US CAPITAL MARKETS REPORT: US ... - Cushman Rate Survey Report_SPRING 2015.… · US CAPITAL MARKETS REPORT: ... OVERVIEW C&W Class A Cap Rate ... Total investment sales rose to $394.0

US CAPITALMARKETS REPORT: CAPITALIZATION

RATES BY ASSET TYPE

0CUSHMAN & WAKEFIELD

US CAPITAL MARKETS REPORT:

CAPITALIZATION RATES BY PROPERTY TYPE

SPRING 2015


RATES BY ASSET TYPE


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

Offi

ce C

BD A

Offi

ce C

BD B

Offi

ce N

on-C

BD A

Offi

ce N

on-C

BD B

War

ehou

se A

War

ehou

se B

Mul

tifam

ily A

Mul

tifam

ily B

Mul

tifam

ily C

Mall

s CBD

A

Mall

s CBD

B

Mall

s Non

-CBD

A

Mall

s Non

-CBD

B

Strip

Cen

ters

CBD

A

Strip

Cen

ters

CBD

B

Strip

Cen

ters

Non

-CBD

A

Strip

Cen

ters

Non

-CBD

B

Source: Real Capital Analytics, C&W Capital Markets

CAPITALIZATION RATES BY PROPERTY TYPE

SPRING 2015

US CAPITAL MARKETS REPORT:

CAPITALIZATION RATES BY ASSET TYPE

O V E R V I E WC&W Class A Cap Rate Range C&W Class B Cap Rate Range C&W Class C Cap Rate RangeRCA Reported Cap Rate on Transactions in 4Q 2014

An improving economy and firming fundamentals continue to attract investors into the U.S. real estate market. While strong demand for office and multifamily has pushed pricing up to the new highs, surpassing previous peak pricing from 2007, the retail and industrial sectors have yet to reach pre-recession levels. Demand has been especially strong for downtown office markets, particularly in major gateway cities where demographic and economic shifts are changing the environment. According to the Moody’s/RCA Commercial Property Price Index (CPPI) through February 2015, the apartment sector has outperformed other sectors with a 25% increase in prices from the previous peak, followed closely by CBD offices (22%). Pricing for all property types across the major markets was also up 22% from the previous peak. Driving up prices has been the increased competition from investors, both foreign and domestic, looking to take advantage of U.S. real estate’s outperformance relative to other asset classes and countries. Total investment sales rose to $394.0 billion, a 15.5% increase in 2014. By sector, retail posted the largest increase in activity year-over-year (31.1%), followed by land (21.1%) and hospitality (20.4%). Office came in fourth with an increase of 13.9%. The debt market also fueled the increase in activity, as a low cost of capital has resulted in competition across all private and public entities looking to place debt.

Given the increasing investor appetite, since our last survey cap rates have compressed an additional 8 to 15 bps for class A products across all property types and 20 bps across class B properties. Investors are taking on more risks and searching for yield. Some investors are seeking development plays in the top core markets where pricing has surpassed prior peak levels while other investors are increasing their allocation to the suburban markets. As a result, cap rates continued to compress through Spring 2015.

MARKET OBSERVATIONSWhile published cap rate series currently exist, commonly used indices generally do not distinguish between class A and B assets, resulting in index volatility as the product quality mix of traded assets (RCA) and owned assets (NCREIF) changes. This is particularly apparent when, like today, investors start to move up the risk/reward spectrum. The cap rate ranges provided herein are today’s executable cap rate ranges provided by local C&W brokers, together with their assessment of market momentum for the next 6 months in light of investor appetite and transaction pipelines. The following are some overall observations by property type.


RATES BY ASSET TYPE


CBD

NATIONAL VACANCY RATES ACROSS CBD MARKETS

12.0%

0%

5%

10%

15%

20%

25%

0%

5%

10%

15%

20%

25%

Broo

klyn

NY

Mid

tow

n So

uth

NY

San

Fran

cisco

, CA

Bost

on, M

A

Dow

ntow

n N

Y

Port

land,

OR

Hou

ston

, TX

Mid

tow

n N

Y

Sacr

amen

to, C

A

Phila

delp

hia,

PA

Den

ver,

CO

Nat

iona

l U.S

.

Oak

land,

CA

Ora

nge

Cou

nty

CA

Tam

pa, F

L

Was

hing

ton,

D.C

.

Chi

cago

, IL

Orla

ndo,

FL

Ft. L

aude

rdale

, FL

Miam

i, FL

San

Die

go, C

A

Silico

n Va

lley

CA

Balti

mor

e, M

D

Har

tford

, CT

Palm

Bea

ch, F

L

Atlan

ta, G

A

New

Hav

en, C

T

Los A

ngel

es C

BD

Jacks

onvil

le, F

L

Wes

tche

ster

NY

Dall

as, T

X

Phoe

nix,

AZ

Fairf

ield

Cou

nty

CT

UC

AS

% O

F IN

VEN

TORY

VAC

ANC

Y RA

TE

Vacancy % UC

NATIONAL VACANCY RATES ACROSS NON-CBD MARKETS

16.4%

0%

5%

10%

15%

20%

25%

30%

0%

5%

10%

15%

20%

25%

30%

San

Fran

cisco

, CA

Silico

n Va

lley

CA

SF P

enin

sula

CA

San

Die

go, C

AFt

. Lau

derd

ale, F

LH

oust

on, T

XD

enve

r, C

OPo

rtlan

d, O

RSF

Nor

th B

ay C

ABa

ltim

ore,

MD

Ora

nge

Cou

nty

CA

Miam

i, FL

Con

tra

Cos

ta, C

ASa

cram

ento

, CA

Los A

ngel

es M

etro

Oak

land,

CA

New

Hav

en, C

TN

atio

nal U

.S.

Tam

pa, F

LPh

ilade

lphi

a, PA

Long

Islan

d N

YD

allas

, TX

Jacks

onvil

le, F

LIn

land

Empi

re C

ABo

ston

, MA

Orla

ndo,

FL

St. P

eter

sbur

g FL

Atlan

ta, G

APa

lm B

each

, FL

Cen

tral

NJ

Sout

hern

NH

Chi

cago

, IL

Wes

tche

ster

NY

Har

tford

, CT

Fairf

ield

Cou

nty

CT

Subu

rban

MD

Nor

ther

n VA

Nor

ther

n N

JPh

oeni

x, A

Z

UC

AS

% O

F IN

VEN

TORY

VAC

ANC

Y RA

TE

Vacancy % UC

OFFICE

Source: C&W Research, C&W Capital Markets

OFFICE FUNDAMENTALSIncreasing job growth has translated directly into rising demand for the office market. The latest unemployment rate held steady at 5.5% in March 2015 from the previous month as the U.S. added 126,000 new jobs in March, well below expectations but believed to be a function of the severe weather in much of the country. Given the strong demand, the U.S. leasing market had a strong year in 2014 with total leasing activity increasing 4.4% to nearly 215 msf, led by activity in the CBD markets. The overall vacancy in the CBDs dropped by 60 bps during the quarter and 150 bps during the year to end 2014 at 12.0%. One fourth of the CBD markets tracked by Cushman & Wakefield have single-digit vacancy rates, with Midtown South, San Francisco and Boston having the lowest vacancy rates in the country. The vacancy rate in suburban markets declined 60 bps during the year to 16.4%. Class A direct asking rents in the CBD increased 3.5% year-over-year to $48.76 psf and class A rents in suburban markets increased 1.8% to $29.59 psf.

Construction levels are starting to ramp up, with development concentrated in a handful of markets. A total of 21.7 msf of new product was delivered in 2014 across both CBD and suburban markets, equating to only 0.7% of the total inventory, on par with last year’s level. Another 58.9 msf of space was under construction at year-end, equating to 1.8% of total inventory. Speculative projects are on the rise, comprising 69% of total completions in 2014, compared to 52% in 2013. Silicon Valley has one of the highest levels of new construction underway with 6.7 msf, equating to 13.5% of total inventory. However, 70% of that space is pre-leased to tenants either new to the market or in need of expansion space.

Investment sales totaled $114.5 billion in 2014, up 14% from the previous year, as investors continue to allocate capital to the office sector. The top six gateway markets are attracting a large share of activity as these top markets accounted for 51% of total transaction volume. Activity in the non-CBD markets is accelerating as greater availability of debt is spurring more investors into secondary markets. Non-CBD sales volume increased by 10% during the year.

CAP RATE SURVEY RESULTSInvestor interest in downtown markets continued as cap rates in CBDs have compressed further in the past six months. Class A CBD office cap rates range from 5.6% to 6.3% as of Spring 2015, down 14 bps from Fall 2014. Cap rates for prime cities are even lower at 4.25% to 5.0%. Cap rates for class B assets across the CBDs declined 10 to 13 bps to 6.5% to 7.2%, with cap rates for class B assets in top cities even lower at 5.1% to 5.8%. Manhattan, which has dominated investment activity in recent years, posted cap rates for class A buildings in the 3.75% to 4.25% range, flat to slightly down from the previous survey. Class B assets are trading for 4.0% to 5.0%, down 50 bps from Fall 2014. Class A assets in San Francisco and Boston, which both had a banner year for sales volume in 2014, are trading between 4.0% and 4.75%. Class B assets in San Francisco have been in favor for a while given the lack of class A assets on the market, and these are trading at 4.25% to 5.0%, down 25 bps from Fall 2014. Class B assets in Boston have been gaining favor over the past two years and are now trading for 4.75% to 5.5%. Downtown LA posted the largest decline in cap rates during the past six months, compressing by 25 to 50 bps as the investment market is gaining momentum.

While investors are stepping up their acquisitions in suburban markets, cap rates in those markets on average have yet to show a meaningful decline. Class A properties in suburban locations are trading for 100 bps more than their downtown counterparts at 6.6% to 7.3%, basically flat since Fall 2014. Suburban markets located outside primary markets are trading for 20 bps less at 6.4% to 7.1%, only 5 bps lower than six months ago. Moving out to class A buildings in secondary markets garners an additional 20 to 30 bps of yield as these assets are selling for 6.7% to 7.4%. Strong activity in the San Jose market pushed its cap rate down 50 bps during the past six months to the 5.5% to 6.0% range, the lowest in the country among all suburban markets. A fiercely competitive New York market has pushed investors out to the boroughs and suburbs, where deals are trading for 7.0% to 7.5%. Atlanta assets are attracting more investors, as the cap rate there declined 50 to 75 bps to 7.25% to 8.0% since Fall 2014.


RATES BY ASSET TYPE


OFFICE

EASTERNMARKETS

Class A

TrendNext 6 Mo. IN

STIT

UT

ION

AL

REIT

DEV

ELO

PER

FORE

IGN

PRIV

AT

EC

API

TA

L CLASS B

TrendNext 6 Mo. IN

STIT

UT

ION

AL

REIT

DEV

ELO

PER

FORE

IGN

PRIV

AT

EC

API

TA

L Class A

TrendNext 6 Mo. IN

STIT

UT

ION

AL

REIT

DEV

ELO

PER

FORE

IGN

PRIV

AT

EC

API

TA

L Class B

TrendNext 6 Mo. IN

STIT

UT

ION

AL

REIT

DEV

ELO

PER

FORE

IGN

PRIV

AT

EC

API

TA

L

Atlanta, GA 6.00% - 6.50% • • • • • 6.75% - 7.50% • • • 7.25% - 8.00% • • • • 8.00% - 8.75% • •Baltimore, MD 6.75% - 7.50% • • • 7.50% - 8.25% • 7.25% - 8.00% • • • 8.00% - 8.75% • •Boston, MA 4.00% - 4.75% • • 4.75% - 5.50% • • • 6.00% - 6.75% • • 8.00% - 8.75% • •Charlotte, NC 6.00% - 6.75% • • • • • 6.75% - 7.50% • • • 7.25% - 8.00% • • • 8.25% - 9.00% • •Chicago, IL 5.00% - 5.75% • • 6.25% - 7.00% • • 7.50% - 8.25% • • 8.25% - 9.00% • •Minneapolis, MN 6.25% - 7.00% • • 7.75% - 8.25% • • 7.00% - 7.50% • • 8.25% - 9.00% • •Northern New Jersey 6.00% - 6.75% • • • 6.50% - 7.00% • • • • 7.25% - 8.00% • • • • 8.25% - 9.00% • •New York 3.75% - 4.25% • • 4.00% - 5.00% • • • N/A • N/ANYC Suburbs/Westchester 6.00% - 6.75% • • • • 6.50% - 7.25% • • • • 7.00% - 7.75% • • • • 8.50% - 9.25% • •New Haven/Stamford 6.00% - 7.00% • • • • 6.50% - 7.50% • • • • 7.50% - 8.50% • • • • 8.50% - 9.50% • •Orlando, FL 6.00% - 6.50% • • 7.25% - 7.75% • 6.25% - 6.75% • • 7.50% - 8.00% •Philadelphia, PA 6.50% - 7.00% • 7.25% - 8.00% • 7.00% - 7.50% • 8.00% - 8.50% •Miami, FL 5.00% - 5.50% • • • 5.75% - 6.25% • • 6.00% - 6.50% • • • 6.50% - 7.50% •Tampa, FL 6.25% - 6.75% • 7.50% - 8.00% • 6.25% - 7.00% • • 7.75% - 8.50% •Washington DC 4.50% - 5.25% • • • • 5.10% - 5.80% • • • 6.00% - 6.50% • • • 7.00% - 7.75% • • • •AVERAGE 5.60% - 6.27% 6.41% - 7.10% 6.82% - 7.50% 7.91% - 8.66%

WESTERN MARKETS Class A

TrendNext 6 Mo. IN

STIT

UT

ION

AL

REIT

DEV

ELO

PER

FORE

IGN

PRIV

AT

EC

API

TA

L Class B

TrendNext 6 Mo. IN

STIT

UT

ION

AL

REIT

DEV

ELO

PER

FORE

IGN

PRIV

AT

EC

API

TA

L Class A

Trend Next 6 Mo. IN

STIT

UT

ION

AL

REIT

DEV

ELO

PER

FORE

IGN

PRIV

AT

EC

API

TA

L Class B

Trend Next 6 Mo. IN

STIT

UT

ION

AL

REIT

DEV

ELO

PER

FORE

IGN

PRIV

AT

EC

API

TA

L

Austin, TX 5.75% - 6.50% • • • • 6.75% - 7.50% • • • • 6.00% - 6.75% • • • • 7.25% - 8.00% • • • •Dallas, TX 6.00% - 6.75% • • • 7.50% - 8.25% • 6.00% - 6.75% • • • • 8.00% - 8.75% • •Denver, CO 5.00% - 5.75% • • • 6.00% - 6.75% • • 5.75% - 6.50% • • • 6.50% - 7.25% • •Houston, TX 5.75% - 6.50% • 6.75% - 7.50% • • • • 6.50% - 7.25% • • 7.75% - 8.25% • •Las Vegas, NV 6.50% - 7.25% • • 7.25% - 8.00% • 8.00% - 8.75% • 7.50% - 8.00% • •Los Angeles, CA 4.25% - 5.25% • • • • 6.00% - 6.75% • • • 6.50% - 7.25% • • 7.25% - 8.00% • •Phoenix, AZ 5.50% - 6.50% • • 7.00% - 7.50% • 6.00% - 6.50% • • 6.50% - 7.50% •Portland, OR 5.75% - 6.25% • • 6.75% - 7.25% • • 6.75% - 7.00% • • 7.25% - 8.00% • •Sacramento, CA 7.00% - 7.75% • • 7.50% - 8.25% • • 7.50% - 8.25% • • 8.25% - 9.00% •San Antonio, TX 7.25% - 8.00% • • 8.50% - 9.25% • • 7.50% - 8.25% • • 8.25% - 9.00% • •San Diego, CA 5.50% - 6.25% • 6.50% - 7.25% • 5.50% - 6.25% • 6.50% - 7.25% •San Francisco, CA 4.00% - 4.75% • • • 4.25% - 5.00% • • • 6.00% - 6.75% • • 7.00% - 7.75% • •San Jose, CA 6.00% - 6.50% • • • 6.75% - 7.25% • • • 5.50% - 6.00% • • 6.00% - 6.50% • •Seattle, WA 4.75% - 5.50% • • • • • 5.75% - 6.50% • • • • • 6.50% - 7.25% • • • • • 7.25% - 8.25% • • • •AVERAGE 5.64% - 6.39% 6.66% - 7.36% 6.43% - 7.11% 7.23% - 7.96%

CLASS A5.62% - 6.33%

CLASS B6.53% - 7.23%

CLASS A6.63% - 7.30%

CLASS B7.57% - 8.31%

CBD SUBURBS


RATES BY ASSET TYPE


Seattle CBDClass A: 4.75% - 5.50% Class B: 5.75% - 6.50% SUBURBAN Seattle Class A: 6.50% - 7.25% Class B: 7.25% - 8.25%

Portland CBDClass A: 5.75% - 6.25% Class B: 6.75% - 7.25% SUBURBAN Portland Class A: 6.75% - 7.00% Class B: 7.25% - 8.00%

Sacramento CBDClass A: 7.00% - 7.75% Class B: 7.50% - 8.25% SUBURBAN Sacramento Class A: 7.50% - 8.25% Class B: 8.25% - 9.00% San Francisco CBDClass A: 4.00% - 4.75% Class B: 4.25% - 5.00% SUBURBAN San Francisco Class A: 6.00% - 6.75% Class B: 7.00% - 7.75% San Jose CBDClass A: 6.00% - 6.50% Class B: 6.75% - 7.25% SUBURBAN San Jose Class A: 5.50% - 6.00% Class B: 6.00% - 6.50%

Los Angeles CBDClass A: 4.25% - 5.25% Class B: 6.00% - 6.75% SUBURBAN Los Angeles Class A: 6.50% - 7.25% Class B: 7.25% - 8.00%

San Diego CBDClass A: 5.50% - 6.25% Class B: 6.50% - 7.25% SUBURBAN San Diego Class A: 5.50% - 6.25% Class B: 6.50% - 7.25%

Denver CBDClass A: 5.00% - 5.75% Class B: 6.00% - 6.75% SUBURBAN DenverClass A: 5.75% - 6.50% Class B: 6.50% - 7.25%

Minneapolis CBDClass A: 6.25% - 7.00% Class B: 7.75% - 8.25% SUBURBAN MinneapolisClass A: 7.00% - 7.50% Class B: 8.25% - 9.00%

Philadelphia CBDClass A: 6.50% - 7.00% Class B: 7.25% - 8.00% SUBURBAN Philadelphia Class A: 7.00% - 7.50% Class B: 8.00% - 8.50%

Northern NJ CBDClass A: 6.00% - 6.75% Class B: 6.50% - 7.00% SUBURBAN Northern NJ Class A: 7.25% - 8.00% Class B: 8.25% - 9.00%

Baltimore CBDClass A: 6.75% - 7.50% Class B: 7.50% - 8.25% SUBURBAN Baltimore Class A: 7.25% - 8.00% Class B: 8.00% - 8.75% DC CBDClass A: 4.50% - 5.25% Class B: 5.10% - 5.80% SUBURBAN DC Class A: 6.00% - 6.50% Class B: 7.00% - 7.75%

Charlotte CBDClass A: 6.00% - 6.75% Class B: 6.75% - 7.50% SUBURBAN Charlotte Class A: 7.25% - 8.00% Class B: 8.25% - 9.00%

Orlando CBDClass A: 6.00% - 6.50% Class B: 7.25% - 7.75% SUBURBAN Orlando Class A: 6.25% - 6.75% Class B: 7.50% - 8.00%

Tampa CBDClass A: 6.25% - 6.75% Class B: 7.50% - 8.00% SUBURBAN Tampa Class A: 6.25% - 7.00% Class B: 7.75% - 8.50%

Houston CBDClass A: 5.75% - 6.50% Class B: 6.75% - 7.50% SUBURBAN Houston Class A: 6.50% - 7.25% Class B: 7.75% - 8.25%

Austin CBDClass A: 5.75% - 6.50% Class B: 6.75% - 7.50% SUBURBAN Austin Class A: 6.00% - 6.75% Class B: 7.25% - 8.00%

San Antonio CBDClass A: 7.25% - 8.00% Class B: 8.50% - 9.25% SUBURBAN San Antonio Class A: 7.50% - 8.25% Class B: 8.25% - 9.00%

LEGENDCap Rate Trend Next 6 months

FLAT

DOWN

UP

Phoenix CBDClass A: 5.50% - 6.50% Class B: 7.00% - 7.50% SUBURBAN PhoenixClass A: 6.00% - 6.50% Class B: 6.50% - 7.50%

Atlanta CBDClass A: 6.00% - 6.50% Class B: 6.75% - 7.50% SUBURBAN Atlanta Class A: 7.25% - 8.00% Class B: 8.00% - 8.75%

New Haven/Stamford CBDClass A: 6.00% - 7.00% Class B: 6.50% - 7.50% SUBURBANClass A: 7.50% - 8.50% Class B: 8.50% - 9.50% NY Burbs/Westchester CBDClass A: 6.00% - 6.75% Class B: 6.50% - 7.25% SUBURBANClass A: 7.00% - 7.75% Class B: 8.50% - 9.25%

Boston CBDClass A: 4.00% - 4.75% Class B: 4.75% - 5.50% SUBURBAN Boston Class A: 6.00% - 6.75% Class B: 8.00% - 8.75% New York City CBDClass A: 3.75% - 4.25% Class B: 4.00% - 5.00%

Las Vegas CBDClass A: 6.50% - 7.25% Class B: 7.25% - 8.00% SUBURBAN Las VegasClass A: 8.00% - 8.75% Class B: 7.50% - 8.00%

OFFICE

Chicago CBDClass A: 5.00% - 5.75% Class B: 6.25% - 7.00% SUBURBAN Chicago Class A: 7.50% - 8.25% Class B: 8.25% - 9.00%

Miami CBDClass A: 5.00% - 5.50% Class B: 5.75% - 6.25% SUBURBAN Miami Class A: 6.00% - 6.50% Class B: 6.50% - 7.50%

Dallas CBDClass A: 6.00% - 6.75% Class B: 7.50% - 8.25% SUBURBAN Dallas Class A: 6.00% - 6.75% Class B: 8.00% - 8.75%


RATES BY ASSET TYPE


CBD

NATIONAL WAREHOUSE VACANCY RATES ACROSS INDUSTRIAL MARKETS

6.8%

0%

5%

10%

15%

20%

25%

0%

5%

10%

15%

20%

25%

SF P

enin

sula,

CA

Gre

ater

Los

Ang

eles

Silico

n Va

lley,

CA

Den

ver,

CO

Oak

land,

CA

Ora

nge

Cou

nty,

CA

Phila

delp

hia,

PALa

kelan

d, F

LSt

. Pet

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urg,

FLSF

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th B

ay C

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Dist

Cor

rC

ontr

a C

osta

, CA

Palm

Bea

ch, F

LH

oust

on, T

XSa

n D

iego

, CA

Inlan

d Em

pire

CA

Nat

iona

lTa

mpa

, FL

Miam

i, FL

Orla

ndo,

FL

Ft. L

aude

rdale

, FL

New

Jers

ey -

Nor

ther

nAt

lanta

, GA

Stoc

kton

/Tra

cy C

ABa

ltim

ore,

MD

Chi

cago

, IL

Dall

as/F

t. W

orth

TX

New

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ey -

Cen

tral

Long

Islan

d N

YSu

burb

an M

DN

orth

ern

VASa

cram

ento

, CA

Bost

on, M

AJac

kson

ville

, FL

Har

tford

, CT

Phoe

nix,

AZ

New

Hav

en, C

TSo

uthe

rn N

H

UC

AS

% O

F IN

VEN

TO

RY

VA

CA

NC

Y R

AT

E

Vacancy Under Construction (as % of Inventory)

INDUSTRIAL - WAREHOUSE

Source: C&W Research, C&W Capital Markets

INDUSTRIAL FUNDAMENTALSWhile industrial production was up 4.3% year-over-year in the fourth quarter of 2014, the latest figures indicate a decline of 0.6% in March, which equated to a decline of 1.0% on an annualized basis during the first quarter, largely a result of a drop in oil and gas well drilling. Capacity utilization fell to 78.4% in March from 79.0% as of February, but increased 3.0% on an annual basis. An improving economy, the expansion of e-commerce and the growth of domestic manufacturing further fueled the rapid improvement in market fundamentals. Robust demand resulted in 469.1 msf of industrial space leased in 2014, an increase of 5.6% from 2013 levels. The U.S. industrial vacancy rate dropped to its lowest level in more than ten years, declining to 7.0% in the fourth quarter, a 100 bps drop from the previous year. The national warehouse vacancy rate dropped 70 bps during the year to 6.8% and rents increased by 4.3%. Construction activity is subdued, with industrial product under construction amounting to only 0.2% of inventory.

INDUSTRIAL CAP RATE SURVEY RESULTSSales volume increased 8% during the year to $45.0 billion, with the volume of single asset sales up 25% year-over-year. Warehouse transactions dominated activity, accounting for 68% of the total volume. On a national basis, cap rates edged down 11 bps between Fall 2014 and Spring 2015 as investor interest continues to increase in this sector. Class A industrial assets are now trading at 5.9% to 6.6% and class B assets are trading for a 6.9% to 7.7% cap rate. The core coastal markets are trading for sub-5% cap rates, flat to down 25 bps from Fall 2014. Southern California and San Francisco markets are trading for 4.25% to 5.0% with Northern New Jersey and Miami in the 4.75% to 5.50% range. Class B assets in these core markets are trading in the 5% to 6.5% range. The only markets with noticeable increases were the Texas markets, where concerns about the economy are causing demand from investors to pull back.

Interest in secondary markets is increasing as leasing fundamentals are improving, which has resulted in cap rates compressing. Denver posted the largest decline, with Class A assets trading for 5.5% to 6.25%, a 75 bps drop since our last survey. Other secondary locations, including Atlanta, Baltimore, and Sacramento, recorded 25 bps drop with cap rates in the 5.0% to 6.5% range. Class B assets in secondary locations are in the mid-6% to high-7% range.


RATES BY ASSET TYPE


EASTERN MARKETS Class A Trend Next 6 Mo.

INST

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TIO

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L

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DEV

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Atlanta, GA 5.50% - 6.25% • • • • • 6.50% - 7.00% • • •Baltimore, MD 5.00% - 6.20% • • 5.50% - 7.25% • •Boston, MA 6.75% - 7.50% • 8.25% - 9.00% •Charlotte, NC 6.00% - 6.75% • • • 6.75% - 7.50% • •Chicago, IL 5.25% - 5.75% • • • 6.75% - 7.50% • •Cincinnati, OH 6.25% - 6.75% • • • • 8.00% - 8.75% • •Cleveland, OH 8.00% - 9.00% • • 9.00% - 10.00% • •Columbus, OH 6.50% - 7.25% • • • • • 8.50% - 9.25% • • •Detroit, MI 9.00% - 10.00% • 10.00% - 11.00% •Indianapolis, IN 6.25% - 7.00% • • • • • 7.50% - 8.25% • •Kansas City, MO 6.75% - 7.25% • • • • • 8.50% - 9.25% • •Memphis, TN 6.75% - 7.50% • 7.50% - 8.00% •Miami, FL 4.75% - 5.25% • • • • • 5.25% - 6.00% • • • • •Minneapolis, MN 6.00% - 6.75% • • • 7.25% - 8.00% • • •Nashville, TN 6.25% - 7.00% • • • • 7.00% - 7.75% • • •Northern New Jersey 4.75% - 5.50% • • • 5.75% - 6.50% • •Orlando, FL 6.00% - 6.50% • • • • • 6.75% - 7.75% • • • •Philadelphia Metro 6.00% - 7.50% • 7.00% - 8.00% • •Tampa, FL 6.25% - 6.75% • • • • • 7.00% - 7.75% • • • • •AVERAGE 6.21% - 6.97% 7.30% - 8.13%

WESTERN MARKETS Class A Trend Next 6 Mo.

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Austin, TX 6.75% - 7.50% • • • • 7.50% - 8.25% • • • •Dallas, TX 5.75% - 6.50% • • • • 7.00% - 7.75% • •Denver, CO 5.50% - 6.25% • • • 6.75% - 7.50% • •Houston, TX 6.00% - 6.75% • • • • 7.25% - 8.00% • • • •Los Angeles, CA 4.25% - 4.75% • 5.00% - 5.50% •Orange County, CA 4.25% - 4.75% • 5.00% - 5.50% •Phoenix, AZ 6.00% - 6.75% • • • 6.75% - 7.25% • • •Portland, OR 6.00% - 6.75% • • • 7.00% - 7.50% • •Inland Empire, CA 4.25% - 5.00% • 5.25% - 5.75% •Sacramento, CA 5.75% - 6.50% • • • 7.00% - 7.75% • •San Antonio, TX 7.00% - 8.00% • • 7.75% - 8.50% • •San Diego, CA 5.00% - 5.50% • 5.25% - 6.00% •San Francisco, CA 4.25% - 5.00% • • • • • 6.00% - 6.75% • • • •San Jose, CA 5.25% - 6.00% • • • • • 6.00% - 6.75% • • • •St. Louis, MO 6.50% - 7.25% • • • • 8.00% - 9.00% • • •AVERAGE 5.50% - 6.22% 6.50% - 7.18%OVERALLCLASS A 5.90% - 6.64% CLASS B 6.95% - 7.71%

WAREHOUSE


RATES BY ASSET TYPE



FLAT

DOWN

UP

PortlandClass A: 6.00% - 6.75% Class B: 7.00% - 7.50%

SacramentoClass A: 5.75% - 6.50% Class B: 7.00% - 7.75%

San FranciscoClass A: 4.25% - 5.00% Class B: 6.00% - 6.75%

Los AngelesClass A: 4.25% - 4.75% Class B: 5.00% - 5.50% Orange CountyClass A: 4.25% - 4.75% Class B: 5.00% - 5.50% San DiegoClass A: 5.00% - 5.50% Class B: 5.25% - 6.00% Inland EmpireClass A: 4.25% - 5.00% Class B: 5.25% - 5.75%

AustinClass A: 6.75% - 7.50% Class B: 7.50% - 8.25%

DallasClass A: 5.75% - 6.50% Class B: 7.00% - 7.75%

TampaClass A: 6.25% - 6.75% Class B: 7.00% - 7.75%

MiamiClass A: 4.75% - 5.25% Class B: 5.25% - 6.00%

AtlantaClass A: 5.50% - 6.25% Class B: 6.50% - 7.00%

CharlotteClass A: 6.00% - 6.75% Class B: 6.75% - 7.50%

CincinnatiClass A: 6.25% - 6.75% Class B: 8.00% - 8.75%

BaltimoreClass A: 5.00% - 6.20% Class B: 5.50% - 6.75%

BostonClass A: 6.75% - 7.50% Class B: 8.25% - 9.00% Northern NJClass A: 4.75% - 5.50% Class B: 5.75% - 6.50% PhiladelphiaClass A: 6.00% - 7.50% Class B: 7.00% - 8.00%

ChicagoClass A: 5.25% - 5.75% Class B: 6.75% - 7.50%

St. LouisClass A: 6.50% - 7.25% Class B: 8.00% - 9.00%

DenverClass A: 5.50% - 6.25% Class B: 6.75% - 7.50%

MinneapolisClass A: 6.00% - 6.75% Class B: 7.25% - 8.00%

PhoenixClass A: 6.00% - 6.75% Class B: 6.75% - 7.25%

HoustonClass A: 6.00% - 6.75% Class B: 7.25% - 8.00%

OrlandoClass A: 6.00% - 6.50% Class B: 6.75% - 7.75%

DetroitClass A: 9.00% - 10.00% Class B: 10.00% - 11.00%

ColumbusClass A: 6.50% - 7.25% Class B: 8.50% - 9.25%

ClevelandClass A: 8.00% - 9.00% Class B: 9.00% - 10.00%

NashvilleClass A: 6.25% - 7.00% Class B: 7.00% - 7.75%

MemphisClass A: 6.75% - 7.50% Class B: 7.50% - 8.00%

Kansas CityClass A: 6.75% - 7.25% Class B: 8.50% - 9.25%

San AntonioClass A: 7.00% - 8.00% Class B: 7.75% - 8.50%

San JoseClass A: 5.25% - 6.00% Class B: 6.00% - 6.75%

IndianapolisClass A: 6.25% - 7.00% Class B: 7.50% - 8.25%

WAREHOUSE


RATES BY ASSET TYPE


CBD

NATIONAL VACANCY RATES ACROSS MULTIFAMILY MARKETS

4.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

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Vacancy Completions (as % of Inventory)

Source: Reis, C&W Capital Markets

MULTIFAMILY

MULTIFAMILY FUNDAMENTALSFundamental housing drivers including job growth and demographic factors continue to strengthen, indicating that growth will continue in this sector. The overall vacancy rate remained flat between the third and fourth quarter of the year but was down 10 bps from the previous year to end 2014 at 4.2%. The construction pipeline is starting to ramp up as construction completions averaged 1.6% of total national inventory in 2014. Effective rents increased 3.6% during the year to $1,124 per month with tech markets outperforming the rest of the country. The overall outlook for this sector is favorable. The ramp-up in construction is expected to slightly outpace absorption over the next three years, resulting in a vacancy rate in the low- to mid-5% range by 2017. Construction levels are expected to peak 2015 and then slowly taper off through 2017. Rent growth is forecast to average 2.8% per year during the next three years, with the major coastal markets outperforming the U.S. average.

MULTIFAMILY CAP RATE SURVEYInvestor demand for multifamily properties remains robust, as competition is pushing prices and volumes higher. Deal volume in the fourth quarter of 2014 was the highest it has been since the peak of fourth quarter 2007, bringing the 2014 total up to $1,06.1 billion, a 9% increase from 2013. Excluding portfolio transactions, sales volume of single assets increased 34% year-over-year. Class A assets are trading in the 4.5% to 5.2% range, 9 bps lower than where they were trading six months ago. Shifting to class B assets garners about 100 bps in yield as these properties are trading for 5.4% to 6.2%, about 7 bps lower than they were in the Fall. Not surprisingly, New York and San Francisco, which are the two most sought-after markets, have the lowest cap rates in the country at 3.5% to 4.0%.

Demand is also strong for assets in Southern California, where cap rates are in the 3.75% to 4.25% range and in Seattle, Boston and Portland where cap rate are 25 to 50 bps higher. Some of the largest movements in cap rates were in Chicago and Denver, where rates compressed 50 bps for class A properties, followed by Las Vegas, Sacramento, Salt Lake City, Northern New Jersey and Minneapolis, all places where the economy is steadily rebounding. Moving out to class B assets in the top coastal gateway markets garners another 100bps of yield and class C assets in those same markets are an additional 100 bps higher. The same trend holds true for secondary markets, that increasing to the next lower class increases the yield by another 100 bps.


RATES BY ASSET TYPE


EASTERN MARKETS Class A TrendNext 6 Mo.

Class B TrendNext 6 Mo.

Class C TrendNext 6 Mo.

Atlanta, GA 4.50%-5.25% 5.50%-6.50% 6.50%-7.00% Baltimore, MD 4.75%-5.50% 6.00%-6.50% 7.50%-8.00% Boston, MA 4.00%-5.00% 5.00%-5.75% 7.00%-8.00% Charlotte, NC 4.75%-5.25% 5.25%-6.25% 6.25%-7.25% Chicago, IL 4.00%-5.25% 5.75%-6.75% 6.25%-8.25% Columbus, OH 5.75%-6.75% 7.00%-8.00% 8.00%-10.00% Indianapolis, IN 5.20%-6.30% 6.70%-7.90% 7.90%-9.00% Jacksonville, FL 5.00%-6.00% 6.00%-7.00% 7.50%-8.50% Minneapolis, MN 4.25%-5.25% 5.25%-6.00% 6.00%-7.25% Nashville, TN 5.00%-5.50% 5.50%-6.25% 6.25%-7.50% Northern New Jersey 4.25%-4.75% 5.25%-5.75% 6.00%-7.00% New York (NYC) 3.50%-4.00% 4.00%-4.50% 5.00%-6.00% Orlando, FL 4.80%-5.50% 5.50%-6.25% 6.25%+ Philadelphia, PA 4.50%-5.00% 5.00%-5.75% 6.00%-7.00% Raleigh-Durham, NC 4.75%-5.25% 5.25%-6.25% 6.25%-7.25% South Florida 4.25%-4.75% 5.00%-5.50% 5.75%-6.25% Tampa, FL 4.75%-5.50% 5.50%-6.00% 6.00%-7.00% Washington DC 4.25%-5.00% 5.25%-6.00% 6.75%-7.50% AVERAGE 4.57% - 5.32% ` 5.48% - 6.27% 6.51% - 7.50%

WESTERN MARKETS Class A TrendNext 6 Mo.

Class B TrendNext 6 Mo.

Class C TrendNext 6 Mo.

Austin, TX 4.50%-5.50% 5.50%-6.50% 6.25%-6.75% Dallas, TX 4.50%-5.50% 6.00%-6.75% 7.00%-8.00% Denver, CO 4.25%-5.00% 5.25%-5.75% 6.00%-6.50% Houston, TX 4.75%-5.75% 6.25%-6.75% 7.00%-8.00% Inland Empire, CA 4.75%-5.25% 5.50%-6.00% 6.25%-6.75% Las Vegas, NV 4.75%-5.25% 5.50%-6.25% 6.50%-7.50% Los Angeles, CA 3.75%-4.25% 4.75%-5.25% 5.25%-5.75% Orange County, CA 3.75%-4.25% 4.75%-5.25% 5.25%-5.75% Phoenix, AZ 4.75%-5.25% 5.50%-6.25% 6.25%-7.00% Portland, OR 4.00%-5.00% 5.00%-6.00% 6.00%-7.00% Sacramento, CA 4.50%-5.25% 5.25%-5.85% 5.85%-6.50% Salt Lake City, UT 5.25%-5.50% 6.00% 6.50% San Antonio, TX 5.25%-6.00% 6.00%-6.50% 6.75%-7.75% San Diego, CA 3.75%-4.25% 4.75%-5.25% 5.25%-5.75% San Francisco, CA 3.50%-4.00% 4.25%-5.00% 5.25%-6.00% Seattle, WA 4.00%-4.50% 5.00%-6.00% 6.00%-7.00% St. Louis, MO 5.50%-6.50% 6.50%-7.50% 8.00%-9.00% AVERAGE 4.44% - 5.12% 5.40% - 6.05% 6.20% - 6.91%

OVERALL NATION CLASS A4.51% - 5.22%

CLASS B5.44% - 6.16%

CLASS C6.36% - 7.21%

MULTIFAMILY


RATES BY ASSET TYPE


MULTIFAMILY

SeattleClass A: 4.00% - 4.50% Class B: 5.00% - 6.00% Class C: 6.00% - 7.00%


FLAT

DOWN

UP

PortlandClass A: 4.00% - 5.00% Class B: 5.00% - 6.00% Class C: 6.00% - 7.00%

Salt Lake CityClass A: 5.25% - 5.50% Class B: 6.00% Class C: 6.50% San FranciscoClass A: 3.50% - 4.00% Class B: 4.25% - 5.00% Class C: 5.25% - 6.00% Los AngelesClass A: 3.75% - 4.25% Class B: 4.75% - 5.25% Class C: 5.25% - 5.75%

Inland EmpireClass A: 4.75% - 5.25% Class B: 5.50% - 6.00% Class C: 6.25% - 6.75%

Las VegasClass A: 4.75% - 5.25% Class B: 5.50% - 6.25% Class C: 6.50% - 7.50% AustinClass A: 4.50% - 5.50% Class B: 5.50% - 6.50% Class C: 6.25% - 6.75%

DallasClass A: 4.50% - 5.50% Class B: 6.00% - 6.75% Class C: 7.00% - 8.00%

NashvilleClass A: 5.00% - 5.50% Class B: 5.50% - 6.25% Class C: 6.25% - 7.50%

TampaClass A: 4.75% - 5.50% Class B: 5.50% - 6.00% Class C: 6.00% - 7.00%

South FloridaClass A: 4.25% - 4.75% Class B: 5.00% - 5.50% Class C: 5.75% + 6.25%

CharlotteClass A: 4.75% - 5.25% Class B: 5.25% - 6.25% Class C: 6.25% - 7.25%

Raleigh-DurhamClass A: 4.75% - 5.25% Class B: 5.25% - 6.25% Class C: 6.25% - 7.75%

DCClass A: 4.25% - 5.00% Class B: 5.25% - 6.00% Class C: 6.75% - 7.50%

BaltimoreClass A: 4.75% - 5.50% Class B: 6.00% - 6.50% Class C: 7.50% - 8.00%

BostonClass A: 4.00% - 5.00% Class B: 5.00% - 5.75% Class C: 7.00% - 8.00%

Northern NJClass A: 4.25% - 4.75% Class B: 5.25% - 5.75% Class C: 6.00% - 7.00%

PhiladelphiaClass A: 4.50% - 5.00% Class B: 5.00% - 5.75% Class C: 6.00% - 7.00%

St. LouisClass A: 5.50% - 6.50% Class B: 6.50% - 7.50% Class C: 8.00% - 9.00%

MinneapolisClass A: 4.25% - 5.25% Class B: 5.25% - 6.00% Class C: 6.00% - 7.25%

PhoenixClass A: 4.75% - 5.25% Class B: 5.50% - 6.25% Class C: 6.25% - 7.00%

HoustonClass A: 4.75% - 5.75% Class B: 6.25% - 6.75% Class C: 7.00% - 8.00%

JacksonvilleClass A: 5.00% - 6.00% Class B: 6.00% - 7.00% Class C: 7.50% - 8.50%

OrlandoClass A: 4.80% - 5.50% Class B: 5.50% - 6.25% Class C: 6.25% +

ColumbusClass A: 5.75% - 6.75% Class B: 7.00% - 8.00% Class C: 8.00% - 10.00%

IndianapolisClass A: 5.20% - 6.30% Class B: 6.70 % - 7.90% Class C: 7.90% - 9.00%

San AntonioClass A: 5.25% - 6.00% Class B: 6.00% - 6.50% Class C: 6.75% - 7.75%

San DiegoClass A: 3.75% - 4.25% Class B: 4.75% - 5.25% Class C: 5.25% - 5.75%

Orange CountyClass A: 3.75% - 4.25% Class B: 4.75% - 5.25% Class C: 5.25% - 5.75%

New YorkClass A: 3.50% - 4.00% Class B: 4.00% - 4.50% Class C: 5.00% - 6.00%

AtlantaClass A: 4.50% - 5.25% Class B: 5.50% - 6.50% Class C: 6.50% - 7.00%

DenverClass A: 4.25% - 5.00% Class B: 5.25% - 5.75% Class C: 6.00% - 6.50%

ChicagoClass A: 4.00% - 5.25% Class B: 5.75% - 6.75% Class C: 6.25% - 8.25%

SacramentoClass A: 4.50% - 5.25% Class B: 5.25% - 5.85% Class C: 5.85% - 6.50%


RATES BY ASSET TYPE


CBD

NATIONAL VACANCY RATES ACROSS RETAIL MARKETS

9.5%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

San

Fran

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CA

NC

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RETAIL

Source: Reis, C&W Capital Markets

RETAIL FUNDAMENTALSDespite mixed economic indicators for the retail sector, fundamentals continue to strengthen in the retail sector as job growth and personal income is on the rise. While the latest retail sales and consumer confidence figures were weak in February, they improved in March with retail sales up 0.9% during the month and consumer confidence up to 101.3 in March from 98.8 in February. Lower energy prices and an improved labor market helped push auto sales up, which continue to be bright spot in the economy. Overall, strong economic growth led to the U.S. retail vacancy rate declining 50 bps during the year to 9.5%. U.S. rents increased 2.1% year-over-year and positive trends are forecast for 2015.

RETAIL CAP RATE SURVEYRetail investment surged in the fourth quarter of 2014 to nearly $22 billion, bringing the 2014 total to $74.6 billion, a 31% jump from 2013 levels. While international investors are favoring High Street retail and its double-digit rent growth in top gateway cities, domestic buyers are chasing malls and strip centers. Overall cap rates have compressed by 15 bps on average in class A assets with suburban cap rates for both malls and strip centers compressing more than 20 bps as more domestic investors are searching for yield. Focusing on class A malls, cap rates for CBD assets are trading in the 5% to 6% range on average, with primary and even some secondary markets trading in the sub-5% range. Class A properties in suburban locations are trading in the 5.25% to 6.25% range, with a number of markets trading in the 4.5% to 5.5% range.

Interest in strip centers is also on the rise as cap rates compressed 15 to 20 bps for both CBD and suburban locations and for class A and class B assets. In markets where the housing market is finally recovering after a deep recession, cap rates compressed between 25 bps and to as much as 50 bps in some markets (Atlanta, Orlando, Tampa, Los Angeles and Phoenix). Cap rates compressed even in strip centers in Texas markets, whereas other property types did not fare as well. Overall, class A assets in CBD locations are trading for 5.4% to 6.2% and suburban locations garner an additional 30 bps of yield with cap rates in the 5.7% to 6.6% range. Cap rates are about 90 bps higher for class B assets.


RATES BY ASSET TYPE


EASTERNMARKETS

Class A

TrendNext 6 Mo. IN

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Atlanta, GA 5.25% - 6.00% • • • 5.75% - 6.50% • • • 5.50% - 6.25% • • • • 7.00% - 8.00% • •Boston, MA 4.25% - 5.00% • • • 5.25% - 6.00% • • • • • 5.00% - 5.75% • • • • • 6.25% - 7.00% • • •Chicago, IL 4.25% - 5.00% • • • • • 5.25% - 6.00% • • 5.25% - 6.00% • • • • 6.25% - 7.00% • • •Miami, FL 4.25% - 5.00% 5.25% - 6.00% 4.50% - 5.25% • • • 6.50% - 7.25% •Minneapolis, MN 5.75% - 6.50% • • 6.50% - 7.25% • •Northern New Jersey 5.25% - 6.00% • • 7.00% - 7.75% • •Orlando, FL 4.75% - 5.50% 6.00% - 6.75% 4.75% - 5.50% • • • 6.75% - 7.50% • •Philadelphia, PA 5.00% - 6.00% • • 6.00% - 7.00% • • • 5.50% - 6.25% • • 7.50% - 8.50% • • • •Tampa, FL 4.75% - 5.50% 6.00% - 6.75% 4.75% - 5.50% • • • 6.75% - 7.50% •AVERAGE 4.64% - 5.43% 5.64% - 6.43% 5.14% - 5.89% 6.27% -7.53%

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Austin, TX 4.50% - 6.00% • • 6.00% - 7.00% • • 4.50% - 6.00% • • 6.00% - 7.00% • •Dallas, TX 4.50% - 6.00% • • 6.00% - 7.00% • • 4.50% - 6.00% • • 6.00% - 7.00% • •Denver, CO 6.25% - 6.75% • • • 7.25% - 8.00% • • 6.25% - 6.75% • • • 7.25% - 8.00% • •Houston, TX 4.50% - 6.00% • • 6.00% - 7.00% • • 4.50% - 6.00% • • 6.00% - 7.00% • •Las Vegas, NV 7.00% - 8.50% • 7.00% - 8.50% • 6.00% - 7.50% • • 6.50% - 7.50% •Los Angeles, CA 4.50% - 5.50% • 5.00% - 6.50% • 4.50% - 6.00% • • 5.50% - 7.00% •Portland, OR 5.75% - 6.50% • • • 6.75% - 7.50% • • 6.50% - 7.00% • • 7.50% - 8.00% • •Inland Empire, CA 7.00% - 8.50% • • 7.00% - 8.50% • 6.00% - 7.50% • • 6.50% - 7.50% •San Antonio, TX 5.50% - 6.50% • • 7.50% - 8.50% • • • 7.00% - 8.00% • • • 8.00% - 9.00% • • •San Diego, CA 4.50% - 5.50% • 5.00% - 6.50% • 5.00% - 6.00% • • 6.00% - 7.00% •San Jose, CA 4.25% - 5.00% • • • • • 6.00% - 7.00% • • • • • 4.25% - 5.00% • • • • • 6.00% - 7.00% • • • • •AVERAGE 5.30% - 6.43% 6.32% -7.45% 5.36% - 6.52% 6.48% - 7.45%

CLASS A5.04% - 6.04%

CLASS B6.06% - 7.06%

CLASS A5.26% - 6.24%

CLASS B6.59% - 7.49%

PRIMARY SUBURBAN

RETAIL: MALL


RATES BY ASSET TYPE






Minneapolis CBDN/ASUBURBAN MinneapolisClass A: 6.25% - 7.00% Class B: 7.00% - 8.00%



Northern NJ CBDN/ASUBURBAN Northern NJ Class A: 5.25% - 6.00% Class B: 7.00% - 7.75%

Orlando CBDClass A: 4.75% - 5.50% Class B: 6.00% - 6.75% SUBURBAN Orlando Class A: 4.75% - 5.50% Class B: 6.75% - 7.50%






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Boston CBDClass A: 4.25% - 5.00% Class B: 5.25% - 6.00% SUBURBAN Boston Class A: 5.00% - 5.75% Class B: 6.25% - 7.00% Las Vegas CBD

Class A: 7.00% - 8.50% Class B: 7.00% - 8.50% SUBURBAN Las VegasClass A: 6.00% - 7.50% Class B: 6.50% - 7.50%

Inland Empire CBDClass A: 7.00% - 8.50% Class B: 7.00% - 8.50% SUBURBAN Inland EmpireClass A: 6.00% - 7.50% Class B: 6.50% - 7.50%


San Jose CBDClass A: 4.25% - 5.00% Class B: 5.00% - 6.50% SUBURBAN San JoseClass A: 4.25% - 5.00% Class B: 6.00% - 7.00%

RETAIL: MALL

Dallas CBDClass A: 4.50% - 6.00% Class B: 6.00% - 7.00% SUBURBAN Dallas Class A: 4.50% - 6.00% Class B: 6.00% - 7.00%


RATES BY ASSET TYPE


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Atlanta, GA 5.25% - 6.00% • • • 6.25% - 6.75% • • • 6.00% - 6.75% • • • 7.00% - 7.50% • •Boston, MA 3.50% - 4.25% • • • 5.00% - 5.75% • • • 5.50% - 6.25% • • 6.75% - 7.50% • •Chicago, IL 4.50% - 5.25% • • • • 5.75% - 6.50% • • • • 5.50% - 6.25% • • • • 6.50% - 7.25% • • •Miami, FL 5.00% - 5.75% • • • 6.00% - 6.75% • • • 5.75% - 6.50% • • • 6.50% - 7.25% • • •Minneapolis, MN N/A N/A 6.00% - 6.50% • • • 7.50% - 8.00% •Northern New Jersey 5.25% - 5.50% 5.75% - 6.50% 5.00% - 5.50% • 6.00% - 6.75% •Orlando, FL 5.75% - 6.50% • • • 6.50% - 7.00% • • • 6.50% - 7.25% • • • 7.25% - 8.00% • • •Philadelphia, PA 5.00% - 5.75% • • 5.75% - 6.50% • • 5.25% - 6.00% • • • 6.00% - 6.75% • •Tampa, FL 6.00% - 6.75% • • • 6.50% - 7.25% • • • 6.50% - 7.25% • • • 7.25% - 8.00% • • •AVERAGE 5.03% - 5.72% 5.94% - 6.63% 5.78% - 6.47% 6.75% - 7.44%

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Austin, TX 5.00% - 6.50% • • • 6.25% - 7.00% • • 5.00% - 6.50% • • • 7.00% - 8.00% • •Dallas, TX 5.50% - 6.50% • • • 6.25% - 7.00% • • 5.50% - 6.50% • • • 7.00% - 8.00% • •Denver, CO 6.25% - 6.75% • • • 7.00% - 7.75% • 5.75% - 6.50% • • • • 7.25% - 8.00% • •Houston, TX 5.50% - 6.50% • • • 6.50% - 7.00% • • • 5.50% - 6.50% • • • • 7.00% - 8.00% • •Las Vegas, NV 6.00% - 7.00% • • • 6.50% - 7.50% • 6.00% - 7.00% • • 6.5 % - 7.50% •Los Angeles, CA 4.75% - 5.75% • 5.50% - 6.50% • 4.75% - 5.75% • • 6.00% - 7.00% •Phoenix, AZ 5.75% - 6.75% • • 6.50% - 7.50% • 5.75% - 6.75% • • 6.25% - 7.25% •Portland, OR 6.25% - 6.75% • • 7.00% - 7.50% • • 6.25% - 6.75% • • 7.00% - 7.50% • •Riverside, CA 6.00% - 7.00% • • • 6.50% - 7.50% • 6.00% - 7.00% • • 6.50% - 7.50% •San Antonio, TX 6.75% - 7.25% • • 7.50% - 8.25% • • • • 7.25% - 7.75% • • • 8.25% - 8.75% •San Diego, CA 4.75% - 5.75% • 6.00% - 7.00% • 4.75% - 5.75% • 6.50% - 7.50% •AVERAGE 5.68% - 6.59% 6.50% - 7.32% 5.68% - 6.61% 6.84% - 7.73%

CLASS A5.41% - 6.22%

CLASS B6.26% - 7.03%

CLASS A5.73% - 6.55%

CLASS B6.80% - 7.60%

PRIMARY SUBURBAN

RETAIL: STRIP CENTERS


RATES BY ASSET TYPE






Minneapolis CBDN/ASUBURBAN MinneapolisClass A: 6.00% - 6.50% Class B: 7.50% - 8.00%



Northern NJ CBDClass A: 5.25% - 5.50% Class B: 5.75% - 6.50% SUBURBAN Northern NJ Class A: 5.50% - 6.00% Class B: 6.00% - 6.25%

Orlando CBDClass A: 5.75% - 6.50% Class B: 6.50% - 7.00% SUBURBAN Orlando Class A: 6.50% - 7.25% Class B: 7.25% - 8.00% Dallas CBD

Class A: 5.50% - 6.50% Class B: 6.25% - 7.00% SUBURBAN Dallas Class A: 5.50% - 6.50% Class B: 7.00% - 8.00%







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Boston CBDClass A: 3.50% - 4.25% Class B: 5.00% - 5.75% SUBURBAN Boston Class A: 5.50% - 6.25% Class B: 6.75% - 7.50%

Las Vegas CBDClass A: 6.00% - 7.00% Class B: 6.50% - 7.50% SUBURBAN Las VegasClass A: 6.00% - 7.00% Class B: 6.50% - 7.50%

Riverside CBDClass A: 6.00% - 7.00% Class B: 6.50% - 7.50% SUBURBAN RiversideClass A: 6.00% - 7.00% Class B: 6.50% - 7.50%

Phoenix CBDClass A: 5.75% - 6.75% Class B: 6.50% - 7.50% SUBURBAN PhoenixClass A: 5.75% - 6.75% Class B: 6.25% - 7.25%

RETAIL: STRIP CENTERS


RATES BY ASSET TYPE


OUTLOOK

The commercial real estate sector continues to attract capital as investors seek stable and healthy returns on the heels of an improving economy and stronger leasing market. Investors have been focused on gateway markets, acquiring well-located and well-leased assets with more and more investors turning to secondary property types and markets in search of yield. In addition, development and asset repositioning is gaining more interest from investors given where we are in the cycle. The debt market is also improving, providing a tailwind to the borrowers, especially in secondary markets. So while rising interest rates is expected to put some upward pressure on cap rates in 2015, stronger NOI growth from rising rents is expected to offset rising debt costs.

The latest C&W survey indicates that cap rates are at cyclical lows for the office and multifamily sectors and there is more room for compression for industrial and retail properties, especially in secondary locations that have lagged the recovery thus far. With our forecast for an increase in investment activity in 2015, we believe broadly that cap rates will remain flat to down a little in certain pockets.

OFFICEToday office cap rates range from a low of 4.0% on average in the top gateway markets for class A product to a high of 9.0% for suburban class B buildings in secondary locations, down 8 to 10 bps from Fall 2014. With pricing already above previous peak levels in the top CBD markets, we believe there is little to no room for further cap rate compression. In the top six core markets of New York, Washington, D.C., Boston, Chicago, Los Angeles and San Francisco, we forecast that cap rates for class A buildings, already at cyclically low levels in the 4.25% to 5.0% range, will remain at those levels over the next six months. Moving out to class B assets in those same markets, we believe there is potential for further compression in Los Angeles. As investors are getting priced out of the core downtown markets, they are shifting their focus to the surrounding suburban areas in those prime cities, and it is in those markets where we see greater potential for further cap rate declines. In areas such as the outer boroughs of New York and Oakland (now referred to as the “Brooklyn” of San Francisco), we believe increased investor demand will push cap rates further down.

Sentiment is a little more mixed in the secondary markets. The strong demand from investors in the Silicon Valley market is exerting additional downward pressure on cap rates, which are currently in the 6.0% to 6.5% range. There is also room for additional cap rate compression in Atlanta, Baltimore, Charlotte and Tampa on the East Coast and Portland and Sacramento on the west coast over the next six months. In many of the other suburban markets in our survey we expect cap rates to remain flat. The one exception is Houston, where cap rates are expected to creep up given the negative press in that market.

INDUSTRIAL –WAREHOUSEClass A industrial buildings are currently trading for 5.9% to 6.4% with the major distribution hubs trading 160 bps lower in the 4.25% to 5.0% range. The general view is that rates have the potential for a little bit more downward movement, but not much given that the strong interest in these markets over the last two years has already pushed pricing up. Class B building in these same locations are also near peak and have little room for additional compression.

Looking at secondary markets, there is more room for cap rates to tick down further as more investors ramp up activity in these markets. Atlanta and Baltimore are two markets that stand out along the Eastern Seaboard where we believe cap rates could decline in the next six months. And a number of the Midwestern markets that have lagged this recovery are improving and garnering more attention from investors. We believe cap rates for both class A and B assets in Chicago, Kansas City, Cincinnati and Cleveland could compress further.

MULTIFAMILYThe outlook for 2015 is for continued strong demand from investors for multifamily properties throughout the U.S. We expect sales volume in 2015 to surpass the $100 billion mark once again, with continued low cap rates in primary markets and further cap rate compression in secondary market as investors move out on the risk/reward spectrum in search of yield. In addition, housing markets that lagged in this recovery, including Las Vegas and South Florida, are forecast to have additional cap rate compression. As more investors turn to class C assets for either repositioning opportunities, or because they are priced out of the class A and B market, we believe there is additional room for cap rates to come down for those assets as well.

RETAILAs the economy is firming, pricing for class B assets, which has lagged, is finally in recovery mode. As a result, cap rates for class B assets declined more sharply in the past six months than those for class A assets, even though class A properties are trading for more than class B assets. Retail fundamentals are expected to improve in 2015 with a limited construction pipeline coupled with stronger consumer spending expected to bolster this sector. As such, the investment outlook over the next six months for the retail sector is for pricing to increase on average for both class A and class B retail properties, exerting downward pressure on cap rates. Malls in high-density downtown areas are likely to edge down in some pockets, with other markets, such as Las Vegas and Los Angeles to remain steady. Strip centers are trading in the 5.5% to 6.5% range, with class A assets at the lower end and class B assets in the upper end of that range. The outlook is expected to follow that of the mall sector, with additional downward pressure on cap rates in most markets.


RATES BY ASSET TYPE


ABOUT CAPITAL MARKETSCushman & Wakefield is a world-leading provider of real estate Capital Markets expertise. Our Group provides comprehensive advisory and execution services to clients engaged in buying, selling, investing in, financing or developing real estate and real estate-related assets. Our solutions are tailored to meet the objectives of private and institutional owners and investors, as well as corporate owners and occupiers.

CONTACT

STEVEN WEILBACHSenior Managing DirectorMultifamily Capital Markets+1 415 773 [email protected]

FRED HARMEYERSenior Managing DirectorEastern Capital Markets+1 212 841 [email protected]

JANICE STANTONSenior Managing DirectorInvestment Strategies+1 212 841 [email protected]

Investment Sales & AcquisitionsEquity, Debt & Structured FinanceCorporate Finance & Investment Banking

Cushman & Wakefield is the world’s largest privately‐held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world’s major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917, it has 250 offices in 60 countries, employing more than 16,000 professionals. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has more than $3.7 billion in assets under management globally. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge.

OUR CAPITAL MARKET SERVICES

CAROLINE ROONEYManaging DirectorResearch and Capital Markets+1 415 658 [email protected]

Documents

US CAPITAL MARKETS REPORT: US ... - Cushman Rate Survey Report_SPRING 2015.… · US CAPITAL MARKETS REPORT: ... OVERVIEW C&W Class A Cap Rate ... Total investment sales rose to $394.0