November 23, 2008
PricewaterhouseCoopers Press Releases
FOR IMMEDIATE RELEASE
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Wendy Amstutz PricewaterhouseCoopers 646.471.5079 wendy.amstutz@us.pwcglobal.com |
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U.S. Real Estate Markets Remain Stronger Than Last Recession; Full Recovery Expected in 2004
New York, February 13, 2002 - The majority of real estate markets will remain in contraction, rather than recession, in 2002 and through 2003. Expansion and recovery are predicted by the end of 2003 and into 2004 throughout the industry, according to PricewaterhouseCoopers Real Estate Value Cycles.
Hardest hit in 2002 and beyond will be the office sector. The warehouse sector will experience a very steep downturn, but recovery in this sector will be swift. Multifamily and retail sectors are poised to survive the downturn.
Office Market
The office market will show continued weakness through 2003. In 2004, the percentage of the market in recovery and expansion will grow significantly.
• In 2002, 3.3 billion square feet will be in contraction or recession, and .2 billion square feet will be in recovery or expansion.
• By 2004, 2.5 billion square feet will be in contraction or recession, and 1.2 billion square feet in recovery or expansion.
• Office markets with the greatest value potential include Austin, Las Vegas, Riverside, Phoenix and Kansas City. Markets with stable value prospects include Honolulu, Washington, New York, Northern New Jersey and Nassau-Suffolk County, N.Y. Markets that will find it harder to emerge from the recession phase and that will have limited value potential include San Diego, Oakland, Houston, Sacramento and Seattle.
Warehouse Market
The warehouse market is tied very closely to the economy. While many markets will be in contraction and recession this year, this will change dramatically in 2003 and 2004 as the economy improves.
• In 2002, 4.85 billion square feet will be in contraction or recession. There will be no expansion in this market, and less than .2 billion square feet in recovery.
• By 2004, there will be no contraction or recession in this market, and 3.5 billion square feet will be in expansion, and 1.6 billion square feet in recovery.
• Markets with greatest value potential include Richmond, Baltimore, Orlando, Fort Lauderdale, Cincinnati, Charlotte, San Antonia, Raleigh-Durham, San Francisco and Dallas. Markets with stable value prospects include Salt Lake City, Nassau-Suffolk, Boston, Seattle, Cleveland.
Retail Market
Annual retail sales performances for 2001 were up 2.7% over the same period in 2000. This insulated the retail sector from further deterioration and will provide a strong recovery.
• In 2002, 5 billion square feet will be in contraction or recession--over 4.2 billion square feet of that in contraction--and .2 billion square feet will be in recovery with no markets in expansion.
• By 2004, there will be a sharp drop of markets in contraction to 2.1 billion square feet, and no markets in recession. Over 3 billion square feet will be in expansion or recovery.
• The retail markets with the greatest value potential include Las Vegas, Orlando, Atlanta, Austin and Los Angeles, while the markets with stable value potential include Oakland, San Francisco, New York, Boston and San Diego. Markets with limited value potential include, Jacksonville (FL), Oklahoma City, West Palm Beach, Riverside, and New Orleans.
National Multifamily Market
Although most individual apartment markets have been contracting since 2000, the multifamily market is positioned for a mild recession in 2002, followed by a return to expansion in 2003. Given the moderating supply, the multifamily market is positioned to increase value and rent levels in 2003.
• In 2002, 7.1 billion square feet will be in contraction. Another 4.5 billion square feet will be in recession, and .25 billion square feet in recovery.
• By 2004, 7 billion square feet will be in contraction, and another 5.6 billion square feet will be in recovery or expansion. There will be no markets in recession.
• While new supply has outpaced new demand in Orlando, Austin, Columbus, West Palm Beach and Richmond, PricewaterhouseCoopers' research suggests that these markets will hit bottom in 2002, gradually recover through 2006, and become the cities with greatest potential for value increases.
The entire publication can be purchased for $225 (hardcopy) or $150 (electronic) at www.pwcreval.com or call 631-234-5143 for information about this and other PwC publications.
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PricewaterhouseCoopers' Real Estate Value Cycles is a semiannual publication of real estate cycle information on the position of office, warehouse, retail, apartment, and hotel sectors in the 59 major U.S. markets. Based on PricewaterhouseCoopers' propriety real estate cycle model, this publication makes extensive use of graphs and explanatory analysis and comments providing a clear and concise understanding of emerging trends in U.S. real estate value cycles. Portfolio analysis; in-house presentations of cycle methodology, practical uses, and current market conditions; custom analysis; and historical and submarket cycles charts are available.
PricewaterhouseCoopers (www.pwcglobal.com) helps its clients develop and execute integrated solutions to build value, manage risk and improve their performance. Drawing on the knowledge and skills of 155,000 people in 150 countries, we provide a full range of business advisory and consulting services to leading global, national and local companies and to public institutions.
PricewaterhouseCoopers refers to the member firms of the worldwide PricewaterhouseCoopers organization.
Today and throughout its 65-year history, the Appraisal Institute is the leading organization for professional real estate appraisers. Through its extensive educational programs, the Appraisal Institute's more than 18,000 members are skilled in the up-to-date methods of real estate valuation for commercial and/or residential properties. Reflecting their unbiased and objective approach to real property appraisal and analysis, members of the Appraisal Institute adhere to a strictly enforced Code of Professional Ethics and Standards of Professional Practice. The Appraisal Institute currently confers the prestigious MAI and SRA designations.
Reaching Equilibrium: Real Estate Value Cycles Are "Moving to the Middle" Says A New Report
New York, January 29, 2001 - A new report issued by PricewaterhouseCoopers, in association with the Appraisal Institute, "Real Estate Value Cycles," provides valuable insight into the current state of commercial real estate markets throughout the country. According to the report, many markets appear to be moving toward a point of stability, with investment and development fundamentals in relative balance.
"It appears that after eight years of expansion in our economy and our real estate markets, we will enter a contraction phase in 2001," says Peter Korpacz, Director, Global Strategic Real Estate Research Group at PricewaterhouseCoopers. "However, a contraction is not necessarily a bad thing. It simply means that conditions will not be as glowingly attractive as they have been in the past several years."
The report indicates that markets will begin to see a slow down in rental rate and property income growth as the economy cools, supply catches up with demand, and vacancy rates begin to rise. The vast majority of real estate markets throughout the country will experience this slow down, but at the same time will maintain a balance in supply and demand fundamentals that will help them stay in the "middle."
The report, which covers multifamily, warehouse, office, retail, and hotel property types, also discusses the current and forecast state of each property type individually. Highlights from the study appear below:
MULTIFAMILY
Overall, the multifamily market appears to have the strongest value prospects of the five property types covered. Positive demographic trends will help keep demand levels ahead of new supply. As a result, the market should see continued gains in rental rates, declining vacancy, peaking investor interest, and increasing values over the next several years. Furthermore, the report points to the multifamily industry's tendency to weather economic storms better than other property types, thereby helping to put apartments at the top of the list.
WAREHOUSE
Poised for a period of stability, the majority of warehouse markets will see vacancy rate changes of less than 2% over the next five years. The market will begin to see a slight shift in the supply/demand balance as new completions edge out the net demand for space. As this happens, the market will come off the cycle peak and vacancy rates will increase slightly, but market fundamentals should remain strong and stable. The forecast stability in the market helps make warehouse properties a good place for solid, predictable returns.
OFFICE
As with the warehouse market, the national office market is forecast to ease gently into contraction over the next several years. Slowing employment growth combined with relatively high levels of new supply will cause vacancy rates to edge higher. Increased risks to cash flows and reversion will lead to slightly higher capitalization rates and moderately increasing to stable property values.
RETAIL
Retail sales are forecast to experience a substantial decrease as the economy cools, leading to a significant decline in the demand for retail space. As demand falls below the level of new supply, the national retail market will experience a slide into contraction. As vacancy rates rise and rental growth begins to slow, income and property value growth will slow as well.
What does the gradual movement into contraction mean for most real estate markets? Stability. And as most markets move to a new equilibrium somewhere in the "middle," the resulting stability could be a boost to real estate as a whole. "In a time of volatility in non-real estate asset classes, investors may view real estate as a stable, predictable income-generating investment," says Peter Korpacz.
The entire publication can be purchased for $225 (hardcopy) or $150 (electronic) at www.pwcreval.com.
# # #
PricewaterhouseCoopers' Real Estate Value Cycles is a semiannual publication of real estate cycle information on the position of office, warehouse, retail, apartment, and hotel sectors in the 59 major U.S. markets. Based on PricewaterhouseCoopers' propriety real estate cycle model, this publication makes extensive use of graphs and explanatory analysis and comments providing a clear and concise understanding of emerging trends in U.S. real estate value cycles. Portfolio analysis; in-house presentations of cycle methodology, practical uses, and current market conditions; custom analysis; and historical and submarket cycles charts are available.
PricewaterhouseCoopers (www.pwcglobal.com) is the world's largest professional services organization. Drawing on the knowledge and skills of more than 150,000 people in 150 countries, we help our clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance in an Internet-enabled world.
PricewaterhouseCoopers refers to the member firms of the worldwide PricewaterhouseCoopers organization.
Today and throughout its 65-year history, the Appraisal Institute is the leading organization for professional real estate appraisers. Through its extensive educational programs, the Appraisal Institute's more than 18,000 members are skilled in the up-to-date methods of real estate valuation for commercial and/or residential properties. Reflecting their unbiased and objective approach to real property appraisal and analysis, members of the Appraisal Institute adhere to a strictly enforced Code of Professional Ethics and Standards of Professional Practice. The Appraisal Institute currently confers the prestigious MAI and SRA designations.
Worried About Real Estate Investment Opportunities? Survey Says "Steady As It Goes"
New York, December 13, 2000 - Let the good times roll. Strong underlying fundamentals in the real estate industry indicate that investors will continue to prosper from one of the healthiest real estate markets in history despite signs of a slowing economy, according to PricewaterhouseCoopers' Fourth Quarter Korpacz Real Estate Investor Survey®.
"Everything seems to be holding steady," says one survey participant. Other investors echo this positive outlook, saying they "see fundamentals staying pretty much the same over the next 12 months" and "rents are not leaping like they used to, but returns are still good." With no dramatic changes expected in the industry over the near term, some investors' strategies will remain the same: to acquire Class-A product in top markets.
Nevertheless, some investors say they will fine-tune their portfolios in 2001 by focusing on different property types and reinvesting in new geographic locations. For example, some say they are shifting their focus from suburban office space to apartment deals.
Well-balanced market conditions combined with a stable economy have helped to boost stock prices for several REITs. As a result, the survey says many REITs -- particularly office and industrial ones -- will be more active in the upcoming year. "We expect to see a little bit more REIT capital coming back into the market," says one participant.
Aside from investing in the United States, some established REITs are buying and constructing properties overseas. However the survey cautions that such investments are not free from risk, citing language barriers, cultural differences, and currency issues as major factors deterring many U.S. REITs from investing abroad.
The survey also says that the abundance of high-tech, Internet, and Internet-related companies occupying real estate throughout the country is raising red flags with many investors. Survey participants cited several reasons for this trend including losses incurred by landlords from broken leases.
Survey participants identify downsizing, mergers, consolidations, and overseas capital crises as possible causes of a future economic downturn. Some say that even a simple redirection of international investors' money could cause such a downturn because, as one investor puts it, "a good part of our real estate industry is being driven by international money." Surprisingly, investors say they are less concerned about higher interest rates.
While interest rate hikes have hindered some construction activity in various suburban markets, they have not significantly impacted the buying side of the real estate industry, according to the survey. Many of the most active investors in the industry are institutional all-cash buyers such as pension funds and insurance companies. On the other hand, interest rate increases are affecting the smaller, private buyers' ability to close deals since it is now both difficult and time consuming to obtain financing. "Marketing time tends to be longer when dealing with buyers who are sensitive to interest rates," says one participant. As a result, some leveraged buyers may be passed over in favor of all-cash buyers.
Other important survey findings are:
Frequently mentioned states and cities where most types of real estate are performing exceptionally well include California, New York, Washington, DC, San Francisco, and Boston
Preferred markets for state-of-the-art, Class-A industrial properties include Chicago, and Dallas, however investors caution that some Midwestern markets are not performing as well
Cities with strong job growth are top picks for suburban office investments including Los Angeles, Washington, DC, and Houston
Investors are developing new top-tier regional malls in underserved urban markets such as Chicago, while larger, high-growth markets such as Los Angeles are considered better for grocery-anchored shopping centers
The entire survey can be purchased for $95 (hardcopy) or $75 (electronic version) at www.pwcreval.com.
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PricewaterhouseCoopers (www.pwcglobal.com) is the world's largest professional services organisation. Drawing on the knowledge and skills of more than 150,000 people in 150 countries, we help our clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance in an Internet-enabled world.
PricewaterhouseCoopers refers to the member firms of the worldwide PricewaterhouseCoopers organisation.
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