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CRE Finance World, Autumn 2012

Through A Sharper Lens: CRE Analysis Using Monthly Data Effective rents stayed flat at $16.55 per square foot in July, but have The vacancy rate for warehouse, distribution, and Flex/R&D been nudging upwards since bottoming at $16.49 in November properties fell by 10 bps in July, to 12.9%. It has been a consistent 2011. These trends are not much of a surprise: almost four years march downward for the vacancy rate, which has fallen by 160 bps ago, in late 2008, Reis predicted that the retail sector would be since its cyclical peak of 14.5% in September 2010. the last to recover, given the peculiarities of the massive recession we were then just about to go through. Households deleveraging Net absorption has been correspondingly healthy, with 10.4 million historic high levels of debt, and tumbling home prices deflating square feet added to occupied stock in July, well above the 7.6 million the wealth effect and blunting consumer confidence, all worked square feet average monthly run rate for the second quarter. together to postpone the recovery of retail fundamentals. All this Occupied stock rose by 48.1 million square feet in the first seven has come to pass, and the good news suggested by recent monthly months of 2012 — a slightly faster rate of improvement versus data appears to be that occupancies and rents are improving slowly, the first seven months of 2011, when a net figure of 45.6 million despite weak economic growth and shaky consumer confidence. square feet leased up. Chart 6 Chart 7 Retail Effective Rent Growth Industrial Vacancy and Net Absorption Source: Reis, Inc. Source: Reis, Inc. Industrial Properties Are Doing Very Well Effective rents have also increased at a measured pace, rising by The industrial sector has consistently shown improvement over the 0.2% in July. This is the same monthly run rate over the first six past two years, and the latest monthly data suggests continuing months of the year – which implies that industrial rents are growing gains for occupancy and rents. faster and more consistently than either office or retail properties. CRE Finance World Autumn 2012 26


CRE Finance World, Autumn 2012
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