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The US real estate report examines the commercial office, retail, industrial and construction sectors in the country in the context of a gradual return to growth.
With a focus on the principal cities of New York, Los Angeles, Chicago, Dallas and Philadelphia, the report covers the rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of economic on a market that can dictate regional performance. Despite the bleak horizon outlined at the beginning of 2012, the US commercial real estate market is continuing to exhibit signs of a recovery in 2013, albeit a cautious one. Positive consumer sentiment has gone some way to keeping real estate investment afloat. The overriding view seems to be that the outlook for commercial real estate is improving, but that ongoing vulnerability in the market is leading to continued caution among real estate players. This indicates that while the recovery is under way, it will continue to be slow.
Office vacancy levels currently remain high, and forecasts for a decline in unemployment have not yet reversed this trend. New office space is being added at a higher rate, but has not yet matched that discarded during the downturn. Our latest data collection in July of 2012 has revealed the recovery in the office market continues to be patchy, while the retail segment posted some very strong results in comparison to its peers. Retail activity is being buoyed by a shift in focus to second-tier shopping malls, as competition for top quality space has saturated that part of the market. International retailers are also pursuing expansion plans across the US, taking advantage of a recent move for some major retailers to close some of their stores. Meanwhile, industrial production in the US - which has long been a driver of growth - remains flat - and rental rates have seen the gains of H211 already eroded.
KEY POINTS:
The US real estate report examines the commercial office, retail, industrial and construction sectors in the country in the context of a gradual return to growth.
With a focus on the principal cities of New York, Los Angeles, Chicago, Dallas and Philadelphia, the report covers the rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of economic on a market that can dictate regional performance. Despite the bleak horizon outlined at the beginning of 2012, the US commercial real estate market is continuing to exhibit signs of a recovery in 2013, albeit a cautious one. Positive consumer sentiment has gone some way to keeping real estate investment afloat. The overriding view seems to be that the outlook for commercial real estate is improving, but that ongoing vulnerability in the market is leading to continued caution among real estate players. This indicates that while the recovery is under way, it will continue to be slow.
Office vacancy levels currently remain high, and forecasts for a decline in unemployment have not yet reversed this trend. New office space is being added at a higher rate, but has not yet matched that discarded during the downturn. Our latest data collection in July of 2012 has revealed the recovery in the office market continues to be patchy, while the retail segment posted some very strong results in comparison to its peers. Retail activity is being buoyed by a shift in focus to second-tier shopping malls, as competition for top quality space has saturated that part of the market. International retailers are also pursuing expansion plans across the US, taking advantage of a recent move for some major retailers to close some of their stores. Meanwhile, industrial production in the US - which has long been a driver of growth - remains flat - and rental rates have seen the gains of H211 already eroded.
KEY POINTS:
- The US economy continues to expand at a very modest pace. The downside shock risks remain prevalent, but the balance of evidence suggests that the economy has and will continue to avoid recession barring a major external crisis, or the triggering of the 'fiscal cliff' in 2013.
- Leading construction data is reinforcing our long-held view that the US construction industry will return to growth in 2012. In fact, the data implies a more positive investment climate for the sector than we had previously factored in, and thus we are upgrading our 2012 growth estimate to 1.2%, with further upside potential. The key growth divers remain the energy and utilities sector, as well as the ongoing revival in residential construction.
- The upward revision is a strong validation of our mid-2011 view that the US housing sector had bottomed-out and was about to experience a moderate recovery. Since this point, indicators have continued to point to an uptick in residential activity, which we believe has the potential to lift the construction sector as a whole. The non-residential sector is also experiencing a relative recovery, although we question how long much of this spending can be sustained as federal and state budgets remain tight.
- Our building materials forecast for the North American region is largely positive off the back of increasingly positive indicators for the US construction industry and the consistently strong performance of the Canadian sector. H212 has so far seen significant y-o-y increases in the supply of steel and concrete, yet we note that output and consumption levels are still significantly trailing those reported pre-2008.
Executive Summary
SWOT Analysis
US Real Estate/Construction SWOT
US Political SWOT
US Economic SWOT
US Business Environment SWOT
Real Estate Market Overview
Real Estate Market Analysis - Office
Supply And Demand
Rents And Yields
Table: Historic Rents - 2011-2012 (US$ per m2/month)
Table: Net Yield, 2011-2012 (%)
Table: Terms Of Rental Contract/Leases - H112
Industry Forecast Scenario
Table: Forecast Rents - (US$ per m2/month)
Table: Forecast Net Yield, 2010-2017 (%)
Real Estate Market Analysis - Retail
Supply And Demand
Rents And Yields
Table: Historic Rents - 2011-2012 (US$ per m2/month)
Table: Net Yield, 2011-2012 (%)
Table: Terms Of Rental Contract/Leases - H112
Industry Forecast Scenario
Table: Forecast Rents (US$ per m2/month)
Table: Forecast Net Yield, 2010-2017 (%)
Real Estate Market Analysis - Industrial
Supply And Demand
Rents And Yields
Table: Historic Rents - 2011-2012 (US$ per m2/month)
Table: Net Yield, 2011-2012 (%)
Table: Terms Of Rental Contract/Leases - H112
Industry Forecast Scenario
Table: Forecast Rents - (US$ per m2/month)
Table: Forecast Net Yield, 2008-2016 (%)
Forecast Scenarios
Infrastructure Report
Table: US Construction And Infrastructure Industry Data, 2008-2016
Table: US Construction And Infrastructure Long-Term Forecast, 2013-2021
Construction And Infrastructure Forecast Scenario
Macroeconomic Outlook
Table: United States - GDP By Expenditure, Real Growth %
Real Estate Risk/Reward Ratings
Real Estate/Construction Risk/Reward Ratings
Table: Real Estate Risk/Reward Ratings
US Business Environment
Table: BMI Business And Operation Risk Ratings
Institutions
Table: BMI Legal Framework Rating
Infrastructure
Table: Labour Force Quality
Market Orientation
Table: Trade And Investment Ratings
Table: Top Export Destinations, US$mn
Operational Risk
Competitive Landscape
Company Profiles
Bechtel
Fluor Corporation
KBR
Turner Construction Company
Demographic Data
Table: The United States' Population By Age Group, 1990-2020 ('000)
Table: The United States' Population By Age Group, 1990-2020 (% of total)
Table: The United States' Key Population Ratios, 1990-2020
Table: The United States' Rural And Urban Population, 1990-2020
BMI Methodology
How We Generate Our Industry Forecasts
Construction Industry
Bank Lending
Real Estate/Construction Business Environment Rating
Table: Weighting Of Indicators
Sources
SWOT Analysis
US Real Estate/Construction SWOT
US Political SWOT
US Economic SWOT
US Business Environment SWOT
Real Estate Market Overview
Real Estate Market Analysis - Office
Supply And Demand
Rents And Yields
Table: Historic Rents - 2011-2012 (US$ per m2/month)
Table: Net Yield, 2011-2012 (%)
Table: Terms Of Rental Contract/Leases - H112
Industry Forecast Scenario
Table: Forecast Rents - (US$ per m2/month)
Table: Forecast Net Yield, 2010-2017 (%)
Real Estate Market Analysis - Retail
Supply And Demand
Rents And Yields
Table: Historic Rents - 2011-2012 (US$ per m2/month)
Table: Net Yield, 2011-2012 (%)
Table: Terms Of Rental Contract/Leases - H112
Industry Forecast Scenario
Table: Forecast Rents (US$ per m2/month)
Table: Forecast Net Yield, 2010-2017 (%)
Real Estate Market Analysis - Industrial
Supply And Demand
Rents And Yields
Table: Historic Rents - 2011-2012 (US$ per m2/month)
Table: Net Yield, 2011-2012 (%)
Table: Terms Of Rental Contract/Leases - H112
Industry Forecast Scenario
Table: Forecast Rents - (US$ per m2/month)
Table: Forecast Net Yield, 2008-2016 (%)
Forecast Scenarios
Infrastructure Report
Table: US Construction And Infrastructure Industry Data, 2008-2016
Table: US Construction And Infrastructure Long-Term Forecast, 2013-2021
Construction And Infrastructure Forecast Scenario
Macroeconomic Outlook
Table: United States - GDP By Expenditure, Real Growth %
Real Estate Risk/Reward Ratings
Real Estate/Construction Risk/Reward Ratings
Table: Real Estate Risk/Reward Ratings
US Business Environment
Table: BMI Business And Operation Risk Ratings
Institutions
Table: BMI Legal Framework Rating
Infrastructure
Table: Labour Force Quality
Market Orientation
Table: Trade And Investment Ratings
Table: Top Export Destinations, US$mn
Operational Risk
Competitive Landscape
Company Profiles
Bechtel
Fluor Corporation
KBR
Turner Construction Company
Demographic Data
Table: The United States' Population By Age Group, 1990-2020 ('000)
Table: The United States' Population By Age Group, 1990-2020 (% of total)
Table: The United States' Key Population Ratios, 1990-2020
Table: The United States' Rural And Urban Population, 1990-2020
BMI Methodology
How We Generate Our Industry Forecasts
Construction Industry
Bank Lending
Real Estate/Construction Business Environment Rating
Table: Weighting Of Indicators
Sources