CCIM Investment Trends Quarterly - 1Q 2011

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InvestmentTrendsQUARTERLYFirst Quarter 2011 Report sVol. 7, No. 1

1Investment Trends Quarterly s Copyright© 2011 by Real Estate Research Corporation (RERC) and the CCIM Institute.

February 2011

Dear Readers,

As 2011 gets underway, we are seeing slightly more confidence in the economy and the commercial real estate market. According to RERC’s survey respondents, credit is more available in some areas, while other areas are starting to work through the distress in the market. Many brokers still say they are not seeing much activity in their markets, but they are more optimistic about the potential for future leasing and sales as the year progresses and as we move into 2012.

We are seeing this view backed-up by their ratings, too. Survey respondents have increased their ratings for the national and regional economies, as well as their views of the investment conditions for all property types. Ratings are also up for return versus risk and for value versus price. Volume is up too, particularly for large-size properties, although it is disappointing that the aggregate price for smaller size properties is not increasing signifi-cantly, particularly in small-town America. Demand is slowly starting to increase in some of the secondary and ter-tiary markets, but it will be some time before most markets see significant improvement in price or rental growth.

We would like to thank those of you who have faithfully completed RERC’s research surveys during the past year, and to let you know that we look forward to working with you again throughout the new year to collect the information only those of you in the field can contribute. Thank you for your data, as we continue to analyze the research, interpret the findings, and report the results for all CCIM Institute members through the RERC/CCIM Investment Trends Quarterly.

Best wishes for a happy, healthy, and successful 2011.

Sincerely,

Kenneth P. Riggs, Jr., CCIM, CRE, MAIPresident & CEOReal Estate Research Corporation (RERC)

Frank N. Simpson, CCIM2011 CCIM Institute PresidentPresident, The Simpson Company

F o r e w o r d


Economic Growth Expected to Increase in 2011

With the initial estimate of fourth quarter 2010 growth of gross domestic product (GDP) at 3.2 percent, according to the Bureau of Economic Analysis (BEA), the U.S. economy ended 2010 with a real GDP growth rate of 2.9 percent, slightly higher than the 2.6 percent growth in 2009. Although economic growth for fourth quarter was slightly lower than investor expectations, it has been positive each quarter in 2010, and thus far, we have avoided the much-feared “double-dip.” More importantly, the economy seems to have acquired a little more steam as we move into 2011, and the Federal Reserve expects GDP to grow at a slightly higher pace of between 3 percent and 4 percent in 2011.

According to many economists, the Federal Reserve’s re-cent expansion of their quantitative easing program (QE2) by buying $600 billion in treasuries through second quarter 2011, along with their continued commitment to keeping in-terest rates low “for an extended period,” is helping to stim-ulate stock market returns and contributing to the “wealth effect” for households.

Deficit Reaches New High

The Congressional Budget Office (CBO) announced that the federal budget deficit will reach a new record of nearly $1.5 trillion in fiscal year (FY) 2011, and as a share of GDP, is expected to increase to 9.8 percent. As a percentage of economic output, the 9.8-percent deficit would be the sec-ond-largest in 65 years, behind only the 10-percent level

in 2009. The increase in the deficit is generally due to the weak economy, along with the higher government spending and the tax cuts lawmakers have initiated to help stimulate economic growth.

Treasury officials warned lawmakers that the U.S. could hit the $14.3 trillion debt ceiling by the end of March 2011. Fur-ther, debt is expected to increase to $20.9 trillion by 2017 due to increased healthcare costs, an aging population, and soaring interest, predicts the CBO. The credit rating agen-cies repeated their warnings that the U.S. needs to reverse the direction of its debt if it hopes to keep its AAA rating.

Unemployment Rate Starting to Decline

According to the Bureau of Labor Statistics (BLS), the un-employment rate declined to 9.4 percent in December 2010, with nonfarm payroll employment increasing by 103,000 during the month. Although this rate of growth does not keep up with the addition of new entrants into the workforce each month, at least it is a positive number. The economy added 1.1 million jobs during the past year.

It is important to note that the 9.4-percent unemployment rate is the lowest it has been in more than a year and a half, but government figures also indicate that the rate declined primarily because a record number of people stopped look-ing for work. There are more layoffs still to come too, as tens of thousands of state and local government workers receive pink slips as revenues fail to meet budgets this year.

I n v e s t m e n t E n v i r o n m e n tWith a full year of positive economic growth under our belts, the Dow Jones Industrial Average (DJIA) Index surpassing the symbolic 12,000 mark, and more capital finally available to investors, we are reminded of how many hurdles the U.S. economy has already overcome during the past few years. There are many other obstacles yet to cross, including debt that, according to the Federal Reserve and credit rating agencies, is “unsustainable,” a housing market that is still looking for bottom, and too few new jobs to drive a recov-ery, but confidence seems to be creeping back. However, the recent crisis in Egypt and the unrest elsewhere in the Middle East reminds us how fragile the geopolitical climate is and how quickly the economic stability of the U.S. (and the world) can be affected.

The struggling economy makes the current performance of the institutional real estate market all the more astounding. Although there are still serious difficulties for some property types in most markets, the commercial real estate markets

are meeting these challenges and we are seeing improve-ment in the form of increased transaction volume, lower capitalization rates, and price increases at some level for most property types.

E c o n o m i c H i g h l i g h t s


Despite the weakness in the labor market, however, busi-nesses are more optimistic than they have been for some time, which should help prompt future hiring. According to a recent survey conducted by the National Association for Business Economics (NABE), 42 percent of respondents expect to increase jobs in the next 6 months while only 7 percent of companies expect to shed jobs.

Consumers seemed to be a little more optimistic in fourth quarter as well, and opened their pocketbooks during the 2010 holiday season, with total retail sales from October through December 2010 up 7.8 percent from the same pe-riod a year ago, according to the U.S. Census Bureau. This topped off a year of increases, with total retail sales for the entire year up 6.6 percent from 2009 figures, including non-store retail sales up 15.0 percent and auto and motor ve-hicle dealer sales up 14.7 percent in 2010 from the previous year’s sales.

Hints of Inflation

Although we are not seeing much inflation in the U.S.—the Consumer Price Index (CPI) for all urban consumers in-creased 0.5 percent in December 2010 on a seasonally-ad-justed basis, and 1.5 percent over the past 12 months—one of the global economic challenges discussed at the January 2011 World Economic Forum in Davos, Switzerland, was inflation. Increasing prices in some parts of the world are prompting concerns in the U.S., where we also have seen recent increases in the price of food, energy, and raw mate-rials/commodities.

But according to the Federal Reserve’s statement following their January meeting, “longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward.” Others point out, however, that although high unemployment may help keep the cost of labor from increasing, higher raw material prices—wheat,

coal, iron ore, and oil, to name a few—caused the CPI’s energy index to increase 7.7 percent in 2010.

Home Prices Expected to Decline Slightly in 2011

Although the U.S. housing market had several bright mo-ments during fourth quarter 2010, the majority of indicators showed that the market has more pain ahead. Existing home sales increased 12.3 percent from November to an annual-ized pace of 5.28 million units in December, the strongest monthly gain since 1999, according to the National Associa-tion of REALTORS® (NAR). In addition, new home sales jumped 17.5 percent in December to a seasonally-adjusted pace of 329,000 homes, the strongest monthly gain since the mid-1990s, according to the Commerce Department. Al-though new home sales in December were up, 2010 overall was the worst year on record for the homebuilding industry.

Also, the S&P/Case-Shiller Composite 20-city home price index declined 1 percent in November from October, the fourth straight month-over-month drop. San Diego was the only city where home prices increased, while the other 19 cities in the index posted monthly declines. In fact, nine of the 20 markets (Atlanta, Charlotte, Chicago, Detroit, Las Vegas, Miami, Portland, Seattle, and Tampa) hit their low-est points since home values started dropping 4 years ago. Projections are for home prices to decline further in 2011. And then there is the foreclosure situation. According to Re-alty Trac Inc., banks took back more than 1 million homes in 2010. Foreclosure filings are expected to increase about 20 percent in 2011.

CCIM Members Upgrade Economic Ratings

CCIM members saw the economy significantly improve nationally and across all the regions during fourth quarter 2010. This is a complete turnaround from the previous quar-ter, when respondents downgraded the national and region-al economies. The national economy received a rating of 4.9 on a scale of 1 to 10, with 10 being high, during fourth quarter, up significantly from a rating of 3.7 in third quarter. On a regional basis, the South received an economic rating of 5.7 on the same scale, followed closely by the Midwest regional economy with a score of 5.6. The East and West regional economies received ratings of 5.4 and 5.0, respec-tively. Although the economy is not out of the woods, these higher ratings show CCIM members are more confident and optimistic about both the national economy and their region-al economies compared to the previous quarter.


Commercial real estate activity was mixed during fourth quarter 2010. Leasing markets exhibited increasing signs of recovery, although construction activity was quite limited. According to our sources, the bulk of new commercial real estate construction activity was related to healthcare, public infrastructure, and multifamily/apartment housing.

Banking Activity Mixed

Credit activity was mixed across the U.S. during fourth quarter 2010, and while loan demand was stable in some areas, it remained soft or has been declining in other areas as we move into 2011. According to the Federal Reserve’s Summary of Commentary on Current Economic Conditions issued in January 2011, commercial and industrial loans have increased, albeit only slightly (0.46 percent at small banks, but about five times this much at large banks). How-ever, many CCIM members reported that credit is becoming more available.

According to the Federal Reserve Flow of Funds, the level of commercial/multifamily mortgage debt outstanding de-creased to $3.2 trillion in third quarter 2010, a decrease of $42 billion (or 1.3 percent) from the previous quarter. Fore-sight Analytics reported that an estimated $1.4 trillion in loans is set to come due between 2010 and 2014, with the majority due in 2013. Multifamily mortgage debt increased to $847 billion in third quarter, however -- an increase of $2.3 billion (or 0.3 percent) from the previous quarter.

The delinquency rate for commercial mortgage-backed se-curities (CMBS) rose by 14 basis points in January 2011, despite new issuances and falling treasury spreads, report-ed Trepp, LLC. This brings the percentage of CMBS loans 30 or more days delinquent, in foreclosure, or owned by the lender to 9.34 percent, the highest in history, with the value of delinquent loans at approximately $61.4 billion.

With respect to the conditions of the banks, there were 157 failed banks in 2010 (more than any year since 1992) but with $92.1 billion in total assets, which was a decrease of 45.7 percent from the $167.7 billion in assets that failed in 2009. According to the Federal Deposit Insurance Corpo-ration (FDIC), nearly half of the failed banks were located in four states: California, Florida, Georgia, and Illinois. The FDIC’s list of “troubled banks” (those whose weaknesses threaten their continued financial viability) increased to 860 as of Sept. 30, 2010, the highest since 1993, although the number of bank failures is expected to decline in 2011.

RERC/CCIM Investment Trends Quarterly Survey Results

Despite the positive momentum in the stock market during fourth quarter 2010, respondents to the RERC/CCIM In-vestment Trends Quarterly survey once again rated com-mercial real estate as the top investment option among the alternatives listed. As shown in Exhibit 1, their rating for commercial real estate increased to 6.3 on a scale of 1 to 10, with 10 being high, while the rating for stocks increased to 5.4. The investment ratings for cash and bonds declined to 4.2 and 3.8, respectively.

RERC’s institutional investment survey respondents in-creased their buy/sell/hold recommendations during fourth quarter 2010 over third quarter results. The hold recom-mendation, as shown in Exhibit 2, was rated highest, earn-ing a rating of 7.1 on a scale of 1 to 10, with 10 being high. However, as demand for high-quality institutional properties increased (along with prices), the sell recommendation also increased, jumping to 5.3 on the same scale. The buy rec-ommendation increased slightly to 6.4 during fourth quarter from 6.3 the previous quarter, but has held mostly steady (or may even be tipping downward) on a year-over-year basis.

The investment conditions ratings for all the major property types improved during fourth quarter 2010. As shown in Ex-hibit 3, the apartment sector continued to receive the high-est investment conditions rating, with a rating of 6.6 on a scale of 1 to 10, with 10 being high. This was followed by the industrial sector, which continued to receive the second-highest rating and increased to 5.2 during fourth quarter. The retail, hotel, and office sector ratings improved to 4.9, 4.8, and 4.4, respectively, and although they remain some-what low on a relative basis, CCIM members believe that the investment potential of these property types is increas-ing.

Exhibit 1. CCIM Respondents Rate Investments

4Q 2010 3Q 2010

Commercial Real Estate 6.3 5.6

Stocks 5.4 4.4

Bonds 3.8 4.2

Cash 4.2 4.8

Ratings are based on a scale of 1 to 10, where 1 is poor and 10 is excellent.Source: RERC/CCIM Investment Trends Quarterly Survey, 4Q 2010.

C o m m e r c i a l R e a l E s t a t e H i g h l i g h t s


After declining in third quarter 2010 (see Exhibit 4), the rating for commercial real estate return versus risk over-all bounced back in fourth quarter with a rating of 5.4 on a scale of 1 to 10, with 10 being high, indicating CCIM mem-bers’ increased confidence in the return potential of this as-set class versus the risk involved.

CCIM members likewise increased their return versus risk ratings for all property types in fourth quarter 2010. CCIM members gave the apartment sector the highest return ver-sus risk rating, with a score of 6.7 on a scale of 1 to 10, with 10 being high. The only other property type to receive a return versus risk rating higher than 5.0 was the industrial sector with a rating of 5.2. At 4.9, the retail sector received the next highest rating, followed closely by the ratings for the hotel and office sectors at 4.7 and 4.5, respectively. Al-though the return on investment in the apartment and indus-trial sectors is considered higher than the amount of risk in-volved, the opposite is true for the rest of the property types.

CCIM members also increased their value versus price rat-ing for commercial real estate during fourth quarter 2010. This higher overall rating of 5.5 on a scale of 1 to 10, with 10 being high, indicates that the value of commercial real es-tate is increasingly higher than the price of product, and that properties in general are regaining their worth, albeit slowly.

Interestingly, the value versus price rating increased slightly for all property sectors with the exception of the apartment sector. Although the apartment sector retained the highest value versus price rating among the property types, the rat-ing fell slightly to 5.3 in fourth quarter 2010 from 5.4 in third quarter, indicating that the sector may be slightly overpriced and is moving closer to equilibrium. The industrial sector received a score of 5.2, the only property type besides the apartment sector with a higher value than its price. As shown in Exhibit 4, the retail, office, and hotel sectors re-ceived ratings of 4.9, 4.8, and 4.7, respectively, indicating that while the ratings are increasing slightly, the value of these property sectors is still slightly less than the price.

On a 12-month trailing basis, total volume increased in all property types except for the retail sector, where volume declined approximately 2 percent during fourth quarter 2010. However, on a quarter-to-quarter basis, total volume increased for all property types during fourth quarter, includ-ing retail.

In addition, the size-weighted average price per square foot/unit for the office and apartment sectors increased ap-proximately 10 percent on a 12-month trailing basis, while the size-weighted average price per square foot/unit dec-

Exhibit 4. Historical Return/Risk and Value/Price Ratings4Q 2010 3Q 2010 2Q 2010 1Q 2010 4Q 2009

Return vs. RiskOverall 5.4 4.9 5.4 5.1 4.8

Office 4.5 4.1 4.4 4.1 4.1

Industrial 5.2 4.8 4.8 4.7 4.7

Retail 4.9 4.2 4.7 4.1 3.9

Apartment 6.7 6.2 6.2 6.1 5.8

Hotel 4.7 4.1 4.4 3.9 3.9

Value vs. PriceOverall 5.5 5.1 5.2 5.5 4.7

Office 4.8 4.7 4.7 5.0 4.3

Industrial 5.2 5.1 5.1 5.0 4.7

Retail 4.9 4.8 4.5 4.9 4.2

Apartment 5.3 5.4 5.2 5.6 4.9

Hotel 4.7 4.5 4.7 4.7 4.0Ratings are based on a scale of 1 to 10, where 1 is poor and 10 is excellent.Source: RERC/CCIM Investment Trends Quarterly Survey, 4Q 2010.

Exhibit 3. Real Estate Investment Conditions Ratings4Q

20103Q

20102Q

20101Q

20104Q

2009Office 4.4 3.8 4.0 3.8 3.8

Industrial 5.2 4.5 4.4 4.2 4.1

Retail 4.9 3.9 4.2 3.7 3.8

Apartment 6.6 6.0 5.9 5.5 5.4

Hotel 4.8 3.9 4.2 3.8 3.8Ratings are based on a scale of 1 to 10, where 1 is poor and 10 is excellent.Source: RERC/CCIM Investment Trends Quarterly Survey, 4Q 2010.

0

2

4

6

8

10

0

2

4

6

8

10

Hold

Sell

Buy

4Q 2010

4Q 2009

4Q 2008

4Q 2007

4Q 2006

4Q 2005

4Q 2004

4Q 2003

4Q 2002

4Q 2001

Exhibit 2. RERC Historical Buy, Sell, Hold Recommendations

Ratings are based on a scale of 1 to 10, where 1 is poor and 10 is excellent.Source: RERC Institutional Investment Survey, 4Q 2010.

Rat

ing


creased for the retail and hotel sectors decreased approximately 5 percent (price for industrial sector remained unchanged from the previous quarter). The 12-month trailing weighted-average capital-ization rate decreased across all property sectors during fourth quarter 2010.

Although the economy remains uncertain and many individuals continue to struggle on a day-to-day and month-to-month basis, the performance of the various asset classes, as reported in Exhibit 5, shows that investors are finally starting to re-gain some of the wealth they lost during the reces-sion. With the stock market coming back, it is par-ticularly interesting that the National Association of Real Estate Investment Trusts (NAREIT) Index offered the highest returns during 2010 among the investment alternatives that RERC regularly moni-tors, with a performance reading of 27.95 percent. However, institutional real estate, as represented by the National Council of Real Estate Investment Fiduciaries (NCREIF) Index, also offered a very solid return of 13.11 percent.

Exhibit 5. What Do the Financial Markets Tell Us?

Compounded Annual Rates of Return as of 12/31/2010

Market Indices 1-Year 3-Year 5-Year 10-Year 15-Year

Consumer Price Index1 1.25% 1.33% 2.13% 2.35% 2.42%

10-Year Treasury Bond2 3.22% 3.34% 3.89% 4.17% 4.76%

Dow Jones Industrial Average 14.06% -1.61% 4.31% 3.15% 7.91%

NASDAQ Composite3 16.91% 0.01% 3.76% 0.71% 6.36%

NYSE Composite3 10.84% -6.49% 0.54% 1.38% 5.67%

S&P 500 15.06% -2.86% 2.29% 1.41% 6.76%

NCREIF Index 13.11% -4.18% 3.51% 7.38% 9.16%

NAREIT Index (Equity REITS) 27.95% 0.65% 3.03% 10.76% 10.54%

1Based on the published data from the Bureau of Labor Statistics (Seasonally Adjusted).2Based on Average End of Day T-Bond Rates.3Based on Price Index, and does not include the dividend yield.Sources: BLS, Federal Reserve Board, S&P, Dow Jones, NCREIF, NAREIT, compiled by RERC.

As the economy continues to take a few steps forward and few steps back in its struggle to stabilize, commercial real estate is defying investor expectations. As a result, RERC anticipates:

• Economic growth to continue at a moderate pace, and unemployment to remain high during 2011.

• The administration and Federal Reserve to do all they can to encourage economic growth and keep interest rates low “for an extended period,” including extending tax cuts, reducing payroll taxes, or buying more treasur-ies.

• Despite increasing raw materials/commodity prices, in-flation should remain low for the near term.

• The housing market will remain depressed and home prices may decline further as foreclosures continue in 2011.

• Lending will expand and more capital, including CMBS, will be available for investing in commercial real estate.

• Interest rates will remain low for the foreseeable future.

• Surging corporate profits and solid balance sheets will allow businesses to boost investment and hiring (if de-mand increases).

• Expect more banking, business, and real estate merg-ers and acquisitions to occur in 2011.

• Many characteristics of a trifurcated market will remain in 2011, as the division between top properties, distressed properties, and “the rest” continues (although there has been progress in resolving distressed properties).

• Capitalization rates further compressed during fourth quarter 2010, but are expected to begin to stabilize in 2011.

S u m m a r y


Snapshot of Real Estate Market Performance – 4Q 2010

Performance Indicator Recent Data Impact on Commercial Real Estate

Vacancy Rates

Office: 17.6%Industrial: 14.3%Retail: 10.9%Apartment: 6.6%Hotel: 57.6% (occupancy)

According to Reis, Inc., vacancy for the office and retail sectors re-mained unchanged. In contrast, the apartment sector vacancy rate decreased. The industrial sector availability rate also fell during fourth quarter, according to CBRE-EA. Smith Travel Research reported that ho-tel occupancy increased during fourth quarter.

Rental Rates(RERC’s surveyed rent growth expectations)

Office: 1.7% to 2.1% Industrial: 1.5% to 2.0%Retail: 1.9% to 2.0%Apartment: 3.1%Hotel: 3.4%

RERC’s rental rate expectations were slightly higher for the office and retail sectors during fourth quarter 2010, while expected rents for the apartment and hotel sectors jumped significantly when compared to third quarter 2010. The rental rate expectation for the industrial sector fell slightly from the previous quarter.

Real Estate Returns

RERC Required Returns:Office: 8.3% to 9.3%Industrial: 8.7% to 9.3%Retail: 8.6% to 8.9%Apartment: 8.0%Hotel: 10.5%

NCREIF Realized Returns:Office: 8.8% to 16.1%Industrial: 5.9% to 11.9%Retail: 9.9% to 14.5%Apartment: 18.2%Hotel: 9.0%

RERC’s required returns declined slightly for all property sectors dur-ing fourth quarter 2010. In comparison, NCREIF’s realized returns sig-nificantly improved during fourth quarter, as all property sectors showed positive returns.

Capitalization Rates

RERC Realized Cap Rates:Office: 6.7%Industrial: 7.7%Retail: 8.2%Apartment: 6.1%Hotel: 7.1%

NCREIF Implied Cap Rates:Office: 6.5% to 7.2%Industrial: 7.2% to 7.5%Retail: 7.0% to 7.7%Apartment: 5.9%Hotel: 6.6%

RERC’s realized cap rates declined during fourth quarter for all property sectors. NCREIF’s implied cap rates declined for the office and industrial sectors, while the rate for the hotel sector increased during fourth quar-ter. The apartment and retail cap rates remained unchanged compared to the previous quarter.

0%

2%

4%

6%

8%

10%

12%

0%

2%

4%

6%

8%

10%

12%

Unemployment

Going-In Cap Rate

4Q 2010

4Q 2009

4Q 2008

4Q 2007

4Q 2006

4Q 2005

4Q 2004

4Q 2003

4Q 2002

4Q 2001

4Q 2000

4Q 1999

4Q 1998

4Q 1997

4Q 1996

4Q 1995

4Q 1994

4Q 1993

4Q 1992

4Q 1991

4Q 1990

4Q 1989

4Q 1988

4Q 1987

4Q 1986

4Q 1985

4Q 1984

4Q 1983

4Q 1982

4Q 1981

4Q 1980

Recession

Sources: RERC, BLS, NBER, 4Q 2010.

Going-In Cap Rates vs. Unemployment


National Transaction Breakdown12-Month Trailing Averages (01/01/10 - 12/31/10)

Office Industrial Retail Apartment Hotel< $2 MillionVolume (Mil) $1,235 $2,509 $2,644 $1,216 $92

Size Weighted Avg. ($ per sf/unit) $81 $44 $76 $40,238 $21,941

Price Weighted Avg. ($ per sf/unit) $117 $71 $120 $67,646 $34,470

Median ($ per sf/unit) $85 $54 $81 $48,088 $23,042

$2 - $5 MillionVolume (Mil) $1,640 $2,981 $3,163 $2,222 $350




> $5 MillionVolume (Mil) $46,809 $11,941 $17,742 $27,522 $10,841




All TransactionsVolume (Mil) $49,683 $17,430 $23,549 $30,961 $11,282




Capitalization Rates (All Transactions)Range (%) 4.0 - 11.5 5.4 - 12.0 4.0 - 11.7 4.0 - 11.1 4.7 - 8.5

Weighted Avg. (%) 6.7 7.7 8.2 6.1 7.1

Median (%) 7.5 7.9 7.8 6.5 7.5 Source: RERC.

N a t i o n a l M a r k e t A n a l y s i s


National Transaction BreakdownCurrent Quarter Rates (10/01/10 - 12/31/10)

Office Industrial Retail Apartment Hotel< $2 MillionVolume (Mil) $282 $677 $734 $368 $33




$2 - $5 MillionVolume (Mil) $383 $893 $884 $644 $90













Weighted Avg. (%) 6.6 7.4 7.8 6.3 6.1


N a t i o n a l M a r k e t A n a l y s i s


w The majority of fourth quarter 2010 respondents to RERC’s survey for the RERC/CCIM Investment Trends Quarterly stated that distressed office properties—many of them well-located, free-standing properties—were attractively priced, selling well, and even outselling other properties. Other re-spondents stated, however, that the office sector was risky due to oversupply.

w Office sector total volume and size-weighted average price per square foot continued to trend upward on a 12-month trailing basis during fourth quarter 2010. Fur-thermore, office sector volume increased by more than 40 percent from the previous quarter. (This volume increase was more than for any other sector, except for the hotel sector.) The size-weighted average price per square foot rose approximately 10 percent from the previous quarter.

w In contrast to the 12-month trailing weighted-average capi-talization rate, which declined to 6.7 percent during fourth quarter 2010, the quarterly weighted-average capitaliza-tion rate increased for the first time since second quarter 2009.

w While the office sector volume and size-weighted aver-age price for transactions that totaled greater than $5 mil-lion increased during fourth quarter, volume and price for transactions that totaled less than $2 million declined from the previous quarter.

w According to Reis, Inc., the vacancy rate for the office sector remained flat at 17.6 percent during fourth quar-ter 2010. In addition, net absorption increased 2.5 million square feet for the quarter, the first increase since the end of 2007. Asking and effective rents also increased during fourth quarter.

6%

7%

8%

9%

6%

7%

8%

9%

NationalWest

Midwest

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East

4Q103Q102Q101Q104Q09

RERC Weighted Average Capitalization Rate(12-Month Trailing Average)

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$500NationalWest

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RERC Price-Weighted Average PPSF(12-Month Trailing Average)

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$75

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$175

$225

$275

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$275NationalWest

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4Q103Q102Q101Q104Q09

RERC Size-Weighted Average PPSF(12-Month Trailing Average)

N a t i o n a l O f f i c e P r o p e r t y S e c t o r


w According to the RERC/CCIM Investment Trends Quarter-ly survey respondents, industrial properties offered a good investment opportunity during fourth quarter 2010. Many respondents said that both normal and distressed indus-trial properties were selling well, depending on location.

w During fourth quarter 2010, transaction volume for the in-dustrial sector rose 20 percent, while the size-weighted average price per square foot remained flat on a 12-month trailing basis. In comparison, the quarterly size-weighted average price per square foot of industrial space declined 10 percent from the previous quarter. The 12-month trail-ing weighted-average capitalization rate for the industrial sector declined 50 basis points to 7.7 percent.

w According to RERC’s fourth quarter 2010 analysis, the volume of industrial property transactions of less than $2 million, of $2 million to $5 million, and those of more than $5 million each increased on a 12-month trailing basis. In contrast, the size-weighted average price per square foot of industrial space from transactions that totaled greater than $5 million increased slightly, while the size-weighted average price of industrial space for transactions of less than $2 million fell 5 percent from the previous quarter.

w According to CBRE-EA, the national industrial availability rate fell by 30 basis points to 14.3 percent during fourth quar-ter 2010. Although availability remains high, low construction and an improving economy should further reduce availability going forward.

7.0%

7.5%

8.0%

8.5%

9.0%

7.0%

7.5%

8.0%

8.5%

9.0%

NationalWestMidwest

SouthEast

4Q103Q102Q101Q104Q09


$25

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4Q103Q102Q101Q104Q09

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N a t i o n a l I n d u s t r i a l P r o p e r t y S e c t o r


7%

8%

9%

10%

7%

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10%

4Q103Q102Q101Q104Q09

NationalWest

Midwest

South

East


$100

$160

$220

$280

$340

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$280

$340

$400

4Q103Q102Q101Q104Q09

NationalWest

Midwest

South

East


w The majority of fourth quarter 2010 respondents to the RERC/CCIM Investment Trends Quarterly survey stated that distressed retail properties were selling well due to reasonable pricing, and several respondents noted that the retail sector was considered an attractive investment. Furthermore, retail sales were strengthened by holiday sales, though sales slowed in December.

w Compared to the previous quarter, the volume for the retail sector in fourth quarter 2010 declined by 2 percent on a 12-month trailing basis, while the size-weighted average price per square foot fell nearly 5 percent. In contrast, the quarterly volume for retail grew 10 percent during fourth quarter. The 12-month trailing weighted-average capital-ization rate decreased 20 basis points to 8.2 percent.

w The volume of retail property transactions that totaled less than $2 million increased on a 12-month trailing basis, while the volume for transactions greater than $5 million declined compared to the previous quarter, suggesting that distressed or smaller properties are the primary sales in this category. The size-weighted average price per square foot of retail space decreased for all transaction sizes.

w According to Reis, Inc., the vacancy rate for the retail sec-tor remained unchanged at 10.9 percent during fourth quarter 2010. In addition, the lowest number of comple-tions was recorded since 1999, with only 594,000 square feet of neighborhood/community center space brought online during the quarter. Both asking and effective rents declined. $50

$75

$100

$125

$150

$175

$200

$50

$75

$100

$125

$150

$175

$200

4Q103Q102Q101Q104Q09

NationalWest

Midwest

South

East


N a t i o n a l R e t a i l P r o p e r t y S e c t o r


w The apartment sector was the most attractive property in-vestment during fourth quarter 2010, according to respon-dents to the RERC/CCIM Investment Trends Quarterly survey. Respondents said demand was strong, although pricing and location could be challenging.

w Apartment sector volume continued to improve, increasing about 30 percent from the previous quarter on a 12-month trailing basis. Likewise, the size-weighted average price per apartment unit rose about 5 percent on a 12-month trailing basis. Quarterly apartment sector volume showed a steeper increase from the previous quarter, while the quarterly size-weighted average price per apartment unit remained flat, or up slightly. The weighted-average capital-ization rate decreased 10 basis points to 6.1 percent on a 12-month trailing average.

w The volume of apartment sector transactions that totaled less than $2 million increased nearly 10 percent on a 12-month trailing basis, while the volume of transactions that totaled greater than $5 million increased approximate-ly 30 percent during fourth quarter 2010.

w According to Reis, Inc., the national vacancy rate for the apartment sector dropped sharply to 6.6 percent in fourth quarter 2010. In addition, occupied stock increased by nearly 58,000 units for the quarter, with absorption for the year 2010 totaling over 227,000 units. Asking and effective rents continued to increase at approximately 0.5 percent.

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

4Q103Q102Q101Q104Q09

NationalWest

MidwestSouthEast


$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

4Q103Q102Q101Q104Q09

NationalWest

Midwest

South

East

RERC Price-Weighted Average PPU(12-Month Trailing Average)

$25,000

$50,000

$75,000

$100,000

$125,000

$150,000

$25,000

$50,000

$75,000

$100,000

$125,000

$150,000

4Q103Q102Q101Q104Q09

NationalWest

MidwestSouthEast

RERC Size-Weighted Average PPU(12-Month Trailing Average)

N a t i o n a l A p a r t m e n t P r o p e r t y S e c t o r


w CCIM members who completed the survey for the RERC/CCIM’s Investment Trends Quarterly noted that the hotel sector continued to struggle during fourth quarter 2010. Many respondents stated that distressed hotel properties were selling, although confidence in the sector remained low.

w Hotel sector volume jumped 70 percent on a 12-month trailing basis during fourth quarter 2010, while the size-weighted average price per unit fell about 5 percent after steadily improving since third quarter 2009. The 12-month trailing weighted-average capitalization rate dropped 90 ba-sis points to 7.1 percent compared to the previous quarter.

w In contrast to the other property sectors RERC analyzes, the hotel sector showed the same volume and size-weighted average price trends (higher volume, lower size-weighted pricing) for all transaction levels on a 12-month trailing ba-sis.

w According to Smith Travel Research, hotel sector occupan-cy increased 5.7 percent to 57.6 percent in December 2010. In contrast, the average daily rate (ADR) declined 0.1 per-cent to $98.08, while revenue per available room (RevPar) rose 5.5 percent to $56.47.

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

4Q103Q102Q101Q104Q09

National

East


$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

4Q103Q102Q101Q104Q09

NationalWest

Midwest

South

East

RERC Price-Weighted Average PPU(12-Month Trailing Average)

$25,000

$50,000

$75,000

$100,000

$125,000

$150,000

$25,000

$50,000

$75,000

$100,000

$125,000

$150,000

4Q103Q102Q101Q104Q09

NationalWest

Midwest

South

East

RERC Size-Weighted Average PPU(12-Month Trailing Average)

N a t i o n a l H o t e l P r o p e r t y S e c t o r


East Transaction Breakdown12-Month Trailing Averages (01/01/10 - 12/31/10)


















Weighted Avg. (%) 6.3 7.9 7.8 5.8 6.7


E a s t R e g i o nTr a n s a c t i o n B r e a k d o w n


South Transaction Breakdown12-Month Trailing Averages (01/01/10 - 12/31/10)

















Capitalization Rates (All Transactions)Range (%) 5.8 - 10.4 7.2 - 10.0 5.8 - 11.0 4.4 - 10.1 -

Weighted Avg. (%) 7.4 7.7 8.6 6.7 -

Median (%) 8.0 7.9 8.0 7.2 -Source: RERC.

S o u t h R e g i o nTr a n s a c t i o n B r e a k d o w n


Midwest Transaction Breakdown12-Month Trailing Averages (01/01/10 - 12/31/10)


















Weighted Avg. (%) 6.7 8.2 8.2 7.3 -

Median (%) 7.9 7.9 8.5 7.6 - Source: RERC.

M i d w e s t R e g i o nTr a n s a c t i o n B r e a k d o w n


West Transaction Breakdown12-Month Trailing Averages (01/01/10 - 12/31/10)





$2 - $5 MillionVolume (Mil) $771 $1,367 $1,088 $1,014 $152













Weighted Avg. (%) 7.0 7.4 8.4 5.8 -

Median (%) 7.7 7.3 7.4 6.1 -Source: RERC.

W e s t R e g i o nTr a n s a c t i o n B r e a k d o w n


-7

-5

-3

-1

1

3

5

7

9

-7

-5

-3

-1

1

3

5

7

9

4Q 2010

2Q 2010

4Q 2009

2Q 2009

4Q 2008

2Q 2008

4Q 2007

2Q 2007

4Q 2006

2Q 2006

4Q 2005

2Q 2005

4Q 2004

2Q 2004

4Q 2003

2Q 2003

4Q 2002

Perc

ent C

hang

e Q

uart

er A

go

According to the Bureau of Economic Analysis, real gross domestic product (GDP) growth increased to 3.2 percent on an annualized basis in fourth quarter 2010. This growth was helped by strengthening demand from consumers and businesses. In addition, the final sales for GDP jumped 7.1 percent - the largest quarterly gain since 1984, which bodes well for near-term growth.

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

Dec-10

Nov-10

Oct-10

Sep-10

Aug-10

July-1

0

Jun-1

0

May-10

Apr-10

Mar-10

Feb-10

Jan-1

0

Dec-09

Perc

ent C

hang

e M

onth

Ago

The Consumer Price Index (CPI) rose 0.5 percent to 220.25 in December 2010. Compared to a year ago, the CPI was up 1.5 percent. Thanks to widespread exuberance in the commodities markets, headline inflation remained positive for the second consecutive reading.

Source: Bureau of Labor Statistics.

Perc

ent

4

6

8

10

12

4

6

8

10

12

Dec-10

July-1

0

Mar-10

Nov-09

Jul-0

9

Mar-09

Nov-08

Jul-0

8

Mar-08

Nov-07

Jul-0

7

Mar-07

Nov-06

Jul-0

6

Mar-06

Nov-05

Jul-0

5

Mar-05

Nov-04

Jul-0

4

Mar-04

Nov-03

Jul-0

3

Mar-03

Nov-02

The unemployment rate fell to 9.4 percent in December. Although improving from November, the employment situation was still a disappointment as the numbers fell short of expectations. Employment is expected to increase in 2011, but more economic certainty and increased demand is needed.

Source: Bureau of Labor Statistics.

Source: Bureau of Economic Analysis.

Perc

ent

0

1

2

3

4

5

6

7

0

1

2

3

4

5

6

7

Discount Rate

Fed Funds Rate

Dec-10

Sep-10

Mar-10

Oct-09

Jun-09

Dec-08

Apr-08

Oct-07

May-07

Oct-06

May-06

Nov-05

Apr-05

Nov-04

May-04

Oct-03

May-03

Nov-02

May-02

Nov-01

Jun-01

Jan-01

The Federal Open Market Committee (FOMC) was slightly more optimisitic about the economy at its December 2010 meeting. Recent data was stronger than expected and growth is expected to increase in the near term. However, the long-term outlook was little changed. The federal funds rate remained in the 0.0-percent to 0.25-percent range, and the discount rate remained at 0.75 percent.

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

Dec-10

Sep-10

Jul-1

0

May-10

Mar-10

Jan-1

0

Nov-09

Sep-09

Jul-0

9

May-09

Mar-09

Jan-0

9

Nov-08

Sep-08

Jul-0

8

May-08

Mar-08

Jan-0

8

Nov-07

Year

To Y

ear P

erce

nt C

hang

e

Although retail sales rose 0.6 percent in December, this was the weakest growth since July. However, holiday sales in total were strong and exceeded expectations. Growth is predicted to continue into early 2011 due to the release of pent-up demand and increased optimism.

Source: Census Bureau.

60

65

70

75

80

85

60

65

70

75

80

85

Dec-10

Jul-1

0Feb-1

0

Sep-09

Apr-09

Nov-08

Jun-0

8

Jan-0

8

Aug-07

Mar-07

Oct-06

May-06

Dec-05

Jul-0

5Feb-0

5

Sep-04

Apr-04

Nov-03

Jun-0

3

Jan-0

3

Aug-02

Mar-02

Oct-01

May-01

Dec-00

Perc

ent

In December 2010, factory output increased at a 2.4-percent annual rate, down from 6.5 percent in the third quarter. Manufacturing utilization rose slightly to 73.5 percent. With strong demand and continued consumer spending, manufacturing utilization is expected to increase further.

Source: Federal Reserve.

Source: Federal Reserve.

Unemployment

GDP

Consumer Price Index

Manufacturing Utilization

FOMC Policy Decisions

Retail Sales


Mill

ions

3.0

4.0

5.0

6.0

7.0

8.0

3.0

4.0

5.0

6.0

7.0

8.0

Dec-10

Jul-1

0

Mar-10

Nov-09

Jul-0

9

Mar-09

Nov-08

Jul-0

8

Mar-08

Nov-07

Jul-0

7

Mar-07

Nov-06

Jul-0

6

Mar-06

Nov-05

Jul-0

5

Mar-05

Nov-04

Jul-0

4

Mar-04

Nov-03

Jul-0

3

Mar-03

Nov-02

Jul-0

2

Mar-02

Dec-01

Existing home sales jumped 12.3 percent in December 2010, at an annualized rate of 5.28 million units. This is the strongest monthly gain since 1999. However, compared to a year ago, sales are down 2.9 percent. Foreclosure processing issues persist, threatening demand and creating uncertainty. Home prices are expected to decline further, before stabilizing in the second half of the year.

Source: NAR.

100

110

120

130

140

150

160

170

180

190

100

110

120

130

140

150

160

170

180

190

Dec-10

Oct-10

Aug-10

Jun-1

0

Apr-10

Feb-10

Dec-09

Oct-09

Aug-09

Jun-0

9

Apr-09

Feb-09

Dec-08

Oct-08

Aug-08

Jun-0

8

Apr-08

Feb-08

Dec-07

Oct-07

Inde

x

The National Association of REALTORS® (NAR) Housing Affordability Index measures whether or not a typical family could qualify for a mortgage on a typical home. During fourth quarter 2010, the index increased until December, when it fell slightly to 185.3. However this still indicates that a typical family is more than able to afford a median-priced home.

Source: NAR.

6

7

8

9

10

11

12

13

6

7

8

9

10

11

12

13

Dec-10

Nov-10

Oct-10

Sep-10

Aug-10

Jul-1

0

Jun-1

0

May-10

Apr-10

Mar-10

Feb-10

Jan-1

0

Dec-09

Nov-09

Mon

ths

During fourth quarter, the monthly home supply continued to steadily decrease, with the De-cember 2010 single-family home supply declining to 8.1 from the previous month. This re-mains considerably higher than the normal rate of around 6.0 months, but demand for housing is expected to increase as job growth increases.

Source: NAR.

20

40

60

80

100

120

20

40

60

80

100

120

Jan-1

1

Sep-10

Apr-10

Nov-09

Jun-0

9

Jan-0

9

Aug-08

Mar-08

Oct-07

May-07

Dec-06

Jul-0

6

Feb-06

Sep-05

Apr-05

Nov-04

Jun-0

4

Jan-0

4

Aug-03

Mar-03

Oct-02

May-02

Dec-01

Inde

x

After decreasing slightly in December, consumer confidence rose 7.2 points to 60.6 in January 2011. This is only the second time the index exceeded 60 since 2008. This improvement might have been caused by tax cuts and improving labor market conditions. While moods are looking up, there is evidence that consumers believe the recession has not ended.

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Dec-10

Nov-10

Oct-10

Sep-10

Aug-10

Jul-1

0

Jun-1

0

May-10

Apr-10

Mar-10

Feb-10

Jan-1

0

Perc

ent C

hang

e Q

uart

er A

go

The Conference Board’s Index of Leading Indicators rose 1 percent in December 2010, indi-cating that the pace of recovery should increase in 2011. Compared to a year ago, the index grew 5 percent, and is more broad-based than previously. Economic growth has accelerated in recent months, and consumer spending is expected to strengthen with help from reductions in payroll taxes.

Source: The Conference Board.

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

Dec-10

Aug-10

Apr-10

Dec-09

Aug-09

Apr-09

Dec-08

Aug-08

Apr-08

Dec-07

Aug-07

Apr-07

Dec-06

Aug-06

Apr-06

Dec-05

Aug-05

Apr-05

Dec-04

Aug-04

Apr-04

Dec-03

Aug-03

Apr-03

Dec-02Be

ginn

ing

of M

onth

Adj

uste

d Cl

osin

g Pr

ice

The S&P 500 ended December 2010 at 1,257.64, up 0.07 percent from November. Overall, the S&P 500 was less volatile during fourth quarter as it gradually increased. Stocks in general are becoming more popular, though they are still considered to be more risky than commercial real estate.

Source: S&P.

Source: The Conference Board.

Consumer Confidence Housing Affordability

S&P 500 Existing Home Sales

Index of Leading Indicators Single Family Home Supply


The analysis provided in the RERC/CCIM Investment Trends Quarterly is conducted by Real Estate Research Corporation (RERC). The information is gathered in raw form from surveys sent to CCIM designees and candidates, and from sales transactions collected from various sources, including CCIM members, various key commercial information exchange organizations (CIEs), the media, assessors’ offices, RERC contacts in the marketplace, and other reliable public and private resources. All sales transactions are aggregated, analyzed, and reported on by RERC. Additional data and forecasts are provided courtesy of the REALTORS® Commercial Alliance and Torto Wheaton Research.

Published quarterly, the RERC/CCIM Investment Trends Quarterly report provides timely insight into transaction volume, pricing, and capitalization rates for the core income-producing properties.

RERC Definitions

Capitalization Rate: The capitalization rate is defined as the first year “stabilized” net operating income (NOI) (NOI is before capital expenditures – tenant improvements, leasing commissions, reserves – and debt service) divided by the present value (or purchase price). Capitalization rates included are transaction-based medians and price-weighted averages.

RERC Capitalization Rate and Ranges: Capitalization rates and ranges listed throughout this report are based on RERC’s proprietary realized capitalization rate model, which includes available transaction-based capitalization rates, NCREIF Index Returns, and other market factors, but is heavily weighted toward transaction-based capitalization rates for each property type within each market.

Price-Weighted Average: The price-weighted average is developed through weighting each asset based on the gross sales price. Therefore, larger dollar properties are given more weight than the smaller dollar properties, with the weighted average reflecting more weight towards institutional real estate.

Size-Weighted Average: The size-weighted average is developed through weighting each asset based on its gross square footage – simply an aggregation of all the gross sales prices divided by the aggregation of the gross square footage.

National/Regional Market Analysis: RERC ranks the investment potential of the metros and property types it covers based on various space market and financial market criteria, including pricing, capitalization rates, vacancy rates, and other factors.

Investment Conditions Rating: A rating of 1 through 10 (with 10 being high) reflecting survey respondents’ collective views of the investment environment for a particular property type in comparison with other property types. The rating may take into account supply and demand, economic conditions, pricing, rental rates, or other factors.

NCREIF Definitions

NCREIF: The National Council of Real Estate Investment Fiduciaries (NCREIF) is an independent organization dedicated to the compilation, validation, and distribution of performance data for the institutional real estate investment community.

Total Return: The total return includes appreciation (or depreciation), realized capital gain (or loss), and income. It is computed by adding the income and capital appreciation return on a quarterly basis.

Implied Cap Rate (Income Return): The implied capitalization rate measures the portion of return attributable to each property’s NOI. It is computed by dividing the total NOI by the total quarterly investment.

Capital Appreciation Return: The capital appreciation return measures the change in market value adjusted for any capital improvements/expenditures and partial sales divided by the average quarterly investment.

Annual and Annualized Returns: Annual returns are computed by chain-linking quarterly rates of return to produce time-weighted rates of return for the annual and annualized periods under study. For time periods beyond 1 year, the annualized returns are expressed as the annual compounded rate of return.

Allocation: The distribution, expressed as a percentage of the overall investment, in a particular geographic area by property type.

For a detailed description of the proceeding returns, as well as the calculations used by NCREIF to derive these figures, please visit http://www.ncreif.org/indices.

The combined returns are the weighted average of the returns for each property type according to the proportionate market value of properties surveyed relative to the total market values surveyed during a time period.

RERC Defined Regions and MSAs

West: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming

Midwest: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin

South: Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, Texas

East: Connecticut, Delaware, Kentucky, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, Washington D.C., West Virginia

Metropolitan Statistical Area (MSA): A geographic unit comprised of one or more counties around a central city or urbanized area with 50,000 or more population. Contiguous counties are included if they have close social and economic links with the area’s population nucleus.

With a few exceptions, the MSAs within this report coincide with the U.S. Office of Management and Budget’s December 2005 definitions for each MSA. For example, St. Paul, Minn., and Bloom-ington, Minn., as well as many other suburbs, are included within the Minneapolis MSA.

Note of Caution: It is imperative to exercise caution when comparing the data contained herein to previous reports published by RERC. The data herein is not “fixed,” and will be updated and changed as additional transaction information is gathered and analyzed.

Disclaimer: This publication is designed to provide accurate information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal or accounting service. The publisher advises that no statement in this issue is to be construed as a recommendation to make any real estate investment or to buy or sell a security or as investment advice. The examples contained in the publication are intended for use as background on the real estate industry as a whole, not as support for any particular real estate investment or security. Although the RERC/CCIM Investment Trends Quarterly uses only sources that it deems reliable and accurate, Real Estate Research Corporation (RERC) does not warrant the accuracy of the information contained herein.

S c o p e & M e t h o d o l o g y


RERCsCCIM Investment Trends QUARTERLYRERC Editorial Staff

PublisherKenneth P. Riggs, Jr.CFA, CRE, FRICS, MAI, CCIM

Editor-in-ChiefBarb Bush

Lead AnalystBrian Velky, CFA

Research AnalystsGreg PhilippKyle CorcoranCliff CarlsonCharles GohrDavid KellyLindsey KuhlmannMeredith SteffenYe ThwayMorgan Westpfahl

Layout & DesignJeff Carr

Data ManagementScott HamerlinckBen NeilDaniel Warner

Production CommitteeTerri CotterNicole Hardy

Research AssistantJeffrey Harms

CCIM Institute

PresidentFrank N. Simpson, CCIM

President-ElectLeil Koch, CCIM

First Vice PresidentWayne D’Amico, CCIM

TreasurerCharles C. Connely IV, CCIM

Executive Vice President/CEOHenry F. White, Jr.

Copyright Notice for RERC~CCIM Investment Trends Quarterly

Copyright© 2011 by Real Estate Research Corporation (RERC) and the CCIM Institute. All rights reserved. No part of this publication may be reproduced, duplicated, or copied in any form, includ-ing electronic forwarding or copying, xerography, microfilm, or other methods, or incorporated into any information retrieval system, without the written permission of RERC and the CCIM Institute.

Real Estate Research CorporationFounded more than 75 years ago, Real Estate Research Corporation (RERC) was the nation’s first independent real estate firm that specialized in both real estate research and analysis. Recognized as a pioneer in the art of real estate management and for monitoring key sectors of the econ-omy that influence the real estate industry, RERC has retained its place as one of the industry’s leading real estate investment trends analysts through the publication of such reports as Expectations & Market Realities in Real Estate and the RERC Real Estate Report. Today, RERC is known for its research publications and market studies, commercial property valuations, complex consulting assignments, portfolio management and technology services, and independent fiduciary services.

The CCIM InstituteSince 1969, the Chicago-based CCIM Institute has conferred the Certi-fied Commercial Investment Member (CCIM) designation to commercial real estate and allied professionals through an extensive curriculum of 200 classroom hours and professional experiential requirements. Currently, there are 9,000 CCIMs in 1,000 markets in the U.S. and 31 additional coun-tries. Another 7,000 practitioners are pursuing the designation, making the institute the governing body of 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 powerful technology tools such as the Site To Do Business (site analysis and demographics resource) and CCIMREDEX (commercial property data exchange), impact and influ-ence the commercial real es-tate industry. Visit www.ccim.com, www.stdbonline.com, and www.ccimredex.com for more information.

The RERC/CCIM Investment Trends Quarterly is produced by Real Estate Research Corporation (RERC) in association with and for members of the CCIM Institute.

A c k n o w l e d g e m e n t s


Sergio A. Adame Nemont Realty South

Denise Adams Due Diligence Research Group LLC Raleigh, NC

Patrick Agee The Advantage Realty Group, Inc. Tuscaloosa, AL

Jay Amoruso Re/Max Precision Realty Hartford, CT

Sage N. Andress Sunmark Realty Tampa, FL

Noah Balanoff CB Richard Ellis Northern New Jersey

Bo Barron Sperry Van Ness/The Barron Group Western Kentucky

J. Paul Basinger American Real Estate Specialists Youngstown, OH

Tray Bates Bates Commercial LLC Corpus Christi, TX

Brian Bell Campana Resources, LLC San Antonio, TX

Tim J. Besaw Besaw and Associates Realty Ltd. Milwaukee, WI

Jon Bohm Bohm Commercial Real Estate Minneapolis, MN

Chase Brieman CB Richard Ellis Madison, WI

Terry Broussard Broussard Realty & Appraisal New Orleans, LA

Heidi Burgess East Carolina Commer-cial Inc. Eastern North Carolina

Fred Caminite Kelly Capital, LLC South

Tony Carlson Grandbridge Real Estate Capital Minneapolis, MN

Quentin Caruso Realty Capital Advisors, Inc. Orlando, FL

Susan Cerone RealtyUSA Commercial East

Kent Clifford Clifford Commercial Real Estate Las Vegas, NV

Patrick Coates Coates Commercial Properties, LLC Tulsa, OK

Barry Comiskey WCPMI Dallas, TX

Brion Costa Marcus & Millichap Los Angeles, CA

Jim Dahlem Dahlem Realty Com-pany, Inc. Louisville, KY

Skip Duemeland Duemelands Minneapolis, MN

Donald Dyche Rekast Realty Group, LLC Atlanta, GA

Bill Eshenbaugh Eshenbaugh Land Company Tampa, FL

David Fanney Deegansanglyn Com-mercial Real Estate New York, NY

Christopher Felix Century 21 Realty Management West

W. Darrow Fiedler KW Commercial Los Angeles, CA

Gregory Fitzgerald Tri-Oak Commercial Group South

Patrick Fitzgerald BankUnited Orlando, FL

Tony Fluhr NTS Development Company Louisville, KY

Christopher Fojo Pan American Real Estate Advisors LLC Orlando, FL

John Foley Hess Realty Central Pennsylvania

Bob Fredrickson Coldwell Banker Com-mercial Danforth Seattle, WA

Mark Freitas Craig L Michalak, Inc. Seattle, WA

Robert Gardner Sentry Commercial Realty Advisors Las Vegas, CA

Brenda Garretson CB Richard Ellis New York, NY

Gerald M. Garvin Coldwell Banker Com-mercial NRT Sacramento, CA

Jeremy Greena-myre Greenamyre Rentals, Inc. Kansas City, MO

Jag Grewal Ian Black Real Estate Tampa, FL

Laura Hankins Century 21 Boston Co. Realtors Midwest

Daren Hebold Daigle Commercial Group Maine

C o n t r i b u t o r s


F.G. Buddy Hege Gibson Smith Realty Co. Charlotte, NC

Scott Hensley Piedmont Properties Charlotte, NC

Scott Hileman Nye Commercial Advi-sors, Inc Tampa, FL

Gary Hunter Colliers International Seattle, WA

Steve Jacquemin S.J. Financial Group, Inc. St. Louis, MO

Michael JakubiecMichael P. Jakubiec Investment Real Estate, Inc.

Chicago, IL

Bruce Johnson Block Real Estate Ser-vices, LLC Kansas City, MO

Todd Kamps Kwekel Companies Midwest

Andy Kay Lifestyles Real Estate San Francisco, CA

Art Kelley Tucson, AZ

Kenneth Krawczyk K.S.K. Services Inc. Milwaukee, WI

Christina Kurtz-Clark

Coldwell Banker Com-mercial Orlando, FL

Chris Leon Realty World San Francisco, CA

Mike Lester Lester & Associates Realty Oklahoma City, OK

Tim Lidstrom Lidstrom Commercial Realtors Minneapolis, MN

Michael Lunn Re/Max Commercial Property Solutions Chicago, IL

Ned Madonia Triskelion LLC Las Vegas, NV

Reni Della Maggiore The Duncan Co., Inc. Sacramento, CA

Russell Malayery Marcus & Millichap Atlanta, GA

Karl Dee Maret Coldwell Banker Com-mercial NRT Tampa, FL

Allen C. McDonald Baker Storey McDonald Investments, LLC Nashville, TN

Kayvan Mehr-bakhsh Sperry Van Ness Washington D.C.

Nicole Messer Adler Realty Services LLC Miami, GA

Joe Milkes Milkes Realty Valuation Dallas, TX

Nick Miner Commercial Properties Inc Phoenix, AZ

Dale Mueller Mueller & Associates, Inc. Hampton Roads, VA

Troy Muljat Muljat Group Bellingham, WA

Scott Naugle RPIMLLC Washington D.C.

Ed Nutting Marcus & Millichap Atlanta, GA

Marc Oram RE/Max Commercial Associate Miami, GA

Edward B Partridge Wedge Management, Inc. San Antonio, TX

Shad Phipps CB Richard Ellis Columbus, OH

Davide F. Pio Security Pacific San Francisco, CA

Luciano H. Rappa Kaizen Realty Partners Miami, GA

Peter Rasmusson Lee & Associates Northern New Jersey

David Reese Commercial Choice Realty, Inc Midwest

James P. Robert-son

Long Commercial Real Estate Services Tucson, AZ

W. Robinette SPC Commercial Coeur d'Alene, ID

Dan Robinson Lidstrom Commercial Realtors Southern Minnesota

John Robinson Magnusson Balfour Commercial Maine

Henry Rogers Coldwell Banker Com-mercial Benchmark Northeast Florida

Scott M. Schmitt Coldwell Banker Com-mercial Minneapolis, MN

Jose M Serrano New Miami Realty Corp Miami, GA

Michael Shaffer Skogman Comercial Cedar Rapids, IA

Cynthia Shelton Colliers International Orlando, FL

R. Tom Smith Coast/Sperry Van Ness Portland, OR



Stephen M. Soble Ernest Soble Commercial Properties, Inc. San Antonio, TX

Linda Sorkin Aukamp Brokerage & Consulting Charlotte, NC

Dewey Struble Sperry Van Ness Reno-Sparks, NV

Duke Suwyn Colliers International Western Michigan

Julius Tabert Sperry Van Ness/The Group Commercial LLC Denver, CO

Barbara Tarin Tarin Real Estate San Antonio, TX

Juan Teran Teran and Associates, Inc. Tucson, AZ

Cheri Thomas Newmark Knight Frank Nashville, TN

Craig Thomas Marcus & Millichap South

David Thomas KW Commercial Atlanta, GA

Nick A. Tillema Access Valuation, LLC Indianapolis, IN

Joe Turner AllSouth Alabama

Mark Vellinga Graham Organization South Dakota

Maurice Walker Birch Advisors Baltimore, MD

Elgin Weaver First Community Credit Union Houston, TX

Steven Weil Coldwell Banker South

Frank Weiskopf Rwalty Executives South

Dean Weitenhagen Fleetwood CRES Iowa

Jeff Wilke Graham & Company Huntsville, AL

Rober Wilson Remax SW Houston, TX

Dave Winder Lee & Associates Boise, ID

Jim Wright Jim Wright Company Killeen-Temple, TX

Daniel Zelonker Mizrach Realty Associ-ates Miami, GA


Thank you to all who sharedinformation

for this report.

Documents

CCIM Investment Trends Quarterly - 1Q 2011