q 2010 

15% 

10% 

5% 

0% 

-5% 

-10% 

-15% 

-20% 

-25% 

-30% 

-35% 

-40% 

15% 

12% 

9% 

6% 

WWW.RERC.COM 23


INSTITUTIONAL ANALYSIS & REGIONAL CRITERIA 


Institutional Pre-Tax Yield (IRR) Analysis - 4Q 2010 


CBD Suburban Warehouse R&D Flex 

Regional 

Mall 

Power 

Center 

Neigh/ 

Comm 

WINTER 2011 | VOL 39 | NO 4 


Institutional Investors 

Range 7.3 - 10.0 8.0 - 11.0 7.8 - 10.0 8.0 - 10.5 8.0 - 10.8 7.0 - 10.0 7.1 - 10.3 7.1 - 11.0 6.0 - 10.0 9.0 - 12.0 

Average 8.3 9.3 8.7 9.2 9.3 8.6 8.9 8.8 8.0 10.5 

National Results from Regional Survey (First-Tier) 

Range 7.0 - 13.0 7.0 - 13.0 7.0 - 15.0 7.0 - 14.0 6.0 - 13.0 7.0 - 14.0 7.0 - 14.0 7.0 - 14.0 6.0 - 13.0 8.0 - 15.0 

Average 9.7 10.0 9.9 10.1 9.9 9.8 9.9 10.1 9.0 11.6 

Realized Returns Five-Year Averages (NCREIF) 

Range -19.1 - 20.5 -17.9 - 17.0 -10.9 - 13.5 -17.5 - 18.2 -20.4 - 23.6 

Average 

Alternative Investments 

5.0 3.5 4.9 3.9 4.2 

The table Required Real Estate vis-a-vis Capital Market Returns shows historic spreads between the average targeted yield for real estate and actual yields for alternative investments. 

The current capital market returns range from 2.7% to 5.8%, broader than last quarter. The normative spread over the last several years ranges from 325 to 550 basis points. The current 

range is from 620 basis points on 10-year treasuries to 310 basis points on Moody’s Baa Corporate. The gap only serves to underline the relative attractiveness of current returns on real 

estate as compared to other asset classes. Adding in the normative spread for real estate of 325 basis points for Moody’s Baa Corporate and using 550 basis points from 10-year treasuries, 

for example, the alternative market analysis indicates a discount range of 8.2% to 9.1%. 

Pre-tax Yield (IRR) Conclusion 

The criteria outlined in this section served as the basis in the selection of an appropriate capitalization rate for commercial properties. 

The capitalization rate is to be applied to the first year or stabilized cash flow of the property for the determination of value for the direct 

capitalization approach and must reflect the quality and durability of the income projections, as well as the likelihood of real long-term 

gain in asset value. The rate to the investor must be at a level commensurate with alternative investment vehicles. The most comparable 

rates for commercial properties, as previously discussed, are listed to the right: 

Institutional Investors: 8.0 - 10.5 

Regional Respondents: 9.0 - 11.6 

Real Estate Indices: 3.5 - 5.0 

Alternative Investments: 8.2 - 9.1 

*The NCREIF Property Index Return Survey presents the total returns for all the properties surveyed. Total returns, also called overall returns, include three qualifying factors: appreciation (or depreciation), realized 

capital gains (or loss) and income. Total return is computed by adding the capital appreciation return and the income return on a quarterly basis. 


WINTER 2011 | VOL 39 | NO 4 


Institutional Going-In Capitalization Rate Analysis - 4Q 2010 


CBD 

Office 

Suburban Warehouse 

Industrial 

R&D Flex Regional Mall 

Retail 

Power Center Neigh/Comm 



Range 5.5 - 8.0 6.5 - 9.3 6.5 - 9.0 7.0 - 9.0 7.0 - 11.0 6.0 - 9.0 6.2 - 10.0 6.0 - 9.5 5.0 - 7.8 7.5 - 12.0 

Average 6.7 7.7 7.5 8.1 8.6 7.2 7.7 7.4 6.0 9.0 


Range 5.5 - 12.0 6.0 - 12.0 6.0 - 12.0 6.5 - 11.0 6.0 - 10.5 5.5 - 12.0 6.0 - 12.0 6.0 - 12.0 4.8 - 11.0 6.0 - 13.0 

Average 8.0 8.4 8.3 8.6 8.6 8.2 8.3 8.4 7.3 9.3 

Realized Returns Five-Year Averages (NCREIF) 

Range 4.9 - 6.9 5.9 - 7.3 5.7 - 7.1 4.5 - 5.9 4.4 - 8.6 

Average 

Alternative Investments 

6.0 6.6 6.3 5.2 6.6 

The table Required Real Estate vis-a-vis Capital Market Returns shows historic spreads between the average targeted capitalization rates for real estate and actual yields for alternative investments. 

The current capital market returns range from 2.7% to 5.8%, broader than last quarter The normative spread over the last several years ranges from 125 to 350 basis points. 

The current range is from 180 basis points on Moody’s Baa Corporate to 490 basis points on 10-year treasuries. The gap only serves to underline the relative attractiveness of current 

returns on real estate as compared to other asset classes. Adding in the normative spread for real estate of 125 basis points for Moody’s Baa Corporate and using 350 basis points from 

10-year treasuries, for example, the alternative market analysis indicates a going-in capitalization rate range of 6.2% to 7.1%. 

Going-In Capitalization Rate Conclusion 

The criteria outlined in this section served as the basis in the selection of an appropriate capitalization rate for commercial proper- Institutional Investors: 6.0 - 9.0 

ties. The capitalization rate is to be applied to the first year or stabilized cash flow of the property for the determination of value for Regional Respondents: 7.3 - 9.3 

the direct capitalization approach and must reflect the quality and durability of the income projections, as well as the likelihood of real Real Estate Indices: 5.2 - 6.6 

long-term gain in asset value. The rate to the investor must be at a level commensurate with alternative investment vehicles. The most 

comparable rates for commercial properties, as previously discussed, are listed to the right: 

Alternative Investments: 6.2 - 7.1 

*The NCREIF Property Index Return Survey presents the total returns for all the properties surveyed. Income returns include only the income of the property and do not take into account the appreciation and/or 

depreciation of the property. 

Institutional Terminal Capitalization Rate Analysis - 4Q 2010 

CBD 

Office 

Suburban Warehouse 

Industrial 

R&D Flex Regional Mall 

Retail 

Power Center Neigh/Comm 



Range 6.5 - 8.5 7.0 - 10.0 7.0 - 9.5 6.0 - 10.0 7.0 - 11.0 6.5 - 9.0 6.5 - 10.0 6.5 - 11.0 5.5 - 8.3 8.0 - 10.5 

Average 7.4 8.4 8.0 8.5 8.9 7.5 8.3 8.0 6.6 9.1 

Spread Basis Points Range 50 - 100 50 - 70 50 - 50 -100 - 100 0 - 0 0 - 50 0 - 30 50 - 150 50 - 50 -150 - 50 

Spread Basis Points Average 70 70 50 40 30 30 60 60 60 10 


Range 6.3 - 12.0 7.0 - 12.0 6.5 - 12.0 7.0 - 12.0 6.0 - 13.0 6.0 - 13.0 7.0 - 12.0 6.5 - 13.0 5.0 - 12.0 8.0 - 13.0 

Average 8.6 8.9 8.9 9.1 9.1 8.8 8.8 9.0 7.9 9.9 

Spread Basis Points Range 0 - 80 0 - 100 0 - 50 50 - 100 0 - 250 50 - 100 0 - 100 50 - 100 30 - 100 0 - 200 

Spread Basis Points Average 60 50 60 50 50 60 50 60 60 60 

Terminal Capitalization Rate Conclusion 

The terminal (reversion) capitalization rate is calculated by adjusting a typical stabilized overall capitalization rate for the Institutional Investors: 6.6 - 9.1 

loss in the competitive market standing realized by properties over the holding period due to the nominal aging of the Regional Respondents: 7.9 - 9.9 

property. Taking into account information in the previous sections, specifically the capitalization rates by property type, Institutional Average Going-In/Terminal Spread: 10 - 70 bps. 

a determination can be made using the spread between the terminal and the going-in capitalization rates. Typically, this 

has ranged between 40 to 100 basis points, with the average around 60 basis points. After adjusting the data for the time 

horizon and relative earning rates for different properties, the indicated terminal ranges have been deemed appropriate for 

the different property types. 

Regional Average Going-In/Terminal Spread: 50 - 60 bps. 

WWW.RERC.COM 25


West Investment Criteria 


Regional Investment Criteria - 4Q 2010 | First-Tier 1 Investment Properties 


CBD Suburban Warehouse R&D Flex Regional Mall Power Center Neigh/Comm 

WINTER 2011 | VOL 39 | NO 4 



Range 7.0 - 12.0 7.5 - 12.0 7.0 - 12.0 7.5 - 13.0 6.0 - 12.5 7.0 - 12.0 7.0 - 13.0 7.5 - 12.5 6.0 - 12.0 8.0 - 15.0 

Average 9.7 10.0 9.7 10.1 9.8 9.9 10.2 10.0 8.7 11.6 


Range 6.0 - 9.5 6.5 - 11.0 6.5 - 9.5 6.5 - 10.0 6.0 - 10.0 5.5 - 10.0 6.0 - 10.0 6.0 - 10.0 4.8 - 8.5 6.0 - 12.0 

Average 7.7 8.1 7.9 8.1 8.2 7.8 8.1 7.9 6.6 9.2 


Range 7.0 - 10.0 7.0 - 11.0 7.0 - 10.0 7.5 - 11.0 6.0 - 11.0 6.0 - 10.0 7.5 - 10.0 6.5 - 10.0 5.0 - 10.0 8.0 - 13.0 

Average 8.3 8.7 8.5 8.8 8.8 8.4 8.7 8.5 7.3 9.7 

Midwest Investment Criteria 


Range 7.0 - 12.0 8.0 - 12.0 8.0 - 12.0 8.0 - 14.0 8.0 - 13.0 8.3 - 14.0 7.5 - 14.0 8.0 - 14.0 7.5 - 12.0 8.0 - 15.0 

Average 10.0 10.3 9.9 10.3 10.1 10.5 10.2 10.7 9.4 11.6 


Range 6.0 - 12.0 7.5 - 12.0 6.0 - 12.0 7.5 - 11.0 7.5 - 10.5 7.0 - 12.0 6.5 - 12.0 7.0 - 12.0 6.0 - 11.0 8.0 - 13.0 

Average 8.8 9.1 8.9 8.9 8.9 8.9 8.7 9.1 7.7 10.0 


Range 6.5 - 11.0 7.5 - 12.0 6.5 - 11.0 7.5 - 11.5 7.5 - 11.5 7.5 - 13.0 7.0 - 12.0 7.5 - 13.0 7.0 - 12.0 8.0 - 13.0 

Average 9.0 9.4 9.1 9.3 9.3 9.6 9.1 9.6 8.4 10.4 

South Investment Criteria 


Range 7.0 - 13.0 8.0 - 13.0 7.0 - 15.0 7.0 - 13.0 7.0 - 13.0 7.0 - 13.0 7.0 - 13.0 7.0 - 13.5 7.0 - 13.0 8.5 - 15.0 

Average 10.1 10.2 10.3 10.1 10.1 9.8 9.8 10.2 9.4 11.8 


Range 6.5 - 10.0 7.0 - 10.5 6.5 - 10.0 6.5 - 10.0 6.5 - 10.5 6.0 - 10.0 6.5 - 10.0 6.5 - 12.0 5.0 - 10.0 6.0 - 12.0 

Average 8.2 8.4 8.5 8.8 8.8 8.2 8.3 8.5 7.7 9.1 


Range 7.0 - 12.0 7.5 - 12.0 7.0 - 12.0 7.0 - 12.0 7.0 - 13.0 6.0 - 10.5 7.0 - 11.0 7.0 - 11.5 6.0 - 11.0 8.0 - 13.0 

Average 9.0 9.1 9.3 9.4 9.4 8.8 8.9 9.2 8.4 10.0 

East Investment Criteria 


Range 7.0 - 12.0 7.0 - 13.0 7.5 - 12.5 7.5 - 13.0 7.5 - 12.0 7.5 - 14.0 7.5 - 12.0 7.5 - 12.0 6.0 - 10.8 8.0 - 15.0 

Average 9.0 9.5 9.5 10.0 9.8 9.3 9.5 9.6 8.4 11.4 


Range 5.5 - 10.0 6.0 - 10.0 6.8 - 10.0 7.0 - 11.0 7.0 - 10.5 6.0 - 10.0 6.5 - 10.0 6.5 - 10.0 5.0 - 11.0 6.0 - 12.0 

Average 7.6 7.9 8.2 8.5 8.5 8.0 8.0 8.1 7.2 9.2 


Range 6.3 - 12.0 7.0 - 11.0 7.3 - 10.5 7.0 - 12.0 7.5 - 11.0 6.5 - 11.0 7.0 - 10.3 6.8 - 10.3 5.5 - 10.0 8.0 - 12.0 

Average 8.2 8.6 8.8 9.0 9.1 8.5 8.4 8.6 7.7 9.8 

1 First-tier investment properties are defined as new or newer quality construction in prime to good locations. 

A list of RERC Defined Regions is located in the back of this report in the “Scope and Methodology” section. 


WINTER 2011 | VOL 39 | NO 4 




Regional Investment Criteria - 4Q 2010 | Second-Tier 1 Investment Properties 





Range 7.5 - 12.3 7.0 - 14.0 7.0 - 12.5 7.0 - 14.0 7.0 - 12.8 7.0 - 12.5 8.0 - 13.0 8.0 - 13.0 6.5 - 13.0 8.0 - 15.0 

Average 10.3 10.7 10.1 10.4 10.3 10.4 10.7 10.4 9.1 12.1 


Range 7.0 - 10.0 7.0 - 11.0 7.0 - 10.0 7.0 - 11.0 7.0 - 11.0 6.5 - 11.0 7.5 - 11.0 6.5 - 11.0 5.5 - 9.3 7.5 - 12.5 

Average 8.3 8.6 8.4 8.7 8.7 8.4 8.6 8.4 7.3 9.8 


Range 7.5 - 10.0 7.0 - 11.8 7.0 - 11.0 7.0 - 12.0 7.0 - 12.0 7.0 - 11.0 8.0 - 11.0 7.0 - 11.0 6.0 - 10.5 8.0 - 13.0 

Average 8.8 9.2 8.9 9.3 9.3 8.9 9.3 9.0 7.9 10.4 



Range 8.0 - 14.0 8.0 - 13.0 8.5 - 13.0 8.5 - 14.0 8.0 - 14.0 8.5 - 15.0 8.0 - 13.0 8.3 - 14.0 7.8 - 12.0 8.8 - 15.0 

Average 11.0 11.1 10.8 11.0 10.8 11.2 10.5 11.1 10.0 11.9 


Range 7.0 - 12.0 7.5 - 13.0 7.5 - 12.0 7.5 - 12.0 7.5 - 12.0 7.0 - 11.0 7.5 - 12.0 7.5 - 13.0 6.5 - 12.0 8.0 - 13.0 

Average 9.5 9.8 9.5 9.5 9.5 9.2 9.1 9.6 8.5 10.6 


Range 7.5 - 12.0 7.5 - 12.0 7.5 - 12.0 7.5 - 12.0 7.5 - 12.0 7.5 - 13.0 7.5 - 12.0 7.5 - 13.0 7.0 - 12.0 8.0 - 13.0 

Average 9.8 9.9 9.7 9.9 9.8 9.9 9.6 10.0 8.8 10.9 



Range 7.5 - 15.0 8.0 - 15.0 8.0 - 15.0 8.0 - 15.0 8.0 - 15.0 8.0 - 14.0 8.0 - 15.5 8.0 - 15.5 8.0 - 15.0 9.0 - 16.0 

Average 10.7 10.9 10.9 10.8 10.9 10.7 11.0 11.3 10.5 12.3 


Range 7.0 - 11.0 7.5 - 11.0 7.0 - 11.0 7.0 - 11.0 7.0 - 11.0 7.0 - 11.0 7.0 - 11.0 7.5 - 11.5 5.5 - 11.0 7.0 - 13.0 

Average 8.8 8.9 9.0 9.2 9.2 8.7 8.9 9.0 8.4 9.8 


Range 7.5 - 13.0 8.0 - 12.0 7.5 - 12.0 7.5 - 12.0 7.5 - 13.0 7.5 - 11.0 8.0 - 12.0 8.0 - 12.0 6.5 - 13.0 8.0 - 13.5 

Average 9.6 9.7 9.7 9.8 10.0 9.5 9.6 9.8 9.2 10.6 



Range 7.5 - 12.5 7.5 - 12.5 7.5 - 12.5 8.0 - 13.0 7.5 - 12.3 7.8 - 12.5 7.8 - 13.0 8.0 - 13.0 7.3 - 14.0 9.0 - 15.0 

Average 9.9 10.0 10.1 10.6 10.4 10.0 10.2 10.2 9.3 12.1 


Range 6.5 - 11.0 7.0 - 10.0 7.0 - 10.0 7.0 - 10.5 7.5 - 10.0 7.0 - 10.0 7.0 - 12.0 7.5 - 13.0 5.5 - 10.0 7.0 - 13.5 

Average 8.3 8.5 8.7 8.9 8.9 8.6 8.8 8.9 7.7 9.9 


Range 7.0 - 11.0 7.5 - 11.0 7.0 - 11.5 8.0 - 11.0 8.0 - 11.0 7.0 - 11.0 7.5 - 12.0 7.5 - 13.0 6.5 - 10.0 8.0 - 13.0 

Average 8.9 9.1 9.4 9.4 9.6 9.2 9.3 9.5 8.3 10.6 

1 Second-tier investment properties are defined as aging, former first-tier properties, in good to average locations. 


WWW.RERC.COM 27




Regional Investment Criteria - 4Q 2010 | Third-Tier 1 Investment Properties 



WINTER 2011 | VOL 39 | NO 4 



Range 8.0 - 14.0 8.0 - 15.0 8.0 - 14.0 8.0 - 14.0 8.0 - 14.0 8.0 - 13.0 8.0 - 14.0 8.0 - 14.0 7.0 - 14.0 9.0 - 16.0 

Average 11.3 11.5 11.1 11.3 11.3 11.4 11.5 11.3 10.0 13.0 


Range 7.0 - 11.0 7.5 - 10.5 7.0 - 12.0 7.0 - 12.0 7.0 - 12.0 6.5 - 11.0 7.5 - 11.0 6.5 - 11.0 6.0 - 12.0 8.0 - 13.5 

Average 9.1 9.2 9.0 9.2 9.3 9.2 9.4 9.1 8.2 10.6 


Range 8.0 - 11.0 8.0 - 11.0 8.0 - 12.5 8.0 - 12.5 8.0 - 12.5 8.0 - 12.0 8.0 - 12.0 8.0 - 12.0 6.5 - 11.0 8.5 - 14.0 

Average 9.8 10.0 9.8 10.1 10.1 9.9 10.1 10.0 9.0 11.5 



Range 9.0 - 16.0 9.0 - 15.0 9.0 - 15.0 9.0 - 15.0 9.0 - 15.0 8.8 - 16.0 8.5 - 16.0 8.5 - 16.0 8.0 - 15.0 9.0 - 16.0 

Average 12.3 12.1 11.9 11.9 11.8 12.3 11.8 12.2 10.9 12.8 


Range 8.0 - 13.0 8.0 - 13.0 8.0 - 13.0 8.0 - 13.0 8.0 - 13.0 8.0 - 15.0 8.0 - 14.0 8.0 - 14.0 7.0 - 12.0 8.0 - 15.0 

Average 10.3 10.4 10.1 10.3 10.3 10.4 10.0 10.3 9.3 11.6 


Range 8.0 - 14.0 8.0 - 15.0 8.0 - 14.0 8.0 - 14.0 8.0 - 14.0 8.0 - 15.0 8.0 - 15.0 8.0 - 15.0 7.5 - 13.0 9.0 - 15.0 

Average 10.7 10.9 10.8 10.7 10.7 11.0 10.6 10.9 9.8 11.7 



Range 8.0 - 15.0 8.5 - 15.0 9.5 - 15.0 9.0 - 15.0 8.0 - 15.0 9.5 - 15.0 9.5 - 16.0 9.0 - 15.5 8.0 - 15.5 9.5 - 16.0 

Average 11.2 11.7 11.5 11.7 11.7 11.8 11.7 12.1 11.6 12.8 


Range 7.5 - 12.0 7.5 - 11.5 7.5 - 12.0 7.5 - 12.0 7.5 - 12.0 7.0 - 12.0 7.0 - 11.0 7.5 - 11.5 7.0 - 11.5 7.0 - 14.0 

Average 9.7 9.7 9.6 9.8 9.8 9.6 9.6 9.8 9.2 10.5 


Range 8.5 - 12.5 8.5 - 12.0 9.0 - 12.0 9.0 - 12.0 9.0 - 13.0 7.8 - 12.0 8.0 - 12.0 8.5 - 13.0 8.0 - 13.0 8.0 - 14.0 

Average 10.3 10.4 10.4 10.5 10.6 10.3 10.4 10.6 10.1 11.2 



Range 8.8 - 15.0 8.8 - 15.0 9.0 - 14.0 9.0 - 15.0 7.5 - 14.4 8.0 - 15.0 8.0 - 15.0 9.0 - 15.0 7.5 - 14.0 10.0 - 17.5 

Average 11.1 11.2 11.1 11.3 11.2 10.8 11.1 11.4 9.9 13.1 


Range 7.5 - 12.0 7.5 - 11.5 7.5 - 11.3 7.5 - 12.0 7.5 - 11.0 7.5 - 12.5 7.5 - 12.0 8.0 - 15.0 6.0 - 12.0 8.0 - 15.0 

Average 9.3 9.4 9.6 9.7 9.7 9.6 9.6 9.7 8.5 11.1 


Range 8.0 - 12.5 8.0 - 12.0 8.0 - 12.5 8.0 - 13.0 8.0 - 11.8 8.0 - 14.0 8.0 - 12.0 8.0 - 15.0 7.5 - 13.0 9.5 - 15.5 

Average 9.9 10.0 10.2 10.3 10.3 10.3 10.1 10.3 9.1 11.9 

1 Third-tier investment properties are defined as older properties with functional inadequacies and/or marginal locations. 



WINTER 2011 | VOL 39 | NO 4 

RERC REAL ESTATE CAP RATE AND YIELD RATE EXPECTATIONS 

Metro 

NCREIF Total Returns (All Types) – 4Q 2010 

1-Year 

Average 

3-Year 

Average 

5-Year 

Average 


10-Year 

Average 

Atlanta 9.54% -4.46% 2.20% 5.31% 

Boston 11.18% -6.85% 5.73% 8.33% 

Chicago 11.83% -2.72% 4.12% 6.80% 

Dallas 12.88% -4.77% 2.89% 6.19% 

Houston 14.09% 2.91% 8.04% 9.74% 

Los Angeles 13.36% -3.96% 5.93% 9.83% 

Minneapolis 10.32% -2.14% 3.68% 6.51% 

New York 15.89% -6.27% 5.64% 9.89% 

San Francisco 14.45% -5.76% 5.39% 6.47% 

Seattle 12.54% -3.95% 5.30% 7.64% 

Washington, D.C. 19.79% 0.85% 6.68% 11.56% 

Source: NCREIF, compiled by RERC, 4Q 2010. 

Current Quarter 

(Annualized) 

Property Sector/ 

Subsector 


NAREIT Investment Performance Index* - 4Q 2010 

Total Return 

2010 2009 

Number of 

REITs 

Dividend 

Yield** 

Equity REIT Index 27.95 27.99 119 3.54 

Industrial/Office 17.04 29.17 31 3.67 

Industrial 18.89 12.17 8 3.51 

Office 18.41 35.55 17 3.37 

Mixed Use 8.75 34.90 6 5.46 

Retail 33.41 27.17 27 3.47 

Shopping Centers 30.78 -1.66 16 3.55 

Regional Malls 34.64 62.99 7 3.12 

Free Standing 37.37 25.93 4 5.47 

Residential 46.01 30.82 18 3.33 

Apartments 47.04 30.40 15 3.31 

Manufactured 

Homes 

NCREIF Property Index Returns 

27.02 40.92 3 3.82 

Diversified 23.75 17.02 11 3.79 

Lodging/Resorts 42.77 67.19 11 1.41 

Health Care 19.20 24.62 13 5.28 

Self Storage 29.29 8.37 4 3.07 

Specialty 4.31 NA 4 2.92 

* All figures represent percent change except where noted. 

** Dividend yield is quoted in percent and is for month end. 

Source: NAREIT, as of December 31, 2010. 

2010 2009 2008 2007 2006 2005 

Office 16.66% 11.74% -19.10% -7.29% 20.51% 19.16% 19.46% 

Industrial 14.41% 9.37% -17.85% -5.76% 14.95% 16.96% 20.31% 

Retail 20.49% 12.62% -10.95% -4.11% 13.51% 13.35% 19.98% 

Apartment 27.61% 18.21% -17.51% -7.29% 11.36% 14.63% 21.15% 

Hotel 14.08% 8.97% -20.40% -9.35% 18.10% 23.57% 18.99% 

East 22.94% 15.12% -17.19% -7.92% 16.03% 17.74% 21.58% 

West 18.90% 12.88% -19.07% -6.85% 18.29% 18.45% 21.04% 

Midwest 15.03% 9.70% -12.98% -5.28% 13.52% 11.46% 14.10% 

South 18.91% 12.08% -14.35% -3.83% 12.78% 14.72% 19.83% 

National 19.81% 13.11% -16.85% -6.46% 15.85% 16.60% 20.06% 

Source: NCREIF, compiled by RERC, 4Q 2010. 

WWW.RERC.COM 29


Property Type 

Apartments 

- Standard 

Retail - 

Anchored / 

Community 

Retail - 

Unanchored 

Industrial 

Warehouse 

- Bulk 

Industrial 

Warehouse 

- Flex 

Office - 

Class B 

Mobile Home 

Park 

Range of 

DSCR 

Reprinted with permission of John B. Levy & Company, Inc., a real-estate investment bank in Richmond, Virginia (www.jblevyco.com). 

Copyright © 2011 Dow Jones & Company, Inc. All Rights Reserved. 


Max LTV 

Range 

Spread 

Range at 

Par 

SURVEY OF MORTGAGE QUOTES - January 4, 2011 

#1 #2 #3 #4 #5 

Midpoint 

of Quote 

at Par 

Spread 

Range at 

Par 

Midpoint 

of Quote 

at Par 

Spread 

Range at 

Par 

Midpoint 

of Quote 

at Par 

Spread 

Range at 

Par 

Midpoint of 

Quote at Par 

WINTER 2011 | VOL 39 | NO 4 

Spread 

Range at 

Par 

Midpoint 

of Quote 

at Par 

1.25 - 1.35 55% - 75% 300 300 225 - 275 250 225 225 215 - 250 232.5 300 300 261.50 

1.25 - 1.35 55% - 75% 300 300 275 275 275 275 225 - 250 237.5 325 325 282.50 

1.25 - 1.35 55% - 70% 325 325 N/A N/A 275 275 290 290 325 - 350 337.5 306.88 

1.25 - 1.35 55% - 70% 300 - 325 312.5 300 300 275 275 275 - 300 287.5 300 - 350 325 300.00 

1.25 - 1.35 55% - 70% 300 - 325 312.5 300 300 275 275 275 - 300 287.5 300 -350 325 300.00 

1.25 - 1.35 55% - 70% 300 - 325 312.5 300 300 275 275 275 - 300 287.5 300 - 350 325 300.00 

1.25 - 1.35 55% - 70% 300 - 325 312.5 N/A N/A N/A N/A 290 290 350 350 317.50 

Self Storage 1.25 - 1.35 55% - 70% 300 - 325 312.5 N/A N/A N/A N/A 290 290 350 350 317.50 

Floating Rate - 30 Day LIBOR 

Apts - Leveraged at 65% to 75% 525 - 575 550 N/A N/A N/A N/A 525 - 575 550 N/A N/A 550.00 

Mezzanine 10% - 12% 11.00% N/A N/A N/A N/A 10% - 14% 12.00% 11% - 12% 11.50% 11.50% 

On the Run 

Treasury 

On the Run 

Treasury 

On the Run 

Treasury 

On the Run 

Treasury 

On the Run 

Treasury 

Defeasance? No Defeasance? No Defeasance? No Defeasance? No Defeasance? No 

Estimated 

Premium for 

Yield Maint. 

N/A 

Estimated 

Premium for 

Yield Maint 

N/A 

Estimated 

Premium for 

Yield Maint 

N/A 

Estimated 

Premium for 

Yield Maint 

N/A 

Estimated 

Premium for 

Yield Maint 

Int. Calc.: Actual/360 Int. Calc.: 30/360 Int. Calc.: 30/360 Int. Calc.: 30/360 Int. Calc.: Actual/360 


N/A 

Ave. of 

Midpoint 

Quotes

WINTER 2011 | VOL 39 | NO 4 

RERC PARTNER PROFILE 

WILLIAM L. CORBIN, MAI 

William Corbin serves as managing director of Real Estate Research Corporation’s (RERC’s) West Coast 

office, and has nearly 30 years experience in commercial real estate analysis, finance, and valuation. His 

previous experience in commercial real estate finance gives him particular insight to the capital and investment 

markets and their impact on institutional real estate activity and values. 



Prior to his association with RERC in 2009, Mr. Corbin served with First American Appraisal and Consulting 

Services, LLC (formerly KTR Real Estate Services), where he was responsible for managing the Los Angeles 

regional office, developing and managing institutional accounts, and performing direct valuation work for 

those clients. While with First American, he also headed the firm’s national pension fund valuation practice, 

and served as their designated representative to the National Council of Real Estate Investment Fiduciaries 

(NCREIF). Prior to his work with First American, he was an appraiser for Landauer Associates from 1992 to 1995. 

Mr. Corbin has conducted numerous current value narrative appraisals for national and regional institutional lenders and investors on warehouse 

distribution buildings, industrial and business parks, office buildings, shopping centers, and apartments. 

Mr. Corbin served as a mortgage banker from 1983 to 1992, when he arranged a wide variety of financing structures with institutional lenders 

and equity investors, including permanent loans, construction loans, and joint ventures. With George Smith Financial Services/Grubb & Ellis and 

Center Financial Group, he worked with over 90 institutions and closed over 150 transactions totaling in excess of $700 million. 

As a consultant with Robert Charles Lesser & Co. in the early 1980s, Mr. Corbin performed over 75 market supply and demand, economic feasibility, 

and strategic planning assignments for prominent regional and national clients in more than 20 major metropolitan areas in the Western 

and Central U.S. 

Contact Bill at: 

RERC 

1801 Century Park East 

Suite 2210 

Los Angeles, CA 90067 

Phone: (310) 734-1401 

Fax: (310) 203-0230 

Email: wcorbin@rerc.com 

WWW.RERC.COM 31


2010 Investor Behavior As a Guide for 2011 

By RERC Managing Director, William L. Corbin, MAI 

After the economic collapse in 2008 and the sorting-out period in 

2009 (when minimal transaction activity occurred), market transaction 

volume increased substantially in 2010. Top quality office 

assets (along with apartments) drew the majority of investment 

interest in 2010, propelling investment rates substantially lower 

than they were in 2009. Today, investment rates are currently 

approaching all-time lows for the highest quality assets in top 

national markets. 

The decline in capitalization rates was and is driven by several key 

factors: 

1. Flight to safe haven, low-risk investments, 

2. Accumulation of idle investment capital needing to be 

deployed or opportunistic capital looking to capitalize on 

cyclically low prices, 

3. Realization that the leasing markets’ occupancy fallout and 

precipitous rental rate decline has stabilized or is near to 

stabilizing, 

4. Substantial increase in lending activity and historically low 

borrowing rates, and 

5. The limited supply of quality assets offered to market. 

Stabilization of Markets 

Most major California office markets have now experienced three 

to four quarters of stabilizing vacancies and rents as tenant attrition 

has waned. While there is essentially no positive office-using 

job growth yet, most markets seem to have found bottom, or at 

least the bottom is predictable and further decline is incremental. 

This has allowed investors to take a forward-looking approach 

to purchase underwriting. Most investors now view only market 

upside ahead, but market recovery timing projections vary widely 

and have low certainty. On the other hand, stabilizing market conditions 

have provided higher certainty and have given investors 

and lenders the confidence needed to transact. These market conditions 

also have signaled to bargain shoppers that the time to buy 

is now, as market pricing has reached its cyclical low point. In the 

better markets, values are already on the rise. 

Availability of Debt 

After the absence of meaningful investment and lending activity 

in 2008 and 2009, and as the general economy stabilized and the 

real estate markets approached their cyclical low points through 

2009, both lenders and investors entered 2010 with pent-up desire 

and funds. The increasing certainty in seeing market occupancies 

and rental rates reaching their low points created confidence for 

lenders to re-enter the market with the expectation of meeting 

their production goals, and for new lending sources to emerge 

in early 2010. This, combined with the limited availability of asset 


WINTER 2011 | VOL 39 | NO 4 

offerings, created competition among lenders. As with investors, 

the competition was either for the top-quality, safest assets in 

major markets, or to a lesser extent, the bargain-priced distressed 

assets in quality locations with bright futures. Assets that did not 

generally fall into one of these two categories found debt difficult 

to obtain in 2010. 

The competition for best assets is still substantial, particularly from 

life insurance companies and foreign (both Asian and European) 

and domestic banks, as evidenced by recent sales in California. 

The property at 333 Market St. in the San Francisco financial district 

leased to Wells Fargo & Company with 18 years remaining on its 

lease sold at a 6.50-percent capitalization rate in second quarter 

2010, setting an investment rate benchmark. Investor competition 

was substantial for this asset, but lender competition was equally 

strong. Following that sale, Oakland City Center, a very good asset 

but considered not as simple or as safe, was offered in downtown 

Oakland. Bidders for that property reported that many of the same 

lenders that competed for (but did not win) 333 Market St. competed 

for the Oakland property, and debt rates lent were in the 

same range at both properties. 

With general interest rates near all-time lows and debt rates close 

behind providing positive leverage on loan terms from 5 to 10 

years, buyers of top properties were able to match expected holding 

periods with loan terms, creating an ideal situation for borrowers. 

In mid- to late-2010, fixed rates to the borrower were reported 

in the range of high 3 percent to mid-4 percent, and often they 

were interest-only for the first 5 years. Many of these fixed-rate 

loans were swapped from short-term London Interbank Offered 

Rate (LIBOR) based rates in the range of 1 percent. Lender spreads 

were in the range of 175 basis points to 200 basis points during 

the same time period for top properties, but beginning in 2011, we 

heard reports that spreads were narrowing into the 150-basis point 

to 170-basis point range. Further, fixed-rate lenders and borrowers 

report that spreads could narrow further as 2011 progresses, if 

competition dictates and most fixed-rate lenders (banks and life 

companies) report healthy production targets for 2011. If there is 

upward pressure on base rates in 2011, some or all of the increase 

could be absorbed by lower spreads, although most lenders would 

be surprised if spreads went to 130 basis points or lower. 

Mitigating the risk potential for higher rates going forward, Real 

Capital Analytics (RCA) identified three possible scenarios for 

general inflation and its effect on capitalization rates (see below). 

The two most probable scenarios present muted probabilities for 

higher capitalization rates. 

1. If interest rates increase because economic activity is 

strengthening, pressure on capitalization rates to increase 


WINTER 2011 | VOL 39 | NO 4 

will be mitigated as buyers will be able to reasonably underwrite 

rent growth and increasing net operating income 

(NOI). 

2. If interest rates rise simply in anticipation of or concern for 

inflation, upward pressure on rates should also be mitigated 

because during past inflationary periods, the spread 

between capitalization rates and Treasuries has narrowed 

substantially, and at times has even gone negative, because 

“hard assets” such as real property (and precious metals) are 

considered a hedge if real estate market fundamentals are 

stable, as they are now becoming. RCA reports capitalization 

rate spreads to Treasuries (the real estate risk premium), 

are well above historic norms, currently approximately 421 

basis points compared to the decade average of 277 basis 

points (this is for all property classes nationwide, not just top 

assets). These current higher spreads will allow the market 

to absorb further increases in interest rates without moving 

capitalization rates significantly. 

3. In the scenario where there are deteriorating leasing fundamentals, 

a rise in interest rates could cause a rise in capitalization 

rates, but this would require a double-dip recession, 

which at this point appears unlikely (as we have reported 

that major markets in Southern California and the Bay 

Area have experienced three to four quarters of stabilizing 

vacancies and market rental rates). 



Limited Supply of Sale Offerings 

The key driver in the current investment market’s performance is 

the limited supply of sale offerings. The only top core assets that 

have been brought to market since late 2009 have a compelling 

ownership issue or debt issue. These include portfolio level issues 

where underperforming assets have compelled a fund to sell 

best-performing assets, which have depreciated the least, to raise 

liquidity for the fund; forced sales from loan defaults on overleveraged 

assets with reduced cash flows as a result of lower market 

rents; or newly completed single-tenant buildings cashing out the 

developer. As 2010 progressed, additional best assets were offered 

nationally to take advantage of the acceleration in prices, where in 

some major markets, record prices were achieved. 

While the volume of office sales was anemic in 2009, the international 

and national investment community was very active in 2010 

for purchasing well-leased, high-quality office buildings in the best 

national markets, including West Los Angeles, New York (Manhattan), 

Washington, D.C., and San Francisco—the top performing 

investment markets over the last decade—as well as Boston, Chicago, 

and Seattle. Investors involved in bidding and winning these 

properties typically have long-term hold time horizons, and are 

seeking investment safety and value in the best properties. As a 

result of the small inventory of this type offered to market, investors 

began to expand the quality standards in terms of location 

and vacancy throughout 2010 and into 2011. 

West Los Angeles historically has fewer transactions than the other 

top national markets. This is because they have more limited offerings 

to begin with, since the majority of the better Class A buildings 

are held by a handful of owners, with Douglas Emmett & 

Company and Blackstone/Equity Office holding the top two highest 

concentrations, in that order. Douglas Emmett & Company is a 

long-term holder, and Blackstone would possibly divest seeking 

highest value but also has the highest base of all major Class A 

office owners, which has prevented it from selling assets to date. As 

can be seen in the following table, a few more assets were shaken 

loose in Southern California toward the end of 2010, but investors 

again began to stretch some in terms of location in order to obtain 

assets; none sold were in West Los Angeles proper, except for the 

former Hilton Hotels headquarters in Beverly Hills (9336-9346 Civic 

Center Drive) which was 100-percent vacant. This sale possibly 

represents the next phase in what has been an accelerated investment 

market recovery at the top end—buying vacancy (albeit for 

unique sites in top, protected markets). At the least, this sale shows 

that in 2011, buyers will become more creative and will stretch the 

envelope regarding what qualifies as a safe, long-term investment 

in order to place idle capital. 

The following table lists the majority of recent sales of major buildings 

in the top national office markets, and illustrates the high price 

per square foot achieved by top buildings. 

WWW.RERC.COM 33



RECENT HIGH VALUE NATIONAL OFFICE SALES 

WINTER 2011 | VOL 39 | NO 4 

Sale Date Street City ST SF Age/Renov. % Leased Price/SF Seller Buyer 

Contract 12121 & 12181 Bluff Creek Los Angeles CA 459,917 2007 90% $579 Lincoln Properties JP Morgan Asset Mgmt. 

Jan-11 9336-9346 Civic Ctr. Dr. Beverly Hills CA 184,305 1985 0% $425** Blackstone Group Tishman Speyer 

Jan-11 3101 Wilson Blvd. Arlington VA 212,000 2003 100% $531 Angelo Gordon Heitman Capital Mgmt. 

Dec-10 521 5th Avenue New York NY 490,000 1929/2007 93% $501 City Investment Fund SL Green Realty 

Dec-10 200 Clarendon Boston MA 1,723,352 1971/2006 95% $540 Normandy RE Ptrns. Boston Props. 

Dec-10 800 Newport Center Dr. Newport Beach CA 280,000 1982 98% $446 Northwestern Mutual Irvine Company 

Dec-10 University Towne Centre San Diego CA 125,200 2000 100% $507 Collins Development BioMed Realty Trust 

Dec-10 111 8th Street New York NY 2,961,071 1932/2000 93% $598 Jamestown/NYSCRF Google 

Dec-10 1225 Connecticut Ave. Washington DC 240,811 1968/2008 100% $897 Brookfield/Blackstone World Bank 

Dec-10 71 S. Wacker Dr. Chicago IL 1,472,460 2005 95% $424 Pritzker Realty Group The Irvine Company 

Nov-10 6500 Wilshire Blvd. Los Angeles CA 443,762 1986 99% $412 TIAA-CREF Lincoln/Morgan Stanley 

Nov-10 100 First Street San Francisco CA 465,363 1988 94% $415 Beacon Capital Ptrs. Kilroy Realty 

Nov-10 2121 K St. NW Washingtion DC 190,458 1981/2009 71% $433 ING Clarion TF Cornerstone 

Nov-10 1110 Vermont Ave. Washingtion DC 305,000 1980/2007 83% $426 GMAC/Perseus Realty Tishman Speyer 

Nov-10 1501 M Street Washington DC 170,224 1991 93% $464 John Buck Company JP Morgan Asset Mgmt. 

Oct-10 1111 Pennsylvania Ave. Washington DC 331,264 1967/2002 100% $664 Karasick/Shorenstein INVESCO 

Oct-10 1299 Pennsylvania Ave. Washington DC 560,000 1924/1992 93% $795 Vornado Realty Trust CPP Inv. Board 

Oct-10 180-200 Oyster Pt. Blvd. S. San Francisco CA 205,000 2009 100% $609 Chamberlin Assocs. BioMed Realty Trust 

Oct-10 1750 H Street Washington DC 111,510 2002 100% $583 Nat'l Treasury Eply. Union AEW Capital 

Sep-10 1899 Pennsylvania Ave. Washington DC 186,000 1920/2002 100% $812 Westwind Cap./DRI Ptnrs. Paramount/Hamberg Trs. 

Sep-10 650 F St. NW Washington DC 424,000 1924/2003 100% $625 Tishman Speyer Beacon Cap. Partners 

Sep-10 510 Madison Ave. New York NY 350,000 2009 - $786 Macklowe Props. Boston Props. 

Sep-10 11025 NE 8th St. Bellevue WA 755,000 2008 100% $543 Schnitzer/Investcorp Principal RE Investors 

Aug-10 125 Park Ave. New York NY 603,433 1922/2003 96% $547 Shorenstein Properties SL Green Realty 

Aug-10 11900 Gilbert St. Garden Grove CA 11,938 1970/2007 100% $502 Hewson Properties Chiu Inv. Trust 

Jul-10 55 E. 52nd St. New York NY 1,137,452 1981/2005 100% $590 Fisher Brothers Rockpoint Group 

Jun-10 1101 Pennsylvania Ave. Washington DC 225,501 1898/1989 88% $798 Westwind Capital Ptrs. TIAA-CREF 

Jun-10* 300 N. La Salle Chicago IL 1,267,331 2009 95% $499 Hines Interests TIAA-CREF 

Jun-10 1466 Broadway New York NY 298,695 1907/2004 90% $624 Prudential/Elliman Highgate Holdings 

May-10 333 Market Street San Francisco CA 657,177 1979/2005 100% $507 Principal RE Investors Downtown Props. 

May-10 340 Madison Ave. New York NY 738,686 1920/2002 92% $772 Broadway Partners RXR Realty 

May-10 10 Brookline Pl. W Needham MA 160,000 1971 100% $668 Nat'l Dev./Chas.River RE INVESCO 

May-10 1350 Eye St. NW Washington DC 364,302 1989 100% $581 Beacon Capital Ptrs. EDGE Fund Advisors 

May-10 600 Lexington Ave. New York NY 289,386 1985 94% $636 Hines/Sumitomo SL Green/CPP Inv. Brd. 

Mar-10 Mission Hospital MOB Mission Viejo CA 136,732 2008 100% $492 Pacific Med. Bldgs. Nationwide Health Props. 

Mar-10 St. Joseph Med. Plaza Orange CA 125,970 2008 100% $495 Pacific Med. Bldgs. Nationwide Health Props. 

Jan-10 299 Park Ave. New York NY 1,049,280 1967 100% $600 UBS Bancorp Rockpoint Group 

Aug-09* 1999 K Street NW Bldg. Washington DC 249,000 2009 100% $835 Vornado Realty Trust Deka Immobilien Invst. GmbH 

* Highest $/SF in city history 

** Includes $125/SF renovation costs 

Source: Real Capital Analytics. 

Avg. $587 


WINTER 2011 | VOL 39 | NO 4 

Owners for high-quality assets in the better markets of metro Los 

Angeles County, Orange County, and San Francisco continue to 

hold their ownership positions; however, more high-dollar assets 

in these markets have transacted of late (although as witnessed by 

the locations, investors are now stretching the envelope to obtain 

quality assets in markets they project will perform well for the long 

term, in light of the very limited supply offered). In Los Angeles, 

6500 Wilshire transacted at $412 per square foot, where the highest 

price paid for a Class A building in the Miracle Mile District of Los 

Angeles was $359 for Wilshire Courtyard in 2005. Horizon at Playa 

Vista is comprised of two average quality Class A buildings that are 

90-percent leased to Fox Interactive Media (including My Space) to 

2021, but the project is vacant seeking sub-tenants. The project is 

located 4 miles south of Interstate 10 and what is considered West 

Los Angeles proper in the new Playa Vista master planned community. 

At $579 per square foot, this is the highest price paid for a 

Class A office building of at least 100,000 square feet in Los Angeles 

County or Orange County that is not in West Los Angeles proper. 

Most indicative of the changed and changing investment landscape 

is Tishman Speyer’s recent purchase of the vacant former 

Hilton Hotels headquarters in Beverly Hills located just east of the 

Triangle. Tishman Speyer paid approximately $300 per square 

foot for this vacant project. The buyer plans to invest $23 million 

($125 per square foot) to modernize the two connected buildings, 

including mechanical systems, elevators, and landscaping (this 

does not include final tenant improvements allowances, leasing 

commissions, and lost rent). Brokers familiar with the transaction 

report the buyer’s view is that the building could be worth in the 

range of $600 per square foot when completed, either leased to 

a major credit tenant as a long-term leased investment, or to an 

owner-user as the market may dictate. This, particularly, is a benchmark 

sale with the investor buying vacancy (as in the 2005 to 2007 

market), albeit an outstanding location compared nationally with 

an asset size not reproducible in the market. 

Emphasizing the dearth of quality offerings in Orange County, only 

two top Class A core buildings sold in 2010: 2211 Michelson and 

800 Newport Center Drive. In San Francisco, there is an existing 

stock of approximately 47 million square feet of Class A space. In 

2009 and 2010, only nine non-distressed Class A buildings totaling 

about 4 million square feet transacted (and this was one of the 

most active markets nationally in 2010!). Further, the Airport and 

Newport Center markets, Orange County’s top office markets, and 

the San Francisco financial district, have no dominant ownership 

groups suppressing market activity, as does West Los Angeles. 

Underwriting 

In fourth quarter 2010 and first quarter 2011, we have received 

multiple reports from national investment sale brokers and investors 

that while they “couldn’t make the numbers work,” they were 

nonetheless comfortable and felt safe with their purchase price on 

a per square foot basis in comparison to replacement cost. In other 



words, they were stretching their economic underwriting of cash 

flow by use of a combination of accelerated market rent growth, 

lower reversion capitalization rates, and/or lower discount rates 

beyond what was recently viewed as reasonable. In major California 

markets, replacement cost for significant Class A buildings is 

generally in the range of $450 to $650 per square foot, depending 

on the scope of the project and the land value estimate. Therefore, 

discounts to replacement cost are often achieved in the range of 

20 percent to 40 percent, even with stretch underwriting. Institutional 

investors understand they have limited certainty as to when 

market performance will catch up to underwriting in many cases, 

but they are generally not concerned (on a relative basis) when 

buying the best assets in the best locations, as they have more 

confidence that these assets will appreciate and achieve best 

rates of increase on a comparative basis to other assets. Clearly, 

as the discount to replacement cost increases, the buyer is more 

protected and can afford more market risk with the asset, which 

has fueled the other active market segment—troubled properties 

with good long-term potential. 

Generally, investors view discount to replacement cost as a risk 

mitigator because its presence usually reflects a protected market 

position for a property because construction of new competition 

WWW.RERC.COM 35


cannot economically be justified until a rise in market rent also 

increases the purchased property’s value to the same level as the 

cost required for new construction. Now that the leasing market 

trough is known for most markets, investors are looking forward 

and are now commonly projecting accelerated market rent 

growth in better markets to the year in which they project market 

rent will rise to an economically feasible level for new construction. 

This level is now generally projected to occur in the later years of 

the 10-year projection period, depending on the market and the 

estimated current market rent. In some top Southern California 

and Bay Area markets, because of severe political constraints that 

have been in place for years, market rent has not declined below 

a cost-feasible level and there is no discount to replacement cost. 

Where these severe constraints exist, they are typically in markets 

with high demand, which exacerbates the supply and demand 

imbalance, and which in turn is the fundamental reason they are 

among the top few office markets in the nation. 

Both West Los Angeles and the San Francisco financial district have 

experienced periods of exceptionally high market rent growth 

over the past two real estate cycles, because at some point, market 

saturation has occurred and without sufficient new development 

to relieve demand, market rents spike sharply. In West Los Angeles, 

market rent increased approximately 66 percent from 1995 to 

2000, and 56 percent from 2004 to 2008, reaching market saturation 

only near the time of each market peak (and with the market 

rent trough higher in each successive cycle). In the San Francisco 

financial district, market rent increased in the range of 100 percent 

from 1995 to 2000, and in the range of 80 percent from 2003 

to 2007 (also with successively higher market trough rents). This 

potential also exists for the next up market, and is reflected in current 

investor underwriting with some of the lowest capitalization 

rates in the nation being achieved and approaching those markets’ 

all-time low rates. 

Summary 

There is a gradient among markets and asset qualities that is still 

somewhat steep and which reflects where and for which assets 

investors are willing to stretch their underwriting in order to make 

purchases, where and for which assets more conservative underwriting 

will prevail, and for which markets and assets investment 

consideration will still be absent. Now that the trough in leasing 

markets has been realized and as more idle investment capital 

aggregates, the range in investment quality—comprised of a 

combination of market quality, site uniqueness, building quality, 

and tenancy—for which investors are willing to stretch, should 

further expand in 2011. The return to investment in commercial 

real estate for risk diversification and safety, which has been the 

driving factor in the current investment market recovery, should 

continue to guide the speed and degree at which further progress 

will occur in 2011. The window for matching low rate, fixed-term 

debt with longer term hold expectations in an accretive manner 

should continue in 2011, providing a fertile environment for 


WINTER 2011 | VOL 39 | NO 4 

continued pressure on capitalization rates, and should also expand 

the range of assets investors view as suitable for acquiring. Supplyconstrained 

California markets are poised to benefit the most from 

this confluence of positive investment market factors, which has 

been the case in the last two market cycles, as they have been 

among those markets to decline the least and improve the most. 


WINTER 2011 | VOL 39 | NO 4 

Atlanta, GA 

Chicago, IL 

Houston, TX 

Miami, FL 

METROPOLITAN INVESTMENT CRITERIA 

Atlanta 

Austin 

Baltimore 

Boston 

Charlotte 

Chicago 

Cincinnati 

Cleveland 

Columbus 

Dallas/Ft. Worth 

Denver 

Detroit 

Hartford 

Honolulu 

Houston 

Indianapolis 

Kansas City 

Las Vegas 

Los Angeles 

Memphis 

Miami 

Milwaukee 

Minneapolis 

Nashville 


New York, NY 

Pittsburgh, PA 

San Francisco, CA 

St. Louis, MO 


New Orleans/Baton Rouge 

New York City 

Norfolk 

Northern New Jersey 

Oklahoma City 

Omaha 

Orlando 

Philadelphia 

Phoenix 

Pittsburgh 

Portland 

Raleigh 

Richmond 

Sacramento 

Salt Lake City 

San Antonio 

San Diego 

San Francisco 

Seattle 

St. Louis 

Tampa 

Toledo 

Tucson 

Washington, D.C. 

WWW.RERC.COM 37



WINTER 2011 | VOL 39 | NO 4 

ATLANTA 4TH QUARTER 2010 

RERC 

Estimate 

Atlanta Investment Criteria | First-Tier 1 Investment Properties 

Pre-Tax Yield (%) Going-In Cap Rate (%) Terminal Cap Rate (%) Anticipated 1-Year Growth Rates 

South 

Region 

U.S. 

RERC 

Estimate 

South 

Region 

U.S. 

RERC 

Estimate 

CBD 9.1 10.1 9.7 7.5 8.2 8.0 8.2 9.0 8.6 -0.7 -0.7 -1.2 -0.4 

Suburban 9.7 10.2 10.0 8.1 8.4 8.4 8.7 9.1 8.9 -1.5 -0.7 -1.8 -0.5 

Warehouse 9.6 10.3 9.9 8.1 8.5 8.3 8.7 9.3 8.9 -0.3 -0.1 -0.6 -0.3 

R&D 9.8 10.1 10.1 8.6 8.8 8.6 9.1 9.4 9.1 -0.8 -0.4 -0.8 0.0 

Flex 9.8 10.1 9.9 8.8 8.8 8.6 9.3 9.4 9.1 -0.6 -1.0 -0.7 -0.8 

Regional Mall 9.2 9.8 9.8 7.8 8.2 8.2 8.2 8.8 8.8 -1.3 -1.1 -1.3 -0.6 

Power Center 9.4 9.8 9.9 8.1 8.3 8.3 8.6 8.9 8.8 -1.1 -0.5 -1.1 -0.2 

Neigh/Comm. 9.7 10.2 10.1 8.1 8.5 8.4 8.7 9.2 9.0 -1.1 -0.6 -1.5 -0.4 

Apartment 8.7 9.4 9.0 6.9 7.7 7.3 7.6 8.4 7.9 2.4 2.3 2.2 2.4 

Hotel 11.1 11.8 11.6 9.2 9.1 9.3 9.6 10.0 9.9 0.2 1.3 0.5 1.4 

Average 9.6 10.2 10.0 8.1 8.5 8.3 8.7 9.2 8.9 -0.5 -0.1 -0.6 0.1 



AUSTIN 4TH QUARTER 2010 

RERC 

Estimate 

South 

Region 

Austin Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

South 

Value 

National 

Rent 


South 

Region 

U.S. 

RERC 

Estimate 

South 

Region 

U.S. 

RERC 

Estimate 

CBD 9.5 10.1 9.7 7.7 8.2 8.0 8.5 9.0 8.6 -0.7 -0.7 -1.2 -0.4 

Suburban 10.0 10.2 10.0 8.2 8.4 8.4 8.9 9.1 8.9 -1.5 -0.7 -1.8 -0.5 

Warehouse 10.1 10.3 9.9 8.4 8.5 8.3 9.1 9.3 8.9 -0.3 -0.1 -0.6 -0.3 

R&D 10.1 10.1 10.1 8.8 8.8 8.6 9.4 9.4 9.1 -0.8 -0.4 -0.8 0.0 

Flex 10.2 10.1 9.9 9.0 8.8 8.6 9.6 9.4 9.1 -0.6 -1.0 -0.7 -0.8 

Regional Mall 9.4 9.8 9.8 7.8 8.2 8.2 8.3 8.8 8.8 -1.3 -1.1 -1.3 -0.6 

Power Center 9.5 9.8 9.9 8.0 8.3 8.3 8.6 8.9 8.8 -1.1 -0.5 -1.1 -0.2 

Neigh/Comm. 9.7 10.2 10.1 8.1 8.5 8.4 8.7 9.2 9.0 -1.1 -0.6 -1.5 -0.4 

Apartment 9.0 9.4 9.0 7.1 7.7 7.3 7.8 8.4 7.9 2.4 2.3 2.2 2.4 

Hotel 11.1 11.8 11.6 9.2 9.1 9.3 9.5 10.0 9.9 0.2 1.3 0.5 1.4 

Average 9.9 10.2 10.0 8.2 8.5 8.3 8.8 9.2 8.9 -0.5 -0.1 -0.6 0.1 



South 

Region 

U.S. 

National 

Value 

South 

Value 

National 

Rent 

South 

Rent 

South 

Rent 


WINTER 2011 | VOL 39 | NO 4 



BALTIMORE 4TH QUARTER 2010 

RERC 

Estimate 

Baltimore Investment Criteria | First-Tier 1 Investment Properties 


East 

Region 

U.S. 

RERC 

Estimate 

East 

Region 

U.S. 

RERC 

Estimate 

CBD 8.7 9.0 9.7 7.2 7.6 8.0 7.8 8.2 8.6 -0.7 0.0 -1.2 -1.0 

Suburban 9.3 9.5 10.0 7.9 7.9 8.4 8.4 8.6 8.9 -1.5 -0.9 -1.8 -1.5 

Warehouse 9.0 9.5 9.9 7.9 8.2 8.3 8.4 8.8 8.9 -0.3 -0.1 -0.6 -0.5 

R&D 9.7 10.0 10.1 8.4 8.5 8.6 8.8 9.0 9.1 -0.8 -0.4 -0.8 -0.5 

Flex 9.7 9.8 9.9 8.6 8.5 8.6 9.1 9.1 9.1 -0.6 -0.3 -0.7 -0.6 

Regional Mall 8.8 9.3 9.8 7.5 8.0 8.2 7.9 8.5 8.8 -1.3 -0.2 -1.3 -0.7 

Power Center 9.0 9.5 9.9 7.8 8.0 8.3 8.2 8.4 8.8 -1.1 -0.4 -1.1 0.0 

Neigh/Comm. 9.0 9.6 10.1 7.6 8.1 8.4 8.1 8.6 9.0 -1.1 0.0 -1.5 -0.3 

Apartment 8.1 8.4 9.0 6.5 7.2 7.3 7.0 7.7 7.9 2.4 2.5 2.2 2.1 

Hotel 10.8 11.4 11.6 9.1 9.2 9.3 9.4 9.8 9.9 0.2 -0.2 0.5 0.0 

Average 9.2 9.6 10.0 7.9 8.1 8.3 8.3 8.7 8.9 -0.5 0.0 -0.6 -0.3 



BOSTON 4TH QUARTER 2010 

RERC 

Estimate 

East 

Region 

Boston Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

East 

Value 

National 

Rent 


East 

Region 

U.S. 

RERC 

Estimate 

East 

Region 

U.S. 

RERC 

Estimate 

CBD 8.3 9.0 9.7 7.0 7.6 8.0 7.6 8.2 8.6 -0.7 0.0 -1.2 -1.0 

Suburban 8.9 9.5 10.0 7.6 7.9 8.4 8.3 8.6 8.9 -1.5 -0.9 -1.8 -1.5 

Warehouse 9.3 9.5 9.9 8.1 8.2 8.3 8.8 8.8 8.9 -0.3 -0.1 -0.6 -0.5 

R&D 9.7 10.0 10.1 8.5 8.5 8.6 8.9 9.0 9.1 -0.8 -0.4 -0.8 -0.5 

Flex 9.8 9.8 9.9 8.8 8.5 8.6 9.3 9.1 9.1 -0.6 -0.3 -0.7 -0.6 

Regional Mall 8.9 9.3 9.8 7.4 8.0 8.2 7.9 8.5 8.8 -1.3 -0.2 -1.3 -0.7 

Power Center 9.1 9.5 9.9 7.7 8.0 8.3 8.2 8.4 8.8 -1.1 -0.4 -1.1 0.0 

Neigh/Comm. 9.2 9.6 10.1 7.6 8.1 8.4 8.2 8.6 9.0 -1.1 0.0 -1.5 -0.3 

Apartment 7.9 8.4 9.0 6.3 7.2 7.3 7.0 7.7 7.9 2.4 2.5 2.2 2.1 

Hotel 10.4 11.4 11.6 8.6 9.2 9.3 9.1 9.8 9.9 0.2 -0.2 0.5 0.0 

Average 9.2 9.6 10.0 7.8 8.1 8.3 8.3 8.7 8.9 -0.5 0.0 -0.6 -0.3 



East 

Region 

U.S. 

National 

Value 

East 

Value 

National 

Rent 

East Rent 

East Rent 

WWW.RERC.COM 39



WINTER 2011 | VOL 39 | NO 4 

CHARLOTTE 4TH QUARTER 2010 

RERC 

Estimate 

Charlotte Investment Criteria | First-Tier 1 Investment Properties 


East 

Region 

U.S. 

RERC 

Estimate 

East 

Region 

U.S. 

RERC 

Estimate 

CBD 8.7 9.0 9.7 7.2 7.6 8.0 7.9 8.2 8.6 -0.7 0.0 -1.2 -1.0 

Suburban 9.4 9.5 10.0 7.9 7.9 8.4 8.5 8.6 8.9 -1.5 -0.9 -1.8 -1.5 

Warehouse 9.4 9.5 9.9 8.1 8.2 8.3 8.6 8.8 8.9 -0.3 -0.1 -0.6 -0.5 

R&D 9.8 10.0 10.1 8.5 8.5 8.6 8.9 9.0 9.1 -0.8 -0.4 -0.8 -0.5 

Flex 9.8 9.8 9.9 8.8 8.5 8.6 9.2 9.1 9.1 -0.6 -0.3 -0.7 -0.6 

Regional Mall 9.1 9.3 9.8 7.7 8.0 8.2 8.1 8.5 8.8 -1.3 -0.2 -1.3 -0.7 

Power Center 9.3 9.5 9.9 8.0 8.0 8.3 8.5 8.4 8.8 -1.1 -0.4 -1.1 0.0 

Neigh/Comm. 9.2 9.6 10.1 7.8 8.1 8.4 8.4 8.6 9.0 -1.1 0.0 -1.5 -0.3 

Apartment 8.4 8.4 9.0 6.7 7.2 7.3 7.2 7.7 7.9 2.4 2.5 2.2 2.1 

Hotel 10.8 11.4 11.6 9.1 9.2 9.3 9.4 9.8 9.9 0.2 -0.2 0.5 0.0 

Average 9.4 9.6 10.0 8.0 8.1 8.3 8.5 8.7 8.9 -0.5 0.0 -0.6 -0.3 



CHICAGO 4TH QUARTER 2010 

RERC 

Estimate 

East 

Region 

Chicago Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

East 

Value 

National 

Rent 


Midwest 

Region 

U.S. 

RERC 

Estimate 

Midwest 

Region 

U.S. 

RERC 

Estimate 

CBD 9.2 10.0 9.7 8.1 8.8 8.0 8.1 9.0 8.6 -0.7 -1.3 -1.2 -1.7 

Suburban 9.8 10.3 10.0 8.7 9.1 8.4 8.8 9.4 8.9 -1.5 -2.1 -1.8 -2.1 

Warehouse 9.5 9.9 9.9 8.5 8.9 8.3 8.5 9.1 8.9 -0.3 0.0 -0.6 -0.5 

R&D 9.7 10.3 10.1 8.5 8.9 8.6 8.8 9.3 9.1 -0.8 -0.4 -0.8 -0.6 

Flex 9.6 10.1 9.9 8.6 8.9 8.6 8.9 9.3 9.1 -0.6 -0.2 -0.7 -0.4 

Regional Mall 9.7 10.5 9.8 8.2 8.9 8.2 8.7 9.6 8.8 -1.3 -2.4 -1.3 -2.3 

Power Center 9.6 10.2 9.9 8.3 8.7 8.3 8.7 9.1 8.8 -1.1 -2.0 -1.1 -2.2 

Neigh/Comm. 9.7 10.7 10.1 8.5 9.1 8.4 8.8 9.6 9.0 -1.1 -2.5 -1.5 -2.7 

Apartment 8.8 9.4 9.0 7.0 7.7 7.3 7.6 8.4 7.9 2.4 2.4 2.2 2.2 

Hotel 11.0 11.6 11.6 10.0 10.0 9.3 9.8 10.4 9.9 0.2 -0.6 0.5 0.6 

Average 9.7 10.3 10.0 8.4 8.9 8.3 8.7 9.3 8.9 -0.5 -0.9 -0.6 -1.0 



Midwest 

Region 

U.S. 

National 

Value 

Midwest 

Value 

National 

Rent 

East Rent 

Midwest 

Rent 


WINTER 2011 | VOL 39 | NO 4 



CINCINNATI 4TH QUARTER 2010 

RERC 

Estimate 

Cincinnati Investment Criteria | First-Tier 1 Investment Properties 


Midwest 

Region 

U.S. 

RERC 

Estimate 

Midwest 

Region 

U.S. 

RERC 

Estimate 

CBD 9.6 10.0 9.7 8.0 8.8 8.0 8.6 9.0 8.6 -0.7 -1.3 -1.2 -1.7 

Suburban 10.2 10.3 10.0 8.7 9.1 8.4 9.2 9.4 8.9 -1.5 -2.1 -1.8 -2.1 

Warehouse 9.6 9.9 9.9 8.3 8.9 8.3 8.6 9.1 8.9 -0.3 0.0 -0.6 -0.5 

R&D 10.0 10.3 10.1 8.7 8.9 8.6 9.1 9.3 9.1 -0.8 -0.4 -0.8 -0.6 

Flex 9.9 10.1 9.9 8.9 8.9 8.6 9.3 9.3 9.1 -0.6 -0.2 -0.7 -0.4 

Regional Mall 10.0 10.5 9.8 8.4 8.9 8.2 8.9 9.6 8.8 -1.3 -2.4 -1.3 -2.3 

Power Center 10.0 10.2 9.9 8.6 8.7 8.3 9.1 9.1 8.8 -1.1 -2.0 -1.1 -2.2 

Neigh/Comm. 10.2 10.7 10.1 8.6 9.1 8.4 9.2 9.6 9.0 -1.1 -2.5 -1.5 -2.7 

Apartment 8.9 9.4 9.0 7.0 7.7 7.3 7.7 8.4 7.9 2.4 2.4 2.2 2.2 

Hotel 11.3 11.6 11.6 9.9 10.0 9.3 10.1 10.4 9.9 0.2 -0.6 0.5 0.6 

Average 10.0 10.3 10.0 8.5 8.9 8.3 9.0 9.3 8.9 -0.5 -0.9 -0.6 -1.0 



CLEVELAND 4TH QUARTER 2010 

RERC 

Estimate 

Midwest 

Region 

Cleveland Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

Midwest 

Value 

National 

Rent 


Midwest 

Region 

U.S. 

RERC 

Estimate 

Midwest 

Region 

U.S. 

RERC 

Estimate 

CBD 9.3 10.0 9.7 8.0 8.8 8.0 8.4 9.0 8.6 -0.7 -1.3 -1.2 -1.7 

Suburban 10.0 10.3 10.0 8.8 9.1 8.4 9.1 9.4 8.9 -1.5 -2.1 -1.8 -2.1 

Warehouse 9.2 9.9 9.9 8.1 8.9 8.3 8.4 9.1 8.9 -0.3 0.0 -0.6 -0.5 

R&D 9.7 10.3 10.1 8.5 8.9 8.6 8.8 9.3 9.1 -0.8 -0.4 -0.8 -0.6 

Flex 9.5 10.1 9.9 8.8 8.9 8.6 9.0 9.3 9.1 -0.6 -0.2 -0.7 -0.4 

Regional Mall 10.0 10.5 9.8 8.5 8.9 8.2 9.0 9.6 8.8 -1.3 -2.4 -1.3 -2.3 

Power Center 9.7 10.2 9.9 8.4 8.7 8.3 8.9 9.1 8.8 -1.1 -2.0 -1.1 -2.2 

Neigh/Comm. 9.8 10.7 10.1 8.4 9.1 8.4 8.9 9.6 9.0 -1.1 -2.5 -1.5 -2.7 

Apartment 8.6 9.4 9.0 6.9 7.7 7.3 7.5 8.4 7.9 2.4 2.4 2.2 2.2 

Hotel 11.4 11.6 11.6 10.0 10.0 9.3 10.0 10.4 9.9 0.2 -0.6 0.5 0.6 

Average 9.7 10.3 10.0 8.4 8.9 8.3 8.8 9.3 8.9 -0.5 -0.9 -0.6 -1.0 



Midwest 

Region 

U.S. 

National 

Value 

Midwest 

Value 

National 

Rent 

Midwest 

Rent 

Midwest 

Rent 

WWW.RERC.COM 41



WINTER 2011 | VOL 39 | NO 4 

COLUMBUS 4TH QUARTER 2010 

RERC 

Estimate 

Columbus Investment Criteria | First-Tier 1 Investment Properties 


Midwest 

Region 

U.S. 

RERC 

Estimate 

Midwest 

Region 

U.S. 

RERC 

Estimate 

CBD 9.4 10.0 9.7 7.9 8.8 8.0 8.4 9.0 8.6 -0.7 -1.3 -1.2 -1.7 

Suburban 10.0 10.3 10.0 8.6 9.1 8.4 9.1 9.4 8.9 -1.5 -2.1 -1.8 -2.1 

Warehouse 9.4 9.9 9.9 8.4 8.9 8.3 8.7 9.1 8.9 -0.3 0.0 -0.6 -0.5 

R&D 9.9 10.3 10.1 8.6 8.9 8.6 9.0 9.3 9.1 -0.8 -0.4 -0.8 -0.6 

Flex 9.8 10.1 9.9 8.9 8.9 8.6 9.3 9.3 9.1 -0.6 -0.2 -0.7 -0.4 

Regional Mall 9.8 10.5 9.8 8.2 8.9 8.2 8.8 9.6 8.8 -1.3 -2.4 -1.3 -2.3 

Power Center 9.8 10.2 9.9 8.4 8.7 8.3 8.9 9.1 8.8 -1.1 -2.0 -1.1 -2.2 

Neigh/Comm. 10.1 10.7 10.1 8.4 9.1 8.4 9.0 9.6 9.0 -1.1 -2.5 -1.5 -2.7 

Apartment 8.8 9.4 9.0 6.9 7.7 7.3 7.6 8.4 7.9 2.4 2.4 2.2 2.2 

Hotel 11.1 11.6 11.6 9.9 10.0 9.3 10.0 10.4 9.9 0.2 -0.6 0.5 0.6 

Average 9.8 10.3 10.0 8.4 8.9 8.3 8.9 9.3 8.9 -0.5 -0.9 -0.6 -1.0 



DALLAS/FT. WORTH 4TH QUARTER 2010 

RERC 

Estimate 

Midwest 

Region 

U.S. 

National 

Value 

Dallas/Ft. Worth Investment Criteria | First-Tier 1 Investment Properties 

Midwest 

Value 

National 

Rent 


South 

Region 

U.S. 

RERC 

Estimate 

South 

Region 

U.S. 

RERC 

Estimate 

CBD 9.9 10.1 9.7 8.0 8.2 8.0 8.8 9.0 8.6 -0.7 -0.7 -1.2 -0.4 

Suburban 10.2 10.2 10.0 8.3 8.4 8.4 9.0 9.1 8.9 -1.5 -0.7 -1.8 -0.5 

Warehouse 9.9 10.3 9.9 8.3 8.5 8.3 9.0 9.3 8.9 -0.3 -0.1 -0.6 -0.3 

R&D 10.1 10.1 10.1 8.7 8.8 8.6 9.3 9.4 9.1 -0.8 -0.4 -0.8 0.0 

Flex 10.1 10.1 9.9 8.7 8.8 8.6 9.4 9.4 9.1 -0.6 -1.0 -0.7 -0.8 

Regional Mall 9.4 9.8 9.8 8.1 8.2 8.2 8.5 8.8 8.8 -1.3 -1.1 -1.3 -0.6 

Power Center 9.5 9.8 9.9 8.2 8.3 8.3 8.8 8.9 8.8 -1.1 -0.5 -1.1 -0.2 

Neigh/Comm. 10.0 10.2 10.1 8.3 8.5 8.4 8.9 9.2 9.0 -1.1 -0.6 -1.5 -0.4 

Apartment 9.2 9.4 9.0 7.2 7.7 7.3 8.0 8.4 7.9 2.4 2.3 2.2 2.4 

Hotel 11.6 11.8 11.6 9.2 9.1 9.3 9.9 10.0 9.9 0.2 1.3 0.5 1.4 

Average 10.0 10.2 10.0 8.3 8.5 8.3 9.0 9.2 8.9 -0.5 -0.1 -0.6 0.1 



South 

Region 

U.S. 

National 

Value 

South 

Value 

National 

Rent 

Midwest 

Rent 

South 

Rent 


WINTER 2011 | VOL 39 | NO 4 



DENVER 4TH QUARTER 2010 

RERC 

Estimate 

Denver Investment Criteria | First-Tier 1 Investment Properties 


West 

Region 

U.S. 

RERC 

Estimate 

West 

Region 

U.S. 

RERC 

Estimate 

CBD 9.6 9.7 9.7 7.5 7.7 8.0 8.3 8.3 8.6 -0.7 -0.8 -1.2 -1.9 

Suburban 10.1 10.0 10.0 8.1 8.1 8.4 8.9 8.7 8.9 -1.5 -2.5 -1.8 -3.2 

Warehouse 9.8 9.7 9.9 8.0 7.9 8.3 8.5 8.5 8.9 -0.3 -1.0 -0.6 -1.0 

R&D 10.2 10.1 10.1 8.3 8.1 8.6 8.9 8.8 9.1 -0.8 -1.9 -0.8 -2.1 

Flex 10.2 9.8 9.9 8.6 8.2 8.6 9.1 8.8 9.1 -0.6 -0.9 -0.7 -1.0 

Regional Mall 9.8 9.9 9.8 7.7 7.8 8.2 8.2 8.4 8.8 -1.3 -1.7 -1.3 -1.9 

Power Center 10.0 10.2 9.9 8.1 8.1 8.3 8.7 8.7 8.8 -1.1 -1.6 -1.1 -1.9 

Neigh/Comm. 9.8 10.0 10.1 8.0 7.9 8.4 8.5 8.5 9.0 -1.1 -1.6 -1.5 -2.7 

Apartment 8.7 8.7 9.0 6.6 6.6 7.3 7.5 7.3 7.9 2.4 2.5 2.2 2.0 

Hotel 11.7 11.6 11.6 9.4 9.2 9.3 9.8 9.7 9.9 0.2 -0.1 0.5 0.0 

Average 10.0 10.0 10.0 8.0 8.0 8.3 8.6 8.6 8.9 -0.5 -1.0 -0.6 -1.4 



DETROIT 4TH QUARTER 2010 

RERC 

Estimate 

West 

Region 

Detroit Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

West 

Value 

National 

Rent 


Midwest 

Region 

U.S. 

RERC 

Estimate 

Midwest 

Region 

U.S. 

RERC 

Estimate 

CBD 9.6 10.0 9.7 8.2 8.8 8.0 8.6 9.0 8.6 -0.7 -1.3 -1.2 -1.7 

Suburban 10.2 10.3 10.0 8.7 9.1 8.4 9.2 9.4 8.9 -1.5 -2.1 -1.8 -2.1 

Warehouse 9.5 9.9 9.9 8.3 8.9 8.3 8.7 9.1 8.9 -0.3 0.0 -0.6 -0.5 

R&D 10.1 10.3 10.1 8.7 8.9 8.6 9.2 9.3 9.1 -0.8 -0.4 -0.8 -0.6 

Flex 10.0 10.1 9.9 9.0 8.9 8.6 9.3 9.3 9.1 -0.6 -0.2 -0.7 -0.4 

Regional Mall 9.6 10.5 9.8 8.3 8.9 8.2 8.9 9.6 8.8 -1.3 -2.4 -1.3 -2.3 

Power Center 9.8 10.2 9.9 8.4 8.7 8.3 8.9 9.1 8.8 -1.1 -2.0 -1.1 -2.2 

Neigh/Comm. 10.0 10.7 10.1 8.3 9.1 8.4 8.9 9.6 9.0 -1.1 -2.5 -1.5 -2.7 

Apartment 8.9 9.4 9.0 6.9 7.7 7.3 7.5 8.4 7.9 2.4 2.4 2.2 2.2 

Hotel 11.4 11.6 11.6 9.9 10.0 9.3 10.1 10.4 9.9 0.2 -0.6 0.5 0.6 

Average 9.9 10.3 10.0 8.5 8.9 8.3 8.9 9.3 8.9 -0.5 -0.9 -0.6 -1.0 



Midwest 

Region 

U.S. 

National 

Value 

Midwest 

Value 

National 

Rent 

West 

Rent 

Midwest 

Rent 

WWW.RERC.COM 43



WINTER 2011 | VOL 39 | NO 4 

HARTFORD 4TH QUARTER 2010 

RERC 

Estimate 

Hartford Investment Criteria | First-Tier 1 Investment Properties 


East 

Region 

U.S. 

RERC 

Estimate 

East 

Region 

U.S. 

RERC 

Estimate 

CBD 8.9 9.0 9.7 7.3 7.6 8.0 8.0 8.2 8.6 -0.7 0.0 -1.2 -1.0 

Suburban 9.6 9.5 10.0 8.0 7.9 8.4 8.7 8.6 8.9 -1.5 -0.9 -1.8 -1.5 

Warehouse 9.4 9.5 9.9 8.1 8.2 8.3 8.7 8.8 8.9 -0.3 -0.1 -0.6 -0.5 

R&D 9.9 10.0 10.1 8.6 8.5 8.6 9.0 9.0 9.1 -0.8 -0.4 -0.8 -0.5 

Flex 9.8 9.8 9.9 8.8 8.5 8.6 9.2 9.1 9.1 -0.6 -0.3 -0.7 -0.6 

Regional Mall 9.1 9.3 9.8 7.7 8.0 8.2 8.2 8.5 8.8 -1.3 -0.2 -1.3 -0.7 

Power Center 9.4 9.5 9.9 8.1 8.0 8.3 8.6 8.4 8.8 -1.1 -0.4 -1.1 0.0 

Neigh/Comm. 9.4 9.6 10.1 7.9 8.1 8.4 8.5 8.6 9.0 -1.1 0.0 -1.5 -0.3 

Apartment 8.2 8.4 9.0 6.6 7.2 7.3 7.2 7.7 7.9 2.4 2.5 2.2 2.1 

Hotel 11.1 11.4 11.6 9.0 9.2 9.3 9.4 9.8 9.9 0.2 -0.2 0.5 0.0 

Average 9.5 9.6 10.0 8.0 8.1 8.3 8.6 8.7 8.9 -0.5 0.0 -0.6 -0.3 



HONOLULU 4TH QUARTER 2010 

RERC 

Estimate 

East 

Region 

Honolulu Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

East 

Value 

National 

Rent 


West 

Region 

U.S. 

RERC 

Estimate 

West 

Region 

U.S. 

RERC 

Estimate 

CBD 9.2 9.7 9.7 7.3 7.7 8.0 8.0 8.3 8.6 -0.7 -0.8 -1.2 -1.9 

Suburban 9.9 10.0 10.0 8.1 8.1 8.4 8.7 8.7 8.9 -1.5 -2.5 -1.8 -3.2 

Warehouse 9.4 9.7 9.9 7.8 7.9 8.3 8.3 8.5 8.9 -0.3 -1.0 -0.6 -1.0 

R&D 9.9 10.1 10.1 8.2 8.1 8.6 8.8 8.8 9.1 -0.8 -1.9 -0.8 -2.1 

Flex 9.8 9.8 9.9 8.5 8.2 8.6 9.0 8.8 9.1 -0.6 -0.9 -0.7 -1.0 

Regional Mall 9.2 9.9 9.8 7.5 7.8 8.2 7.9 8.4 8.8 -1.3 -1.7 -1.3 -1.9 

Power Center 9.5 10.2 9.9 7.9 8.1 8.3 8.5 8.7 8.8 -1.1 -1.6 -1.1 -1.9 

Neigh/Comm. 9.3 10.0 10.1 7.6 7.9 8.4 8.2 8.5 9.0 -1.1 -1.6 -1.5 -2.7 

Apartment 8.4 8.7 9.0 6.3 6.6 7.3 7.0 7.3 7.9 2.4 2.5 2.2 2.0 

Hotel 11.1 11.6 11.6 9.0 9.2 9.3 9.3 9.7 9.9 0.2 -0.1 0.5 0.0 

Average 9.6 10.0 10.0 7.8 8.0 8.3 8.4 8.6 8.9 -0.5 -1.0 -0.6 -1.4 



West 

Region 

U.S. 

National 

Value 

West 

Value 

National 

Rent 

East Rent 

West 

Rent 


WINTER 2011 | VOL 39 | NO 4 



HOUSTON 4TH QUARTER 2010 

RERC 

Estimate 

Houston Investment Criteria | First-Tier 1 Investment Properties 


South 

Region 

U.S. 

RERC 

Estimate 

South 

Region 

U.S. 

RERC 

Estimate 

CBD 9.3 10.1 9.7 7.6 8.2 8.0 8.1 9.0 8.6 -0.7 -0.7 -1.2 -0.4 

Suburban 9.8 10.2 10.0 8.1 8.4 8.4 8.7 9.1 8.9 -1.5 -0.7 -1.8 -0.5 

Warehouse 9.8 10.3 9.9 8.3 8.5 8.3 8.8 9.3 8.9 -0.3 -0.1 -0.6 -0.3 

R&D 9.6 10.1 10.1 8.4 8.8 8.6 8.9 9.4 9.1 -0.8 -0.4 -0.8 0.0 

Flex 9.7 10.1 9.9 8.7 8.8 8.6 9.2 9.4 9.1 -0.6 -1.0 -0.7 -0.8 

Regional Mall 9.4 9.8 9.8 7.9 8.2 8.2 8.5 8.8 8.8 -1.3 -1.1 -1.3 -0.6 

Power Center 9.5 9.8 9.9 8.0 8.3 8.3 8.7 8.9 8.8 -1.1 -0.5 -1.1 -0.2 

Neigh/Comm. 9.8 10.2 10.1 8.2 8.5 8.4 8.8 9.2 9.0 -1.1 -0.6 -1.5 -0.4 

Apartment 9.2 9.4 9.0 7.4 7.7 7.3 8.0 8.4 7.9 2.4 2.3 2.2 2.4 

Hotel 11.4 11.8 11.6 9.3 9.1 9.3 9.9 10.0 9.9 0.2 1.3 0.5 1.4 

Average 9.8 10.2 10.0 8.2 8.5 8.3 8.8 9.2 8.9 -0.5 -0.1 -0.6 0.1 



INDIANAPOLIS 4TH QUARTER 2010 

RERC 

Estimate 

South 

Region 

Indianapolis Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

South 

Value 

National 

Rent 


Midwest 

Region 

U.S. 

RERC 

Estimate 

Midwest 

Region 

U.S. 

RERC 

Estimate 

CBD 9.3 10.0 9.7 7.8 8.8 8.0 8.3 9.0 8.6 -0.7 -1.3 -1.2 -1.7 

Suburban 9.9 10.3 10.0 8.7 9.1 8.4 9.1 9.4 8.9 -1.5 -2.1 -1.8 -2.1 

Warehouse 9.3 9.9 9.9 8.3 8.9 8.3 8.6 9.1 8.9 -0.3 0.0 -0.6 -0.5 

R&D 9.8 10.3 10.1 8.5 8.9 8.6 8.9 9.3 9.1 -0.8 -0.4 -0.8 -0.6 

Flex 9.6 10.1 9.9 8.8 8.9 8.6 9.1 9.3 9.1 -0.6 -0.2 -0.7 -0.4 

Regional Mall 9.8 10.5 9.8 8.3 8.9 8.2 8.7 9.6 8.8 -1.3 -2.4 -1.3 -2.3 

Power Center 9.8 10.2 9.9 8.5 8.7 8.3 8.9 9.1 8.8 -1.1 -2.0 -1.1 -2.2 

Neigh/Comm. 10.1 10.7 10.1 8.5 9.1 8.4 9.0 9.6 9.0 -1.1 -2.5 -1.5 -2.7 

Apartment 8.9 9.4 9.0 6.9 7.7 7.3 7.5 8.4 7.9 2.4 2.4 2.2 2.2 

Hotel 10.8 11.6 11.6 9.5 10.0 9.3 9.6 10.4 9.9 0.2 -0.6 0.5 0.6 

Average 9.7 10.3 10.0 8.4 8.9 8.3 8.8 9.3 8.9 -0.5 -0.9 -0.6 -1.0 



Midwest 

Region 

U.S. 

National 

Value 

Midwest 

Value 

National 

Rent 

South 

Rent 

Midwest 

Rent 

WWW.RERC.COM 45



WINTER 2011 | VOL 39 | NO 4 

KANSAS CITY 4TH QUARTER 2010 

RERC 

Estimate 

Kansas City Investment Criteria | First-Tier 1 Investment Properties 


Midwest 

Region 

U.S. 

RERC 

Estimate 

Midwest 

Region 

U.S. 

RERC 

Estimate 

CBD 9.4 10.0 9.7 7.9 8.8 8.0 8.4 9.0 8.6 -0.7 -1.3 -1.2 -1.7 

Suburban 10.0 10.3 10.0 8.9 9.1 8.4 9.1 9.4 8.9 -1.5 -2.1 -1.8 -2.1 

Warehouse 9.4 9.9 9.9 8.6 8.9 8.3 8.8 9.1 8.9 -0.3 0.0 -0.6 -0.5 

R&D 10.0 10.3 10.1 8.9 8.9 8.6 9.2 9.3 9.1 -0.8 -0.4 -0.8 -0.6 

Flex 9.8 10.1 9.9 8.9 8.9 8.6 9.2 9.3 9.1 -0.6 -0.2 -0.7 -0.4 

Regional Mall 10.0 10.5 9.8 8.2 8.9 8.2 8.8 9.6 8.8 -1.3 -2.4 -1.3 -2.3 

Power Center 9.9 10.2 9.9 8.7 8.7 8.3 9.1 9.1 8.8 -1.1 -2.0 -1.1 -2.2 

Neigh/Comm. 10.1 10.7 10.1 8.8 9.1 8.4 9.2 9.6 9.0 -1.1 -2.5 -1.5 -2.7 

Apartment 8.9 9.4 9.0 7.4 7.7 7.3 7.9 8.4 7.9 2.4 2.4 2.2 2.2 

Hotel 11.4 11.6 11.6 9.8 10.0 9.3 9.8 10.4 9.9 0.2 -0.6 0.5 0.6 

Average 9.9 10.3 10.0 8.6 8.9 8.3 9.0 9.3 8.9 -0.5 -0.9 -0.6 -1.0 



LAS VEGAS 4TH QUARTER 2010 

RERC 

Estimate 

Midwest 

Region 

Las Vegas Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

Midwest 

Value 

National 

Rent 


West 

Region 

U.S. 

RERC 

Estimate 

West 

Region 

U.S. 

RERC 

Estimate 

CBD 9.5 9.7 9.7 7.5 7.7 8.0 8.2 8.3 8.6 -0.7 -0.8 -1.2 -1.9 

Suburban 10.0 10.0 10.0 8.2 8.1 8.4 8.8 8.7 8.9 -1.5 -2.5 -1.8 -3.2 

Warehouse 9.3 9.7 9.9 7.8 7.9 8.3 8.4 8.5 8.9 -0.3 -1.0 -0.6 -1.0 

R&D 9.8 10.1 10.1 8.2 8.1 8.6 8.8 8.8 9.1 -0.8 -1.9 -0.8 -2.1 

Flex 9.2 9.8 9.9 8.5 8.2 8.6 8.9 8.8 9.1 -0.6 -0.9 -0.7 -1.0 

Regional Mall 9.5 9.9 9.8 7.8 7.8 8.2 8.2 8.4 8.8 -1.3 -1.7 -1.3 -1.9 

Power Center 9.8 10.2 9.9 8.2 8.1 8.3 8.7 8.7 8.8 -1.1 -1.6 -1.1 -1.9 

Neigh/Comm. 9.6 10.0 10.1 7.9 7.9 8.4 8.5 8.5 9.0 -1.1 -1.6 -1.5 -2.7 

Apartment 8.4 8.7 9.0 6.5 6.6 7.3 7.2 7.3 7.9 2.4 2.5 2.2 2.0 

Hotel 11.3 11.6 11.6 9.4 9.2 9.3 9.7 9.7 9.9 0.2 -0.1 0.5 0.0 

Average 9.6 10.0 10.0 8.0 8.0 8.3 8.5 8.6 8.9 -0.5 -1.0 -0.6 -1.4 



West 

Region 

U.S. 

National 

Value 

West 

Value 

National 

Rent 

Midwest 

Rent 

West 

Rent 


WINTER 2011 | VOL 39 | NO 4 



LOS ANGELES 4TH QUARTER 2010 

RERC 

Estimate 

Los Angeles Investment Criteria | First-Tier 1 Investment Properties 


West 

Region 

U.S. 

RERC 

Estimate 

West 

Region 

U.S. 

RERC 

Estimate 

CBD 9.2 9.7 9.7 7.3 7.7 8.0 7.9 8.3 8.6 -0.7 -0.8 -1.2 -1.9 

Suburban 9.5 10.0 10.0 7.7 8.1 8.4 8.3 8.7 8.9 -1.5 -2.5 -1.8 -3.2 

Warehouse 9.0 9.7 9.9 7.4 7.9 8.3 8.0 8.5 8.9 -0.3 -1.0 -0.6 -1.0 

R&D 9.3 10.1 10.1 7.7 8.1 8.6 8.2 8.8 9.1 -0.8 -1.9 -0.8 -2.1 

Flex 9.2 9.8 9.9 7.8 8.2 8.6 8.3 8.8 9.1 -0.6 -0.9 -0.7 -1.0 

Regional Mall 9.4 9.9 9.8 7.5 7.8 8.2 8.1 8.4 8.8 -1.3 -1.7 -1.3 -1.9 

Power Center 9.7 10.2 9.9 7.7 8.1 8.3 8.4 8.7 8.8 -1.1 -1.6 -1.1 -1.9 

Neigh/Comm. 9.5 10.0 10.1 7.5 7.9 8.4 8.2 8.5 9.0 -1.1 -1.6 -1.5 -2.7 

Apartment 8.2 8.7 9.0 6.2 6.6 7.3 6.8 7.3 7.9 2.4 2.5 2.2 2.0 

Hotel 11.3 11.6 11.6 8.8 9.2 9.3 9.5 9.7 9.9 0.2 -0.1 0.5 0.0 

Average 9.4 10.0 10.0 7.6 8.0 8.3 8.2 8.6 8.9 -0.5 -1.0 -0.6 -1.4 



MEMPHIS 4TH QUARTER 2010 

RERC 

Estimate 

West 

Region 

Memphis Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

West 

Value 

National 

Rent 


South 

Region 

U.S. 

RERC 

Estimate 

South 

Region 

U.S. 

RERC 

Estimate 

CBD 9.8 10.1 9.7 7.9 8.2 8.0 8.7 9.0 8.6 -0.7 -0.7 -1.2 -0.4 

Suburban 10.2 10.2 10.0 8.4 8.4 8.4 9.1 9.1 8.9 -1.5 -0.7 -1.8 -0.5 

Warehouse 10.2 10.3 9.9 8.5 8.5 8.3 9.2 9.3 8.9 -0.3 -0.1 -0.6 -0.3 

R&D 10.2 10.1 10.1 8.9 8.8 8.6 9.5 9.4 9.1 -0.8 -0.4 -0.8 0.0 

Flex 10.3 10.1 9.9 9.1 8.8 8.6 9.7 9.4 9.1 -0.6 -1.0 -0.7 -0.8 

Regional Mall 9.7 9.8 9.8 8.1 8.2 8.2 8.6 8.8 8.8 -1.3 -1.1 -1.3 -0.6 

Power Center 9.8 9.8 9.9 8.3 8.3 8.3 8.9 8.9 8.8 -1.1 -0.5 -1.1 -0.2 

Neigh/Comm. 10.0 10.2 10.1 8.3 8.5 8.4 9.0 9.2 9.0 -1.1 -0.6 -1.5 -0.4 

Apartment 9.2 9.4 9.0 7.3 7.7 7.3 8.0 8.4 7.9 2.4 2.3 2.2 2.4 

Hotel 11.6 11.8 11.6 9.3 9.1 9.3 9.9 10.0 9.9 0.2 1.3 0.5 1.4 

Average 10.1 10.2 10.0 8.4 8.5 8.3 9.1 9.2 8.9 -0.5 -0.1 -0.6 0.1 



South 

Region 

U.S. 

National 

Value 

South 

Value 

National 

Rent 

West 

Rent 

South 

Rent 

WWW.RERC.COM 47



WINTER 2011 | VOL 39 | NO 4 

MIAMI 4TH QUARTER 2010 

RERC 

Estimate 

Miami Investment Criteria | First-Tier 1 Investment Properties 


South 

Region 

U.S. 

RERC 

Estimate 

South 

Region 

U.S. 

RERC 

Estimate 

CBD 9.2 10.1 9.7 7.4 8.2 8.0 8.1 9.0 8.6 -0.7 -0.7 -1.2 -0.4 

Suburban 9.7 10.2 10.0 8.1 8.4 8.4 8.6 9.1 8.9 -1.5 -0.7 -1.8 -0.5 

Warehouse 9.4 10.3 9.9 8.0 8.5 8.3 8.5 9.3 8.9 -0.3 -0.1 -0.6 -0.3 

R&D 9.6 10.1 10.1 8.4 8.8 8.6 8.8 9.4 9.1 -0.8 -0.4 -0.8 0.0 

Flex 9.6 10.1 9.9 8.6 8.8 8.6 9.0 9.4 9.1 -0.6 -1.0 -0.7 -0.8 

Regional Mall 9.1 9.8 9.8 7.6 8.2 8.2 8.0 8.8 8.8 -1.3 -1.1 -1.3 -0.6 

Power Center 9.3 9.8 9.9 7.9 8.3 8.3 8.5 8.9 8.8 -1.1 -0.5 -1.1 -0.2 

Neigh/Comm. 9.5 10.2 10.1 8.0 8.5 8.4 8.5 9.2 9.0 -1.1 -0.6 -1.5 -0.4 

Apartment 8.6 9.4 9.0 6.8 7.7 7.3 7.4 8.4 7.9 2.4 2.3 2.2 2.4 

Hotel 11.0 11.8 11.6 9.0 9.1 9.3 9.4 10.0 9.9 0.2 1.3 0.5 1.4 

Average 9.5 10.2 10.0 8.0 8.5 8.3 8.5 9.2 8.9 -0.5 -0.1 -0.6 0.1 



MILWAUKEE 4TH QUARTER 2010 

RERC 

Estimate 

South 

Region 

Milwaukee Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

South 

Value 

National 

Rent 


Midwest 

Region 

U.S. 

RERC 

Estimate 

Midwest 

Region 

U.S. 

RERC 

Estimate 

CBD 9.4 10.0 9.7 8.0 8.8 8.0 8.5 9.0 8.6 -0.7 -1.3 -1.2 -1.7 

Suburban 10.1 10.3 10.0 8.7 9.1 8.4 9.1 9.4 8.9 -1.5 -2.1 -1.8 -2.1 

Warehouse 9.4 9.9 9.9 8.2 8.9 8.3 8.6 9.1 8.9 -0.3 0.0 -0.6 -0.5 

R&D 10.0 10.3 10.1 8.7 8.9 8.6 9.1 9.3 9.1 -0.8 -0.4 -0.8 -0.6 

Flex 9.9 10.1 9.9 8.9 8.9 8.6 9.3 9.3 9.1 -0.6 -0.2 -0.7 -0.4 

Regional Mall 9.8 10.5 9.8 8.3 8.9 8.2 8.8 9.6 8.8 -1.3 -2.4 -1.3 -2.3 

Power Center 9.9 10.2 9.9 8.5 8.7 8.3 8.7 9.1 8.8 -1.1 -2.0 -1.1 -2.2 

Neigh/Comm. 10.2 10.7 10.1 8.5 9.1 8.4 9.2 9.6 9.0 -1.1 -2.5 -1.5 -2.7 

Apartment 8.8 9.4 9.0 7.0 7.7 7.3 7.7 8.4 7.9 2.4 2.4 2.2 2.2 

Hotel 11.2 11.6 11.6 9.8 10.0 9.3 10.0 10.4 9.9 0.2 -0.6 0.5 0.6 

Average 9.9 10.3 10.0 8.5 8.9 8.3 8.9 9.3 8.9 -0.5 -0.9 -0.6 -1.0 



Midwest 

Region 

U.S. 

National 

Value 

Midwest 

Value 

National 

Rent 

South 

Rent 

Midwest 

Rent 


WINTER 2011 | VOL 39 | NO 4 



MINNEAPOLIS 4TH QUARTER 2010 

RERC 

Estimate 

Minneapolis Investment Criteria | First-Tier 1 Investment Properties 


Midwest 

Region 

U.S. 

RERC 

Estimate 

Midwest 

Region 

U.S. 

RERC 

Estimate 

CBD 9.4 10.0 9.7 8.1 8.8 8.0 8.4 9.0 8.6 -0.7 -1.3 -1.2 -1.7 

Suburban 9.9 10.3 10.0 8.6 9.1 8.4 9.1 9.4 8.9 -1.5 -2.1 -1.8 -2.1 

Warehouse 9.5 9.9 9.9 8.4 8.9 8.3 8.8 9.1 8.9 -0.3 0.0 -0.6 -0.5 

R&D 9.9 10.3 10.1 8.6 8.9 8.6 8.9 9.3 9.1 -0.8 -0.4 -0.8 -0.6 

Flex 9.8 10.1 9.9 8.7 8.9 8.6 9.0 9.3 9.1 -0.6 -0.2 -0.7 -0.4 

Regional Mall 9.8 10.5 9.8 8.2 8.9 8.2 8.8 9.6 8.8 -1.3 -2.4 -1.3 -2.3 

Power Center 9.8 10.2 9.9 8.4 8.7 8.3 8.8 9.1 8.8 -1.1 -2.0 -1.1 -2.2 

Neigh/Comm. 10.1 10.7 10.1 8.8 9.1 8.4 9.3 9.6 9.0 -1.1 -2.5 -1.5 -2.7 

Apartment 8.7 9.4 9.0 7.2 7.7 7.3 7.5 8.4 7.9 2.4 2.4 2.2 2.2 

Hotel 11.3 11.6 11.6 9.9 10.0 9.3 10.1 10.4 9.9 0.2 -0.6 0.5 0.6 

Average 9.8 10.3 10.0 8.5 8.9 8.3 8.9 9.3 8.9 -0.5 -0.9 -0.6 -1.0 



NASHVILLE 4TH QUARTER 2010 

RERC 

Estimate 

Midwest 

Region 

Nashville Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

Midwest 

Value 

National 

Rent 


South 

Region 

U.S. 

RERC 

Estimate 

South 

Region 

U.S. 

RERC 

Estimate 

CBD 9.3 10.1 9.7 7.6 8.2 8.0 8.3 9.0 8.6 -0.7 -0.7 -1.2 -0.4 

Suburban 9.7 10.2 10.0 8.1 8.4 8.4 8.7 9.1 8.9 -1.5 -0.7 -1.8 -0.5 

Warehouse 9.5 10.3 9.9 8.1 8.5 8.3 8.7 9.3 8.9 -0.3 -0.1 -0.6 -0.3 

R&D 9.7 10.1 10.1 8.6 8.8 8.6 9.0 9.4 9.1 -0.8 -0.4 -0.8 0.0 

Flex 9.8 10.1 9.9 8.8 8.8 8.6 9.3 9.4 9.1 -0.6 -1.0 -0.7 -0.8 

Regional Mall 9.5 9.8 9.8 7.9 8.2 8.2 8.4 8.8 8.8 -1.3 -1.1 -1.3 -0.6 

Power Center 9.4 9.8 9.9 8.0 8.3 8.3 8.6 8.9 8.8 -1.1 -0.5 -1.1 -0.2 

Neigh/Comm. 9.6 10.2 10.1 8.0 8.5 8.4 8.6 9.2 9.0 -1.1 -0.6 -1.5 -0.4 

Apartment 8.7 9.4 9.0 6.7 7.7 7.3 7.4 8.4 7.9 2.4 2.3 2.2 2.4 

Hotel 11.4 11.8 11.6 9.1 9.1 9.3 9.7 10.0 9.9 0.2 1.3 0.5 1.4 

Average 9.7 10.2 10.0 8.1 8.5 8.3 8.7 9.2 8.9 -0.5 -0.1 -0.6 0.1 



South 

Region 

U.S. 

National 

Value 

South 

Value 

National 

Rent 

Midwest 

Rent 

South 

Rent 

WWW.RERC.COM 49



WINTER 2011 | VOL 39 | NO 4 

NEW ORLEANS/BATON ROUGE 4TH QUARTER 2010 

RERC 

Estimate 

New Orleans/Baton Rouge Investment Criteria | First-Tier 1 Investment Properties 


South 

Region 

U.S. 

RERC 

Estimate 

South 

Region 

U.S. 

RERC 

Estimate 

CBD 9.6 10.1 9.7 8.0 8.2 8.0 8.7 9.0 8.6 -0.7 -0.7 -1.2 -0.4 

Suburban 10.2 10.2 10.0 8.4 8.4 8.4 9.0 9.1 8.9 -1.5 -0.7 -1.8 -0.5 

Warehouse 10.3 10.3 9.9 8.4 8.5 8.3 9.0 9.3 8.9 -0.3 -0.1 -0.6 -0.3 

R&D 10.0 10.1 10.1 8.8 8.8 8.6 9.3 9.4 9.1 -0.8 -0.4 -0.8 0.0 

Flex 9.9 10.1 9.9 8.9 8.8 8.6 9.3 9.4 9.1 -0.6 -1.0 -0.7 -0.8 

Regional Mall 9.8 9.8 9.8 8.1 8.2 8.2 8.5 8.8 8.8 -1.3 -1.1 -1.3 -0.6 

Power Center 9.9 9.8 9.9 8.4 8.3 8.3 9.0 8.9 8.8 -1.1 -0.5 -1.1 -0.2 

Neigh/Comm. 10.1 10.2 10.1 8.3 8.5 8.4 9.0 9.2 9.0 -1.1 -0.6 -1.5 -0.4 

Apartment 9.1 9.4 9.0 7.1 7.7 7.3 7.7 8.4 7.9 2.4 2.3 2.2 2.4 

Hotel 11.5 11.8 11.6 9.4 9.1 9.3 9.8 10.0 9.9 0.2 1.3 0.5 1.4 

Average 10.0 10.2 10.0 8.4 8.5 8.3 8.9 9.2 8.9 -0.5 -0.1 -0.6 0.1 



NEW YORK CITY 4TH QUARTER 2010 

RERC 

Estimate 

South 

Region 

U.S. 

National 

Value 

New York City Investment Criteria | First-Tier 1 Investment Properties 

South 

Value 

National 

Rent 


East 

Region 

U.S. 

RERC 

Estimate 

East 

Region 

U.S. 

RERC 

Estimate 

CBD 8.4 9.0 9.7 7.2 7.6 8.0 7.6 8.2 8.6 -0.7 0.0 -1.2 -1.0 

Suburban 9.3 9.5 10.0 7.7 7.9 8.4 8.3 8.6 8.9 -1.5 -0.9 -1.8 -1.5 

Warehouse 9.0 9.5 9.9 7.8 8.2 8.3 8.3 8.8 8.9 -0.3 -0.1 -0.6 -0.5 

R&D 9.8 10.0 10.1 8.4 8.5 8.6 8.7 9.0 9.1 -0.8 -0.4 -0.8 -0.5 

Flex 9.6 9.8 9.9 8.5 8.5 8.6 8.9 9.1 9.1 -0.6 -0.3 -0.7 -0.6 

Regional Mall 8.9 9.3 9.8 7.6 8.0 8.2 7.9 8.5 8.8 -1.3 -0.2 -1.3 -0.7 

Power Center 9.0 9.5 9.9 7.8 8.0 8.3 8.2 8.4 8.8 -1.1 -0.4 -1.1 0.0 

Neigh/Comm. 9.1 9.6 10.1 7.7 8.1 8.4 8.2 8.6 9.0 -1.1 0.0 -1.5 -0.3 

Apartment 7.8 8.4 9.0 6.8 7.2 7.3 6.9 7.7 7.9 2.4 2.5 2.2 2.1 

Hotel 10.8 11.4 11.6 9.3 9.2 9.3 9.2 9.8 9.9 0.2 -0.2 0.5 0.0 

Average 9.2 9.6 10.0 7.9 8.1 8.3 8.2 8.7 8.9 -0.5 0.0 -0.6 -0.3 



East 

Region 

U.S. 

National 

Value 

East 

Value 

National 

Rent 

South 

Rent 

East Rent 


WINTER 2011 | VOL 39 | NO 4 



NORFOLK 4TH QUARTER 2010 

RERC 

Estimate 

Norfolk Investment Criteria | First-Tier 1 Investment Properties 


East 

Region 

U.S. 

RERC 

Estimate 

East 

Region 

U.S. 

RERC 

Estimate 

CBD 9.0 9.0 9.7 7.5 7.6 8.0 8.1 8.2 8.6 -0.7 0.0 -1.2 -1.0 

Suburban 9.7 9.5 10.0 8.1 7.9 8.4 8.7 8.6 8.9 -1.5 -0.9 -1.8 -1.5 

Warehouse 9.5 9.5 9.9 8.2 8.2 8.3 8.8 8.8 8.9 -0.3 -0.1 -0.6 -0.5 

R&D 10.0 10.0 10.1 8.6 8.5 8.6 9.0 9.0 9.1 -0.8 -0.4 -0.8 -0.5 

Flex 9.9 9.8 9.9 8.8 8.5 8.6 9.2 9.1 9.1 -0.6 -0.3 -0.7 -0.6 

Regional Mall 9.3 9.3 9.8 7.8 8.0 8.2 8.3 8.5 8.8 -1.3 -0.2 -1.3 -0.7 

Power Center 9.4 9.5 9.9 8.1 8.0 8.3 8.5 8.4 8.8 -1.1 -0.4 -1.1 0.0 

Neigh/Comm. 9.5 9.6 10.1 8.0 8.1 8.4 8.6 8.6 9.0 -1.1 0.0 -1.5 -0.3 

Apartment 8.5 8.4 9.0 6.9 7.2 7.3 7.5 7.7 7.9 2.4 2.5 2.2 2.1 

Hotel 11.0 11.4 11.6 9.1 9.2 9.3 9.6 9.8 9.9 0.2 -0.2 0.5 0.0 

Average 9.6 9.6 10.0 8.1 8.1 8.3 8.6 8.7 8.9 -0.5 0.0 -0.6 -0.3 



NORTHERN NEW JERSEY 4TH QUARTER 2010 

RERC 

Estimate 

East 

Region 

U.S. 

National 

Value 

Northern New Jersey Investment Criteria | First-Tier 1 Investment Properties 

East 

Value 

National 

Rent 


East 

Region 

U.S. 

RERC 

Estimate 

East 

Region 

U.S. 

RERC 

Estimate 

CBD 8.7 9.0 9.7 7.2 7.6 8.0 7.8 8.2 8.6 -0.7 0.0 -1.2 -1.0 

Suburban 9.3 9.5 10.0 7.8 7.9 8.4 8.4 8.6 8.9 -1.5 -0.9 -1.8 -1.5 

Warehouse 9.3 9.5 9.9 8.0 8.2 8.3 8.6 8.8 8.9 -0.3 -0.1 -0.6 -0.5 

R&D 9.8 10.0 10.1 8.5 8.5 8.6 8.9 9.0 9.1 -0.8 -0.4 -0.8 -0.5 

Flex 9.7 9.8 9.9 8.6 8.5 8.6 9.1 9.1 9.1 -0.6 -0.3 -0.7 -0.6 

Regional Mall 9.0 9.3 9.8 7.6 8.0 8.2 8.1 8.5 8.8 -1.3 -0.2 -1.3 -0.7 

Power Center 9.2 9.5 9.9 7.8 8.0 8.3 8.3 8.4 8.8 -1.1 -0.4 -1.1 0.0 

Neigh/Comm. 9.2 9.6 10.1 7.7 8.1 8.4 8.3 8.6 9.0 -1.1 0.0 -1.5 -0.3 

Apartment 8.1 8.4 9.0 6.6 7.2 7.3 7.1 7.7 7.9 2.4 2.5 2.2 2.1 

Hotel 10.9 11.4 11.6 9.0 9.2 9.3 9.4 9.8 9.9 0.2 -0.2 0.5 0.0 

Average 9.3 9.6 10.0 7.9 8.1 8.3 8.4 8.7 8.9 -0.5 0.0 -0.6 -0.3 



East 

Region 

U.S. 

National 

Value 

East 

Value 

National 

Rent 

East Rent 

East Rent 

WWW.RERC.COM 51



WINTER 2011 | VOL 39 | NO 4 

OKLAHOMA CITY 4TH QUARTER 2010 

RERC 

Estimate 

Oklahoma City Investment Criteria | First-Tier 1 Investment Properties 


South 

Region 

U.S. 

RERC 

Estimate 

South 

Region 

U.S. 

RERC 

Estimate 

CBD 9.3 10.1 9.7 7.8 8.2 8.0 8.5 9.0 8.6 -0.7 -0.7 -1.2 -0.4 

Suburban 9.8 10.2 10.0 8.3 8.4 8.4 9.0 9.1 8.9 -1.5 -0.7 -1.8 -0.5 

Warehouse 9.6 10.3 9.9 8.3 8.5 8.3 8.9 9.3 8.9 -0.3 -0.1 -0.6 -0.3 

R&D 9.8 10.1 10.1 8.8 8.8 8.6 9.2 9.4 9.1 -0.8 -0.4 -0.8 0.0 

Flex 9.9 10.1 9.9 9.0 8.8 8.6 9.4 9.4 9.1 -0.6 -1.0 -0.7 -0.8 

Regional Mall 9.8 9.8 9.8 8.2 8.2 8.2 8.7 8.8 8.8 -1.3 -1.1 -1.3 -0.6 

Power Center 9.5 9.8 9.9 8.3 8.3 8.3 8.9 8.9 8.8 -1.1 -0.5 -1.1 -0.2 

Neigh/Comm. 9.8 10.2 10.1 8.3 8.5 8.4 8.9 9.2 9.0 -1.1 -0.6 -1.5 -0.4 

Apartment 9.3 9.4 9.0 7.4 7.7 7.3 8.1 8.4 7.9 2.4 2.3 2.2 2.4 

Hotel 11.4 11.8 11.6 9.2 9.1 9.3 9.8 10.0 9.9 0.2 1.3 0.5 1.4 

Average 9.8 10.2 10.0 8.4 8.5 8.3 8.9 9.2 8.9 -0.5 -0.1 -0.6 0.1 



OMAHA 4TH QUARTER 2010 

RERC 

Estimate 

South 

Region 

Omaha Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

South 

Value 

National 

Rent 


Midwest 

Region 

U.S. 

RERC 

Estimate 

Midwest 

Region 

U.S. 

RERC 

Estimate 

CBD 9.8 10.0 9.7 8.3 8.8 8.0 8.7 9.0 8.6 -0.7 -1.3 -1.2 -1.7 

Suburban 10.3 10.3 10.0 8.9 9.1 8.4 9.3 9.4 8.9 -1.5 -2.1 -1.8 -2.1 

Warehouse 9.8 9.9 9.9 8.6 8.9 8.3 8.9 9.1 8.9 -0.3 0.0 -0.6 -0.5 

R&D 10.2 10.3 10.1 8.9 8.9 8.6 9.3 9.3 9.1 -0.8 -0.4 -0.8 -0.6 

Flex 10.1 10.1 9.9 9.1 8.9 8.6 9.4 9.3 9.1 -0.6 -0.2 -0.7 -0.4 

Regional Mall 10.2 10.5 9.8 8.6 8.9 8.2 9.2 9.6 8.8 -1.3 -2.4 -1.3 -2.3 

Power Center 10.1 10.2 9.9 8.7 8.7 8.3 9.1 9.1 8.8 -1.1 -2.0 -1.1 -2.2 

Neigh/Comm. 10.4 10.7 10.1 8.8 9.1 8.4 9.3 9.6 9.0 -1.1 -2.5 -1.5 -2.7 

Apartment 9.2 9.4 9.0 7.3 7.7 7.3 8.0 8.4 7.9 2.4 2.4 2.2 2.2 

Hotel 11.4 11.6 11.6 10.0 10.0 9.3 10.2 10.4 9.9 0.2 -0.6 0.5 0.6 

Average 10.2 10.3 10.0 8.7 8.9 8.3 9.1 9.3 8.9 -0.5 -0.9 -0.6 -1.0 



Midwest 

Region 

U.S. 

National 

Value 

Midwest 

Value 

National 

Rent 

South 

Rent 

Midwest 

Rent 


WINTER 2011 | VOL 39 | NO 4 



ORLANDO 4TH QUARTER 2010 

RERC 

Estimate 

Orlando Investment Criteria | First-Tier 1 Investment Properties 


South 

Region 

U.S. 

RERC 

Estimate 

South 

Region 

U.S. 

RERC 

Estimate 

CBD 9.7 10.1 9.7 7.7 8.2 8.0 8.5 9.0 8.6 -0.7 -0.7 -1.2 -0.4 

Suburban 10.1 10.2 10.0 8.3 8.4 8.4 8.9 9.1 8.9 -1.5 -0.7 -1.8 -0.5 

Warehouse 10.2 10.3 9.9 8.5 8.5 8.3 9.1 9.3 8.9 -0.3 -0.1 -0.6 -0.3 

R&D 10.3 10.1 10.1 8.8 8.8 8.6 9.4 9.4 9.1 -0.8 -0.4 -0.8 0.0 

Flex 10.4 10.1 9.9 9.0 8.8 8.6 9.5 9.4 9.1 -0.6 -1.0 -0.7 -0.8 

Regional Mall 9.4 9.8 9.8 7.8 8.2 8.2 8.3 8.8 8.8 -1.3 -1.1 -1.3 -0.6 

Power Center 9.9 9.8 9.9 8.3 8.3 8.3 8.9 8.9 8.8 -1.1 -0.5 -1.1 -0.2 

Neigh/Comm. 10.0 10.2 10.1 8.3 8.5 8.4 8.9 9.2 9.0 -1.1 -0.6 -1.5 -0.4 

Apartment 8.8 9.4 9.0 7.3 7.7 7.3 7.9 8.4 7.9 2.4 2.3 2.2 2.4 

Hotel 11.7 11.8 11.6 9.3 9.1 9.3 9.8 10.0 9.9 0.2 1.3 0.5 1.4 

Average 10.1 10.2 10.0 8.3 8.5 8.3 8.9 9.2 8.9 -0.5 -0.1 -0.6 0.1 



PHILADELPHIA 4TH QUARTER 2010 

RERC 

Estimate 

South 

Region 

Philadelphia Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

South 

Value 

National 

Rent 


East 

Region 

U.S. 

RERC 

Estimate 

East 

Region 

U.S. 

RERC 

Estimate 

CBD 8.9 9.0 9.7 7.4 7.6 8.0 8.0 8.2 8.6 -0.7 0.0 -1.2 -1.0 

Suburban 9.3 9.5 10.0 7.8 7.9 8.4 8.4 8.6 8.9 -1.5 -0.9 -1.8 -1.5 

Warehouse 9.4 9.5 9.9 8.0 8.2 8.3 8.6 8.8 8.9 -0.3 -0.1 -0.6 -0.5 

R&D 9.7 10.0 10.1 8.4 8.5 8.6 8.8 9.0 9.1 -0.8 -0.4 -0.8 -0.5 

Flex 9.6 9.8 9.9 8.3 8.5 8.6 8.8 9.1 9.1 -0.6 -0.3 -0.7 -0.6 

Regional Mall 8.9 9.3 9.8 7.5 8.0 8.2 7.9 8.5 8.8 -1.3 -0.2 -1.3 -0.7 

Power Center 9.2 9.5 9.9 7.8 8.0 8.3 8.2 8.4 8.8 -1.1 -0.4 -1.1 0.0 

Neigh/Comm. 9.4 9.6 10.1 7.9 8.1 8.4 8.4 8.6 9.0 -1.1 0.0 -1.5 -0.3 

Apartment 8.4 8.4 9.0 6.8 7.2 7.3 7.3 7.7 7.9 2.4 2.5 2.2 2.1 

Hotel 10.8 11.4 11.6 9.1 9.2 9.3 9.4 9.8 9.9 0.2 -0.2 0.5 0.0 

Average 9.4 9.6 10.0 7.9 8.1 8.3 8.4 8.7 8.9 -0.5 0.0 -0.6 -0.3 



East 

Region 

U.S. 

National 

Value 

East 

Value 

National 

Rent 

South 

Rent 

East Rent 

WWW.RERC.COM 53



WINTER 2011 | VOL 39 | NO 4 

PHOENIX 4TH QUARTER 2010 

RERC 

Estimate 

Phoenix Investment Criteria | First-Tier 1 Investment Properties 


West 

Region 

U.S. 

RERC 

Estimate 

West 

Region 

U.S. 

RERC 

Estimate 

CBD 9.3 9.7 9.7 7.3 7.7 8.0 8.0 8.3 8.6 -0.7 -0.8 -1.2 -1.9 

Suburban 9.9 10.0 10.0 8.1 8.1 8.4 8.7 8.7 8.9 -1.5 -2.5 -1.8 -3.2 

Warehouse 9.4 9.7 9.9 7.8 7.9 8.3 8.3 8.5 8.9 -0.3 -1.0 -0.6 -1.0 

R&D 9.8 10.1 10.1 8.2 8.1 8.6 8.7 8.8 9.1 -0.8 -1.9 -0.8 -2.1 

Flex 9.8 9.8 9.9 8.5 8.2 8.6 8.9 8.8 9.1 -0.6 -0.9 -0.7 -1.0 

Regional Mall 9.3 9.9 9.8 7.5 7.8 8.2 8.0 8.4 8.8 -1.3 -1.7 -1.3 -1.9 

Power Center 9.6 10.2 9.9 7.9 8.1 8.3 8.5 8.7 8.8 -1.1 -1.6 -1.1 -1.9 

Neigh/Comm. 9.5 10.0 10.1 7.7 7.9 8.4 8.3 8.5 9.0 -1.1 -1.6 -1.5 -2.7 

Apartment 8.6 8.7 9.0 6.4 6.6 7.3 7.1 7.3 7.9 2.4 2.5 2.2 2.0 

Hotel 11.1 11.6 11.6 9.0 9.2 9.3 9.3 9.7 9.9 0.2 -0.1 0.5 0.0 

Average 9.6 10.0 10.0 7.8 8.0 8.3 8.4 8.6 8.9 -0.5 -1.0 -0.6 -1.4 



PITTSBURGH 4TH QUARTER 2010 

RERC 

Estimate 

West 

Region 

Pittsburgh Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

West 

Value 

National 

Rent 


East 

Region 

U.S. 

RERC 

Estimate 

East 

Region 

U.S. 

RERC 

Estimate 

CBD 8.6 9.0 9.7 7.3 7.6 8.0 7.9 8.2 8.6 -0.7 0.0 -1.2 -1.0 

Suburban 9.3 9.5 10.0 8.0 7.9 8.4 8.7 8.6 8.9 -1.5 -0.9 -1.8 -1.5 

Warehouse 9.0 9.5 9.9 8.0 8.2 8.3 8.6 8.8 8.9 -0.3 -0.1 -0.6 -0.5 

R&D 9.4 10.0 10.1 8.4 8.5 8.6 8.8 9.0 9.1 -0.8 -0.4 -0.8 -0.5 

Flex 9.4 9.8 9.9 8.6 8.5 8.6 9.0 9.1 9.1 -0.6 -0.3 -0.7 -0.6 

Regional Mall 9.1 9.3 9.8 7.8 8.0 8.2 8.3 8.5 8.8 -1.3 -0.2 -1.3 -0.7 

Power Center 9.3 9.5 9.9 8.1 8.0 8.3 8.7 8.4 8.8 -1.1 -0.4 -1.1 0.0 

Neigh/Comm. 9.3 9.6 10.1 7.9 8.1 8.4 8.6 8.6 9.0 -1.1 0.0 -1.5 -0.3 

Apartment 8.1 8.4 9.0 6.6 7.2 7.3 7.2 7.7 7.9 2.4 2.5 2.2 2.1 

Hotel 10.8 11.4 11.6 9.2 9.2 9.3 9.6 9.8 9.9 0.2 -0.2 0.5 0.0 

Average 9.2 9.6 10.0 8.0 8.1 8.3 8.5 8.7 8.9 -0.5 0.0 -0.6 -0.3 



East 

Region 

U.S. 

National 

Value 

East 

Value 

National 

Rent 

West 

Rent 

East Rent 


WINTER 2011 | VOL 39 | NO 4 



PORTLAND 4TH QUARTER 2010 

RERC 

Estimate 

Portland Investment Criteria | First-Tier 1 Investment Properties 


West 

Region 

U.S. 

RERC 

Estimate 

West 

Region 

U.S. 

RERC 

Estimate 

CBD 9.1 9.7 9.7 7.2 7.7 8.0 7.9 8.3 8.6 -0.7 -0.8 -1.2 -1.9 

Suburban 9.8 10.0 10.0 8.1 8.1 8.4 8.6 8.7 8.9 -1.5 -2.5 -1.8 -3.2 

Warehouse 9.3 9.7 9.9 7.8 7.9 8.3 8.3 8.5 8.9 -0.3 -1.0 -0.6 -1.0 

R&D 9.8 10.1 10.1 8.2 8.1 8.6 8.7 8.8 9.1 -0.8 -1.9 -0.8 -2.1 

Flex 9.8 9.8 9.9 8.5 8.2 8.6 8.8 8.8 9.1 -0.6 -0.9 -0.7 -1.0 

Regional Mall 9.3 9.9 9.8 7.5 7.8 8.2 7.9 8.4 8.8 -1.3 -1.7 -1.3 -1.9 

Power Center 9.5 10.2 9.9 7.9 8.1 8.3 8.5 8.7 8.8 -1.1 -1.6 -1.1 -1.9 

Neigh/Comm. 9.3 10.0 10.1 7.6 7.9 8.4 8.2 8.5 9.0 -1.1 -1.6 -1.5 -2.7 

Apartment 8.2 8.7 9.0 6.3 6.6 7.3 6.9 7.3 7.9 2.4 2.5 2.2 2.0 

Hotel 11.3 11.6 11.6 9.2 9.2 9.3 9.4 9.7 9.9 0.2 -0.1 0.5 0.0 

Average 9.5 10.0 10.0 7.8 8.0 8.3 8.3 8.6 8.9 -0.5 -1.0 -0.6 -1.4 



RALEIGH 4TH QUARTER 2010 

RERC 

Estimate 

West 

Region 

Raleigh Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

West 

Value 

National 

Rent 


East 

Region 

U.S. 

RERC 

Estimate 

East 

Region 

U.S. 

RERC 

Estimate 

CBD 8.8 9.0 9.7 7.2 7.6 8.0 7.9 8.2 8.6 -0.7 0.0 -1.2 -1.0 

Suburban 9.5 9.5 10.0 7.9 7.9 8.4 8.6 8.6 8.9 -1.5 -0.9 -1.8 -1.5 

Warehouse 9.5 9.5 9.9 8.2 8.2 8.3 8.7 8.8 8.9 -0.3 -0.1 -0.6 -0.5 

R&D 10.0 10.0 10.1 8.6 8.5 8.6 9.1 9.0 9.1 -0.8 -0.4 -0.8 -0.5 

Flex 10.0 9.8 9.9 8.9 8.5 8.6 9.4 9.1 9.1 -0.6 -0.3 -0.7 -0.6 

Regional Mall 9.0 9.3 9.8 7.5 8.0 8.2 8.0 8.5 8.8 -1.3 -0.2 -1.3 -0.7 

Power Center 9.2 9.5 9.9 7.8 8.0 8.3 8.4 8.4 8.8 -1.1 -0.4 -1.1 0.0 

Neigh/Comm. 9.2 9.6 10.1 7.6 8.1 8.4 8.2 8.6 9.0 -1.1 0.0 -1.5 -0.3 

Apartment 8.2 8.4 9.0 6.6 7.2 7.3 7.2 7.7 7.9 2.4 2.5 2.2 2.1 

Hotel 10.8 11.4 11.6 9.0 9.2 9.3 9.4 9.8 9.9 0.2 -0.2 0.5 0.0 

Average 9.4 9.6 10.0 7.9 8.1 8.3 8.5 8.7 8.9 -0.5 0.0 -0.6 -0.3 



East 

Region 

U.S. 

National 

Value 

East 

Value 

National 

Rent 

West 

Rent 

East Rent 

WWW.RERC.COM 55



WINTER 2011 | VOL 39 | NO 4 

RICHMOND 4TH QUARTER 2010 

RERC 

Estimate 

Richmond Investment Criteria | First-Tier 1 Investment Properties 


East 

Region 

U.S. 

RERC 

Estimate 

East 

Region 

U.S. 

RERC 

Estimate 

CBD 9.0 9.0 9.7 7.3 7.6 8.0 7.9 8.2 8.6 -0.7 0.0 -1.2 -1.0 

Suburban 9.7 9.5 10.0 8.0 7.9 8.4 8.6 8.6 8.9 -1.5 -0.9 -1.8 -1.5 

Warehouse 9.5 9.5 9.9 8.2 8.2 8.3 8.8 8.8 8.9 -0.3 -0.1 -0.6 -0.5 

R&D 10.1 10.0 10.1 8.7 8.5 8.6 9.1 9.0 9.1 -0.8 -0.4 -0.8 -0.5 

Flex 9.9 9.8 9.9 8.9 8.5 8.6 9.3 9.1 9.1 -0.6 -0.3 -0.7 -0.6 

Regional Mall 9.4 9.3 9.8 7.7 8.0 8.2 8.1 8.5 8.8 -1.3 -0.2 -1.3 -0.7 

Power Center 9.5 9.5 9.9 8.0 8.0 8.3 8.5 8.4 8.8 -1.1 -0.4 -1.1 0.0 

Neigh/Comm. 9.5 9.6 10.1 7.9 8.1 8.4 8.4 8.6 9.0 -1.1 0.0 -1.5 -0.3 

Apartment 8.3 8.4 9.0 6.7 7.2 7.3 7.2 7.7 7.9 2.4 2.5 2.2 2.1 

Hotel 10.8 11.4 11.6 9.0 9.2 9.3 9.3 9.8 9.9 0.2 -0.2 0.5 0.0 

Average 9.6 9.6 10.0 8.0 8.1 8.3 8.5 8.7 8.9 -0.5 0.0 -0.6 -0.3 



SACRAMENTO 4TH QUARTER 2010 

RERC 

Estimate 

East 

Region 

Sacramento Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

East 

Value 

National 

Rent 


West 

Region 

U.S. 

RERC 

Estimate 

West 

Region 

U.S. 

RERC 

Estimate 

CBD 9.1 9.7 9.7 7.4 7.7 8.0 8.0 8.3 8.6 -0.7 -0.8 -1.2 -1.9 

Suburban 9.8 10.0 10.0 8.2 8.1 8.4 8.8 8.7 8.9 -1.5 -2.5 -1.8 -3.2 

Warehouse 9.6 9.7 9.9 8.0 7.9 8.3 8.6 8.5 8.9 -0.3 -1.0 -0.6 -1.0 

R&D 10.1 10.1 10.1 8.5 8.1 8.6 9.0 8.8 9.1 -0.8 -1.9 -0.8 -2.1 

Flex 9.9 9.8 9.9 8.7 8.2 8.6 9.2 8.8 9.1 -0.6 -0.9 -0.7 -1.0 

Regional Mall 9.2 9.9 9.8 7.5 7.8 8.2 8.0 8.4 8.8 -1.3 -1.7 -1.3 -1.9 

Power Center 9.5 10.2 9.9 7.9 8.1 8.3 8.6 8.7 8.8 -1.1 -1.6 -1.1 -1.9 

Neigh/Comm. 9.5 10.0 10.1 7.7 7.9 8.4 8.4 8.5 9.0 -1.1 -1.6 -1.5 -2.7 

Apartment 8.3 8.7 9.0 6.3 6.6 7.3 7.0 7.3 7.9 2.4 2.5 2.2 2.0 

Hotel 10.9 11.6 11.6 9.1 9.2 9.3 9.4 9.7 9.9 0.2 -0.1 0.5 0.0 

Average 9.6 10.0 10.0 7.9 8.0 8.3 8.5 8.6 8.9 -0.5 -1.0 -0.6 -1.4 



West 

Region 

U.S. 

National 

Value 

West 

Value 

National 

Rent 

East Rent 

West 

Rent 


WINTER 2011 | VOL 39 | NO 4 



SALT LAKE CITY 4TH QUARTER 2010 

RERC 

Estimate 

Salt Lake City Investment Criteria | First-Tier 1 Investment Properties 


West 

Region 

U.S. 

RERC 

Estimate 

West 

Region 

U.S. 

RERC 

Estimate 

CBD 9.2 9.7 9.7 7.3 7.7 8.0 8.0 8.3 8.6 -0.7 -0.8 -1.2 -1.9 

Suburban 9.8 10.0 10.0 8.1 8.1 8.4 8.7 8.7 8.9 -1.5 -2.5 -1.8 -3.2 

Warehouse 9.3 9.7 9.9 7.8 7.9 8.3 8.3 8.5 8.9 -0.3 -1.0 -0.6 -1.0 

R&D 9.8 10.1 10.1 8.2 8.1 8.6 8.7 8.8 9.1 -0.8 -1.9 -0.8 -2.1 

Flex 9.7 9.8 9.9 8.5 8.2 8.6 8.9 8.8 9.1 -0.6 -0.9 -0.7 -1.0 

Regional Mall 9.7 9.9 9.8 7.8 7.8 8.2 8.3 8.4 8.8 -1.3 -1.7 -1.3 -1.9 

Power Center 9.7 10.2 9.9 8.1 8.1 8.3 8.7 8.7 8.8 -1.1 -1.6 -1.1 -1.9 

Neigh/Comm. 9.6 10.0 10.1 7.9 7.9 8.4 8.5 8.5 9.0 -1.1 -1.6 -1.5 -2.7 

Apartment 8.5 8.7 9.0 6.5 6.6 7.3 7.1 7.3 7.9 2.4 2.5 2.2 2.0 

Hotel 10.9 11.6 11.6 9.1 9.2 9.3 9.3 9.7 9.9 0.2 -0.1 0.5 0.0 

Average 9.6 10.0 10.0 7.9 8.0 8.3 8.5 8.6 8.9 -0.5 -1.0 -0.6 -1.4 



SAN ANTONIO 4TH QUARTER 2010 

RERC 

Estimate 

West 

Region 

San Antonio Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

West 

Value 

National 

Rent 


South 

Region 

U.S. 

RERC 

Estimate 

South 

Region 

U.S. 

RERC 

Estimate 

CBD 9.2 10.1 9.7 7.7 8.2 8.0 8.4 9.0 8.6 -0.7 -0.7 -1.2 -0.4 

Suburban 9.8 10.2 10.0 8.3 8.4 8.4 9.0 9.1 8.9 -1.5 -0.7 -1.8 -0.5 

Warehouse 9.7 10.3 9.9 8.4 8.5 8.3 9.0 9.3 8.9 -0.3 -0.1 -0.6 -0.3 

R&D 9.8 10.1 10.1 8.8 8.8 8.6 9.3 9.4 9.1 -0.8 -0.4 -0.8 0.0 

Flex 10.2 10.1 9.9 9.0 8.8 8.6 9.6 9.4 9.1 -0.6 -1.0 -0.7 -0.8 

Regional Mall 9.6 9.8 9.8 8.0 8.2 8.2 8.5 8.8 8.8 -1.3 -1.1 -1.3 -0.6 

Power Center 9.7 9.8 9.9 8.2 8.3 8.3 8.8 8.9 8.8 -1.1 -0.5 -1.1 -0.2 

Neigh/Comm. 9.5 10.2 10.1 8.1 8.5 8.4 8.8 9.2 9.0 -1.1 -0.6 -1.5 -0.4 

Apartment 8.8 9.4 9.0 7.1 7.7 7.3 7.8 8.4 7.9 2.4 2.3 2.2 2.4 

Hotel 11.4 11.8 11.6 9.2 9.1 9.3 9.8 10.0 9.9 0.2 1.3 0.5 1.4 

Average 9.8 10.2 10.0 8.3 8.5 8.3 8.9 9.2 8.9 -0.5 -0.1 -0.6 0.1 



South 

Region 

U.S. 

National 

Value 

South 

Value 

National 

Rent 

West 

Rent 

South 

Rent 

WWW.RERC.COM 57



WINTER 2011 | VOL 39 | NO 4 

SAN DIEGO 4TH QUARTER 2010 

RERC 

Estimate 

San Diego Investment Criteria | First-Tier 1 Investment Properties 


West 

Region 

U.S. 

RERC 

Estimate 

West 

Region 

U.S. 

RERC 

Estimate 

CBD 8.9 9.7 9.7 7.2 7.7 8.0 7.8 8.3 8.6 -0.7 -0.8 -1.2 -1.9 

Suburban 9.6 10.0 10.0 7.9 8.1 8.4 8.5 8.7 8.9 -1.5 -2.5 -1.8 -3.2 

Warehouse 9.0 9.7 9.9 7.6 7.9 8.3 8.2 8.5 8.9 -0.3 -1.0 -0.6 -1.0 

R&D 9.5 10.1 10.1 8.1 8.1 8.6 8.6 8.8 9.1 -0.8 -1.9 -0.8 -2.1 

Flex 9.4 9.8 9.9 8.3 8.2 8.6 8.7 8.8 9.1 -0.6 -0.9 -0.7 -1.0 

Regional Mall 9.3 9.9 9.8 7.5 7.8 8.2 8.0 8.4 8.8 -1.3 -1.7 -1.3 -1.9 

Power Center 9.3 10.2 9.9 7.8 8.1 8.3 8.3 8.7 8.8 -1.1 -1.6 -1.1 -1.9 

Neigh/Comm. 9.1 10.0 10.1 7.5 7.9 8.4 8.1 8.5 9.0 -1.1 -1.6 -1.5 -2.7 

Apartment 8.0 8.7 9.0 6.1 6.6 7.3 6.7 7.3 7.9 2.4 2.5 2.2 2.0 

Hotel 11.1 11.6 11.6 9.0 9.2 9.3 9.4 9.7 9.9 0.2 -0.1 0.5 0.0 

Average 9.3 10.0 10.0 7.7 8.0 8.3 8.2 8.6 8.9 -0.5 -1.0 -0.6 -1.4 



SAN FRANCISCO 4TH QUARTER 2010 

RERC 

Estimate 

West 

Region 

U.S. 

National 

Value 

San Francisco Investment Criteria | First-Tier 1 Investment Properties 

West 

Value 

National 

Rent 


West 

Region 

U.S. 

RERC 

Estimate 

West 

Region 

U.S. 

RERC 

Estimate 

CBD 8.8 9.7 9.7 7.0 7.7 8.0 7.7 8.3 8.6 -0.7 -0.8 -1.2 -1.9 

Suburban 9.4 10.0 10.0 7.8 8.1 8.4 8.4 8.7 8.9 -1.5 -2.5 -1.8 -3.2 

Warehouse 9.3 9.7 9.9 7.8 7.9 8.3 8.3 8.5 8.9 -0.3 -1.0 -0.6 -1.0 

R&D 9.7 10.1 10.1 8.3 8.1 8.6 8.7 8.8 9.1 -0.8 -1.9 -0.8 -2.1 

Flex 9.6 9.8 9.9 8.5 8.2 8.6 8.9 8.8 9.1 -0.6 -0.9 -0.7 -1.0 

Regional Mall 9.1 9.9 9.8 7.3 7.8 8.2 7.8 8.4 8.8 -1.3 -1.7 -1.3 -1.9 

Power Center 9.4 10.2 9.9 7.8 8.1 8.3 8.4 8.7 8.8 -1.1 -1.6 -1.1 -1.9 

Neigh/Comm. 9.3 10.0 10.1 7.6 7.9 8.4 8.2 8.5 9.0 -1.1 -1.6 -1.5 -2.7 

Apartment 8.1 8.7 9.0 6.0 6.6 7.3 6.6 7.3 7.9 2.4 2.5 2.2 2.0 

Hotel 10.8 11.6 11.6 9.1 9.2 9.3 9.3 9.7 9.9 0.2 -0.1 0.5 0.0 

Average 9.4 10.0 10.0 7.7 8.0 8.3 8.2 8.6 8.9 -0.5 -1.0 -0.6 -1.4 



West 

Region 

U.S. 

National 

Value 

West 

Value 

National 

Rent 

West 

Rent 

West 

Rent 


WINTER 2011 | VOL 39 | NO 4 



SEATTLE 4TH QUARTER 2010 

RERC 

Estimate 

Seattle Investment Criteria | First-Tier 1 Investment Properties 


West 

Region 

U.S. 

RERC 

Estimate 

West 

Region 

U.S. 

RERC 

Estimate 

CBD 8.9 9.7 9.7 7.1 7.7 8.0 7.7 8.3 8.6 -0.7 -0.8 -1.2 -1.9 

Suburban 9.5 10.0 10.0 7.8 8.1 8.4 8.3 8.7 8.9 -1.5 -2.5 -1.8 -3.2 

Warehouse 9.1 9.7 9.9 7.6 7.9 8.3 8.1 8.5 8.9 -0.3 -1.0 -0.6 -1.0 

R&D 9.5 10.1 10.1 8.0 8.1 8.6 8.5 8.8 9.1 -0.8 -1.9 -0.8 -2.1 

Flex 9.4 9.8 9.9 8.2 8.2 8.6 8.6 8.8 9.1 -0.6 -0.9 -0.7 -1.0 

Regional Mall 9.3 9.9 9.8 7.5 7.8 8.2 7.9 8.4 8.8 -1.3 -1.7 -1.3 -1.9 

Power Center 9.5 10.2 9.9 7.8 8.1 8.3 8.3 8.7 8.8 -1.1 -1.6 -1.1 -1.9 

Neigh/Comm. 9.3 10.0 10.1 7.6 7.9 8.4 8.1 8.5 9.0 -1.1 -1.6 -1.5 -2.7 

Apartment 8.2 8.7 9.0 6.2 6.6 7.3 6.8 7.3 7.9 2.4 2.5 2.2 2.0 

Hotel 10.9 11.6 11.6 9.0 9.2 9.3 9.3 9.7 9.9 0.2 -0.1 0.5 0.0 

Average 9.4 10.0 10.0 7.7 8.0 8.3 8.2 8.6 8.9 -0.5 -1.0 -0.6 -1.4 



ST. LOUIS 4TH QUARTER 2010 

RERC 

Estimate 

West 

Region 

St. Louis Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

West 

Value 

National 

Rent 


Midwest 

Region 

U.S. 

RERC 

Estimate 

Midwest 

Region 

U.S. 

RERC 

Estimate 

CBD 9.6 10.0 9.7 8.1 8.8 8.0 8.5 9.0 8.6 -0.7 -1.3 -1.2 -1.7 

Suburban 10.1 10.3 10.0 8.8 9.1 8.4 9.1 9.4 8.9 -1.5 -2.1 -1.8 -2.1 

Warehouse 9.5 9.9 9.9 8.4 8.9 8.3 8.6 9.1 8.9 -0.3 0.0 -0.6 -0.5 

R&D 9.9 10.3 10.1 8.6 8.9 8.6 9.0 9.3 9.1 -0.8 -0.4 -0.8 -0.6 

Flex 9.8 10.1 9.9 8.8 8.9 8.6 9.1 9.3 9.1 -0.6 -0.2 -0.7 -0.4 

Regional Mall 10.0 10.5 9.8 8.4 8.9 8.2 9.0 9.6 8.8 -1.3 -2.4 -1.3 -2.3 

Power Center 9.9 10.2 9.9 8.5 8.7 8.3 9.0 9.1 8.8 -1.1 -2.0 -1.1 -2.2 

Neigh/Comm. 10.2 10.7 10.1 8.6 9.1 8.4 9.2 9.6 9.0 -1.1 -2.5 -1.5 -2.7 

Apartment 9.0 9.4 9.0 7.2 7.7 7.3 7.9 8.4 7.9 2.4 2.4 2.2 2.2 

Hotel 11.3 11.6 11.6 9.9 10.0 9.3 10.1 10.4 9.9 0.2 -0.6 0.5 0.6 

Average 9.9 10.3 10.0 8.5 8.9 8.3 9.0 9.3 8.9 -0.5 -0.9 -0.6 -1.0 



Midwest 

Region 

U.S. 

National 

Value 

Midwest 

Value 

National 

Rent 

West 

Rent 

Midwest 

Rent 

WWW.RERC.COM 59



WINTER 2011 | VOL 39 | NO 4 

TAMPA 4TH QUARTER 2010 

RERC 

Estimate 

Tampa Investment Criteria | First-Tier 1 Investment Properties 


South 

Region 

U.S. 

RERC 

Estimate 

South 

Region 

U.S. 

RERC 

Estimate 

CBD 9.8 10.1 9.7 8.1 8.2 8.0 8.7 9.0 8.6 -0.7 -0.7 -1.2 -0.4 

Suburban 10.2 10.2 10.0 8.4 8.4 8.4 9.1 9.1 8.9 -1.5 -0.7 -1.8 -0.5 

Warehouse 10.1 10.3 9.9 8.3 8.5 8.3 9.0 9.3 8.9 -0.3 -0.1 -0.6 -0.3 

R&D 9.7 10.1 10.1 8.6 8.8 8.6 9.2 9.4 9.1 -0.8 -0.4 -0.8 0.0 

Flex 9.7 10.1 9.9 8.8 8.8 8.6 9.4 9.4 9.1 -0.6 -1.0 -0.7 -0.8 

Regional Mall 9.3 9.8 9.8 7.8 8.2 8.2 8.2 8.8 8.8 -1.3 -1.1 -1.3 -0.6 

Power Center 9.4 9.8 9.9 8.0 8.3 8.3 8.6 8.9 8.8 -1.1 -0.5 -1.1 -0.2 

Neigh/Comm. 9.6 10.2 10.1 8.1 8.5 8.4 8.7 9.2 9.0 -1.1 -0.6 -1.5 -0.4 

Apartment 9.1 9.4 9.0 7.0 7.7 7.3 7.7 8.4 7.9 2.4 2.3 2.2 2.4 

Hotel 11.9 11.8 11.6 9.0 9.1 9.3 9.6 10.0 9.9 0.2 1.3 0.5 1.4 

Average 9.9 10.2 10.0 8.2 8.5 8.3 8.8 9.2 8.9 -0.5 -0.1 -0.6 0.1 



TOLEDO 4TH QUARTER 2010 

RERC 

Estimate 

South 

Region 

Toledo Investment Criteria | First-Tier 1 Investment Properties 

U.S. 

National 

Value 

South 

Value 

National 

Rent 


Midwest 

Region 

U.S. 

RERC 

Estimate 

Midwest 

Region 

U.S. 

RERC 

Estimate 

CBD 9.6 10.0 9.7 8.2 8.8 8.0 8.7 9.0 8.6 -0.7 -1.3 -1.2 -1.7 

Suburban 10.2 10.3 10.0 8.9 9.1 8.4 9.3 9.4 8.9 -1.5 -2.1 -1.8 -2.1 

Warehouse 9.6 9.9 9.9 8.5 8.9 8.3 8.9 9.1 8.9 -0.3 0.0 -0.6 -0.5 

R&D 10.1 10.3 10.1 8.9 8.9 8.6 9.3 9.3 9.1 -0.8 -0.4 -0.8 -0.6 

Flex 10.0 10.1 9.9 9.1 8.9 8.6 9.4 9.3 9.1 -0.6 -0.2 -0.7 -0.4 

Regional Mall 10.1 10.5 9.8 8.5 8.9 8.2 9.0 9.6 8.8 -1.3 -2.4 -1.3 -2.3 

Power Center 10.1 10.2 9.9 8.7 8.7 8.3 9.2 9.1 8.8 -1.1 -2.0 -1.1 -2.2 

Neigh/Comm. 10.3 10.7 10.1 8.7 9.1 8.4 9.3 9.6 9.0 -1.1 -2.5 -1.5 -2.7 

Apartment 9.1 9.4 9.0 7.3 7.7 7.3 8.0 8.4 7.9 2.4 2.4 2.2 2.2 

Hotel 11.1 11.6 11.6 9.8 10.0 9.3 9.9 10.4 9.9 0.2 -0.6 0.5 0.6 

Average 10.0 10.3 10.0 8.7 8.9 8.3 9.1 9.3 8.9 -0.5 -0.9 -0.6 -1.0 



Midwest 

Region 

U.S. 

National 

Value 

Midwest 

Value 

National 

Rent 

South 

Rent 

Midwest 

Rent 


WINTER 2011 | VOL 39 | NO 4 



TUCSON 4TH QUARTER 2010 

RERC 

Estimate 

Tucson Investment Criteria | First-Tier 1 Investment Properties 


West 

Region 

U.S. 

RERC 

Estimate 

West 

Region 

U.S. 

RERC 

Estimate 

CBD 9.5 9.7 9.7 7.5 7.7 8.0 8.2 8.3 8.6 -0.7 -0.8 -1.2 -1.9 

Suburban 10.0 10.0 10.0 8.3 8.1 8.4 8.9 8.7 8.9 -1.5 -2.5 -1.8 -3.2 

Warehouse 9.6 9.7 9.9 8.0 7.9 8.3 8.5 8.5 8.9 -0.3 -1.0 -0.6 -1.0 

R&D 10.1 10.1 10.1 8.4 8.1 8.6 9.0 8.8 9.1 -0.8 -1.9 -0.8 -2.1 

Flex 10.0 9.8 9.9 8.7 8.2 8.6 9.1 8.8 9.1 -0.6 -0.9 -0.7 -1.0 

Regional Mall 9.6 9.9 9.8 7.7 7.8 8.2 8.1 8.4 8.8 -1.3 -1.7 -1.3 -1.9 

Power Center 10.0 10.2 9.9 8.1 8.1 8.3 8.7 8.7 8.8 -1.1 -1.6 -1.1 -1.9 

Neigh/Comm. 9.8 10.0 10.1 7.9 7.9 8.4 8.5 8.5 9.0 -1.1 -1.6 -1.5 -2.7 

Apartment 8.9 8.7 9.0 6.6 6.6 7.3 7.3 7.3 7.9 2.4 2.5 2.2 2.0 

Hotel 11.4 11.6 11.6 9.3 9.2 9.3 9.6 9.7 9.9 0.2 -0.1 0.5 0.0 

Average 9.9 10.0 10.0 8.1 8.0 8.3 8.6 8.6 8.9 -0.5 -1.0 -0.6 -1.4 



WASHINGTON, D.C. 4TH QUARTER 2010 

RERC 

Estimate 

West 

Region 

U.S. 

National 

Value 

Washington, D.C. Investment Criteria | First-Tier 1 Investment Properties 

West 

Value 

National 

Rent 


East 

Region 

U.S. 

RERC 

Estimate 

East 

Region 

U.S. 

RERC 

Estimate 

CBD 8.4 9.0 9.7 6.9 7.6 8.0 7.5 8.2 8.6 -0.7 0.0 -1.2 -1.0 

Suburban 9.1 9.5 10.0 7.6 7.9 8.4 8.2 8.6 8.9 -1.5 -0.9 -1.8 -1.5 

Warehouse 9.0 9.5 9.9 7.8 8.2 8.3 8.3 8.8 8.9 -0.3 -0.1 -0.6 -0.5 

R&D 9.5 10.0 10.1 8.2 8.5 8.6 8.7 9.0 9.1 -0.8 -0.4 -0.8 -0.5 

Flex 9.5 9.8 9.9 8.5 8.5 8.6 8.9 9.1 9.1 -0.6 -0.3 -0.7 -0.6 

Regional Mall 8.8 9.3 9.8 7.4 8.0 8.2 7.9 8.5 8.8 -1.3 -0.2 -1.3 -0.7 

Power Center 9.1 9.5 9.9 7.8 8.0 8.3 8.2 8.4 8.8 -1.1 -0.4 -1.1 0.0 

Neigh/Comm. 9.1 9.6 10.1 7.6 8.1 8.4 8.2 8.6 9.0 -1.1 0.0 -1.5 -0.3 

Apartment 8.0 8.4 9.0 6.4 7.2 7.3 7.0 7.7 7.9 2.4 2.5 2.2 2.1 

Hotel 10.6 11.4 11.6 8.9 9.2 9.3 9.2 9.8 9.9 0.2 -0.2 0.5 0.0 

Average 9.1 9.6 10.0 7.7 8.1 8.3 8.2 8.7 8.9 -0.5 0.0 -0.6 -0.3 



East 

Region 

U.S. 

National 

Value 

East 

Value 

National 

Rent 

West 

Rent 

East Rent 

WWW.RERC.COM 61


NATIONAL RESPONDENTS - WINTER 2011 

Aegon USA Realty Advisors 

Allianz of America, Inc. 

American Realty Advisors 

ASB Capital Management 

Boston Capital 

BPG Properties 

Capright Property Advisors 

CB Richard Ellis 

Cornerstone Real Estate Advisers 

Cushman & Wakefield 

Delta Associates Inc. 

EnTrust Realty Advisors 

Grosvenor Investment Management 

ING Clarion Partners 

Keystone Consulting Group 

LaSalle Investment Management 

Lincoln Property Company 

Long Realty Commercial Real Estate 

MacGregor Associates 

Marcus & Millichap 

National Electrical Benefit Fund 

NewTower Trust Company 

Northwestern Investment 

Management Company 

PKF Consulting 


Principal Real Estate Investors 

Prudential Real Estate Investors 

RREEF 

Saltash Partners 

Sperry Van Ness Commercial 

Real Estate Advisors 

WINTER 2011 | VOL 39 | NO 4 

State Teachers Retirement System of Ohio 

Thomas Properties Group 

Trecap Partners 

University of Denver 

This is a list of our institutional and national survey respondents 

who wished to be identified; it does not represent our entire list of 

quarterly survey respondents. 


WINTER 2011 | VOL 39 | NO 4 

REGIONAL RESPONDENTS - WINTER 2011 

Paul Aase 

Roberts Commercial Real Estate 

Alpharetta, GA 

Al Abbott 

Abbott & Associates, Inc. 

Houston, TX 

Michael Adler 

Adler Realty Advisors, Inc. 

Woodland Hills, CA 

Barry Alperin 

Alperin Appraisal 

Walnut, CA 

Pedro Alvarez 

P & P Realty, Inc. 

South Miami, FL 

William Armstrong 

Terzo & Bologna, Inc. 

Livonia, MI 

C. Roger Arnold 

George McElroy & Associates 

Plano, TX 

John Asay 

Northwestern Energy 

Butte, MT 

Joel Asmar 

Asmar Appraisal Company, Inc. 

Pensacola, FL 

Jennifer Ayers 

Paramount Valuation Services, Inc. 

Dallas, TX 

James Babb, Jr. 

Property Analysts, Inc. 

Indianapolis, IN 

Jack Bailey 

R.K. Barnes and Associates, Inc. 

Brentwood, TN 

Alan Balladares 

Quality Appraisal Services 

Metairie, LA 

Robert Bancroft 

Bancroft Appraisal 

Medford, OR 

Steven Barrett 

S.W. Barrett Real Estate Appraisers 

Carlisle, PA 

Mark Barrs 

Barrs Appraisal Services, Inc. 

Montgomery, AL 

Richard Bass 

Bass & Associates, Inc. 

Sarasota, FL 

Robin Beck 

The Appraisal Group 

Texarkana, TX 

Scott Belke 

Belke Appraisal and Consulting Svcs. 

Kansas City, MO 

Ryan Bessler 

Diversified Real Estate Services, Inc. 

Minneapolis, MN 

Richard Binder 

Binder Realty Consultants, Inc. 

Downers Grove, IL 

Wells Blake 

Ed Blake Company 

Jerome Block 

Wilrock Appraisal & Consulting, Inc. 

New York, NY 

Paul Borysow 

Borysow Appraisal 

Chicago, IL 

William Bott 

Equity Appraisal Co., Inc. 

Springhouse, PA 

MacKenzie Bottum 

Mackenzie S. Bottum & Asociates, Inc. 

Addison, TX 

John Boucher 

John F. Boucher & Associates 

Seattle, WA 

Peter Bowes 

Bowes and Company 

Denver, CO 


Michael Bownik 

The Valuation Group 

Plymouth, MN 

William Brecka 

Willam C. Brecka, PL 

Longboat Key, FL 

Richard Briscoe 

GVA Kidder Mathews 

Seattle, WA 


Gary Brown 

Gary Brown & Associates, Inc. 

Houston, TX 

Richard Buckles 

R.A. Buckles & Associates, Inc. 

St. Louis, MO 

Stephen Bullock 

Bullock Commercial Appraisal 

Windham, NH 

Matthew Bulthuis 

Bulthuis Realty Consultants, Inc. 

Downers Grove, IL 

Steven Burak 

Sizemore & Sizemore, Inc. 

Tallassee, AL 

Peter Burgess 

Burgess-Johnson & Associates 


Reily Burrell 

Burrell Appraisal Service, Inc. 


M. Brent Burris 

Burris Realty Group Inc. 

Lakeland, FL 

Bernard Camins 

Camins Associates 

Philadelphia, PA 

Marcos Campos 

Campos Appraisals, Inc. 

Mountlake Terrace, WA 

Michael Carey 

New Market Real Estate Group 

New Market, MD 

Edward Carlson 

PGP Valuation, Inc. 

San Diego, CA 

Martin Carmody 

Carmody & Associates 

Paoli, PA 

Kevin Casserly 

Casserly Appraisals 

Rogers, MN 

James Casson 

Casson Valuation Services, LLC 

Port Jervis, NY 

Richard Chaiken 

Appraisal Consultants Corp. 

Livingston, NJ 

Harrison Chavis 

Harrison Chavis & Associates 

Richmond, VA 

Alwyn Chikamoto 

Pacific Rim Bank 

Honolulu, HI 

Sampson Child 

Sampson R. Child & Associates 

Excelsior, MN 

Gerald Chuman 

Summit Valuations 

Alhambra, CA 

Leonard City 

Commerce Appraisal 

Los Angeles, CA 

Michael Clapp 

Michael S. Clapp & Assoc., Inc. 

Winston-Salem, NC 

Judson Clendaniel 

Clendaniel Company, Inc. 

Bothell, WA 

Paul Cloutier 

Northeast Appraisal, Inc. 

South Portland, ME 

Gary Cohen 

Global Lodging Consultants 

Corona Del Mar, CA 

WWW.RERC.COM 63


Stephen Cosby 

CB Richard Ellis 

Fayetteville, AR 

Joe Creech 

Colliers International 

Seattle, WA 

Raymond Croteau 

Northern Appraisal Assoc. 

Manchester, NH 

Dwight Dahlen 

Dahlen & Dwyer & Foley 

St. Paul, MN 

Joseph D’Antoni 

Corporate Sciences, Inc. 

Pasadena, CA 

Robert Decker 

Decker Associates, Inc. 

Littleton, CO 

Edward DeLaurier 

JAX Realty Advisors, Inc. 

Ponte Vedra Beach, FL 

Timothy Dick 

Trimont Real Estate Advisors, Inc. 

Atlanta, GA 

John Dickinson 

Dickinson, Lewis & Associates, LLC 

Raleigh, NC 

Larry Dobbs 

Larry E. Dobbs, Inc. 

Rockwall, TX 

O. Marshall Dodds 

Marshall Dodds Company, Inc. 

Columbia, SC 

Dean Dodson 

Dodson Real Estate Analysis 

Roaring Spring, PA 

Dale Donerkiel 

DMD Appraisals, Inc. 

San Fernando, CA 

John (Jack) Donnelly 

John C. Donnelly, Inc. 

Bethesda, MD 

Richard DuBay 

Appraisal Consultants 

St Paul, MN 


Daryl Duncan 

Joseph J. Blake & Associates, Inc. 

Dallas, TX 

Donald Duncan 

The Duncan Appraisal Corporation 

Huntington Beach, CA 

Dean Emanuels 

Washington Trust Bank 

Spokane, WA 

Kenneth Evans 

Kenneth C Evans, P.A. 

Tampa, FL 

R. Kent Faver 

Faver & Associates 

Lufkin, TX 

Jean Felts 

Jean C. Felts & Company 

New Orleans, LA 

Brian Finch 

Brian A. Finch, Inc. 

Bloomington, IL 

Patrick Fishback 

Florida Dept. of Transportation 

Tampa, FL 

Mark Fisher 

StanCorp Mortgage Investors, LLC 

Hillsboro, OR 

Kara Fishman 

Fishman Appraisal Services 

Lebanon, CT 

Brian Flanagan 

Property Valuation Advisors, Inc. 

Chicago, IL 

William Forrest 

REVAC, Inc. 

Houston, TX 

Thomas Gallup 

Evaluation & Review Associates, Inc. 

Olney, MD 

Steven Gant 

Gant Realty 

Lake Suzy, FL 

James Gavin 

Duff & Phelps LLC 


Anthony Gibbons 

RE-SOLVE 

Bainbridge, WA 

C. Gordon Gilbert 

Gilbert Advising & Appraising, LLC 

Baltimore, MD 

Brian Ginter 

Bert and Herbert Bank 

Alexandria, VA 

Jerry Gisclair 

FirstService PGP Valuation 

Tampa, FL 

Alex Glade 

U.S. Government 

Sacramento, CA 

Robert Glenn 

Robert Glenn Associates, Inc. 

Wrightsville Beach, NC 

John Gobbell 

Lea Associates, Inc. 


John Gordon 

GVA Kidder Matthews 

Bellevue, WA 

Steve Grant 

Fowler Properties Acquisition 


Michael Green 

Real Estate Analysts Limited 

St. Louis, MO 

Bruce Greenberg 

Bruce D. Greenberg, Inc. 

Tucson, AZ 

Joel Greenberg 

Consolidated Appraisal Svcs., Inc. 

Choral Springs, FL 

John Grimes 

R.J. Schmitt & Associates, Inc. 

Arlington Heights, IL 

Trisha Guarnieri 


Boca Raton, FL 

Mohamed Hammad 

Hammad & Associates, Inc. 

Studio City, CA 

WINTER 2011 | VOL 39 | NO 4 

Stephen Harrington 

Stover Harrinton, Inc. 

Sacramento, CA 

Mark Harris 

Excelsior Real Estate Advisors 

Cleveland, OH 

Robert Hastings 


Honolulu, HI 

Joseph Hatzell 

Joseph J. Blake & Associates 

Coral Gables, FL 

Dale Hayes 

Hayes Appraisal Group, Inc. 

Clermont, FL 

Dale Hayter 

DWH Consulting 

Flowery Branch, GA 

Dick Heins 

Midwest Real Estate Company 


Peter Helland 

Real Valuation Group LLC 

St. Charles, IL 

Paul Hendricks 

Paul Hendricks Appraisal 

Tucson, AZ 

Gerald Hendry 

Maxwell & Hendry Valuation Svcs., Inc. 

Ft. Myers, FL 

J. Thomas Hester 

Hester & Co. 

Raleigh, NC 

Roger Hettema 

Hettema, Saba & Walch 

Sarasota, FL 

Jeff Hicks 

The Dohring Group 

Tampa, FL 

D. Curtis Hinckley 

Hinckley Appraisal Service, Inc. 

Tampa, FL 

James Hinsley 

Lone Star Land Bank, ACA. 

Aubrey, TX 


WINTER 2011 | VOL 39 | NO 4 

Daniel Hogan 

Red Capital Group 

Columbus, OH 

Philip Holden 

S.F. Holden, Inc. 

Palm Beach Gardens, FL 

Austin Hollis 

Hollis Appraisals, Inc. 

Jacksonville, FL 

Thomas Horner 

Ohio Real Estate Consultants, Inc. 

Dublin, OH 

John Hosey 

Shelterfield Valuation Services 

Flourtown, PA 

Steven Hurlbut 

Liberty Bank 

Middletown, CT 

Michael Husij 

Integral Property Tax Services 

Scottsdale, AZ 

Mary Hutton 

The Hutton Co., Inc. 

San Antonio, TX 

Anthony Iaccio 

Blake & Iaccio, LLC 

New York, NY 

Brian Iannarone 

Wells Fargo Bank 

Union, NJ 

Howard Jackson 

Integrated Real Estate Svcs., Inc. 

Garden City, NY 

William James 

James Real Estate Services, Inc. 

Denver, CO 

Bruce Jolicoeur 

Auble, Jolicoeur & Gentry 

Spokane, WA 

Kerry Jorgensen 

Jorgensen Appraisal, Inc. 

Sandy, UT 

James Justice 

Real Estate Appraisal Services, Inc. 

Tyler, TX 

James Katon 

Integra Realty Resources 

Charlotte, NC 

Charles Kelly 

Coldwell Banker Commercial 

Dallas, TX 

Patrick Kerr 

Integra Realty Resources-Baltimore 

Beltsville, MD 

Daniel Killam 

William Fall Group 

Toledo, OH 

Stephen King 

Beaumont & Matthes, Inc. 

Orlando, FL 

Albin Kline 

The Appraisal Group, Ltd. 

Maple Grove, MN 

Justin Landry 

Stirling Properties 

New Orleans, LA 

Paul Laubach 

Providence Capital Group 

Encinitas, CA 

Russell Lauer 

The Lauer Appraisal Company 

St. Louis, MO 

Christopher Lauger 

Asset Insight of Nevada 

Las Vegas, NV 

Paul Leis 

PJL Realty Advisors, Inc. 

Erdenheim, PA 

Will Leonard 

Henrico County- Real Estate 

Richmond, VA 

Jason Letman 

Consultus Asset Valuation, Inc. 

Englewood, CO 

Donald Lindner 

Coastal Realty Consultants, LLC 

Savannah, GA 

Rick Lippert 

Inland Real Estate Inv. Corp 

Oak Brook, IL 



Carrington Lobban 

Diversified Property Specialists, Inc. 

Titusville, FL 

Bradley Lofgren 

Peregrine Realty Partners 


Lon Lundberg 

Thornton Oliver Keller, LLC 

Boise, ID 

Daniel Lupiani 

Lupiani & Associates 

River Forest, IL 

George Mann 

Collateral Evaluation Services 

Cincinnati, OH 

Steven Marshall 

Clayton, Roper, & Marshall, Inc. 

Altamonte Springs, FL 

Robert Martinek 

Ernst & Young 

Millstone Township, NJ 

Maureen Mastroieni 

Mastroieni & Associates 

Plymouth Meeting, PA 

Scott McHenry 

Cobiz Bank 

Denver, CO 

Gerald McKim 

Ace Real Estate Appraisal 

Garland, TX 

Pamela McKinney 

Byrne McKinney & Associates, Inc. 

Boston, MA 

James McNairy 

McNairy & Associates 

Greensboro, NC 

Michael McNamara 


Ft. Lauderdale, FL 

Thomas McReynolds 

McReynolds Von Trapp Daniel-Gentry 

St. Louis, MO 

Kevin McRoberts 

McRoberts & Associates 

Des Moines, IA 

Andrew McRoberts 

McRoberts & Company, Inc. 

Dallas, TX 

Suzanne Mellen 

HVS International 


John Meltzer 

Meltzer Properties LTD 

Ouray, CO 

James Meurer 

J.R. Meurer Company, Inc. 

Golden, CO 

Richard Michaud 

Michaud Company, Inc. 

New Haven, CT 

Charles Minor 

Roe Minor 

Ft. Lauderdale, FL 

Donald Mitchell 

M&R Real Estate Consultants, Inc. 

Amory, MS 

Peter Moegenburg 

Moegenburg Research, Inc. 

Brookfield, WI 

Michael Mohn 

Kennedy & Mohn, P.S. 

Bothell, WA 

James Moran 

Cushman & Wakefield of CT, Inc. 

Stamford, CT 

Garlan Morse 

Morris & Morse Company, Inc. 

Boston, MA 

Eric Moskau 

AXIA Valuation 

Mandeville, LA 

Michael Mullenix 

SunTrust Bank 

Orlando, FL 

Chuck Munson 

CJM Investment Property Advisors, Inc. 

Bellevue, WA 

Paul Muscente 

RPM Appraisal Services 

Fountain Valley, CA 

WWW.RERC.COM 65


Robert Nahigian 

Auburndale Realty Company 

Newton, MA 

Michael Naifeh 

MJN Enterprises, Inc. 

Tucson, AZ 

Bruce Nakaoka 

Tradewind Capital Group, Inc. 

Honolulu, HI 

Gene Nelsen 

Nelsen Appraisal Associates, Inc. 

Urbandale, IA 

Douglas Nelson 

Nelson Appraisal 

Bettendorf, IA 

Kenneth Newman 

Sweetser & Newman Realty Advisors 

Martinez, CA 

James Norby 

J.C. Norby & Associates 

Eau Claire, WI 

William Norton 

Norton Asset Management, Inc. 

Manchester, NH 

Dennis Noto 

Dennis Noto & Associates, Inc. 

Tampa, FL 

James Nowadnick 

James R. Nowadnick, Inc. 

Bainbridge Island, WA 

Mark O’Briant 

Henry S. Miller Consulting, LLC 

Dallas, TX 

Derek Olsen 

Capital Hotel Management 

Georgetown, MA 

John O’Neill 

Hospitality Advisory Services, LLC 

University Park, PA 

Joe Parker 

Appraisal Research Company Inc. 

Jackson, MS 

William Pastuszek 

Shepherd Valuation Associates 

Newton, MA 


Dan Paulus 

NAI Horizon Valuation Services 

Scottsdale, AZ 

Allan Payne 

LandAmerica Commercial 

Salt Lake City, UT 

Gary Peterson 

Peterson Appraisal Group, LTD 

Chicago, IL 

Richard Pettey 

Pettey & Assoc. R.E. Appraisers 

Decatur, AL 

Thomas Pike 

Thomas M. Pike & Assoc. 

Coto de Caza, CA 

C. Spencer Powell 

Powell Valuation, Inc. 

Salem, OR 

Steve Price 

Terra Property Analytics, LLC 

Seattle, WA 

Paul Quinn 

Lagreca & Quinn Real Estate Services 

Oreland, PA 

Wade Ragas 

Real Property Associates 

Metairie, LA 

Brian Reed 

The Furman Co. 

Greenville, SC 

Mark Reiling 

Towle Properties, Inc. 


Michael Rende 

Wieme, Rende & Associates, PC 

Troy, MI 

John Renken 

The Renken Company 

Claremont, CA 

Howard Richter 

Howard B. Richter & Associates, Inc. 

Deerfield, IL 

William Rielly 

Kelly-Rielly-Nell & Associates, Inc. 

Pittsburgh, PA 

Thomas Rife 

Rife & Co. Appraisers 

Bentonville, AR 

Richard Riley 

Real Property Services, Inc. 

Oklahoma City, OK 

R. Maurice Robinson 

Maurice Robinson & Associates 

El Segundo, CA 

James Rohrig 

Gerald A. Teel Co. 

Dallas, TX 

Fred Rolison 

The Ross Group, Inc. 

Northbrook, IL 

Joseph Rose 

PNC Bank 

Clayton, MO 

Rosalie Roszak 

Cal-Roz Associates 

Oro Valley, AZ 

Matthew Rufrano 

KTR Real Estate Advisors 

New York, NY 

Linda Rushing 

CB Richard Ellis, Inc. 

McLean, VA 

Abbas Saiidifar 

GSA - National Capital Region 

Washington, DC 

William Schoenecker 

Valuation Research Corporation 

Brookfield, WI 

William Schoenhut 

Star Valuation Services, LLC 

Berwyn, PA 

Robert Schwarz 

Harry L. Schwarz & Co. 

Dover, NJ 

Arthur Schwertz 

The Adalia Corporation 

Metairie, LA 

Karen Scott 

Scott Appraisal Co. 

Madison, WI 

WINTER 2011 | VOL 39 | NO 4 

Marcus Scott 

Asset Valuation Advisors, LLP 

Greenwood Village, CO 

P. Richard Seevers 

Seevers Jordan Ziegenmeyer 

Rocklin, CA 

Jan Sell 

Sell & Associates, Inc. 

Tempe, AZ 

E. Larry Sewell 

Sewell, Valentich, Tillis & Associates 

Sarasota, FL 

Timothy Sheehan 

T. W. Sheehan & Associates, LLC 

Cherry Hill, NJ 

John Sherman 

Sherman Appraisals 

Cheyenne, WY 

Steven Sherwood 

Valuation Plus, Inc. 

Mamaroneck, NY 

David Shlosh 

Citigroup 

New York, NY 

William Sirny 

North American Realty Advisors 

Milwaukee, WI 

Thomas Slack 

Thomas H. Slack & Co. 

Overland Park, KS 

Stuart Smith 

Millennium Real Estate Advisors 

Rockville, MD 

John Snell 

Snell Real Estate Evaluation Co. 


Peter Sockler 

Sockler Realty Services Group, Inc. 

Hightstown, NJ 

Michael Sorich 

Tropical Realty Advisors 

Orlando, FL 

Stephen Spraberry 

Ambrose Group 

Dallas, TX 


WINTER 2011 | VOL 39 | NO 4 

Henry Staley 

Colliers PKF Consulting 

Jacksonville, FL 

Sheila Stewart 

Stewart Advisors, Inc. 

Houston, TX 

Everett Strand 

Nicollet Partners 


James Stuart 

Stuart Appraisal Company, Inc. 

Freehold, NJ 

Michael Tarnow 

Northern Michigan R.E. Consultants 

Traverse City, MI 

Stewart Tedford 

Tedford & Associates 

Ft. Mill, SC 

John Thistlethwaite 

John M. Thistlethwaite Interests 

Fort Wayne, IN 

Mitchell Todd 

Beer-Wells-Todd Real Property Analysts 

Frisco, TX 

Timothy Tolson 


Addison, TX 

Stanley Tomkinson 

Bristol Realty Counselors, LLC 

Boulder, CO 

Ryan Toole 

Pyne Companies 

Lakewood, CO 

John Trabold 

Advanced Valuation Systems, Inc. 

Dallas, TX 

Wilburn Trotter 

O’Conner & Associates 

Houston, TX 

Bonnie Tuerke 

Benchmark Appraisals 

West Friendship, MD 

Jerry Turner 

Alvarez & Marsal 

Houston, TX 

Christopher Turner 

Keystone Mortgage Corporation 

El Segundo, CA 

Cary Ulman 

U.S. General Services Administration 

Chicago, IL 

Kelly Underwood 

Landmark Realty Analysts Inc. 

El Dorado Hills, CA 

Michael VanBuskirk 

Zimmer Real Estate Svcs ONCOR Int’l 


Alexis Victors 

Creative Real Estate Magazine 

Menlo Park, CA 

Kenneth Voss 

Kenneth Voss & Associates, LLC 

Atlanta, GA 

Garrett Waldner 

Washington Appraisal Services, Inc. 

Newcastle, WA 

Michael Waldron 

Waldron & Associates, Inc. 

Orange, CA 

David Walther 

Haginas & Chapman 

Houston, TX 

Jeff Warfield 

Warfield, Messner & Dodd Appr. 

Rochester, MN 

Todd Warner 

ValuStreet 

Phoenix, AZ 

Russell Wehner 

Russ Wehner Realty Co. 

Denver, CO 

John Weissler 

McNeel, Weissler & Associates, Inc. 

San Antonio, TX 

Peter Whiteley 

Lumina Services Inc. 

Edmonds, WA 

Donald Wieme 

Wieme, Rende & Assoc. 

Troy, MI 


Scott Williams 

CB Richards Ellis 

Newport Beach, CA 


Michael Williams 

Gerald Alcock Company, LLC 

Ann Arbor, MI 

Timothy Williams 

Williams Research, Inc. 

Eagle, ID 

Gary Winegar 

GriffisBlessing, Inc. 

Colorado Springs, CO 

Edgar Woolslair 

Woolslair & Associates, Inc. 

Davie, FL 

Bryan Younge 


Chicago, IL 

Michael Yovio-Young 

Yovino-Young, Inc. 

Berkeley, CA 

WWW.RERC.COM 67


RERC SCOPE AND METHODOLOGY 

Report Methodology 

The RERC Real Estate Investment Survey summarizes the required 

rates of return (ex-ante), property selection criteria, and investment 

outlook of a representative sample of large institutional investors and 

regional respondents throughout the United States. We survey both 

regional and institutional investors across the nation quarterly, questioning 

them on specific investment criteria in their local marketplace 

and trends across the country. The results are collected, averaged, and 

then displaced in our quarterly report. 

Published quarterly, the data provides timely insight into yields, return 

criteria, and risk adjustments that institutional investors rely on when 

making acquisitions. The survey data is used by investors, developers, 

appraisers, and financial institutions to monitor changing market conditions 

and to estimate financial performance. 

Findings reflect ex-ante required returns, or goals, of investors contemplating 

acquisitions. Thus, the RERC survey acts as a barometer of 

current market perceptions and confidence among the nation’s top 

professionals. 

Readers should also recognize that underwriting assumptions and 

practices, as well as underlying definitions of key terms, will vary 

slightly among survey respondents. Therefore, the greatest benefit 

to an investor who is interpreting survey results over time is an 

appreciation of the trends of various measuring devices and contemplation 

of the relationship of one measuring device to another. It is 

equally important to keep in mind that the investment survey reports 

required returns, not actual or historical performance. Performance 

data is available from other sources. 

RERC Definitions 

Basis Point Spread (bps): The difference between the yield (as 

defined) and an alternative investment with a comparable life (10-Year 

Treasuries, Moody’s Baa, Moody’s Aaa). 

Going-In (Overall) Capitalization Rate: Going-in capitalization rate 

is usually defined as the first year NOI (before capital items of tenant 

improvements and leasing commissions and debt service but after 

real estate taxes) divided by present value (or purchase price). 

Holding period: Average period of time that a property type is held 

for investment. 

Marketing Time: The period of time between the offering of a property 

for sale and securing a bona fide buyer. 

Pre-tax Yield (IRR, Discount Rate): The pre-tax yield is the rate of 

interest that discounts the pre-income tax cash flows received on 

an unleveraged investment back to a present value that is exactly 

equal to the amount of the original equity investment. (It is in effect a 


WINTER 2011 | VOL 39 | NO 4 

time-weighted average return on equity and, as used here, is synonymous 

with the term “yield.”) 

Renewal Probability: Percentage probability that is expected for an 

existing tenant to renew their lease after the expiration date. 

RERC Estimate vs. Survey Rates: In addition to the survey responses 

(survey rates) that RERC receives and analyzes each quarter, RERC also 

developed a model that incorporates unemployment, vacancy rates, 

and other financial and space market data. This modeled information, 

combined with the data received from the survey responses, is the 

RERC Estimate. 

RERC Portfolio Index (RPI): The RPI is RERC’s required return utilizing 

a weighted average based on the NCREIF Property Index. 

Reserves: Amount allocated for periodic replacement of long-lived 

building components during a property’s economic life. 

Terminal (Residual) Capitalization Rate: Terminal cap rate is the 

rate used to estimate resale or reversion value at the end of the holding 

period. Typically, it is the NOI in the year following the last year of 

the holding period that is capitalized. Similar to the going-in capitalization 

rate, but applied at the end of the holding investment period. 

Down Time: Number of months a space remains unleased at the 

expiration of a vacating tenant. 

Vacancy Loss: Percentage of total revenue uncollected due to space 

that remains vacant over a typical holding period. 

RERC Defined Regions 

West: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, 

Nevada, New Mexico, Oregon, Utah, Washington, Wyoming 

Midwest: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, 

Nebraska, North Dakota, Ohio, South Dakota, Wisconsin 

South: Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, 

Oklahoma, Tennessee, Texas 

East: Connecticut, Delaware, Kentucky, Maine, Maryland, Massachusetts, 

New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, 

Rhode Island, South Carolina, Vermont, Virginia, Washington 

D.C., West Virginia 

Note of Caution: It is imperative to exercise caution when interpreting 

required rates of return. RERC national return data shows a normal 

range of expected returns from all categories of investment-grade 

properties. Obviously, properties with greater investment risk will be 

at the high end of the scale. Rates obtained from this survey are not 

directly applicable to non-investment grade properties. 

We also note that investors generally strive to achieve a diversified 

portfolio; this motivation partially explains the variation in IRR 

requirements. Ranges and other data reflect the central tendencies 

of respondents, and unusually high and low responses have been 

eliminated. 


Addressing the industry’s investment needs since 1931. 

Measure the future. Today. 

Real Estate Research Corporation (RERC) developed its Real Estate Dynamic Benchmarking service 

to help real estate professionals more efficiently analyze and compare their property-related data 

with other critical information via an interactive Internet-based web reporting system. 

Customized around each client’s investment objectives and information requirements, the RERC 

Real Estate Dynamic Benchmarking service provides a variety of valuable market intelligence, 

including property, portfolio, and industry analyses and reporting capabilities, and metrics 

involving investment specifics, operational information, or detailed data requests. 

Features 

u Continuously updated with new data as it becomes available 

u Customizable to fit each client’s specific needs and includes the unique metrics that pertain to 

each client 

u Provides personalized solutions focusing on each client’s investment objectives, and reports 

data in a functional format for analysis 

Reporting Capabilities 

Real Estate Dynamic Benchmarking can produce the following specific reports for clients: 

u Portfolio Rate Analysis - Identify value trends, as well as individual properties that may be 

viewed as undervalued or overvalued. 

u Market Rate Analysis - Monitor individual asset valuation conclusions and check the consistency 

of rates of return across the entire portfolio. 

u Forecast of Quarterly Cash Flows - Quarterly income projections and forecasts of both income 

and capital components for the fund. 

u Performance and Attribution Analyses - Dynamic reports that benchmark and attribute a 

client’s fund performance relative to the industry (i.e., NCREIF) benchmark. 

For additional information, including a complete list of services provided by RERC, visit www.rerc.com. 

Contact 

Kenneth P. Riggs, Jr., 

CFA, CRE, FRICS, MAI, CCIM 

312.587.1900

Addressing the industry’s real estate 

investment needs since 1931. 

One of the first, 

and nearly 80 years later, 

we are still at the heart of the industry. 

Real Estate Research Corporation (RERC) continues to be one of the most committed 

commercial real estate research, valuation and consulting/advisory firms in the 

nation. For nearly 80 years, our real estate research, publications, market studies, 

property valuations, and investment and trends analysis have proven visionary. 

As an SEC-registered investment advisor, we use our knowledge and expertise in the real estate 

field to act as an independent fiduciary on behalf of our clients, including: 

Independent fiduciary services for a major financial services fund valued in excess of 

$9 billion. 

Fairness opinions on dozens of major acquisitions. 

Expert witness testimony regarding the valuation of billions of dollars of real estate. 

Valuation management and consulting for one of the nation’s largest pension funds, with 

oversight responsibilities on a real estate portfolio containing approximately $19 billion in 

gross asset value. 

For additional information, including a complete list of services provided by RERC, 

visit www.rerc.com. 

Fiduciary & Advisory Services 

Research & Publications 

Valuation Management & Oversight 

Management Information Systems 

Contact 

Kenneth P. Riggs, Jr., 

CFA®, CRE, FRICS, MAI, CCIM 

312.587.1900

WINTER 2011 | VOL 39 | NO 4 

REAL ESTATE RESEARCH CORPORATION 

It was in 1931 – with the Great Depression well underway – that Real Estate 

Research Corporation (RERC) was founded. Recognized for monitoring 

key sections of the economy that influenced the real estate industry, 

RERC worked with some of the nation’s most well-known industrialists 

and government agencies involved with post-Depression and World 

War II building. Today we offer clients the following services. 

Independent Fiduciary Services - As a registered investment adviser with the 

Securities and Exchange Commission (SEC) and with its nearly 80 years of research, 

valuation, and consulting experience, RERC is ideally suited to provide a variety of real 

estate-related services for institutions that manage real estate assets for others: 

n Independent fiduciary services for a 180-property investment manager with 

gross asset values exceeding $12 billion. 

n Fairness opinions on dozens of major acquisitions totaling over $1 billion. 

n Valuation consultant for the second largest pension fund in the U.S. 

Valuation and Consulting Services - As one of its core businesses, RERC performs 

property-level, independent valuations and analyses founded in thoroughly 

researched market fundamentals. RERC’s valuation and consulting services feature: 

n Valuation and consulting expertise with office buildings, industrial properties, 

retail properties, apartments, hotels and hospitality-related property, and multiuse 

properties in all major U.S. markets. 

n Appraisal management services to include assisting with third-party appraiser 

selection, developing an approved vendor list, and coordinating appraisal 

assignments and rotations. 

Management and Valuation Information Systems - RERC’s management information 

system (MIS) and valuation management system (VMS) offer completely customizable 

technology solutions that offer clients real-time data and reporting to help 

manage their portfolios, track and store important files, and maintain information 

security. RERC’s web-based systems manage a variety of equity portfolios valued in 

excess of $50 billion. 

Research & Publications 

n The RERC DataCenter is a proprietary database that provides current and historical 

survey-based and transaction-based investment criteria, property volume 

and pricing averages, and library and querying functions. 

n The RERC Real Estate Report has been published for nearly 40 years and is 

considered “the National Real Estate Authority.” The report is best known for its 

survey-based capitalization and pre-tax yield rates and expectations for 10 major 

property types on an institutional, regional, and metro basis. 



LEADERSHIP 

Kenneth P. Riggs, Jr. 

CFA, CRE, MAI, FRICS, CCIM 

President & CEO 

312.587.1900 

riggs@rerc.com 


Managing Director 

312.587.0351 

jmarling@rerc.com 

Del H. Kendall, CRE, MAI 


713.661.8880 

dkendall@rerc.com 

Donald A. Burns, CRE, MAI 


770.623.4922 

dburns@rerc.com 

Gregory P. Kendall, CRE, MAI 


251.648.2959 

gkendall@rerc.com 

Kent D. Steele, CRE, FRICS, MAI 


630.430.3865 

ksteele@rerc.com 

William L. Corbin, MAI 


310.734.1401 

wcorbin@rerc.com 

Steven W. Thompson, MAI 


713.661.8880 

sthompson@rerc.com 

Real Estate Research Corporation 

980 North Michigan Avenue 

Suite 1400 

Chicago, I L 60611 

312.587.1800 

www.rerc.com 

WWW.RERC.COM 71


The National Real Estate Authority 

WINTER 2011 | VOL 39 | NO 4

REAL ESTATE REPORT - REDI-net.com

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