REAL ESTATE REPORT - REDI-net.com
REAL ESTATE REPORT - REDI-net.com
REAL ESTATE REPORT - REDI-net.com
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WINTER 2011 | VOL 39 | NO 4<br />
© 2011 <strong>REAL</strong> <strong>ESTATE</strong> RESEARCH CORPORATION. ALL RIGHTS RESERVED.<br />
SNAPSHOT OF <strong>REAL</strong> <strong>ESTATE</strong> MARKET PERFORMANCE – 4Q 2010<br />
RERC © <strong>REAL</strong> <strong>ESTATE</strong> <strong>REPORT</strong> - THE NATIONAL <strong>REAL</strong> <strong>ESTATE</strong> AUTHORITY<br />
PERFORMANCE INDICATOR RECENT DATA IMPACT ON COMMERCIAL <strong>REAL</strong> <strong>ESTATE</strong><br />
Vacancy Rates<br />
Rental Rates<br />
(RERC’s surveyed rent growth<br />
expectations)<br />
Real Estate Returns<br />
Capitalization Rates<br />
12%<br />
10%<br />
8%<br />
6%<br />
4%<br />
2%<br />
0%<br />
Going-In Cap Rates vs. Unemployment<br />
4Q 1980<br />
4Q 1981<br />
4Q 1982<br />
4Q 1983<br />
Sources: RERC, BLS, NBER, 4Q 2010.<br />
Office: 17.6%<br />
Industrial: 14.3%<br />
Retail: 10.9%<br />
Apartment: 6.6%<br />
Hotel: 57.6% (occupancy)<br />
Office: 1.7% to 2.1%<br />
Industrial: 1.5% to 2.0%<br />
Retail: 1.9% to 2.0%<br />
Apartment: 3.1%<br />
Hotel: 3.4%<br />
RERC Required Returns:<br />
Office: 8.3% to 9.3%<br />
Industrial: 8.7% to 9.3%<br />
Retail: 8.6% to 8.9%<br />
Apartment: 8.0%<br />
Hotel: 10.5%<br />
RERC Required Cap Rates:<br />
Office: 6.7% to 7.7%<br />
Industrial: 7.5% to 8.6%<br />
Retail: 7.2% to 7.7%<br />
Apartment: 6.0%<br />
Hotel: 9.0%<br />
Unemployment<br />
Going-In Cap Rate<br />
Recession<br />
NCREIF Realized Returns:<br />
Office: 8.8% to 16.1%<br />
Industrial: 5.9% to 11.9%<br />
Retail: 9.9% to 14.5%<br />
Apartment: 18.2%<br />
Hotel: 9.0%<br />
NCREIF Implied Cap Rates:<br />
Office: 6.5% to 7.2%<br />
Industrial: 7.2% to 7.5%<br />
Retail: 7.0% to 7.7%<br />
Apartment: 5.9%<br />
Hotel: 6.6%<br />
4Q 1984<br />
4Q 1985<br />
4Q 1986<br />
4Q 1987<br />
4Q 1988<br />
4Q 1989<br />
4Q 1990<br />
4Q 1991<br />
4Q 1992<br />
4Q 1993<br />
4Q 1994<br />
4Q 1995<br />
4Q 1996<br />
4Q 1997<br />
4Q 1998<br />
4Q 1999<br />
4Q 2000<br />
4Q 2001<br />
4Q 2002<br />
4Q 2003<br />
4Q 2004<br />
4Q 2005<br />
4Q 2006<br />
4Q 2007<br />
4Q 2008<br />
4Q 2009<br />
4Q 2010<br />
12%<br />
10%<br />
8%<br />
6%<br />
4%<br />
2%<br />
0%<br />
According to Reis, Inc., vacancy for the office and retail sectors<br />
remained unchanged. In contrast, the apartment sector vacancy<br />
rate decreased. The industrial sector availability rate also fell during<br />
fourth quarter, according to CBRE-EA. Smith Travel Research<br />
reported that hotel occupancy increased during fourth quarter.<br />
RERC’s rental rate expectations were slightly higher for the office and<br />
retail sectors during fourth quarter 2010, while expected rents for<br />
the apartment and hotel sectors jumped significantly when <strong>com</strong>pared<br />
to third quarter 2010. The rental rate expectation for the industrial<br />
sector fell slightly from the previous quarter.<br />
RERC’s required returns declined slightly for all property sectors<br />
during fourth quarter 2010. In <strong>com</strong>parison, NCREIF’s realized returns<br />
significantly improved during fourth quarter, as all property sectors<br />
showed positive returns.<br />
RERC’s required going-in cap rates declined during fourth quarter<br />
for all property sectors, with the exception of the hotel sector, where<br />
rates remained unchanged. NCREIF’s implied cap rates declined for<br />
the office and industrial sectors, while the rate for the hotel sector<br />
increased during fourth quarter. The apartment and retail cap rates<br />
remained unchanged <strong>com</strong>pared to the previous quarter.<br />
WWW.RERC.COM 15
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