Commercial Investment Real Estate July/August 2016

MARKE T TREND S Canadian Hotel Investment, 2015 Transaction volume YOY % change Hotels traded Price per room $2.5 billion 69% 147 $114,300 Source: Colliers International Loan Originations, 1Q16 Sector Hotel Industrial Multifamily Ofﬁ ce YOY change  3%  56%  2%  18% Source: Mortgage Bankers Association Brieﬂ y Noted Hospitality — “The brands are all chasing the millennials now,” said Tye Turman, a senior vice president for development for Marriott International, at a recent conference discussion on hotel development trends. To attract young customers, brands are looking past the cookie cutter model and ﬂ exing design and development rules to add unique elements. Trends include historic and ofﬁ ce building reuse and cobranding between select service and full service brands, particularly in urban areas. Industrial — New supply will slow industrial rent growth next year, as new supply comes online, according to CBRE. “We also expect that demand might ease a little, because it’s been so strong for so long,” says Jeff Havsy, CBRE’s Americas chief economist. “You’ll probably see a slight pickup in vacancy this year, but nothing dramatic.” Availability of U.S. industrial space declined 20 bps to 9.2 percent in 1Q16, the lowest level since 2001. Multifamily 1031 Exchanges Lead Net-Lease Buyer Pool As more property owners near retirement, many are deciding to transition their investment portfolios from apartment assets that are trading at a premium into net-leased retail properties across the U.S. Among the benefi ts, higher initial yields than other low- maintenance options and reduced volatility relative to the other property types. — Apartment developers are hitting the breaks as the average annual rate of multifamily construction starts for March fell to 312,000, essentially the same rate as last year, according to JLL. This makes six months of starts below the 12-month average of 384,000. In addition, multifamily construction permits also declined for the third month in a row, down 12.4 percent. Ofﬁ ce — Nervous ﬁ nancial markets led to lower job growth in the office-using sectors of business and professional services during 1Q16, which posted its lowest hiring ﬁ gures since 4Q13, according to CBRE. A 10 bps hike in ofﬁ ce vacancy also occurred in 1Q16, but the overall trend is downward with 47 of 58 markets tracked showing a YOY vacancy decrease. Another positive sign: a 6 percent YOY increase in the average gross asking rent. Retail — Slowing sales growth will limit brick and mortar retail expansion, according to CoStar. Same-store sales growth dropped to 1 percent in early 2016, from a high in 2012 of 3.5 percent. “These numbers in aggregate indicate that public retailers will be pulling back on their expansion plans,” says Ryan McCullough, CoStar’s senior real estate economist. “The retail recovery has matured. We’re beyond talking about pent-up demand for retail and are now looking at underlying fundamentals driving retail sales growth.”  July | August | 2016 Commercial Investment Real Estate

Commercial Investment Real Estate July/August 2016 | Page 10