Banks Edge Back Into Investment Property Lending #cre #multifamily

Focus Is Still on Multifamily, and on Core Markets and Borrowers

nothumbAfter tentatively testing the water in 2011, banks increased their overall lending for commercial real estate in 2012 with total CRE loan balances outstanding at year-end up 3% year-over-year. Investment property loans outstanding showed the biggest gain, ending 2012 up 11% from 2011. And multifamily loans outstanding were up 7% year-over-year.

Banks also continued to shrink their loan exposure in areas that caused the biggest problems during the Great Recession. Construction and development loans outstanding ended down 16% year-over-year.

Still, a great deal of disparity exists between which banks are lending again and which borrowers and markets are benefitting.


 

“Larger institutions have historically been significantly under-allocated to CRE relative to the banking universe,” said Matthew Seminerio, a financial analyst for CoStar Group’s Property and Portfolio Research (PPR). “The largest banks (those with more than $50 billion in assets) are down 0.4% year-over-year, while banks with $10 billion to $50 billion in assets are up 7%. Smaller institutions are down even more. Banks with $1 billion to $10 billion were down 0.3%, and those with less than $1 billion, down 4.5%.”

“However, the larger banks are better positioned from a balance sheet perspective, and thus have also been able to take more writedowns,” Seminerio said. “For example, if you remove the impact of construction loans, the more than $50 billion change is actually up 3.6%, vs. 9.6%, 1.6%, and -3.1% for the other three categories, respectively.”

Here is how CRE lending for the six largest banks fared in 2012.

    • Bank — % Change in CRE Lending YoY (excluding construction & development)

 

    • PNC Bank — 15.02%

 

    • JPMorgan Chase Bank — 13.36%

 

    • Bank of America — 9.32%

 

    • U.S. Bank — 2.44%

 

    • Branch Banking and Trust Co. — 1.56%

 

  • Wells Fargo Bank — 1.45%

Pittsburgh-based PNC’s 2012 numbers include its acquisition of more than 400 branches across six Southeastern states from RBC Bank (USA) last year. This was PNC’s seventh acquisition in the past eight years.

For banks in the $10 billion to $50 billion asset range, here is how the six fared that had the largest amount of CRE loans on their books at year-end.

    • Bank — % Change in CRE Lending YoY (excluding construction & development)

 

    • People’s United Bank — 769.15%

 

    • Signature Bank — 39.81%

 

    • New York Community Bank — 6.14%

 

    • Synovus Bank — 2.87%

 

    • First-Citizens Bank & Trust Co. – (-0.47%)

 

  • Zions First National Bank – (-3.93%)

The New York City metropolitan area proved a huge stomping ground for many of biggest CRE lenders.

For People’s United Bank in Bridgeport, CT, mortgage warehouse lending, asset-based lending, New York commercial real estate and equipment finance, all contributed to total loan growth of $1.4 billion during 2012, the bank said. The bank also posted a $935 million increase in total deposits in 2012 and expanded it branch acquisition activity in both the Boston and New York City MSAs.

Signature Bank posted record loan growth in 2012, including commercial and industrial, commercial real estate including multi-family and specialty finance. At year-end 2011, loans comprised 46.7% of its balance sheet and that grew to 56% at the end of 2012.

“This past year we again demonstrated our consistency, discipline and reputation as the bank of choice for New York privately owned businesses,” said Scott A. Shay, chairman of Signature Bank.

CoStar also looked at the six largest bank lenders that concentrate primarily in CRE lending. More than 90% of these banks’ loans outstanding were for commercial real estate.

    • Bank — % Change in CRE Lending YoY (excluding construction & development)

 

    • The Dime Svgs. Bank of Williamsburgh — 31.08%

 

    • Oritani Bank — 26.98%

 

    • Parkway Bank and Trust Co. – (-3.80%)

 

    • The National Republic Bank of Chicago – (-8.01%)

 

    • Intervest National Bank – (-8.12%)

 

  •  United Central Bank – (-18.00%)

Vincent F. Palagiano, chairman and CEO of Brooklyn, NY-based Dime, said his bank’s results reflect elevated loan refinance activity. The bank also typically ranks among the top five multifamily lenders in its delineated lending market (primarily Manhattan, Brooklyn and Queens counties), and Palagiano said his expectation is that it will continue to be among the leaders again with last year’s results.

The bank also expects to record gains on property sales during both the December 2012 and March 2013 quarters. Real estate values in New York City have climbed steadily over the past 15 years, and the bank owns certain New York City properties with market values greatly exceeding their recorded book values, Dime reported.

Wash, NJ-based Oritani Bank’s primary focus is organic growth of multifamily and commercial real estate loans. However, the bank said it does not expect originations to continue at its 2012 pace in fiscal 2013.

Not all sizes of borrowers fared as well under the improving CRE lending conditions. Loans outstanding to small businesses secured by nonresidential real estate ended down 4% year-over-year. Banks had 61,650 fewer small business loans on their books at the end of 2012 than at the end of 2011. That amounted to $ 13.2 billion less in outstanding small business loan balances.

Overall, however, owner-occupied loans outstanding to large and small businesses ended up 3% year-over-year.

CRE asset quality indicators continued to improve for banks in the second quarter. As of the end of 2012, 4.2% of the banks’ total commercial real estate loans were delinquent. This was down from 6.2% at the end of 2011.

In addition, non 1- to 4-family restructured loans and leases ended down 19% year-over-year.

The amount of total delinquent CRE loans and foreclosed properties continues to fall significantly. The total amount dropped 29% year-over-year and now stands at less than $85 billion.

Banks disposed of $5.94 billion in foreclosed properties in 2012 with the largest percentage drop off coming from multifamily properties (down 31%). Banks still held more than $22 billion in foreclosed CRE assets on their books, with more than $12 billion of that being construction and development properties.

It’s All Relative

This week, the Mortgage Bankers Association released an analysis of FDIC data and found that commercial and multifamily mortgages fared better through the credit crunch and recession than any other major type of loan held by banks and thrifts.

The MBA analysis showed that commercial and multifamily mortgages had delinquency rates lower than the average delinquency rate for banks’ overall books of loans and leases and that the charge-off rates for commercial and multifamily mortgages were lower than for any other major loan type held by commercial banks and thrifts during that period.

“Commercial and multifamily mortgages were a net positive for banks and thrifts through the credit crunch and recession,” said MBA vice president of commercial real estate research Jamie Woodwell. “The amount of credit extended by banks stayed relatively constant during the recession; the delinquency rates for commercial and multifamily mortgages remained relatively subdued; and banks and thrifts saw far less in charge-offs for their commercial and multifamily mortgages than they did for other loan types.”

Among the MBA’s other findings:

Over the course of the recession, the credit crunch and headlines about the lack of capital available for commercial real estate, the actual amount of commercial and multifamily mortgage debt extended and held by banks remained remarkably steady. The balance of commercial mortgages fell just 3% between the peak (2009) and trough (2011) before rising again in 2012.

By contrast, the balance of construction loans fell by 62% between 2007 and 2012; the balance of commercial and industrial loans fell by 21% between 2008 and 2010 before rising again in 2011 and 2012; and the balance of single-family loans fell by 14% between 2007 and 2012.

Across various loans and leases held by banks and thrifts, commercial and multifamily mortgages finished 2012 with 30+ day delinquency rates lower than the average for all loans and leases held by these institutions. At the end of the fourth quarter, commercial mortgages had a 30+ day delinquency rate of 3.55%, down from 4.67% at the end of 2011. Multifamily mortgages recorded a rate of 2.19%, down from 3.22% at the end of 2011.

Throughout the credit crunch and recession and into 2012, commercial and multifamily mortgages had the lowest charge-off rates of any type of loan held by commercial banks and thrifts. In 2012, banks and thrifts charged off 0.55% of their balance of commercial mortgages and 0.32% of their multifamily mortgages, compared to charge-off rates of 0.84% and 0.74% respectively in 2011.

In aggregate dollars, the charge-offs of commercial and multifamily mortgages by banks and thrifts also remained far below those of other loan types during the recession. From 2007 through 2012, banks and thrifts charged off (net) $212 billion of single-family mortgages, $205 billion of credit card loans, $95 billion of commercial and industrial loans, $85 billion of construction loans and $72 billion of other loans to individuals. By contrast, over the same period they have had to charge-off only $41 billion in commercial mortgages and $8.5 billion in multifamily mortgages.

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Mortgage REITs: What They Are and Aren’t

By A.D. PRUITT

Mortgage real-estate investment trusts, which have operated in relative obscurity for decades, have emerged center stage in the debate over the Federal Reserve’s strategy to stimulate the economy.

Some policy makers, including Fed governor Jeremy Stein, have pointed to the explosive growth of mortgage REITs as an example of risks emerging in the economy as a result of the Fed holding down interest rates.

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The assets of mortgage REITs ballooned to $426 billion in the third quarter of 2012 from $111.5 billion at the end of 2009, according to SNL Financial.

The concern has raised questions about the recent performance of mortgage REITs, their current health and whether they pose any possible risk for the broader economy.

Here are some answers:

Q: What are mortgage REITs?

Mortgage REITs are niche financial stocks that have been around since the REIT industry was established in 1960. These REITs don’t buy office buildings or malls but invest in real-estate debt. Some used to make loans but now primarily buy commercial and residential mortgage-backed securities. Many of the 33 existing mortgage REITs currently focus on buying mortgage securities guaranteed byFreddie Mac FMCC -0.68% and Fannie MaeFNMA -1.02% which are government-backed financial firms.

 

Q: How do mortgage REITs make money?

They borrow money using short-term debt and use the funds to buy longer-term mortgage securities, earning the spread between the rates. They also use leverage to boost their returns.

 

Q: Why is the Fed’s stimulus policy creating a mortgage-REIT boom?

The Fed is keeping short-term interest rates low to stimulate the economy. This is greatly reducing mortgage REIT borrowing costs, enabling them to make more money off their bond portfolio. REITs that purchase Freddie and Fannie debt currently pay dividends of about 12%, compared with 3.4% for equity REITs and 1.8% for U.S. Treasury bonds. Low rates are driving investors into instruments such as REITs that promise high returns. Overall, mortgage REITs have raised $30 billion in equity during the past two years to buy cheap mortgage debt.

Q: Should I call my broker?

Be careful. The Fed’s economic-stimulus plan has been a double-edged sword for mortgage REITs. While short-term rates have lowered funding costs for the REITs, the Fed’s $80 billion monthly purchases of mortgage securities—part of its quantitative-easing program—has pushed mortgage bond prices higher and yields lower. As a result, some REITs have been less profitable and have seen declines in dividends and stock prices over the past six months.

Q: What is the larger danger?

Fed officials are concerned about their funding model. During the 2008 crisis, financial institutions that depended on short-term debt were prone to investor panics. They also face risk if interest rates rise, a likely outcome when the Fed slows down quantitative easing. That would increase the short-term borrowing costs of mortgage REITs and cut the value of the mortgage bonds that they hold, possibly resulting in losses.

Q: Does this pose a risk for the broader economy?

Probably not. Mortgage REITs pose no systemic economic threat because the sector is still a small player in financial markets despite its rapid growth. Mortgage REITs represent less than 10% of the nearly $7 trillion securitized residential and commercial mortgage market. But there are numerous other investment vehicles that also have seen rapid growth because of the Fed’s interest-rate policies, such as the junk-bond market. If all of these vehicles suffer big losses at the same time, there is more systemic risk.

Q: What do mortgage REITs say about the Fed’s concerns?

Mortgage REIT executives say they are protected against these future pitfalls. They say they aren’t as highly leveraged as they were before the financial crisis. REIT executives also say they are significantly hedged against a rise in interest rates by using interest rate swaps. Mortgage REITs focused on Fannie and Freddie debt point out that they survived other spikes in short-term rates. Unlike the market for some mortgage debt, such as bonds backed by subprime loans, they point out that the market for government-secured debt has never collapsed.

Q: Why are analysts still skeptical?

Analysts say that hedging tools may not be able to offset a steep drop in bond prices that may occur if the Fed halts its bond-buying program. Although companies can reinvest at lower bond prices, that will depend on having enough capital left over from covering potential losses on bond prices.

Q: Have mortgage REITs attracted other regulatory scrutiny?

In 2011, the Securities and Exchange Commission launched a review of mortgage REITs to determine if these companies should remain unregulated companies or be subjected, like mutual funds, to the Investment Act of 1940. Companies that invest the majority of their assets in real estate have always been exempted from the Investment Act. It appeared the SEC was looking at whether a distinction should be made between REITs that manage and operate real estate versus those that invest in real-estate securities. But the SEC hasn’t pursued the matter.

—Jon Hilsenrath contributed to this article.

A version of this article appeared March 6, 2013, on page C6 in the U.S. edition of The Wall Street Journal, with the headline: Mortgage REITs: What They Are and Aren’t.

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U.S. Commercial-Property Prices Seen Rising Near Peak #CRE

Prices for U.S. commercial property are expected to climb in the next six months, extending a rebound that has sent values close to levels reached at the market’s peak in 2007, according to Green Street Advisors Inc.

There is an 80 percent likelihood that commercial real estate prices will rise over the next six months, the Newport Beach, California-based research firm said in a report yesterday. Prices climbed 1 percent in February and are within 1 percentage point of their August 2007 high, according to the company, which tracks real estate investment trusts.

“We’re effectively back to peak pricing,” Mike Kirby, Green Street’s director of research, said in a phone interview. “We’re fairly confident that the rebound will continue.”

A “renaissance” in the issuance of commercial mortgage- backed securities will help boost prices, particularly for lower-quality properties, because financing will be more available, according to the report. JPMorgan Chase & Co. raised its 2013 CMBS sales forecast to $70 billion from $45 billion last month as issuance in January and February exceeded expectations.

Green Street’s commercial real estate price index is based on its estimate of the value of portfolios of REITs (BBREIT), which tend to own high-quality properties. Another measure of national values, the Moody’s/RCA Commercial Property Price Index, is 20 percent below its peak in November 2007.

REITs are trading at “moderate” premiums to net asset values, which historically has been a positive sign for prices of apartments, industrial and office properties, malls and strip shopping centers, according to the report. The spread between real estate returns and yields on investment-grade corporate bonds is also wider than usual, which is also a signal for climbing prices, Green Street said.

“Values of high-quality (i.e., REIT-owned) properties have recovered virtually all of their lost value, while prices of lower-quality assets remain mired in the doldrums,” according to the report, written by Kirby and Peter Rothemund. “A recent renaissance in the CMBS market –- issuance is back to ’04 levels -– bodes well for a narrowing of the gap.”

To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

 

Source: BusinessWeek.com

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Reis Provides Tucson & #Phoenix Commercial Real Estate Data Analysis #CRE

In his quarterly briefing this past month, Dr. Victor Calanog, Reis’s Vice President of Research and Economics, highlighted the drop in Tucson’s Q4 2012 revenue per square foot for office space, a 0.8% decrease from Q4 2011.  This compares to a national increase of 2.3% over the same period.  During this time, Phoenix experienced a 1.1% increase.

TUCSON’S VACANCY RATE & LIMITED NEW CONSTRUCTION HELPING RECOVERY

Slow to recover, Tucson is still reeling from the economic downturn.  This sluggishness is reflected across all sectors, and the office market is no exception.  Part of the reason for the declining revenue in Tucson is the stubbornness of rent growth in the office real estate market.  Quarterly effective rent growth was -0.4% in Q4 2012, ranking near the bottom of all major metros tracked by Reis.  This bad news is offset by a vacancy rate of 15.5%, which is comfortably below the nationwide average of 17.1%.  Limited new construction has helped to maintain a relatively low vacancy rate despite inconsistent demand.

PHOENIX JOB MARKET CONTINUES TO IMPROVE

Improving commercial marketsComparatively, Phoenix fared much better than Tucson in Q4 2012 in terms of effective rent growth: At +0.4%, the metro placed close to the midpoint of the major markets covered by Reis.  Still, the recovery in office space has been tepid nationwide and Phoenix has not been immune.  Particularly worrying is Phoenix’s high vacancy rate, which has historically been quite volatile.  After hitting a cyclical low of 11.5% in 2006, the current figure stands at 25.8%, among the highest in the country.  But while faint, there is a light at the end of the tunnel as the local job market has shown signs of life.  The metro’s unemployment rate has fallen from a cyclical high of 10.6% to 6.7% as of the end of 2012.  As the job market continues to improve, Phoenix landlords will benefit from firms looking to expand their space to meet burgeoning staff levels.

Q4 2012 BRIEFING PREDICTS SLOW AND STEADY YEAR FOR 2013 COMMERCIAL REAL ESTATE

Dr. Calanog concluded Reis’s Q4 2012 briefing by predicting a measured increase in national commercial real estate fundamentals throughout 2013, saying that he expected slow and steady growth for the year.  We expect Tucson and Phoenix to follow a similar slow growth path for the foreseeable future.

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Big Real-Estate Firms Are Going to School

By DAWN WOTAPKA

Developers Test the Market for Off-Campus College Housing; Amenities Include Tanning Beds and Resort-Style Pools

[image]Erdy McHenry ArchitectureRendering of a student-housing community by Brandywine Realty and Campus Crest in Philadelphia.

Housing for college students, long dominated by small players willing to put up with beer pong and raucous parties, is attracting some of the biggest names in real-estate development.

Lennar Corp., LEN +2.08% one of the nation’s largest home builders, this month broke ground on its first off-campus apartment community near the University of Texas at Austin. Toll Brothers Inc., TOL +1.30% best known for its sprawling suburban homes, is purchasing land near the University of Maryland in College Park and Penn State University in State College, Pa., on which it plans to build upscale student housing. The two Toll Brothers projects, totaling about 3,100 beds, could open by 2015.

Brandywine Realty TrustBDN +1.21%a real-estate investment trust that specializes in suburban office space and other real estate, recently teamed up with Campus Crest Communities Inc.,CCG +3.25% to build a 33-story tower in Philadelphia that will serve students from several schools, including the University of Pennsylvania and Drexel University.

The moves are designed to help the companies better weather the next economic recession by diversifying into areas considered less sensitive to downturns. During the real-estate crash, as prices of single-family homes declined and apartment landlords reduced rent, many student-housing landlords continued to raise rent, thanks to the generosity of parents and student-loan programs.

Meanwhile, established players in the market are on a buying spree in hopes of remaining competitive against the big-name newcomers. Last year, a record $3.7 billion of student-housing properties traded hands, up nearly 95% from the previous year, according to ARA Student Housing.

“A lot of people think our space is hot,” said J. Wesley Rogers, president of Landmark Properties, a longtime owner and developer with about 5,000 beds and 2,700 under construction. “You see a lot of new players circling the space right now.”

The frenzy comes amid increasing debate about the skyrocketing cost of college tuition and the ease of borrowing that is leading many students to graduate with heavy debt loads. Also, the companies are ramping up construction at time when college-student enrollment has slipped, falling 1.8% in 2012 from 2011, according to the nonprofit National Student Clearinghouse Research Center.

But the companies maintain that over the long term, enrollment will continue to rise, especially at large state schools where much of the construction is taking place. And they believe that demographics support an expanding industry. More than three million high-school students are expected to graduate each year until the 2021-2022 academic year, according to the Department of Education, and many of them are expected to pursue higher education. At the same time, enrollment from foreign students remains robust.

Yet, most colleges and universities don’t have enough beds to go around. American colleges are short a total of between 1.5 million and 2.15 million beds, according to research from consultant Michael Gallis & Associates. Moreover, many colleges and universities lack the funds needed to upgrade current dormitories or build new ones and are relying on the private sector to fill the gap.

“They just can’t accommodate all these people. Some of them have just handed over all the reins altogether,” said Will Baker, a senior vice president with Walker & DunlopInc., WD -1.98% which financed $157.1 million of off-campus housing deals in 2012.

Still, some industry analysts question whether some newcomers to student housing understand the hidden risks and high costs associated with the business, which requires more maintenance and management oversight than typical apartment housing. Students are notoriously hard on housing and they are known to hop from property to property, leaving older properties more at risk of occupancy declines.

Each bed typically turns over annually, and a bed that is empty when school starts often remains empty for the entire semester. Operators also have to balance the demands of students straddling childhood and adulthood, educators and overprotective parents.

Toll Brothers says it likely will allow property managers familiar with the student-housing business to help. “The management is very important because you have three months to get these buildings leased up,” said Martin Connor, Toll’s chief financial officer. “You have a two-week turnover period, generally, where all your tenants move out and all your tenants move in.”

There is growing concern of overbuilding in some markets. Construction numbers for individual cities are limited, but some 40,000 off-campus beds are in the pipeline for 2013, according to ARA. The firm tracks 71 projects under way, up from about 40 last year.

To entice students to pay top dollar, developers are adding upscale amenities including tanning beds, resort-style pools and ice-skating rinks. Today’s developments give students their own bedroom and bathroom, allowing developers to charge more rent. Depending on the market and how many students share a unit, monthly rents can approach $1,000 per bed.

“As today’s parents know as they drop their kids off at college, these are not the most inexpensive places you can find, like some of us may have experienced in our college days,” said Mr. Connor, 48 years old. “They are high quality, in great locations and generate significant rent.”

There are concerns that some companies might be adding capacity too quickly.American Campus Communities Inc., ACC +0.57% the nation’s largest publicly held owner of student housing, which spent $1.8 billion on new beds last year, surprised industry watchers earlier this month when it reported that its student housing portfolio was 43.3% preleased as of February for the 2013 academic year that begins next fall, down from 46.4% at this time last year.

“There’s still plenty of time in the leasing season,” American Campus Chief Executive Bill Bayless pointed out.

While it is still early, analysts are monitoring the issue. Alexander Goldfarb, a REIT analyst with Sandler O’Neill + Partners, said he is confident American Campus will fill the beds before the new academic year begins. But “if we get another quarter and the gap is still pretty big, people may question if it’s a macro issue.”

Developers’ heavy construction activity has prompted Freddie MacFMCC +14.48%which purchases student-housing loans from lenders, to turn somewhat cautious. “You can’t help but notice there’s a lot of interest now going into that space,” said John Cannon, head of multifamily sales at Freddie Mac, which purchased $1.7 billion in student-housing loans last year, up 55% from 2011.

“You want to be careful that the market’s not overheating and you’re not getting ahead of yourself,” he said.

A big reason why companies are diversifying into student housing is that they believe the sector is recession-resistant.

Kayne Anderson Real Estate Advisors, a private-equity investor with 15,000 beds, posted annual returns that exceeded 20% between 2007 and 2012, despite the economic downturn. The firm isn’t worried about oversupply.

“I don’t think we’re in a situation where you’re looking at overdevelopment,” said Al Rabil, managing partner of Kayne Anderson. “In almost all cases, you’re looking at a situation where development is just catching up in creating supply to keep up with demand.”

A version of this article appeared February 27, 2013, on page C8 in the U.S. edition of The Wall Street Journal, with the headline: Big Real-Estate Firms Are Going to School.

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Commercial Real Estate Sectors Steadily Improve #CRE

Media Contact: Walter Molony / 202-383-1177 / Email

WASHINGTON (February 25, 2013) – Major commercial real estate sectors continue to improve, albeit slowly, with gradual economic improvement and job creation driving absorption of space, according to the National Association of Realtors® quarterly commercial real estate forecast.

Lawrence Yun, NAR chief economist, said rental housing demand has been exceptionally strong. “Rent increases have been higher in multifamily housing where supply is not matching strong demand, thereby allowing landlords to raise rents at faster rates,” he said. “Overall commercial real estate leasing activity continued to grow in most markets during the closing months of 2012, which is modestly lowering vacancy rates in all of the commercial sectors early this year.”

National vacancy rates over the coming year are expected to decline 0.4 percentage point in the office market, 0.4 point in industrial, 0.3 point for retail and 0.1 point in multifamily, with that sector experiencing the tightest availability.

“Business spending is expected to rise faster in 2013 because of record high corporate profits. Low interest rates also are permitting companies to improve their balance sheets,” Yun said.

NAR’s latest Commercial Real Estate Outlook1 offers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data for metro areas were provided by REIS, Inc.,2 a source of commercial real estate performance information.

Office Markets

Vacancy rates in the office sector are forecast to fall from a projected 16.0 percent in the first quarter to 15.6 percent in the first quarter of 2014.

The markets with the lowest office vacancy rates presently (in the first quarter) are Washington, D.C., with a vacancy rate of 9.4 percent; New York City, at 9.6 percent; and Little Rock, Ark., 12.1 percent.

Office rents should increase 2.6 percent in 2013 and 2.8 percent next year, following a 2.0 percent gain in 2012. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is expected to total 34.0 million square feet this year and 42.3 million in 2014.

Industrial Markets

Industrial vacancy rates are likely to decline from 9.6 percent in the first quarter of this year to 9.2 percent in the first quarter of 2014.

The areas with the lowest industrial vacancy rates currently are Los Angeles and Orange County, Calif., each with a vacancy rate of 3.6 percent; Miami, 5.6 percent; and Seattle at 6.0 percent.

Annual industrial rents are projected to rise 2.3 percent this year and 2.6 percent in 2014, after increasing 1.7 percent last year. Net absorption of industrial space nationally is likely to total 121.8 million square feet in 2013 and 103.5 million next year.

Retail Markets

Retail vacancy rates are forecast to slide from 10.7 percent in the first quarter of the year to 10.4 percent in the first quarter of 2014.

Presently, markets with the lowest retail vacancy rates include San Francisco, 3.5 percent; Fairfield County, Conn., at 4.2 percent; and Orange County, Calif., 5.2 percent.

Average retail rents will probably rise 1.5 percent in 2013 and 2.1 percent next year, following a 0.8 percent gain in 2012. Net absorption of retail space is seen at 11.9 million square feet in 2013 and 16.4 million next year.

Multifamily Markets

The apartment rental market – multifamily housing – should see vacancy rates ease from 4.0 percent in the first quarter to 3.9 percent in the first quarter of 2014; vacancy rates below 5 percent generally are considered a landlord’s market with demand justifying higher rents.

Areas with the lowest multifamily vacancy rates currently are New Haven, Conn., at 2.0 percent; New York City, 2.1 percent; and Minneapolis and Syracuse, N.Y., each at 2.5 percent.

Average apartment rents are expected to increase 4.6 percent this year and 4.7 percent in 2014, after rising 4.1 percent in 2012. Multifamily net absorption is projected at 270,600 units in 2013 and 253,200 next year.

The Commercial Real Estate Outlook is published by the NAR Research Division. NAR’s Commercial Division, formed in 1990, provides targeted products and services to meet the needs of the commercial market and constituency within NAR.

The NAR commercial community includes commercial members; commercial real estate boards; commercial committees, subcommittees and forums; and the NAR commercial affiliate organizations – CCIM Institute, Institute of Real Estate Management, Realtors® Land Institute, Society of Industrial and Office Realtors®, and Counselors of Real Estate.

Approximately 78,000 NAR and institute affiliate members specialize in commercial brokerage and related services, and an additional 232,000 members offer commercial real estate services as a secondary business.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries. For additional commentary and consumer information, visitwww.houselogic.com and http://retradio.com.

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The Future is Bright – And Flexible – Daily News Article – #CRE

ORANGE COUNTY-With new workplace demands, more employees in smaller spaces, being one. Both workers and employers need to adapt and, in Emily Watkins’ view be “flexible.” This week, the vice president corporate client development at JLL took some time to cover social media (her preferred platform is Twitter),  new work environments and better education in the commerical real estate industry to allow for more women to thrive.

GlobeSt: First of all, how do you think the commercial real estate industry can work more towards a positive, more innovative structure in 2013?

I think continuing our efforts to better integrate with other functions is a great start.  The better understanding we have of those bigger-picture strategies, the more effectively we focus our lens on driving innovation.  Additionally, being more creative and exploring innovation-drivers from industries outside of our own, then learning to apply new thinking and strategies within, we’ll generate valuable, positive ideas for our overall structure.

GlobeSt: How do you view the ideal office of the future – one that, hopefully, prompts creativity and productivity? 

I think the ideal office of the future will be flexible.  And I mean that literally: flexible walls, the ability to easily convert space to support both short- and long-term project teams, and provide semi-private space or creative, open, collaborative space. Office space needs to fit the needs of the worker and depends on what he or she needs to accomplish at a given time.

GlobeSt: In the Vlog from last year’s CoreNet Global Summit, you mention how one company effectively used social media. In what ways can the commercial real estate industry benefit from adopting new media and social media? 

Social media gives us the ability to engage with almost anyone at any time. The firms using it well are able to gain a better understanding on and insight to what is important to their customers, employees even competitors. In a world of “B2Me” it’s not about having a great message to consumers; rather, it’s about interacting with those consumers to better your own product or service.

Globest: Which social media platform do you find the most useful and why? 

I love Twitter because it connects me to such a broad wealth of content, ideas and information, while also providing me with the targeted one-on-one engagement platform of direct communication. Where else can you follow-up on yesterday’s conference call with a member of the team hundreds of miles away, then read about the latest in “pop-up” libraries trends from an industry magazine, and  learn about the tiny red West African “miracle berry” … all in the time it takes to have a sip of cappuccino?

GlobeSt:As a woman in the industry, how do you think things could positively change to equally profile men and women? Unless you think that both genders are represented equally already and if so, could you elaborate on that? 

I think our industry has a way to go before we are represented equally, but I do see a lot of momentum in a great direction.  The more we can educate our industry on how diversity generates innovation and successes – both in terms of driving business and leading to a more inclusive workforce – we’ll see more representation.  At Jones Lang LaSalle, I am fortunate to be leading our women-focused Employee Resource Group, The Women’s Network, and every day I’m so impressed with the progress we’re making, the impact have as a resource and the connections we’re making between employees and leadership across our national offices.

 

The Future is Bright – And Flexible – Daily News Article – GlobeSt.com.

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