Archive for July, 2013

Industrial Sector Takes Off | CCIM Institute | #CRE #REALESTATE

July 24, 2013 Leave a comment

Posted July 23rd 2013

In 2Q13, the industrial sector recorded its fifth consecutive quarter of net absorption above 20 million sf, with 26.7 million sf of space absorbed, according to Cassidy Turley’s U.S. Office and Industrial Report. The U.S. saw widespread absorption growth across the country in 2Q13, most notably in the South and Midwest where 22.3 million sf and 19.4 million sf of industrial space was absorbed respectively.

Thus far the recovery has recorded 283 million sf of industrial absorption, surpassing the 178 million sf lost during the recession, according to the report. The gains have been driven by housing construction, the auto sector, durable goods manufacturing, and e-commerce.

The industrial vacancy rate now sits at 8.5 percent, 140 basis points below its recessionary peak. And despite overall rent growth being restricted by antiquated properties, newly constructed industrial space posted a 2.3 percent rise in rents year over year.

Download the complete report (PDF).

2Q13 Industrial Rent Growth by City (YOY)

Miami         ↑11.3 % Chicago       ↑9.7 % Portland, Ore. ↑9.3 % Louisville, Ky.↑8.3% San Antonio   ↑6.8%

Source: Cassidy Turley

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via Industrial Sector Takes Off | CCIM Institute.


Cap Rate Compression Continues after a Short Pause – #CRE #MONTREAL

July 12, 2013 Leave a comment

Cap Rate Compression Continues after a Short Pause

After a brief lull, the first since Q3 2009, cap rates continued their slow descent to new record levels this quarter, according to the latest Altus InSite Investment Trends Survey results. At 5.62% last quarter, the average OCR across the 8 markets and 4 major asset types has compressed by a few points and now stands at 5.55%. While the overall average cap rate has compressed by a mere 7 points during the last quarter, results differ substantially from one asset class to another, although all basis point variations remain in the single digit range.
Suburban Multiple Unit Residential, the most aggressively priced asset class, has posted stable OCRs at an average 5.06% for 3 consecutive quarters. The priciest market, Vancouver (average price: $179,200/unit), has seen its average OCR rise from 4.1% last quarter to 4.5% this quarter, closing the gap between the average OCR in Toronto and Calgary, which now stand at a record low 4.7%, after a 20-point compression in each market over the same period. Other markets recorded very little or no change since Q1 2013. While this could be a sign of values stabilising, 38% of survey respondents expect further increases in value for this asset class in the next 12 months.
Single Tenant Industrial is also showing signs of stability, with only a 10-point compression since last quarter, moving from an 8-city average of 6.34% to this quarter’s 6.33%. Average OCRs in Quebec City and Edmonton registered a small 10 point increase and now stand at 7.4% and 6.1% respectively. Inversely, Montreal (6.6%) and Calgary (5.9%) both recorded a 10 point compression since Q1 2013, while other markets remained stable over the same period. Total year-over-year compression for this asset class was a modest 26 points, with only 27% of survey respondents expecting this asset class to increase in value in the next 12 months.
It is difficult to establish a clear pattern on the office side. After a hardly noticeable 2-point increase in OCR between Q4 2012 (5.74%) and Q1 2013 (5.76%), the 8-city average OCR for Downtown Class AA Office dropped to 5.68% this quarter. This is in contrast to most other markets, with the exception of Ottawa (10-point increase) recording a compression in cap rates, with Vancouver, Toronto and Montreal compressing by a modest 10 points since last quarter. Curiously, Quebec City and Halifax, which recorded cap rate increases last quarter, are showing the largest compression for this asset class this quarter, at 30 points and 20 points respectively. Average cap rates in Edmonton and Calgary have not changed for three quarters in a row.
In this context of modest compressions, Tier 1 Regional Mall stands out with an impressive 17-point compression between Q1 2013 (5.30%) and Q2 2013 (5.13%). The average OCR has compressed by a total of 44 points since Q2 of last year – the most significant change across all the asset classes covered. Tier 1 Regional is by far the most popular asset class on the Altus InSite Investor Preference Barometer, and its popularity is gaining momentum.
Still All about Interest Rates
If current returns on real estate investments seem low, the real estate premium has never been higher. As long as interest rates remain low, the case for real estate investment is sound. However, interest rates will eventually rise and some investors are expecting an impact on values. When asked about the impact of a 1.0% increase in interest rates on overall capitalization rates, more than half of the Altus InSite Investment Trends Survey Respondents estimate a hike of at least 50 basis points. Fears of eventually higher interest rates have already affected the REIT market where rates of return expectations have increased by about 60 basis points since last month.
Interest rate policies are definitely a key market indicator on real estate investors’ radar screen. But while future rise in interest rates is inevitable, investors have grown accustomed to seeing it delayed and postponed again and again. The bank of Canada and its US counterpart have communicated the need to bring interest rates back to ‘normal’ levels. However, lower than expected GDP Growth in both countries makes this move risky and supports pushing back a bit more. Rate increases may be coming, but when they do, they will be small and incremental.
Every quarter, senior Altus Group professionals reach out to over 300 investors, managers, owners, lenders, analysts and other market stakeholders to survey their opinion on value trends and perspectives. Conducted with the same benchmark properties for over 10 years, the survey provides valuable insights on valuation parameters for 32 asset classes in Canada’s 8 largest markets. For more detailed survey results, please contact

Rio Tinto to Relocate Headquarters to Deloitte Tower in Montreal #cre #montreal

July 12, 2013 Leave a comment

The Square Foot – Rio Tinto to Relocate its Rio Tinto Alcan Global Headquaters

The Cadillac Fairview Corporation Limited is proud to announce a long-term lease agreement with Rio Tinto, who will relocate its 800-employee Montreal office, including the global headquarters of Rio Tinto Alcan, to the Deloitte Tower in fall 2015. The company will occupy 190,000 square feet on the top eight floors of the 26-storey office development, and become the Deloitte Tower’s largest tenant in terms of square footage.
Rio Tinto Alcan, which established its head office in downtown Montreal more than 80 years ago, will occupy an additional 10,000 square feet for auxiliary services at the adjacent heritage-designated Windsor Station.
“Cadillac Fairview is proud to partner with Rio Tinto, and the decision to choose Deloitte Tower as their new home in Montreal speaks to the quality of our project,” said John Sullivan, president and chief executive officer, The Cadillac Fairview Corporation Limited. “Rio Tinto stands for sustainable development and innovation, and Cadillac Fairview is confident that Deloitte Tower reflects these core values.”
“As a long-time member of the Montreal community Rio Tinto Alcan has an important place in this city’s history, but today we are looking to the exciting future for our company in this city and our new home. Rio Tinto is very proud to be a part of this ambitious project and we look forward to moving to the city’s most modern, environmentally-friendly office building,” said Jacynthe Côté, chief executive of Rio Tinto Alcan.
Salvatore Iacono, Cadillac Fairview’s senior vice-president, development and portfolio management, Eastern Canada, is pleased with Deloitte Tower’s leasing momentum. “Deloitte Tower is now 70% leased only one year after the project and Deloitte’s role as anchor tenant were announced, and two years prior to the project’s completion.”
Deloitte Tower will be a state-of-the-art, green, contemporary, collaborative workplace and serves as a flagship to Cadillac Fairview’s commitment to Montreal. Over the next 15 years, the company plans to invest up to $2 billion to transform the area surrounding the Bell Centre, including $200 million to build Deloitte Tower.

on July 11, 2013

Office Sector Gains Ground in 2Q13 | CCIM Institute

July 11, 2013 Leave a comment


Office Sector Gains Ground in 2Q13 Posted July 11th 2013 The U.S. office sector experienced its third-strongest quarter since 2010 in 2Q13, absorbing 15.1 million square feet of space, according to Cassidy Turley. Vacancy rates fell 10 basis points during the same period to 15.3 percent — 1.9 percent below the recessionary peak. “Even though there is a general push for space efficiency across most markets, business growth has been strong enough to generate consistent improvement in the office-leasing fundamentals,” said Kevin Thorpe, chief economist at Cassidy Turley. “The demand metrics continue to be the strongest at the high end class A and the low end class C of the market, while the middle segment of the market continues to struggle to retain existing tenants or find new ones.”Average asking rents reached $21.74 in 2Q13, up 3 cents year over year. New office construction increased slightly during the second quarter as well.“It is interesting to observe that tenants are consistently gravitating to newer buildings, and yet, that segment remains supply constrained,” Thorpe said. “New development remains 30 percent below the norm. So this one sliver of the market, new space, is entering into a tight supply/strong demand scenario. Rents could very well soar for the new office space that delivers to the market over the next 12-24 months.”

The Top 10 Office Markets in 2Q13, based on absorption
1.New York, 1.7 msf
2.San Jose, Calif., 1.2 msf
3.Houston, 1.1 msf
4.Atlanta, 800,000 sf
5.Chicago, 780,000 sf
6.Omaha, Neb., 703,000 sf
7.Oakland, Calif., 672,000 sf
8.Central N.J., 622,000 sf
9.Anaheim, Calif., 580,000 sf
10.Northern N.J., 470,000 sf
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via Office Sector Gains Ground in 2Q13 | CCIM Institute.

Occupier insight navigating emerging markets 2013 #cre

July 10, 2013 Leave a comment