Ties that bind – part 3

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From Ben Breslau
Managing Director, Americas Research
Jones Lang LaSalle

With the ULI Fall Meeting starting tomorrow, the Boston Blog caught up with Ben for a third time on what’s next for real estate development.

Q: Which product types are institutional investors putting high on their purchase or hold list now? Is there a hot product type in today’s market?

A: Sales volume year over year is up about 10% in the US across property types. That’s compared to leasing volumes which are down about 15-20%. Investment volumes in 2010 were up 110% over 2009, and 2011 was up 65% over 2010. While any growth is better than nothing, the rate of growth in volumes has clearly slowed. As happened last year, this year has already seen some shifting back and forth between more risk taking earlier in the year to more risk aversion in the 2nd and 3rd quarters with the Euro crisis heating up.

Buyers lost some confidence and sellers seemed to lose motivation, and the pace of activity slowed a bit over the last few months. This is compared to risk off shift at about the same time last year with the first debt ceiling debacle so the y-o-y comparisons aren’t that bad. We are expecting volume to be up about 10% this year and maybe about the same next year, but with a significant range of possibilities. Last year after the summer slowdown the year end was actually pretty strong for sales. I would expect this year might fall short of that given the timing of the election in November and fiscal cliff concerns hitting early next year. 

YTD through the end of August apartments have been the hot property type purchased in today’s market, followed by office, retail, industrial and hotels.  Investors have snatched up apartments primarily in the top 3 markets of Manhattan, Los Angeles and  DC. Apartment have been the strongest but should also be the first to peak and could see some slowdown over the next year as people see the pricing get too frothy, the new supply pipeline grow, and the housing market start to recover.

-Ben

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