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Boston

Jones Lang LaSalle Spring Cross-Sector Survey Indicates Turnaround for Investment Activity in 2010

Multifamily, hotel and industrial poised to outperform other sectors


BOSTON, APRIL 14, 2010 — In a marked turnaround from the uncertainty that has prevailed for the past two years, investors and developers in the nationwide retail, office, multifamily, industrial and hotel commercial real estate sectors appear overwhelmingly dedicated to increasing their overall investment activity this year compared with last, according to Jones Lang LaSalle’s 2010 Spring Cross-Sector Survey.  While more than half (54 percent) of those surveyed predict an increase in their investment spending of up to 30 percent, an additional 20 percent have an even healthier outlook on the future, predicting their investment or development activity will be up 75 percent or greater relative to 2009.  Just seven percent of those responding projected their investment activity would decline in 2010.
 
Jones Lang LaSalle’s spring survey of nationwide property owners, development firms and professional services firm/consultants was completed by 60 planned attendees of the Urban Land Institute’s Spring Council Forum this week in Boston, Massachusetts.  The survey is conducted bi-annually in the spring and fall with comparative results provided in the following findings.
 
In 2009, results were far more mixed with slightly less than a third (30 percent) of those surveyed predicting a drop in investment spending of up to 30 percent, while more than a third (37 percent) foresaw their investment activity to rebound by up to 30 percent.
 
“Beginning in the third quarter of 2009, our Capital Markets teams began noticing a clear shift in the mindset of both buyers and sellers.  Both felt that a true pricing floor had been reached and there was a real sense of confidence that we had turned a corner on the economic downturn,” said Jay Koster, Jones Lang LaSalle’s Americas Capital Markets President. “The issue now is that a majority of investors are seeking well-located core assets and those are simply hard to come by at the moment and scarcity is driving upward pricing momentum in these assets.  Given the limited core investment opportunities, we expect distressed assets to garner a vast uptick in interest in the coming months.”
 
A quarter of survey respondents believe the pricing floor has already been set, while 36 percent of respondents believe property prices will hit bottom sometime in 2010. Another 35 percent say that won’t happen until 2011. As for distressed assets, more than half of respondents (53 percent) believe those will hit the sales market in 2011, while another 40 percent see opportunities in distress in 2010.
 
The availability of capital, both debt and equity, remains high on the minds of most in the commercial real estate community once again this year with the majority claiming that is the one factor that will most influence development/investment activity in the coming year.  Others say the employment rate will have the greatest impact.
 
While most survey respondents predict performance in all sectors besides office and retail to rise in 2010, the greatest pockets of opportunity appear to exist in the multifamily, hotel and industrial sectors.
 
Multifamily Sector
More than half of all respondents (58 percent) surveyed this year predict multifamily offers the best potential for outperformance among sectors of anywhere from zero to 30 percent.  That number represents a rise from 38 percent one year ago.  Conversely, slightly more than a third of all respondents (37 percent) predict multifamily will underperform by as much as zero to 20 percent compared with other sectors in 2010.
 
Hotel Sector
A slightly higher number of respondents (61 percent) also predict the hotel sector will outperform other sectors by as much as zero to 40 percent this year.  This stands in marked contrast from the 87 percent of respondents who predicted that sector would underperform relative to other sectors by that same amount in 2009.
 
Industrial Sector
More than half (56 percent) of those surveyed also predict the industrial sector will outperform other sectors by as much as zero to 30 percent this year.  However, 38 percent predict the industrial sector will see a decline of zero to 20 percent.
 
Retail Sector
Predictions for the retail sector are evenly split for 2010, as 42 percent of respondents believe the retail sector will outperform in comparison to other sectors by zero to 30 percent this year.  That same number (42 percent) believes retail will underperform relative to other sectors by zero to 30 percent.  This again contrasts with 2009 results as a year ago, a full 100 percent of respondents predicted the retail sector would underperform relative to other sectors anywhere from zero to 40 percent.
 
Office Sector
The office sector garners the lowest expectations for outperformance in 2010 with just 34 percent predicting that sector would outperform others by anywhere from zero to 30 percent.  Nearly two-thirds (65 percent) expect the office sector to underperform relative to other sectors by zero to 30 percent.  Last year, a full 100 percent predicted the same decline for the office sector.
 
As to the status of the occupancy of their commercial portfolios, respondents are again straddling the fence:  slightly more than half (54 percent) say occupancy will rise by zero to 30 percent by the year end of 2010 as compared with the previous year, while 41 percent say occupancy levels will decline by zero to 20 percent in 2010 relative to 2009.
 
For an insider’s perspective of all the happenings at the ULI Spring Council Forum in Boston, look no farther than Jones Lang LaSalle’s ULI Blog.  Sign up now to receive e-mail alerts from Jones Lang LaSalle experts on the hot topics being discussed at the Spring Forum. We'll provide the "net-net" for many of the educational and keynote sessions, and report on the behind-the-scenes buzz.  Read our blog and register for e-mail alerts now at www.us.joneslanglasalle.com/uliblog.
 
About Jones Lang LaSalle Capital Markets

Jones Lang LaSalle Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. Our in-depth local market and global investor knowledge delivers the best-in-class solutions for our clients — whether a sale, financing, repositioning, advisory or recapitalization execution. In the last three years, Jones Lang LaSalle Capital Markets completed more than $143 billion transactions globally. Our Capital Markets team comprises approximately 1,500 specialists, operating in 180 major markets worldwide.
 
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2008 global revenue of $2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.4 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $37 billion of assets under management. For further information, please visit our Web site, www.joneslanglasalle.com.
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