Colliers analysis: 10 predictions for 2012

Ten Predictions for 2012 Forecasts and predictions from Colliers International researchers and data providers. January 24, 2012 James Cook– U.S. Director of Research

Top 10 Predictions for 2012 1. Eurozone Headed For a Second Dip Austerity will be the name of the game, with tight bank credit and plummeting confidence. • Eurozone GDP will (at best) contract by 0.7% in 2012 •UK might be able to eke out 0.3% growthPrediction made by: Nariman Behravesh, Chief Economist, IHS

Top 10 Predictions for 2012 2. U.S. GDP Will Grow by 1.5% ‐ 2% •EU austerity will reduce demand for American goods •US would require job growth of over 2k per month to beat 2% GDP growth – an unlikely event •Govt spending at all levels will decline •Construction (with the exception of apartments) will remain in the doldrumsPrediction made by: KC Conway, Executive Managing Director, Market Analytics

Top 10 Predictions for 2012 3. Interest Rates will Remain Low •Interest rates will remain historically low, artificially buoying asking prices. •However, appraisal, underwriting and lending will keep prices flat.Prediction made by: Douglas Garcia, Director, Research, Northern California & Nevada

Top 10 Predictions for 2012 4. Taxes will Rise •Federal, state and local legislatures will expand their creativity for balancing budgets and request additional funds.Prediction made by: Douglas Garcia, Director, Research, Northern California & Nevada

Top 10 Predictions for 2012 5. Food Prices Will Drop •Food prices will drop, following the expiration of the $6B federal ethanol subsidies, as corn and other agricultural prices reset to market levels.Prediction made by: Douglas Garcia, Director, Research, Northern California & Nevada

Top 10 Predictions for 2012 6. Residential Property Values Will Remain Stagnant • National home prices have been dropping less sharply since 2008, but haven’t bottomed out yet. • National home prices will decline another 3-5% and finally bottom out in 2012 Chart Source: ZillowPrediction made by: Sean O’Neill, Research Director, Baltimore KC Conway, Executive Managing Director, Market Analytics

Top 10 Predictions for 2012 7.Warehouse Will Be the New Star Performer • There is less distressed warehouse debt than other property types. •The least amount of new construction still underway among the major CRE property types. •Has yet to see major cap rate compression. Cap rates are still above 6% for even Class A in core port markets.Prediction made by: KC Conway, Executive Managing Director, Market Analytics

Top 10 Predictions for 2012 8. Hotel Revenues Will Rise • U.S. hotel revenues will grow 6.1 percent in 2012, the result of a 1.3 percent rise in the number of occupied rooms and a 4.7 percent increase in average daily room rates.Prediction made by: Robert Mandelbaum, Director of Research Information Services, PKF Hospitality Research

Top 10 Predictions for 2012 9. Investment Volume to Grow by 50% • Investment sales will hit $300 billion in 2012. • Lenders have $160 billion in distressed commercial loans that need resolving. • REITs raised a record $37.5 billion in 2011 Chart Source: Real Capital AnalyticsPrediction made by: Real Capital Analytics

Top 10 Predictions for 2012 10. Most Cap Rate Compression Will End • Cap rate compression has run its course for all but Warehouse. Cap rates will rise in 2012 as the volume of assets coming to market from failed CRE refinancings, EU asset sales, and US failure to gets its fiscal house in order. Chart Source: Real Capital AnalyticsPrediction made by: KC Conway, Executive Managing Director, Market Analytics

EconoFocus James Cook U.S. Director of Research james.cook@colliers.com 39

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Colliers analysis: 10 predictions for 2012

by Coy Davidson on Jan 23, 2012

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