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CRE sales up, led by offices.

* Commercial real estate (CRE) investment sales should finish this year 10 percent to 15 percent higher than 2012, according to Jones Lang LaSalle Capital Markets (JLL), Chicago. [paragraph] "With institutions, private equity, high-net-worth individuals and foreign investors all in aggressive pursuit of commercial real estate, transaction activity in the United States should remain brisk and continue to grow," said Jay Koster, Americas president for capital markets at Jones Lang LaSalle. [paragraph] U.S. investment sales increased 18 percent in the first half of 2013 compared with last year, JLL reported.

"In particular, we expect office sales transactions to significantly boost volume in the second half of the year, with activity propelled by improving employment growth within the technology, healthcare and energy sectors," Koster said.

JLL predicted more activity for top-quality office assets in secondary markets as investors discouraged by prime assets' low yields move higher up the risk curve. "Activity in Atlanta, Dallas, Houston and Minneapolis is keeping that share strong, and based on the heated investment competition in primary markets, there are very solid prospects for additional sales growth in these areas," said Marisha Clinton, director of capital markets research with ILL.

Investors continue to pursue quality industrial properties in primary markets such as northern New Jersey, central Pennsylvania, Chicago, Texas and California's Inland Empire, JLL reported. "Class-A cap rates have compressed by 50 to 75 basis points since the start of the year," said John Huguenard, JLL leader of industrial capital markets. "The large portfolios continue to be highly desirable and price aggressively. The limited class-A offerings and ability to put out a large amount of capital in a single transaction result in a portfolio premium."

Huguenard said a combination of limited high-quality industrial product, a 13-quarter vacancy decline for bulk product and increasing rents has resulted in both build-to-suit and speculative development in virtually all primary and top-tier secondary markets.

The multifamily sector also remains a prized possession among investors with nearly 250,000 multifamily units under construction, Jones Lang LaSalle reported. "Because of the favorable demographics and socioeconomic trends facing the apartment industry, the number of markets that core-focused investors will consider for multifamily properties is much higher than for other property types," said Jubeen Vaghefi, JLL leader of multifamily capital markets.

Retail property prices could also rise significantly, said Kris Cooper, managing director of retail capital markets with Ja. Though retail occupancy rates and rents continue to rise "ever so slightly," he said the sector could see significant improvement shortly, and reported higher sales values and decreased cap rates for core assets.

"With The Conference Board's Consumer Confidence Index spiking in the second quarter and the home market gathering strength, the U.S. retail market has become the object of much more intense investor interest," Cooper said.
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Title Annotation:Commercial
Publication:Mortgage Banking
Article Type:Financial report
Date:Oct 1, 2013
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