By: Youguo Liang, Ph.D.
Businesses are Rich in Cash and High in Profits = 2012 will be about 14% of GDP, which has been increasing in the last year.
Household deb service ratio is declining from 2008.
There will be a limited supply growth in all CRE through 2015.
10 year treasure and 3 month LIBOR lowest since the 50s.
Cap rates got up to about 7% in 2009 and 2010 and is now around 6.5% compared to the lowest of about 5.5% in 2008.
Annual total returns were -15% in 2009 and is now up to about 13% positive in 2011 and is projected to be equal in 2012.
Price index is near full recovery from 2007 and 2008 levels.
Annual transaction volume of all CRE deals was about $225B in 2011, which has been increasing since 2009. The 2012 levels will be in the $325B area, which is equal to 2004 and 2005 levels.
Secondary office markets price per square foot is on the rise.
Homeownership has declined since 2004 and is expected to remain flat through 2016.
Residential rental rates are currently higher than homeownership by 1.4 times.
Employee compensation as a % of GDP is at the lowest level over.
Quality shopping centers are good investments, regardless of the market timing.
85% of industrial market is warehouse, followed by 9.3% of flex space.
Industrial vacancy rates are down since 2008.
China has the lion’s share of container port volume, LA is #7 and NY and NJ is #19.
Overall, he sees favorable returns because of low int rates, rising transaction volume, higher risk in tertiary markets, quality of retail investments is key, and seaport, Panama Canal, and population are major considerations for industrial space. Multifamily a factor of economic growth, shifting homeownership, echo boomer demos and renting/owning dynamics.