Joseph C. Smith, sees reason for hope in the
hotel market in 2011. Although it was among
the hardest-hit sectors, Kestin points out that
RevPAR growth, which is expected to show
an increase of approximately 5% this year,
rose considerably in the latter part of 2010.
After declining by some 40% over the course
of two years, he notes, RevPAR has increased
8% in just the past three months.
Total Transaction Volume ($ Billions)
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
2001
2002
2003
2004
2005
Properties of at Least $5 Million
2006
2007
Kestin says that 2011 also looks promising
for hotels because neither debt nor equity
has been available to build new projects, “so
you are not competing against a large
increase in room count.” He expects that
hotel owners will continue to focus on
increasing occupancy for the time being, but
once the occupancies improve enough,
rates will go up. “The resorts probably are
going to take the longest to recover because
that represents leisure travel and conferences, which are down because of the recession,” he says. In multifamily, Kestin is one of
many who say that readily available financing from Fannie Mae and Freddie Mac is one
of the factors that kept the sector humming
in 2010 and will favor it in 2011 as well.
The current market presents something
of a paradox for an opportunistic buyer like
Glenmont, whose business strategy historically has been “to make an inefficient asset
more efficient,” then divest it. “Since we are
trying to drive a higher IRR to our investors,
the longer we hold, the more diluted it
becomes,” Kestin says. However, “We also
want to sell into a favorable market, and
right now is probably not a great time to be
selling,” says Kestin, who believes that prices
will rise as the recovery continues.
Glenmont’s approach contrasts that of
Los Angeles-based Westwood Financial
Corp., a 40-year-old shopping center com-
pany that buys for the long term. “We buy
property to own it forever,” says EVP Joe
Dykstra. Westwood owns a portfolio of
approximately 100 shopping centers and
other retail properties in 23 metro markets,
was a buyer in 2010 and will “definitely be a
buyer in 2011 and beyond,” he says.
Volumes leaps to $125 billion in 2011
U.S. Total transaction volume – office, industrial, retail, multifamily
Outlook
Projected 2010
volume
increase: 80%
to
$92 billion
Forecast for
2011: Up
30-40% to
$125 billion
Source: Jones Lang LaSalle, Real Capital Analytics
services, including leasing assignments for
approximately 750 retail centers totaling 60
million square feet and management of 7. 5
million square feet of retail throughout the
Southeast and Mid-Atlantic.
Birnbrey expects 2011 to be a better year
for 80% of the retail sector, but the remaining 20% will still face difficult debt maturi-ties and other problems, including “retail
space that, for all practical purposes, has
become obsolete.” While it’s hard to generalize about retail because it includes so many
different categories, overall he foresees
retailers opening more stores in 2011. At the
same time, they will be leasing smaller stores
in an effort to improve efficiencies. He also
foresees the pace of investment sales continuing to increase as investors come to grips
with the new valuations and financing continues to grow more readily available. “I
think the investment sales industry is going
to go crazy over the next few years,” he says.
Another change Birnbrey foresees is the
resurgence of mom-and-pop retailers, many
of which shut down in the recession. This,
he says, is because people are opening stores
to replace jobs they’ve lost in the downturn
or early retirement, and because of “
overwhelming inventory overload, the category
killers are at risk for the first time in years.”
He cites bookstores as an example.
“If we believe that people will always read
books, then the neighborhood bookstore
will come back because bookstores don’t
need 100,000 titles. They only need the New
York Times top sellers list and a few categories,” Birnbrey says. He thinks that, in addition to bookstores, mom-and-pop toy stores
Long Recovery to Former Health
21
18
15
Employment, Change From Peak
12
9
12
6
3
10
0
8
6
- 3
- 6
- 9
- 12
- 15
- 18
4
- 21
- 24
2
- 27
- 30
- 33
0
- 36
- 39
- 2
- 42
- 45
- 4
- 48
- 51
- 54
- 6
- 57
- 60
- 8
Months from Start of Recession
- 63
- 66
24
Global Research and Consulting
Source: Bureau of Labor Statistics, CBRE Econometric Advisors (September, 2010).
And This is
Optimistic!!
Today (Dec 2007)
2001 (Feb 2001)
1990 (June 1990)
1981-82 (July 1981)
will also come back in vogue.
The improvement in the retail world will
not likely lead to much new construction in
2011 because “People are not even in the
conceptual stages of retail right now, and if
