Cushman & Wakefield, BOMA see strong national markets.
The quarterly publication, nearly a year in planning, studies North American vacancy rates; absorption rates; new construction statistics; rental rates; and trend analysis for the office and industrial real estate markets.
The January edition of the Market Intelligence report contains forecasts of where the industry is headed in 1998.
"We are in a very healthy period for real estate markets, wherein low interest rates, availability of capital, low unemployment and slow and steady growth are combining to fuel strong markets," said Cushman & Wakefield President and CEO Arthur J. Mirante II.
Cushman & Wakefield Managing Director of Research Services Maria T. Sicola expects activity through 1998 will mirror the trends of the last eight quarters. Vacancy rates will continue to decline and rental rates will rise in tight markets. The bulk of construction will take place in the suburbs in response to steady demand and lack of available Class A space. Technology and globalization will be the driving factors, and Cushman & Wakefield expects markets such as New York, San lose, Dallas and Florida to be the beneficiaries. By year-end 1998, the national downtown vacancy rate will close the year marginally lower than the suburbs for the first time since fourth quarter 1993.
"Competition is growing more fierce, and our demand for accurate, timely market statistics and capital market analysis is also escalating, as we realize that information is crucial to success," said W.S. "Bill" Garland, president of BOMA International. "Additionally, the roles of asset managers and property managers are becoming intertwined - lending even more impetus to the need for a product that meets both constituencies's goals and gives detailed national statistics."
The report said that 1997 proved to be another positive year for U.S. real estate markets. The office sector matched its 1996 performance in the suburban markets, and the downtowns outperformed expectations.
Although construction returned to some suburban areas, Class A availabilities are at levels from 50 to 75 percent lower than 1992.
Over 33 million square feet are now under construction with activity returning to some downtowns for the first time since 1990.
With unemployment rates at their lowest levels since 1973, the strong demand for space, coupled with the ever diminishing supply, has resulted in rising rental rates, both asking and effective.
Activity has been strong in every region of the country, with Dallas, Northern Virginia, and San Jose leading the suburbs and New York, Boston and San Francisco demonstrating solid downtown resurgence.
The national suburban vacancy rate ended 1997 at about 11 percent, and the downtown rate at roughly 12 percent*
Sales activity has also been brisk, fueled by the return of capital and the $130 billion REIT industry, as well as renewed interest by foreign investors.
Prices have risen accordingly, with some trophy properties in Manhattan commanding $300 to $400 per square foot. Capitalization rates are on the decline. REITs will continue to play a role in market pricing.
Industrial markets remained healthy in 1997 with leasing activity far out-pacing 1996. Several areas continue to dominate including Los Angeles, Chicago, Atlanta Dallas, San Jose, Boston and New Jersey.
Warehouse construction continued to be robust in response to user demand for more modern characteristics such as larger centers, higher ceiling heights and wider turning areas for trucks. The move to third-party warehousing has also contributed to this activity.
With 80 million square feet added to the industrial inventory in 1997 and another 74 million square feet under construction, rising vacancy rates and stabilizing rental rates are forecasted for industrial properties in 1998.
One exception is high-tech space, which is not as abundant and which continues to experience rental rate increases.
The BOMA/Cushman & Wakefield Market Intelligence Report is available via subscription by calling BOMA International's Research Department at (202) 326-6366.
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|Title Annotation:||Building Owners and Managers Association|
|Publication:||Real Estate Weekly|
|Date:||Feb 11, 1998|
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