SATURATED WITH SPACE

Across the industrial sector, net absorption is expected to worsen as demand remains soft. The good news is that many markets have avoided the problems associated with overbuilding, in part because developers have focused on build-to-suit rather than spec projects.

BARGAIN HOTEL RATES IN MANHATTAN?

Manhattan still has the priciest room rates in the country, but hotel operators have lowered their rates in the past two years. Average Daily Rates (ADR), at $185 in 2002, are expected to rise to $192 in 2003. That small increase would fall far short of the $222 ADR in 2000.

THE GAP WIDENS

The hotel industry continues to experience the widest bid/ask spread, not surprising given the continued pressure on occupancy rates. In a survey by PricewaterhouseCoopers and Lend Lease Real Estate Investments, participants predict that the 2003 bid/ask spread for hotels will reach 160 basis points. They expect deal flow for limited-service hotels to increase when cap rates reach 11.7%.

CAPITALIZATION RATE BID/RISK CHARACTERISTICS
Property Type Bid Ask (Basis Points)
Bid/Ask Spread
Deal
Limited-Service Hotels 12.5% 10.9% 160 11.7%
Full-Service Hotels 11.3 10.0 130 10.7
Power Centers 10.4 9.6 80 9.9
Suburban Office 10.1 9.3 80 9.7
Research & Development 10.0 9.4 60 9.8
Community Shopping Centers 9.4 8.8 60 9.1
Warehouse 9.1 8.5 60 8.9
Downtown Office 9.1 8.5 60 8.8
Regional Malls 8.7 8.1 60 8.4
Apartments 8.5 8.0 50 8.3
Source: Lend Lease Real Estate Investments and PricewaterhouseCoopers


OFFICE CONSTRUCTION STILL FALLING

New office construction continues to fall from its 2000 crest, keeping office supply in relative check. Unfortunately, the demand side of the equation remains a problem, as a result of an unprecedented overhang of sublease space.

PROSPEROUS CITIES

Rising household income typically indicates a growing job market. Between 1990 and 2000, San Francisco climbed from No. 4 in the nation with a median household income of $41,459, to No. 1 with a median income of $62,024 as workers flocked to the dot-com mecca. Statistics presented here are for metropolitan statistical areas (MSAs) and consolidated metropolitan statistical areas (CMSAs), defined as regions comprised of more than one MSA.

Metropolitan Statistical Area* 1990 Median Household Income
1. Washington, D.C. MSA $46,884
2. Anchorage, Alaska MSA $43,946
3. Poughkeepsie, N.Y. MSA $42,250
4. San Francisco CMSA $41,459
5. Hartford, Conn. CMSA $41,440
Metropolitan Statistical Area* 2000 Median Household Income
1. San Francisco CMSA $62,024
2. Washington, D.C.-Baltimore CMSA $57,291
3. Anchorage, Alaska MSA $55,546
4. Minneapolis-St. Paul, Minn. MSA $54,304
5. Boston CMSA $52,792
*Between the 1990 Census and the 2000 Census, the Washington, D.C. MSA and the Baltimore MSA were combined to form the Washington, D.C.-Baltimore CMSA.
Source: U.S. Census Bureau