Roundtable Sees Little Movement in General Sentiment 

The Real Estate Roundtable Sentiment Index is a survey of real estate industry senior executive officer’s confidence in the real estate industry. Based upon surveys from over 100 senior real estate executives, the quarterly survey measures “current and future outlook on three topics: (1) overall real estate conditions, (2) access to capital markets, and (3) real estate asset pricing”. If you are interested in reading the survey in its entirety, please visit the Real Estate Roundtable’s web site.

The following is a summary of the survey’s findings: 

General Conditions: The Q4 Index saw little movement since Q3; all eyes are on the national elections as the air of uncertainty continued to strengthen within the commercial real estate market. Although general sentiment remains positive, participants acknowledge a gentle recovery and many forecast a slower incline for 2013. 

Asset Values: Asset pricing remains strong for high-quality assets in top markets while a sluggish recovery tempers pricing for second tier real estate. 

Capital Markets: Debt capital remains widely available as interest rates continue to compress; equity also remains plentiful. 

Demand for Commercial Loans Increases 

According to the Federal Reserve’s most recent Senior Loan Officer opinion survey (dated October 31st), demand for commercial real estate loans increased to its highest level since early 1998; unfortunately, banks were not cooperating with fewer banks reporting loosening lending standards than in the prior quarter. 

CMBS Delinquency Rate Drops to 8.3 Percent 

According to Fitch, the percentage of securitized commercial mortgage loans 60 days past due declined to 8.29 percent as of October 31, 2012 from 8.37 percent as of September 30, 2012 and 8.56 percent at October 31, 2011. The delinquency level is now at its lowest level since December 2010 when it was 8.23 percent. 

Overall, principal amount of the loans being resolved (and therefore removed from the index) is greater than the amount being added, an overall positive sign for the CMBS industry as it continues to deal with its legacy issues. 

Monday’s Numbers 

According to its most recent Trepp survey, spreads bounced around a little, ending the week basically unchanged week-over-week as the markets prepared for the foreshortened Thanksgiving week. 

With the fiscal cliff still to be scaled, market participants seem to be resting in preparation for the mad dash to December 31st

All-in, mortgage rates remain incredibly attractive and seem likely to stay at this level until this year’s allocation is completely exhausted (or loan officers become completely exhausted).

Asking Spreads over U.S. Treasury Bonds in Basis Points
(10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value Ratios)

12/31/09

12/31/10

12/31/11

11/9

Week Earlier

Month Earlier

Office

342

214

210

220

220

225

Retail

326

207

207

210

207

204

Multifamily

318

188

202

198

200

204

Industrial

333

201

205

209

206

218

Average Spread

330

203

205

209

208

213

10-Year Treasury

3.83%

3.29%

1.88%

1.70%

1.69%

1.62%

The Cushman & Wakefield Equity, Debt, and Structured Finance Commercial Mortgage Spread monthly survey of commercial mortgage spreads showed spreads for 10-year, fixed rate mortgages, coming in approximately 15 basis points across all property sectors over the past 30 days.

Property Type

Mid-Point of Fixed Rate Commercial Mortgage
Spreads For 5 Year Commercial Real Estate Mortgages

12/31/10

7/26/12

9/3/12

9/27/12

11/6/12

Multifamily – Non-Agency

+270

+245

+240

+235

+220

Multifamily – Agency

+280

+225

+225

+210

+210

Regional Mall

+280

+295

+290

+285

+270

Grocery Anchored

+280

+290

+285

+280

+265

Strip and Power Centers

 

+315

+310

+305

+295

Multi-Tenant Industrial

+270

+300

+295

+290

+270

CBD Office

+280

+295

+285

+280

+250

Suburban Office

+300

+315

+305

+300

+270

Full-Service Hotel

+320

+360

+360

+355

+340

Limited-Service Hotel

+400

+370

+370

+365

+350

5-Year Treasury

2.60%

0.57%

0.68%

0.64%

0.71%

Source: Cushman & Wakefield Equity, Debt, and Structured Finance.

Property Type

Mid-Point of Fixed Rate Commercial Mortgage
Spreads For 10 Year Commercial Real Estate Mortgages

12/31/10

7/26/12

9/3/12

9/27/12

11/6/12

Multifamily – Non-Agency

+190

+220

+210

+205

+190

Multifamily – Agency

+200

+210

+210

+195

+180

Regional Mall

+175

+235

+230

+225

+210

Grocery Anchor

+190

+230

+225

+220

+205

Strip and Power Centers

 

+250

+245

+240

+225

Multi-Tenant Industrial

+190

+255

+250

+245

+225

CBD Office

+180

+245

+235

+230

+200

Suburban Office

+190

+265

+260

+255

+225

Full-Service Hotel

+290

+290

+290

+285

+270

Limited-Service Hotel

+330

+310

+310

+305

+390

10-Year Treasury

3.47%

1.42%

1.64%

1.64%

1.71%

Source: Cushman & Wakefield Equity, Debt, and Structured Finance.

Property Type

Mid-Point of Floating-Rate Commercial Mortgage
Spreads For 3 – 5 Commercial Real Estate Year Mortgages

12/31/10

7/26/12

9/3/12

9/27/12

11/6/12

Multifamily – Non-Agency

+250-300

+200-260

+200-260

+200-260

+180-250

Multifamily- Agency

+300

+220-265

+220-265

+220-265

+200-260

Regional Mall

+275-300

+210-275

+210-275

+210-275

+210-275

Grocery Anchored

+275-300

+210-275

+210-275

+210-275

+210-275

Strip and Power Centers

 

+225-300

+225-300

+225-300

+225-300

Multi-Tenant Industrial

+250-350

+230-305

+230-305

+230-305

+230-305

CBD Office

+225-300

+225-300

+225-300

+225-300

+180-250

Suburban Office

+250-350

+250-325

+250-325

+250-325

+250-325

Full-Service Hotel

+300-450

+275-400

+275-400

+275-400

+275-400

Limited-Service Hotel

+450-600

+325-450

+325-450

+325-450

+325-450

1-Month LIBOR

0.26%

0.24%

0.24%

0.24%

0.21%

3-Month LIBOR

0.30%

0.46%

0.43%

0.43%

0.31%

* A dash (-) indicates a range.

Source: Cushman & Wakefield Equity, Debt, and Structured Finance.

Year-to-Date Public Equity Capital Markets 

DJIA (1): +3.03%
S & P 500 (2): +8.13%
NASDAQ (3): +9.52%
Russell 2000 (4):+4.79%
Morgan Stanley U.S. REIT (5):+7.10%

 (1) Dow Jones Industrial Average. (2) Standard & Poor’s 500 Stock Index. (3) NASD Composite Index.
(4) Small Capitalization segment of U.S. equity universe. (5) Morgan Stanley REIT Index.

U.S. Treasury Yields

12/31/10

12/31/11

11/16/12

3-Month

0.12%

0.01%

0.07%

6-Month

0.18%

0.06%

0.06%

2 Year

0.59%

0.24%

0.24%

5 Year

2.01%

0.83%

0.62%

7 Year

 

 

1.01%

10 Year

3.29%

1.88%

1.58%

                                                  

Key Rates (in Percentages)

 

Current

1 Yr. Prior

Fed Funds Rate

0.17

0.06

Federal Reserve Target Rate

0.25

0.25

Prime Rate

3.25

3.25

US Unemployment Rate

7.90

8.90

1-Month Libor

0.21

0.25

3-Month Libor

0.31

0.47