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%.
| 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 | |