REAL ESTATE REPORT - REDI-net.com

More documents

Recommendations

Info

RERC © REAL ESTATE REPORT - THE NATIONAL REAL ESTATE AUTHORITY PROPERTY TYPES MARKET RECAP ALL PROPERTY TYPE AVERAGE 18 WWW.RERC.COM 12% 10% 8% 6% Historical IRRs, Going-In Cap Rates, and Terminal Cap Rates 2000 - 2010 4Q 2000 4Q 2001 Source: RERC, 4Q 2010. 4Q 2002 4Q 2003 4Q 2004 4Q 2005 4Q 2006 4Q 2007 Terminal Cap Rate Going-In Cap Rate Pre-Tax Yield 4Q 2008 4Q 2009 4Q 2010 8% 6% WINTER 2011 | VOL 39 | NO 4 12% 10% © 2011 REAL ESTATE RESEARCH CORPORATION. ALL RIGHTS RESERVED.
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% *RAR = Risk-Adjusted Returns. Sources: RERC, NCREIF. © 2011 REAL ESTATE RESEARCH CORPORATION. ALL RIGHTS RESERVED. RERC © REAL ESTATE REPORT - THE NATIONAL REAL ESTATE AUTHORITY 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 Sources: RERC, NCREIF, 4Q 2010. *Difference between NCREIF realized and RERC required returns. CBD Investment Criteria Trends 12% 10% 8% 6% 4% 4Q 2000 4Q 2001 Source: RERC, 4Q 2010. 4Q 2002 4Q 2003 4Q 2004 4Q 2005 Suburban Investment Criteria Trends 12% 10% 8% 6% 4Q 2000 4Q 2001 Source: RERC, 4Q 2010. 4Q 2002 4Q 2003 4Q 2004 4Q 2005 4Q 2006 4Q 2006 4Q 2007 4Q 2007 4Q 2008 4Q 2009 Terminal Cap Rate Going-In Cap Rate Pre-Tax Yield 4Q 2008 4Q 2009 Terminal Cap Rate Going-In Cap Rate 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
Page 1 and 2: REAL ESTATE REPORT Defying Expectat
Page 3 and 4: REAL ESTATE REPORT T H E N AT I O N
Page 5 and 6: WINTER 2011 | VOL 39 | NO 4 RERC’
Page 7 and 8: WINTER 2011 | VOL 39 | NO 4 number.
Page 9 and 10: WINTER 2011 | VOL 39 | NO 4 HOW IS
Page 11 and 12: WINTER 2011 | VOL 39 | NO 4 the ind
Page 13 and 14: WINTER 2011 | VOL 39 | NO 4 Pre-tax
Page 15 and 16: WINTER 2011 | VOL 39 | NO 4 SUMMARY
Page 17 and 18: WINTER 2011 | VOL 39 | NO 4 RISK-AD
Page 19 and 20: WINTER 2011 | VOL 39 | NO 4 © 2011
Page 21: WINTER 2011 | VOL 39 | NO 4 Consume
Page 25 and 26: WINTER 2011 | VOL 39 | NO 4 RETAIL
Page 27 and 28: WINTER 2011 | VOL 39 | NO 4 HOTEL n
Page 31 and 32: WINTER 2011 | VOL 39 | NO 4 West In
Page 33 and 34: WINTER 2011 | VOL 39 | NO 4 RERC RE
Page 35 and 36: WINTER 2011 | VOL 39 | NO 4 RERC PA
Page 37 and 38: WINTER 2011 | VOL 39 | NO 4 will be
Page 39 and 40: WINTER 2011 | VOL 39 | NO 4 Owners
Page 41 and 42: WINTER 2011 | VOL 39 | NO 4 Atlanta
Page 67 and 68: WINTER 2011 | VOL 39 | NO 4 REGIONA
Page 69 and 70: WINTER 2011 | VOL 39 | NO 4 Daniel
Page 71 and 72: WINTER 2011 | VOL 39 | NO 4 Henry S
Page 73 and 74:
Addressing the industry’s investm
Page 75 and 76:
WINTER 2011 | VOL 39 | NO 4 REAL ES
show all

REAL ESTATE REPORT - REDI-net.com

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?