Vous êtes sur la page 1sur 6

Private US Real Estate

Overview With economic growth outpacing expectations early in 2011, commercial real estate fundamentals are finally moving in a positive direction across all sectors. Apartment Vacancy rates for the multifamily sector have declined180bps from their high in 4Q09, and all signs point to a continuation of these positive trends as a declining homeownership rate, strengthening job market, and demographic trends push demand. Industrial Demand for the sector turned positive in the second half of 2010, but record high vacancy rates will cause rents to remain flat until more space is absorbed. Office Demand for office space has seen a slow recovery, but the sector is expected to underperform the NPI in the near term, as steep declines in office-using employment will take years to recover. Retail Consumer confidence is rising again, but uncertainty remains as to the sustainability of consumer spending, and demand for retail space is expected to lag other sectors. Hotel Hotel ADRs and RevPAR were up 3.1% and 9% in 1Q11, respectively, as demand increases from both leisure and business travelers. Overall, the sector is expected to outperform the NPI in the near

April 2011

Market Outlook
The discussion of real estate fundamentals has centered on job creation over the past several years. Nearly 8 million jobs were lost during the recession, and the pace of new job creation has been slow. Only 1 million jobs were added during
Figure 1. NCREIF vs. Unemployment

2010, but the pace of job growth in 2011 is expected to increase, driven by strong corporate profits. Corporate profits have historically been a leading indicator of job creation, and reached record levels in 4Q10. Assuming this relationship hold true, the rise in corporate profits should benefit all commercial property types. As fundamentals improve across all sectors, the pace of investment has also improved, particularly for core assets in gateway cities. For core assets in many primary markets, acquisition cap rates have fallen to historic lows, and transaction volume is up nearly 50% from a year ago. In addition, availability of debt capital is increasing. New CMBS issuance is expected to reach $ 45 billion in 2011, and lenders are increasingly expanding into second-tier properties and markets, and competing on price and leverage. Looming over the real estate market, however, is the prospect of rising interest rates. Since the recession, rates have been kept artificially low by the Federal Reserve. Higher rates would raise the cost of debt for property owners and cause investors to demand higher acquisition yields, negatively impacting property values.

Figure 2. Total Returns (%)

term, as one-night leases allow the sector to more quickly capitalize on increases in demand.

NPI Apartments Office Industrial Retail Hotel NAREIT S&P 500 L/T US Gov CPI Inflation

1 Yr 16.0 21.7 14.3 12.2 15.4 13.5 25.0 15.6 -0.9 2.0

3 Yr -3.6 -2.6 -5.3 -4.8 -0.6 -7.0 2.6 2.4 4.2 1.5

5 Yr 3.5 2.9 3.6 2.6 4.4 2.7 1.7 2.6 6.3 2.3

10 Yr 7.5 7.5 6.5 6.9 10.2 5.4 11.5 3.3 6.4 2.4

20 Yr 7.2 8.6 6.4 7.5 7.8 8.9 11.4 8.7 8.3 2.6

L/T Risk* 9.4 9.1 11.5 9.5 8.6 12.8 22.6 18.4 9.1 1.4

Source: NCREIF, BlackRock, Moody's Economy.com, Ibbotson; all data through March 31 2011 *Long term average is 1991-2010

1 Real Estate Fundamentals

Apartment
Strengths The U.S. population continues to grow, requiring housing. In particular, the prime renting cohort (20-34 year old population) is expected to grow disproportionately over the next decade. In addition, more stringent lending requirements and persistent unemployment levels are pushing the homeownership rate downward, fostering apartment demand. Finally, the credit crisis and related economic distress have served to constrain new apartment construction, just as demand intensifies. Weaknesses Record low mortgage rates and improved affordability of housing could detract from apartment demand as the housing market stabilizes in the wake of the credit crisis. In addition, apartment cap rates are currently the lowest of the five sectors, indicating that strong growth is already being priced into transactions. An elevated single family home shadow supply could also remain a threat to apartment occupancy levels. Outlook Near-universal consensus amongst analysts and investors seems to be that the 2011 multifamily sector outlook is the strongest of the five sectors, owing to homeownership levels declining towards long-run averages, demographic trends that will foster demand for rental housing, and severely constrained new apartment construction levels.

Figure 1. NCREIF Apartment Sector Returns

Figure 2. U.S. Homeownership Rate

Figure 3. Apartment Fundamentals


Row 1 2 3 4 5 6 7 8 9 10 11 12 Strengths Vacancy rates declining Echo boomers are peaking Household growth is picking up Job growth resuming Homeownership declining Mortgage standards tightening Rent growth resuming Limited supply Weaknesses Home prices declining Record low mortgage rates Lowest cap rates of any sector Single family home shadow supply Vacancy rate (%) 20-34 year old population (4Q/4Q change, %) US households (4Q/4Q change, %) Employment (4Q/4Q change, %) Homeownership rate (households,%) Banks tightening standards (annual average, %) Effective rent (YoY change, %) Completions (% of inventory) Median single family home price (4Q/4Q change, %) 30 year mortgage rate (annual average) Apartment average cap rate (%) Single family homeowner vacancy rate (%) 2007 5.8 1 1 0.9 67.8 27 2.2 1.1 -5.8 6.2 6.2 2.5 2008 6.8 1.2 0.9 -2.1 67.6 69 -0.7 1.3 -12.2 5.8 6.5 2.5 2009 8.2 1.4 0.8 -4 67.3 36 -5.9 1.5 -5.4 4.7 7 2.3 2010 7.2 1.6 0.9 0.7 66.4 25 4.3 1 0.3 4.3 6.8 2.1 2011* 6.6 1.4 1.2 1.3 65.8 5 5 0.6 -5.4 4.6 2012* 6.2 1.2 1.4 2.6 65.6 -25 4.6 0.8 1.8 6.3 L/T average** 5.4 0.1 1.2 1 66.5 7.4 1.5 1.5 3.2 6.7 6.9 1.6

Source: UBS, CRE Finance Council, Reis as of September 2010, Real Capital Analytics as of October 2010, Moody's Analytics as of December 2010 *Forecas t **Long-term average is 1990-2009

2 Real Estate Fundamentals

Industrial
Strengths The industrial sector will benefit from severely constrained new supply, as completion levels are expected to be lower in 2010 2012 than at any year in the past two decades. In addition, growth in both exports and imports is responding favorably to the global economic recovery, fostering demand for industrial space. Finally, industrial production and capacity utilization are trending upward with the economic recovery, and are expected to see continued growth in 2011. Weaknesses Any benefit from supply constraints will be largely offset by record high availability rates, which are expected to remain elevated through 2012. This abundance of excess space will serve to further soften the sectors already-weak rent growth over the next several years. In addition, industrial net operating incomes fell further than any property type during the recession and are forecast to recover slowly. Outlook General consensus amongst analysts seems to be that the industrial market will continue to bump along the bottom in the near term in spite of improving global trade conditions, with any near-term rent growth dampened by high availability rates.

Figure 4. NCREIF Industrial Sector Returns

Figure 5. Industrial Production and Capacity Utilization

Figure 6. Industrial Fundamentals


Row 1 2 3 4 5 6 7 8 9 10 11 12 13 Strengths Limited supply Improving absorption Improving global trade Strong export growth Strong import growth Production growth resuming Highest cap rates of all sectors Weaknesses Record high availability Weak rent growth Weak employment growth Weak employment growth Steep declines in industrial NOI Contribution below L/T average Change in completions (%) Change in net absorption (%) Global GDP (4Q/4Q change, %) Real exports (4Q/4Q change, %) Real imports (4Q/4Q change,%) Industrial production index (2007 = 100) Industrial cap rate (%) Availability Rate Change to rent index (%) Industrial employment (4Q/4Q change, %) Transp. And warehouse employment (4Q/4Q change, %) Change in Industrial NOI (%) Industrial contribution to GDP growth (%) 2007 1.4 1.3 15.2 10.1 0.7 100 79 9.6 3.6 -0.5 1 5.4 -0.2 2008 1.5 -0.5 2.7 -2.9 -6 93 71 11.4 0.2 -4.2 -2.7 -1.4 -0.9 2009 0.6 -1.9 -3.9 -0.1 -7.2 89 69 13.9 -10.3 -8.6 -5.8 -8.1 0.5 2010 0.1 0 9.9 9.2 15.9 94 73 14 -4.3 1.3 0.8 -3 1.6 2011* 0.3 1.1 4.3 9.9 8.3 99 76 13.1 0 0.6 0.8 2012* 0.5 1.8 6.2 13.6 10.1 104 79 11.8 11.8 1.1 1.1 L/T average** 1.5 1.1 5.9 5.3 5.6 82 78 95 9.7 -1 1.2 0.9 1.9

Source: UBS, Federa l Res erve, CBRE Econometri c Advi s ors , NCREIF, Rea l Ca pi tal Ana l ytics a s of October 2010, Moody's Ana l ytics a s of December 2010 *Foreca s t **Long-term a vera ge i s 1990-2009

3 Real Estate Fundamentals

Office
Strengths Record low completion levels are expected to continue through 2012, and office employment is forecast to improve in the near term, fostering demand. In addition, recent corporate profit growth has been significant, which should serve to further bolster demand. Weaknesses Any potential benefits for office sector investors as a result of limited supply levels will be offset by record-high vacancies. Sector vacancies are not expected to return to pre-recession levels for several years, dampening rent growth for some time. In addition, significant declines in office-using employment during the financial crisis will take years to recover, further suppressing demand in the near term. Outlook The office sector is generally expected to underperform the NPI in 2011, with elevated vacancy levels and weak demand positioning the sector for continued below-average net absorption. Class B and C assets and those in suburban markets are expected to struggle the most, as tenants capitalize on the market dislocation by trading up to better space or demanding rent concessions.

Figure 7. NCREIF Office Sector Returns

Figure 8. Employment Growth: Office vs. Total

Figure 9. Office Fundamentals


Row 1 2 3 4 5 6 7 8 9 10 11 Strengths Record low completions Office employment stabilizing Strong corporate profit growth Business confidence improving Productivity increasing Increasing hours worked Weaknesses Aggressive pricing for CBD assets Office jobs recovering slowly Elevated vacancy rates Weak net absorption Severe rent declines Change in completions (%) Office employment (4Q/4Q change, %) Corporate profits (4Q/4Q change, %) Moody's survey of business confidence (index) Change in output per hour Change in private employment avg hours worked CBD closed cap rates Office employment (millions of jobs) Vacancy rate (%) Net absorption (change in %) Rent index (change, %) 2007 2 0.6 -8.1 20.2 2.6 -0.1 5.8 29.3 12.6 1.7 9.8 2008 2.3 -3.3 -31.9 1.6 -0.4 0.4 6.4 28.3 14 0.6 3.7 2009 1.5 -5.1 42.5 -8.3 6.2 0.3 7.9 26.9 16.3 -1.1 -12.2 2010 0.6 1 18 20 1.6 0.2 6.6 27.1 16.7 0.1 -1.5 2011* 0.2 1.6 1.9 0.7 0.3 27.6 16.4 0.5 1.1 2012* 0.2 3.4 17 1.5 0.2 28.5 15.3 1.3 4.3 L/T average** 1.7 1.5 6.2 2.3 0.1 7.4 25.3 14.1 1.6 1.6

Source: UBS, Bureau of Labor Statistics, CBRE Econometric Advisors, NCREIF, Real Capital Analytics, Moody's Analytics as of December 2010 *Forecast **Long-term average is 1990-2009

4 Real Estate Fundamentals

Retail
Strengths Record low completion levels throughout the recession have helped the sector weather the downturn better than expected. In addition, slowly improving consumer confidence levels are reflected in stronger retail sales and discretionary spending trends. Weaknesses Despite recent improvements in consumer confidence, elevated unemployment and saving levels are expected to restrain retail spending in the near term. Also, retail vacancy rates rose more than any other sector during the recession, leaving relatively more slack to absorb before rent growth can resume. These vacancy levels are not expected to return to pre-recession lows for several years. Outlook Overall, the retail sector is expected to underperform the NPI in the near term, as elevated unemployment levels are expected to dampen consumer confidence, while high vacancies will offset lowered construction levels. Malls and retail stores located in central business districts of primary markets are expected to significantly outperform those in suburban areas, as retailers take advantage of market dislocation to relocate stores in better areas.

Figure 10. NCREIF Retail Sector Returns

Figure 12. U.S. Homeownership Rate

Figure 13. Retail Fundamentals


Row 1 2 3 4 5 6 7 8 9 10 11 12 Strengths Low supply levels Consumer confidence rising Personal consumption rising Retail sales rising Discretionary spending rising Personal incomes improving Weaknesses High unemployment Consumer confidence still low High saving rate Weak net absorption Effective rents still falling High vacancy rates Change in completions (%) Consumer confidence index, annual avg (1985 = 100) Real PCE (4Q/4Q change, %) Retail Sales (4Q/4Q change, %) Durable goods (4Q/4Q change, %) Personal income (4Q/4Q change, %) Unemployment rate, year-end, % Consumer confidence index, annual avg (1985 = 100) Saving rate (%) Change in net absorption Change in effective rent Vacancy rate (%) 2007 1.7 103 1.8 4.3 3.9 5.5 4.8 103 2 1.3 2.5 7.2 2008 1.3 58 -1.9 -8.5 -12.3 1.8 7 58 4.1 -0.3 -1.1 8.8 2009 0.7 45 0.2 1.8 4.8 -0.9 10 45 5.9 -1 -3.7 10.4 2010 0.8 53 2.7 5.3 8.9 3.7 9.8 53 5.8 -1.3 -1.6 10.9 2011* 0.7 68 3.9 5.8 4.1 6.5 10 68 6.2 0.2 -0.4 11.3 2012* 1 82 3.3 7.1 6 6.7 8.4 82 6.6 1 0.7 11.2 L/T average** 1.9 95 2.9 4.3 5 5.2 5.7 95 4.3 1.8 1.9 8

Source: UBS, Reis, CBRE Econometric Advisors, Moody's Analytics as of December 2010 *Forecast **Long-term average is 1990-2009

5 Real Estate Fundamentals

Hotel
Strengths Hotel performance is more responsive than any other sector to changing economic conditions, owing to one-night leases that allow owners to quickly adjust rates to capitalize on changes in demand. As such, the sector will see more rapid improvements from the global economic recovery and associated increases in business travel, tourism, and leisure demand. This trend has been evident through recent improvements in occupancy levels and RevPAR. Weaknesses Uncertainty remains, however, as the sector is the most susceptible to a setback in the global economic recovery. Despite recent improvements, both RevPAR and ADR will take several years to recover to pre-recession levels. In addition, acquisition prices for hotels located in central business districts have now largely recovered their prerecession levels, leaving fewer opportunities to acquire high quality assets at distressed prices. Outlook Overall, the hotel sub-index is expected to outperform the NPI in the near term, driven by a strengthening economic recovery and resulting improvements in sector fundamentals.

Figure 14. NCREIF Hotel Sector Returns

Figure 15. IFS World GDP

Figure 16. Hotel Fundamentals


Row 1 2 3 4 5 6 7 8 9 10 11 12 Strengths RevPAR growth resuming Occupancy improving Room demand improving New construction has abated US travel expenditures improving Leisure demand trending up Global economy improving Int'l travel to US improving Weaknesses RevPAR will take years to recover ADR will take years to recover Class A assets priced aggressively Highest CMBS default rates RevPAR (change, %) Occupancy rate (%) Change in demand (%) change in hotel supply (%) US Traval Association (change, %) Hospitality employment (4Q/4Q change, %) Global GDP (4Q/4Q change, %) Us Dept. of Commerce, international visitors (change, %) RevPAR (USD) Hotel ADR (USD) Sale price per room CMSA, percent of loans 60+ days delinquent 2007 6.5 67.3 0.4 1 6.1 2.1 15.2 9.8 83 124 170 0.3 2008 -1.5 64.6 -1.9 2.2 4.7 -1.7 2.7 3.4 82 127 154 1 2009 -18.8 58.8 -6.1 3.1 -8.8 -2.1 -3.9 -5 67 113 102 9.6 2010 6.4 62.6 8.7 2.1 7.3 1.7 9.9 9.1 71 113 191 2011* 4.2 63.4 2.1 0.8 5.2 2.6 4.3 5.7 74 117 2012* 4.6 64.8 2.9 0.7 5 3.7 6.2 5.7 77 119 L/T average** 2.6 65.9 0.9 2.1 n/a 1.9 5.9 2.2 59.7 90.7 157 4.1

Source: UBS, Reis, CBRE Econometric Advisors, Bureau of Transportation Statistics, NCREIF, Bureau of Labor Statistics, Moody's Analytics, US Department of Commerce, US Travel Association *Forecast **Long-term average is 1990-2009

6 Real Estate Fundamentals

Vous aimerez peut-être aussi