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CRE Finance World, Autumn 2012

Through A Sharper Lens: CRE Analysis Using Monthly Data Chart 4 that meant less of a glut to deal with as demand contracted. Office Effective Rent Growth However, from 2008 onwards tech-metro inventory grew by 3.2% versus 1.4% for all others. Robust demand from tech firms is swamping competitive pressure from additions to new supply, and boosting rents and occupancies. Tech-oriented metros are simply the boats that are getting more of a lift from the rising tide, and this trend is evident whether one examines annual, quarterly, or monthly data. Monthly Retail Fundamentals are Flat With consumer confidence ebbing to its lowest point in months, and retail sales growth remaining lackluster, perhaps the best we can say about retail fundamentals is that monthly trends have remained relatively flat, with some notable points of improvement. National vacancies for neighborhood and community centers have remained stuck at 10.8% through July, a figure that has not budged for three months. While 10.8% is a level that hovers around highs unseen since the early 1990s, it at least represents Source: Reis, Inc. a 20 bps improvement over the cyclical peak value of 11% that the sector hit at the end of 2011. Trends for the first seven months of As one might expect from a pie that is not growing very fast, patterns 2012 render us confident of pronouncing the start of a recovery of recovery have been markedly uneven. Metro areas with a larger for the sector. share of tech-related jobs have been driving the recovery for CRE fundamentals. Consider a separate analysis for nine metros that Absorption came in at a tepid 935,000 square feet for the month, fit the “tech-heavy” criteria: Austin; Boston; Denver; Portland; but this represents a slight improvement over the monthly run rate Raleigh-Durham; San Diego; San Francisco; San Jose; and Seattle. of 672,000 square feet in the second quarter. San Francisco and San Jose stand out given their association with Silicon Valley, but all of these metros support a strong local tech Chart 5 cluster. Data from metros with a large technology base indicate Retail Vacancy and Net Absorption above-average rent growth and occupancy gains over the past several years. Since peaking in late 2010, vacancy declines have been more pronounced for tech markets, declining 151 bps while all other markets fell by just 31 bps. The variation is just as notable for rents; from trough to present, asking and effective rents are up 4.2% and 5%, respectively, for tech markets versus increases of 2.1% and 2.6% for all other markets. Net absorption figures yield another measure through which tech markets shine. These nine tech-oriented metros provide inventory that add up to only 15% of the total, but generated 35% of the increase in occupied stock from late 2010 to July 2012. Perhaps all this is driven by tight supply conditions, versus strong demand, but the data says otherwise. Yes, supply growth has been relatively tight for office properties leading up to the recession — Source: Reis, Inc. CRE Finance World Autumn 2012 24


CRE Finance World, Autumn 2012
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