Commercial Investment Real Estate March/April 2018 | Page 10

MARKET TRENDS U.S. Cities Showing Strong Momentum Rank Total Return % MSA 1 19.87 San Francisco 2 17.84 Nashville, Tenn. 3 16.54 Portland, Ore. 4 17.55 Salt Lake City 5 15.02 Hartford, Conn. 6 14.01 Milwaukee 7 17.45 San Antonio 8 16.06 Denver 9 14.17 Jacksonville, Fla. 10 15.15 Oklahoma City Note: Market rankings for the observation date are based on historic returns from Q3 2014 to Q3 2015, reflecting the two-quarter lag. Returns listed in the table reflect historic one-year return performance from Q1 2015 to Q1 2016. Source: CBRE Econometrics Advisors, CBRE Americas Research, Q1 2017 Briefly Noted Hospitality — Hotel occupancy is expected to continue soaring to record levels of 65.9 percent nationally through 2019, marking 10 years of nonstop growth, according to CBRE. However, challenges on the horizon consist of increased hotel construction in local markets, low inflation, the sharing economy, and book-direct, best- price guarantees for hotel rooms. Countering these headwinds, international and domestic travel rose 3.8 percent during 2016, increasing the demand for hotel rooms and contributing to the demand outpacing supply, according to Marcus & Millichap. Norfolk-Virginia Beach, Va.; Orlando, Fla.; and Atlanta experienced high increases in demand for hotel rooms. 8 March | April 2018 Industrial — Three trends are spurring growth in the industrial sector: low, steady vacancy at 5.2 percent nationwide; strong pre- leasing of 54.2 percent; and the strength of e-commerce, which commands 25 percent of leasing demand. The U.S. absorbed nearly 165.6 million square feet of new industrial properties YOY, while nearly 221.2 msf of new inventory is in the pipeline, according to JLL. Pressure continues for faster shipments and lower costs for consumers, resulting in companies investing in locations that are closer to labor and their customers. Multifamily — Consistent good performance is the mantra of the multifamily sector for 2018. Yardi Matrix predicts multifamily will continue its long run, buoyed by the strong economy and job growth; the shift to renting property by many baby boomers; and the continued support by millennials. Hurricanes Irma and Harvey helped to readjust the supply and demand equation for multifamily, particularly in Houston. Office — As large, multinational companies spread globally, more firms will rise from emerging economies. By 2025, more than 45 percent of the Fortune Global 500 will come from emerging economies, compared to 5 percent in 1990, according to Cushman & Wakefield. The technology sector is creating a new generation of companies that could compete in more diverse locations in secondary markets, such as Seoul, South Korea; Stockholm; and Austin, Texas. The total revenue for the tech sector grew from $600 billion to more than $6 trillion over three decades, resulting in a new crop of firms. Retail — As retail continues its marketplace transition, the top 90 U.S. shopping centers have spent billions of dollars to renovate their space, capti- vating shoppers with more food and fun; community connections; and stronger curb appeal. More than 41 percent have upgraded their food and beverage offerings; 34.4 percent have renovated tenant space; and nearly 30 percent have boosted entertain- ment, according to JLL. COMMERCIAL INVESTMENT REAL ESTATE