RREEF and BP report takeaways

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from Geoff Homer
Research Analyst
Jones Lang LaSalle

It is always interesting to read research reports from other sources, in particular those of our investor clients. The other day, I combed through a publication from RREEF Research: 2011 U.S. Real Estate Investment Outlook and Market Perspective. The annual report identifies national trends across all property types. One of the major takeaways was that the real estate recovery is ongoing but it will take time before fundamentals reach healthy levels.

The report was focused primarily on the investor. It highlighted some general trends that are applicable to the Boston market:

> New supply will be limited.

> Subdued rent growth and slight occupancy improvements over the short-term, but above-trend rent and occupancy growth over the five-year forecast.

> CBDs and inner employment centers should substantially outperform commodity business park product in suburban submarkets.

> Boston is recovering organically through higher demand for tech-related products from consumers, businesses and abroad.

> Less office space per employee will be required as technology and culture increase worker mobility and reduce the need for file storage.

> Class A properties are benefiting as tenants capitalize on low rents.

> Looking ahead, RREEF projects strong rent growth in both the short and long-term.

> Most markets will see a virtual shut-down of construction in 2011 and 2012.

The Boston market was also discussed in the recent Q1 2011 earnings release from Boston Properties. The local REIT reported occupancy rates of 95% in the CBD versus 80% in the suburbs. The firm also revealed that the Back Bay, Cambridge and Waltham submarkets are seeing an uptick in leasing velocity, rental rates and/or lower transaction concessions.

The RREEF report can be accessed here.



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