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2Q16 CAPITAL MARKETS REPORT
OFFICE TRENDS
Average Price Per Square Foot; Institutional Quality
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
$314
$186
$349
$150
$200
$250
$300
$350
$400
United States 10-Year Average
[10-Year Average = $280 PSF]
Prices in major markets continued to climb in
the second quarter, albeit at a slower pace
than previous quarters.
$1,062
$805
$715
$650
$610
$535
$469
$405
$350
$349
$326
$319
$307
$305
$258
Manhattan
SanFrancisco
Boston
SanJose
WashingtonD.C.
LosAngeles
Seattle
Miami
Austin
UnitedStates
SanDiego
Portland
Denver
OrangeCounty
Chicago
$0
$250
$500
$750
$1,000
$1,250](https://image.slidesharecdn.com/a72c48c5-ea7c-46d7-92d0-38224e001ec2-160726144826/75/2Q16-NGKF-US-Capital-Markets-Report-20-2048.jpg)
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2Q16 CAPITAL MARKETS REPORT
OFFICE TRENDS
Average Cap Rate; Institutional Quality
Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
5.0%
7.6%
5.7%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
4%
5%
6%
7%
8%
United States 10-Year Average
[10-Year Average = 5.8%]
Cap rates in some United States cities have
begun to expand after several years of
compression.
4.4%
4.4%
4.9%
4.9%
5.1%
5.2%
5.3%
5.4%
5.5%
5.7%
5.7%
5.8%
5.9%
6.0%
Manhattan
SanFrancisco
Washington,DC
Boston
Seattle
SanJose
Miami
LosAngeles
OrangeCounty
UnitedStates
SanDiego
Denver
Atlanta
Chicago
0%
2%
4%
6%](https://image.slidesharecdn.com/a72c48c5-ea7c-46d7-92d0-38224e001ec2-160726144826/75/2Q16-NGKF-US-Capital-Markets-Report-21-2048.jpg)
2Q16 NGKF US Capital Markets Report
- 1. CAPITAL MARKETS REPORT Forthe Intelligent Investor 2Q16 UNITED STATES Todd P. Hershman Associate Director 212.359.8520 [email protected] Jonathan Mazur Managing Director, Research 212.372.2154 [email protected]
- 2. 2 2Q16 CAPITAL MARKETSREPORT 2Q16 UNITED STATES CAPITAL MARKETS REPORT 3 Market Summary 4 Executive Overview 5 Economic Dashboard 6 Global Yields 7 Top Regional Buyers 8 Pricing Heat Map - Office 9 18-Hour Cities 10 Investment Activity Index - United States Overall Rankings 11 Investment Activity Index - Top 10 Cities 12 Investment Activity Index - Ranking Matrix 13 Capital Markets Analysis 14 Global Capital 15 Global Outbound United States Capital 16 International Capital Distribution - United States 17 International Capital Investment - United States 18 Buyer Distribution 19 Total Sales Volume - Major Metropolitan Cities 20 Office Trends - Average Price Per Square Foot 21 Office Trends - Average Cap Rates 22 Multihousing Trends - Primary vs. Secondary Markets 23 Multihousing Trends - Primary Market Pricing Matrix 24 Retail Trends - Primary vs. Secondary Markets 25 Retail Trends - Urbanization in Premier Markets 26 Hospitality Trends 27 Industrial Trends 28 Healthcare Trends 29 Development Site Trends 30 Debt Market Statistics 31 CMBS Issuance 32 CMBS Volume by Property Type 33 Debt Market Update 34 Commercial Mortgage Maturities
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- 4. 4 2Q16 CAPITAL MARKETSREPORT 4 Commercial and multihousing mortgage debt outstanding is expected to reach $2.9 trillion in 2016; more than three percent higher than at the end of 2015. MBA projects originations of commercial and multihousing mortgages will total $500 billion in 2016, roughly flat from the $504 billion originated in 2015 and down slightly from the record-high $508 billion originated in 2007. More than $1 trillion of commercial real estate debt is scheduled to mature between 2018-2019. Market LegislationFinancing EXECUTIVE OVERVIEW Following back-to-back historic years, demand for quality product remains strong despite slowing overall volume. International capital continues to be prevalent in the United States market with future investment mandates potentially shifting away from Europe. Cap rates in some markets have moved from compression to expansion. There are currently twenty five markets averaging at least $200 per square foot for office buildings, with eight averaging at least $400 per square foot. FIRPTA reform enacted to ease restrictions, allowing for additional foreign investment into the United States. PATH Act regulations will limit tax-free REIT spinoffs beyond traditional real estate companies. New Credit Risk Retention Rule takes effect December 24th, 2016. EB5 extended, but is set to expire in September.
- 5. 5 2Q16 CAPITAL MARKETSREPORT 5 ECONOMIC DASHBOARD Source: Federal Reserve Bank of St. Louis, Newmark Grubb Knight Frank * Consumer Price Index Inflation for 2016 is based on May data release. The Fed has been reducing its projection of the funds rate for the past four years as growth expectations have been tempered. 2.40% 5.60% 1.65% 4.25% 2.40% 5.60% 1.69% 4.00% 2.20% 5.35% 2.00% 3.75% 2.15% 5.10% 0.17% 3.75% 2.00% 4.80% 1.07% 3.00% GDP Unemployment Rate CPI Inflation Federal Funds Rate June '12 June '13 June '14 June '15 June '16
- 6. 6 2Q16 CAPITAL MARKETSREPORT -2.00% -0.50% 1.00% 2.50% 4.00% 5.50% United States All Property Type Cap Rate Average = 5.2% Singapore Australia China 232Bps GLOBAL YIELDS 10-Year Government Bonds vs. United States Cap Rates Source: Newmark Grubb Knight Frank Research, Trading Economics International Capital continues to flock to U.S. commercial real estate as cap rates offer significant upside to their local bond yields. Switzerland Japan Germany France United Kingdom Canada United States South Korea 578Bps 544Bps 534Bps 504Bps 436Bps 417Bps 376Bps 374Bps 329Bps 320Bps
- 7. 7 2Q16 CAPITAL MARKETSREPORT TOP REGIONAL BUYERS All Property Types; 12-Month Totals Source: Newmark Grubb Knight Frank Research, Real Capital Analytics West Company $ Volume Blackstone $10.5B Invesco $1.9B TIAA $1.7B Sun Communities $1.7B CPP Investment Board $1.6B Southwest Midwest Southeast Mid-Atlantic Northeast Company $ Volume Blackstone $3.1B Starwood Capital Group $2.5B China Life Insurance $1.1B Global Logistics Properties $1.1B CPP Investment Board $977M Company $ Volume Blackstone $1.6B ADIA $864M PSP Investments $859M 601W Companies $842M Lone Star $749M Company $ Volume Starwood Capital Group $3.7B Blackstone $1.7B CPP Investment Board $1.2B ADIA $1.1B PSP Investments $1.1B Company $ Volume Lone Star Funds $4.5B Blackstone $2.5B UDR $900M China Life Insurance $799M Global Logistics Properties $799M Company $ Volume Blackstone $10.9B Ivanhoé Cambridge $6.4B Qatar Investment Authority $3.8B SL Green $2.9B RXR Realty $2.8B Blackstone continues to be one of the top two investors in each region following their large portfolio purchases from Hines and RioCan.
- 8. 8 2Q16 CAPITAL MARKETSREPORT 8 Price Per Square Foot PRICING HEAT MAP - OFFICE Greater than $400 $201-$400 $100-$200 $100-$200 There are currently twenty five markets averaging at least $200 per square foot for office buildings. Source: Newmark Grubb Knight Frank Research, Real Capital Analytics Office sales in eight United States metropolitan markets currently average more than $400 PSF: Manhattan, San Francisco, San Jose, Los Angeles, Boston, Washington D.C., Miami and Seattle. California has six markets averaging at least $200 per square foot for office buildings: San Francisco, San Jose, Los Angeles, Orange County, San Diego and East/North Bay.
- 9. 9 2Q16 CAPITAL MARKETSREPORT Office Rental Growth (Past 12 Months) Investment Sales Vol Growth (Past 12 Months, All Types) Austin 6.1% 6.0% Atlanta 6.1% 15.6% Charlotte 4.2% 4.7% Denver 7.3% 28.1% Nashville 12.0% 2.6% Portland 10.2% 28.0% Seattle 5.2% 29.5% . . . . . . . PEOPLE GRAVITATE, COMPANIES FOLLOW, CITIES PROSPER 18-Hour Cities AUSTIN Total Net Migration (Past 24 Months): 81,453 2016 Population Growth Projections: 3% NASHVILLE Total Net Migration (Past 24 Months): 49,949 2016 Population Growth Projections: 1.4% ATLANTA Total Net Migration (Past 24 Months): 111,965 2016 Population Growth Projections: 1.9% CHARLOTTE Total Net Migration (Past 24 Months): 63,831 2016 Population Growth Projections: 1.9% SEATTLE Total Net Migration (Past 24 Months): 63,889 2016 Population Growth Projections: 1.4% PORTLAND Total Net Migration (Past 24 Months): 35,715 2016 Population Growth Projections: 1.3% DENVER Total Net Migration (Past 24 Months): 68,534 2016 Population Growth Projections: 1.6% NEW TECHNOLOGY Atlanta, Austin, Seattle Austin, Seattle Austin, Charlotte, Denver, Portland, Seattle Nashville Nashville Nashville Austin Denver, Portland, Seattle Atlanta, Seattle Austin, Charlotte, Denver, Portland, Seattle Total Net Migration - People (Past 24 Months) LEGEND UNITED STATES POPULATION GROWTH = 0.77%
- 10. 10 2Q16 CAPITAL MARKETSREPORT RANK CITY 1 New York City 2 San Francisco 3 Los Angeles 4 Boston 5 Washington D.C. 6 Chicago 7 San Jose 8 Seattle 9 Miami 10 Dallas/Fort Worth RANK CITY 11 San Diego 12 Austin 13 Orange County 14 Denver 15 Portland 16 Phoenix 17 Atlanta 18 Houston 19 Philadelphia 20 Northern New Jersey RANK CITY 21 Nashville 22 Baltimore 23 Charlotte 24 Orlando 25 Tampa/St. Petersburg 26 Sacramento 27 Las Vegas 28 Honolulu/Hawaii 29 Inland Empire 30 Raleigh/Durham RANK CITY 31 Salt Lake City 32 Westchester/Fairfield 33 San Antonio 34 Detroit 35 Kansas City 36 Minneapolis/St. Paul 37 Pittsburgh 38 Columbus 39 Jacksonville 40 New Orleans INVESTMENT ACTIVITY INDEX United States Overall Rankings Source: NGKF Research, U.S. Bureau of Labor Statistics, U.S. Census Bureau, Real Capital Analytics, Costar, National Association of Realtors Markets showing the most strength are those influenced by technology companies and their youthful, creative employee base.
- 11. 11 2Q16 CAPITAL MARKETSREPORT Investment Sales Volume Rank Billions New York City 1 $56.1 Los Angeles 2 $27.8 Chicago 3 $19.8 Boston 4 $19.0 Dallas/Fort Worth 5 $18.1 Atlanta 6 $15.2 Seattle 7 $14.3 San Francisco 8 $13.0 Denver 9 $12.6 Phoenix 10 $12.1 Multihousing Cap Rates Rank Cap New York City 1 3.6% San Francisco 2 3.8% Los Angeles 3 4.2% San Jose 3 4.2% Boston 5 4.5% Northern New Jersey 5 4.5% Miami 7 4.6% San Diego 7 4.6% Sacramento 7 4.6% Chicago 10 4.8% Office Absorption (2Q) Rank MSF Minneapolis/St. Paul 1 .90 San Jose 2 .87 Dallas/Fort Worth 3 .85 Chicago 4 .75 Kansas City 4 .75 San Francisco 6 .61 Salt Lake City 7 .60 St. Louis 8 .59 Los Angeles 9 .58 Washington, D.C. 10 .56 Office Cap Rates Rank Cap San Francisco 1 4.3% New York City 2 4.4% Boston 3 4.9% Washington, D.C. 3 4.9% Seattle 5 5.1% San Jose 6 5.2% Miami 7 5.3% Los Angeles 8 5.4% Orange County 9 5.5% San Diego 10 5.7% Office SF Under Construction Rank MSF New York City 1 11.9 Dallas/Fort Worth 2 11.1 San Jose 3 8.05 Seattle 4 7.72 Washington, D.C. 5 7.52 Chicago 6 7.25 Houston 7 6.80 San Francisco 8 5.35 Boston 9 4.82 Denver 10 4.31 Median Home Price (YoY % Change) Rank % Detroit 1 17.4% Tampa/St. Petersburg 2 14.6% Portland 3 12.9% Orlando 4 11.6% New Orleans 5 10.0% Nashville 6 9.8% Dallas/Fort Worth 7 9.1% Denver 7 9.1% Seattle 9 8.7% San Diego 10 8.6% New Housing Units (YTD) Rank # of Units Dallas/Fort Worth 1 21.9K Houston 2 19.2K Atlanta 3 15.9K Washington, D.C. 4 10.9K Phoenix 5 10.8K Nashville 6 9.7K Austin 7 8.8K Seattle 8 8.7K Orlando 9 8.6K Miami 10 8.4K Hotel Cap Rates Rank Cap New York City 1 4.7% Honolulu 2 5.0% Miami 3 5.8% Las Vegas 4 6.0% San Francisco 5 6.1% Washington, D.C. 5 6.1% Boston 7 6.6% San Diego 8 6.7% Orange County 8 6.7% Salt Lake City 10 6.8% Retail Cap Rates Rank Cap New York City 1 4.0% Miami 2 4.2% San Francisco 3 4.4% Washington, D.C. 4 5.0% Orange County 4 5.0% Los Angeles 6 5.3% San Diego 6 5.3% San Jose 8 5.4% Inland Empire 8 5.4% Boston 10 5.5% Retail Rents Rank $ New York City 1 $86.10 San Francisco 2 $37.92 Honolulu 3 $34.32 Miami 4 $32.62 San Jose 5 $30.49 Los Angeles 6 $27.51 Washington, D.C. 7 $26.13 Orange County 8 $25.29 Westchester/Fairfield 9 $23.18 San Diego 10 $22.41 Office Rents Rank $ New York City 1 $75.92 San Francisco 2 $54.71 San Jose 3 $40.46 Los Angeles 4 $36.86 Washington, D.C. 5 $36.21 Boston 6 $35.69 Miami 7 $32.98 Austin 8 $32.19 Seattle 9 $31.69 San Diego 10 $31.17 Office $/SF Rank $/SF New York City 1 $1,062 San Francisco 2 $805 Boston 3 $715 San Jose 4 $650 Washington, D.C. 5 $610 Los Angeles 6 $535 Seattle 7 $469 Miami 8 $405 Memphis 9 $387 Austin 10 $350 Hotel $/Unit Rank $/Room New York City 1 $658K San Jose 2 $501K San Francisco 3 $485K Washington, D.C. 4 $481K Boston 5 $479K Miami 6 $449K Honolulu 7 $348K Orange County 8 $308K Philadelphia 9 $289K Portland 10 $287K Retail $/SF Rank $/SF New York City 1 $2,630 Miami 2 $1,507 Washington, D.C. 3 $1,102 San Francisco 4 $908 Los Angeles 5 $824 Honolulu 6 $796 Boston 7 $582 Chicago 8 $525 San Jose 9 $441 Nashville 10 $414 INVESTMENT ACTIVITY INDEX Top 10 Cities by Metric Source: NGKF Research, U.S. Bureau of Labor Statistics, U.S. Census Bureau, Real Capital Analytics, Costar, National Association of Realtors Retail Absorption (2Q) Rank MSF Dallas/Fort Worth 1 1.60 Chicago 2 .96 Tampa 3 .82 Phoenix 4 .77 Los Angeles 4 .69 Denver 6 .68 Baltimore 7 .64 Cleveland 8 .55 Atlanta 9 .54 San Antonio 10 .52
- 12. 12 2Q16 CAPITAL MARKETSREPORT INVESTMENT ACTIVITY INDEX Ranking Matrix Rank Property Type Sales (All) Office Caps Office $/SF Retail Caps Retail $/SF Hotel Caps Hotel $/Unit Multihousing Caps Office U/C SF Office Absorption Retail Absorption Home Sale % Change New Housing Units Office Rents Retail Rents Source: NGKF Research, U.S. Bureau of Labor Statistics, U.S. Census Bureau, Real Capital Analytics, Costar, National Association of Realtors RANKED CITY #1-10 RANKED CITY #11-20 RANKED CITY #21-30 RANKED CITY #31-40 New York City 1 San Francisco 2 Los Angeles 3 Boston 4 Washington, D.C. 5 Chicago 6 San Jose 7 Seattle 8 Miami 9 Dallas/Fort Worth 10 San Diego 11 Austin 12 Orange County, CA 13 Denver 14 Portland, OR 15 Phoenix 16 Atlanta 17 Houston 18 Philadelphia 19 Northern New Jersey 20 Nashville 21 Baltimore 22 Charlotte 23 Orlando 24 Tampa/St. Petersburg 25 Sacramento 26 Las Vegas 27 Honolulu/Hawaii 28 Inland Empire 29 Raleigh/Durham 30 Salt Lake City 31 Westchester/Fairfield 32 San Antonio 33 Detroit 34 Kansas City 35 Minneapolis/St. Paul 36 Pittsburgh 37 Columbus 38 Jacksonville 39 New Orleans 40
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- 14. 14 2Q16 CAPITAL MARKETSREPORT GLOBAL CAPITAL 12-Month Totals; All Property Types Source: Newmark Grubb Knight Frank Research, Real Capital Analytics There has been $315 billion of capital invested around the world over the past twelve months. $57.9 $42.3 $36.6 $28.4 $20.8 $19.6 $16.8 $9.4 $9.1 United States Canada Hong Kong China United Kingdom Singapore Germany Qatar South Korea Billions Top Countries of Origin $26.0 $24.5 $7.5 $7.1 $6.7 $5.7 $5.6 $5.6 $4.7 London Manhattan Sydney Paris Shanghai Los Angeles Madrid Berlin Singapore Billions Top Market Destinations
- 15. 15 2Q16 CAPITAL MARKETSREPORT 15 Invested in LATIN AMERICA over the past 12 months, more than half of the capital invested a year earlier. $521.0M Invested in the NORDICS over the past 12 months. (Blackstone - top investor, $1.1B). $2.7B Invested in AUSTRALIA over the past 12 months. (Blackstone-lead investor, $1.7B). $4.2B Invested in CHINA over the past 12 months following more than $8.0B between 2013-2015. $1.0B Invested over the past year in the UNITED KINGDOM and GERMANY with significant investments from Blackstone and Simon Property Group. $24.0B Invested in CANADA over the past 12 months with 84% going to Toronto. $650.0M GLOBAL OUTBOUND UNITED STATES CAPITAL The U.K. will likely see a capital investment decline in the short-term, potentially leading to additional post-Brexit activity in the U.S.
- 16. 16 2Q16 CAPITAL MARKETSREPORT INTERNATIONAL CAPITAL DISTRIBUTION United States; Year-to-Date; All Property Types Source: Newmark Grubb Knight Frank Research, Real Capital Analytics INVESTED CAPITAL $500+ MILLION Caisse de Depot Anbang Insurance Group Brookfield AM GIC (Government of Singapore) Qatar Investment Authority CPP Investment Board China Life Insurance ADIA PSP Investments Allianz Union Investment Norges Bank Canada China Canada Singapore Qatar Canada China UAE Canada Germany Germany Norway $1 B+ China Investment Corp Mirae Asset Chelsfield Olyan Group Jamestown Global Holdings HNA Group China Oceanwide Holdings Fimalac Investcorp GLL RE Partners China South Korea United Kingdom Saudi Arabia Germany Israel China China France Bahrain Germany $500 M - $999 M International Investment Of the Chinese firms that have made United States investments in 2016, half were new entrants to the market.
- 17. 17 2Q16 CAPITAL MARKETSREPORT . Miami 3.3% Boston 3.3% D.C. Metro 3.9% New York City 28.1% INTERNATIONAL CAPITAL INVESTMENT United States; Year-to-Date; All Property Types Source: Newmark Grubb Knight Frank Research, Real Capital Analytics RANK 2016 - YTD VOLUME (B) 1 China $10.7 2 Canada $8.09 3 Germany $3.66 4 South Korea $1.89 5 Saudi Arabia $1.11 Global Total $34.0 Origin of Capital Top Five Countries by Year RANK 2015 $81.5B 2014 $47.4B 2013 $37.5B 1 Canada Canada Canada 2 Singapore China China 3 China Norway Singapore 4 Norway Japan Israel 5 UAE Germany Germany RANK 2012 $27.9B 2011 $24.6B 2010 $12.3B 1 Canada Canada Canada 2 Germany Switzerland Israel 3 Switzerland Germany UK 4 UK Israel China 5 Israel South Korea Germany Chicago 6.9% Other Cities 22.6% Seattle 2.2% Dallas 1.3% Atlanta 1.3% Phoenix 2.5% 56.4% of the foreign capital invested in US real estate during the first two quarters of 2016 went into properties located within the six major markets. San Diego 3.9% Austin 1.7% Orange County 2.5% Denver 1.0%San Francisco 8.3% Los Angeles 5.9%
- 18. 18 2Q16 CAPITAL MARKETSREPORT BUYER DISTRIBUTION United States; By Year and Market Tier Source: Newmark Grubb Knight Frank Research, Real Capital Analytics 15.0% 18.9% 18.2% 12.9% 8.4% 41.4% 41.5% 42.9% 40.7% 42.3% 28.5% 24.2% 22.7% 25.2% 29.3% 6.5% 5.3% 5.5% 4.3% 8.0% 8.6% 10.1% 10.7% 16.9% 12.0% 0% 20% 40% 60% 80% 100% 2012 2013 2014 2015 2016-YTD Public/REITs Private Institutional User/Other International 6.2% 9.5% 12.1% 38.0% 45.5% 47.2% 30.6% 30.9% 19.4% 9.6% 5.8% 9.9% 15.7% 8.4% 11.4% 0% 20% 40% 60% 80% 100% Primary Secondary Tertiary Public/REITs Private Institutional User/Other International International Capital continues to prefer gateway markets, while REITs invested more heavily in secondary and tertiary markets despite an overall decline in activity.
- 19. 19 2Q16 CAPITAL MARKETSREPORT $56.0 $27.7 $19.7 $20.7 $19.0 $17.4 $15.0 $14.3 $13.7 $12.5 $12.5 $12.1 $10.7 $10.5 $10.1 $8.8 $8.0 $8.0 $7.2 $7.0 $59.7 $29.3 $21.4 $20.5 $16.2 $18.7 $16.0 $12.4 $16.3 $13.3 $9.8 $9.7 $9.0 $11.2 $7.7 $13.2 $8.2 $7.2 $7.2 $5.5 Manhattan LosAngeles Chicago D.C.Metro Boston Dallas Atlanta Seattle SanFrancisco *NYCBoroughs Denver Phoenix NorthernNJ SanJose SanDiego Houston Miami OrangeCounty EastBay Austin $0 $10 $20 $30 $40 $50 $60 Billions Current One Year Ago * Includes Brooklyn, Queens, Bronx, Staten Island and Long Island TOTAL SALES VOLUME Major Metropolitan Cities; 12-Month Totals; All Property Types Source: Newmark Grubb Knight Frank Research, Real Capital Analytics Bay Area = $31.4 Billion New York City = $68.5 Billion Total sales volume in the United States is 4.9% lower than one year ago with declining activity in more than half of the top 20 markets.
- 20. 20 2Q16 CAPITAL MARKETSREPORT OFFICE TRENDS Average Price Per Square Foot; Institutional Quality Source: Newmark Grubb Knight Frank Research, Real Capital Analytics $314 $186 $349 $150 $200 $250 $300 $350 $400 United States 10-Year Average [10-Year Average = $280 PSF] Prices in major markets continued to climb in the second quarter, albeit at a slower pace than previous quarters. $1,062 $805 $715 $650 $610 $535 $469 $405 $350 $349 $326 $319 $307 $305 $258 Manhattan SanFrancisco Boston SanJose WashingtonD.C. LosAngeles Seattle Miami Austin UnitedStates SanDiego Portland Denver OrangeCounty Chicago $0 $250 $500 $750 $1,000 $1,250
- 21. 21 2Q16 CAPITAL MARKETSREPORT OFFICE TRENDS Average Cap Rate; Institutional Quality Source: Newmark Grubb Knight Frank Research, Real Capital Analytics 5.0% 7.6% 5.7% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 4% 5% 6% 7% 8% United States 10-Year Average [10-Year Average = 5.8%] Cap rates in some United States cities have begun to expand after several years of compression. 4.4% 4.4% 4.9% 4.9% 5.1% 5.2% 5.3% 5.4% 5.5% 5.7% 5.7% 5.8% 5.9% 6.0% Manhattan SanFrancisco Washington,DC Boston Seattle SanJose Miami LosAngeles OrangeCounty UnitedStates SanDiego Denver Atlanta Chicago 0% 2% 4% 6%
- 22. 22 2Q16 CAPITAL MARKETSREPORT MULTIHOUSING TRENDS United States: Primary and Secondary Markets Source: Newmark Grubb Knight Frank Research, Real Capital Analytics On a price per unit basis, secondary markets have grown 11.9%, year-over-year compared to 2.3% in primary markets. 4.5% 5.3% 4% 5% 6% 7% 2006 2008 2010 2012 2014 2016 Primary Markets Secondary Markets Cap Rates $306,916 $143,284 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 2006 2008 2010 2012 2014 2016 Primary Markets Secondary Markets Price Per Unit
- 23. 23 2Q16 CAPITAL MARKETSREPORT MULTIHOUSING TRENDS Primary Market Pricing Matrix Source: Newmark Grubb Knight Frank Research, Real Capital Analytics Cap rates in the six major markets continue to compress year-over-year, while per unit pricing remains relatively flat. Manhattan Boston Washington DC Chicago San Francisco Los Angeles Manhattan Boston Washington DC Chicago San Francisco Los Angeles $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 3.5% 4.0% 4.5% 5.0% 5.5% PricePerUnit Cap Rate 2Q16 2Q15
- 24. 24 2Q16 CAPITAL MARKETSREPORT RETAIL TRENDS United States: Primary Markets vs. Secondary Markets Source: Newmark Grubb Knight Frank Research, Real Capital Analytics 5.3% 5.9% 4% 5% 6% 7% 8% 9% 2006 2008 2010 2012 2014 2016 Primary Markets Secondary Markets Cap Rates $469.15 $228.60 $0 $100 $200 $300 $400 $500 $600 2006 2008 2010 2012 2014 2016 Primary Markets Secondary Markets Price Per Square Foot Year-over-year cap rates in primary markets have expanded by 40 basis points, while yields in secondary markets have compressed 10 basis points.
- 25. 25 2Q16 CAPITAL MARKETSREPORT BOSTON LOS ANGELES MANHATTAN RETAIL TRENDS Urbanization In Premier Markets MIAMI SAN FRANCISCO The retail landscape in Boston is expanding. Landlords are starting to want more unique retailers as well as pop-up tenants to add to the experience of the property. $590 $/SF 22.2% 3-YEAR $/SF GROWTH Downtown Los Angeles has over 300,000 square feet of retail space now under construction, creating new opportunities for tenants and landlords. $713 $/SF 22.3% 3-YEAR $/SF GROWTH Manhattan has had a recent burst of activity in casual dining restaurants. With the demand of new eateries, landlords are trying to appeal to both office and residential tenants. $2,419 $/SF 46.8% 3-YEAR $/SF GROWTH The influx of Millennials to Downtown Miami has brought many restaurants and retailers to the area; forecasting great opportunities in the future. $1,060 $/SF 61.8% 3-YEAR $/SF GROWTH San Francisco real estate has become popular for both domestic and international buyers; rents continue to climb while interest rates remain relatively low. $908 $/SF 43.7% 3-YEAR $/SF GROWTH Source: Newmark Grubb Knight Frank Research, Real Capital Analytics
- 26. 26 2Q16 CAPITAL MARKETSREPORT Source: Newmark Grubb Knight Frank Research, Smith Travel Research 2.9% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016- YTD -20% -15% -10% -5% 0% 5% 10% RevPAR Percentage Change $121.19 65.5% 50% 55% 60% 65% 70% $70 $80 $90 $100 $110 $120 $130 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016- YTD ADR Occupancy HOSPITALITY TRENDS United States *Data is annualized, 2016 is trailing 12 months as of May. United States RevPAR continues to increase albeit at a slower acceleration than last year.
- 27. 27 2Q16 CAPITAL MARKETSREPORT Source: Newmark Grubb Knight Frank Research, Real Capital Analytics, AAPA survey INDUSTRIAL TRENDS United States Pricing remains in a range just below the historical peak with recent volume tied to portfolio sales and activity near the primary markets (LA, NY, Seattle). 8.2 7.2 6.4 3.7 3.5 2.5 2.3 2.1 2.0 1.2 LosAngeles LongBeach NewYork/Jersey Savannah Seattle HamptonRoads Oakland Houston Charleston Honolulu 0 1 2 3 4 5 6 7 8 9 Millions Largest United States Container Ports (TEU’s) $181 $107 $0 $50 $100 $150 $200 $250 2006 2008 2010 2012 2014 2016 Primary Markets Secondary Markets Price Per Square Foot
- 28. 28 2Q16 CAPITAL MARKETSREPORT HEALTHCARE TRENDS Medical Office Building Spotlight Source: Newmark Knight Frank Research, Real Capital Analytics Cap rates fell to 7.0% in 2Q16 while the average price per square foot increased to $250. Medical office building transactions exceeded $11 billion in 2015, a 13% increase year-over-year. Healthcare has been the largest and fastest growing component of the national GDP, expected to comprise a 20% share of production by 2022 Healthcare occupations are projected to have the fastest employment growth between 2014 and 2024, adding 2.3 million jobs, or roughly 1 in 4 new jobs. 2% 3% 4% 5% 6% 7% 8% 9% $0 $50 $100 $150 $200 $250 $300 2006 2008 2010 2012 2014 2016 Price Per Square Foot Cap Rates $2.298 $2.807 $3.660 $5.009 16.4% 17.9% 18.4% 19.9% 0 1 2 3 4 5 6 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 2007 2012 2017 2022 Expenditures (Trillions) % of GDP Medical office has proven more resilient than most asset types with an average vacancy rate of 10% since 2007.
- 29. 29 2Q16 CAPITAL MARKETSREPORT DEVELOPMENT SITE TRENDS Sales Volume: Primary Markets vs. Secondary Markets Source: Newmark Grubb Knight Frank Research, Real Capital Analytics $0 $1 $2 $3 $4 $0 $1 $2 $3 $4 $5 $6 $7 $8 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Billions Billions Primary Markets Secondary Markets Resistance to pricing as well as a healthy pipeline of development activity has led to a pullback in sales volume.
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- 31. 31 2Q16 CAPITAL MARKETSREPORT CMBS ISSUANCE United States Source: Newmark Grubb Knight Frank Research, Commercial Mortgage Alert CMBS ISSUANCE Early projections called for the market to reach nearly $125 billion for the year. However, those forecasts have been adjusted to approximately $70 billion after a volatile first half of the year. CMBS issuance totaled $30.7 billion through the first half of 2016, down 43.7% compared to $54.5 billion through the first half of 2015. $92.6 $166.5 $198.4 $228.6 $12.1 $2.7 $11.6 $32.7 $48.4 $86.1 $94.1 $101.0 $30.7 $0 $50 $100 $150 $200 $250 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-YTD Billions
- 32. 32 2Q16 CAPITAL MARKETSREPORT CMBS VOLUME Top Markets by Property Type Source: Newmark Grubb Knight Frank Research, Trepp The office and multihousing sectors continue to attract the highest volume of CMBS loans, with gateway markets the preferred destination. Office Multihousing Retail Hotel Industrial New York $2.5 B Los Angeles $1.1 B New York $628 M New York $195 M San Diego $22 M San Francisco $476 M Denver $924 M Las Vegas $359 M Los Angeles $129 M Des Moines $18 M Boston $454 M San Francisco $675 M Boston $202 M New York $125 M Anchorage $16 M San Diego $424 M Dallas $533 M Norfolk $175 M Houston $100 M Miami $13 M Washington, D.C. $265 M Chicago $430 M Washington, D.C. $104 M Nashville $80 M Columbia (SC) $12 M
- 33. 33 2Q16 CAPITAL MARKETSREPORT Source: Newmark Grubb Knight Frank Research, Mortgage Bankers Association DEBT MARKET UPDATE Commercial and Multihousing Mortgage Debt Outstanding Commercial banks increased their mortgage debt over the past year. They continue to hold the largest share of the outstanding commercial and multihousing mortgage debt, currently at $1.1 trillion, an increase of $118.6 billion, or 12.0%, year- over-year. Multihousing mortgage debt outstanding grew by $18.2 billion quarter-over-quarter, with Agency and GSE increasing their debt outstanding by $11.3 billion, or 2.5%. Current One Year Ago Total commercial and multihousing debt outstanding rose to $2.86 trillion, up 1.7% quarter-over-quarter. Banks 38.6% CMBS 17.6% Life Insurance 13.9% Others 13.4% Agency & GSE 16.5% Banks 36.7% CMBS 19.9% Life Insurance 13.5% Others 14.2% Agency & GSE 15.7%
- 34. 34 2Q16 CAPITAL MARKETSREPORT $187 $159 $133 $135 $151 $171 $188 $181 $149 $106 $72 $78 $96 $104 $136 $48 $38 $35 $27 $33 $12 $27 $24 $24 $26 $27 $27 $27 $28 $29 $27 $25 $25 $84 $85 $90 $100 $106 $103 $94 $86 $75 $65 $57 $0 $50 $100 $150 $200 $250 $300 $350 $400 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Bank CMBS Insurance Companies Other COMMERCIAL MORTGAGE MATURITIES United States Source: Newmark Grubb Knight Frank Research, Trepp with Federal Reserve Flow of Funds Data 2016 Bank: $133B CMBS: $104B Insurance: $26B Other*: $90B *Includes Fannie Mae, Freddie Mac, bridge loans and hard money loans Over the next 24 months, there will be approximately $750 million of commercial mortgages maturing.
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