U.S. ECONOMY BUILDS MOMENTUM
Wachovia Securities predicts that the yield on 10-year Treasuries will rise in the near term, pushing up fixed-rate borrowing costs for real estate investments. Although the 10-year Treasury yield has actually dipped in the last few months to 4%, Wachovia anticipates that robust economic growth will inevitably lead to job creation and higher rates.
| 1Q 2004* | 2Q 2004* | 3Q 2004* | |
|---|---|---|---|
| GDP | 4.0% | 4.6% | 4.4% |
| Unemployment | 5.8% | 5.7% | 5.6% |
| Consumer Price Index Inflation | 1.6% | 2.0% | 2.1% |
| Fed Funds Rate | 1.0% | 1.25% | 1.5% |
| 3-Month LIBOR | 1.25% | 1.4% | 1.65% |
| 10-Year Treasury | 4.5% | 4.7% | 4.9% |
| Note *Forecast | |||
| Source: Wachovia Securities | |||
WEST COAST APARTMENTS IN DEMAND
Tight markets with high barriers to entry and chronic housing shortages — such as Southern California and the Bay Area — are predicted to maintain low vacancy rates in 2004 despite the addition of new units, reports Marcus & Millichap.
WILL HOTELIERS SEE RECOVERY IN 2004?
There's a light at the end of the tunnel for hotel owners: occupancy is expected to grow by 3% to 4% in every region of the country in 2004. In South Atlantic cities, such as Baltimore and Raleigh, N.C., occupancy is projected to jump from 61.8% in 2003 to 65.2%.
| Occupancy | ||
|---|---|---|
| 2003* | 2004* | |
| New England/Mid-Atlantic | 66.0% | 68.8% |
| North Central | 58.9% | 61.4% |
| South Atlantic | 61.8% | 65.2% |
| South Central | 58.1% | 61.1% |
| Mountain and Pacific | 64.3% | 67.8% |
| National | 61.8% | 64.9% |
| *Forecast | ||
| Source: Smith Travel Research, Torto Wheaton Research, Hospitality Research Group of PKF Consulting | ||
GAP NARROWS BETWEEN INDUSTRIAL ABSORPTION AND DELIVERIES
Good news for the industrial sector: deliveries are decreasing, while absorption is growing. In the third quarter of 2003, 17.5 million sq. ft. of industrial space was delivered, down from 20.4 million sq. ft. in the second quarter of 2003. In contrast, absorption shot up from 1.4 million sq. ft. in the second quarter to 10 million sq. in the third quarter.
DOLLAR STRETCHERS
Discounters, take note. Between 2000 and 2002, the percentage of households with incomes of $70,000 and greater that shop at dollar stores rose by 8%.
| 2000 | 2002 | |
|---|---|---|
| Less than $20,000 | 67% | 74% |
| $20,000 - $29,000 | 62% | 71% |
| $30,000 - $39,000 | 57% | 67% |
| $40,000 - $49,000 | 54% | 64% |
| $50,000 - $69,000 | 48% | 58% |
| $70,000 and over | 37% | 45% |
| Source: ACNielson Homescan Panel, 2003 | ||