ccim institute 2q14 quarterly market trends
DESCRIPTION
Commercial real estate market data and transaction trends from the CCIM Institute and National Association of Realtors.TRANSCRIPT
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 2
Headline Line HEADLINE
Vacancy Rate34%
2Q • 14
Dear CCIM Institute members,
Welcome to the second-quarter 2014 edition of CCIM Institute’s Quarterly
Market Trends. The report provides timely insight into major commercial real
estate indicators for core income-producing properties. It is produced by the
National Association of Realtors® in conjunction with and for members of the
CCIM Institute, the premier provider of commercial real estate education.
The second-quarter 2014 report features commentary from Lawrence Yun, Ph.D.,
NAR chief economist, and George Ratiu, director of NAR’s quantitative and
commercial research. It also includes market analysis and data collected from
CCIM members that illustrate regional economic and transactional trends across the U.S. I’d like to thank
the CCIM members who participated in the survey and shared insights on their local markets.
I hope that the information provided in CCIM’s Quarterly Market Trends report provides both economic and
commercial real estate market information that will assist you in your business strategies in 2014 and beyond.
Help CCIM make this report even more valuable by participating in the next QMT survey. Watch your email
for details.
Sincerely,
Karl Landreneau, CCIM
2014 CCIM Institute President
Quarterly Market TRENDS
July 2014 FOREWORD
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 3
2Q • 14
Headline Line HEADLINE
CCIM Transaction Survey Highlights 4
Commercial Property Sector Analysis 5
Commercial Real Estate Market Update 10
Commercial Real Estate Forecast 13
U S Economic Overview 14
U S Metropolitan Economic Outlook 21
Sponsors 24
Contributors 25
Table of CONTENTS
Vacancy Rate34%
Vacancy Rate34%
Vacancy Rate34%
Quarterly Market TRENDS
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 4
2Q • 14Quarterly Market Trends
CCIM Transaction Survey HIGHLIGHTS
Year-over-year deal flow saw the BIGGEST GAINS in the industrial sector, with 70% of CCIM respondents reporting an increase in transactions in 2Q14.
According to CCIM members, the multifamily sector’s investment conditions were the MOST FAVOR-ABLE in 2Q14, followed by industrial, retail, hospitality, and office.
INVESTMENT CONDITIONS: MULTIFAMILY RANKS HIGHEST IN 2Q14
AVERAGE RATING SCALE: 1 (LOW) TO 5 (HIGH)
GREATEST DEAL FLOW INCREASE: INDUSTRIAL
2Q14 YOY % BY SECTOR
CREDIT CONDITIONS
2Q14 YOY % BY SECTOR
Current credit conditions are expected to IMPROVE, according to 60% of CCIM respondents, while 35% consider the current tightness to be the new normal.
With rising deals and investor confidence, CCIM Institute members provided insights into their markets in a May/June 2014 survey.
OFFICE MULTI- FAMILY
INDUS-TRIAL
RETAIL HOSPI-TALITY
INDUS-TRIAL
RETAIL OFFICE HOTEL MULTI-FAMILY
EXPECT CREDIT CONDITIONS TO
IMPROVE
CONSIDER THE CURRENT TIGHT-NESS TO BE THE NEW NORMAL
EXPECT CREDIT CONDITIONS TO TIGHTEN
FURTHER.
About 54% OF CCIM MEMBERS INDICATED MORE DEALS IN 2Q14 compared to same period the year before.
66% OF RESPONDENTS INDICATED MORE INQUIRIES RELATED TO BUYING, while 10% said they received more inquiries from clients who wanted to sell assets.
Property prices continued to firm in 2Q14 with 33% of respondents reporting prices similar to last year, while 49% REPORTED HIGHER PRICES.
The CAP RATE GAP BETWEEN BUYERS AND SELLERS NARROWED IN 2Q14, according to 45% of CCIM members. Forty-three percent of
respondents said the cap rate gap remained flat.
Rents increased, with 55% OF CCIMs INDICATING HIGHER RENTS YOY; 28% of respondents indicated similar rents YOY.
Cap rates compressed slightly during 2Q14, with 54% OF RESPONDENTS INDICATING RATES REMAINED THE SAME AS LAST YEAR; 38% dealt with lower rates.
About 46% OF RESPONDENTS EXPECT RENTS AND PRICES TO MOVE TOGETHER in the next few years. Twenty-two percent said rent growth will outpace price growth,
while 32% said prices are expected to outperform rents.
48% OF CCIM RESPONDENTS EXPECT TREASURY YIELDS TO REMAIN ABOUT THE SAME; 21% of respondents indicated that Treasury yields will rise, but will only mini-mally impact cap rates due to the current spreads; 10% of CCIMs said Treasury yield increases will push up cap rates.
An average of 35% OF RESPONDENTS INDICATED MEANINGFUL IMPROVE-MENT IN CREDIT AVAILABILITY compared to last year; 55% reported
marginal improvement.
5
4
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10
0
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QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 5
2Q • 14Quarterly Market Trends
Commercial Property SECTOR ANALYSIS
NATIONAL OFFICE MARKETS
Office trends moderated in the second quarter for CCIM members:
l Deal flow was higher for 50 percent of CCIM members (compared with 55 percent in 2Q13). l Property prices were higher for 43 percent of CCIM, while 34 percent found them to be flat. l Cap rates were even for 69 percent of CCIMs, and lower for 24 percent of respondents. l Rental income was flat for 28 percent of respondents; higher for 59 percent of CCIMs. l 54 percent of respondents had more serious buying inquiries (compared with 51 in 2Q13).
FINANCE OUTLOOK / Office Properties %
The current tight conditions will be the new normal
Credit will become even more difficult to access over time
Credit will be more readily accessible over time
Source: CCIM Institute, National Association of Realtors®
FINANCE TRENDS (YoY) / Office Properties %
Credit availability is just as tight as last year with no improvement
Credit availability has turned for the worse and is even tighter than last year
Credit availability has only marginally improved
Credit availability has meaningfully improved from last year
Source: CCIM Institute, National Association of Realtors®
0 20 40 60 800 10 20 30 40 50 60
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 6
2Q • 14Quarterly Market Trends
Commercial Property SECTOR ANALYSIS
NATIONAL INDUSTRIAL MARKETS
The industrial landscape recorded improvements during the second quarter:
l Industrial deal flow was higher year-over-year for 70 percent of respondents (vs. 60 percent in 2Q13). l Prices were even for 40 percent of CCIMs, and higher for 52 percent of respondents. l Cap rates were flat for 60 percent, while 32 percent reported lower cap rates. l 62 percent of CCIM members reported higher rents. l CCIM members reported 82 percent more buying inquiries during the quarter.
FINANCE OUTLOOK / Industrial Properties %
The current tight conditions will be the new normal
Credit will become even more difficult to access over time
Credit will be more readily accessible over time
Source: CCIM Institute, National Association of Realtors®
FINANCE TRENDS (YoY) / Industrial Properties %
Credit availability is just as tight as last year with no improvement
Credit availability has turned for the worse and is even tighter than last year
Credit availability has only marginally improved
Credit availability has meaningfully improved from last year
Source: CCIM Institute, National Association of Realtors®
0 10 20 30 40 50 600 10 20 30 40 50
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 7
2Q • 14Quarterly Market Trends
Commercial Property SECTOR ANALYSIS
NATIONAL RETAIL MARKETS
The retail sector saw mild improvement in the second quarter:
l Retail deals increased for 59 percent of CCIMs (compared with 63 percent in 2Q13). l Prices were higher for 44 percent of respondents and flat for 40 percent of respondents. l Cap rates were the same for 56 percent of CCIMs, and lower for 37 percent. l Rental income rose for 53 percent of CCIM members (vs. 67 percent in 2Q13). l CCIM members reported 62 percent greater buying inquiries during the quarter.
FINANCE OUTLOOK / Retail Properties %
The current tight conditions will be the new normal
Credit will become even more difficult to access over time
Credit will be more readily accessible over time
Source: CCIM Institute, National Association of Realtors®
FINANCE TRENDS (YoY) / Retail %
Credit availability is just as tight as last year with no improvement
Credit availability has turned for the worse and is even tighter than last year
Credit availability has only marginally improved
Credit availability has meaningfully improved from last year
Source: CCIM Institute, National Association of Realtors®
0 20 40 60 800 20 40 60 80
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 8
2Q • 14Quarterly Market Trends
Commercial Property SECTOR ANALYSIS
NATIONAL APARTMENT MARKETS
As more supply entered the market, trends for apartment properties moved sideways:
l 46 percent of CCIM members reported more deals YOY (58 percent in 2Q13). l Prices were higher for 69 percent of respondents (vs. 51 percent in 2Q13). l Cap rates were flat for 26 percent of members and lower for 63 percent. l Rental income rose for 56 percent of CCIMs (vs. 49 percent in 2Q13). l 77 percent of respondents said they received more serious buying inquiries.
FINANCE OUTLOOK / Multifamily %
The current tight conditions will be the new normal
Credit will become even more difficult to access over time
Credit will be more readily accessible over time
Source: CCIM Institute, National Association of Realtors®
FINANCE TRENDS (YoY) / Multifamily %
Credit availability is just as tight as last year with no improvement
Credit availability has turned for the worse and is even tighter than last year
Credit availability has only marginally improved
Credit availability has meaningfully improved from last year
Source: CCIM Institute, National Association of Realtors®
0 20 40 60 800 20 40 60 80
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 9
2Q • 14Quarterly Market Trends
Commercial Property SECTOR ANALYSIS
NATIONAL HOTEL MARKETS
Activity in the hospitality sector dropped the second quarter:
l Sales of hotels were higher for 50 percent of CCIMs (vs. 80 percent in 2Q13). l Prices increased for 50 percent of respondents YOY (vs. 40 percent in 2Q13). l Cap rates were higher for 50 percent of respondents.
FINANCE OUTLOOK / Hospitality %
The current tight conditions will be the new normal
Credit will become even more difficult to access over time
Credit will be more readily accessible over time
Source: CCIM Institute, National Association of Realtors®
FINANCE TRENDS (YoY) / Hospitality %
Credit availability is just as tight as last year with no improvement
Credit availability has turned for the worse and is even tighter than last year
Credit availability has only marginally improved
Credit availability has meaningfully improved from last year
Source: CCIM Institute, National Association of Realtors®
0 30 60 90 1200 20 40 60 80
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 10
2Q • 14Quarterly Market Trends
Commercial Real Estate Market UPDATE
Commercial real estate fundamentals
appeared to be favorable, with
declining vacancies, space absorption,
rent increases, and—to a lesser
degree—leasing improvements,
according to the 2Q14 CCIM Market
Intelligence Survey results and a
range of industry data sources.
OFFICE
On a national basis, net absorp-
tion continued on a positive trend,
while moderate new construction
translated into vacancy declines.
Office absorption weathered the
first quarter well, despite anemic
job growth, and vacancy declined
nationally by 10 basis points. Net
absorption for office buildings rose
by 9.8 million square feet, based on
data from Reis. The increase was the
highest quarterly gain since the latter
half of 2007. In addition, supply of
new office space rose by 6.3 million
square feet during the quarter.
Job growth provided the major
differentiator in office performance
across markets. In technology and
energy centers, employment gains
led to strong office demand and high
rent growth. The top 10 markets by
growth in effective rent included San
Jose, Calif., San Francisco, Dallas,
Houston, Austin, Texas, Seattle, and
Oklahoma City. Washington, D.C.,
and New York continued their tussle
for top spot. After another reversal
during 4Q13, Washington, D.C., took
back the title of the tightest market,
with a 9.7 percent availability rate.
Asking rents for office space advanced
0.7 percent in the 1Q14, according
to Reis. Effective rents rose by 0.8
percent during the same period,
averaging about $24 per square foot.
Asking rents are expected to grow by
2.5 percent this year.
INDUSTRIAL
In the wake of strong performance
figures in the latter part of 2013,
industrial fundamentals softened
during 1Q14 as the economy dipped.
Availability rates declined 10 basis
points from the previous quarter.
Net absorption for warehouses was
15.4 million square feet, while
absorption of flex space totaled 2.4
million square feet. Flex space
demand jumped more than 50
percent from 4Q13, as new supply
slowed in tandem with rising
demand. Completions of flex space
were a scant 150,000 square feet in
1Q14, according to Reis. New ware-
house space came online to the tune
of 9.4 million square feet.
Regionally, distribution centers regis-
tered the strongest numbers. Markets
such as Houston and San Bernardino/
Riverside, Calif., posted rent growth
in excess of 3.0 percent during 1Q14.
Atlanta and Kansas City, Mo., also
showed upbeat rent growth with
identical increases of 2.9 percent.
Memphis, Tenn., and Chicago
recorded rent gains of 2.7 percent and
2.6 percent respectively. Asking rents
are estimated to grow 2.4 percent by
year-end as demand for space is
expected to remain strong.
Vacancy Rate34%IN TECHNOLOGY AND ENERGY CENTERS, EMPLOYMENT GAINS LED TO STRONG OFFICE DEMAND AND HIGH RENT GROWTH.
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 11
2Q • 14Quarterly Market Trends
Commercial Real Estate Market UPDATE
RETAIL
Retail leasing took the brunt of the
winter weather in 1Q14. National
vacancy rates stayed flat for the
quarter, as demand and supply
slowed down. Net absorption of
retail space totaled 698,000 square
feet, according to Reis. The main
driver in the decline seemed to have
been the termination of Midwest-
based grocer Dominick’s operations.
Its closing led to 2.6 million square
feet of empty space. Construction of
new retail space was also impacted
by the weather—new supply reached
just 650,000 square feet in 1Q14.
In line with differing regional
economic recoveries, retail funda-
mentals were split. Coastal markets,
including New York, San Francisco,
San Jose, and Los Angeles, remained
the tightest in terms of retail vacancy.
Markets with high employment
growth, such as Houston, Atlanta,
and Denver also witnessed strong
demand. And during a prolonged
cold spell, warm tourist destinations
saw favorable demand, including Ft.
Lauderdale, Fla., Orange County,
Calif., and Palm Beach, Fla.
Retail asking rents increased by
0.4 percent in the first quarter, as
effective rents gained 0.5 percent,
based on Reis data. Asking rents are
expected to advance 2.0 percent by
year-end.
MULTIFAMILY
Apartments remained well posi-
tioned in the 1Q14. Demand for
apartments was positive, especially
in light of the weather and broader
economic trends. Net absorption
totaled 41,881 units, according to
Reis. Completions of new units
slowed down significantly, however,
reaching only 25,745 units. The
national vacancy rate declined 20
basis points.
New Haven, Conn., continued as
the tightest apartment market, with
a vacancy rate of just 2.3 percent
during the 1Q14. Several California
markets also registered low vacan-
cies, including San Jose, San Diego,
and Riverside/San Bernardino.
Apartment asking rents have been
slowing down in light of very tight
availability. In 1Q14, asking rents
advanced by 0.5 percent and effective
rents rose 0.6 percent, according to
Reis. Landlords may have gotten past
the peak of rent growth, especially
given the 96 percent occupancy rate
coupled with stagnant wages and
slow employment outlook. National
asking rents were $1,138 per unit in
the first quarter. Asking apartment
rents are expected to rise 4.0 percent
by year-end.
DEMAND FOR APARTMENTS WAS POSITIVE, ESPECIALLY
IN LIGHT OF THE WEATHER AND BROADER
ECONOMIC TRENDS.
COASTAL MARKETS— INCLUDING NEW YORK, SAN FRANCISCO, SAN JOSE, AND LOS ANGELES— REMAINED
THE TIGHTEST IN TERMS OF
RETAIL VACANCY.
Vacancy Rate34%
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 12
2Q • 14Quarterly Market Trends
COMMERCIAL REAL ESTATE INVESTMENT ACTIVITY
Sales of commercial real estate assets
at the lower-end of the price scale
rose 11 percent YOY and sale prices
increased approximately 4 percent,
according to National Association of
Realtors 1Q14 commercial real estate
data. Prices for properties at the
higher-end of the price range rose
14.8 percent, according to Real Capital
Analytics. In addition, commercial real
estate sales prices in the six major
markets rose at a faster rate (17.1
percent) than those in secondary and
tertiary markets (13.6 percent).
Cap rates for properties at the lower
end of the price spectrum averaged
8.2 percent in 1Q14, a 50 basis point
decrease from the previous quarter,
according to NAR data. Apartments
recorded the lowest average cap rate
for the quarter at 7.7 percent, while
office and retail cap rates averaged
8.0 percent and industrial properties
posted cap rates of 8.1 percent.
Vacancy Rate34%
Commercial Real Estate Market UPDATE
NATIONAL AVERAGE CAP RATES (%)
Apt/Multifamily Office CBD Office Suburban Industrial Warehouse Industrial Flex Retail Hotel/Lodging Development Land
Source: CCIM Institute, National Association of Realtors®
0.0 2.0 4.0 6.0 8.0 10.0
CAP RATES BY REGION CANADA EAST MIDWEST OTHER SOUTH WEST & MEXICO
Apartment Cap Rate 5 5% 6 5% 7 1% 9 3% 6 9% 5 7%Office CBD Cap Rate 7 6 7 9 8 8 7 2 7 5 6 9 Office Suburban Cap Rate 10 0 8 5 8 8 7 7 8 4 7 5Warehouse Cap Rate 6 2 7 9 8 3 7 2 8 1 6 9Flex Cap Rate 6 3 8 3 8 6 7 9 8 4 7 2Retail Cap Rate 5 8 7 4 8 1 7 7 7 7 7 1Hotel Cap Rate 7 9 8 1 7 9 7 9 7 6Development Cap Rate 11 9 8 0 7 3 9 9 9 7Land Cap Rate 12 2 7 5 9 5 8 1 8 8
© 2014 The CCIM Institute, National Association of Realtors®
INVESTMENT VALUE VS. PRICE RATIO
Office 3 0Multifamily 3 0Industrial 3 2Retail 3 0Hospitality 3 0
© 2014 The CCIM Institute, National Association of Realtors® Based on May/June 2014 CCIM transaction survey.
0.0 1.0 2.0 3.0 4.0 5.0
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 13
2Q • 14Quarterly Market Trends
Due to a number of factors, the U.S. economy is expected to perform at a quicker pace during the remainder of
2014. However, the pace of growth remains muted, tempering expectations for commercial real estate. Absorption is
projected to continue growing, leading to declining vacancies across most property types. The forecast below projects
conditions for the commercial sector through 2015.
Commercial Real Estate FORECAST
Commercial Real Estate / FORECAST THROUGH 2015 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 2014 2015
OFFICE
Vacancy Rate 15 80% 15 60% 15 70% 15 70% 15 60% 15 50% 15 60% 16 00% 15 60%Net Absorption 9,803 10,980 9,020 11,369 12,663 13,358 12,452 39,676 49,841(‘000 sq ft ) Completions (‘000 sq ft ) 6,745 5,504 5,652 10,153 11,653 10,606 10,455 23,537 42,866Inventory (‘000,000 sq ft ) 4,121 4,126 4,132 4,142 4,154 4,164 4,175 4,132 4,175Rent Growth 0 60% 0 60% 0 60% 0 70% 0 80% 0 90% 0 80% 2 50% 3 20% INDUSTRIAL
Vacancy Rate 9 00% 8 90% 8 80% 8 70% 8 70% 8 60% 8 50% 8 90% 8 60%Net Absorption 26,962 32,355 29,119 19,283 26,782 32,138 28,924 107,849 107,127(‘000 sq ft ) Completions (‘000 sq ft ) 23,733 22,202 14,546 14,309 21,122 19,760 12,946 76,558 68,137Inventory (‘000,000 sq ft ) 8,473 8,496 8,510 8,525 8,546 8,565 8,578 8,510 8,578Rent Growth 0 60% 0 60% 0 70% 0 60% 0 70% 0 70% 0 60% 2 40% 2 60% RETAIL
Vacancy Rate 10 00% 9 90% 9 80% 9 90% 9 80% 9 80% 9 70% 10 00% 9 80%Net Absorption 3,353 3,095 4,255 5,373 4,553 3,533 6,157 11,543 19,616(‘000 sq ft ) Completions (‘000 sq ft ) 1,842 2,110 2,342 3,398 2,935 3,299 3,368 8,404 13,001Inventory (‘000,000 sq ft ) 2,038 2,040 2,042 2,046 2,049 2,052 2,056 2,042 2,056Rent Growth 0 50% 0 50% 0 60% 0 50% 0 60% 0 60% 0 60% 2 00% 2 30% MULTIFAMILY
Vacancy Rate 4 00% 4 00% 4 10% 4 10% 4 10% 4 20% 4 20% 4 00% 4 00%Net Absorption (Units) 57,612 55,397 66,476 44,087 40,930 39,233 48,804 221,366 173,055Completions (Units) 47,450 46,161 49,495 30,032 38,146 34,834 36,965 178,655 139,976Inventory 10 1 10 2 10 2 10 3 10 3 10 3 10 4 10 2 10 4(Units in millions) Rent Growth 1 00% 1 00% 0 90% 0 90% 1 00% 1 00% 1 10% 4 00% 4 00%
Sources: National Association of Realtors® / Reis, Inc.
Copyright © 2014 NATIONAL ASSOCIATION OF REALTORS®. Reproduction, reprinting or retransmission in any form is prohibited without written permission. For questions regarding this matter please e-mail [email protected].
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 14
2Q • 14Quarterly Market Trends
U.S. Economic OVERVIEW
Employment and job growth appear
to be the most important drivers of
the need for commercial real estate.
To a significant degree, the country’s
gross domestic product and jobs vary
together. The overall performance
of the economy has been mediocre
in recent years following the Great
Recession—growth has been positive
but somewhat less than what would
normally be expected. However,
economic growth is expected to pick
up over the next several years, which
should have a favorable impact on
the demand for commercial space.
MAKING PROGRESS AT MIDYEAR
The economy produced some disap-
pointing results during 1Q14. Real
GDP growth was around -2.9 percent,
and unemployment was in the neigh-
borhood of 6.7 percent, declining to
6.3 percent in May. The harsh winter
weather appears to have been a major
cause of the decline in GDP, but the
economy had already been performing
at a sluggish rate—essentially since
the end of the Great Recession.
Most economists expect the economy
to pick up in the forthcoming
months, and preliminary indications
suggest a growth rate in the neigh-
borhood of 3 percent by the end of
the year. However, on a yearly basis
the overall GDP growth projection
for 2014 is 1.9 percent, along with
unemployment at 6.3 percent and
continued low inflation and interest
rates. In short, recent economic
performance could be termed as
mediocre with the economy now
expected to be on an uptrend.
However, a number of economic
uncertainties, such as energy prob-
lems from the Middle East, a
potential decline in the stock market
that shakes consumer confidence,
and a lack of enthusiasm and confi-
dence about economic conditions,
may pose problems that cause
economic growth to be less than
would normally occur.
Real GDP growth for 2014 is
projected at 1.9 percent, below the
normal 3 percent growth rate.
However, exports will probably pick
up as foreign economies continue to
expand and business inventories
appear likely to increase. Therefore,
economic growth is projected to
resume for the rest of the year in the
neighborhood of 2.7 to 3 percent.
U.S. ECONOMY: A DETAILED ANALYSIS
Economists analyze the economy in
terms of consumption, investment,
government expenditures, and net
exports when making projections
of economic activity. A focus on
the factors that could cause the four
categories to vary can show potential
upward or downward shifts in the
economy.
GDP GROWTH RATE THROUGH 1Q14
10.0 % 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 -6.0 -8.0 -10.0
Source: Bureau of Economic Analysis
80 Q1
81 Q1
82 Q1
83 Q1
84 Q1
85 Q1
86 Q1
87 Q1
88 Q1
89 Q1
90 Q1
91 Q1
92 Q1
93 Q1
94 Q1
95 Q1
96 Q1
97 Q1
98 Q1
99 Q1
00 Q1
01 Q1
02 Q1
03 Q1
04 Q1
05 Q1
06 Q1
07 Q1
08 Q1
09 Q1
10 Q1
11 Q1
12 Q1
13 Q1
14 Q1
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 15
2Q • 14Quarterly Market Trends
U.S. Economic OVERVIEW
Consumers account for approxi-
mately 70 percent of GDP economic
activity. The Consumer Confidence
Index is an indicator measures the
degree of optimism on the state of
the economy that consumers are
expressing through their activities
of saving and spending. The index
is issued by The Conference Board,
based on a monthly survey of 5,000
households. Opinions on current
conditions make up 40 percent of the
index, with expectations of future
conditions comprising the remaining
60 percent. The index has recovered
from its depth of 25.3 in February of
2009 during the Great Recession but
still continues to be somewhat lower
than would be expected in a normally
expanding economy. One would
expect an increase in consumption to
occur with an increase in consumer
confidence, part of which appears
to be currently driven by emotional
reactions to news reports. Assuming
continued economic recovery, the
uncertainties are probably more
towards the upside.
Recent fluctuations in household
wealth coupled with continued
job market problems have prob-
ably contributed to the currently
muted level of consumer confidence.
Changes in consumer confidence
can occur relatively quickly, so the
current Consumer Confidence Index
level and direction suggests that
good economic news could impact
the index, thereby setting the stage
for additional economic expansion
in terms of personal consumption
expenditures. Nevertheless, income
and wealth issues are relevant
in examining the overall level of
personal consumption expenditures.
Another factor affecting consumer
confidence appears to have been
declining median family income and
a lack of growth in worker earnings.
Stated in constant dollars, families do
not appear to have benefitted from
the economic recovery. These factors
tend to limit consumer spending from
what it would otherwise have been in
addition to creating rancorous press
coverage which also appears to nega-
tively impact confidence. On a longer
term basis, there are numerous reports
in the press concerning the concen-
tration of wealth and income in
upper-bracket individuals as the
economy changes. In contrast, about
one-third of American households
are reported as living hand-to-
mouth, meaning that they spend all
their paychecks.
CONSUMER CONFIDENCE INDEX
160
140
120
100
80
60
40
20
0
Source: The Conference Board
06 77
12 78
06 80
12 81
06 83
12 84
06 86
12 87
06 89
12 90
06 92
12 93
06 95
12 96
06 98
12 99
06 01
12 02
06 04
12 05
06 07
12 08
06 10
12 11
06 13
MO YR
THE CCI HAS RECOVERED FROM ITS DEPTH DURING THE GREAT RECESSION, BUT CONTINUES TO BE
LOWER THAN EXPECTED IN A NORMALLY
EXPANDING ECONOMY.
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 16
2Q • 14Quarterly Market Trends
U.S. Economic OVERVIEW
EMPLOYMENT’S EFFECTS
Employment trends and job avail-
ability have been difficult for many
consumers. The unemployment rate
continues to fall, based on people
actively seeking work. However,
unemployment continues to be high
relative to normal expectations. Most
of the recent drop in unemployment
appears to have occurred as a result
of potential workers leaving the job
market—and therefore not actively
seeking employment. In addition,
the percentage of people actually in
the work force has declined signifi-
cantly from a few years ago.
As measured in terms of “Establish-
ment Employment” the number of
people actually working has recov-
ered from the depths of the Great
Recession, but we appear to have lost
four years of employment growth as
a result of the Great Recession.
In order to meet the expanding job
needs of the U.S. economy due to
population growth, the economy
needs to add approximately 150,000
new jobs every month just to stay
even. Any jobs added above 150,000
can help to reduce the number of
unemployed and underemployed
potential workers. Employment
has accelerated modestly in recent
months, which should help to
continue the downward pressure on
the unemployment rate. However,
a significant number of people have
been out of work for six months
or longer. The longer people are
out of work, the more their skills
erode. If former workers are perma-
nently frozen out of the job market,
economic growth is negatively
impacted. In addition, the number
of people working part-time due to
economic reasons is substantial, and
workers entering the job markets are
reported as having difficulty finding
jobs with upscale growth potential.
In the coming year, growth of
personal consumption expenditure
should at least equal what has been
experienced over the past year since
both job and GDP growth are posi-
tive. Considering all of the factors
mentioned, on balance we could even
see some upscale potential beyond
that which is projected. However, for
the longer run, in order for personal
consumption expenditures to achieve
significantly greater growth it may be
necessary for lower income earners to
leave part-time employment and to
participate to a greater degree in the
growth of the economy.
INVESTMENT
Both residential and business invest-
ments continue to recover from
the depths of the Great Recession.
Total investment is approximately
16 percent of the GDP and has
been rising. The change in private
inventories—which makes up
approximately 4 percent of total
investment—is, however, quite vola-
tile and through a multiplier effect
can have some impact on GDP. For
the next few quarters any changes in
investment impacts on the economy
are likely to be positive.
Looking at quarterly changes in
investment, it is clear that inventory
investment is relatively small but is
also subject to fairly wide swings in
magnitude. During 1Q14, there was a
significant decline in business inven-
tory investment, reportedly due to
weather. Companies were reported
as sharply cutting back on their
restocking of goods—partly due to
weather, partly due to demand. This
should reverse for the rest of the
year: The economy is on an upswing
Vacancy Rate34%
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 17
2Q • 14Quarterly Market Trends
U.S. Economic OVERVIEW
and weather impacts are unlikely.
There do not appear to be any major
changes in investment likely over the
next year which would impact the
economic projections.
GOVERNMENT EXPENDITURES
Federal, state, and local government
expenditures account for approxi-
mately 19 percent of the GDP.
Measured on a constant dollar basis,
government expenditures have
declined slightly in recent years.
Looking to the future, one would
expect government expenditures to
stabilize and probably rise. Some of
the areas prominently mentioned
include medical, infrastructure,
education, and social services. However,
major changes in government
expenditures are unlikely this year
and will probably not affect current
economic projections in this paper.
NET EXPORTS
Net exports declined slightly during
the first quarter of 2014, accounting
for a portion of the negative 2.9 percent
decline: Exports declined and imports
increased. Foreign economies on
balance now seem to be on an expan-
sionary track, suggesting a pickup in
exports in following quarters.
ADDITIONAL FACTORS
In addition to looking at the compo-
nents of GDP, it is appropriate to
consider trends in monetary policy,
inflation, housing, and general
risks in making an economic fore-
cast. Overall, the trends in these
areas seem to be favorable, further
3000
2500
2000
1500
1000
500
0
-500
INVENTORY CHANGE RESIDENTIAL NON-RESIDENTIAL
INVESTMENT TRENDS
00 Q1
00 Q4
01 Q3
02 Q2
03 Q1
03 Q4
04 Q3
05 Q2
06 Q1
06 Q4
07 Q3
08 Q2
09 Q1
09 Q4
10 Q3
11 Q2
12 Q1
12 Q4
13 Q3
Source: National Association of Realtors®
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 18
2Q • 14Quarterly Market Trends
INFLATION: PERCENT CHANGE YOY
6 5 4 3 2 1 0 -1 -2 -3
U.S. Economic OVERVIEW
substantiating that there may be
some upscale potential to the fore-
cast and continued evidence that the
expansion will continue.
MONETARY POLICY
In the case of monetary policy, the
good news is that interest rates are
projected to remain relatively low
by historical standards. Credit stan-
dards have been unreasonably tight
in recent years, largely as part of the
fallout from the Great Recession. In
recent months there has been some
easing in terms of credit availability,
and hopefully this will continue.
The Federal Reserve is expected to
continue decreasing quantitative
easing, and an interest rate hike
seems likely at some point in late
2014 or 2015. However, none of the
possible changes that seem likely in
monetary policy are seen as having a
significantly negative impact on the
economic forecast.
INFLATION
Inflation has been relatively modest
in recent years. The Federal Reserve
has indicated that an inflation rate of
2 percent would provide the appro-
priate stimulation to the economy.
A major component of the inflation
rate is the cost of housing, which
factors very heavily into the CPI and
is based to a significant degree on
imputed homeowner costs based
on apartment rents. In the past
year, apartment rents have been
increasing, and the impact will be
an increase in the reported inflation
rate. In addition, declining unem-
ployment should eventually put
upward pressure on prices. However,
the inflation outlook does not appear
to have a significant impact on the
current economic forecast.
MANUFACTURERS’ SHIPMENTS
Manufacturers’ shipments declined
in January—presumably due to
weather--but subsequently resumed
their upward trend. Shipments
are an indicator of the strength of
the economy and substantiate the
current economic forecast.
HOUSING
Housing is a major economic driver.
The sale of an existing home adds
approximately $30,000 to the GDP,
and the sale of a new single family
home adds over $250,000 to the GDP.
Home sales for new and existing
homes have been climbing out of the
valley created by the Great Recession.
However, several factors have been
holding sales back.
Although interest rates have been
and continue to be low by historic
standards, credit availability has been
excessively restrictive. In the case of
new construction, small builders,
who have typically accounted for
approximately one half of new
construction, have been unable to
obtain adequate access to credit or
Source: Federal Reserve Board
ALL ITEMS ALL ITEMS EXCL. FOOD & ENERGY
1998 2000 2002 2004 2006 2008 2010 2012
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 19
2Q • 14Quarterly Market Trends
U.S. Economic OVERVIEW
were eliminated by the Great Reces-
sion. In any case, this has had a
major negative impact on housing
permits for single family and multi-
family units, which have been in the
neighborhood of a million units
per year or less instead of the
expected 1.5 million units yearly. In
addition, the Millennials are the
next generation for home owner-
ship, but so far that has not occurred.
Family formation for Millennials
has been slower than expected,
possibly due to a combination of
factors such as the slow economy,
changing social customs, debt levels,
and expectations as a result of the
Great Recession. Between 2007 and
2014, median incomes for the gener-
ation segment aged 25 to 34 (the
typical age for a first-time home
purchase) have decreased at a rate
of 9 percent.
For the short run, none of the
negative factors impacting housing
appear likely to get worse in the next
year; in fact, there appears to be a
modest increase in lending as well as
job growth, so any risk to the
economic forecast is upwards rather
than downwards.
RISKS: UNCERTAINTIES AND PROBLEMS
In the short term, the major risks to
the economy are a dip in consumer
confidence or higher energy prices.
Consumer confidence has continued
its fragile recovery, but a major
pullback in the possibly overheated
stock market would again have
potentially major impacts on house-
hold balance sheets. This could work
its way through the economic system,
resulting in declining consumption
and falling GDP.
The international outlook is also
a risk, particularly in terms of a
potential energy problem and
accompanying higher gasoline prices.
Middle East turmoil could become a
threat to the economy, particularly if
curtailed shipments from Iraq caused
oil prices to increase. Decreased
consumer demand due to spending
on energy might limit economic
growth. Iraq accounts for approxi-
mately 1.7 percent of global crude
consumption. An interruption of
Iraqi oil would raise prices and create
heightened uncertainty in financial
markets, possibly depressing the
U.S. ECONOMIC OUTLOOK / Actual and Forecasted 2013 2013 2013 2013 2014 2014 2014 2015 2015 ANNUAL Q1 Q2 Q3 Q4 Q2 Q3 Q4 Q1 Q2 2012 2013 2014 2015
HISTORY FORECAST* HISTORY FORECAST*
GDP g r (%) 1 1 2 5 4 1 2 4 2 8 3 0 3 0 2 9 2 9 2 8 1 9 2 4 2 9Non-farm Payroll Employment, g r (%) 1 9 1 7 1 6 1 8 1 7 1 5 1 6 1 8 1 9 1 7 1 7 1 6 1 8Consumer Prices, g r (%) 1 2 0 4 2 2 1 1 2 8 3 0 3 0 3 4 3 5 2 1 1 4 2 5 3 5Unemployment Rate (%) 7 7 7 5 7 2 7 0 6 3 6 2 6 2 6 1 6 0 8 1 7 4 6 4 6 030-Year Government 3 0 3 1 3 7 3 7 3 4 3 6 3 9 4 3 4 6 2 9 3 4 3 7 4 7 Bond Yield (%)30-Year Fixed 3 5 3 7 4 4 4 3 4 3 4 5 4 8 5 1 5 4 3 7 4 0 4 5 5 5 Mortgage Rate (%)Consumer Confidence 63 75 81 74 83 84 84 85 87 67 73 83 87 (1985=100)
*Forecast as of March 2014
Source: National Association of Realtors©
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 20
2Q • 14Quarterly Market Trends
U.S. Economic OVERVIEW
values of various assets. The short
term impact could be substantial,
probably wiping out GDP growth.
Longer term, energy markets could
adapt to the loss of product.
Longer term, the major risks appear
to be associated with household
formation and job creation. House-
hold formation has been relatively
slow in recent years. The major
drivers of residential and commer-
cial real estate demand in the long
run are household formation and
job creation. Both have been slower
than expected. Explanations for slow
household formation include the
state of the economy, changing social
mores, a slow job market, and rising
levels of consumer debt. Explana-
tions for slow job creation include
the impacts of the Great Recession
as well as technological change and
major realignments in the economy.
Both household formation and job
creation appear likely to be picking
up in the foreseeable future.
ECONOMIC OUTLOOK
For the next year, the economy
appears to be in a slow growth
mode—an economy expanding
at slower than expected rates. The
economic outlook is favorable for
supporting at least the current level
of commercial sales and rentals; in
addition, based on cutbacks during
the Great Recession there appears to
be a level of pent-up demand, so on
balance the outlook for commercial
real estate is positive.
The positive factors associated with
the economic outlook include rising
home prices, easing credit terms,
reasonable energy prices, recovery
from global economic slowdowns,
recovering consumer balance sheets,
and the potential for additional
household formation. Uncertain-
ties with the international situation
(energy, recessions, and political
instability) coupled with lingering
consumer confidence issues are the
negatives. On balance, the economic
forecast is positive and, to the degree
there is uncertainty and risk, the
outcomes are probably more towards
the upside than the downside. In
short, the economic environment is
moderately favorable for commercial
real estate.
Vacancy Rate34%
ECONOMIC RATE
REGIONAL Average 3 8 NATIONAL Average 3 2
© 2014 The CCIM Institute, National Association of Realtors® Based on May/June 2014 CCIM transaction survey.
0.0 1.0 2.0 3.0 4.0 5.0
ECONOMIC CLIMATE BY REGION CANADA EAST MIDWEST OTHER SOUTH WEST & MEXICOThe regional economic climate is booming – 2 9% 3 6% 20 8% 32 9% 25 4%The regional economic climate is level – 11 8 21 4 8 3 8 2 5 1The regional economic climate is moderately positive 40 0 70 6 60 7 58 3 56 5 50 8The regional economic climate is stagnant – 2 9 3 6 – 1 2 –The regional economic climate is weak – 11 8 10 7 12 5 1 2 18 6
© 2014 The CCIM Institute, National Association of Realtors® Based on May/June 2014 CCIM transaction survey.
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 21
2Q • 14Quarterly Market Trends
U.S. Metropolitan ECONOMIC OUTLOOK
Phoenix AZ B 78 13 -15% -3% 6 2% 2 2% 16%
Tucson AZ D 62 50 -15% -3% 6 4% 0 7% -5%
Los Angeles CA C 68 75 -27% 4% 7 8% 2 1% 0%
San Bernardino/Riverside CA B 75 00 -27% 4% 9 2% 2 4% 57%
Sacramento CA C 71 88 -27% 4% 7 6% 2 7% 49%
San Diego CA C 71 88 -27% 4% 6 7% 2 2% 29%
San Francisco CA B 75 00 -27% 4% 5 7% 2 2% -3%
San Jose CA B 78 13 -27% 4% 5 9% 4 0% 18%
Colorado Springs CO B 84 38 -15% -7% 7 4% 1 3% 7%
Denver CO A 87 50 -15% -7% 5 8% 2 8% 15%
Hartford CT C 71 88 -8% -8% 7 1% 0 7% -15% Washington DC C 71 88 -1% 6% 4 8% 0 2% 7%
Jacksonville FL D 62 50 -6% -6% 6 1% 3 3% -6%
Miami FL B 75 00 -6% -6% 6 4% 3 2% 29%
Orlando FL B 75 00 -6% -6% 5 9% 4 5% 3%
Tampa-St Petersburg FL D 62 50 -6% -6% 6 5% 2 6% -10%
Atlanta GA C 65 63 -9% -11% 6 9% 2 0% 44%
Chicago IL C 68 75 -7% -7% 7 7% 0 7% 43% Indianapolis IN B 78 13 -7% -15% 5 3% 2 0% 44%
Lexington KY C 68 75 -6% -10% 6 6% 0 2% 38%
Louisville KY C 71 88 -6% -10% 7 1% 0 8% 17%
New Orleans LA B 75 00 -1% -22% 4 7% 1 3% -1%
Boston MA B 84 38 -22% -12% 5 5% 1 2% 34%
LEADING INDICATOR INDEXCITY STATE SCORE LEADING BANKRUPTCY UNEMPLOYMENT UNEMPLOYMENT EMPLOYMENT TOTAL INDICATOR FILINGS CLAIMS RATE as of 2014 (APR 2014 vs PERMITS (2014 vs 2013)* (2014 vs 2013)** APR 2013)** (2014 vs 2013)**
*April 2013 through March 2014 vs. April 2012 through March 2013
**May 2013 through April 2014 vs May 2012 through April 2013
The leading market index uses an array of factors to assess the relative health of an individual market. The factors include job creation, unemployment claims, bankruptcy filings, and permits for construction. The first two factors provide an indication of potential business expansion/contraction as well as of labor market health and a leading
indicator of multifamily rental growth. Bankruptcy filings allude to the health of the business environment, while the permits data point to business plans and have an indirect impact on inventories.
The leading indicator is weighted based on both the current measure
as well as its recent trend or lagged measures. These weighted measures are then added to create a score. This score is then ranked relative to a fixed scale where a measure of 85 or better indicates a robust market, 75 to 85 a strong market, 65 to 75 an average market, and a score below 65 coincides with a weak market.
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 22
2Q • 14Quarterly Market Trends
Baltimore MD B 75 00 -3% -10% 5 9% 1 8% 2%
Detroit MI C 65 63 -14% -8% 8 1% -0 3% 19%
Minneapolis MN B 78 13 -14% -6% 4 5% 1 6% 1%
St Louis MO C 71 88 -16% -1% 7 3% 0 7% 0%
Kansas City MO C 65 63 -16% -1% 6 3% 0 6% 4%
Greensboro/Winston-Salem NC B 78 13 -13% -45% 6 7% 0 3% 31%
Raleigh-Durham NC B 84 38 -13% -45% 5 1% 4 1% -12%
Charlotte NC B 78 13 -13% -45% 6 3% 2 0% 8%
Omaha NE B 81 25 -11% -13% 4 1% 1 7% -2% Albuquerque NM D 62 50 -9% -13% 7 2% -1 2% 9%
Las Vegas NV B 84 38 -20% -16% 8 5% 3 0% 13%
Buffalo NY B 75 00 -10% -11% 6 3% 0 7% 52%
New York NY C 71 88 -10% -11% 7 0% 1 1% 53%
Cleveland OH C 68 75 -4% -16% 7 0% 0 6% 18%
Columbus OH B 78 13 -4% -16% 4 8% 0 9% -2%
Cincinnati OH B 84 38 -4% -16% 5 5% 1 7% 24%
Oklahoma City OK B 75 00 -10% -14% 4 7% 2 8% 12%
Tulsa OK B 75 00 -10% -14% 5 0% 1 7% -2%
Portland OR C 71 88 -7% -11% 6 3% 2 8% 3%
Pittsburgh PA C 71 88 -6% -7% 5 6% 0 5% 21%
Philadelphia PA C 71 88 -6% -7% 6 3% 0 5% 24%
Providence RI B 81 25 -11% -11% 8 5% 1 0% 14%
Charleston SC B 81 25 -3% -13% 4 7% 1 4% 7%
Columbia SC B 81 25 -3% -13% 5 0% 1 7% -1%
Greenville SC B 78 13 -3% -13% 4 5% 2 6% 41%
Knoxville TN C 71 88 -5% -11% 5 4% 2 0% 19%
Nashville TN B 75 00 -5% -11% 5 0% 3 1% 48%
Chattanooga TN D 62 50 -5% -11% 6 3% 0 8% 50%
Memphis TN D 56 25 -5% -11% 7 8% 0 2% -2%
Austin TX A 87 50 -13% -4% 4 3% 3 5% -4%
Dallas TX A 87 50 -13% -4% 5 3% 3 8% 20%
Houston TX A 90 63 -13% -4% 5 2% 3 1% 12%
San Antonio TX A 96 88 -13% -4% 5 0% 2 2% 9%
LEADING INDICATOR INDEXCITY STATE SCORE LEADING BANKRUPTCY UNEMPLOYMENT UNEMPLOYMENT EMPLOYMENT TOTAL INDICATOR FILINGS CLAIMS RATE as of 2014 (APR 2014 vs PERMITS (2014 vs 2013)* (2014 vs 2013)** APR 2013)** (2014 vs 2013)**
U.S. Metropolitan ECONOMIC OUTLOOK
*April 2013 through March 2014 vs. April 2012 through March 2013
**May 2013 through April 2014 vs May 2012 through April 2013
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 23
2Q • 14Quarterly Market Trends
Salt Lake City UT B 84 38 -8% -11% 3 8% 1 4% 44%
Richmond VA B 81 25 -8% -11% 5 4% 1 7% 1%
Seattle WA A 87 50 -12% -7% 5 0% 2 9% 10%
Milwaukee WI B 75 00 -9% -12% 6 3% 1 5% 24%
Birmingham AL C 68 75 -5% -12% 6 1% 1 0% 15%
Little Rock AR C 65 63 -5% -10% 6 1% 0 7% -23%
New Haven CT B 75 00 -8% -8% 7 3% 1 3% 11%
Wichita KS B 78 13 -5% -9% 5 8% 0 6% 11%
Rochester NY B 75 00 -10% -11% 6 1% 0 3% -8%
Syracuse NY C 65 63 -10% -11% 6 4% -0 3% -1%
Dayton OH C 68 75 -4% -16% 5 8% 0 3% -22%
Ventura County CA B 78 13 -27% 4% 7 0% 2 0% 8%
Westchester NY B 75 00 -10% -11% 4 6% -0 3% -17%
Norfolk/Hampton Roads VA B 75 00 -8% -11% 5 5% -0 3% 2%
Tacoma WA C 71 88 -12% -7% 6 9% 0 3% 10%
Orange County CA C 65 63 -27% 4% 5 0% -0 3% 67%
Palm Beach FL C 71 88 -6% -6% 6 4% 2 8% 5%
Fairfield County CT B 78 13 -8% -8% 6 0% 0 7% 17%
Fort Lauderdale FL B 78 13 -6% -6% 5 5% 3 3% 29%
Fort Worth TX A 87 50 -13% -4% 5 2% 2 9% 20%
Long Island NY B 78 13 -10% -11% 5 2% 0 8% 53%
Northern New Jersey NJ C 71 88 -4% -18% 6 9% 0 5% 37%
Oakland-East Bay CA C 71 88 -27% 4% 6 5% 1 6% -3%
Suburban Maryland MD B 78 13 -3% -10% 4 4% 0 3% 7%
Suburban Virginia VA B 84 38 -8% -11% 3 6% 0 1% 7%
Durham NC A 93 75 -13% -45% 5 0% 1 5% 23%
Raleigh-Cary NC B 84 38 -13% -45% 5 1% 4 1% -12%
Central New Jersey NJ B 78 13 -4% -18% 5 8% 0 5% 33%
LEADING INDICATOR INDEXCITY STATE SCORE LEADING BANKRUPTCY UNEMPLOYMENT UNEMPLOYMENT EMPLOYMENT TOTAL INDICATOR FILINGS CLAIMS RATE as of 2014 (APR 2014 vs PERMITS (2014 vs 2013)* (2014 vs 2013)** APR 2013)** (2014 vs 2013)**
U.S. Metropolitan ECONOMIC OUTLOOK
*April 2013 through March 2014 vs. April 2012 through March 2013
**May 2013 through April 2014 vs May 2012 through April 2013
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 24
2Q • 14Quarterly Market Trends
SPONSORS
CCIM INSTITUTE
Since 1969, the Chicago-based CCIM Institute has conferred the Certified Commercial Investment Member (CCIM) designation to commercial real estate and allied professionals through an extensive curriculum of 160 classroom hours and professional experiential requirements. Currently, there are 9,000 CCIMs in 1,000 markets in the U.S. and 31 countries worldwide. Another 3,000 practitioners are pursuing the designation, making the Institute one of the largest commercial real estate networks in the world. An affiliate of the National Association of REALTORS®, the CCIM Institute’s recognized curriculum, networking programs, and the powerful technology tool, Site To Do Busi-ness (site analysis and demographics resource), positively impact and influence the commercial real estate industry.
Visit www.ccim.com for more information.
CCIM INSTITUTE 2014 EXECUTIVE LEADERSHIP
NATIONAL ASSOCIATION OF REALTORS®
The Mission of the National Association of REALTORS® Research Division is to collect and disseminate timely, accu-rate and comprehensive real estate data and to conduct economic analysis in order to inform and engage members, consumers, and policy makers and the media in a professional and accessible manner.
The Research Division monitors and analyzes economic indicators, including gross domestic product, retail sales, industrial production, producer price index, and employment data that impact commercial markets over time. Additionally, NAR Research examines how changes in the economy affect the commercial real estate business, and evaluates regulatory and legislative policy proposals for their impact on REALTORS,® their clients and America’s property owners.
The Research Division provides several products covering commercial real estate including:
l Commercial Real Estate Outlook l Commercial Real Estate Quarterly Market Survey l Commercial Real Estate Lending Survey l Commercial Member Profile
To find out about other products from NAR’s Research Division, visit www.realtor.org/research-and-statistics.
NATIONAL ASSOCIATION OF REALTORS® RESEARCH DIVISION
©2014 The CCIM Institute and National Association of REALTORS.® All rights reserved.
B.K. Allen, CCIM Interim Executive Vice President/CEO [email protected]
Karl Landreneau, CCIM President
Mark Macek, CCIM President-Elect
Steven W. Moreira, CCIM First Vice President
Craig Blorstad, CCIM Treasurer
CCIM Institute 430 North Michigan Ave., Suite 800 Chicago, IL 60611 312-321-4460 www.ccim.com
Lawrence Yun, PhD Sr. Vice President, Chief Economist [email protected]
George Ratiu Director, Quantitative & Commercial Research [email protected]
Ken Fears Director, Regional Economics & Housing Finance Policy [email protected]
National Association of REALTORS® 500 New Jersey Ave. N.W. Washington, D.C. 20001 800-874-6500 www.realtors.org
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 25
2Q • 14Quarterly Market Trends
CONTRIBUTORS
David Ellermann Ellermann Brokerage Chicago IL
Jason Bantel Lee & Associates Central Florida, LLC Orlando FL
Diane Baer Yecko Capital Realty Group Pittsburgh PA
Gary Hunter Westlake Associates, Inc Seattle WA
Maire Herron CIC Jackson WY
Lydia Bennett CRE West Coast LLC Bellingham WA
Nancy Fish Park Place Real Estate Kalamazoo MI
Stephen Jacquemin S J Financial Group St Louis MO
Terry Phillips The Phillips Group, Inc Vancouver WA
Ryan Haedrich Haedrich & Co , Inc Redding CA
Dolf deVos IPMG, Inc Corvallis OR
Dan Naylor Mericle Commercial Real Estate Wilkes-Barre PA
Lloyd Miller Morris Realty Group Memphis TN
Robert Resneder US Trust Dallas TX
Lee Ehlers Investors Realty, Inc Omaha NE
Jody Elder Cushman & Wakefield Cornerstone Nashville TN
Gary Best KW Commercial Division Tucson AZ
Lauren Nasser Arthur Kowitz Realty Daytona Beach FL
James J Katon Integra Realty Resources Charlotte NC
John McLaughlin McLaughlin Investments, Inc Boston MA
Mike Stuhlmiller Stuhlmiller Realty Hayden ID
Gary Tang Hannah Investment, Inc Albany CA
Sheng-Hong Eric Wang Yuanta Asset Mgt Taipei
Linda Sorkin Aukamp Brokerage & Consulting Matthews NC
Steve Johnson Red Sky Partners LLC Brookfield WI
Ian Levin Nathan Levin Co Salem OR
Tom Davies Norris & Stevens Portland OR
James Gerdts SquareHat Real Estate Raleigh NC
Steve Caton Caton Commercial Real Estate Group Plainfield IL
William Shopoff The Shopoff Group Irvine CA
John Schutzius Industrial Commercial Realty and Investment Corp Aurora IL
Gina Dingman Annette Xollier Able Real Estate Philadelphia PA
Alan Doak Colliers International Ottawa OH
Jim Kasten Kasten Long Commercial Group Phoenix AZ
Garry Adams Capital Realty, Inc Sherman Oaks CA
Reuben Trinidad Hoff & Leigh - Colorado Springs Colorado Springs CO
Rob Burlingame CBRE San Antonio TX
Michel Hibbert Charles Dunn Company Los Angeles CA
Tyler Smith PRG Investments Louisville KY
David Luebke Hendricks Commercial Properties Beloit WI
Shannon Mar Guarantee Real Estate Fresno CA
Steven Caravelli Coldwell Banker Commercial San Francisco CA
Anthony Strauss Colliers Minneapolis MN
Jeff Sage Realty Development Aspen CO
J R Fulton J R Fulton & Associates Oklahoma City OK
Brian Resendez Sperry Van Ness Portland OR
Simeon Spirrison Adelphia Properties Oak Brook IL
Peter A Frandano Southport Realty Southport NC
Trent Grothues Pollan Hausman Real Estate Services, LLC Houston TX
Edward T Herbert HCR Associates Realtors Nashville TN
Eric Duxstad Frost Bank San Antonio TX
Rick Colon Cassidy Turley Tampa FL
Gary Lee Jones Lang LaSalle Atlanta GA
Alan Stamm century 21 consolidated Las Vegas NV
Marguerite Haverly CBRE Albuquerque NM
Arch Jeffery De Rito Partners, Inc Phoenix AZ
David Aikens KW Commercial Louisville KY
Jennifer Gray Jennifer Gray Commercial Realty Southlake TX
Mike Carroll Sealy Realty Co , Inc Tuscaloosa AL
Frank Leatherman, MAI Leatherman Real Estate Services Raleigh NC
Cyril Crocker Keller Williams Washington DC
Sammie Kessner US National Commercial Real Esate Services Las Vegas NV
Trent Frankum Tan, Frankum & Associates Manila
James Milner James R Milner III Boone NC
Dan Mincher The Vollman Company, Inc Sacramento CA
Rick Padelford Realty Executives Commercial Tempe AZ
Jeff Eales Birtcher Anderson Realty San Juan Capistrano CA
Eugene Heathman Garland Realty R , LLC Ruidoso NM
Brad Welborn Colonial Square Realty, Inc Fort Myers FL
Bruce Johnson Block Real Estate Services, LLC Kansas City MO
Cal Northam Prudential Floberg Realtors Billings MT
Nicole Willoughby Associated Bank Milwaukee WI
Paul Mader MTC Commercial RE Castro Valley CA
David Staruch CCIM GRI Century 21 Jim White & Associates Treasure Island FL
Shahid K Abdulla PlainsCapital Bank San Antonio TX
Grant Ackerly R P Hubbell and Company, Inc Poughkeepsie NY
Lucio Cantu RE/MAX Commercial San Antonio TX
Jim Purgerson Citizens Bank & Trust Baton Rouge LA
John Lutz Lutz Commercial Realty Union NJ
Brian Sorrentino ROI Commercial Real Estate, Inc Las Vegas NV
Joe Milkes Milkes Realty Valuation Plano TX
Todd Balsiger JLL Minneapolis MN
Anthony Ricco Sperry Van Ness/ Bluestone & Hockley Portland OR
John Levinsohn Levi Investment Realty, inc Indianapolis IN
Ira Korn Coldwell Banker Commercial Meridian Rochester NY
Laurens Nicholson Lee & Associates Greenville SC
John Capes KW Commercial Realty Augusta GA
Mike Milovick Royal LePage Grand Valley Realty Kitchener
Robert Powell Powell Realty Advisors, LLC Dallas TX
David Schnitzer Venture Commercial Dallas TX
Karen Johnson NAI MLG Commercial Milwaukee WI
Kenneth Kujawa Century 21 Signature Realty Saginaw MI
Beverly Keith Trinity Partners Raleigh NC
Rocket Glass Inland Pacific Commercial Properties San Diego CA
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 26
2Q • 14Quarterly Market Trends
CONTRIBUTORS
Tom Baker KW Commercial Eagan MN
Joe R Romero Cauwels & Stuve Realty and Devel-opment Advisors LLC Albuquerque NM
Peter Aburrow Encore Real Estate Dallas TX
Rhonda Reap-Curiel Coldwell Banker Reap Realty Alexandria LA
Lizby Eustis Keller Williams Realty Mandeville LA
Patrick Bell Dunes Properties Charleston SC
Vikki Keyser Keller Williams Commercial Sarasota FL
Gary Maitha Upland Group, Inc Tempe AZ
James Kaiser Heartland Properties, Inc Council Bluffs IA
D Robb Encon Commercial Santa Fe Springs CA
Katy Welsh Hunter Real Estate West Palm Beach FL
Bruce Bauer Bauer Appraisal Group, Inc Albany NY
Lyman Whitlatch The Whitlatch Group Visalia CA
Jay Verro NAI Platform Albany NY
Michael Shaffer Skogman Commercial Cedar Rapids IA
Lisa Campbell Coldwell Banker Morris Bend OR
David Kearney Remax Sabre Realy Port Coquitlam
April Thompson Healthcare REIT Jupiter FL
Eric Rehn Kennedy Wilson Brokerage Group Walnut Creek CA
Brad Alton NAI Commercial Edmonton
Peter Kravaritis IHDA Chicago IL
John Cohoat Browning Investments Indianapolis IN
Brian Spring NAI Spring Canton OH
Edward Miller Colliers International Tampa FL
Rick Ikeler SRS Real Estate Partners Dallas TX
Roger Cobb Selwyn Property Group Charlotte NC
John John REMAX Boone Realty Columbia MO
David Auel Avison Young Pittsburgh PA
Don Sebastian Coldwell Banker Commercial McMahan Co Lexington KY
Matt Boehlke Regus Maple Grove MN
Michael McNally Pacific Commercial Management San Diego CA
Matt Carter Joyner Commercial, The Commercial Division of Berkshire Hathaway C
Dan Joyner REALTORS Greenville SC
Todd Hamilton Cutler Commercial Scottsdale AZ
Scot E Hall Wolf Realty Inc Glendale AZ
Lyle Gilbertson Cassidy Turley St Louis MO
Dave Winder Cushman & Wakefield Commerce Boise ID
Kenneth Crimmins Blau and Berg Short Hills NJ
Mike Eurchuk Realty Executives Meridian Edmonton
Thomas Knaub Colliers International Phoenix AZ
Jeff Wilke Graham & Company Huntsville AL
Todd Gannet Equitable Metropolitan West Orange NJ
Todd Mitchell Columbia Property Trust Atlanta GA
Rick Gonzalez Crosby + Associates, Inc Tavares FL
Andrew Joyner The Simpson Company Gainesville GA
Jerry Fiume NAI Cummins Real Estate Akron OH
Michael Merker NAI Park Capital Guelph
Asok Agarwal Re/Max Commercial Glendale CA
John Floyd Crye-Leike Commercial Property Management Brentwood TN
Bill Crawford Crawford Associates Greenville SC
Nick Miner ORION Investment Real Estate Scottsdale AZ
Eric Higgins Colliers International Birmingham AL
Marc Veras RE Commercial LLC Appleton WI
Helen Jobes Kennedy Wilson Austin TX
George Spirrison Adelphia Properties Oak Brook IL
Julie Teague Hull Storey Gibson Augusta GA
David R Dunn Sperry Van Ness/ Dunn Commercial Arlington TX
Chad Heer RE/MAX Results Commercial Saint Paul MN
Reagan Schwarzlose JP Morgan Chase Dallas TX
Todd Clarke NM Apartment Advisors Albuquerque NM
Allen Gump Colliers International Dallas TX
Paul Lynn Paul A Lynn & Associates, LLC Houston TX
Shannon Mar Guarantee Real Estate Fresno CA
Hal Alpert Alpert Commercial Real Estate Vacaville CA
Timothy L Skinner Keaty Real Estate Lafayette LA
John Orr Colliers International Charleston SC
George Barnett Century 21 Foote-Ryan Plattsburgh NY
Tom Corbett First Venture Properties, LLC Wilson NC
Soozi Jones Walker Commercial Executives Las Vegas NV
John Capes KW Commercial VIP Group, LLC Augusta GA
T J Woosley Hal Woosley Properties, Inc Bellevue WA
Tim Mills CBRE San Diego CA
Lily Seymour Gershman Commercial Real Estate St Louis MO
Joanne Birtz Lifro Ltd Medicine Hat
Paul Kenny Paul Kenny & Matt Bogue Commer-cial Real Estate Sun Valley ID
Dalerie Wu STC Management Whittier CA
Lee Farris Farrmont Realty Group, Inc Phoenix AZ
Jeffrey Stanton MC Management Bellaire TX
Arielle Dorman Kidder Mathews Bellevue WA
Michael Armanious KW Commercial Tacoma WA
Samuel Ivey GHI Ventures, LLC Marietta GA
Brian Wolford Paradigm Tax Group Houston TX
Baltazar Cantu Colliers International Monterrey TX
Olga Hallstedt Results! Commercial Real Estate Grand Rapids MI
Wayne Shulman Newmark Grubb Knight Frank Chicago IL
Corey Schneider Passaic NJ
David Wieder CPI San Antonio TX
James Mangas Best Corpoarate Real Estate Upper Arlngton OH
Craig Evans Cassidy Turley New York NY
David Victorio Coldwell Banker Commercial NRT Manfield TX
Ted Taylor Grandbridge Real Estate Capita Miami FL
Chris Jacobson CBRE Minneapolis MN
Mike Wells Wells Asset Management Inc Dallas TX
Travis Newton Florida Blue (BCBS) Jacksonville FL
Todd Hamilton Cutler Commercial Scottsdale AZ
Rick Egitto Inverness Properties Englewood CO
Nancy Fish Park Place Real Estate Kalamazoo MI
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 27
Quarterly Market Trends 2Q • 14
CONTRIBUTORS
Mark Thiessen RE/MAX Professionals Winnipeg ND
Bruce Johnson Block Real Estate Services Kansas City MO
Brent McLean Eugene Industrial Real Estate, LLC Eugene OR
Rich Musgrove Hotel Asset Value Enhancement Walnut Creek CA
Giancarlo Da Prato IDI- Industrial Developments International El Paso TX
Todd Younghans Coldwell Banker Commercial Georgetown
Ken Krawczyk K S K Services Inc Pewaukee WI
Scot E Hall Wolf Realty Inc Glendale AZ
Linda Larabee TriStone Realty Management, LLC Houston TX
Douglas Page SVN high Desert Commercial Idaho Falls ID
Lon Lundberg Mark Bottles Real Estate Services Eagle ID
Gregg Waller Long and Foster Vienna VA
Peter Rasmusson Lee & Associates Elmwood Park NJ
Brandon Saylor Colliers International Albuquerque NM
Bill Whitlatch The Whitlatch Group Visalia CA
Kelly Keesee RE/MAX Lubbock Lubbock TX
Todd LaPlante Five Points Commercial Real Estate, Inc Huntington Beach CA
Dale DeBoer DeBoer Commercial Real Estate Modesto CA
Thomas Pollom Cassidy Turley Indianapolis IN
Dewey Struble Dewey Struble CCIM Reno NV
Eric Rehn Kennedy Wilson Brokerage Group Walnut Creek CA
Erik Schwetje EWS Advisors Winter Park FL
Doug Prickett Lionstone Investments Houston TX
C J Webb Grandbridge Real Estate Capital Charlotte NC
Sean KL Jackson Keller Williams Tri-Valley Realty Livermore CA
Benjamin Bach Cushman & Wakefield Waterloo Region Kitchener-Waterloo, Ontario, Canada
H Winston Hines HWH Properties Chesnee SC
Forrest Gibson PRG Developments Inc Jacksonville FL
Max Finkle ReMax Renaissance Realtors Chattanooga TN
Salvatore Vitale RE Commercial Appleton WI
Keith Thomas RE/MAX Parkside Olympia WA
Karen Higgins WestMark Realtors Lubbock TX
Patty Burns Fickling & Company Macon GA
Steve Massell Lee and Associates Atlanta GA
Scott Babcock CBSHOME Commercial Omaha NE
Tim Miller Close~Converse Inc Baxter MN
Gerard R C Pastrano Sperry Van Ness/ The Pastrano Grp San Antonio TX
Michael Johsz AT&T Tustin CA
Bill Ginder Caldwell Companies Houston TX
Kane Morris-Webster Colliers International Orlando FL
Bob White Adams Commercial Real Estate Decatur GA
Colin Khan Commercial Property Realty Ann Arbor MI
Simon Asef DMC Real Estate North Hollywood CA
Dan Dowd Cole Taylor Bank Chicago IL
Daphne Zollinger Daphne Real Estate Denton TX
Peter Kordonowy Summerhill Commercial Real Estate, LLC Chanhassen MN
Mike Mausteller Harvey Lindssay Commercial Real Estate Newport News VA
Joel Miller Sperry Van Ness Geneva IL
Jack Williams Colliers International Southfield MI
Palmer Bayless Emerge Real Estate Services Roswell GA
Jack Strollo Broadway Brokerage, LLC Lakeland FL
Kara Rafferty Jones Lang LaSalle Dallas TX
Danny Morales Hartman Income REIT Houston TX
Brian D Harris REOC San Antonio San Antonio TX
Hunter Swearingen Ciminelli Real Estate Services Tampa FL
Michael Manning Main Place Liberty Group Buffalo NY
Russell Hur BBG Austin TX
Stephanie Chang NAI Maestas & Ward Albuqeurque NM
Greg J Hrabcak HER Commercial Columbus OH
Philip Corriher The Chambers Group Charlotte NC
Wes Schollenberg Avison Young Winnipeg
Ethan Horn Ryan, LLC Denver CO
Bill Puddephatt First Service Bank Little Rock AR
QUARTERLY MARKET TRENDS u NATIONAL ASSOCIAT ION OF REALTORS ® AND CCIM INST ITUTE 28
Headline Line HEADLINE
Help the CCIM Institute make its Quarterly Market TRENDS data
more valuable: Provide your market and transaction information by
responding to future quarterly CCIM Market Intelligence Surveys.
Visit www.ccim.com/resources to learn more about
CCIM’s Quarterly Market Trends report.
Quarterly Market TRENDS
Vacancy Rate34%
2Q • 14