Warehouse Demand Off to Strongest Start Since 2008

A new article from CoStar titled Don't Look Now But Warehouse Demand Off to Strongest Start Since 2008 has been released, noting the strong start of the warehouse market in 2013 as the growing pace of construction remains in check with a demand for growth. A survey of transaction data by CoStar's Property & Portfolio Research shows warehouse supply and demand at its strongest levels in at least five years. An excerpt from the article follows:

"Speculative new construction is still not a threat to the ongoing recovery as it is still heavily concentrated in markets that also have strong demand, such as the Inland Empire, Phoenix, and more recently Memphis," said Rene Circ, director of U.S. research/industrial Property & Portfolio Research (PPR), a CoStar company.

"The industrial market is enjoying a recovery in line with historic trends," said Robert Bach, national director of market analytics for Newmark Grubb Knight Frank. "The leasing market is performing better than the investment market, only because it’s harder for investors to source industrial product to match their appetites."

"Housing has emerged from its recessionary slump and is once again driving demand for both warehouse and flex product," said Jason W. Tolliver, vice president of research, Cassidy Turley. "The manufacturing sector continued to expand in the first quarter, although the pace of growth seems to be slowing. Despite this, factory hiring has continued and this bodes well for future CRE demand."

For more news and information visit Blumberg Capital Partners.

Grubb & Ellis Economist is "Pretty Optimistic" on CRE

Robert Bach, senior vice president and chief economist at Grubb & Ellis in Indianapolis, addressed the Wichita Independent Business Association's annual meeting at the DoubleTree by Hilton Wichita Airport this week to discuss the current state and outlook of commercial real estate. "Overall, I'm pretty optimistic about commercial real estate markets," he told roughly 200 people gathered for the meeting.

The Wichita Business Journal reports that according to Bach, commercial real estate struggled during the recession, with average prices falling by 44 percent between October 2007 and October 2009. However, the market has significantly improved since then, he said, and returns for commercial real estate investors are fairly attractive in the current low-interest-rate environment.

Bach predicted that cap rates will drop this year which, along with slowly increasing rents across sectors, would have properties throwing off more income. He noted that lower prices have enticed tenants to take advantage of the opportunity to upgrade at lower prices, and that industrial space has performed well in the face of manufacturing growth and years of improved efficiencies.

For more news and information visit Blumberg Capital Partners.

Moody's CPPI Up 2.4% in August

The latest Moody's/REAL Commercial Property Price Indices report for October 2011 was released this week recording a 2.4% increase in August for the National — All Property Type Aggregate Index (CPPI), bringing it to 15.3% above the post-peak low recorded in April 2011. An excerpt from the report:

The share of distressed transactions included within this month's CPPI was 21.7%, down 5.9% from last month and the lowest level since January 2010. Prices for distressed transactions were down by 3.5% from the last month and are 6.9% above their post peak low set in August 2010. The reduced share of distressed transactions helped drive this month's overall price increase.

Looking forward, we do not envision significant price increases over the next year. While distressed transactions should be at or near their high water mark for this cycle, there is less CMBS loan origination to help support acquisition pricing, especially beyond the portfolio lender sweet spot of trophy properties and top tier markets.

"There's more caution," Robert Bach, chief economist for Grubb & Ellis Co., a Santa Ana, California-based brokerage, said in a telephone interview with Businessweek before the Moody's report was released. "Investors in general are a little more cautious, and that includes investors in commercial real estate."

For more news and information visit Blumberg Capital Partners.