2Q16 NGKF US Capital Markets Report

CAPITAL MARKETS REPORTFor the Intelligent Investor

2Q16 UNITED STATES Todd P. HershmanAssociate Director [email protected]

Jonathan MazurManaging Director, [email protected]

22Q16 CAPITAL MARKETS REPORT

2Q16 UNITED STATES CAPITAL MARKETS REPORT

3 Market Summary

4 Executive Overview5 Economic Dashboard6 Global Yields7 Top Regional Buyers8 Pricing Heat Map - Office9 18-Hour Cities

10 Investment Activity Index - United States Overall Rankings11 Investment Activity Index - Top 10 Cities12 Investment Activity Index - Ranking Matrix

13 Capital Markets Analysis

14 Global Capital15 Global Outbound United States Capital16 International Capital Distribution - United States17 International Capital Investment - United States18 Buyer Distribution19 Total Sales Volume - Major Metropolitan Cities20 Office Trends - Average Price Per Square Foot21 Office Trends - Average Cap Rates22 Multihousing Trends - Primary vs. Secondary Markets23 Multihousing Trends - Primary Market Pricing Matrix24 Retail Trends - Primary vs. Secondary Markets25 Retail Trends - Urbanization in Premier Markets26 Hospitality Trends27 Industrial Trends28 Healthcare Trends29 Development Site Trends

30 Debt Market Statistics

31 CMBS Issuance32 CMBS Volume by Property Type33 Debt Market Update34 Commercial Mortgage Maturities

MARKET SUMMARY


4

Commercial and multihousing mortgage

debt outstanding is expected to

reach $2.9 trillion in 2016; more than

three percent higher than at the end of

2015.

MBA projects originations of commercial

and multihousing mortgages will total

$500 billion in 2016, roughly flat from the

$504 billion originated in 2015 and down

slightly from the record-high $508 billion

originated in 2007.

More than $1 trillion of commercial real

estate debt is scheduled to mature

between 2018-2019.

Market LegislationFinancing

EXECUTIVE OVERVIEW

Following back-to-back historic years,

demand for quality product remains

strong despite slowing overall volume.

International capital continues to be

prevalent in the United States market

with future investment mandates

potentially shifting away from Europe.

Cap rates in some markets have

moved from compression to expansion.

There are currently twenty five markets

averaging at least $200 per square foot

for office buildings, with eight averaging

at least $400 per square foot.

FIRPTA reform enacted to ease

restrictions, allowing for additional foreign

investment into the United States.

PATH Act regulations will limit tax-free

REIT spinoffs beyond traditional real

estate companies.

New Credit Risk Retention Rule takes

effect December 24th, 2016.

EB5 extended, but is set to expire in

September.


5

ECONOMIC DASHBOARD

Source: Federal Reserve Bank of St. Louis, Newmark Grubb Knight Frank

* Consumer Price Index Inflation for 2016 is based on May data release.

The Fed has been reducing its projection of the funds rate for the past four years as growth expectations have been tempered.

GDP Unemployment Rate CPI Inflation Federal Funds Rate

2.40

%

5.60

%

1.65

%

4.25

%

2.40

%

5.60

%

1.69

%

4.00

%

2.20

%

5.35

%

2.00

%

3.75

%

2.15

%

5.10

%

0.17

%

3.75

%

2.00

%

4.80

%

1.07

%

3.00

%

June '12 June '13 June '14 June '15 June '16


-2.00%

-0.50%

1.00%

2.50%

4.00%

5.50%United States All Property Type Cap Rate Average = 5.2%

Singapore Australia

China

232

Bps

GLOBAL YIELDS10-Year Government Bonds vs. United States Cap Rates

Source: Newmark Grubb Knight Frank Research, Trading Economics

International Capital continues to flock to U.S. commercial real estate as cap rates offer significant upside to their local bond yields.

SwitzerlandJapan

GermanyFrance

United Kingdom Canada

United States

South Korea

578

Bps

544

Bps

534

Bps

504

Bps 43

6 B

ps

417

Bps

376

Bps

374

Bps

329

Bps

320

Bps


TOP REGIONAL BUYERSAll Property Types; 12-Month Totals

Source: Newmark Grubb Knight Frank Research, Real Capital Analytics

West

Company $ Volume

Blackstone $10.5B

Invesco $1.9B

TIAA $1.7B

Sun Communities $1.7B

CPP Investment Board $1.6B

Southwest Midwest Southeast Mid-Atlantic Northeast

Company $ Volume

Blackstone $3.1B

Starwood Capital Group $2.5B

China Life Insurance $1.1B

Global Logistics Properties $1.1B

CPP Investment Board $977M

Company $ Volume

Blackstone $1.6B

ADIA $864M

PSP Investments $859M

601W Companies $842M

Lone Star $749M

Company $ Volume

Starwood Capital Group $3.7B

Blackstone $1.7B

CPP Investment Board $1.2B

ADIA $1.1B

PSP Investments $1.1B

Company $ Volume

Lone Star Funds $4.5B

Blackstone $2.5B

UDR $900M

China Life Insurance $799M

Global Logistics Properties $799M

Company $ Volume

Blackstone $10.9B

Ivanhoé Cambridge $6.4B

Qatar Investment Authority $3.8B

SL Green $2.9B

RXR Realty $2.8B

Blackstone continues to be one of the top two investors in each region following their large portfolio purchases from Hines and RioCan.


8

Price Per Square FootPRICING HEAT MAP - OFFICE

Greater than $400 $201-$400 $100-$200 $100-$200

There are currently twenty five markets averaging at least $200 per square foot for office buildings.


Office sales in eight United

States metropolitan markets

currently average more than $400

PSF: Manhattan, San Francisco,

San Jose, Los Angeles, Boston,

Washington D.C., Miami and

Seattle.

California has six markets averaging

at least $200 per square foot for

office buildings: San Francisco, San

Jose, Los Angeles, Orange County,

San Diego and East/North Bay.


Office Rental Growth

(Past 12 Months)

Investment Sales Vol Growth

(Past 12 Months, All Types)

Austin 6.1% 6.0%

Atlanta 6.1% 15.6%

Charlotte 4.2% 4.7%

Denver 7.3% 28.1%

Nashville 12.0% 2.6%

Portland 10.2% 28.0%

Seattle 5.2% 29.5%

.

.

..

.

.

.

PEOPLE GRAVITATE, COMPANIES FOLLOW, CITIES PROSPER18-Hour Cities

AUSTINTotal Net Migration (Past 24 Months): 81,4532016 Population Growth Projections: 3% NASHVILLE

Total Net Migration (Past 24 Months): 49,9492016 Population Growth Projections: 1.4%

ATLANTATotal Net Migration (Past 24 Months): 111,9652016 Population Growth Projections: 1.9%

CHARLOTTETotal Net Migration (Past 24 Months): 63,8312016 Population Growth Projections: 1.9%

SEATTLETotal Net Migration (Past 24 Months): 63,8892016 Population Growth Projections: 1.4%

PORTLANDTotal Net Migration (Past 24 Months): 35,7152016 Population Growth Projections: 1.3%

DENVERTotal Net Migration (Past 24 Months): 68,5342016 Population Growth Projections: 1.6%

NEW TECHNOLOGY

Atlanta, Austin, Seattle

Austin, Seattle

Austin, Charlotte, Denver,

Portland, Seattle

Nashville

Nashville

Nashville

Austin

Denver, Portland, Seattle

Atlanta, Seattle

Austin, Charlotte, Denver,

Portland, Seattle

Total Net Migration - People(Past 24 Months)

LEGEND

UNITED STATES POPULATION

GROWTH = 0.77%


RANK CITY1 New York City

2 San Francisco

3 Los Angeles

4 Boston

5 Washington D.C.

6 Chicago

7 San Jose

8 Seattle

9 Miami

10 Dallas/Fort Worth

RANK CITY11 San Diego

12 Austin

13 Orange County

14 Denver

15 Portland

16 Phoenix

17 Atlanta

18 Houston

19 Philadelphia

20 Northern New Jersey

RANK CITY21 Nashville

22 Baltimore

23 Charlotte

24 Orlando

25 Tampa/St. Petersburg

26 Sacramento

27 Las Vegas

28 Honolulu/Hawaii

29 Inland Empire

30 Raleigh/Durham

RANK CITY31 Salt Lake City

32 Westchester/Fairfield

33 San Antonio

34 Detroit

35 Kansas City

36 Minneapolis/St. Paul

37 Pittsburgh

38 Columbus

39 Jacksonville

40 New Orleans

INVESTMENT ACTIVITY INDEXUnited States Overall Rankings

Source: NGKF Research, U.S. Bureau of Labor Statistics, U.S. Census Bureau, Real Capital Analytics, Costar, National Association of Realtors

Markets showing the most strength are those influenced by technology companies and their youthful, creative employee base.


Investment Sales VolumeRank Billions

New York City 1 $56.1Los Angeles 2 $27.8Chicago 3 $19.8Boston 4 $19.0Dallas/Fort Worth 5 $18.1Atlanta 6 $15.2Seattle 7 $14.3San Francisco 8 $13.0Denver 9 $12.6Phoenix 10 $12.1

Multihousing Cap RatesRank Cap

New York City 1 3.6%San Francisco 2 3.8%Los Angeles 3 4.2%San Jose 3 4.2%Boston 5 4.5%Northern New Jersey 5 4.5%Miami 7 4.6%San Diego 7 4.6%Sacramento 7 4.6%Chicago 10 4.8%

Office Absorption (2Q)Rank MSF

Minneapolis/St. Paul 1 .90San Jose 2 .87Dallas/Fort Worth 3 .85Chicago 4 .75Kansas City 4 .75San Francisco 6 .61Salt Lake City 7 .60St. Louis 8 .59Los Angeles 9 .58Washington, D.C. 10 .56

Office Cap RatesRank Cap

San Francisco 1 4.3%New York City 2 4.4%Boston 3 4.9%Washington, D.C. 3 4.9%Seattle 5 5.1%San Jose 6 5.2%Miami 7 5.3%Los Angeles 8 5.4%Orange County 9 5.5%San Diego 10 5.7%

Office SF Under Construction Rank MSF

New York City 1 11.9Dallas/Fort Worth 2 11.1San Jose 3 8.05Seattle 4 7.72Washington, D.C. 5 7.52Chicago 6 7.25Houston 7 6.80San Francisco 8 5.35Boston 9 4.82Denver 10 4.31

Median Home Price (YoY % Change)Rank %

Detroit 1 17.4%Tampa/St. Petersburg 2 14.6%Portland 3 12.9%Orlando 4 11.6%New Orleans 5 10.0%Nashville 6 9.8%Dallas/Fort Worth 7 9.1%Denver 7 9.1%Seattle 9 8.7%San Diego 10 8.6%

New Housing Units (YTD)Rank # of Units

Dallas/Fort Worth 1 21.9KHouston 2 19.2KAtlanta 3 15.9KWashington, D.C. 4 10.9KPhoenix 5 10.8KNashville 6 9.7KAustin 7 8.8KSeattle 8 8.7KOrlando 9 8.6KMiami 10 8.4K

Hotel Cap Rates Rank Cap

New York City 1 4.7%Honolulu 2 5.0%Miami 3 5.8%Las Vegas 4 6.0%San Francisco 5 6.1%Washington, D.C. 5 6.1%Boston 7 6.6%San Diego 8 6.7%Orange County 8 6.7%Salt Lake City 10 6.8%

Retail Cap RatesRank Cap

New York City 1 4.0%Miami 2 4.2%San Francisco 3 4.4%Washington, D.C. 4 5.0%Orange County 4 5.0%Los Angeles 6 5.3%San Diego 6 5.3%San Jose 8 5.4%Inland Empire 8 5.4%Boston 10 5.5%

Retail RentsRank $

New York City 1 $86.10San Francisco 2 $37.92Honolulu 3 $34.32Miami 4 $32.62San Jose 5 $30.49Los Angeles 6 $27.51Washington, D.C. 7 $26.13Orange County 8 $25.29Westchester/Fairfield 9 $23.18San Diego 10 $22.41

Office Rents Rank $

New York City 1 $75.92San Francisco 2 $54.71San Jose 3 $40.46Los Angeles 4 $36.86Washington, D.C. 5 $36.21Boston 6 $35.69Miami 7 $32.98Austin 8 $32.19Seattle 9 $31.69San Diego 10 $31.17

Office $/SFRank $/SF

New York City 1 $1,062San Francisco 2 $805Boston 3 $715San Jose 4 $650Washington, D.C. 5 $610Los Angeles 6 $535Seattle 7 $469Miami 8 $405Memphis 9 $387Austin 10 $350

Hotel $/Unit Rank $/Room

New York City 1 $658KSan Jose 2 $501KSan Francisco 3 $485KWashington, D.C. 4 $481KBoston 5 $479KMiami 6 $449KHonolulu 7 $348KOrange County 8 $308KPhiladelphia 9 $289KPortland 10 $287K

Retail $/SFRank $/SF

New York City 1 $2,630Miami 2 $1,507Washington, D.C. 3 $1,102San Francisco 4 $908Los Angeles 5 $824Honolulu 6 $796Boston 7 $582Chicago 8 $525San Jose 9 $441Nashville 10 $414

INVESTMENT ACTIVITY INDEXTop 10 Cities by Metric

Source: NGKF Research, U.S. Bureau of Labor Statistics, U.S. Census Bureau, Real Capital Analytics, Costar, National Association of Realtors

Retail Absorption (2Q)Rank MSF

Dallas/Fort Worth 1 1.60Chicago 2 .96Tampa 3 .82Phoenix 4 .77Los Angeles 4 .69Denver 6 .68Baltimore 7 .64Cleveland 8 .55Atlanta 9 .54San Antonio 10 .52


INVESTMENT ACTIVITY INDEXRanking Matrix

Rank Property Type Sales (All)

Office Caps

Office$/SF

RetailCaps

Retail$/SF

HotelCaps

Hotel$/Unit

Multihousing Caps

OfficeU/C SF

OfficeAbsorption

RetailAbsorption

Home Sale% Change

New Housing

UnitsOfficeRents

RetailRents

Source: NGKF Research, U.S. Bureau of Labor Statistics, U.S. Census Bureau, Real Capital Analytics, Costar, National Association of RealtorsRANKED CITY #1-10 RANKED CITY #11-20

RANKED CITY #21-

30RANKED CITY #31-

40

New York City 1

San Francisco 2

Los Angeles 3

Boston 4

Washington, D.C. 5

Chicago 6

San Jose 7

Seattle 8

Miami 9

Dallas/Fort Worth 10

San Diego 11

Austin 12

Orange County, CA 13

Denver 14

Portland, OR 15

Phoenix 16

Atlanta 17

Houston 18

Philadelphia 19

Northern New Jersey 20

Nashville 21

Baltimore 22

Charlotte 23

Orlando 24

Tampa/St. Petersburg 25

Sacramento 26

Las Vegas 27

Honolulu/Hawaii 28

Inland Empire 29

Raleigh/Durham 30

Salt Lake City 31

Westchester/Fairfield 32

San Antonio 33

Detroit 34

Kansas City 35

Minneapolis/St. Paul 36

Pittsburgh 37

Columbus 38

Jacksonville 39

New Orleans 40

CAPITAL MARKETS ANALYSIS


GLOBAL CAPITAL12-Month Totals; All Property Types


There has been $315 billion of capital invested around the world over the past twelve months.

United States

Canada

Hong Kong

China

United Kingdom

Singapore

Germany

Qatar

South Korea

$57.9

$42.3

$36.6

$28.4

$20.8

$19.6

$16.8

$9.4

$9.1

Top Countries of Origin

Bill

ions

London

Manhattan

Sydney

Paris

Shanghai

Los Angeles

Madrid

Berlin

Singapore

$26.0

$24.5

$7.5

$7.1

$6.7

$5.7

$5.6

$5.6

$4.7

Top Market Destinations

Bill

ions


15

Invested in LATIN AMERICA over the past 12 months,

more than half of the capital invested a year earlier.

$521.0M

Invested in the NORDICS over the past 12 months.(Blackstone - top investor,

$1.1B).

$2.7B

Invested in AUSTRALIA over the past 12 months.

(Blackstone-lead investor,$1.7B).

$4.2B

Invested in CHINA overthe past 12 months following more than $8.0B between 2013-2015.

$1.0B

Invested over the past year in the UNITED KINGDOM and GERMANY

with significant investments fromBlackstone and Simon Property Group.

$24.0B

Invested in CANADA over thepast 12 months with

84% going to Toronto.

$650.0M

GLOBAL OUTBOUND UNITED STATES CAPITAL

The U.K. will likely see a capital investment decline in the short-term, potentially leading to additional post-Brexit activity in the U.S.


INTERNATIONAL CAPITAL DISTRIBUTIONUnited States; Year-to-Date; All Property Types


INVESTED CAPITAL $500+ MILLION

Caisse de DepotAnbang Insurance GroupBrookfield AMGIC (Government of Singapore)Qatar Investment AuthorityCPP Investment BoardChina Life InsuranceADIAPSP InvestmentsAllianzUnion InvestmentNorges Bank

CanadaChinaCanadaSingaporeQatarCanadaChinaUAECanadaGermanyGermanyNorway

$1 B+

China Investment CorpMirae AssetChelsfieldOlyan GroupJamestownGlobal HoldingsHNA GroupChina Oceanwide HoldingsFimalacInvestcorpGLL RE Partners

ChinaSouth KoreaUnited KingdomSaudi ArabiaGermanyIsraelChinaChinaFranceBahrainGermany

$500 M - $999 M

China 31.3%

Canada 23.8%Germany 10.8%

South Korea 5.6%

Saudi Arabia 3.3%

UK 3.1%

Israel 3.0%

Qatar 2.8%

Other 16.3%

InternationalInvestment

Of the Chinese firms that have made United States investments in 2016, half were new entrants to the market.


.

Miami 3.3%

Boston3.3%

D.C. Metro3.9%

New York City28.1%

INTERNATIONAL CAPITAL INVESTMENTUnited States; Year-to-Date; All Property Types


RANK 2016 - YTD VOLUME (B)

1 China $10.7

2 Canada $8.09

3 Germany $3.66

4 South Korea $1.89

5 Saudi Arabia $1.11

Global Total $34.0

Origin of Capital Top Five Countries by Year

RANK 2015$81.5B

2014$47.4B

2013$37.5B

1 Canada Canada Canada

2 Singapore China China

3 China Norway Singapore

4 Norway Japan Israel

5 UAE Germany Germany

RANK 2012$27.9B

2011$24.6B

2010$12.3B

1 Canada Canada Canada

2 Germany Switzerland Israel

3 Switzerland Germany UK

4 UK Israel China

5 Israel South Korea Germany

Chicago6.9%

Other Cities22.6%

Seattle2.2%

Dallas1.3%

Atlanta1.3%

Phoenix2.5%

56.4% of the foreign capital invested in US real estate during the first two quarters of 2016 went into properties located within the six major markets.

San Diego3.9%

Austin1.7%

Orange County2.5%

Denver1.0%San Francisco

8.3%

Los Angeles5.9%


BUYER DISTRIBUTIONUnited States; By Year and Market Tier


2012 2013 2014 2015 2016-YTD0%

20%

40%

60%

80%

100%

15.0% 18.9% 18.2%12.9% 8.4%

41.4%41.5% 42.9%

40.7%42.3%

28.5% 24.2% 22.7%

25.2% 29.3%

6.5% 5.3% 5.5%4.3%

8.0%

8.6% 10.1% 10.7%16.9%

12.0%

Public/REITs Private Institutional User/Other International

Primary Secondary Tertiary0%

20%

40%

60%

80%

100%

6.2% 9.5% 12.1%

38.0%

45.5%47.2%

30.6%

30.9% 19.4%

9.6%

5.8%9.9%

15.7%8.4% 11.4%

Public/REITs Private Institutional User/Other International

International Capital continues to prefer gateway markets, while REITs invested more heavily in secondary and tertiary markets despite an overall decline in activity.


Man

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Los

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Chi

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D.C

. Met

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Bos

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Dal

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Atla

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Sea

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San

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co

*NY

C B

orou

ghs

Den

ver

Pho

enix

Nor

ther

n N

J

San

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San

Die

go

Hou

ston

Mia

mi

Ora

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Cou

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Eas

t Bay

Aus

tin

$0

$10

$20

$30

$40

$50

$60

$56.

0

$27.

7

$19.

7

$20.

7

$19.

0

$17.

4

$15.

0

$14.

3

$13.

7

$12.

5

$12.

5

$12.

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$10.

7

$10.

5

$10.

1

$8.8

$8.0

$8.0

$7.2

$7.0

$59.

7

$29.

3

$21.

4

$20.

5

$16.

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7

$16.

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$12.

4 $16.

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$9.8

$9.7

$9.0 $11.

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$7.7

$13.

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$8.2

$7.2

$7.2

$5.5

Current One Year Ago

Bill

ions

* Includes Brooklyn, Queens, Bronx, Staten Island and Long Island

TOTAL SALES VOLUMEMajor Metropolitan Cities; 12-Month Totals; All Property Types


Bay Area = $31.4 Billion

New York City = $68.5 Billion

Total sales volume in the United States is 4.9% lower than one year ago with declining activity in more than half of the top 20 markets.


OFFICE TRENDSAverage Price Per Square Foot; Institutional Quality


2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016$150

$200

$250

$300

$350

$400

$314

$186

$349

United States 10-Year Average

[10-Year Average = $280 PSF]

Prices in major markets continued to climb in the second quarter, albeit at a slower pace than previous quarters.

Man

hatta

n

San

Fra

ncis

co

Bos

ton

San

Jos

e

Was

hing

ton

D.C

.

Los

Ang

eles

Sea

ttle

Mia

mi

Aus

tin

Uni

ted

Sta

tes

San

Die

go

Por

tland

Den

ver

Ora

nge

Cou

nty

Chi

cago

$0

$250

$500

$750

$1,000

$1,250

$1,0

62

$805

$715

$650

$610

$535

$469

$405

$350

$349

$326

$319

$307

$305

$258


OFFICE TRENDSAverage Cap Rate; Institutional Quality


2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20164%

5%

6%

7%

8%

5.0%

7.6%

5.7%

United States 10-Year Average

[10-Year Average = 5.8%]

Cap rates in some United States cities have begun to expand after several years of compression.

Man

hatta

n

San

Fra

ncis

co

Was

hing

ton,

DC

Bos

ton

Sea

ttle

San

Jos

e

Mia

mi

Los

Ang

eles

Ora

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Cou

nty

Uni

ted

Sta

tes

San

Die

go

Den

ver

Atla

nta

Chi

cago

0%

2%

4%

6%

4.4%

4.4%

4.9%

4.9% 5.

1% 5.2% 5.3% 5.4% 5.5% 5.

7%

5.7% 5.8% 5.9% 6.0%


MULTIHOUSING TRENDSUnited States: Primary and Secondary Markets


On a price per unit basis, secondary markets have grown 11.9%, year-over-year compared to 2.3% in primary markets.

2006

2Q06

3Q06

4Q06

2007

2Q07

3Q07

4Q07

2008

2Q08

3Q08

4Q08

2009

2Q09

3Q09

4Q09

2010

2Q10

3Q10

4Q10

2011

2Q11

3Q11

4Q11

2012

2Q12

3Q12

4Q12

2013

2Q13

3Q13

4Q13

2014

2Q14

3Q14

4Q14

2015

2Q15

3Q15

4Q15

2016

2Q16

4%

5%

6%

7%

4.5%

5.3%

Primary Markets Secondary Markets

Cap Rates

2006

2Q06

3Q06

4Q06

2007

2Q07

3Q07

4Q07

2008

2Q08

3Q08

4Q08

2009

2Q09

3Q09

4Q09

2010

2Q10

3Q10

4Q10

2011

2Q11

3Q11

4Q11

2012

2Q12

3Q12

4Q12

2013

2Q13

3Q13

4Q13

2014

2Q14

3Q14

4Q14

2015

2Q15

3Q15

4Q15

2016

2Q16

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$306,916

$143,284


Price Per Unit


MULTIHOUSING TRENDSPrimary Market Pricing Matrix


Cap rates in the six major markets continue to compress year-over-year, while per unit pricing remains relatively flat.

3.5% 4.0% 4.5% 5.0% 5.5%$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Manhattan

Boston

Washington DC

Chicago

San Francisco

Los Angeles

Manhattan

Boston

Washington DC

Chicago

San Francisco

Los Angeles

Cap Rate

Pric

e Pe

r Uni

t

2Q16

2Q15


RETAIL TRENDSUnited States: Primary Markets vs. Secondary Markets


2006

2Q06

3Q06

4Q06

2007

2Q07

3Q07

4Q07

2008

2Q08

3Q08

4Q08

2009

2Q09

3Q09

4Q09

2010

2Q10

3Q10

4Q10

2011

2Q11

3Q11

4Q11

2012

2Q12

3Q12

4Q12

2013

2Q13

3Q13

4Q13

2014

2Q14

3Q14

4Q14

2015

2Q15

3Q15

4Q15

2016

2Q

16

4%

5%

6%

7%

8%

9%

5.3%

5.9%


Cap Rates

2006

2Q06

3Q06

4Q06

2007

2Q07

3Q07

4Q07

2008

2Q08

3Q08

4Q08

2009

2Q09

3Q09

4Q09

2010

2Q10

3Q10

4Q10

2011

2Q11

3Q11

4Q11

2012

2Q12

3Q12

4Q12

2013

2Q13

3Q13

4Q13

2014

2Q14

3Q14

4Q14

2015

2Q15

3Q15

4Q15

2016

2Q16

$0

$100

$200

$300

$400

$500

$600

$469.15

$228.60


Price Per Square Foot

Year-over-year cap rates in primary markets have expanded by 40 basis points, while yields in secondary markets have compressed 10 basis points.


BOSTON LOS ANGELES MANHATTAN

RETAIL TRENDSUrbanization In Premier Markets

MIAMI SAN FRANCISCO

The retail landscape in Boston is

expanding. Landlords are starting to want

more unique retailers as well as pop-up

tenants to add to the experience of the

property.

$590$/SF

22.2%3-YEAR $/SF

GROWTH

Downtown Los Angeles has over 300,000

square feet of retail space now under

construction, creating new opportunities

for tenants and landlords.

$713$/SF

22.3%3-YEAR $/SF

GROWTH

Manhattan has had a recent burst of

activity in casual dining restaurants. With

the demand of new eateries, landlords are

trying to appeal to both office and

residential tenants.

$2,419$/SF

46.8%3-YEAR $/SF

GROWTH

The influx of Millennials to Downtown Miami

has brought many restaurants and retailers

to the area; forecasting great opportunities

in the future.

$1,060$/SF

61.8%3-YEAR $/SF

GROWTH

San Francisco real estate has become

popular for both domestic and international

buyers; rents continue to climb while

interest rates remain relatively low.

$908$/SF

43.7%3-YEAR $/SF

GROWTH



Source: Newmark Grubb Knight Frank Research, Smith Travel Research

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-YTD

-20%

-15%

-10%

-5%

0%

5%

10%

2.9%

RevPAR Percentage Change

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-YTD

$70

$80

$90

$100

$110

$120

$130

50%

55%

60%

65%

70%

$121.19

65.5%

ADR Occupancy

HOSPITALITY TRENDSUnited States

*Data is annualized, 2016 is trailing 12 months as of May.

United States RevPAR continues to increase albeit at a slower acceleration than last year.


Source: Newmark Grubb Knight Frank Research, Real Capital Analytics, AAPA survey

INDUSTRIAL TRENDSUnited States

Pricing remains in a range just below the historical peak with recent volume tied to portfolio sales and activity near the primary markets (LA, NY, Seattle).

Los

Ang

eles

Long

Bea

ch

New

Yor

k/Je

rsey

Sav

anna

h

Sea

ttle

Ham

pton

Roa

ds

Oak

land

Hou

ston

Cha

rlest

on

Hon

olul

u

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

8,160,458.0

7,192,066.0

6,371,720.0

3,737,402.03,529,446.0

2,549,271.02,277,521.02,130,544.01,973,204.0

1,213,129.0

Largest United States Container Ports (TEU’s)

Mill

ions

2006

2Q06

3Q06

4Q06

2007

2Q07

3Q07

4Q07

2008

2Q08

3Q08

4Q08

2009

2Q09

3Q09

4Q09

2010

2Q10

3Q10

4Q10

2011

2Q11

3Q11

4Q11

2012

2Q12

3Q12

4Q12

2013

2Q13

3Q13

4Q13

2014

2Q14

3Q14

4Q14

2015

2Q15

3Q15

4Q15

2016

2Q16

$0

$50

$100

$150

$200

$250

$181

$107


Price Per Square Foot


HEALTHCARE TRENDSMedical Office Building Spotlight

Source: Newmark Knight Frank Research, Real Capital Analytics

Cap rates fell to 7.0% in 2Q16 while

the average price per square foot

increased to $250.

Medical office building transactions

exceeded $11 billion in 2015, a 13%

increase year-over-year.

Healthcare has been the largest and

fastest growing component of the

national GDP, expected to comprise

a 20% share of production by 2022

Healthcare occupations are

projected to have the fastest

employment growth between 2014

and 2024, adding 2.3 million jobs, or

roughly 1 in 4 new jobs.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016$0

$50

$100

$150

$200

$250

$300

2%

3%

4%

5%

6%

7%

8%

9%

Price Per Square Foot Cap Rates

2007 2012 2017 202216.0%

17.0%

18.0%

19.0%

20.0%

21.0%

0

1

2

3

4

5

6

$2.298

$2.807

$3.660

$5.009

16.4%

17.9%

18.4%

19.9%

Expenditures (Trillions) % of GDP

Medical office has proven more resilient than most asset types with an average vacancy rate of 10% since 2007.


DEVELOPMENT SITE TRENDSSales Volume: Primary Markets vs. Secondary Markets


2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016$0

$1,000,000,000

$2,000,000,000

$3,000,000,000

$4,000,000,000

$5,000,000,000

$6,000,000,000

$7,000,000,000

$8,000,000,000

$0

$1,000,000,000

$2,000,000,000

$3,000,000,000

$4,000,000,000


Resistance to pricing as well as a healthy pipeline of development activity has led to a pullback in sales volume.

DEBT MARKET STATISTICS


CMBS ISSUANCEUnited States

Source: Newmark Grubb Knight Frank Research, Commercial Mortgage Alert

CMBS ISSUANCE

Early projections called for the

market to reach nearly $125 billion for the

year. However, those forecasts

have been adjusted to

approximately $70 billion after a volatile first

half of the year.

CMBS issuance totaled $30.7 billion through the first half of 2016, down 43.7% compared to $54.5 billion through the first half of 2015.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-YTD$0

$50

$100

$150

$200

$250

$92.6

$166.5

$198.4

$228.6

$12.1$2.7

$11.6

$32.7

$48.4

$86.1$94.1

$101.0

$30.7

Bill

ions


CMBS VOLUMETop Markets by Property Type

Source: Newmark Grubb Knight Frank Research, Trepp

The office and multihousing sectors continue to attract the highest volume of CMBS loans, with gateway markets the preferred destination.

Office Multihousing Retail Hotel Industrial

New York$2.5 B

Los Angeles$1.1 B

New York$628 M

New York$195 M

San Diego$22 M

San Francisco$476 M

Denver$924 M

Las Vegas$359 M

Los Angeles$129 M

Des Moines$18 M

Boston$454 M

San Francisco$675 M

Boston$202 M

New York$125 M

Anchorage$16 M

San Diego$424 M

Dallas$533 M

Norfolk$175 M

Houston$100 M

Miami$13 M

Washington, D.C.$265 M

Chicago$430 M

Washington, D.C.$104 M

Nashville$80 M

Columbia (SC)$12 M


Source: Newmark Grubb Knight Frank Research, Mortgage Bankers Association

DEBT MARKET UPDATECommercial and Multihousing Mortgage Debt Outstanding

Commercial banks increased their

mortgage debt over the past year.

They continue to hold the largest

share of the outstanding commercial

and multihousing mortgage debt,

currently at $1.1 trillion, an increase

of $118.6 billion, or 12.0%, year-

over-year.

Multihousing mortgage debt

outstanding grew by $18.2 billion

quarter-over-quarter, with Agency

and GSE increasing their debt

outstanding by $11.3 billion, or

2.5%.

Current One Year Ago

Total commercial and multihousing debt outstanding rose to $2.86 trillion, up 1.7% quarter-over-quarter.

Banks 38.6%

CMBS 17.6%

Life Insurance 13.9%

Others 13.4%

Agency & GSE 16.5%

Banks 36.7%

CMBS 19.9%

Life Insurance 13.5%

Others 14.2%

Agency &

GSE 15.7%


2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024$0

$50

$100

$150

$200

$250

$300

$350

$400

$187$159

$133 $135 $151 $171 $188 $181$149

$106$72

$78$96

$104$136

$48$38

$35$27

$33

$12

$27

$24$24

$26

$27

$27 $27$28

$29

$27

$25$25

$84$85

$90

$100

$106 $103$94

$86

$75

$65$57

Bank CMBS Insurance Companies Other

COMMERCIAL MORTGAGE MATURITIESUnited States

Source: Newmark Grubb Knight Frank Research, Trepp with Federal Reserve Flow of Funds Data

2016

Bank: $133BCMBS: $104BInsurance: $26BOther*: $90B

*Includes Fannie Mae, Freddie Mac, bridge loansand hard money loans

Over the next 24 months, there will be approximately $750 million of commercial mortgages maturing.

www.ngkf.com

New York CityHEADQUARTERS125 Park AvenueNew York, NY 10017212.372.2000

Todd P. HershmanAssociate Director [email protected]

Jonathan MazurManaging Director, [email protected]

All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Grubb Knight Frank (NGKF) has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NGKF. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient’s choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NGKF, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.

Newmark Grubb Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents.

Newmark Grubb Knight Frank Research Reports are also available at www.ngkf.com/research

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Documents

2Q16 NGKF US Capital Markets Report