GOOD NEWS FOR APARTMENT SELLERS
Today's multifamily market is characterized by falling cap rates in both suburban and urban sectors. Suburban multifamily cap rates declined from an average of 8.6% in 2002 to 8.04% in 2003, while urban multifamily cap rates dropped from an 8.6% average in 2002 to 8.23% in 2003.
| Rank | Property Type | 2003 Low (%) | 2003 High (%) | 2003 Average |
|---|---|---|---|---|
| 1 | Suburban Multifamily | 6.3% | 9.5% | 8.04% |
| 2 | Urban Multifamily | 6.0% | 10.5% | 8.23% |
| 3 | Regional Mall | 7.0% | 10.0% | 8.46% |
| 4 | Community Mall | 7.3% | 10.0% | 8.77% |
| 5 | Neighborhood Strip Centers | 7.5% | 10.8% | 8.90% |
| Source: Integra Realty Resources | ||||
DEVELOPERS SCALE BACK ON NEW CONSTRUCTION
Shrinking demand in 2003 caused many developers to curtail the number of projects in their construction pipelines. As a result, several sectors experienced a decline in construction spending between 2002 and 2003 — most notably the manufacturing sector, where construction spending declined 16.5%. Total U.S. construction spending measured $899 billion in 2003, up 4.4% from 2002's total of $861 billion.
| Type of Construction | 2002 | 2003 | % Change |
|---|---|---|---|
| Manufacturing | $16.9 billion | $14.1 billion | -16.5% |
| Office | $44.9 billion | $40.3 billion | -10.3% |
| Lodging | $10.8 billion | $10.7 billion | -0.9% |
| Amusement and Recreation | $18.9 billion | $19.1 billion | 0.8% |
| Education | $70.5 billion | $71.2 billion | 1% |
| Religious | $8.2 billion | $8.4 billion | 1.9% |
| Health Care | $27.5 billion | $29.6 billion | 7.4% |
| Source: U.S. Census Bureau | |||
CBD VACANCIES CONTINUE TO CLIMB
Suburban office markets are on the mend, but Central Business Districts (CBDs) are still ailing. The suburban vacancy rate has declined from a peak of 19.3% in the first quarter of 2003 to 18.9% in the fourth quarter, based on a survey of 44 markets. Conversely, the CBD vacancy rate continues to drift higher, rising from 14.6% to 15% during the same period.
| CBD | Suburban | |
|---|---|---|
| Dallas | 25.4% | 25.7% |
| Los Angeles | 19.6% | 15.5% |
| Atlanta | 17.9% | 23.1% |
| Chicago | 16.1% | 22.6% |
| New York/Long Island | 11.6% | 9.9% |
| Washington, D.C. | 8.4% | 14.2% |
| Source: Grubb & Ellis | ||
AMERICANS SEEK WARMER PASTURES
Americans' mobility patterns trend this way: What's hot is hot, especially when you look at both traditional and nouveau Sun Belt locales' magnetism for domestic movers. Technology has removed the limitations geography had long placed on business development. People used to move to where the jobs are, but now jobs and money are moving to where people want to be.
U.S. Net Migration
| County | 5-Year Net Migration |
|---|---|
| Maricopa County, Ariz. | 216,904 |
| Clark County, Nev. | 203,228 |
| Collin County, Texas | 85,025 |
| Riverside County, Calif. | 80,854 |
| Broward County, Fla. | 65,940 |
| County | 5-Year Net Migration |
|---|---|
| Los Angeles County, Calif. | -567,721 |
| Cook County, Ill. | -377,902 |
| Kings County, N.Y. | -233,555 |
| Queens County, N.Y. | -168,505 |
| Miami-Dade County, Fla. | -159,714 |
Source: American Demographics/U.S Census Bureau, Population Division