NEW YORK--(BUSINESS WIRE)--Integra
Realty Resources, Inc. (Integra) just released its 2011
IRR-Viewpoint, the industry's annual compendium of real estate
valuation, trends and forecasts. This year's report provides thorough
data and analysis on local, national and international market conditions
for nine industry sectors, including office, retail, multifamily,
industrial, lodging, and green building properties throughout the United
States, Mexico, Japan and Canada.
"Certain real estate markets and sectors began to stabilize in the past
year," says Jeffrey Rogers, FRICS, JD, MBA, COO and President of
Integra. "We attribute this stabilization to a number of factors,
including the deleveraging of the market, with the notable exception of
the multifamily sector, and the bifurcation of real estate markets.
Economic forecasts predict that the U.S. economy should slowly begin
adding jobs towards the end of 2011, which will play a major role in
real estate. While the level of growth expected is modest/minimal, we
anticipate slight improvements in certain corresponding sectors, such as
vacancy rates for office, industrial and retail properties in the coming
year."
Key findings of this year's IRR-Viewpoint include:
Office
Continued high unemployment rates, particularly in cities such as
Detroit and Las Vegas, are suppressing recovery in the office sector.
In locales where major employers continue to downsize their workforce,
vacancy rates continue to increase and rents fall as supply
overshadows demand. The CBD office vacancy rate increased from 13.42%
at the end of 2009 to a current rate of 14.55%. Similarly, suburban
office vacancies have increased from 15.45% to 17.10%.
Due to limited construction activity, office inventories have remained
relatively unchanged from last year. Furthermore, development in the
pipeline remains low. For both CBD and suburban markets, construction
activity for the next three years is expected to decrease
approximately 10%. Partly due to/related to these trends, the
projected years required to balance office supply and demand decreased
over last year, falling from 6.25 to 5.66 for CBD markets and 5.96 to
5.28 for suburban markets.
Cities with diversified industries were less impacted by the downturn
in the economy than were cities that relied heavily on financial
services and real estate sectors. In order to combat rising vacancy
rates, many markets have turned to offering increased rent abatements
and tenant improvement allowances.
http://www.youtube.com/watch?v=QZQN0RPZCLU
Retail
Cities with high unemployment such as Detroit, Sacramento, and
Syracuse have suffered the largest setbacks in the retail market, with
steadily climbing vacancy rates since 2008. Those markets have seen
vacancy increases of 6.09%, 7.32%, and 4.62% respectively in the past
two years. The markets with the highest retail vacancy rates in 2010
are Houston at 16.17%, Dayton at 17.57%, and Providence at 20%. At the
other end of the spectrum, some locales have seen a drop in vacancy
rates, including Austin, Greenville, and San Francisco.
Many survey participants indicated that stabilized, well anchored
properties with a good tenant mix were still in demand despite an
influx in supply of retail property as a whole.
The falling rents, increased vacancy rates, and an inability to obtain
capital that has been associated with the economic downturn have
effectively shut down many new retail construction projects.
Multifamily
The apartment sector was the only sector to see expansion during 2010
and is usually the first sector to rebound after a recession. 81%
percent of markets are in the recovery or expansion phase compared to
only 9% last year.
The average apartment vacancy rates decreased from 7.63% to 5.05%. At
13.87%, Houston posted the highest apartment vacancy, while New York
reported a vacancy of just 3.30%, the lowest of all surveyed markets.
In conjunction with decreased vacancy, the estimated years required to
balance current supply and demand fell from 2.74 to 1.83.
While higher quality properties continue to enjoy strong occupancies
and stable rent, many older Class B properties are struggling to
compete. As single-family residences are added to the market, Integra
expects further pressure to be placed on lower end multifamily
properties.
Construction forecasts are up 6% this year. With construction and
absorption expectations improving, of the four major markets (office,
multifamily, industrial, and retail), the apartment sector is showing
the strongest signs of recovery.
Industrial
Vacancy rates continued to climb from 8.57% in 2008, to 10.17% in
2009, to 10.85% in 2010. Notably, projected annual absorption for
2011-2013 reversed its freefall of 41%, from 86 million square feet
per year in 2009 to 51 million square feet per year in 2010, by
increasing to 59 million square feet per year in 2011.
Planned development has seen a decrease. Last year, 197.1 million
square feet were in the pipeline as compared to this year's 184.3
million square feet.
2010 survey participants anticipate that the number of years required
to balance the industrial market is slightly less than 4.5 years. This
represents a marginal improvement over past projections. Some Integra
locations, such as Boise, are indicating that the industrial sector is
the strongest of the three non-residential markets. The industrial
markets which fared the best over the past couple of years are those
that entered the economic slowdown with little current speculative
construction. Many markets report the first submarkets to show signs
of recovery include well-located, high-quality properties.
Lodging
As of 3Q 2010, the market appears more than ready to recognize the
inherent value of quality full service properties and well-known
brands. Lodging Econometrics reports that REITs have spent $1.87
billion on 3Q 2010 acquisitions, over ten times the amount spent by
REITS for the same period in 2009.
Occupancy is forecasted to increase by 4.4% in 2010, reaching a level
of 57.1% as compared to the 61% average occupancy from 1999 to 2009.
Occupancy is expected to increase another 1.4% by 2011, reaching
57.9%. Average daily rate (ADR) is projected to end 2010 at $97.74, up
0.5% from the same time last year. ADR is expected to further increase
to $101.55 for 2011.
These dramatic changes in occupancy and ADR, combined with scarce
construction financing and a sparse development pipeline suggest the
favored brands and locations of this sector will be able to regain
footing quickly. In the secondary and tertiary markets, however, and
where the demand drivers remain distressed, solid footing may remain
elusive for the foreseeable future.
Green Building
The growing trend toward sustainable construction and retrofitting,
otherwise known as the "greening" of commercial real estate, is linked
to social pressures and expectations from both the public and the
younger workforce, as well as government agencies. According to
figures from various studies, including the U.S. Environmental
Protection Agency (EPA) and U.S. Green Building Council (USGBC),
Denver, Colorado has more green building activity per capita than any
other major city in the nation. Other cities in which significant
green building and retrofitting are occurring are San Francisco,
Houston, Minneapolis/St. Paul, Washington D.C., and Chicago. Even
traditionally non-green cities are getting into the action.
The primary variable in which green buildings excel over non-green
buildings is in vacancy and tenant retention. Even without an increase
in lease rates, higher leasing velocity, higher occupancy/tenant
retention, and lower operating costs can demonstrate why green
buildings have a lower risk profile and are ultimately a more stable
investment relative to competing non-green buildings. Market demand,
current construction projects, and societal trends in the green real
estate market are profoundly affecting current purchase and leasing
activity.
"It is no secret that the last year has been challenging for the
commercial real estate industry," said Anthony S. Graziano, MAI, CRE,
FRICS, Chairman of the Board. "Most areas of the real estate and
financing industries are still struggling to recover from the recession.
The high unemployment rate and difficulty obtaining financing will
continue to limit the ability of the industry to fully recover for the
foreseeable future. On the other hand, there are signs of life in
commercial real estate. Transaction volumes are up, and cap rates
reported by our offices are slightly lower. Integra professionals are
reporting a segmenting of the markets as a major theme as we look toward
2011. The best Class A properties are getting the tenants, buyers and
financing, but much of the industry is still struggling in these areas."
The full 2011 IRR-Viewpoint report includes 60 market breakdowns and
in-depth analyses for Japan, Canada, Mexico, and the seniors housing,
green building, self-storage and gaming sectors. Additional resources
included are documented methodology, 25 graphs and 17 tables, is
available for free download on Integra's home page: www.irr.com.
ABOUT INTEGRA REALTY RESOURCES, INC. (IRR)
With corporate offices in New York City, Integra Realty Resources, Inc.
is an independent real estate valuation and consulting firm that offers
local expertise on a national scale with 60 offices and 850 credentialed
consultants and staff located across the United States and in Mexico.
Founded in 1999, the Firm specializes in real estate appraisals,
feasibility studies, market studies, expert testimony, and related
property consulting services. Many of the nation's largest and most
prestigious financial institutions, developers, corporations, law firms,
and government agencies are among its clients. Because of the high
quality of its professionals, integrated systems, and state-of-the-art
technology IRR is capable of handling a wide array of assignments and
producing high quality, meaningful results on a timely basis. Please
call Integra for your next assignment or visit us at www.IRR.com.
http://www.businesswire.com/news/home/20110110005129/en/2011-Real-Estate-Trends-Exposed-IRR-Viewpoint-Integra
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