IRR_2016_Annual_Viewpoint

An Integra Realty Resources Publication
VIEWPOINT2016 COMMERCIAL REAL ESTATE TRENDS REPORT

About IRR
Over the past 16 years, Integra Realty Resources,
Inc. (IRR) has grown to become North America’s
largest independent CRE market research,
valuation, and counseling firm. Our clients tell us
that our 875+ professionals in 58 offices deliver
extraordinary insight, unbiased advice, and
excellent service. In 2015, IRR valued over $400
billion in real estate assets across more than 60
metro markets comprising approximately 43,000
assignments.
Every IRR office is supervised by one of our more
than 218 MAl-designated professionals, industry
leaders who have over 25 years, on average, of
experience in their local markets. Having more
MAI-designated experts than any other firm is just
one testament to the high levels of training and
experience which we put at our clients’ disposal: as
of December 2015, IRR’s senior management team
also includes: 46 FRICS; 33 MRICS; 24 CREs; 24
SRAs; 20 CCIMs; 10 ASAs.
These designations from the most prestigious real
estate organizations in the world mean that from a
culture of quality and ongoing professional
development, we can offer unparalleled expertise in
appraisals, feasibility and market studies, expert
testimony, and related property consulting services
across all local and national markets. IRR stands
ready to serve you with unmatched Local
Expertise…Nationally.
Comprehensive Commercial Real Estate
Market Research, Valuation and Advisory Services

1
Chairman’s Letter
4
The Economy
Is the Great Recession
a Memory or a Real
Factor Today?
5
Housing
Reconnecting the
Supply Pipe
6
Capital Markets
Capital:
Is the Tap Staying On?
9
Interest Rates
The Big Question: What
Impact Will Fed’s Change
in Zero-Rate Monetary
Policy Have?
10
Employment
What is Behind the
Jobless Recovery?
12
Property Sector
Expectations for 2016
The Bears or the Bulls
16
Office
Positive Indicators
Continue in 2016,
Despite Challenges
20
Multifamily
Outstanding Performance
in 2015 Stimulates
Confidence For 2016
24
Retail
Fundamentals Improving,
Challenges Remain for 2016
28
Industrial
Significant Expansion and
Growth Highlights Sector
32
Hospitality
2015 Recovery Path
Leads to Favorable
Conditions In 2016
38
Senior Housing
Market at the Peak,
Where Does it Go
From Here?
40
Medical Office
Breakout Investment
Class in 2016
42
Self-Storage
Fierce Investor Demand
Drives Market
44
Auto Dealerships
Vehicle Sales Hit Records
in 2015, Market Expects
Continued Improvement
in 2016
CRE TRENDS PROPERTY REPORTS
CONTENTS
SPECIALTY REPORTS
3

CHAIRMAN’S LETTER
Dear Friends and Colleagues,
All of us at IRR are elated to present Viewpoint 2016,
our 26th annual edition of what we know you’ve
come to count on for critical information that helps
shape your commercial real estate outlook. We
consider it a privilege to share our independent
analysis of commercial real estate trends as they
relate to U.S. and Caribbean property markets.
I’m honored to introduce IRR’s Viewpoint this year,
my first as Chairman. I am particularly keen to
announce that in addition to IRR’s unrivaled
valuation and advisory services that you’ve come
to know and trust, we’ll be providing you with
access to our aggregated cap rate data to help you
drive real-time insights into changing markets
during 2016. With IRR’s unsurpassed scale in
providing 43,000 valuation assignments to our
clients annually, we sit uniquely qualified to
produce such cap rate insights and are excited to
offer this new service to our clients in today’s
increasingly data-driven world.
Real estate markets are always changing, and as a
result, Viewpoint evolves as well. This year, you’ll
discover a fresh look that presents an abundance of
valuable commercial real estate information in the
form of engaging charts that capture what transpired
in 2015, while also shedding light into IRR’s views of
the property markets in the coming year.
Viewpoint 2016 begins by covering observations
and trends on topics ranging from the economy,
interest rates, capital markets, and housing,
including insights as to how these items are
expected to impact commercial real estate markets.
Next, you’ll find more detailed overviews of the five
core property types – office, multifamily, retail,
industrial and hospitality – as well as four specialty
property overviews on senior housing, medical
office buildings, self-storage and auto dealerships.
We are excited to continue providing our
independent services and trusted interpretations to
the industry, and we wish all a happy, healthy, and
prosperous 2016.
___________________
Michael Welch
Chairman of the Board
Integra Realty Resources, Inc.
1

Viewpoint begins its 2016 national
overview and outlook with a glance
at the U.S. economy. We will
explore the major factors impacting
continued recovery, drivers of the
economy, business sentiment
toward growth and expansion,
and a few of the key challenges
and opportunities that face the
U.S. marketplace.
CRE TRENDS
3

THE ECONOMY
Is the Great Recession a Memory
or a Real Factor Today?
Though the U.S. is in its seventh year of the
current economic cycle, uncertainty as to the
recovery’s strength continues to persist. One
view opines that the U.S. is nearing an end of
the current upward cycle, with a high probability
of real estate price correction owing to asset
appreciation that is ahead of real growth. An
alternate view notes that the U.S. economy
may be on a long runway that will continue to
accelerate. The various global and domestic
economic forces are mixed, and as a result,
the state of the economy feels edgy, volatile,
chaotic, and oftentimes fragile.
A Global Perspective
Heading into 2016, one of the
challenges the U.S. economy faces
is global volatility ranging from a
multitude of currency crises,
economic upheaval, political
instability owing to corruption and/
or terrorism, and one of the largest
worldwide migrations of refugees in
history. All of these factors have the
potential for negative economic
consequences on the world stage.
Approximately 30% of the U.S.
economy is tied to imports and
exports. Financial volatility among
global markets causes uncertainty
and can negatively impact the
still-fragile U.S. recovery. Over the
past two years, the U.S. has
represented both a safe haven and a
prospect for global capital
preservation.
Quantitative Easing by
the Federal Reserve
The Federal Reserve successfully
used quantitative easing to attract
equity into the market and spur
investments by keeping borrowing
costs low. The U.S. dollar is at its
strongest in more than a decade,
while inflation has been at zero for
the past 12 months; factors the Fed
will weigh in determining future
interest rate increases and the pace
of hikes. However, analysts who
believe the U.S. economy is nearing
the end of the current cycle are
concerned that interest rate
increases could hasten a downturn
– a concurring view ostensibly held
by Fed economists late into 2015.
30%
Approximate percentage
of the U.S. economy tied
to imports and exports
4
2016 VIEWPOINT / INTEGRA REALTY RESOURCES

The opposing viewpoint is that
economic expansion is just
beginning. Proponents of this view
believe that the recovery from the
Great Recession is different from
previous recoveries. Historically,
economic recoveries begin slowly
and then accelerate. However, there
hasn’t been an accelerator with the
current recovery – just an extended
build up, which could explain a lack
of productivity gains or housing
expansion that traditionally
accompany a healthy U.S. economic
expansion. So the question remains
– are we going to experience an
accelerator within this economic
cycle?
Up, Down or Sideways?
The economy has moved into a
different phase as the memory of
the Great Recession fades. Job
creation is picking up, which is
having a positive impact on
commercial real estate rents and
occupancy, and, in effect, values. But
headwinds could challenge investors
in 2016 as the Fed continues mulling
options and global economies
remain far from stable. IRR predicts
that 2016 will see a return of global
capital into mature developed
European economies, but posits that
the U.S. will maintain greater than
fair share of foreign capital
investment allocations throughout
the year. Some abatement in capital
inflows would be a welcome cooling
to the feverish asset pricing of 2015.
HOUSING
Reconnecting the
Supply Pipe
The home building
industry suffered a
significant blow from
the Great Recession,
shutting off the housing
creation supply pipeline
for roughly three years.
In 2015, the housing
sector did not recover to
pre-recession levels, and
the long-term view for
housing growth remains
unclear. This major pillar
of the U.S. economy
continues adjusting to
demographic, geographic,
and generational shifts.
Housing market conditions are
improving nationally, but the pace of
recovery varies by state and region,
according to the National
Association of Home Builders
(NAHB). Economists at the NAHB
report that in 2009, single-family
home production stood at 27% of
what is considered “normal” levels.
The group considers 1.3 million
units as its annual healthy
Bubble States
California, Arizona, Nevada,
Florida and industrial Midwest
Hardest hit areas during
the downturn
Energy States
North Dakota, Wyoming, Texas,
Montana and Louisiana
Experienced the most successful
recoveries in 2015
Homeownership
Down to 63.7%
Lowest Level in 48 Years
The home ownership rate fell to
63.7% in 3Q 2015 from 64.4% at
the same period in 2014.
5

benchmark average. Starts have risen steadily each year since then,
reaching 647,900 units in 2014. As of the third quarter of 2015, single-family
production was 53% of normal activity, according to the NAHB.
IRR predicts a strong 2016 for U.S. home building as negative
homeownership equity rates continue to decline. Simultaneously, positive
job growth and declining foreclosure rates offer a ray of light towards
stronger U.S. single-family housing growth in 2016.
The Strength of Multifamily
As the home building industry continues its slow recovery, the multifamily
and condominium components have been quite active. Millennials simply
are not flocking to the homeownership pool, a positive trend for
multifamily investors.
The Pew Research Center reported a nominal increase in the number of
young adults establishing their own households – yet fewer households
are headed by 18 to 34 year-olds now than 10 years ago – despite
increases in population and jobs. This trend infers pent-up demand, as
millennials will ultimately move from apartments and urban environments
into homeownership in the suburbs. But, in the meantime, these shifts
have helped fuel the multifamily sector in 2015 and will continue into 2016, as
developers move to capture multifamily opportunities by delivering
residential products to meet current demand.
CAPITAL
MARKETS
Capital: Is the Tap
Staying On?
There is no shortage of
real estate investment
options in international
markets. But, foreign
investors continue
plowing money into
U.S. real estate, a sign
that international money
regards the U.S. as a
safe haven amid global
uncertainty. Commercial
real estate lending
roared back in 2015 with
many active global and
domestic capital sources
- a trend not expected to
slow in 2016.
+29%
According to the NAHB, multifamily starts
jumped 29% from 2014. Multifamily permits
(333,000) exceeded starts, (296,000) suggesting
more projects may begin soon.
+6.7%
According to the NAHB, single-family permits
rose 6.7% from 2014. 2015 single-family permits
were 531,000, trailing 549,000 starts.
6

CROSS-BORDER TOTAL CAPITAL VS. U.S. MARKET SHARE
0%
5%
10%
15%
20%
$-
$5
$10
$15
$20
$25
$30
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Cross-Border Volume ($B) Cross-Border Market Share (%)
DISTRIBUTION OF 2015
TRANSACTION VOLUME
28.3%
27.7%
17.0%
13.5%
8.8% 4.6%
Office Apartment
Retail Industrial
Hotel Dev Site
2015 INVESTOR COMPOSITION
14%
12%
13%
14%
42%
5%
Cross-Border Institutional
Equity Fund Listed/REIT
Private User/Other
COMMERCIAL PROPERTY PRICING INDICES
0
50
100
150
200
250
300
350
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15
Apartment Retail Industrial
Office - CBD Office - Suburban
Global Capital
Environment
It is hard not to opine that the
commercial real estate market is
looking frothy, given that 2015
transaction activity returned to the
$370-billion-plus level YTD 3Q 2015.
This level is comparable to 2005 and
is being achieved during a period of
near zero monetary inflation. The
U.S. market, which experienced an
average rise of $70 billion per year
in transaction volume from 2009 to
2014, is expected to exceed
$500-bilion in total volume in 2015.
Cross-border investment remains
robust – highlighting the
international perception of a strong
U.S. commercial real estate market.
Direct foreign investment, private,
and REIT investment acquisitions
have returned to pre-recession
levels, but institutional lending has
not yet. Cross-border investment is
double the levels experienced in
2005. IRR expects this trend to
continue in 2016 as “home office
wealth” continues to migrate family
money into U.S. direct investment.
Equity Returns
Equity returns have decreased as
investors “pay up” to close deals
quickly. Though equity returns are
lower, it’s a game of liar’s poker as
market players all chase the biggest
deals. A significant volume of global
capital will continue to flow into the
U.S. because foreign investors can
generate positive leverage against a
local economy. The risk outweighs
concerns investors have about dollar
values or the U.S. economy. If the
U.S. economy falters, there likely
will be a receding flow of global
capital. In fact, major equity players
that pursue value deals, such as
BlackRock, Blackstone, and Carlyle
Group, are expected to chase yields
overseas in 2016.
7

21%
27%
23%
22%
17%
10%
9%
7%
5%
6%
18%
17%
18%
27%
27%
12%
11%
12%
14%
20%
7%
7%
8%
7%
8%
16%
14%
18%
14%
13%
15%
14%
13%
11%
9%
2%
1%
1%
1%
1%
0% 20% 40% 60% 80% 100%
2015
2014
2013
2012
2011
CMBS Financial Gov't Agency Insurance
Int'l Bank Nat'l Bank Reg'l/Local Bank Pvt/Other
LENDER COMPOSITION (ALL PROPERTY TYPES)
CMBS ISSUANCES ($BIL.)
$0
$10
$20
$30
$40
$50
$60
$70
$80
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
CMBS Market
Since the recession, CMBS
issuances continued to rise, but
were drastically down in 2015
compared to pre-recession figures.
At the peak in 2006, CMBS issuances
globally totaled $198.4 billion. After
substantially contracting during the
recession, issuances have increased
since 4Q 2010. In 2014, issuances
totaled $94.1 billion globally and
based on historical data, 4Q 2015 will
surpass issuances in prior quarters.
Lending Sources
In 2015, lending sources returned to
the real estate investment market in
big ways. At the close of 2014, there
was concern whether lending would
slow in 2015 due to interest rate risk,
as well as expectations that values
would stabilize, making refinancing
less feasible.
The U.S. lending composition
situation shifted in 2015 when CMBS
decreased its volume share in
comparison with past annual market
share growth. The share of lending
volume held by regional or local
banks increased, as did national
banks’ market share. Government
lending sources maintained lending
control of the multifamily property
sector. In 2015, there was a strong
national bank lending presence
within the industrial property
segment, while CMBS lending
sources held a majority share of
volume in the hotel and retail
sectors in 2015.
In 2015, CMBS lending sources accounted for 21%
of total activity, followed by government sources
(18%), national banks (16%), regional banks (15%),
insurance (12%), and other financial institutions
(10%). International banks and private sources
accounted for the balance.
8

INTEREST RATES
The Big Question: What Impact Will the Fed’s
Change in Zero-Rate Monetary Policy Have?
The zero interest-rate policy (ZIRP) changed in
December 2015; yet there is a lack of strategy
concerning the $19-trillion U.S. debt. Equity is betting
on inflation and devaluation of all currency globally.
ZIRP is swelling the stock market and crushing the
bond market. If the interest rate moves as expected,
it should cool real estate prices, although some
accommodation is priced into market. The real estate
market is expected to rerun to normalized equity and
debt spreads in 2016.
Taking Action, or Not?
The Fed determined the action that best suited U.S. economic needs was to
raise the ZIRP. In mid-December, it increased the benchmark 25 basis points –
fulfilling a long-term promise to raise rates. The Fed also indicated it anticipates
continued bumps in 2016, although it left open the pace of increases.
Quantitative easing is an experiment for which the actual outcome is unknown,
creating a fair amount of economic uncertainty in 2016 for many in the real
estate industry. Quantitative easing has had a profound impact on the central
bank’s balance sheet, as well as fixed income and other capital markets.
Concern exists that, in the short term, turmoil in the public markets will
continue to affect real estate. Still, real estate returns appeal to private
investors as the search for yields continues.
Fed’s Impact on CRE
Commercial real estate market
fundamentals have improved since
2011; prices have recovered and the
significant effects of deleveraging
have been minimized. Apartment
and industrial vacancy rates are at or
near their historic lows. In the office
and retail property sectors, vacancy
rates reached their lowest post-crisis
levels. Development activity remains
more than 25% below its pre-
recession peak.
Many in the real estate industry
believe the first interest rate hike
since 2006 will benefit commercial
real estate markets, as interest rate
hikes generally signal an improving
economy. The increased rate
supports conditions that lead to
higher rents and property values.
More people working spurs
economic growth and productivity,
which, in turn, leads to demand for
more real estate.
Overvaluation Concerns
Current monetary policy has
lowered borrowing costs to
artificially low levels, which has
boosted asset prices. The net effect
could represent a mispricing of
commercial real estate assets, which
will now reprice following rate hikes.
The good news is that an interest
rate hike in a truly robust economy
should not topple real estate valuations.
9

EMPLOYMENT
What is Behind the Jobless Recovery?
The U.S. employment market has drastically changed
during the past seven years of economic recovery.
While the unemployment rate reached an eight-year
low in 2015, it is perhaps more important to note
what’s missing. During that time, the workforce
shrunk and middle-income jobs, a stalwart performer
in the past job picture, disappeared. It could take
several years for middle-income jobs to return,
if they ever do.
The employment recovery is defying
traditional economic theory about
jobs, too. As the economy picked up
steam following the recession, job
creation did not increase.
It is a significant milestone that the
unemployment rate dipped to 5.0%
in October and held steady through
November, an eight-year low. In the
first 11 months of 2015, more than
two million jobs were added. That
means the year’s job gains will likely
close at nearly the same level as
in 2014.
A slowing growth rate in the
working-age population (16 to 65)
and an increasing rate of baby
boomer retirement could combine to
reduce what is considered the
typical U.S. job market – roughly
150,000 jobs added each month.
These fundamental shifts could
mean lower workforce numbers in
the future.
Driven by aging America, health care
jobs dominate the Bureau of Labor
Statistics’ forecasted list of the
fastest growing occupations.
Improved economic environment
and anticipated increased
discretionary income spending
resulted in increased employment in
retail trade, food services, drinking
places and construction.
2015 Employment:
The Bulls & Bears
Growth
Employment in other major
industries, including manufacturing,
wholesale trade, transportation,
warehousing, information, and
financial activities showed little or no
change in November over the
previous month. A strong dollar may
be impacting the manufacturing,
warehouse and trade sector.
No Change
The jobs picture isn’t as bright for
goods-producing jobs, durable goods
jobs and mining jobs, as a result of
falling oil and commodity prices.
Declines
10

142M
Total U.S. employment
of 142 million is now well
above the previous peak
of 138 million in 2008
60%
61%
62%
63%
64%
65%
66%
67%
120,000
125,000
130,000
135,000
140,000
145,000
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Total U.S. Nonfarm Payroll Employment (in Thousands)
Labor Force Participation Rate
U.S. EMPLOYMENT VS. PARTICIPATION RATE
Filling the Hole in
the Middle
There’s a big hole in the
American jobs picture that’s
hard not to notice. Simply
stated, the U.S. is not producing
middle-income jobs like it used to.
In fact, a study by Georgetown
University’s Center on Education
and the Workforce, shows the
U.S. economy now has roughly
one million more jobs in
occupations ranking in the top
third of income, and 800,000
jobs in the lower third. The
middle third, or middle-income
segment, however, has yet to
recover the jobs lost during the
recession – and is likely never to
do so. Surprisingly, growth was
experienced in high-paying
occupations, with nearly all
(97%) of them going to
individuals with at least a
college degree.
While it remains to be seen if
job gains at the top and bottom
will fill the gap middle-income
jobs left behind, it
fundamentally changes how the
U.S. workforce is structured and
will function moving forward.
Changes in employee benefits
– health insurance, defined-
benefit pensions, or defined-
contribution plans, could shift
the burden onto government
programs. Economic growth
flows from jobs and there’s a
direct correlation between jobs,
GDP, and productivity, as well as
commercial real estate. Without
the middle, there’s likely a
bifurcation of what the housing
stock that gets built and a
further polarization of
neighborhoods and local
communities in suburban real
estate markets.
Shifts in Participation Rate
After rising steadily for more than half a century, the overall labor force
participation rate has continued to decline in recent years – and it is occurring
across most demographic segments. Though overall job numbers appear
strong, the labor force participation rate was 62.4% in 3Q 2015, though it
decreased overall in 2015. To put things in perspective, the rate of participation
for workers ages 25 to 54 declined from 84.4% in April 2000 to 83.1% in
December 2007. It is interesting to note that 19% of this age group is classified
as not in the labor force. The normalized percentage would be 23% if those
not considered prime workforce groups (less than age 20 and over age 65)
were excluded.
While the economic downturn accounted for a portion of the labor force
participation decrease, an aging population and higher college enrollment has
also contributed significantly to the decline. Additionally, fiscal, monetary and
family leave policies have played key roles in reducing workforce numbers.
11

PROPERTY SECTOR
EXPECTATIONS FOR 2016
The Bears or The Bulls
Uncertainty will rule the 2016 market for all the
reasons previously discussed. IRR remains bullish
on the U.S. real estate sectors heading into 2016,
because institutionally, we understand that while
the U.S. economy is changing, the people and
economic institutions continue to be innovative
and enthusiastic. American discretionary
spending will be high in 2016 on low oil prices.
A Presidential election year is never a good time
for bad policy on either side of the aisle, and
envisioning the future always tends to bring some
economic “lift” heading into the election.
IRR remains bullish
on the U.S. real estate
sectors heading into 2016
In 2016, we enthusiastically look
forward to continuing our role as
one of the key players in
benchmarking commercial real
estate values nationwide and
assisting our clients in
understanding the broader trends
that contribute to their success in
the real estate markets.
12

Key Property Highlights
The broader trends favor the office sector,
which has been growing in lockstep with the
economic recovery without much new
construction to hinder rent growth.
Provided employment gains continue, the
multifamily market will enjoy continued
investment interest due to pent-up demand,
current buy versus rent preferences, and the
need to replace post-war inventory.
Strong housing growth and improvement in
consumer confidence favors retail in 2016,
except in markets that rely heavily on
international tourist sales.
Despite global headwinds on trade, U.S.
logistic distribution hubs will perform well
on the back of increased retail distribution
activity domestically.
A strong U.S. dollar favors American travel
abroad, coupled with the uncertainty of
international tourism, would be a setback to
ADRs across almost every sector.
Office
Multifamily
Retail
Industrial
Hospitality
13

Five core property types form the
backbone of the commercial real
estate industry – office, multifamily,
retail, industrial, and hospitality.
Each sector is unique and different,
requiring both global trend
interpretations, as well as a local
perspective.
IRR closely tracks these primary
sectors in order to provide
independent analysis and help
shape your outlook. We examine
transaction volume, market cycles
and cap rate insights, so that you can
make informed decisions in 2016.
PROPERTY REPORTS
15

Positive Indicators Continue
in 2016 Despite Challenges
The U.S. office markets exhibited numerous
positive indicators in 2015 that are expected to
continue into 2016. Despite challenges ranging
from volatile global and domestic financial
markets and expected interest rate hikes, gains
in employment helped drive demand for office
space in 2015.
OFFICE
Transaction Volume
There was $145.5-billion in
transactional activity completed
within the U.S. office sector, as
tracked by Real Capital Analytics
(RCA) YOY through 3Q 2015. This
represents a 16.2% increase from
the prior year. Regionally, the East
had 36.5% of the national
transaction volume, followed by the
West (32.3%), South (20.1%), and
Central (11.2%). The largest annual
changes occurred in the South,
which experienced a 26.3% increase,
followed by the West (20.2%), Central
(19.0%), and finally the East (7.5%).
Manhattan transaction activity was
more than three times the
transaction volume of Chicago, IL,
the second-ranked office market
with $8.4 billion in activity in the
past year. The balance of the top five
office transaction volume markets
include: San Francisco, CA, Los
Angeles, CA and Boston, MA.
Seattle, WA is a newcomer in the top
10, replacing Houston, TX as a result
of a 109.2% increase in transaction
volume in 2015.
IRR’s research finds that values are
expected to increase more among
Class A office properties than Class
B properties over the next 12
months. Additionally, IRR expects
that 18.6% of U.S. markets will
experience CBD Class A value
increases of at least 4% in 2016,
compared with 8.5% for CBD Class
B, 6.5% for suburban Class A, and
just 3.2% for suburban Class B.
In terms of debt capital markets
activity, IRR data shows that multi-
tenant CBD office property loans
presented the lowest risk across all
LTV ranges, except on deals with an
LTV of 76% to 85%. In those higher
leverage scenarios, medical office
deals had the lowest perceived risk
among lenders.
16

TOP MARKETS BY OFFICE TRANSACTION VOLUME BASED ON YOY PERCENTAGE CHANGE
2016
Rank
City YOY
Change
Total
4Q14-3Q15
1 Portland 218.00% $1,589,973,056
2 Tampa 177.07% $1,522,768,093
3 Long Island 152.64% $576,670,382
4 Pittsburgh 133.48% $359,921,474
5 Raleigh/Durham 121.45% $1,261,368,443
6 Cleveland 117.00% $389,491,980
7 Hartford 110.59% $305,933,384
8 Seattle 109.23% $5,483,128,306
9 St Louis 100.83% $1,019,707,839
10 Salt Lake City 100.13% $788,614,388
2016
Rank
City YOY
Change
Total
4Q14-3Q15
45 East Bay -12.77% $1,507,167,281
46 Broward -13.99% $878,109,373
47 San Francisco -16.91% $7,505,646,863
48 Los Angeles -21.07% $7,422,030,821
49 Las Vegas -24.47% $296,476,874
50 Boston -24.90% $7,163,562,018
51 Memphis -37.04% $106,917,232
52 Stamford -46.19% $369,356,347
53 Columbus -50.51% $209,685,747
54 Jacksonville -54.70% $286,261,732
Bulls (Top 10) Bears (Bottom 10)
46 Broward
47
San Francisco
48Los Angeles
49Las Vegas
50 Boston
51 Memphis
52 Stamford
53 Columbus
54 Jacksonville
45East Bay
10 Salt Lake City
9 St. Louis
8Seattle
7 Hartford
6 Cleveland
5 Raleigh/Durham
4 Pittsburgh
3 Long Island
2 Tampa Bay
1Portland
3 of the top 5 markets (San Francisco,
Los Angeles, and Boston) saw a decrease
in transaction activity over the past year
17

CBD OFFICE MARKET CYCLE
RECOVERYHYPERSUPPLYEXPANSION
Decreasing Vacancy Rates
Low New Construction
Moderate Absorption
Low/Moderate Employment Growth
Neg/Low Rental Rate Growth
Increasing Vacancy Rates
Moderate/High New Construction
Low/Negative Absorption
Moderate/Low Employment Growth
Med/Low Rental Rate Growth
High Absorption
Moderate/High Employment Growth
Med/High Rental Rate Growth
Moderate/Low New Construction
Low Absorption
Low/Negative Employment Growth
Low/Neg Rental Rate Growth
RECESSION
Charleston, SC
Chicago, IL
San Francisco, CA
Houston, TX
Dayton, OH
Greensboro, NC
Jacksonville, FL
Memphis, TN
New Jersey, No.
St. Louis, MO
Tampa, FL
Tulsa, OK
Baltimore, MD
Detroit, MI
Hartford, CT
Sacramento, CA
San Diego, CA
Syracuse, NY
Washington, DC
Kansas City, MO/KS
Orange County, CA
Orlando, FL
Providence, RI
Atlanta, GA
Birmingham, AL
Cleveland, OH
Greenville, SC
Cincinnati, OH
Columbus, OH
Indianapolis, IN
Louisville, KY
Phoenix, AZ
San Jose, CA
Austin, TX
Boston, MA
Charlotte, NC
Denver, CO
Las Vegas, NV
Long Island, NY
Los Angeles, CA
Boise, ID
Broward-PB, FL
Columbia, SC
Dallas, TX
Fort Worth, TX
Minneapolis, MN
Oakland, CA
Pittsburgh, PA
Portland, OR
HYPERSUPPLY
RECESSION
EXPANSION
RECOVERY
Miami, FL
Nashville, TN
New York, NY
Philadelphia, PA
Raleigh, NC
Richmond, VA
Salt Lake City, UT
Seattle, WA
Jackson, MS
Wilmington, DE
Market Cycle
Half of the CBD office markets in the
South and West are in the midst of
expansionary market phases. Less
than 20% of the markets in the
Central region are considered to be
in an expansion phase, while
Wilmington, DE; Houston, TX;
Dayton, OH; Jackson, MS; and
Greensboro, NC are experiencing
recessionary characteristics.
Within the suburban office
marketplace, more than 75% of the
markets in the East are considered
in a recovery phase, with only
Pittsburgh, PA and Boston, MA in an
expansionary phase. Suburban
markets exhibiting recessionary
characteristics include Houston, TX
and Northern New Jersey.
The comparison of markets in
balance versus those not in balance
reveals that 27% of CBD markets are
in balance compared to 21% of
suburban markets. IRR research
shows that 41% of CBD office
markets are more than two years
away from becoming in balance
compared to 48% for suburban
office markets.
41%
Number of CBD
office markets that
are more than two
years away from
becoming in balance
18

Suburban Class A & B Cap Rates
Cap rate compression continues to be strong in the West for suburban
office space, with an average of 29 bps of contraction for Class B and 32
bps for Class A in 2015. The East reported the highest percentage of
markets with contracting cap rates (62%) for Class B, while suburban Class
A cap rates were tightest in the Central region, and widest in the South
region. Noteworthy changes in 2016 include Houston, TX, which expects
to see suburban office cap rates rise up to 50 bps, and Philadelphia, PA
expects cap rates to decline by up to 50 bps. In 2015, CBD office cap rates
compressed nationally across both Class A and Class B assets by 19 bps
and 20 bps respectively, compared with suburban office property cap rates
that compressed 23 bps for Class A and 17 bps for Class B.
Cap Rates
Cap rate compression continues to
be strong in the South for CBD Class
A assets, with 77% of markets
surveyed by IRR experiencing
contraction. The West region also
saw contraction on average of 20
bps YOY as a result of 71% of
markets having decreasing cap
rates. Cap rates for CBD Class A
office properties fell by 100 bps YOY
in Houston, TX and Atlanta, GA.
These two markets expect increases
in 2016, and are the exceptions to
forecasts of cap rate contraction in
the South. Orlando, FL calls for the
greatest contraction of up to 50 bps
in 2016.
In 2015, CBD office
Cap Rates compressed
nationally across both
Class A and Class B
assets by 19 bps and 20
bps respectively
Cleveland, OH and Kansas City, MO
are the only two Central markets
expecting rates to drop in the next
12 months. The East expects cap
rates to be relatively stable, with
only Philadelphia, PA calling for
further compression, and
Washington, D.C. expected to see a
slight increase.
Investment confidence remains high
for CBD office assets. IRR’s data
shows that 60% of office markets
expect to see cap rates remain
constant over the next 12 months,
with none calling for more than 50
bps of change in cap rates in 2016.
Conclusion
The broader trends favor the office
sector, which has been growing in
lockstep with the economic recovery
without much new construction to
hinder rent growth. Office tends to
be less volatile since rental contracts
are longer and tend to be more
durable in the long run.
REGIONAL RATES COMPARISON - OFFICE
Cap
Rate
Discount
Rate
Market
Rent ($/SF)
Vacancy
Rate
4Q14 - 4Q15
Cap Rate s
South Region
CBD Class A 6.77% 7.99% $26.49 12.21% 38 bps
CBD Class B 7.70% 8.92% $20.40 16.31% 35 bps
Suburban Class A 7.32% 8.46% $23.98 12.45% 30 bps
Suburban Class B 8.03% 9.12% $18.24 14.88% 20 bps
East Region
CBD Class A 6.69% 7.67% $35.94 11.91% 11 bps
CBD Class B 7.60% 8.68% $26.27 14.27% 19 bps
Central Region
CBD Class A 8.11% 9.30% $22.38 17.55% 5 bps
CBD Class B 8.75% 9.93% $16.70 19.71% 7 bps
West Region
CBD Class A 6.03% 7.61% $35.39 12.53% 20 bps
CBD Class B 6.63% 8.18% $26.88 11.66% 17 bps
National Averages/Spreads
CBD Class A 6.83% 8.08% $29.75 13.22% 22 bps
CBD Class B 7.62% 8.88% $22.44 15.43% 22 bps
19

Outstanding Performance in 2015
Stimulates Confidence For 2016
It is difficult not to be bullish on the U.S.
multifamily sector heading into 2016. For one
thing, strong hiring numbers in 2015 provided
significant momentum for the U.S. economy
and especially, demand for multifamily. This, in
turn, drove vacancy rates to 14-year lows, while
boosting absorption. Although construction
volumes are up, steady demand growth is
expected to maintain current vacancy levels in
most markets in 2016.
MULTIFAMILY
Transaction Volume
Since 2010, the multifamily market
has grown from $37.4 billion in total
annual national transaction volume
to $130.7 billion through 3Q 2015, as
reported by RCA. Overall, the
industry saw an increase of 19.4%
YOY in multifamily activity.
The regional distribution of $130.7
billion in national transaction
volume was led by the South
(39.6%), followed by the West
(28.9%), the East (22.9%), and the
Central (8.6%).
The Central region had the largest
percentage increase in transaction
volume YOY, increasing by 34.8%,
led by Minneapolis, MN and St.
Louis, MO. Two Southern Florida
markets, Broward and Palm Beach,
drove the 28.5% yearly growth
experienced in the South.
Elsewhere, transaction volume
increased 14.1% YOY in the West
and 7.5% in the East.
Market Cycle
An overview of 2015 multifamily
property market performance
reveals that 93% of markets are
currently in an expansion phase.
Meanwhile, Atlanta, GA, Raleigh, NC
and Washington, DC are exhibiting
hypersupply conditions. Jackson,
MS is the only market categorized as
in recovery, but nearing the
expansion phase, as bank-owned
properties are diminishing and
for-sale properties are acquired.
IRR’s research finds that asset values
will remain stable more frequently in
urban Class A markets compared to
other market types, such as urban
Class B, as well as suburban Class A
or B. The data also shows that 88.7%
of markets are expecting values to
increase in the next 12 months, with the
exception being markets affected by
oil price drops, such as Houston, TX.
20

TOP MARKETS BY MULTIFAMILY TRANSACTION VOLUME BASED ON YOY PERCENTAGE CHANGE
2016
Rank
City YOY
Change
Total
4Q14-3Q15
1 Palm Beach 175.48% $1,225,966,982
2 Broward 159.88% $1,520,827,127
3 Minneapolis 127.76% $1,353,025,136
4 St Louis 104.47% $608,568,200
5 San Francisco 81.27% $2,822,311,558
6 Inland Empire 65.99% $1,786,105,336
7 Atlanta 58.52% $7,244,010,575
8 Boston 55.41% $2,642,455,762
9 Detroit 52.90% $904,665,613
10 Richmond/Norfolk 52.55% $921,505,850
2016
Rank
City YOY
Change
Total
4Q14-3Q15
45 Las Vegas -11.64% $1,090,684,028
46 Hartford -22.36% $169,652,500
47 Birmingham -27.66% $584,096,218
48 Orange County -28.86% $1,130,983,912
49 Columbus -29.04% $587,987,128
50 San Jose -42.88% $934,216,001
51 Stamford -47.52% $407,688,041
52 Westchester -51.21% $225,260,161
53 Cincinnati -52.99% $176,784,575
54 Pittsburgh -62.38% $61,758,404
45
Las Vegas
46 Hartford
47 Birmingham
48
Orange County
49 Columbus
50
San Jose
51 Stamford
52 Westchester
53 Cincinnati 54 Pittsburgh
9 Detroit
8 Boston
7 Atlanta
6
Inland Empire
5
San
Francisco
4 St. Louis 3 Minneapolis
2 Broward
1 Palm Beach
10 Richmond/
Norfolk
$130.7B
Multifamily transaction volume
jumped 19.4% YOY to $130.7 billion
21

MULTIFAMILY MARKET CYCLE
Moderate Absorption
High Absorption
Low Absorption
RECESSION
Miami, FL
Minneapolis, MN
Naples, FL
New Jersey, Coastal
New Jersey, No.
New York, NY
Oakland, CA
Philadelphia, PA
Phoenix, AZ
Pittsburgh, PA
Richmond, VA
Salt Lake City, UT
San Francisco, CA
San Jose, CA
Sarasota, FL
Syracuse, NY
Tampa, FL
Baltimore, MD
Birmingham, AL
Boise, ID
Boston, MA
Charlotte, NC
Chicago, IL
Cincinnati, OH
Columbus, OH
Dallas, TX
Fort Worth, TX
Hartford, CT
Houston, TX
Indianapolis, IN
Jacksonville, FL
Kansas City, MO/KS
Long Island, NY
Louisville, KYWashington, DC
Atlanta, GA
Raleigh, NC
Austin, TX
Broward-PB, FL
Charleston, SC
Cleveland, OH
Denver, CO
Greensboro, NC
Greenville, SC
Los Angeles, CA
Nashville, TN
Orange County, CA
Orlando, FL
Portland, OR
Columbia, SC
Dayton, OH
Detroit, MI
Las Vegas, NV
Memphis, TN
Sacramento, CA
Wilmington, DE
HYPERSUPPLY
RECESSION
EXPANSION
RECOVERY
Providence, RI
San Diego, CA
Seattle, WA
St. Louis, MO
Tulsa, OK
Jackson, MS
93%
Of markets are currently in
the Expansion Phase
Urban multifamily markets that are
expected to perform well in 2016
with regard to net absorption
include Seattle, WA and Houston,
TX. Among suburban multifamily
properties, Los Angeles, CA forecasts
strong net absorption in 2016.
IRR reports that 83% of suburban
multifamily markets are in balance
compared to 70% of urban
multifamily markets. Less than 4% of
suburban multifamily markets are
more than two years away from
moving to balance.
Cap Rates
IRR forecasts that multifamily cap
rates in 74% of U.S. markets will
remain constant over the next 12
months. Thirteen U.S. markets are
calling for a reversal of cap rate
contraction, with the largest reversal
expected to be felt in Coastal New
Jersey, with a cap rate increase of 75
bps for Class B properties, and a
boost of up to 50 bps for Class A
properties.
Urban Class A Cap Rates
In 2015, 30 of the 60 markets tracked
by IRR experienced cap rate
contraction for urban class A
properties. Multifamily cap rates
compressed in 64% of markets in the
Central region in 2015, leading to
22

compression of 24 bps, which was
the strongest nationally. The South
also experienced strong YOY
contraction (20 bps), resulting from
decreasing YOY cap rates among
52% of the markets. In 2015,
especially strong YOY cap rate
compression for urban Class A
multifamily properties was noted in
Nashville, TN (100 bps), and
Charleston, SC (80 bps).
Bucking the national
trend, Cap Rates for
Suburban Class B
properties, in the East
region, increased by 4 bps
over the past year
The West region had the lowest cap
rates at 4.62% in 2015. On the other
hand, the Central region had the
highest average rate (6.04%), due to
high variability in the region.
Chicago, IL and Dayton, OH
experienced a 300-bps difference in
cap rate spreads. Meanwhile,
Cleveland, OH and Indianapolis, IN
expect rates to increase over the
next 12 months.
Cap rates in the East are forecast to
be relatively stable in 2016, with only
Syracuse, NY likely to experience
additional compression. All West
markets are projected to experience
materially steady cap rates in 2016,
except for Portland, OR, which is
expecting a slight increase.
Suburban Class A
Cap rate compression for suburban
Class A properties was relatively
strong in the South during 2015, at
an average of 29 bps; with 63% of
markets in this region experiencing
contraction in past 12 months. The
East, led by Philadelphia, PA and
Syracuse, NY, experienced an
average YOY contraction of 16 bps
in 2015. The largest change in 2015
for suburban A multifamily cap rates
was seen in Charleston, SC, which
fell by 125 bps YOY. The West
reported the highest percentage of
markets with contraction among
suburban Class A properties.
Factors of Influence
The top factors most likely to impact
cap rates, ranked by IRR’s local
market surveys, include the balance
between supply and demand within
the marketplace, income growth
potential of a multifamily property,
and how well the market’s local
economy is performing, driven
primarily by future job prospects.
The multifamily segment is also
feeling the impacts of demographic
shifts involving millennials and
young professionals in such markets
as Austin, TX, Baltimore, MD, Boise,
ID, Houston, TX and Raleigh, NC.
Conclusion
Provided employment gains
continue, the multifamily market will
enjoy continued investment interest
due to pent-up demand, current buy
versus rent preferences, and the
need to replace post-war inventory.
Rent compression is a risk in some
markets in 2016. The multifamily
market will rebalance in 2016, as a bulk
of the supply pipeline is delivered.
REGIONAL RATES COMPARISON - MULTIFAMILY
Cap
Rate
Discount
Rate
Market
Rent ($/Unit)
Vacancy
Rate
4Q14 - 4Q15
Cap Rate s
South Region
Urban Class A 5.47% 7.13% $1,489 8.85% 19 bps
Urban Class B 6.22% 7.68% $947 6.16% 24 bps
Suburban Class A 5.63% 7.41% $1,082 5.57% 27 bps
Suburban Class B 6.53% 8.00% $797 5.01% 17 bps
East Region
Urban Class A 5.23% 6.74% $2,048 6.67% 17 bps
Urban Class B 6.35% 7.65% $1,350 3.30% 16 bps
Suburban Class B 6.65% 7.87% $1,130 2.94% 4 bps
Central Region
Urban Class A 6.04% 7.38% $1,310 7.61% 24 bps
Urban Class B 7.01% 8.20% $769 4.65% 12 bps
West Region
Urban Class A 4.62% 6.76% $1,932 5.85% 15 bps
Urban Class B 5.27% 7.41% $1,310 3.03% 23 bps
Suburban Class B 5.45% 7.53% $1,209 3.09% 19 bps
Urban Class A 5.34% 7.01% $1,680 7.48% 19 bps
Urban Class B 6.19% 7.71% $1,085 4.56% 20 bps
23

Fundamentals Improving,
Challenges Remain for 2016
Retail fundamentals continued to improve
in 2015 for the U.S. retail real estate sector.
Despite increased competition and unsteady
consumer confidence, the industry experienced
strong net absorption, rents continued to move
steadily upward, and vacancy rates further
trended downward.
RETAIL
Transaction Volume
There has been $90.4-billion in
annual transaction volume recorded
within the U.S. retail sector through
3Q 2015, as reported by RCA. This
represents an increase of nearly $20
billion from the prior year, and is up
from $22.9 billion in transaction
volume in 2010.
The West captured the greatest
share of the national transaction
volume, followed by the South, East
and Central regions in 2015. In terms
of year-over-year percentage
increases, the national transaction
volume grew 25.6%. The West led
with an increase of 49.73%, followed
by the East (22.1%), the Central
(16.8%), and the South (12.5%).
The top three markets in retail
transaction volume size in 2015
include Manhattan, which
experienced a YOY increase of
21.4%, Los Angeles, CA (up 24.5%
YOY), and Chicago, IL (down 2.2%
YOY). These markets rank as the top
three most populous and continue
their stronghold as the dominant
retail centers in their regions. Palm
Beach, FL, which ranks 9th in overall
transaction volume in 2015, reported
more than 325% in YOY volume
increase, joining neighboring city
Miami, FL in the top 10 rankings to
represent another prominent retail
center in the U.S.
IRR research reveals that in 2015
lenders considered outlet centers
and regional malls the highest risk,
as compared to grocery-anchored
properties, an indication of the
impact that e-commerce is having
on the retail commercial real
estate markets.
24

TOP MARKETS BY RETAIL TRANSACTION VOLUME BASED ON YOY PERCENTAGE CHANGE
2016
Rank
City YOY
Change
Total
4Q14-3Q15
1 Palm Beach 326.56% $1,830,885,053
2 San Jose 225.55% $1,178,194,535
3 Columbus 200.47% $967,894,061
4 Kansas City 163.20% $882,602,244
5 N. New Jersey 133.28% $2,015,130,762
6 Detroit 109.27% $1,104,991,407
7 Orange County 86.47% $1,175,697,102
8 NYC Boroughs 82.77% $3,236,109,534
9 Sacramento 67.95% $810,007,101
10 Phoenix 65.92% $1,829,555,755
2016
Rank
City YOY
Change
Total
4Q14-3Q15
45 Long Island -16.93% $373,012,686
46 San Antonio -31.43% $402,546,378
47 Stamford -35.45% $453,839,346
48 Cincinnati -38.89% $372,704,740
49 Cleveland -43.34% $275,909,793
50 Raleigh/Durham -46.78% $322,887,266
51 Indianapolis -49.74% $199,216,586
52 Hartford -49.82% $114,203,219
53 Philadelphia -50.67% $533,087,840
54 Jacksonville -65.56% $210,006,801
46 San Antonio
47 Stamford
48 Cincinnati 49 Cleveland
50 Raleigh/Durham
51 Indianapolis
52 Hartford
53 Philadelphia
54 Jacksonville
9
Sacramento
8 NYC B.
7Orange
County
6 Detroit
5 N. New Jersey
4 Kansas City
3 Columbus
2
San Jose
1 Palm Beach10Phoenix
45 Long Island
$90.4B
Annual retail transaction volume represents an
increase of nearly $20B from the prior year
25

RETAIL MARKET CYCLE
Moderate Absorption
High Absorption
Low Absorption
RECESSION
Chicago, IL
Louisville, KY
Miami, FL
Providence, RI
Syracuse, NY
Cleveland, OH
Columbus, OH
Phoenix, AZ
Pittsburgh, PA
Sacramento, CA
St. Louis, MO
Tulsa, OK
Kansas City, MO/KS
Las Vegas, NV
Los Angeles, CA
New Jersey, Coastal
Orange County, CA
Birmingham, AL
Boise, ID
Dayton, OH
Indianapolis, IN
Jackson, MS
Atlanta, GA
Greensboro, NC
Hartford, CT
Memphis, TN
Portland, OR
Richmond, VA
San Diego, CA
Sarasota, FL
Seattle, WA
Tampa, FL
Washington, DC
Fort Worth, TX
Jacksonville, FL
Minneapolis, MN
Naples, FL
Oakland, CA
Orlando, FL
Philadelphia, PA
Baltimore, MD
Broward-PB, FL
Charleston, SC
Cincinnati, OH
Columbia, SC
Dallas, TX
Denver, CO
Detroit, MI
New Jersey, No.
New York, NY
Raleigh, NC
Salt Lake City, UT
San Francisco, CA
San Jose, CA
Wilmington, DE
Austin, TX
Boston, MA
Charlotte, NC
Greenville, SC
Houston, TX
Long Island, NY
Nashville, TN
HYPERSUPPLY
RECESSION
EXPANSION
RECOVERY
Market Cycle
IRR’s overview of 2015 retail market
performance reveals the Central and
West regions still have a significant
percentage of markets recovering
(55% and 43% respectively). Overall,
63% of retail marketplaces are in the
expansionary phase, driven by the
Southern region with 75% of
markets in expansion. Overall, 66%
of regional mall, 57% of community
retail, and 44% of neighborhood
retail markets researched were
considered stabilized.
Market Fundamentals
Vacancy rates in the East region
were the tightest in 2015 followed by
the West, South and Central regions.
The widest community retail
vacancy rates were experienced in
Birmingham, AL, Cleveland, OH and
Syracuse, NY. The lowest vacancy
rates for community retail were
found in Denver, CO, Dallas, TX and
Washington, DC. The tightest
neighborhood retail vacancy rates in
2015 were found in Orange County,
CA, New York City and Seattle, WA.
IRR’s research reveals that over the
next 36 months, 55% of U.S. retail
markets are expected to experience
annual rent growth rates of 1% - 3%.
IRR also found that a higher
percentage of neighborhood retail
markets are calling for rent increases
compared with community retail or
regional mall retail marketplaces.
Cap Rates
IRR’s data shows that 68% of retail
markets expect to see cap rates
remain constant over the next 12
months. An additional 27% expect
26

A higher percentage
of neighborhood retail
markets are calling
for rent increases
compared with
community retail or
regional mall retail
marketplaces
Factors of Influence
The growth of online shopping
is being felt in markets
nationwide, as omnichannel
strategies emerge. IRR research
found that markets such as
Boise ID, Jacksonville, FL, and
Orlando, FL have been slower to
adopt online retailing.
The emergence and influence of
the fast-casual food segment
was felt in markets such as
Indianapolis, IN, Kansas City,
MO/KS, Memphis, TN, Orlando,
FL, and Washington, DC.
Mixed-use developments played
a prominent role in markets such
as Denver, CO, San Diego, CA,
and Houston, TX, to name a few.
cap rates to decrease marginally in
2016.
Among the top markets expecting a
reversal of retail cap rate
compression in 2016 are Miami, FL,
Los Angeles, CA, and Atlanta, GA.
Relatively strong cap rate
compression is expected in Chicago
for neighborhood retail properties.
IRR’s survey discovered that the
Florida retail markets of Tampa,
Orlando, Naples, and Sarasota are
expected to experience cap rate
compression in 2016.
Community Retail
IRR’s data shows that community
retail cap rates decreased in more
than 80% of the markets in the
South and Central regions over the
past 12 months. Retail cap rates in
the West hit a nadir at the
historically low rate of 6.27%. Cap
rates exhibited the lowest variance
between prime and secondary markets
in the Central Region (175 bps), while
the most variability was experienced in
the East region (295 bps).
Neighborhood Retail
IRR’s research shows that 75% of the
neighborhood retail markets in the
South region and 73% of markets in
the Central experienced cap rate
compression in the past 12 months,
compared to 50% in the West and
only 31% in the East region. The
Central region experienced the
strongest average cap rate
contraction at 30 bps.
Conclusion
Retail remains an opportunity
investment as recovery in rents and
occupancies have been more
measured – though steadily
improving. Strong housing growth
and improvement in consumer
confidence favor retail in 2016,
except in markets that rely heavily
on international tourist sales.
REGIONAL RATES COMPARISON - RETAIL
Cap
Rate
Discount
Rate
Market
Rent ($/SF)
Vacancy
Rate
4Q14 - 4Q15
Cap Rate s
South Region
Community Retail 7.10% 8.31% $16.88 8.54% 34 bps
Neighborhood Retail 7.24% 8.36% $15.08 10.19% 30 bps
Regional Mall 7.00% 8.47% $23.81 6.51% 29 bps
East Region
Central Region
West Region
27

Significant Expansion and Growth
Highlights Sector
The U.S. industrial market continued to adapt
to changes in global supply chain logistics,
constantly shifting global trade routes and rapid
adoption of new technologies designed to
expedite the flow of products into consumers’
hands in 2015.
INDUSTRIAL
Transaction Volume
The strength of the U.S. industrial
market is evident in the significant
growth of industrial transaction
volume that increased from $21.0
billion in 2010 to $48.5 billion in
2014. Year-over-year transaction
activity nationwide as of 3Q 2015
was $66 billion, a 41.5% YOY
increase from the same period in
2014, according to RCA.
Regionally, the West experienced a
57.6% increase YOY in transaction
volumes to $25.7 billion, a dominant
38.9% of the volume nationally.
The South ranks second with a
41.6% lift in volume activity –
exhibiting $18.6 billion in volume
(28.2% market share nationally). The
East’s activity came in third, with
$11.8 billion in volume (17.9%
national market share), representing
a 33.3% increase YOY. The Central
region increased 18.7% YOY as a
result of a $1.6-billion lift in
transaction volume.
The most active market in the
country was Los Angeles, CA, after
experiencing 85.4% growth on $5.3
billion in activity. Chicago, IL ($3.5
billion), fell to second overall in the
rankings, with comparatively
marginal growth at 14.4%. Dallas,
TX, Inland Empire, CA, and Northern
New Jersey round out the top five in
respective order. Markets that
jumped into the top 10 of overall
transaction volume rankings include
Seattle, WA (ninth overall) and East
Bay, CA (tenth overall).
Market Cycle
As a way to track trends nationally,
IRR closely monitors and plots the
phases markets go through on an
accompanying Market Cycle chart.
This popular feature of Viewpoint
shows the Central and South regions
have at least 80% of markets in
expansion phase, while 75% of
28

TOP MARKETS BY INDUSTRIAL TRANSACTION VOLUME BASED ON YOY PERCENTAGE CHANGE
2016
Rank
City YOY
Change
Total
4Q14-3Q15
1 Stamford 767.75% $408,687,398
2 Richmond/Norfolk 517.71% $679,017,264
3 Birmingham 232.90% $78,741,000
4 St Louis 160.14% $597,376,301
5 East Bay 138.10% $1,773,052,780
6 Seattle 127.66% $1,918,120,311
7 Tampa 108.42% $495,985,496
8 Portland 105.36% $869,993,419
9 San Francisco 98.17% $1,167,198,962
10 Memphis 96.58% $628,494,353
2016
Rank
City YOY
Change
Total
4Q14-3Q15
45 Denver 15.37% $998,697,703
46 Chicago 14.40% $3,466,247,998
47 Kansas City 10.81% $288,509,187
48 Cincinnati 7.53% $452,359,195
49 Indianapolis -0.12% $910,600,750
50 NYC Boroughs -3.45% $1,726,249,171
51 Cleveland -15.12% $187,286,050
52 Long Island -22.49% $180,421,948
53 Manhattan -39.87% $497,670,000
54 Raleigh/Durham -41.78% $262,518,951
46 Chicago
47
Kansas City
48 Cincinnati
49 Indianapolis
50 NYC B.
51 Cleveland
52 Long Island
53 Manhattan
54 Raleigh/Durham
45
Denver
8
Portland
7 Tampa
6
Seattle
5
East Bay
4 St. Louis
3 Birmingham
2 Richmond/
Norfolk
1 Stamford
9
San
Francisco
10 Memphis
$66B
Industrial transaction volume
jumped 41.5% YOY to $66 billion
29

INDUSTRIAL MARKET CYCLE
Moderate Absorption
High Absorption
Low Absorption
RECESSION
Houston, TX
Kansas City, MO/KS
Oakland, CA
San Francisco, CA
San Jose, CA
Providence, RI
Jacksonville, FL
San Diego, CA
Syracuse, NY
Wilmington, DE
Cleveland, OH
Greensboro, NC
Hartford, CT
Jackson, MS
Phoenix, AZ
Sacramento, CA
Washington, DC
Birmingham, AL
Boise, ID
New Jersey, Coastal
Greenville, SC
Indianapolis, IN
Los Angeles, CA
Louisville, KY
Miami, FL
Minneapolis, MN
Naples, FL
Atlanta, GA
Austin, TX
Chicago, IL
Columbia, SC
Dallas, TX
Denver, CO
Fort Worth, TX
Baltimore, MD
Boston, MA
Broward-PB, FL
Charleston, SC
Charlotte, NC
Cincinnati, OH
Columbus, OH
Dayton, OH
Pittsburgh, PA
Raleigh, NC
Sarasota, FL
Seattle, WA
St. Louis, MO
Tampa, FL
Tulsa, OK
Detroit, MI
Las Vegas, NV
Long Island, NY
Memphis, TN
Nashville, TN
Orlando, FL
Philadelphia, PA
HYPERSUPPLY
RECESSION
EXPANSION
RECOVERY
New Jersey, No.
New York, NY
Orange County, CA
Portland, OR
Richmond, VA
Salt Lake City, UT
industrial marketplaces overall are in
the expansionary phase. The
industrial markets in the East appear
to be lagging behind other regions
of the country, with 46% of its
markets continuing to exhibit
recovery conditions.
IRR’s 3Q 2015 interest rate survey
found that industrial flex/research
and development assets presented
the highest risk to lenders, especially
on deals financed with a loan-to-
value (LTV) of greater than 60%.
Rents, Vacancies
Over the next 36 months, 30% of
markets expect to see market rents
grow by more than 3% annually with
the remaining markets calling for
stable or limited growth. IRR expects
rent increases will occur in 75% of
markets nationally in 2016. The Bay
Area expects the highest gains at
more than 8% in market rent growth.
The South experienced the most
YOY contraction among industrial
vacancy rates of 27 bps, compared
46%
Of the markets in
the East are in the
Recovery market
cycle phase
30

70%
More than 70% of
the markets in the
South and West have
experienced Cap
Rate decreases in
the past 12 months
The Evolving
Industrial Market
As a result of the shift towards
e-commerce, owners of
industrial properties – as well as
their tenants – are creating new
ways of conducting business to
meet omnichannel retail
strategies. IRR expects that the
industrial and retail sectors will
become more correlated in the
future as the economy continues
its shift from manufacturing to
speedy delivery of goods that
are increasingly produced
elsewhere.
against a national contraction of 23
bps. The tightest vacancy rates
reported in 2015 were in Orange
County, CA (2.9%), Charleston, SC
(3.0%) and Los Angeles, CA (3.0%).
Cap Rates
Cap rate compression continued to
be strong in the South in 2015,
mirroring what IRR tracked for retail,
and perhaps illustrating the
correlation between the two,
especially in areas where
distribution capabilities are paired
with a strong consumer market.
Comparatively, the East experienced
marginal cap rate compression,
specifically with flex properties.
IRR research finds that 95% of
industrial markets will see cap rates
remaining steady or decreasing
slightly in 2016. It remains unclear if
Central region industrial cap rates
reach levels achieved in the West
and East, or will bottom-out at a
higher level.
The Southern region underwent the
strongest cap rate contraction at
30 bps, with the West and Central
regions close behind. The East
contracted by 20 bps in 2015. Cap
rates in Atlanta, GA, Broward
County, FL, Charlotte, NC, and
Coastal New Jersey are expected to
reverse in 2016.
The West experienced the lowest
average cap rates across the U.S. at
6% in 2015. Cap rate decreases have
occurred among more than 70% of
the markets in the South and West
during the previous 12 months. Half
of the markets in the West are
expected to experience further
decreases in 2016, while Hartford,
CT is the only market in the East
calling for further cap rate contraction.
Conclusion
Industrial assets will face many
challenges in 2016, the biggest
being global headwinds on trade
owing to the continued strength of
the U.S. dollar. Primary U.S. logistic
distribution hubs will perform well
on the back of increased retail
distribution activity domestically.
REGIONAL RATES COMPARISON - INDUSTRIAL
Cap
Rate
Discount
Rate
Market
Rent ($/SF)
Vacancy
Rate
4Q14 - 4Q15
Cap Rate s
South Region
Flex Industrial 7.86% 8.95% $8.14 9.74% 26 bps
Industrial 7.11% 8.27% $4.87 8.12% 32 bps
East Region
Industrial 6.64% 7.80% $6.28 8.77% 20 bps
Central Region
Industrial 7.46% 8.51% $4.17 8.44% 29 bps
West Region
Industrial 6.00% 7.38% $7.52 7.19% 29 bps
Industrial 6.83% 8.01% $5.64 8.10% 29 bps
31

2015 Recovery Path Leads to Favorable
Conditions In 2016
The U.S. hospitality industry remained on a
strong growth path in 2015. An ever-improving
economy and the favorable gap between supply
and demand have led to significant growth in
revenues and profits since 2009.
Seven years of demand outpacing supply has
resulted in record levels of occupancy for the
U.S. hospitality industry. According to STR,
Inc., the previous peak for occupancy was
64.7% in 1995. With strong occupancy rates,
average daily rate (ADR) gains ranging from
5.0% to 6.3% are anticipated over the next
three years. With U.S. hotels achieving all-time
high occupancy levels, hoteliers are expected
to increase ADRs at an average annual pace of
5.7% from 2015 through 2017.
HOSPITALITY
Transaction Volume
Transaction volumes, as measured
by RCA, have climbed materially
from around $20.0 billion in 2011 to
$34.2 billion in 2014, with a further
escalation in 2015 to $44.8 billion
annually through 3Q 2015. This
represents a 34.9% YOY change. The
largest YOY change occurred in the
East, which experienced a 68.4%
increase, followed by the South
(48.0%), the Central (43.0%), and the
West (2.6%).
The 68.4% transaction volume
increase in the East has resulted in a
25.3% market share of the national
transaction volume. The South had a
$5.4 billion lift in YOY transaction
volume and now controls the
majority of the transaction volume
(37.3%) nationally. The West only
had a $.3 billion transaction volume
increase in the past year, resulting in
a market share of 27.9%.
IRR’s third quarter 2015 interest rate
survey found that full-service
properties had tight spreads on
deals with an LTV of less than 60%,
highlighting the perception that such
assets offer lower risk compared to
limited and luxury hospitality
categories.
Market Cycle
IRR’s research shows that the West
region has more than 90% of
markets in expansion. Overall, 75%
of marketplaces nationally are in the
expansionary phase. The New York
City market is currently in a
hypersupply stage.
From 2011 through 2014, annual
changes in supply for the nation
were less than 1.0%. The pace of
hotel construction did pick up in
2015, with a net increase of 1.2%. In
2016, forecasts call for supply to
grow by 1.8%, just short of the
long-run average of 1.9%.
32

TOP MARKETS BY HOSPITALITY TRANSACTION VOLUME BASED ON YOY PERCENTAGE CHANGE
2016
Rank
City YOY
Change
Total
4Q14-3Q15
1 Raleigh/Durham 648.95% $446,114,864
2 Orlando 410.24% $2,328,103,247
3 Boston 223.31% $1,141,068,995
4 Las Vegas 165.42% $199,206,838
5 Pittsburgh 144.56% $395,502,708
6 Sacramento 140.08% $152,734,272
7 Indianapolis 137.48% $254,786,745
8 Hartford 135.59% $104,135,839
9 Houston 112.37% $889,658,006
10 Tampa 110.33% $579,874,278
2016
Rank
City YOY
Change
Total
4Q14-3Q15
45 Miami -7.88% $1,719,905,160
46 Long Island -12.35% $123,442,670
47 Salt Lake City -16.13% $110,797,750
48 Cleveland -26.47% $130,216,933
49 Denver -26.63% $400,991,632
50 Seattle -33.16% $369,964,478
51 Broward -37.25% $779,231,079
52 Philadelphia -43.96% $290,069,413
53 East Bay -59.28% $179,950,000
54 NYC Boroughs -66.15% $58,725,000
46 Long Island
47 Salt Lake City
48 Cleveland
49 Denver
50Seattle
51 Broward
52 Philadelphia
53
East Bay
54 NYC B.
45 Miami
9 Houston
8 Hartford
7 Indianapolis
6
Sacramento
5 Pittsburgh
4
Las Vegas
3 Boston
2 Orlando
1 Raleigh/Durham
10 Tampa
$44.8B
Hospitality transaction volume
jumped 34.9% YOY to $44.8 billion
33

HOSPITALITY MARKET CYCLE
Moderate Absorption
High Absorption
Low Absorption
RECESSION
Denver, CO
Indianapolis, IN
Miami, FL
Portland, OR
New York, NY
Hartford, CT
New Jersey, Coastal
Columbia, SC
Greensboro, NC
Greenville, SC
Dayton, OH
Jackson, MS
Houston, TX
Kansas City, MO/KS
Long Island, NY
Louisville, KY
Minneapolis, MN
New Jersey, No.
Orlando, FL
Philadelphia, PA
Atlanta, GA
Austin, TX
Boston, MA
Charleston, SC
Charlotte, NC
Columbus, OH
Dallas, TX
Fort Worth, TX
Boise, ID
Cincinnati, OH
Detroit, MI
Jacksonville, FL
Las Vegas, NV
Orange County, CA
Providence, RI
Salt Lake City, UT
St. Louis, MO
Syracuse, NY
Tampa, FL
Tulsa, OK
HYPERSUPPLY
RECESSION
EXPANSION
RECOVERY
Pittsburgh, PA
Raleigh, NC
Richmond, VA
San Diego, CA
San Francisco, CA
Seattle, WA
Phoenix, AZ
Wilmington, DE
An influx of new hotel supply will
affect some markets sooner than
others, but the overall supply
remains significantly lower than
during the last peak, suggesting that the
current cycle may have room to
continue expanding. It is anticipated
that the cycles will start to peak in 2017.
Hotels located in airport and suburban
areas are forecast to achieve the
strongest RevPAR gains in 2016. The
continuing return of large conventions
is causing compression in several
major markets, which is forcing
demand out of the urban core and
into the suburbs.
For properties located along the
nation’s highways, and in smaller
metro and rural markets, the
seasonality of the interstate market
limits annual occupancy growth. The
economic recovery in the high-
income sector created an imbalance
of hospitality recovery that has
favored upper-priced properties and
large coastal markets. As employment
75%
Of the markets are
in the Expansionary
market cycle phase
34

Caribbean Market
Overview
Caribbean hotel metrics
continue to improve to peak
levels, and tourist arrivals are
also at record highs; resulting in
increased demand in the
hospitality space. Caribbean
region Average Daily Rates
(ADR) grew by 4.5% to $228.04,
while occupancy was up 3.0% to
70.9%, leading to RevPar growth
of 7.6%, or $164.37. A minor
deceleration of growth is
projected in the region’s
tourism-based economies from
2.4% in 2014 to 2.3% in 2015-
2016, which is expected to
trickle through to slower RevPar
and overall economic growth in
the region.
New hotel development is on
the rise in the Caribbean region,
despite debt financing
difficulties. Transactions are
also increasing, particularly with
regard to renovating, re-
branding and re-positioning of
hotel resorts. Smith Travel
Research reports that 42 hotels
in the Caribbean, totaling 7,831
rooms, were in the “in-contract”
stage in 3Q 2015, a 4.3%
increase compared to the same
period of 2014. New
development and renovation
projects are dominated by the
all-inclusive resort sector, which
is becoming more luxury oriented.
levels rise across all employment
sectors, a commensurate uptick in
performance is expected across the
entire U.S. hospitality spectrum.
Supply and demand, as
well as local economic
factors, will have the
strongest impact on
Cap Rates in 2016
Cap Rates
IRR’s survey of capitalization rates
reveals that 71% of markets expect
to see hospitality cap rates remain
constant over the next 12 months.
Full-service asset cap rates remain
the tightest in the West and East
(7.6%), while cap rate compression
continues to be weak in the Central
region, where the highest average
cap rates within the sector persist.
U.S. Market Profits,
Values Continue Rising
The U.S. lodging industry is in the
midst of a six-year period of
continuous double-digit bottom-line
gains. Based on the revenue
forecasts, unit-level net operating
income will increase 14.6% in 2015,
and is forecast to rise by 12.9% in
2016. A critical factor contributing to
double-digit NOI growth is a
significantly lower rate of growth in
operating expenses.
Conclusion
By far, the hospitality market faces
the biggest risks in 2016. The
industry is segmented, so
generalizations about the impact of
inbound international tourism might
be hyperbole. But a strong U.S.
dollar also favors American travel
abroad, which would be a double-
whammy to ADRs across almost
every sector.
REGIONAL RATES COMPARISON - HOSPITALITY
Cap
Rate
Discount
Rate
Avg Daily
Rate ($/Rm)
Occupancy
Rate
4Q14 - 4Q15
Cap Rate s
South Region
Full Service 8.07% 10.05% $147.65 72.81% 27 bps
Limited Service 8.85% 10.49% $97.18 68.26% 36 bps
East Region
Full Service 7.60% 9.14% $169.77 73.32% 12 bps
Central Region
Full Service 8.44% 10.08% $123.22 66.33% 8 bps
West Region
Full Service 7.55% 9.68% $168.89 78.41% 32 bps
Full Service 7.92% 9.77% $152.56 72.88% 22 bps
35

SPECIALTY REPORTS
IRR’s depth and national footprint
allow us to dig beyond the five core
commercial real estate property
sectors. In Viewpoint 2016, we offer
overviews of four specialty property
sectors including senior housing,
medical office buildings, self-storage
and auto dealerships. These outlooks
provide independent analysis of
trends that shape each sector and
provide interpretations of where we
see them heading in 2016.
37

Market at the Peak,
Where Does it Go From Here?
After five years of strong performance and an
especially strong 2015 for the senior housing
asset class, IRR predicts that some markets
could experience declines in pricing and sales
activity in 2016. This prediction is primarily due
to concerns of overbuilding in some markets.
Despite these concerns, the asset class
remains an attractive arena for investors due to
favorable demographic trends. Investors looking
to capitalize on these demographic trends are
driving development capital inflows, but as a
result, new supply appears to be outpacing near-
term demand.
SENIOR HOUSING
Demographic Shifts
Drive Investor Appeal
Between 2015 and 2020, there will
be strong population growth of 1.7%
per year in the 80-plus age sector, an
age that typically triggers a move to
a senior housing property. However,
the first baby boomers won’t turn 80
until 2026, thus a majority of boomers
will not be ready to give up their
homes or traditional rentals for at
least another decade.
Supply and Occupancy
Trends
An abundant capital supply has led
to a construction boom – primarily
among assisted living and memory
care sectors. Construction activity at
the end of the third quarter of 2015
was at its highest level since the
National Investment Center for
senior housing and Care (NIC) began
compiling data in 2008. Increased
supply has exerted downward
pressure on occupancy. There is an
emerging trend of non-traditional
financing sources includes the EB-5
program, which enable developers
to finance a portion of their senior
living centers.
Subsectors
Assisted Living
New development of assisted living
and memory care assets has
continued, in part, due to the asset
classes’ strong performance during
the last real estate downturn. By
exhibiting strong property
fundamental growth, the asset class
fueled perceptions that the industry
is highly resistant to economic
downturns. These properties also
tend to be less expensive to develop.
Developers are usually more
successful procuring equity to
obtain sites, and construction
financing for these developments is
more readily available than for
larger-scale senior housing
38

OCCUPANCY BY SECTOR - ALL MARKETS (MAP99)
TRANSACTION VOLUME AND CAPITALIZATION RATES
Construction activity
is at an all-time high;
however, new supply is
depressing occupancy
rates nationally
projects. Nationally, the average
occupancy rate for assisted living
facilities was 88.3% during the third
quarter of 2015.
Independent Living
Development has picked-up among
independent living centers and this
subsector remains healthy nationally
with average occupancy rates above
90% as of the third quarter of 2015.
Since independent living facilities
tend to be the first to attract a
younger resident base, the facilities
will benefit from the coming wave of
baby boomers.
Nursing Care
The nursing care segment, the
largest of the markets, is
experiencing a slowdown in new
construction. Many developments
are replacements for obsolete
facilities. Declining nursing
occupancy rates are also likely
impacting development.
Capitalization Rates and
Values
Senior housing capitalization rates
have been stable to declining since
2010. NIC Map most recently
reported a four-quarter rolling
average sales price per unit for
senior housing, exclusive of skilled
nursing, of $158,570 per unit. In the
skilled nursing sector, the four-
quarter rolling average price per bed
was $74,015, up 37.7% from the first
quarter of 2010.
85%
86%
87%
88%
89%
90%
91%
92%
Q1’10
Q3’10
Q1’11
Q3’11
Q1’12
Q3’12
Q1’13
Q3’13
Q1’14
Q3’14
Q1’15
Q3’15
AverageOccupancy
Independent Living Assisted Living
Memory Care Skilled Nursing
UNITS UNDER CONSTRUCTION - ALL MARKETS (MAP99)
0
5,000
10,000
15,000
20,000
25,000
Q1’10
Q3’10
Q1’11
Q3’11
Q1’12
Q3’12
Q1’13
Q3’13
Q1’14
Q3’14
Q1’15
Q3’15
UnitsUnderConstruction
Independent Living Assisted Living
Memory Care Skilled Nursing
6%
7%
8%
9%
10%
11%
12%
13%
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
Q1’08
Q3’08
Q1’09
Q3’09
Q1’10
Q3’10
Q1’11
Q3’11
Q1’12
Q3’12
Q1’13
Q3’13
Q1’14
Q3’14
Q1’15
Q3’15
CapitalizationRates
TransactionVolume(Millions)
Skilled Nursing Trans. Vol.
Ind./Asst. Living/Memory Care Trans. Vol.
Ind./Asst. Living/Memory Care Cap Rates
Skilled Nursing Cap Rates
39

Breakout Investment Class in 2016
The medical office building (MOB) market is
expected to be a breakout investment class in
2016. The asset class will continue to appeal
to lenders and investors because of favorable
demographic trends, driving increased demand.
In 2015, the sector experienced increased
demand, partly as hospital systems expanded
outpatient services. Construction of new
facilities took place on and off campus. Hospital
systems also acquired private physician
practices. Lower interest rates, decreased
reimbursements and the Affordable Care Act
(ACA) accelerated physician practice and health
systems acquisitions and alliances – a trend
expected to continue in 2016.
MEDICAL OFFICE
Demographics Drive
Market
The growing population of Americans
age 65 and up is requiring more
healthcare services. This
demographic group is expected to
almost double by 2030, becoming
2.3% of the total U.S. population. By
2050, as many as one in five
Americans will be more than 65
years old, and these age groups
largely drive demand for medical
services, and thereby the need for
medical office space.
Facility Development
The expansion of surgery centers,
freestanding emergency
departments, urgent care centers
and medical office buildings
accelerated in 2015. According to
Accenture Research, the number of
retail medical clinics is projected to
grow by approximately 30% from
2014 to 2015. When combined with
the 20% growth previously
experienced in 2014, it becomes
clear that retail medical clinics are
finding success in serving patient
demand for less complex or lower
acuity cases.
To meet patient demand, medical
clinics are locating within traditional
high-volume retail locations. Where
the retail tenant mix and parking
ratios are right, successful
ambulatory and urgent care tenants
are adding to the gravitational draw
of retail centers.
MOB Investment Trends
The MOB investment class is currently
benefiting from high occupancy and
low cap rates. Increased asset values
fueled by this combination of
factors, in addition to the availability
of low interest rate debt capital, are
40

U.S. MOB SUPPLY AND DEMAND TRENDS
driving investor appetites and strong
sales volumes.
The average price for medical office
assets in 2015 was $289 psf, a 21%
increase from the previous year, as
tracked by RCA through 3Q 2015.
Sales volume increased 44% from
3Q 2014 to $12.3 billion in 2015.
Increased valuations are driving
some of the transaction volume
increases and the number of
properties trading has also increased
31% to 1,151 since the third quarter
of 2014.
The MOB investment
class is currently
benefiting from high
occupancy and low
Cap Rates
Cap Rates
RCA’s national survey data show
that cap rates for medical office
properties average 7.0%. The
average cap rate was 6.6% for on
campus medical office properties, 44
basis points lower than off campus
medical office properties.
Newer facilities in urban primary
market locations with leases
extending 10 years or longer
generally trade in the low-6.0%
range, with top-tier assets
contracting into the 5.0% range.
Similar assets in secondary and
tertiary markets generally trade at
least 100 bps higher. Assets with
shorter leases typically trade in the
high-7.0% to low-8.0% range
depending on the strength of the
properties’ surrounding
demographics and demand for
potential alternative office uses.
MEDICAL OFFICE SALES TRENDS
6.8%
7.0%
7.2%
7.4%
7.6%
7.8%
8.0%
8.2%
8.4%
8.6%
8.8%
$0
$50
$100
$150
$200
$250
2009 2010 2011 2012 2013 2014 2015*
Price Per Sq Ft Cap Rate (%)
* 2015 values are forecasted
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015*
Completions (SF) Vacancy Rate
* 2015 values are forecasted
By 2050, as many as one in
five Americans will be more
than 65 years old, and these
age groups largely drive
demand for medical services,
and thereby the need for
medical office space
41

Fierce Investor Demand Drives Market
The inventory of self-storage properties available
for sale remains low, which is anticipated to
fuel continued aggressive pricing in 2016.
Sustained property fundamentals within the
industry continue to attract first-time buyers to
the property type. Industry consolidation is also
expected to persist as REITs actively expand
their portfolios. The feverish pace of multifamily
rental development, a key leading indicator for
long-term self-storage demand, is propelling
new growth of these facilities
SELF-STORAGE
The self-storage industry continued
to improve on 2015’s record
performance with strong occupancy
and revenue gains. Investors are
increasingly becoming more
comfortable with the sector’s low
capitalization rates. IRR anticipates
that the modest interest rate
increases in 2016 and beyond will
have no material impact on self-
storage asset values.
New construction is increasing in
metro areas, but not at the pace
needed to satisfy current demand
growth patterns. The lack of self-
storage development since 2009,
continued population growth, along
with improved consumer
confidence, continues to drive
strong property performance
fundamentals and further fuels the
already fierce investor demand.
Upward Trending
Market
The industry performed well in the
third quarter of 2015, especially
compared to the same period in
2014. According to REIS, occupancy
rose to 89.6% in 3Q 2015, up 0.9%
year over year. Asking rental rates in
2015 also increased 4.0% compared
to 2014. Storage facilities are
typically busiest during summer
months, when rental rates peak
through the second quarter, and
contract in third and fourth quarters
to maintain occupancy. Occupancy
contracted slightly more in 3Q 2015
on a percentage basis compared
with the same period in 2014. Rental
rates also followed a similar pattern.
These changes could be as a result
of the market beginning to stabilize
after the large gains seen the past
two years.
42

6.7% - 12.6%
Net Operating incomes of Public Storage
REITs exhibited strong growth range from
6.7% - 12.6% over the last two years
REIT Performance
Tracking the industry’s four publicly
traded REITs provides ideal insight
into the sector. Notable highlights
for Public Storage, Extra Space,
CubeSmart, and Sovran REITs
include consistent annual growth in
occupancy and total revenue. NOI
growth of between 6.7% and 12.6%
over the last two years is being
driven by a combination of effective
rental rate and occupancy increases.
National Capitalization
Rate Trends
Cap rates are at historic lows, with
recent transactions averaging 6.5%.
The national cap rate average
among self-storage facilities trading
for more than $1.0 million is 5.5% to
7.0%. Cap rates lower than 5.5% are
evident, especially among Class A
facilities, geographically centered
portfolios, and Class B properties
viewed to have upside potential.
OCCUPANCY TRENDS
80.0%
82.0%
84.0%
86.0%
88.0%
90.0%
92.0%
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
Southwest South Atlantic Northeast
Midwest West U.S. Average
AGGREGATE REIT PERFORMANCE - SAME STORE OPERATION
Period Facility
Count
Occupancy
Change
Revenue
Change
Expense
Change
NOI
Change
3Q-2014 - 3Q-2015 3,253 1.2% 7.6% 2.7% 9.7%
2014 3,154 1.5% 6.9% 3.0% 8.7%
2013 2,949 2.6% 7.5% 2.8% 9.8%
2012 2,888 1.7% 6.0% -1.4% 9.6%
*Public Storage, Extra Space, Sovran, & CubeSmart
43

Vehicle Sales Hit Records in 2015,
Market Expects Continued
Improvement in 2016
Real estate remains a core component inherent
to the value placed on automotive dealerships.
As vehicle sales continue increasing while the
number of dealerships continues to decline,
automobile dealership real estate values are
projected to trend strongly upward for well-
located assets with proven sales histories.
Dealership Real Estate
Trends
The majority of new car dealership
facilities are transferred as part of a
franchise’s larger sale. Industry
market participants note that
dealership franchises are currently
priced at record or near-record
levels. The price allocated to the real
estate as part of the acquisition
process appears to be following the
same trend.
Additionally, manufacturers continue
pressuring franchise owners to
upgrade facilities. Small markets, in
particular, are experiencing
increasing upgrade costs and strong
competition from large ownership
groups and internet sales.
Industry Synergy And
Consolidation
The National Automobile Dealers
Association (NADA) reports front-
end gross profits, as a percentage of
transaction prices, declining by 31%
in new vehicles and 20% in used
vehicles between 2009 and 2014.
Dealership margin compression is
contributing to the need for
dealership consolidations to drive
economies of scale, which is
expected to continue within the
industry in 2016. These industry
economic realities are driving more
movement towards auto malls,
especially malls with multiple
dealerships owned by the same
controlling party.
In addition to consolidation of
existing dealerships into larger
ownership groups, the number of
new car dealerships under
development is decreasing. As a
result, the total number of new
automobile dealership facilities
decreased from approximately
22,000 to roughly 18,000 in the last
decade. The overall decrease in new
car dealers is anticipated to
AUTOMOTIVE
DEALERSHIPS
44

Declining profit margins
contribute to auto mall
proliferation
continue, as small and/or older
properties are redeveloped for
used-car sales or other automobile-
related uses. The growing role of the
internet in the car buying process is
also contributing to industry
consolidation as buyers are more
willing to travel further distances to
make a purchase from larger dealers
who can offer lower prices.
Dealership Marketability
Trends
Large national corporations continue
assuming greater auto industry
ownership roles, replacing what had
previously been the domain of local
or regional automotive groups.
AutoNation is the largest automotive
group in the country with 250
franchises in 15 states, while
NEW VEHICLE SALES AND ANNUAL PERCENT CHANGE
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
0
2
4
6
8
10
12
14
16
18
20
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Vehicles (Millions) Percent Change (%)
Berkshire Hathaway’s 2015
acquisition of the Van Tuyl Group
makes it a formidable competitor of
size with 100 franchises in 10 states.
Manufacturers are beginning to be
concerned about continued
franchise dealer consolidations, with
franchise ownership caps now being
considered in earnest.
Sales Trends
New car and truck sales are forecast
to reach a record high of 17.5 million
in 2016, according to NADA, up
about 2% from 2015. One factor
depressing 2015 sales numbers is
that Congress hadn’t acted (as of
early December 2015) on the tax
deduction for businesses to purchase
vehicles, impacting fleet sales.
45

CRE Trends
Cross Border Total Capital vs. U.S.
Market Share
Source: Real Capital Analytics
Commercial Property Pricing Indices
Sources: Moody’s, Real Capital Analytics
Distribution of 2015 Transaction Volume
2015 Investor Composition
CMBS Issuances ($Bil.)
Source: Compendium of Statistics,
CRE Finance Council, Integra Realty
Resources
Lender Composition (All Property Types)
U.S. Employment vs. Participation Rate
Source: U.S. Bureau of Labor Statistics
Property Reports
Office
Top Markets by Office Transaction
Volume Based on YOY Percentage
Change
Market Cycle
Source: Integra Realty Resources
Regional Rates Comparison
Multifamily
Top Markets by Multifamily Transaction
Change
Market Cycle
Retail
Top Markets by Retail Transaction
Change
Market Cycle
Industrial
Top Markets by Industrial Transaction
Change
SOURCES & REFERENCES PHOTOGRAPHY
Cover
Manhattan
Photo Credit: Terry McLaughlin, Asteryx
Photography © 2015
Chairman’s Letter
Chicago, IL
Photography © 2015
CRE Trends
Page 2-3
Los Angeles, CA
Photography © 2015
Property Reports
Page 14-15
San Francisco, CA
Photography © 2015
Page 20
Elan at Desert Ridge, Phoenix, AZ
Photo Credit: IRR-Phoenix
Page 24
Americana Manhasset, Manhasset, NY
Photo Credit: Americana Manhasset
© 2015
Page 32
JW Marriott Phoenix Desert Ridge Resort
& Spa, Phoenix, AZ
Photo Credit: IRR-Phoenix
Specialty Reports
Page 36-37
Los Angeles, CA
Manhattan
Photography © 2015
Page 38
Arbor Terrace at Crabapple, Alpharetta, GA
Photo Credit: Arbor Terrace at Crabapple
© 2015
Page 42
Seacliff Self Storage, Huntington Beach, CA
Photo Credit: Seacliff Self Storage © 2015
Page 44
Larry H. Miller Lexus, Murray, UT
Photo Credit: IRR-Salt Lake City
Market Cycle
Hospitality
Top Markets by Hospitality Transaction
Change
Market Cycle
Specialty Reports
Senior Housing
Units Under Construction - All Markets
(MAP99)
Source: NIC MAP Data Service
Occupancy By Sector - All Markets
(MAP99)
Transaction Volume and Capitalization
Rates
Medical Office
U.S. MOB Supply and Demand Trends
Sources: Marcus & Millichap Research
Services; Co-Star Group, Inc.
Medical Office Sales Trends
Sources: Marcus & Millichap Research
Services; Co-Star Group, Inc.
Self-Storage
Occupancy Trends
Source: REIS 3Q 2015
Aggregate REIT Performance - Same
Store Operation Public Storage, Extra
Space, Sovran, & CubeSmart
Sources: Companies’ Public Securities
Filings, Integra Realty Resources, Inc.
Auto Dealerships
New Vehicle Sales and Annual Percent
Change
Source: NADA Industry Analysis Division
46

About Viewpoint
IRR’s Viewpoint represents the
compilation and presentation of
Commercial Real Estate (CRE) rates,
market conditions, and forecast data.
The rates, market conditions, and
forecast data is generated via IRR’s
Viewpoint Survey. IRR’s Viewpoint
Survey requests market experts
consisting of Appraisers and
Consultants, each of whom have
deep CRE expertise, to provide
insights on over 60 U.S. markets.
Viewpoint data is collected across
five asset classes including
Multifamily, Office, Retail, Industrial,
and Hospitality.
Viewpoint’s rates data (Cap Rates,
Discount Rates, Reversion Rates,
Vacancy Rates, etc.) reflects an
expert’s opinion based on recent
market activity experienced in the
past 6 months. Viewpoint forecast
data represents a 12-month outlook
based on current market conditions.
The data in Viewpoint reflects rates
data and forecasts based on
stabilized properties in the respective
U.S. marketplace. Where referenced,
all regional and national averages are
based on simple average calculations
and are not weighted.
IRR’s Viewpoint Survey is conducted
through a proprietary data survey
tool, and all data is checked both
manually and by a specially
designed computer editing
procedure. While we do not
guarantee that the survey is
statistically accurate, the Viewpoint
data provides, what we believe, is
the best, clear-sighted insights into
the CRE marketplace.
Disclaimer
This publication includes analyses
and opinions provided by third
parties, and while the available data
is presumed to be accurate, no
representation or warranty is made
regarding the accuracy of the
information contained in this
publication. This publication does
not render legal, accounting,
appraisal, counseling, investment or
other professional advice. Should
such services or other expert
assistance be needed, it is
recommended that the services of a
competent person or firm, having
access to the details of the situation,
be employed.

ABOUT IRR
CARIBBEAN
IRR OFFICES
Integra Realty Resources (IRR) is the largest independent
commercial real estate valuation and consulting firm in
North America, with over 218 MAI-designated members of
the Appraisal Institute among over 875 professionals based
in our 58 offices throughout the United States and the
Caribbean. Founded in 1999, the firm specializes in real
estate appraisals, feasibility and market studies, expert
testimony, and related property consulting services across
all local and national markets. Our valuation and counseling
services span all commercial property types and locations,
from individual properties to large portfolio assignments.
For more information, visit www.irr.com or blog.irr.com.
16+Years Serving
U.S. Markets
Comprehensive Commercial Real Estate
Market Research, Valuation and Advisory Services
875+Professional Staff
58U.S. Offices
218+MAl-Designated
Professionals
irr.com

ALABAMA
Birmingham
Rusty Rich, MAI, MRICS
205-949-5995
rrich@irr.com
ARIZONA
Phoenix
Walter “Tres” Winius III
MAI, FRICS
602-266-5599
twinius@irr.com
CALIFORNIA
Los Angeles
John G. Ellis
MAI, CRE, FRICS
818-290-5444
jellis@irr.com
Metro Los Angeles
Matthew Swanson, MAI
626-792-2107 ext. 3760
mswanson@irr.com
Orange County
Steve Calandra, MAI
949-860-1270
scalandra@irr.com
Sacramento
Scott Beebe, MAI, FRICS
916-949-7360
sbeebe@irr.com
San Diego
Jeff A. Greenwald
MAI, SRA, AI-GRS, ASA, FRICS
858-259-4900
sandiego@irr.com
San Francisco
Jan Kleczewski, MAI, FRICS
415-655-1221
jkleczewski@irr.com
COLORADO
Denver
Brad A. Weiman
MAI, FRICS
303-300-1200
bweiman@irr.com
CONNECTICUT
Hartford
Mark F. Bates
MAI, CRE, FRICS
860-291-8997 ext. 14
mbates@irr.com
DELAWARE
Wilmington
Douglas L. Nickel
MAI, FRICS
302-998-4030 ext. 100
dnickel@irr.com
FLORIDA
Jacksonville
Robert Crenshaw
MAI, FRICS
904-296-8995 ext. 215
rcrenshaw@irr.com
Miami/Palm Beach
Anthony M. Graziano
MAI, CRE, FRICS
305-670-0001
amgraziano@irr.com
Orlando
Christopher D. Starkey
MAI
407-843-3377 ext. 112
cstarkey@irr.com
Southwest Florida
Carlton J. Lloyd, MAI
239-643-6888 ext. 410
clloyd@irr.com
Tampa
Bradford L. Johnson
MAI, MRICS
813-287-1000 ext. 121
bljohnson@irr.com
GEORGIA
Atlanta
Sherry L. Watkins
MAI, FRICS, ASA
404-836-7925
swatkins@irr.com
IDAHO
Boise
Bradford T. Knipe
MAI, ARA, CRE, CCIM, FRICS
208-342-2500
bknipe@irr.com
ILLINOIS
Chicago
Eric L. Enloe
MAI, CRE, FRICS
312-252-8913
eenloe@irr.com
INDIANA
Indianapolis
Michael C. Lady
MAI, SRA, ASA, CCIM, FRICS
317-546-4720 ext. 222
mlady@irr.com
KANSAS
Kansas City
Kenneth Jaggers
MAI, FRICS
913-748-4704
kjaggers@irr.com
KENTUCKY
Louisville
Stacey Nicholas
MAI, MRICS
502-452-1543
snicholas@irr.com
MARYLAND
Baltimore
G. Edward Kerr
MAI, MRICS
410-561-9320 ext. 205
ekerr@irr.com
MASSACHUSETTS
Boston
David Cary, Jr., MAI, MRICS
617-451-9110 ext. 7905
dcaryjr@irr.com
MICHIGAN
Detroit
Anthony Sanna
MAI, CRE, FRICS
248-540-0040 ext. 107
asanna@irr.com
MINNESOTA
Minneapolis/St. Paul
Michael F. Amundson
MAI, CCIM, FRICS
612-339-7700
mamundson@irr.com
MISSISSIPPI
Jackson
John R. Praytor, MAI
601-714-1665
jpraytor@irr.com
MISSOURI
St. Louis
P. Ryan McDonald
MAI, FRICS
314-678-7801
rmcdonald@irr.com
NEVADA
Las Vegas
Charles E. Jack IV, MAI
702-906-0480
cjack@irr.com
NEW JERSEY
Coastal New Jersey
Halvor Egeland, MAI
732-244-7000 ext.103
hegeland@irr.com
Northern New Jersey
Matthew S. Krauser
CRE, FRICS
973-538-3188 ext. 107
mkrauser@irr.com
NEW YORK
New York
Raymond T. Cirz
MAI, CRE, FRICS
212-255-7858 ext. 2020
rcirz@irr.com
Syracuse
William J. Kimball
MAI, FRICS
315-422-5577 ext. 11
wkimball@irr.com
NORTH CAROLINA
Charlotte
Fitzhugh L. Stout
MAI, CRE, FRICS
704-376-0295 ext. 101
fstout@irr.com
Greensboro
Nancy Tritt, MAI, SRA, FRICS
336-676-6033
ntritt@irr.com
Raleigh
Chris R. Morris, MAI, FRICS
919-847-1717
cmorris@irr.com
OHIO
Cincinnati/Dayton
Gary S. Wright
MAI, FRICS, SRA
513-426-7125
gwright@irr.com
Cleveland
Douglas P. Sloan, MAI
330-659-3640 ext. 101
dsloan@irr.com
Columbus
Bruce A. Daubner
MAI, FRICS, ASA
614-398-4314
bdaubner@irr.com
OKLAHOMA
Tulsa
Owen S. Ard, MAI
918-492-4844 ext. 103
oard@irr.com
OREGON
Portland
Brian A. Glanville
MAI, CRE, FRICS
503-478-1002
bglanville@irr.com
PENNSYLVANIA
Philadelphia
Joseph D. Pasquarella
MAI, CRE, FRICS
215-587-6001
jpasquarella@irr.com
Pittsburgh
Paul D. Griffith
MAI, CRE, FRICS
724-742-3324
pgriffith@irr.com
RHODE ISLAND
Providence
Gerard H. McDonough
MAI, FRICS
401-273-7710 ext. 15
gmcdonough@irr.com
SOUTH CAROLINA
Charleston
Cleveland“Bud”Wright,Jr.,
MAI
843-718-2125 ext. 10
cwright@irr.com
Columbia
Michael B. Dodds
MAI, CCIM
803-772-8282 ext. 110
mdodds@irr.com
TENNESSEE
Memphis
J. Walter Allen, MAI, FRICS
901-322-1700
wallen@irr.com
Nashville
R. Paul Perutelli
MAI, SRA, FRICS
615-628-8275 ext. 1
pperutelli@irr.com
TEXAS
Austin
Randy A. Williams
MAI, SR/WA, FRICS
512-459-3440
rawilliams@irr.com
Dallas
Mark R. Lamb
MAI, FRICS, CPA
214-396-5421
mlamb@irr.com
Fort Worth
Gregory B. Cook, SR/WA
817-332-5522 ext. 208
gcook@irr.com
Houston
David R. Dominy
MAI, CRE, FRICS
713-243-3300
ddominy@irr.com
UTAH
Salt Lake City
Darrin W. Liddell
MAI, FRICS, CCIM
801-263-9700 ext. 111
dliddell@irr.com
VIRGINIA
Richmond
Kenneth L. Brown
MAI, FRICS, CCIM
804-346-2600 ext. 209
kbrown@irr.com
WASHINGTON
Seattle
Allen N. Safer, MAI, MRICS
206-436-1190
asafer@irr.com
WASHINGTON, DC
Patrick C. Kerr
MAI, FRICS, SRA
202-774-9360
pkerr@irr.com
CARIBBEAN
Cayman Islands
James V. Andrews
MAI, CRE, FRICS, ASA-BV
844-952-7304 ext. 402
jandrews@irr.com
HEADQUARTERS
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New York, NY 10036
info@irr.com
CONTACT IRR

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