United States . Spring 2013Cross Sector OutlookReal estate markets remain slow and steady overall, but both leasingand investment demand are beginning to broaden. The housingrecovery is enabling more geographic markets to participate in varyinglevels of growth, and activity is finally reaching out the quality and riskspectrum, as tenants search for quality space and talent and investorsseek higher yields.As the cyclical recovery swings between acceleration and deceleration,unique structural transitions are at work, such as the densificationof office space use and e-commerce shifting tenant needs in bothdistribution and retail.We expect positive rental growth across all property types this year asdemand diversifies, development pipelines stay in relative check andthe retail market finally bottoms. The maturing multifamily cycle willagain lead rent growth in 2013, while office, industrial and hotel rentsaccelerate modestly.Slow and steady shall winthe race
2 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 As we entered 2013, we were faced with lingeringdebt ceiling issues and other budgetary policymeasures that were unresolved. However, thingsturned out better than expected and so far strengthin real estate investment activity continues to bedriven by employment growth sectors of technology,energy and healthcare, as well as an improvinghousing recovery. Inflation appears to be containedand still-low long-term treasury yields are inplay to support attractive financing options. Theavailability of tradable product that continues tosatisfy investor appetite for risk is also a positivefactor. While not completely out of the woods in thenear term, we share our views and insights in thepages to follow on what potentially lies ahead andwill be the drivers for sustainable growth for theremainder of 2013 and beyond across core propertysectors, be it in traditional primary or growingsecondary markets.
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4 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Table of contentsCross property comparison 5Multifamily Real Estate Sector 6United States Multifamily Clock 8Office Real Estate Sector 9United States Office Clock 11United States CBD office clock 12United States Suburban office clock 12Industrial Real Estate Sector 13United States Industrial Clock 14Retail Real Estate Sector 15United States Retail Clock 16Hotel Real Estate Sector 17United States Hotel Clock 19Appendix 21 National Class A cap rate maps 22 Sector statistics Multifamily 23 Sector statistics Office 24 Sector statistics Industrial 25 Sector statistics Retail 26 Sector statistics Hotel 27 Sentiment gauge Multifamily 28 Sentiment gauge Office 29 Sentiment gauge Industrial 30 Sentiment gauge Retail 31 Sentiment gauge Hotel 32 Key transactions Multifamily 33 Key transactions Office 34 Key transactions Industrial 35 Key transactions Retail 36 Key transactions Hotel 37 Capital market trends and fundamentals at a glance 38
5 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Cross property comparisonfundamentals, driven partly by continued strength in technology andenergy hub markets. Although construction is rising modestly in somemarkets, rents are increasing slowly, while concessions are firmlyheaded on a downward trajectory. Overall, we expect trends to continueto drive more landlord-favorable markets.Demand for modern, functionally superior space continues in theindustrial sector and vacancy is sitting at post-recession lows. Weexpect demand to broaden as more mid-sized tenants come back intothe market.The hotel sector continues to benefit from overall strong operatingfundamentals, which underpins a buoyant transactions market so farthis year. A number of hotel markets are already on a multiyear run ofdouble-digit RevPAR increases.Multifamily remains separate from the slow recovery pack and is in theearly peaking phase overall. While the anticipated spike in transactionvolume is playing out, particularly as “would be” homeowners remain onthe sidelines, expect compounding occupancy and rent growth to beginto slow a few years out.Reading the clockThe Jones Lang LaSalle U.S. property clock demonstrates where eachproduct type sits within the real estate cycle. Property sectors, mainlydriven by their fundamentals, generally move clockwise around theclock. Property types on the left side of the clock are largely in growthmode, whereas any on the right demonstrate weakness.So far for 2013, construction remains relatively close to a 40-year lowacross most core property sectors outside of multifamily, with limited newdevelopment on the horizon. This lack of new construction and someaccelerated obsolescence in older properties will support the occupancyand rent growth we expect, particularly in quality properties, even withonly slow underlying growth. Overall leasing activity appears stable andvacancy continues to decline across most markets. Investment activitycontinues to increase so far as the year progresses.For the retail sector, expect new construction to remain low for the nextfew years, as emphasis is placed on redevelopment. Population growthremains key to performance in 2013 and beyond.Investment trends in the office sector are following improvingQ1 2013: United States property clockPeaking market Falling marketRising market Bottoming marketMultifamilyRetailHotelIndustrialOffice
MultifamilyReal Estate SectorMarket performance driversMetros with a solid base of 21st century industries (such as high-tech,energy and bio-tech) were our top performers in recent months asdiverse employment opportunities and the resulting population in-migrations have supported increased rental demand. This is evidencedby the double digit rent growth that has occurred in San Francisco,San Jose and Denver as well as the rapid pace of absorption that hasoccurred in the three major Texas metros (Dallas, Houston and Austin).Despite the depth of new deliveries in these markets in 2012, and aheavy pipeline in 2013, over 1.0 percent of the inventory was absorbed(on a net basis) with year-over-year rent growth well above thenational average.Following our “21st Century Markets,” were our metros that we classifyas “rebounders.” These are metros with economies that were heavilyreliant on housing and tourism prior to the downturn and, generallyMultifamily outlookThe presidential election, “fiscal cliff” threat, sequestration and risinggasoline prices were some key challenges of the last 12 monthsthat have kept uncertainty on the forefront and effectively stalled theanticipated rate of economic growth across the nation. The for-salehousing market is a bright spot, as it is beginning to turn a corner andhelping to stabilize economies within some of the hardest hit U.S.housing markets. This is in turn easing pent-up housing demand andallowing for household formation to resume. While low interest ratesand loosening lending requirements are doing their part in spurringhome buying activity, this general uncertainty continues to sidelinemany “would be” home buyers across the nation. As of the first quarterof 2013, much of the reported home sales continued to be driven byinvestors and second home purchasers rather than end users. Thenational rate of homeownership remains at a 10-year low with 34.6percent of households opting to rent.These factors have continued to fuel robust demand for rentalapartments in recent months, causing multifamily occupancy andrents to climb well above their 10-year averages. Nationwide, strongperformance in terms of unit absorption and rent growth continuedacross all major U.S. metros over the last 12 months. While the rapidpace of absorption showed signs of a slowing toward the year-end,conditions for renters continued to tighten as occupancy climbed 40basis points over the last 12 months. Rents followed suit, continuingtheir upward trajectory and increased 4.4 percent year-over-year to newhistoric heights.It is our view that, despite the threat of the swelling construction pipeline,rebounding job growth and increased demand from an expandingrenter population will continue to support healthy absorption levels overthe long term. While short-term setbacks may occur, particularly in“overbuilt” submarkets, apartment fundamentals will remain stronginto 2017.Top 3 leasing market driversDriver CommentsDiverse employment opportunitiesResultant increase in populationmigration supports increase inrental demand.Expanding renter populationBodes well for absorption of inventoryon a net basis.Housing and tourismAids in the recovery that has occurredin “rebounder” metros.Top 3 investment market driversDriver CommentsFavorable debt marketsFunding by GSEs continues to propelmultifamily investment activity.Strong long-term fundamentalsHigh occupancy and growing rentskeep product type highly desirableto investors.Increasing job growthTechnology, energy and other growingemployment sectors drive overallfundamentals in key markets.
7 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 rate compression; sub 4.0 percent cap rates are widely reported forcore product in gateway cities. Because of these compressing yields,there has been much talk by domestic investors of currently pursuingsecondary assets in secondary or tertiary markets and submarkets.Over the last 12 months apartment operators, in typical fashion, havedominated acquisition activity with $40.3 billion in purchases followed byREITs with $29.4 billion, and investment managers, eager to outperformthe NCREIF Index, have purchased $9.0 billion in multifamily assets.Since 2012, uncertainty overseas has driven demand for U.S.multifamily product back to prerecessionary levels. Canadians, whohave historically been active buyers, led international acquisition activityover the last 15 months and closed $3.2 billion in U.S. multifamilytransactions. Switzerland has been the second most active with $698million in purchases followed by Israel ($407M), the United Kingdom($291M) and Kuwait ($272M). This international capital has foundits way to nearly all major metros with Dallas, Houston, Manhattan,Chicago and South Florida each seeing over $300 million in internationalacquisitions since the start of 2012.Flow of capitalWhile the apartment sector’s strong performance was a primary driverbehind investor demand, the availability of attractive debt relative toother property sectors was a large differentiator in 2012. This factis largely supported and fueled by the GSEs; who generally exceedother capital sources in terms of overall proceeds and are estimated toaccount for approximately 65.0 percent of all 2012 originations.In recent months, Freddie Mac was reportedly lending up to an 80.0percent loan-to-value ratio (based on the purchase price) for ClassA assets in primary locations and a loan-to-value ratio of up to 75.0percent for secondary assets and locations. During the first half of 2012it was reported that, in some instances, borrowers successfully executed10-year fixed rate loans, with generous interest-only periods, whilecapturing interest rates below 4.0 percent. However, in recent months,the opportunity to capture interest-only periods diminished but interestrates remained competitive.Along with Fannie Mae and Freddie Mac, life insurance companies andbalance sheet lenders are offering very attractive financing relative tohistorical standards. However, like the agencies, their ability to out-quoteother financing sources in terms of proceeds and rates hinges on theirfavorable evaluation of both an asset and a borrower. Both segmentswere more active in over the last 12 months than the previous threespeaking, are now benefiting from the recovery occurring within thosesectors. Our “rebounders” are primarily located in the Sunbelt andinclude Atlanta, Las Vegas, Phoenix and Los Angeles as well as Floridaand Southern California. These metros have experienced year-over-yearoccupancy increases between 60 and 90 basis points and, in manycases, rent growth above the national average.Multifamily transaction volumesFavorable debt and strong long-term fundamentals continued to propelmultifamily investment demand to peak levels. In 2012, needle movingportfolio sales, large ownership entity transfers and an insatiableappetite from apartment operators drove sales velocity to 2005 levels.Over $80 billion in transactions closed and apartment building salesoutpaced office building sales for the first time in recorded history.These trends have continued into 2013, particularly the needle movingportfolio sales. The most notable being the Equity Residential andAvalon Bay’s joint venture to purchase the entire Archstone portfolio. Asof the close of the first quarter in 2013, sales velocity was on pace with2012 as multifamily sales volumes reached $30 billion. Based on thecapital reportedly circling multifamily, volumes in 2013 are expected toreach record levels.Buyer characteristics & what investors look forAs of the close of the first quarter, sales volumes over the last 12 monthsneared $100 billion, which is a record level. Domestic and internationalbuyers have been flocking to core assets, often with expectationsof a minimal yield in exchange for the safety of a quality asset in aprime location. The highly competitive acquisition landscape, coupledwith the downward pressure on treasuries, continues to support capTransaction volumes by market for 2012 relative to 2011:Gateway markets finished strong, as well as secondary markets with rising appeal,particularly Austin and San Jose; strength continues through Q1 2013$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000$10,000ManhattanDCLosAngelesDallasAtlantaHoustonSeattlePhoenixAustinSouthFlorida*ChicagoBostonSanJoseSanFranciscoSanDiegoTransactionvolume($inmillions)2011 2012 Q1 2013*$16B apartment portfolio deal closed February 2013 is reflected primarily across Los Angeles, DC andManhattan gateway markets Source: Jones Lang LaSalle Research, Real Capital Analytics *Q1 2013 data as of early April 2013
8 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 years and were reported to have been as, or more, competitive thanagencies when financing the higher quality or lower leverage deals.During the first quarter of 2013, the looming uncertainty over theGSE’s future was put into light. Agency lending for multifamily assetshit a historical high in the fourth quarter of 2012 which likely propelledCongress to take action. In an initial effort to reduce the size of theagencies, and have the private sector play a larger role in bearing creditrisk, an annual lending cap of 90.0 percent of 2012’s multifamily loanvolumes was put into place moving forward. While an impact is likely, a10.0 percent cap on 2012’s high GSE origination volumes will not likelyderail the expectations that 2013 will be a historically strong year formultifamily investment.Peaking market Falling marketRising market Bottoming marketCharlotte, Dallas, Houston, Los Angeles,Nashville, Richmond, San DiegoBoston, New York, San FranciscoBaltimore, Chicago, Northern New Jersey, PhiladelphiaAtlanta, Inland Empire, Orange County, PhoenixSouth Florida,Austin, San Jose, Seattle, United StatesLas Vegas, Orlando,Raleigh-Durham, Tampa BayJacksonville, MemphisWashington, DCUnited States Multifamily ClockHousing and tourism driving growth in “rebounder” and other metros
Need full page imageOfficeReal Estate SectorWhile tech and energy markets still comprised the vast majority ofoccupancy growth, the diversity of the recovery have begun to changeever-so-slightly with most markets now participating in growth. In thefirst quarter of 2013, 70.0 percent of markets posted occupancy growthwith numerous tenant industries from retail in St. Louis to finance inOrange County to insurance in Chicago to consulting in Sacramentodemonstrating tenant growth. That diversity is also present in futuregrowth expectations as tenant requirements increased from Bostonto Stamford down to Miami and across to Minneapolis, Dallas andPortland, signaling tenants posturing on future economic conditionsshifting from a neutral or pessimistic view to one that is more optimistic.Despite the diversity we have recently witnessed in tour activity, leasingvolume and expansion, tech and energy continue to dominate the storyof growth. In the first quarter of 2013, Seattle handily led absorptiongains with 1.6 million square feet of absorption driven by firms likeGoogle, Intel, Cisco and Visa, among others. Meanwhile, NorthernCalifornia, the epicenter of tech, saw net absorption of more than 1.5million square feet. However, even in that region, we even saw diversity.Two of the sleepier Northern California market in recent years, the EastBay and Sacramento, came to life with headquarter relocations andhealthcare expansions driving growth in those market segments. On theenergy side, Houston continued to be king, driving significant economic,employment and thus office occupancy gains. In Houston, the regionhas created 118,200 new jobs, a 4.5 percent annual increase, in theOffice outlookThe office sector kicked off 2013 in a much different way than a yearago. The anemic performance of the first quarter 12 months agoprovided a preview of how 2012 ended up: tenant indecision, depressedleasing volumes, growth concentrated in just a few markets and, largely,in quality space and an overall performance that took several steps backfrom 2011. However, the first quarter performance of 2013 provided aview of a transitioning market that appears to be on far-sturdier groundthan we saw 12 months ago. Tenants came back into the market in ameaningful way with respect to touring spaces and completing deals,sublease space declined dramatically in the first quarter, occupancygrowth outnumbered gains from 12 months ago by more than fivefoldand we saw growth in geographies and product types that have beendormant for several years. Additionally, rents, which were declining inclose to 40.0 percent of markets at this point last year, are increasingslowly, but consistently, across more than 80.0 percent of markets JLLtracks, while concessions are firmly headed in the downward direction.Even construction, while focused in a handful of markets on the Eastand West coasts, is jumping up from near-historic lows.All of these factors provide concrete evidence that the market istransitioning from a more neutral position in recent quarters to what willlikely be a landlord-favorable environment across most submarkets andproduct types at this time next year.Market performance driversTop 3 leasing market driversDriver CommentsTenant growth requirementsTenants across multiple industrieshave grown more optimistic on futureeconomic conditions.TechnologyTechnology firms have been leadersin absorption gains within theoffice sector.EnergyEmployment sector of energy hasboosted growth in primary and second-ary markets. Expect sustainable trendsin 2013 and beyond.Top 3 investment market driversDriver CommentsAttractive financing optionsCoupled with diversifying demandand tradable product to meet investorappetite for risk across traditional andnontraditional markets.Energy legislationEnergy legislation should drive futuremomentum, and bodes well for furtherinvestment opportunities in many topmarkets.Healthcare expansionHealthcare expansions to drive growthin some “sleepier” markets.
10 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Buyer characteristics & what investors look forFor the last 24 months, investors have increasingly targeted marketsegments and assets that have benefited from the recovery the most.On the geographic side, demand has largely been limited to tech andenergy markets and the coastal gateway cities. On the quality side,investors have mainly been focused in Trophy and A-Class productwithin urbanized cores and, when looking at the scope of risk, the vastmajority of trades demonstrate investors’ minimal appetite for vacancyor leasing risk. However, we believe the scope of where investors willlook will gradually begin to change as we tread throughout 2013 and into2014 and we see greater leasing momentum across markets.As the number of top-quality deals remains limited and yields in corelocations / markets continue to compress to near-historic lows from SanFrancisco to Seattle to Houston and even to more challenged demandmarkets like New York and Washington, DC, a subset of institutionalinvestors will look to the next tier of markets from Denver to Minneapolisto Portland and Raleigh as solid leasing demand markets that offerhigher yields. This transition could also begin to realize itself acrossquality to Class B assets as leasing demand is finally picking up,evident with Class B net absorption accounting for the majority ofabsorption in the first quarter of 2013- the first time we have seen this inthe current recovery. Flow of capitalWhether investors choose to transact in a primary or secondary market,safety and stability remain favored in highly occupied properties and willlikely do so for the foreseeable future. This is evidenced by the risingaverage 93.0 percent occupancy rate for better-quality office assets thattransacted during the first quarter, which came in significantly above thatfor the overall national office market.Core product in urbanized areas will continue to attract the largestbuying audience especially from foreign capital sources, domesticinstitutions and insurance funds, which have increased their equityallocation into office of late. While more REITs and local playershave begun to further explore core-plus and value-add plays, thoseopportunities and exploration of them remain fewer and far betweenbased on the lagging leasing fundamentals in that type of product. Webelieve supply and demand fundamentals will gradually tighten for core-plus and value-add plays as we head into 2014, and thus more investorscould re-direct some of their buying power to that asset class furtherover the next 12 to 15 months.12 months ending January 2013, a rate that is nearly quadruple that ofthe rest of the country. That job growth drove additional office occupancylevels farther up once again. Houston absorbed more than 1.2 millionsquare feet of additional space in the first quarter. Even while drilling hasslowed and employment growth levels have declined, many companiescontinue their onward growth strategy due to the long-term potentialof the energy sector here in the U.S. and the growing likelihood thatWashington passes energy legislation this year and next that providesthe industry with additional momentum, exploration and investmentopportunities. That future legislation should also benefit Denver andPittsburgh, two areas that have benefitted from higher levels of drillingand the expansion of traditional energy sources of natural gas and oil.Office transaction volumesSo far in 2013, investment volume has picked up as well and begun todiversify across more markets like we have seen on the leasing side.Diversifying demand, coupled with attractive financing options andtradable product that met investor appetite for risk, helped the officemarket pull off its best first quarter performance since prior to the 2008financial crisis. Estimated sales volume for office transactions nationallycame in close to $18 billion during the first quarter, representing a17.0 percent increase over the same period in 2012. Over the pastfive quarters, San Francisco, Seattle, Austin and Houston led activity,while traditional favored markets like New York and Washington, DCsaw a slight pullback in investment activity levels as sellers retreated tothe sidelines due to slower leasing levels in 2012. That trend changedslightly across the first three months of 2013 as Manhattan saw a biguptick in activity in early 2013, along with Houston and Silicon Valley andeven slower-moving geographies that have gained ground of late likeAtlanta and Los Angeles.Most primary markets set solid pace thru 2012 relative to 2011; Manhattan and D.C.take most notable pause, while Austin and Seattle aggressively forge ahead; strengthcontinues thru Q1 2013$0$2,000$4,000$6,000$8,000$10,000$12,000$14,000$16,000$18,000ManhattanSanFranciscoDCLosAngelesSeattleHoustonChicagoBostonDallasSanJoseDenverAtlantaAustinSanDiegoMinneapolisTransactionvolume($inmillions)2011 2012 Q1 2013*Source: Jones Lang LaSalle Research, Real Capital Analytics *Q1 2013 data as of early April 2013
11 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 United States Office ClockTechnology and energy driving fundamentals in top markets; expect Southeast and Southwestmarkets to gain momentumPeaking Market Falling MarketRising Market Bottoming MarketAustin, San Francisco PeninsulaMiamiCharlotte, Chicago, Cincinnati,Cleveland, Columbus, FairfieldCounty, Hampton Roads,Raleigh-Durham, Sacramento,San DiegoOakland-East Bay, San AntonioBaltimore, Detroit, Milwaukee,New Jersey, Phoenix, St. LouisIndianapolis, New York,RichmondJacksonville, Tampa,Westchester CountyAtlanta, Los Angeles,Minneapolis, Orange County,Philadelphia, Portland,United StatesWest Palm BeachHouston, San Francisco, SeattleWashington, DCSilicon ValleyDallasBoston, Denver, PittsburghOrlandoFort Lauderdale
12 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 United States CBD office clockPeaking phase Falling phaseRising phase Bottoming phaseChicago, Cincinnati, Cleveland,Columbus, Dallas, Los Angeles,San Antonio, White Plains CBDSan Francisco, SeattleCharlotte, Detroit, Jacksonville,Oakland CBD, Raleigh-Durham,TampaRaleigh-Durham, Sacramento,San DiegoBaltimore, Fort Lauderdale,OrlandoStamford CBD, United StatesGreenwich CBD, Indianapolis,Philadelphia, Portland, San JosePhoenix, St. LouisMinneapolis, RichmondDenver, MiamiDowntown (NYC), Milwaukee,Washington, DCAustinWest Palm BeachAtlanta, Midtown (NYC)Midtown South (NYC), PittsburghHoustonBostonUnited States Suburban office clockPeaking phase Falling phaseRising phase Bottoming phaseDallasDetroit, Miami, New Jersey,PhoenixAtlanta, Charlotte, Chicago, Cincinnati,Cleveland, Columbus, Lehigh Valley,Hampton Roads (Southside), Philadelphia,Portland (Eastside, Vancouver), San DiegoBaltimore, Portland (Westside) Fairfield County, Hampton Roads(Peninsula), Milwaukee, NorthernDelaware, Raleigh-Durham, Sacramento,St. Louis, Tampa, Westchester CountyDenver, IndianapolisJacksonville, Northern Virginia,Southern New Jersey, Suburban MDOakland Suburbs, San Antonio,United StatesBoston, East Bay Suburbs,Los Angeles, Orange CountyFort Lauderdale, West Palm BeachHouston, San Francisco, SeattleAustinSan Francisco PeninsulaSilicon ValleyOrlandoRichmondCambridgePittsburghPeaking phase Falling phaseRising phase Bottoming phaseChicago, Cincinnati, Cleveland,Columbus, Dallas, Los Angeles,San Antonio, White Plains CBDSan Francisco, SeattleCharlotte, Detroit, Jacksonville,Oakland CBD, Raleigh-Durham,TampaRaleigh-Durham, Sacramento,San DiegoBaltimore, Fort Lauderdale,OrlandoStamford CBD, United StatesGreenwich CBD, Indianapolis,Philadelphia, Portland, San JosePhoenix, St. LouisMinneapolis, RichmondDenver, MiamiDowntown (NYC), Milwaukee,Washington, DCAustinWest Palm BeachAtlanta, Midtown (NYC)Midtown South (NYC), PittsburghHoustonBostonPeaking phase Falling phaseRising phase Bottoming phaseChicago, Cincinnati, Cleveland,Columbus, Dallas, Los Angeles,San Antonio, White Plains CBDSan Francisco, SeattleCharlotte, Detroit, Jacksonville,Oakland CBD, Raleigh-Durham,TampaRaleigh-Durham, Sacramento,San DiegoBaltimore, Fort Lauderdale,OrlandoStamford CBD, United StatesGreenwich CBD, Indianapolis,Philadelphia, Portland, San JosePhoenix, St. LouisMinneapolis, RichmondDenver, MiamiDowntown (NYC), Milwaukee,Washington, DCAustinWest Palm BeachAtlanta, Midtown (NYC)Midtown South (NYC), PittsburghHoustonBostonPeaking phase Falling phaseRising phase Bottoming phaseChicago, Cincinnati, Cleveland,Columbus, Dallas, Los Angeles,San Antonio, White Plains CBDSan Francisco, SeattleCharlotte, Detroit, Jacksonville,Oakland CBD, Raleigh-Durham,TampaRaleigh-Durham, Sacramento,San DiegoBaltimore, Fort Lauderdale,OrlandoStamford CBD, United StatesGreenwich CBD, Indianapolis,Philadelphia, Portland, San JosePhoenix, St. LouisMinneapolis, RichmondDenver, MiamiDowntown (NYC), Milwaukee,Washington, DCAustinWest Palm BeachAtlanta, Midtown (NYC)Midtown South (NYC), PittsburghHoustonBostonPeaking phase Falling phaseRising phase Bottoming phaseChicago, Cincinnati, Cleveland,Columbus, Dallas, Los Angeles,San Antonio, White Plains CBDSan Francisco, SeattleCharlotte, Detroit, Jacksonville,Oakland CBD, Raleigh-Durham,TampaRaleigh-Durham, Sacramento,San DiegoBaltimore, Fort Lauderdale,OrlandoStamford CBD, United StatesGreenwich CBD, Indianapolis,Philadelphia, Portland, San JosePhoenix, St. LouisMinneapolis, RichmondDenver, MiamiDowntown (NYC), Milwaukee,Washington, DCAustinWest Palm BeachAtlanta, Midtown (NYC)Midtown South (NYC), PittsburghHoustonBostonPeaking phase Falling phaseRising phase Bottoming phaseChicago, Cincinnati, Cleveland,Columbus, Dallas, Los Angeles,San Antonio, White Plains CBDSan Francisco, SeattleCharlotte, Detroit, Jacksonville,Oakland CBD, Raleigh-Durham,TampaRaleigh-Durham, Sacramento,San DiegoBaltimore, Fort Lauderdale,OrlandoStamford CBD, United StatesGreenwich CBD, Indianapolis,Philadelphia, Portland, San JosePhoenix, St. LouisMinneapolis, RichmondDenver, MiamiDowntown (NYC), Milwaukee,Washington, DCAustinWest Palm BeachAtlanta, Midtown (NYC)Midtown South (NYC), PittsburghHoustonBostonPeaking phase Falling phaseRising phase Bottoming phaseChicago, Cincinnati, Cleveland,Columbus, Dallas, Los Angeles,San Antonio, White Plains CBDSan Francisco, SeattleCharlotte, Detroit, Jacksonville,Oakland CBD, Raleigh-Durham,TampaRaleigh-Durham, Sacramento,San DiegoBaltimore, Fort Lauderdale,OrlandoStamford CBD, United StatesGreenwich CBD, Indianapolis,Philadelphia, Portland, San JosePhoenix, St. LouisMinneapolis, RichmondDenver, MiamiDowntown (NYC), Milwaukee,Washington, DCAustinWest Palm BeachAtlanta, Midtown (NYC)Midtown South (NYC), PittsburghHoustonBostonPeaking phase Falling phaseRising phase Bottoming phaseChicago, Cincinnati, Cleveland,Columbus, Dallas, Los Angeles,San Antonio, White Plains CBDSan Francisco, SeattleCharlotte, Detroit, Jacksonville,Oakland CBD, Raleigh-Durham,TampaRaleigh-Durham, Sacramento,San DiegoBaltimore, Fort Lauderdale,OrlandoStamford CBD, United StatesGreenwich CBD, Indianapolis,Philadelphia, Portland, San JosePhoenix, St. LouisMinneapolis, RichmondDenver, MiamiDowntown (NYC), Milwaukee,Washington, DCAustinWest Palm BeachAtlanta, Midtown (NYC)Midtown South (NYC), PittsburghHoustonBoston
IndustrialReal Estate SectorMarket performance driversIndustrial outlookThe U.S. industrial market has maintained its positive momentum atthe start of 2013. The market absorbed about 30 million square feet ofspace, enough to bring the vacancy rate down by another 20basis points.We have continued to watch as demand for modern, functionallysuperior space has outpaced all other properties within the industrialmarket. For the past several years, the vacancy rate for newerproperties (built in or after 2005) has significantly exceeded that of olderproperties thanks to large amounts of space delivered during the depthsof the recession. As this space has been leased up over the last twoyears, vacancy in the newer properties has almost reached parity withthat of the older set. As a result, the premium in asking rents for newerproperties has widened significantly.We see many opportunities for users to sign the most favorable deals inClass B space at the same time we see demand beginning to grow forthat portion of the market. In a review of tenants in the market activelysearching for space, we have found roughly the same overall level ofdemand as this time last year, but that demand is spread among moreusers. Total aggregate demand volumes remain consistent, but are nowspread out between more requirements. This broadening of demand isreflective of more mid-sized tenants coming back into the market andimproving local warehouse demand (versus regional and national), aswell as a housing market that is back on track even in some of the mostbattered metros.Overall, we see a market that is moving closer to its prerecession normswith development activity and rental rates rising slowly but steadily in allbut a handful of the hottest or coolest metro markets.Top 3 leasing market driversDriver CommentsShifting buying preferencesWith consumers demanding next day(or faster) delivery for goods purchasedonline, firms are responding by movingdistribution centers closer to populationcenters.Retail salesRetail sales have been growing byabout 3.0 percent year-over-year. Most(if not all) of these goods will movethrough industrial real estate.Trade flowsContainerized imports through U.S.ports continue to grow, creating moredemand for industrial space, especiallyin markets like the Inland Empire.Top 3 investment market driversDriver CommentsBuilding functionalityUser needs for spaces continueto change rapidly with more spacerequired for trailer and employee park-ing and higher clear heights becomingmandatory. This affects investors’ abilityto relet the building down the road.Tight construction financingMost developers are opting for build-to-suit projects as construction financingfor speculative projects is scarce, evenin hot markets like Dallas and Houston.California biasWith its much higher than averageland values, California hascontinued to dominate the industrialinvestment market.
14 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Quarter after quarter, Los Angeles and the Inland Empire continue to bethe top destination for industrial investment dollars and the first quarterwas no exception with $427 million flowing into Los Angeles and $569million going to the more distribution heavy Inland Empire. SouthernCalifornia in general has the lowest cap rates in the country with Class Aproperties now trading between a 4.8 and 5.8 percent band. Other topvolume markets include the major logistics hubs of Dallas, Chicago, NewJersey, Atlanta and Philadelphia. These markets always attract investorattention due to their critical mass of investment grade distribution stock.Beyond the major logistics markets which should always be on investors’radars, Miami, Houston, Indianapolis and Phoenix are markets that areworth watching. Miami has been one of the strongest performing leasingand investment markets in the country thanks to its deep trade ties tofast growing South and Central American markets. Miami InternationalAirport and the Port of Miami are both potent demand drivers for thesurrounding industrial market. Houston is as hot as can be thanks tobooming shale oil production (and looks to remain so for quite sometime). And Phoenix and Indianapolis are both gaining in strength asdistribution markets siphoning demand from the higher priced and morecongested Los Angeles/Inland Empire and Chicago, respectively.Industrial transaction volumesPreliminary first quarter results show $3.7 billion worth of warehouseand manufacturing product changing hands to start the year. The 278properties sold total 63 million square feet trading at an average price of$57 per square foot (7.4 percent cap rate). The total volume is about 5percent higher than the first quarter of 2012 and is the best first quarterfor industrial sales since the Great Recession. Investors continue todiscover industrial as a sector worth exploring as cap rates are higherand bidding less competitive than other sectors such as office or retail.Most primary markets set solid pace thru 2012 relative to 2011; Los Angeles and Chicagotake most notable pause, while Sacramento and Miami aggressively forge ahead; strengthcontinues thru Q1 2013$0$500$1,000$1,500$2,000$2,500$3,000$3,500$4,000LosAngelesDallas/ForthWorthChicagoAtlantaInlandEmpireNorthernNewJerseyPhoenixSeattleHoustonMiamiSacramentoMemphisColumbusPhiladelphiaSt.LouisTransactionvolume($inmillions)2011 2012 Q1 2013*Source: Jones Lang LaSalle Research, Real Capital Analytics *Q1 2013 data as of early April 2013Peaking market Falling marketRising market BottomingmarketGreensboro / Winston-Salem, San Diego, Detroit, Broward County / Fort Lauderdale,Los Angeles, Milwaukee, Northern New Jersey, Pittsburgh, OrlandoLas Vegas,Reno,JacksonvilleBaltimore, Cincinnati, Cleveland, Hampton Roads, Oakland / East Bay,Atlanta, Austin, Central New Jersey, Central Valley (California), Charlotte,Kansas City, Denver, Nashville, Palm Beach, San Antonio, Tampa Bay,United StatesWashington DC, Sacramento, Phoenix, Columbus, Houston,Silicon Valley / South Bay, Boston, Memphis, St. Louis, PortlandInland Empire, MiamiOrange County (California), Dallas / Fort Worth, Chicago,Seattle, Indianapolis, Minneapolis / St. Paul, RichmondPhiladelphiaUnited States Industrial ClockWith limited exceptions, most markets hold steady
RetailReal Estate SectorRetail transaction volumesA new core of top performing markets has developed; namely,Manhattan, Boston, Washington, DC, Chicago, San Francisco, LosAngeles and Miami. Two main conditions define most of the markets towatch: either an energy sector boom or a housing recovery. Markets towatch include: Dallas, Houston, Broward, Tampa, Orlando, Charlotte,Raleigh, Minneapolis and Seattle.Buyer characteristics & what investors look forThere are two separate pools of buyers: Those going after healthyassets and those going after distressed properties. Private investorsand REITs were the most active buyers in 2012, accounting for 68.7percent of transaction volume. Institutional buyers are back in themarket for 2013, particularly for grocery-anchored strips and assets inthe major metro areas. Grocery-anchored strip centers, which typicallyperform well thanks to a strong anchor tenant, are one of the top assetsthat many buyers prefer. Outside of this asset, where competition isstiff, trophy malls remain the darling of investment markets. A thirdpreference is the single-tenant retail asset, such as a major drug storeor bank.Flow of capital or fundsThe abundance of capital continues to keep transaction activity in theretail sector alive and well, with REITs, institutional and private equityRetail outlookInvestment sales have steadily improved in the last 12 months andwill continue to advance in 2013. There is more product on the marketthan there has been in years, despite the fact that abundant capital hascreated a substantial surfeit of buyers over sellers. We believe now is agood time to invest in the retail market given the greater availability ofproduct, the preponderance of capital and low interest rates.Market performance driversTop 3 leasing market driversDriver CommentsPopulation growth andhousing reboundIn select markets (mainly along the SunBelt), population growth projections andrenewed and robust demand for hous-ing will boost demand for retail space.Cross-channel focusAs the line between e-commerce andin-store shopping continues to blur,retailers and shopping center ownerswill need to look at logistics to optimizeconsumer traffic and revenue.Emphasis on redevelopmentRetail construction will remain low forthe next few years as landlords focuson backfilling vacant space. Efficientand creative redevelopment to meetthe evolving needs of consumers willbe critical.Top 3 investment market driversDriver CommentsLack of productEven as investment activity continuesto ramp up, there is still a distinct lackof available product in the market.Abundant capitalA surplus of capital in the market haspushed transaction volume up consid-erably and should continue to do so, aslong as interest rates remain attractive.Low interest ratesLow interest rates have enabled moreinvestors to attain capital, thus fundingincreased acquisitions.Most primary markets set solid pace thru 2012 relative to 2011; outside of non-traditionalmarkets, Broward most aggressively forges ahead; expect continuance in 2013$0$500$1,000$1,500$2,000$2,500$3,000$3,500$4,000$4,500$5,000ManhattanChicagoLosAngelesDallasDCSanDiegoMiamiBostonHoustonBrowardSanFranciscoAtlantaTampaOrlandoPalmBeachTransactionvolume($inmillions)2011 2012 Q1 2013*Source: Jones Lang LaSalle Research, Real Capital Analytics *Q1 2013 data as of early April 2013
16 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 buyers, as well as CMBS lenders quite active within the retail market sofar this year. Over the past six months, private owners and public REITshave together accounted for the majority of transaction volume. Overthat same period, foreign investors, particularly out of Canada, have alsobeen active funders of retail assets. We expect these buying patterns tocontinue in 2013 and beyond.Miami, New York City, HoustonDallas, Fort LauderdaleSan FranciscoPeaking market Falling marketRising market Bottoming marketChicago, Los Angeles, Washington DCBoston, San Diego, Palm Beach, Tampa, LosAngeles, Orange County, SeattleAtlanta, OrlandoUnited States Retail ClockEnergy sector boom or housing recovery define most of the markets to watch
HotelReal Estate SectorMarket performance driversHotel transaction volumesThe bulk of transactions continues to be concentrated in the nation’slarge urban lodging markets. The most active deal market is Manhattan,with hotel trades topping $7 billion since 2011. San Diego, SanFrancisco and Washington, DC rank next in terms of overall liquiditysince 2011.Hotel outlookHotel transaction volumes in the U.S. totaled $15.9 billion in 2011 andmarked an uptick to $16.4 billion in 2012. The year 2013 is expected tosee volumes totaling $17 billion. The activity thus far in 2013 is pacingin line with forecasts, and deal flow is expected to gather pace as theyear progresses.Opportunities for investors currently include prime urban assets whichcan be acquired for less than the cost to build, along with portfolios oflimited service assets which allow buyers to gain critical mass. Anotheropportunity, particularly sought after by off-shore buyers, is the purchaseof hotel assets unencumbered by a brand, which the buyers can convertto their brand as a vehicle to enter the market.Risks that could curtail deal flow include the relatively constrainednumber of hotels on the market available for sale and any economicrisks, which would make it more difficult for investors to underwrite futuregrowth. But lodging fundamentals continue to show strong year-over-year increases.Revenue per available room (RevPAR) marked nearly 7 percent growthin 2012, followed by 6.5 percent growth year-to-date in 2013, indicativeof the rise in demand levels and average daily rates. A number of hotelmarkets such as San Francisco, Houston and New Orleans are on amultiyear run of double-digit RevPAR increases.The hotel supply pipeline is showing some signs of increasing, but thepace of new hotel openings will remain well below the long-term averageover the next several years. The number of available rooms is expectedto rise by a tepid 0.9 percent in 2013 and 2014, respectively.In most markets, it is still more expensive to build new hotels thanbuy existing properties, but certain urban areas such as New York,Washington, DC and Chicago now have a considerable amount of hotelrooms under construction, marking a shift from the downturn when thepipeline slowed dramatically.Most primary markets set solid pace thru 2012 relative to 2011; Manhattan remains mostactive, while Houston and Miami remain strong markets to watch in 2013$0$500$1,000$1,500$2,000$2,500$3,000$3,500$4,000ManhattanLosAngelesCountyWashington,DCSeattleChicagoHoustonDallasSanFranciscoBostonMiami/MiamiBeachAtlantaPhoenixDenverSanDiegoAustinTransactionvolume($inmillions)2011 2012 Q1 2013Source: Jones Lang LaSalle Research, Real Capital Analytics *Q1 2013 data as of early April 2013Transactions $5+ million, excludes casino salesTop 3 investment market driversDriver CommentsRecovering hotel fundamentalsStrong hotel operating fundamentals,with consistent RevPAR growth,continue to motivate domestic and off-shore hotel acquirers.Abundance of debt and equity capitalAmount of capital flowing into thesector has a significant impact on mo-mentum in the hotel transaction market.Number of active lenders seeking hotelproduct continues to increase due tohigher yields.Acquisitions versus developmentConstruction costs for upscale hotelsare exceedingly high, which limitsfeasibility of a number of new projects.
18 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 domestic investors, with off-shore investments typically accounting for 5percent of total volume. In the first quarter of 2013, however, off-shoreinvestment as a proportion of total deal volume increased to 40 percent,driven by buyers of high-value assets from Singapore and the UnitedArab Emirates.In terms of debt capital markets, hotel financing is continuing its strongrun. Barring any major setbacks in the economy, hotel lending willcontinue to strengthen increasingly during 2013. Hotels with strongsponsorship and solid performance are well positioned to obtaincompetitive financing. The number of active lenders seeking hotelproduct has increased dramatically due to higher yields.The resurgence in hotel lending is driven by securitized market: Thevolume of securitized lending increased 70 percent in 2012 and 2013 ispoised to continue seeing growth. Overall, CMBS lenders have doubledtheir allocations to hospitality product.Insurance companies, domestic and foreign banks and debt funds areramping up their hotel lending programs as well. Interest rates andindices are expected to remain low, resulting in an environment wherelenders are able to obtain outsized spreads and still offer compellingrates. As hotel operating performance continues to stabilize, anincreasing number of assets will be eligible for financing, which willunderpin transactional activity in the sector.During 2012, Chicago advanced notably in terms of total volume,reaching third position. The most active markets for transactions in Q12013 are Manhattan, Phoenix/Scottsdale and Atlanta, with the latter tworecording several large singular trades.According to Jones Lang LaSalle’s Hotel Investor Sentiment Survey,targeted cap rates are currently in line with the levels recorded in late2006, averaging 7.7 percent in the country. Transactions of prime urbanassets are averaging as low as 5 to 6 percent.In terms of deal flow in the remainder of 2013, markets to watch that arelikely to see considerable transaction volumes include Manhattan, LosAngeles, Houston, Dallas and Miami.Buyer characteristics and what investors look forThe most active buyers in the U.S. in 2012 were private equity fundsand real estate investment trusts (REITs). Private equity funds acquiredhotel assets to the tune of $7.6 billion, or 46 percent of total volume inthe country. REITs ranked next, with purchases of $4.2 billion, whichrepresented 26 percent of all acquisitions. A similar representation isexpected for 2013.Private equity investors have a nationwide focus, and target bothsingle-asset acquisitions and large portfolios. Private equity groups’trend of acquiring portfolios of limited service hotels intensified in 2012with Blackstone’s buy of Motel 6 hotels for $1.9 billion and CenterbridgePartners, L.P.’s purchase of the Homestead Studio Suites.Private equity investors are expected to continue to target sizeableportfolios of limited service hotel real estate and are also biddingon acquisition opportunities where they can acquire the brand andmanagement company.REITs’ buyer share declined in 2012 compared to their multiyear highin 2011 due to lower share prices. Nonetheless, hotel REITs were thesecond most active buyer group during the year, and continued theirfocus on top-15 urban and prime suburban markets. REITs have apreference for prime single-assets and small portfolios (4-5 hotels) ofupper-tier assets. The investment sweet spot for REITs is branded,institutional quality assets with in-place cash flow.Flow of capitalThe amount of capital flowing to the hotel real estate sector marked asignificant spike during the fourth quarter of 2012 and is maintaininga robust pace. The bulk of hotel investment continues to be funded by
19 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 United States Hotel ClockRevPAR growth remains positive across the board, with lodging fundamentals still showingstrong increases in most marketsRevPARgrowthslowingRevPARfallingRevPARrisingRevPARdeclineslowingChicagoWashington, D.C.Los AngelesNew YorkSan FranciscoMiami
20 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013
21 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Appendix
22 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 U.S. Class A multifamily cap ratesCap rates compressing to historic lows; mostly all at sub 6% levelU.S. Suburban office core product cap ratesCap rates an average 50-100 basis points higher than CBD core productU.S. retail average cap ratesCap rates still elevated in some marketsU.S. CBD office core product cap ratesCap rates the lowest in gateway markets; near historic lows on averageU.S. Class A industrial cap ratesCap rates continue to push lower; sub 6% in most coastal marketsU.S. full-service average hotel cap ratesCap rates compressing to lows not seen since 2006NJCTMANHNCVAWAVTALAZARCACOFLGAIDIL INIAKSKYLAMEMIMNMSMOMTNENVNMNYNDOHOKORPASCSDTNTXUTWVWIWYMDDERISouth Florida4.0 – 5.0%Houston4.5 - 5.75%Dallas-Fort Worth4.5 – 6.0%Charlotte4.75 – 5.5%Atlanta4.25 – 5.25%Washington, DC4.0 – 5.5%New York3.5 – 4.5%Philly5.0 – 6.0%Pittsburgh5.75 – 6.5%Columbus6.0 – 7.0%Chicago4.25 – 5.0%Minneapolis5.0 – 6.0%San Diego3.75 – 4.5%Southern California3.75 – 4.25%Northern California4.25 – 4.5%Seattle-Bellevue3.80 – 4.5%Denver5.0 – 6.0%Boston3.8 – 5.5%Phoenix4.25 – 5.25%Portland5.0 – 6.0%Cincinnati5.75 - 6.5%Central Florida4.75 – 5.5%New Jersey4.5 – 5.5%Las Vegas5.25 – 6.0%Sub 6% cap ratesare highlightedNJCTMANHNCVAWAVTALAZARCACOFLGAIDIL INIAKSKYLAMEMIMNMSMOMTNENVNMNYNDOHOKORPASCSDTNTXUTWVWIWYMDDERIHouston6.50 – 7.25%Washington, DC5.00 – 6.00%New Jersey7.0 - 7.5%Chicago6.0 – 7.5%Los Angeles6.0 – 7.25%Seattle5.40 – 5.75%Boston7.0 – 8.0%Dallas6.0 – 7.5%Silicon Valley5.75 – 6.00%Atlanta7.50 – 8.25%Miami7.0 – 8.0%Denver7.00 – 8.00%San Diego6.0 – 7.0%Philadelphia7.50 – 8.50%Sub 6% cap ratesare highlightedNJCTMANHNCVAWAVTALAZARCACOFLGAIDIL INIAKSKYLAMEMIMNMSMOMTNENVNMNYNDOHOKORPASCSDTNTXUTWVWIWYMDDERISouth Florida8.3%Houston7.0%Dallas-Fort Worth6.0%Charlotte8.0%Atlanta7.9%Washington, DC6.9%New York6.3%Philly7.5%Pittsburgh7.5%Chicago6.8%Minneapolis6.8%San Diego6.8%Denver6.6%Boston6.4%Phoenix7.6%Portland6.9%New Jersey6.9%Las Vegas9.1%NJCTMANHNCVAWAVTALAZARCACOFLGAIDIL INIAKSKYLAMEMIMNMSMOMTNENVNMNYNDOHOKORPASCSDTNTXUTWVWIWYMDDERIHouston6.00 – 6.50%Washington, DC4.25 – 5.0%New York4.00 – 5.00%Chicago5.75 – 6.25%Los Angeles5.25 – 5.75%Seattle4.50 – 5.50%Boston4.75 – 5.25%San Francisco4.00 – 5.00%Dallas6.00 – 7.00%Atlanta6.25 – 7.25%Miami5.50 – 6.50%Denver6.00 – 7.00%San Diego6.00 – 7.00%Philadelphia7.00 – 7.50%Sub 6% cap ratesare highlightedNJCTMANHNCVAWAVTALAZARCACOFLGAIDIL INIAKSKYLAMEMIMNMSMOMTNENVNMNYNDOHOKORPASCSDTNTXUTWVWIWYMDDERISouth Florida5.00 - 6.00%Houston5.75 - 6.50%Dallas6.00 - 6.50%Charlotte6.75 - 7.50%Atlanta6.00 - 7.00%Baltimore/DC5.75 - 6.50%New Jersey5.25 - 6.25%Eastern PA6.00 - 6.75%Harrisburg6.00 - 7.00%Columbus7.25 - 8.00%Chicago5.75 - 6.50%Minneapolis6.50 - 7.50%San Diego6.25 - 7.00%Southern California4.75 - 5.75%Northern California5.25 - 6.00%Seattle5.00 - 6.00%Denver6.75 - 7.25% Kansas City7.00 - 7.75%Louisville7.00 - 7.75%Boston6.75 - 7.75%Memphis7.00 - 8.00%Nashville7.00 - 7.75%Phoenix6.50 - 7.00%Portland7.00 - 7.50%Indianapolis6.75 - 7.25% Cincinnati7.00 - 7.75%Salt Lake City6.75 - 7.50%Sub 6% cap ratesare highlightedSt. Louis7.25 - 8.00%NJCTMANHNCVAWAVTALAZARCACOFLGAIDIL INIAKSKYLAMEMIMNMSMOMTNENVNMNYNDOHOKORPASCSDTNTXUTWVWIWYMDDERIMiami7.2%Houston7.9%Dallas8.2%Atlanta8.5%Washington, DC7.1%New York6.4%Philadelphia7.7%Chicago7.6%San Diego7.5%Los Angeles7.1%San Francisco6.5%Seattle7.4%Denver8.0%Boston7.0%Phoenix8.4%Orlando8.6%National Class A cap rate mapsSource: Jones Lang LaSalle ResearchSource: Jones Lang LaSalle ResearchSource: Jones Lang LaSalle ResearchSource: Jones Lang LaSalle ResearchSource: Jones Lang LaSalle ResearchSource: Jones Lang LaSalle’s Hotel Investor Sentiment Survey
28 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Sentiment gauge MultifamilyMarket Demand Rents Sales volume Construction deliveriesAtlanta Up Up Down UpAustin Up Up Down DownBaltimore Down Up Down DownBoston Down Down Neutral DownCharlotte Up Up Up UpChicago Up Up Down DownDallas - Fort Worth Up Up Up DownHouston Up Up Down UpInland Empire Up Up Down UpJacksonville Up Up Up UpLas Vegas Up Up Down NeutralLos Angeles Up Up Down UpMemphis Up Up Up DownNashville Up Up Up DownNew York Up Up Down UpNorthern New Jersey Up Up Up NeutralOrange County Up Up Up UpOrlando Up Up Down DownPhiladelphia Up Up Down DownPhoenix Up Up Up UpPortland Up Up Down UpRaleigh Up Up Down UpRichmond Up Down Up UpSan Diego Up Up Up DownSan Francisco Up Up Up UpSan Jose Up Up Up UpSeattle Down Up Down UpSouth Florida Up Up Down UpTampa Up Up Down DownWashington - NoVA - MD Up Up Up UpUnited States totals (number of markets)Down (Q-O-Q) 3 2 15 11Neutral (Q-O-Q) 0 28 1 2Up (Q-O-Q) 27 0 13 17Total (Q-O-Q) 30 30 30 30United States totals (% of markets)Down (Q-O-Q) 10.0% 6.7% 53.3% 36.7%Neutral (Q-O-Q) 0.0% 93.3% 3.3% 6.7%Up (Q-O-Q) 90.0% 0.0% 43.3% 56.7%Total (Q-O-Q) 100.0% 100.0% 100.0% 100.0%
29 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Sentiment gauge OfficeMarket Tour velocity Leasing volume Rents Concessions Sales volumeConstructiondeliveriesConstruction startsAtlanta Up Up Up Down Up Neutral NeutralAustin Neutral Down Up Down Up Neutral NeutralBaltimore Neutral Neutral Neutral Neutral Down Neutral UpBoston Neutral Neutral Up Neutral Down Neutral NeutralCharlotte Up Neutral Up Neutral Neutral Up UpChicago CBD Up Up Neutral Neutral Up Neutral UpChicago Suburbs Neutral Up Neutral Neutral Neutral Neutral NeutralCincinnati Neutral Up Neutral Neutral Up Down UpCleveland Neutral Down Neutral Neutral Up Up NeutralColumbus Neutral Up Neutral Neutral Neutral Down UpDallas Up Up Up Neutral Up Down UpDenver Neutral Neutral Up Neutral Down Down UpDetroit Neutral Up Neutral Neutral Up Neutral UpFairfield County Neutral Down Neutral Neutral Down Neutral NeutralFort Lauderdale Neutral Down Neutral Neutral Down Neutral NeutralHampton Roads Neutral Down Neutral Neutral Down Neutral UpHouston Up Up Up Neutral Up Neutral UpIndianapolis Up Up Neutral Down Neutral Neutral NeutralJacksonville Neutral Neutral Neutral Neutral Up Neutral NeutralLos Angeles Up Neutral Neutral Neutral Up Neutral NeutralMiami Neutral Down Up Neutral Up Up NeutralMilwaukee Neutral Up Neutral Neutral Up Neutral NeutralMinneapolis Up Neutral Up Down Up Neutral NeutralNew Jersey Neutral Down Neutral Neutral Down Neutral UpNew York Up Neutral Neutral Up Neutral Neutral NeutralNorthern Virginia Neutral Neutral Neutral Neutral Down Neutral DownOakland-East Bay Up Up Up Neutral Neutral Neutral NeutralOrange County Down Down Neutral Neutral Down Neutral NeutralOrlando Neutral Down Neutral Neutral Neutral Neutral NeutralPhiladelphia Neutral Up Up Neutral Down Up UpPhoenix Up Down Neutral Neutral Down Down NeutralPittsburgh Neutral Neutral Up Down Down Neutral NeutralPortland Up Up Up Neutral Up Neutral UpRaleigh-Durham Up Neutral Neutral Neutral Neutral Neutral NeutralRichmond Up Up Up Down Down Up NeutralSacramento Up Neutral Neutral Neutral Down Neutral NeutralSan Antonio Up Up Up Neutral Neutral Neutral NeutralSan Diego Neutral Down Up Neutral Down Neutral NeutralSan Francisco Up Down Up Down Up Neutral UpSan Francisco Peninsula Up Up Up Down Down Up UpSeattle Neutral Up Up Down Up Neutral UpSilicon Valley Up Up Up Down Up Up UpSt. Louis Up Up Neutral Neutral Down Neutral NeutralSuburban Maryland Neutral Down Neutral Up Neutral Up DownTampa Up Up Up Down Up Neutral NeutralWashington, DC Neutral Neutral Neutral Neutral Down Down DownWest Palm Beach Neutral Down Neutral Neutral Down Neutral NeutralWestchester County Neutral Down Neutral Neutral Down Neutral NeutralUnited States totals (number of markets)Down (Q-O-Q) 1 15 0 11 20 6 3Neutral (Q-O-Q) 26 13 27 35 10 34 28Up (Q-O-Q) 21 20 21 2 18 8 17Total (Q-O-Q) 48 48 48 48 48 48 48United States totals (% of markets)Down (Q-O-Q) 2.1% 31.3% 0.0% 22.9% 41.7% 12.5% 6.3%Neutral (Q-O-Q) 54.2% 27.1% 56.3% 72.9% 20.8% 70.8% 58.3%Up (Q-O-Q) 43.8% 41.7% 43.8% 4.2% 37.5% 16.7% 35.4%Total (Q-O-Q) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
30 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Sentiment gauge IndustrialMarket Rents Sales volume Absorption Under construction DeliveriesAtlanta Down Down Up Up DownAustin Down Up Down Neutral DownBaltimore Neutral Up Neutral Down UpBoston Neutral Up Up Neutral DownBroward County Up Down Up Down UpCentral New Jersey Up Down Neutral Up UpCentral Valley (California) Up Up Down Up NeutralCharlotte Up Down Neutral Down DownChicago Neutral Down Neutral Up UpCincinnati / Dayton Up Up Up Down NeutralCleveland Neutral Down Neutral Down NeutralColumbus Neutral Down Neutral Up DownDallas / Fort Worth Down Down Down Up UpDenver Up Down Neutral Up UpDetroit Up Up Up Down NeutralGreensboro Down Neutral Neutral Up DownHampton Roads Up Up Down Down NeutralHouston Up Neutral Neutral Down UpIndianapolis Up Down Up Up UpInland Empire Up Neutral Up Up UpJacksonville Up Up Neutral Neutral NeutralKansas City Down Up Up Down DownLos Angeles Up Down Neutral Up UpMemphis Up Up Up Up DownMiami-Dade Up Down Down Down UpMinneapolis / St. Paul Up Down Neutral Up NeutralNashville Down Down Neutral Down NeutralNorthern New Jersey Up Down Down Up DownNYC Up UP Up Down NeutralOakland / East Bay Up Neutral Up Up NeutralOrange County (California) Up Up Neutral Up NeutralOrlando Up Down Neutral Down DownPalm Beach Neutral Down Down Neutral NeutralPhiladelphia / Harrisburg Neutral Up Neutral Down NeutralPhoenix Up Up Up Up DownPittsburgh Down Up Neutral Down DownPortland Neutral Down Down Down DownRichmond Down Up Up Down UpSacramento Up Up Neutral Down UpSan Antonio Up Up Neutral Up DownSan Diego Up Down Neutral Down NeutralSan Francisco Up Down Down Neutral NeutralSeattle Up Up Neutral Up UpSilicon Valley / South Bay Up Up Up Neutral NeutralSt. Louis Neutral Up Neutral Up NeutralTampa Bay Up Down Neutral Down NeutralWashington DC Neutral Down Down Down UpUnited States totals (number of markets)Down (Q-O-Q) 8 21 10 21 14Neutral (Q-O-Q) 10 4 23 6 18Up (Q-O-Q) 29 22 14 20 15Total (Q-O-Q) 47 47 47 47 47United States totals (% of markets)Down (Q-O-Q) 17.0% 44.7% 21.3% 44.7% 29.8%Neutral (Q-O-Q) 21.3% 8.5% 48.9% 12.8% 38.3%Up (Q-O-Q) 61.7% 46.8% 29.8% 42.6% 31.9%Total (Q-O-Q) 100.0% 100.0% 100.0% 100.0% 100.0%
31 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Sentiment gauge RetailMarket Leasing volume Rents Sales volume Construction deliveries Construction startsAtlanta Down Up Down Up UpAustin Down Down Down Down DownBaltimore Down Up Down Down UpBoston Up Up Up Down DownCharlotte Down Down Down Down DownChicago Up Up Down Up UpCincinnati Up Up Down Down DownCleveland Up Down Down Down DownDallas Down Up Down Down UpDenver Up Up Down Down DownDetroit Up Down Neutral Down UpFairfield County Down Up Neutral Down UpFort Lauderdale Up Up Up Up UpHampton Roads Down Up Neutral Up DownHouston Down Up Up Down DownIndianapolis Down Up Down Down UpJacksonville Down Down Down Up UpLos Angeles Down Up Up Down DownMiami (Miami-Dade County) Down Down Down Down UpMinneapolis Down Down Down Down UpNorthern New Jersey Up Up Down Down UpNew York Down Up Down Up DownOrange County Down Down Down Down DownOrlando Down Down Down Down DownPhiladelphia Up Up Down Down UpPhoenix Down Down Down Down DownPittsburgh Down Down Up Down DownPortland Down Up Down Down UpRaleigh-Durham Up Up Down Up DownRichmond Down Up Down Down DownSacramento Down Down Down Down UpSan Antonio Down Down Down Down UpSan Diego Down Up Up Down DownSan Francisco Up Up Down Up NeutralSeattle Down Down Down Down DownSt. Louis Down Down Down Down DownTampa Down Up Down Down DownWashington, DC Down Up Down Down DownWestchester County Down Up Neutral Down UpWest Palm Beach Up Up Down Up UpSan Diego Up Down Neutral Down NeutralSan Francisco Up Down Down Neutral NeutralSeattle Up Up Neutral Up UpSilicon Valley / South Bay Up Up Up Neutral NeutralSt. Louis Neutral Up Neutral Up NeutralTampa Bay Up Down Neutral Down NeutralWashington DC Neutral Down Down Down UpUnited States totals (number of markets)Down (Q-O-Q) 28 15 31 31 21Neutral (Q-O-Q) 0 0 3 0 1Up (Q-O-Q) 12 25 6 9 18Total (Q-O-Q) 40 40 40 40 40United States totals (% of markets)Down (Q-O-Q) 70.0% 37.5% 77.5% 77.5% 52.5%Neutral (Q-O-Q) 0.0% 0.0% 7.5% 0.0% 2.5%Up (Q-O-Q) 30.0% 62.5% 15.0% 22.5% 45.0%Total (Q-O-Q) 100.0% 100.0% 100.0% 100.0% 100.0%
32 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Sentiment gauge HotelMarket Investor sentiment Supply Hotel transaction volume Hotel revenue per available roomAtlanta Up Neutral Up UpBoston Up Neutral Up UpChicago Up Up Neutral UpDallas Up Neutral Up UpDenver Up Neutral Neutral UpHouston Up Up Up UpLos Angeles Up Up Up UpMiami Up Neutral Up UpNew York Down Up Neutral UpOrlando Up Neutral Neutral UpPhiladelphia Up Neutral Up UpPhoenix Down Neutral Up UpSan Diego Up Neutral Neutral UpSan Francisco Up Neutral Neutral UpWashington, DC Down Up Down UpUnited States totals (number of markets)Down (Q-O-Q) 3 0 1 0Neutral (Q-O-Q) 0 10 6 0Up (Q-O-Q) 12 5 8 15Total (Q-O-Q) 15 15 15 15United States totals (% of markets)Down (Q-O-Q) 20.0% 0.0% 6.7% 0.0%Neutral (Q-O-Q) 0.0% 66.7% 40.0% 0.0%Up (Q-O-Q) 80.0% 33.3% 53.3% 100.0%Total (Q-O-Q) 100.0% 100.0% 100.0% 100.0%
33 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Key transactions MultifamilyProperty name City State Units Sale date Price $ p.s.f.Price perunitCapRate(%)Buyer SellerArchstone/EQR AVB Portolio Various 21,781 2/27/2013 $15,650,000,000 N/A N/A N/AEquity Residential &AvalonBay CommunitiesLehman BrothersHoldings, Inc.Milestone ApartmentREITPortolio Various 16,943 3/6/2013 $1,200,000,000 $86.95 $70,826 6Milestone ApartmentsREITInvesco RealtyAdvisers, Inc.EQR to Greystar/Gold-man SachsPortolio Various 5,100 3/21/2013 $942,200,000 $205.58 $184,745 5.5Greystar Real EstatePartnersEquity ResidentialWereldhave Sale to LoneStar FundsPortolio Various N/A 3/20/2013 $621,500,000 N/A N/A N/A Lone Star FundsWereldhave USA-CALLCEquity Residential toGoldman/GreystarPortolio Various 2,910 2/12/2013 $557,800,000 $188.38 $191,684 5.5Greystar Real EstatePartnersEquity ResidentialCrystal Towers Arlington VA 912 3/28/2013 $322,250,000 $353.34 $353,344 N/A Dweck Properties Equity ResidentialCrystal House Arlington VA 828 3/21/2013 $262,500,000 $298.30 $317,029 N/AMack-Cali RealtyCorporationAvalonBayCommunities, Inc.EQR/Starwood &BainbridgeOrlando FL 2,294 2/26/2013 $254,000,000 $111.54 $110,724 6 Starwood Capital Group Equity ResidentialMercedes House New York NY 862 2/6/2013 $170,000,000 N/A $197,216 N/A Invesco Ltd.Two TreesManagement Co. LLCBabcock & Brown/Variant N/A N/A 3,709 2/28/2013 $142,000,000 $46.48 $38,285 N/AVariant CommercialReal EstateBabcock & BrownDecoverly Rockville MD 564 3/21/2013 $135,000,000 $366.12 $239,362 N/A Stellar Advisors, LLCAvalonBayCommunities, Inc.Monument Park Fairfax VA 460 1/25/2013 $124,000,000 $258.69 $269,565 N/A Crow Holdings ArchstoneEquity Residential toCortland PartnersN/A GA 1,026 3/28/2013 $117,335,000 $103.03 $114,362 6.4 Cortland Partners Equity ResidentialSummer House Apart-mentsAlameda CA 615 4/16/2013 $117,000,000 $209.49 $190,244 N/A N/A Kennedy Wilson, Inc.Chesapeake GlenGlenBurnieMD 796 2/26/2013 $103,125,000 $146.19 $129,554 5.9 Morgan Properties Equity ResidentialSOMA at 788SanFranciscoCA 160 1/11/2013 $103,000,000 $645.35 $643,750 N/ALaSalle InvestmentManagement, Inc.AvalonBayCommunities, Inc.MSU Student HousingPortfolioN/A MI 846 2/4/2013 $101,700,000 $81.22 $120,213 N/AThe Woodlark Com-paniesThe Pierce Company,Inc.TGM WillowbrookWillow-brookIL 712 2/14/2013 $101,000,000 $138.67 $141,854 5.9 TGM Associates L.P. RREEF AmericaMSU Student HousingPortfolioMI 846 2/4/2013 $101,700,000 $81.22 $302,679 N/AThe WoodlarkCompaniesThe PierceCompany, Inc.TGM WillowbrookWillow-brookIL 712 2/14/2013 $101,000,000 $138.67 $141,854 5.9 TGM Associates L.P. RREEF AmericaArchstone Crystal Towers$322M in April of 2013Jones Lang LaSalle facilitated Equity Resi-dential’s sale of two buildings, consisting of912 units, located in Arlington, VA. DweckProperties was the buyer.EQR Orlando Portfolio$254M in March of 2013Jones Lang LaSalle facilitated EquityResidential’s sale of a 2,294-unit portfoliolocated in Orlando, FL. Starwood Capitalwas the buyer.Canyon RidgeApril of 2013Jones Lang LaSalle facilitated LandmarkTrust of America’s sale of 350 units located inAtlanta, GA. GrayCo was the buyer.Top Jones Lang LaSalle Multifamily sales - YTD 2013
34 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Key transactions OfficeWilliams TowerHouston office property in March of 2013Jones Lang LaSalle facilitated Hines REIT’ssale of a 1,479,764-square-foot Class Atrophy office building located in Houston,Texas. Invesco was the buyer.350 Madison Avenue$261.5M in March of 2013Jones Lang LaSalle sold the Class A394,000-square-foot office property inManhattan for Kensico Properties for $664p.s.f. to RFR Holding. The building traded ata 2.6 percent cap rate.Burnham Center$95M in February of 2013Jones Lang LaSalle sold the 579,848-square-foot, historic, Class B office property inChicago for Harbor Group Internationalfor $163 p.s.f. to The Shidler Group. Thebuilding traded at a 6.5 percent cap rate.Top Jones Lang LaSalle Office sales - YTD 2013
35 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Key transactions IndustrialCore Midwest Distribution Portfolio$99.5M in Q1 2013Jones Lang LaSalle sold on behalf of KTRCapital Partners the five-building, 2.7 million-square-foot industrial portfolio, located acrossChicago, Indianapolis, Cincinnati, Columbusand Walton, KY, to Welsh Property Trust.GE Aviation Facility$35M in Q4 2012Jones Lang LaSalle facilitated Scannell’ssale of a 314,845-square-foot build-to-suitmanufacturing facility located in Auburn, AL.American Realty Capital was the buyer.Pepsi Bottling Ventures$26M in Q3 2012Jones Lang LaSalle facilitated JohnsonDevelopment’s sale of a 526,320-square-footindustrial property, located in Winston-Salem,NC. Tratt Properties was the buyer.Top Jones Lang LaSalle Industrial sales – 2H 2012 – YTD 2013Date Property Name City State Sales Price $ p.s.f. Cap rate Buyer Seller11-Feb-13Barnes & NoblesDistribution CenterMonroe Town-shipNJ $83,000,000 $72 7.20% CalPERS CBRE Global Investors5-Mar-13Centergate Distribu-tion ParkSan Ber-nardinoCA $67,000,000 $65 N/A Bentall Kennedy KTR Capital Partners29-Jan-133100 112th StreetSouthwestEverett WA $48,735,000 $127 N/A Boeing Company Aviation Technical Services25-Feb-13 301 Blair Rd Avenel NJ $48,000,000 $58 N/A KTR Capital Partners C&S Wholesale Grocers13-Feb-13Westport Distribu-tion I & IISalt Lake City UT $47,500,000 $63 N/A Industrial Income Trust Buzz Oates Real Estate28-Feb-134244 N PerrisBoulevardPerris CA $40,000,000 $57 N/A Ross Stores TA Realty1-Feb-13 Newell Rubbermaid Tallmadge OH $34,900,000 $43 N/A American Realty Capital Trust IV (ARCT IV) InSite Real Estate11-Jan-13 Fedex Ground South Windsor CT $32,200,000 $144 6.50% FEM Sullivan Road LLC Suncap Development Group15-Mar-13Fontana LogisticsCenterFontana CA $29,600,000 $71 N/A Coaster Company of America Overton Moore Properties28-Feb-13Attends HealthcareProductsGreenville NC $28,200,000 $34 N/A Attends Healthcare Products Inc Avgeris & Assoc Inc14-Mar-13717-737 SouthDesplaines StreetChicago IL $27,000,000 $118 N/A Ascent Corp Sterling Bay Cos4-Jan-13 Utilimaster Wakarusa IN $25,000,000 $49 N/A Berkshire Hathaway Inc Utilimaster Corporation12-Mar-13Hacks CrossLogistics CenterOlive Branch MS $24,650,000 $41 N/A Gramercy Capital Corp Hillwood7-Feb-13 Future MiTac Newark CA $22,114,000 $93 N/A MiTac International Corp CapRock Partners18-Jan-13Liberty Point Corpo-rate CenterLibertyville IL $21,800,000 $61 N/A Silverman Group MetLife8-Feb-13Cobia DistributionCenterMiami FL $20,600,000 $86 7.00% TIAA-CREF ProLogis2-Jan-13 Medline Industries Dallas TX $20,000,000 $69 N/A Exeter Property Group Alex Liberman3-Jan-13 1990 Lake Pointe Lewisville TX $20,000,000 $50 N/A Exeter Property Group Ardinger Properties LLC15-Mar-13Turnpike Distribu-tion CenterNew Galilee PA $20,000,000 $49 N/A Centurion Investments LLC Al Neyer Inc28-Jan-13165 CambridgePark DrCambridge MA $19,520,000 $258 N/A Hines George B Dodge Jr Trustee
36 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Key transactions RetailDate Property name City StateSales price($M)$ p.s.f.CaprateBuyer SellerMar-13 fmr Pathmark New York NY 150.0 $3,445 N/A Extell Development JV Starwood CG Park-It ManagementMar-13 Legends Outlet Kansas City KS 131.5 $200 N/A KKR JV RED Legacy Morgan StanleyMar-13 Downton Pleasant Hill Pleasant Hill CA 100.0 $289 5.5% UBS Realty Advisors Loja Group LLXMar-13 Peninsula Shopping CenterPalos VerdesPeninsulaCA 87.3 $297 5.3% UBS JV Vestar Development Principal Real Estate InvestorsMar-13 664 North Michigan Ave Chicago IL 86.6 $4,774 N/A Acadia Realty Trust Terra Foundation for American ArtMar-13 Louisiana Boardwalk Bossier City LA 67.6 $121 N/A Garrison Investment Group C-III Asset ManagementApr-13 Garden City Square Retail Garden City NY 65.0 $377 N/A Hampshire CosMetropolitan Ralty Associates JVAngelo GordonMar-13 Marketplace of Delray Delray Beach FL 65.0 $234 7.4% Ramco-Gershenson Properties Clarion PartnersMar-13 Mission Bay Plaza Boca Raton FL 61.6 $234 7.4% Ramco-Gershenson Properties Clarion PartnersMar-13 Canton Marketplace Canton GA 61.1 $182 8.7% Cole Corp Income Trust GLL RE PartnersMar-13 MacArthur Park Irving TX 50.6 $255 N/A Goldman Sachs AmREITMar-13 Courtyard at the Commons Calabasas CA 50.0 $561 6.0% RREEF America CBRE Global InvestorsMiracle Marketplace$92M in January of 2013Jones Lang LaSalle facilitated AWE Talis-man’s sale of the almost 250,000-square-footproperty, located in Miami, FL.Colonie CenterApril of 2013Jones Lang LaSalle facilitated Heitman’s saleof a 1.3 million-square foot property located inAlbany, NY. KKR & Co, L.P. was the buyer.Bethesda WalkMarch of 2013Jones Lang LaSalle facilitated DLC Manage-ment Corporation’s sale of the 68,000-square-foot property located inAtlanta, GA.Top Jones Lang LaSalle Retail sales - YTD 2013
37 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Key transactions HotelProperty name Location Closing date Price Rooms Price per key ($)Atlanta Marriott Marquis Atlanta, GA 13-Jan Undisclosed 1663 UndisclosedBacara Resort and Spa Goleta, CA 13-Feb $184,900,000 354 $522,300Flatotel New York, NY 13-Feb $180,000,000 288 $625,000Loews Madison Hotel Washington, DC 13-Feb $140,000,000 356 $393,300Alex Hotel New York, NY 13-Feb $115,000,000 203 $566,500Embassy Suites San Diego San Diego, CA 13-Jan $112,500,000 337 $333,800The Back Bay Hotel Boston, MA 13-Feb Undisclosed 225 UndisclosedThe James Hotel SoHo New York, NY 13-Mar $85,000,000 114 $745,600Driskill Hotel Austin, TX 13-Mar $84,500,000 189 $447,100Hyatt Place Midtown New York, NY 13-Mar $76,200,000 185 $411,900Omni Providence Providence, RI 13-Jan $65,000,000 564 $115,200Holiday Inn Express Hotel & SuitesFishermans WharfSan Francisco, CA 13-Feb $60,500,000 252 $240,100InterContinental Hotel New Orleans, LA 13-Jan Undisclosed 479 UndisclosedAndaz San Diego San Diego, CA 13-Mar $53,000,000 159 $333,300Miami Beach Resort & Spa$117M ($276,000 per key) in March 2013On behalf of Blackstone, Jones Lang La-Salle’s Hotels & Hospitality Group closed thesale of the Miami Beach Resort and Spa inMarch 2013. MBR Waterview LLC purchasedthe 18-story, 424-room property for $117million. The new ownership group plans toenhance the hotel which will include a newdesign concept for the public areas, restora-tion of meeting facilities, renovated guestrooms, and new food and beverage concepts.Marriott Marquis Atlanta$293M ($176,000 per key), January 2013On behalf of Host Hotels & Resorts, JonesLang LaSalle’s Hotels & Hospitality Groupclosed the sale of the Marriott Marquis Atlantain January 2013. The 1,663-room hoteltransacted for $293 million, marking the city’slargest transaction on record. The hotel wasacquired by an undisclosed buyer.Driskill Hotel Austin$85M ($450,000 per key) in March of 2013In March 2013, an affiliate of Hyatt HotelsCorporation acquired the 189-room DriskillHotel for approximately $85 million from aninvestment fund managed by Lowe EnterprisesInvestors, which was represented in thetransaction by Jones Lang LaSalle’s Hotels &Hospitality Group.Top Jones Lang LaSalle Hotel sales - YTD 2013
38 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Capital market trends and fundamentals at a glanceThe surge in CMBS issuance continues in 2013 with anticipated 60percent year-over-year growth for the full year. We can expect thepace of growth in new CMBS issuance to slow markedly in 2014 and2015 to a more sustainable level, as banks - including for the first timesome smaller-to-medium size regional players - begin to substantiallyincrease their market share aligned with rising interest rates at that time.Investment sales growth continues at a pace of 15 to 20 percent overthe 2013 forecast period, which could reach 25 percent for 2014. Acombination of factors during this period include still low interest rates,stronger U.S. economic expansion, periodic global upheaval whichshould help maintain U.S. appeal as a safe haven, generally increasingThe U.S. continues to be viewed as the “safe haven” for real estateinvestment, given the potential for overall greater returns and protectionin relation to alternative investment classes. Investor flight to ‘‘safer’’properties remains evident throughout the slow market recovery. Weprovide a snapshot here of strengthening fundamentals and higheryields across core property types for 2013 and beyond, as well as thekey factors in the capital markets that support such investment activity.Capital marketsWe expect the 10-year treasury yield to finally begin to turn upward latein the year reaching close to 2.4 percent by the end of 2013.We expect cap rates for higher quality property to stay on averagenationally fairly flat over the next 18-24 months, with modest netdownward pressure over the first half of that time frame, and slightlynet upward pressure over the second half. In the second half of2015, we expect cap rates to begin to see some sustained gradualupward movement, as spread narrowing of the previous two yearsprompts investors to begin to demand modestly higher yields in light ofanticipated rising interest rates above the current near-0 percent policy.CMBS Issuance Peaked in 2007 at $230 Billion1990 – 2013US$billionsNew post-recession high of $48 billion in new issuance for 2012; up over 48.0 percent annually;more viable financing option and already on a surge for 2013New CMBS issuance of $31.0 billion YTD through April is over 3x higher than the $9.3 billionfor same period in 2012$3 $8$14 $17 $18 $16$26$37$74$57$47$67$52$78$93$167$198$229$12$3$12$33$48$31$0$20$40$60$80$100$120$140$160$180$200$220$240199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013YTD*U.S. cap rates, GDP growth and 5 & 10-year treasury comparisonQ1 2001 – Q1 2013*Attractive interest rate environment is evident in the property yields and economic growth differential-6.0%-5.0%-4.0%-3.0%-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%10.0%2001Q12001Q22001Q32001Q42002Q12002Q22002Q32002Q42003Q12003Q22003Q32003Q42004Q12004Q22004Q32004Q42005Q12005Q22005Q32005Q42006Q12006Q22006Q32006Q42007Q12007Q22007Q32007Q42008Q12008Q22008Q32008Q42009Q12009Q22009Q32009Q42010Q12010Q22010Q32010Q42011Q12011Q22011Q32011Q42012Q12012Q22012Q32012Q42013Q1*PercentageApartment Industrial Office Retail GDP Growth 5yr Treas 10yr Treas* As of April 25, 2013Source: Moody’s Analytics, Federal Reserve, Commercial Mortgage Alert,Jones Lang LaSalle ResearchSource: Jones Lang LaSalle Research, Real Capital Analytics, Bloomberg*Preliminary data as of early April 2013;GDP annual growth as of Apr 2013 for Q1 2013U.S. sales transaction volume growth slowed from 60 percent+ in 2011 to just under 30percent for 2012Q1 2001 – Q1 2013*$0$50$100$150$200$250$300$350$400$4502001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*Totaltransactionvolume($billions)Apartment Industrial Office Retail*U.S. total transaction volume by product type – apartment, industrial, office and retailProjectedcombinedfull-year2013 volumegrowth:64%~30%15-20%Properties of at Least $5 Million, portfolio, including entity-level transactions are included in these data*Projections as of early Apr 2013Source: Jones Lang LaSalle Research, Real Capital Analytics
39 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Expect pace of growth to remain healthy into 2014.We expect annual increases of 25 and 34 percent for levels of housingstarts for 2013 and 2014, respectively. A very affordable pricingenvironment and more ‘‘normalized’’ mortgage lending standardssupport room for continued more then 10 percent increases for a coupleyears post-forecast period.We see a further acceleration in housing prices in 2014, given thedevelopment of a shift from the propensity to rent to buy, as interestrates remain very attractive and lending standards loosen somewhat.institutional investor allocation to ‘‘real’’ assets, and a continued broadsearch for higher-yielding investments.Key property fundamentals at a glanceMultifamily:Expect apartment vacancy to remain below 10-year average and stableinto 2014.U.S. apartment vacancy continues below the 10-year average0%2%4%6%8%10%12%Q12009Q22009Q32009Q42009Q12010Q22010Q32010Q42010Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012Q12013YE2013YE20146.1%forecastMultifamily rent growth continues across the nationQuarterly percent change in marketed rents-3.0%-2.5%-2.0%-1.5%-1.0%-0.5%0.0%0.5%1.0%1.5%Q12009Q22009Q32009Q42009Q12010Q22010Q32010Q42010Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012Q120132013*2014*forecastSingle family housing starts expected to gain steam over the next 24 months0200400600800100012001400160018002000200120022003200420052006200720082009201020112012*2013*2014SingleFamilyStarts(thousands)Housing prices continue to gain momentum into 2014-12.0%-8.0%-4.0%0.0%4.0%8.0%12.0%2001200220032004200520062007200820092010201120122013*2014*Annual%ChangeSource: Jones Lang LaSalle Research, Moody’s Analytics, FHFA purchase index (SA)Source: Jones Lang LaSalle Research, Moody’s Analytics, U.S. Census Bureau*average quarterly growth rate for forecast yearsSource: Jones Lang LaSalle Research, PPR, Costar
40 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Industrial:Expect vacancy in newer properties, driven partly by mid-size tenants, tooutpace that of older set.Expect premium in asking rents for newer properties towiden significantly.Office:Projected stronger job growth and little new near-term supply flowsthrough fundamentals, causing overall vacancy to fall at a steady andmoderate pace for 2013-2014. Beyond that, we believe somewhathigher supply by 2015 will begin to cut into occupancy rate gains.Tightening markets, particularly primary and some secondary CBDs,as well as energy/tech markets, are expected to drive similar growth in2013 as in 2012. We expect further acceleration in 2014 and into2015, as rent growth broadens geographically and to a lesser extent byclass. For a market such as Manhattan, however, we expect rentsto reaccelerate.Office rents are down +/- 10.0 percent from prior peaks, but experienced their 9th straightquarter of increases in Q1Quarterly percent change in marketed rents-6.0%-5.0%-4.0%-3.0%-2.0%-1.0%0.0%1.0%2.0%Q12009Q22009Q32009Q42009Q12010Q22010Q32010Q42010Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012Q120132013*2014*forecastDespite continued occupancy gains, U.S. office vacancy remains stubbornly elevated at17.0 percent10%11%12%13%14%15%16%17%18%19%20%Q12009Q22009Q32009Q42009Q12010Q22010Q32010Q42010Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012Q12013YE2013YE201417.0% forecastAccelerating occupancy gains push U.S. industrial vacancy to lowest level since 20090%2%4%6%8%10%12%Q12009Q22009Q32009Q42009Q12010Q22010Q32010Q42010Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012Q12013YE2013YE20148.4% forecastIndustrial rents are tracking upwards and now stand at 3.1 percent over the first quarterlast yearQuarterly percent change in marketed rents-2.5%-2.0%-1.5%-1.0%-0.5%0.0%0.5%1.0%1.5%Q12009Q22009Q32009Q42009Q12010Q22010Q32010Q42010Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012Q120132013*2014*forecast*average quarterly growth rate for forecast years *average quarterly growth rate for forecast years
41 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Hotels:Rise in demand levels associated with improving economy expected toboost occupancy.Recovery in demand and low new supply pipeline are key to growth inhotel ADRs.Retail:Expect landlords to focus on backfilling vacant space.Population growth to partly drive retail sales and rental rate increases.U.S. hotel occupancy levels mark 11 consecutive quarters of increases and approachinglong-term average50%52%54%56%58%60%62%64%Q12009Q22009Q32009Q42009Q12010Q22010Q32010Q42010Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012Q12013YE2013YE201461.9%forecastU.S. hotel occupancy (12-mo. moving average)Growth in hotel average daily rates (ADRs) accelerating due to recovery in demand andlow new supply pipelineChange in 12-mo. moving average ADR-10.0%-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%Q12009Q22009Q32009Q42009Q12010Q22010Q32010Q42010Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012Q1201320132014forecastRetail rents have finally bottomed and are heading upwardQuarterly percent change in marketed rents-1.5%-1.0%-0.5%0.0%0.5%1.0%Q22010Q32010Q42010Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012Q120132013*2014*forecastU.S. retail vacancy has declined only 70 basis points in the last three years5.0%5.5%6.0%6.5%7.0%7.5%8.0%Q12010Q22010Q32010Q42010Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012Q12013YE2013YE20146.8%forecastSource: Smith Travel Research, Jones Lang LaSalle Research Source: Smith Travel Research, Jones Lang LaSalle Research *average quarterly growth rate for forecast years
43 Jones Lang LaSalle • United States Cross Sector Outlook • Q1 2013 Although some clarity has formed so far in 2013,transition remains underway that supports steadygrowth in overall real estate investment activityacross the various property sectors. While theoutlook is promising, it is important to look forany deviating signals. The key for the successfulinvestor is to stay ahead of shifts, and be aware ofany economic or fiscal signals that may point to achange in course, which could impact any of thegrowth factors driving fundamentals.