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December 21, 2010

Three Questions That Will Shape Commercial Real Estate in 2011. December 21, 2010. Real Capital Rewind Presenters. Moderator. Presenters. Peter Slatin Associate Publisher & Editorial Director. Robert M. White, Jr., CRE, FRICS Founder & President. Sam Chandan, PhD, FRICS

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December 21, 2010

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  1. Three Questions That Will Shape Commercial Real Estate in 2011 December 21, 2010

  2. Real Capital Rewind Presenters Moderator Presenters Peter Slatin Associate Publisher & Editorial Director Robert M. White, Jr., CRE, FRICS Founder & President Sam Chandan, PhD, FRICS Global Chief Economist & Executive Vice President

  3. All Property Types: Offered vs Closed

  4. Office: Offered vs Closed

  5. Year-End Projections • $90.7 billion of significant commercial property sales closed year-to-date through November. • Almost $9.0 billion already closed in December. December is projected to be the most active month in over 3 years. • 2010 transaction volume will easily surpass the $100.0 billion milestone.

  6. 2010 Trends Prompt Three Questions for New Year Will Rising Interest Rates = Higher Cap Rates?

  7. Mortgage Spreads Are Wide

  8. Cap Rates vs 10-Year Treasury

  9. Will Rising Interest Rates = Higher Cap Rates? Even if interest rates rise, the correlation to cap rates will be low. Given the extent of capital flows to the sector, cap rates may continue to trend down even as rates trend higher.

  10. 2010 Trends Prompt Three Questions for New Year Will rising interest rates = higher cap rates? Have investors missed the boat on distress?

  11. All Property Types: Distress & Workout Activity

  12. Office: Distress & Workout Activity

  13. Apartment: Distress & Workout Activity

  14. Retail: Distress & Workout Activity

  15. Industrial: Distress & Workout Activity

  16. Hotel: Distress & Workout Activity

  17. Full Recoveries on the Rise

  18. CMBS Reemerges

  19. CMBS Reemerges

  20. Have Investors Missed the Boat on Distress? Inflows to distress have fallen over the course of 2010. In Q4, resolutions of distress should outpace inflows for the first time this cycle. But do not expect that new distress will disappear altogether.

  21. 2010 Trends Prompt Three Questions for New Year Will rising interest rates = higher cap rates? Have investors missed the boat on distress? Will markets re-unite?

  22. Investors Seek Trophy Properties in Major Markets

  23. Core vs Value-Add

  24. CMBS Reemerges

  25. Buyer Activity Changing

  26. Will Markets Re-Unite? In 2010, investors focused their activities in a handful of major markets, including Boston, New York City, Washington, DC, Chicago, San Francisco, and Los Angeles. As cap rates have narrowed in these markets, investors will begin to seek out opportunities to acquire performing assets in secondary and tertiary markets.

  27. Answers to Three Questions That Will Shape Commercial Real Estate in 2011 A moderate rise in interest rates will have little effect on cap rates and pricing. Distress has peaked, with outflows outpacing new additions to distress. Concentration of sales activity in core properties in major markets will spillover into performing assets in secondary and tertiary markets.

  28. Projections for 2011 Transaction activity will continue to rise, supported by improving conditions in credit markets. Real challenges ahead, but the baseline expectation for the New Year is positive.

  29. Hotel Thank you for viewing our on-demand webcast, Real Capital Rewind. All of us at RCA wish you a happy holiday season.

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