May 2012 Commercial Real Estate Quarterly Market Survey

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MAY 2012

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Copyright © 2012 NATIONAL ASSOCIATION OF REALTORS ® . Reproduction, reprinting or retransmissionin any form is prohibited without written permission. For questions regarding this matter please [email protected].

THE NATIONAL ASSOCIATION OF REALTORS ® , “The Voice for Real Estate,” is America’s largest tradeassociation, representing 1.0 million members involved in all aspects of the residential and commercial realestate industries..

Although the information presented in this survey has been obtained from reliable sources, NAR does notguarantee its accuracy, and such information may be incomplete. This report is for information purposesonly.

The REALTORS ® Commercial Real Estate Market Survey measures quarterly activity in the commercialreal estate markets. The survey collects data* from commercial REALTORS ® . The survey is designedto provide an overview of market performance, sales and rental transactions, along with currenteconomic challenges and future expectations.

2NATIONAL ASSOCIATION of REALTORS ® | RESEARCH DIVISION | www.realtors.org/research

* In April 2012, NAR invited a random sample of 35,807 REALTORS® with an interest in commercial realestate to fill an on-line survey. A total of 154 responses were received, for an overall response rate of 0.43percent.



2012.Q1 Survey Highlights

• REALTOR ® commercial markets recorded signs of stabilization during the quarter.• Seven in ten commercial REALTORS ® closed a sales transaction during the quarter.• Sales volume rose eight percent from a year ago. • Sales prices declined nine percent on a year -over-year basis.• Leasing activity advanced one percent from the previous quarter. • Rental rates declined four percent compared with the previous quarter. • Concession levels declined two percent on a quarterly basis.

• Financing remains at the top of the current challenges list, followed closely by pricing. • The estimated average transaction was unchanged at $1.1 million from the prior quarter.

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REALTORS ® Commercial Activity – 2012.Q1

Sales Volume Compared with Previous Quarter Up 3%

Sales Volume Compared with Previous Year Up 8%

Sales Prices Compared with Previous Quarter Down 6%

Sales Prices Compared with Previous Year Down 9%

Expected Inventory Availability for the Next 12 Months Up 2%

Rental Volume Compared with Previous Quarter Up 1%

Rental Rates Compared with Previous Quarter Down 4%

Level of Rent Concessions Compared with Previous Quarter Down 2%

Volume of New Construction Compared with Previous Quarter Down 4%

Direction of Business Opportunities Compared with Previous Quarter Up 2%

NATIONAL ASSOCIATION of REALTORS ® | RESEARCH DIVISION | www.realtors.org/research

MAY 2012



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2012.Q1 Cap Rates

Office 8.4%

Industrial 8.4%

Retail 8.6%

Multifamily 7.7%

Hotel 8.4%

Development 9.2%

2012.Q1 Vacancy Rates

Office 18.0%

Industrial 17.0%

Retail 20.8%

Multifamily 8.6%

Hotel 21.0%


MAY 2012

68%

32%

Did you complete a sales transaction?

Yes

No

2%

3%

2%

8%

25%

30%

30%

Over $10 M

Between $5 M and $10 M

$2 M and $5 M

Between $1 M and $2 M

Between $500K and $1 M

Between $250K and $500K

Under $250K

Dollar amount of last transaction

0% 20% 40% 60% 80% 100%

12.Q1

11.Q4

REALTORS ® Most Pressing Challenges

Inventory

Distress

Financing

Local Economy

National Economy

Pricing Gap: Buyers vs Sellers

Other




MAY 2012

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2.Q1

1.Q4

Average Rental Space Demanded During Last Transaction

Over 100,000 sq ft

50,000 - 100,000 sq

10,000 - 49,999 sq f

7,500 - 9,999 sq fee

5,000 - 7,499 sq fee

2,500 - 4,999 sq fee

Under 2,500 sq feet

%

%

%

%

%

%

%

%

%

%

0 - 12 months 12 months 24 months 36 months 48 months 60 + months 60 months

Average lease term during last transaction



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State-level data may register large fluctuations from one period to the next due to small sample sizes in some states.


MAY 2012

Legend

-75% - -40%-39% - -20%-19% - 0%1% - 20%21% - 40%41% - 140%

Data not available

Sales Volume Compared with Previous Quarter(Based on the overall level of commercial transactions for the first quarter of 2012)(Based on the overall level of commercial transactions for the first quarter of 2012)

DC: N/A

Legend

-95% - -50%-49% - -25%-24% - 0%1% - 25%26% - 50%51% - 165%

Data not available

Sales Volume Compared with Previous Year(Based on the overall level of commercial transactions for the first quarter of 2012)(Based on the overall level of commercial transactions for the first quarter of 2012)

DC: N/A



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MAY 2012

Legend

-35% - -20%-19% - -10%-9% - 0%1% - 10%11% - 20%

Data not available

Sales Prices Compared with Previous Quarter(Based on the overall level of commercial transactions for the first quarter of 2012)(Based on the overall level of commercial transactions for the first quarter of 2012)

DC: N/A

Legend

-50% - -20%-19% - -10%-9% - 0%1% - 10%11% - 20%

Data not available

Sales Prices Compared with Previous Year

(Based on the overall level of commercial transactions for the first quarter of 2012)(Based on the overall level of commercial transactions for the first quarter of 2012)

DC: N/A



8



MAY 2012

Legend

-31% - -15%-14% - -5%-4% - 0%1% - 5%6% - 15%16% - 40%

Data not available

Expected Inventory Availability for the next 12 months(Based on the overall level of commercial transactions for the first quarter of 2012)(Based on the overall level of commercial transactions for the first quarter of 2012)

DC: N/A

Legend

-25% - -15%-14% - -5%-4% - 0%1% - 5%6% - 15%16% - 55%

Data not available

Leasing Activity Compared with Previous Quarter


DC: N/A



9



MAY 2012

Legend

-21% - -10%-9% - -5%-4% - 0%1% - 5%6% - 10%11% - 20%

Data not available

Rental Rates Compared with Previous Quarter(Based on the overall level of commercial transactions for the first quarter of 2012)(Based on the overall level of commercial transactions for the first quarter of 2012)

DC: N/A

Legend

-35% - -15%-14% - -5%-4% - 0%1% - 5%6% - 15%16% - 37%

Data not available

Level of Rent Concessions Compared with Previous Quarter


DC: N/A



10



MAY 2012

Legend

-25% - -15%-14% - -5%-4% - 0%1% - 5%6% - 15%16% - 25%

Data not available

Volume of New Construction Compared with Previous Quarter(Based on the overall level of commercial transactions for the first quarter of 2012)(Based on the overall level of commercial transactions for the first quarter of 2012)

DC: N/A

Legend

-25% - -20%-19% - -10%-9% - 5%6% - 10%11% - 20%21% - 30%

Data not available

Direction of Business Opportunities Compared with Previous Quarter(Based on the overall level of commercial transactions for the first quarter of 2012)(Based on the overall level of commercial transactions for the first quarter of 2012)

DC: N/A



The REALTORS ® Commercial Real Estate Quarterly Market Survey asks participants to comment on

current conditions in their markets. Below are a few of the comments about the latest quarter environmen

Banks remain extremely stingy with loans. Even well qualified sponsors are having to pledge un-fundamental levels of

collateral and/or cash to get funding. Most lenders require SBA guarantees to even give a decent deal a second look. Stop

moving the target in D.C., reduce principals on residential loans, extend foreign tax credits, reduce the federal deficit, repe

national healthcare, and hold your breath that Spain (and Europe in general) can find a way to pay their bills!

Business owners are struggling to keep doors open.

Definite signs of confidence and buyers are giving scenarios that would interest them finally.

Financing requirements need to ease.

I am our chief analyst, not a transaction broker. We are beginning to see signs of life in Monterey in terms of touring and

space user requirements, but overall activity has been flat the past year. We expect minor improvement over the remainin

three quarters of the year.

I feel that the market should show considerable improvements within the next year, businesses that survived are now

reorganizing and or growing so shifts in SF and location will occur.

I specialize in land sales. The banks started last year accepting the low values that investor put on land and lots. In my

region a Caterpillar manufacturing plant and a Baxter (Bio-Medical) manufacturing plant have been announced whichshould greatly help our area.

Landlords and Owners have to take huge concessions to Sell or Lease in general.

Largest problem in our market is that businesses are closing and there are no others to fill the tenancy vacancies. Consum

spending is so low that no one wants to open a new business or office and most want to reduce their space.

Local economy is still in the recession.

Lord, give me one more good real estate market and I promise not to screw it up!

Market is getting better daily. Multifamily is ruling and not enough inventory. Buyers are slowly coming around to new

selling pricing, but is still a challenge to overcome, due to forecast of "shadow inventory" everyone is waiting for.

Market is improving. As investors FINALLY realize that NOW is the time to invest and make money in 2012!

Market is slow but slightly up.

Municipalities, codes and regulations are creating a front-load investment for all types of commercial real estate owners a

users! The real cost of a business license and certificate of occupancy is out of control to protect government workers at th

expense of "new business"


MAY 2012



The REALTORS® Commercial Real Estate Quarterly Market Survey Comments—continued.

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Office market has been small deals under 1000 s/f. Industrial market tightened up a bit. Closing a 85,000 s/f deal in May.

Multi-offers on 33,400 s/f Distribution site. 90,250 s/f site currently under agreement. Some Movement in the retail as it

shifts leaders according to the change in demographics. Influx of Popeye's, Sonic, various dollar stores. Dunkin Donuts

adding drive thru’s etc. Strip centers seeing more vacancy, can't compete with lower rents. Atlantic City is praying the

REVEL Casino makes it if not our local economy will suffer.

Plenty of great opportunities are available but getting potential tenants/purchasers to commit has been the biggest

challenge.

Reno/Sparks MSA has horrible economic fundamentals right now.

Simply put, too much regulation, too many hands in the pot, not enough financing.

Single, credit tenant NNN is highly sought after.

Financing is AVAILABLE!

REO is still available.

Retail activity has picked up substantially!

The current market has not changed much with the exception of lower rents, no construction, breaking contracts and a ver

low confidence level.

The market is continuing to improve but there are still some challenges from the buyers and tenants.

The market is definitely improving, although at a slow rate.

The Real Estate sector is all about jobs & the economy. As long as there is anemic economic growth that produces low

paying jobs, consumer confidence is not going to improve. We are muddling along the bottom & companies are using just

time inventory production schedules to meet demand. Government is implementing policies that are anti-business & anti-

growth. Government does not manufacture or produce anything. Sarbanes Oxley-Dodd Frank-Obamacare-Higher Taxes &Fees are all examples of government over reaching in the name of the public good but never contemplating the concept th

for every action by government policy makers there is a reaction by business leaders & the public. When there is uncertain

& punitive government policies "Risk Capital" goes to the sidelines. There is no incentive to hire the incremental worker. Th

workweek continues to shrink currently 33.5-34 hours. Companies are happy to make to do with their current workforce. W

are stuck with 0%-2% growth.

There is a great need for private money lending and without it will be hard getting out of the hole.

There is little trust in current leadership in Washington D.C. Too much uncertainty for the future.


MAY 2012



The REALTORS® Commercial Real Estate Quarterly Market Survey Comments—continued.

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There is more optimism than we've seen in a long time. Available inventory in our industrial market is very limited.

Very distressed, economic development re-visiting business model changes

We enjoyed an increase of prospect interest in the first three quarters of the year but the closing time is still lengthy.

We have more interest right now, the phones are ringing, tours are resulting in commitments. I sell a lot of small office, an

have sold 3 so far this first quarter and expect to sell 10 or more this year compared to the 3 or 4 sold all year in 09, 10 & 1

Leasing activity is way up, 22 transactions last year under 5000SF.

We need to improve the financing policy in this country.


MAY 2012



NATIONAL ASSOCIATION OF REALTORS ®

RESEARCH DIVISION

The Research Division of the NATIONAL ASSOCIATION

of REALTORS ® produces the Commercial Real Estate

Outlook, a quarterly report forecasting commercial markefundamentals. The Research Division also issues theannual Commercial Member Profile, detailing the businesand demographic characteristics of commercial members

Additionally, NAR Research examines how changes in theconomy affect the commercial real estate business, andevaluates regulatory and legislative policy proposals fortheir impact on REALTORS ® , their clients and America’s

property owners.

If you have questions or comments regarding this report any other commercial real estate research, contactGeorge Ratiu, Manager, Quantitative & CommercialResearch, at [email protected].

To find out about other products from NAR’s ResearchDivision, visit www.REALTOR.org/research-and-statistics

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800.874.6500 • www.REALTOR.org

MAY 2012

Documents

May 2012 Commercial Real Estate Quarterly Market Survey