Emerging Trends in Real Estate 2013”

The Emerging Trends in Real Estate series of publications is sponsored by PricewaterhouseCoopers and the Urban Land Institute and provides an outlook on trends in real estate: investment and development; finance and the capital markets; property sectors and locations; and issues affecting the real estate industry.

Emerging Trends is acknowledged as the real estate industry’s most highly regarded, widely read, and most predictive forecast; 2013 marks the 34th annual edition focused on the North American real estate industry as well as the 10th annual edition focused on the United Kingdom and Europe and the 7th annual edition focused on the Asia Pacific region.

What makes Emerging Trends unique is its research protocol which includes one-on-one interviews combined with on-line, and in-print surveys, with a wide array of real estate industry participants including: public and private owners and developers; institutional investors, real estate advisors, and service providers and; conventional and securitized lenders. This year, more than 900 persons participated in the interview, and survey, process.

Members of the Emerging Trends team are “on the road”, presenting the substance of the report to ULI District Councils; copies of the report are normally distributed to attendees at District Council presentations. If you will be unable to attend your District Council presentation or if your District Council has not scheduled a program for this year, you can access the report on-line at: www.uli.org/emergingtrends.  

Monday’s Numbers

The Trepp, LLC survey showed commercial mortgage spreads coming in a few basis points during the survey period as lenders continue to compete aggressively for new business.

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

10/19

Week Earlier

Month Earlier

Office

342

214

210

221

225

223

Retail

326

207

207

205

215

215

Multifamily

318

188

202

198

210

201

Industrial

333

201

205

206

216

215

Average Spread

330

203

205

208

214

214

10-Year Treasury

3.83%

3.29%

1.88%

1.75%

1.69%

1.64%

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 a uniform 5 basis points across all property sectors and terms 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

6/28/12

7/26/12

9/3/12

9/27/12

Multifamily – Non-Agency

+270

+245

+245

+240

+235

Multifamily – Agency

+280

+225

+225

+225

+210

Regional Mall

+280

+300

+295

+290

+285

Grocery Anchored

+280

+295

+290

+285

+280

Strip and Power Centers

+320

+315

+310

+305

Multi-Tenant Industrial

+270

+305

+300

+295

+290

CBD Office

+280

+300

+295

+285

+280

Suburban Office

+300

+315

+315

+305

+300

Full-Service Hotel

+320

+360

+360

+360

+355

Limited-Service Hotel

+400

+370

+370

+370

+365

5-Year Treasury

2.60%

0.69%

0.57%

0.68%

0.64%

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

6/28/12

7/26/12

9/3/12

9/27/12

Multifamily – Non-Agency

+190

+220

+220

+210

+205

Multifamily – Agency

+200

+200

+210

+210

+195

Regional Mall

+175

+245

+235

+230

+225

Grocery Anchor

+190

+235

+230

+225

+220

Strip and Power Centers

+255

+250

+245

+240

Multi-Tenant Industrial

+190

+260

+255

+250

+245

CBD Office

+180

+250

+245

+235

+230

Suburban Office

+190

+265

+265

+260

+255

Full-Service Hotel

+290

+290

+290

+290

+285

Limited-Service Hotel

+330

+310

+310

+310

+305

10-Year Treasury

3.47%

1.58%

1.42%

1.64%

1.64%

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

6/28/12

7/26/12

9/3/12

9/27/12

Multifamily – Non-Agency

+250-300

+200-260

+200-260

+200-260

+200-260

Multifamily- Agency

+300

+220-265

+220-265

+220-265

+220-265

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

+235-305

+230-305

+230-305

+230-305

CBD Office

+225-300

+225-300

+225-300

+225-300

+225-300

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%

0.24%

3-Month LIBOR

0.30%

0.47%

0.46%

0.43%

0.43%

* A dash (-) indicates a range.

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

Year-to-Date Public Equity Capital Markets

DJIA (1): +7.28%
S & P 500 (2): +12.27%
NASDAQ (3): +14.69%
Russell 2000 (4):+9.77%
Morgan Stanley U.S. REIT (5):+9.72%

(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

10/27/12

3-Month

0.12%

0.01%

0.11%

6-Month

0.18%

0.06%

0.15%

2 Year

0.59%

0.24%

0.30%

5 Year

2.01%

0.83%

0.76%

7 Year

1.19%

10 Year

3.29%

1.88%

1.75%

Key Rates (in Percentages)

Current

1 Mo. Prior

3 Mo. Prior

6 Mo. Prior

1 Yr. Prior

Fed Funds Rate

0.17

0.17

0.06

0.14

0.07

Federal Reserve Target Rate

0.25

0.25

0.25

0.25

0.25

Prime Rate

3.25

3.25

3.25

3.25

3.25

US Unemployment Rate

7.80

8.10

8.20

8.20

9.00

1-Month Libor

0.21

0.22

0.25

0.24

0.25

3-Month Libor

0.31

0.36

0.45

0.47

0.42