Chicago • Cincinnati • Cleveland • Columbus • Detroit • Indianapolis Kansas City • Milwaukee • Minneapolis • Omaha • St
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Midwest Region Chicago • Cincinnati • Cleveland • Columbus • Detroit • Indianapolis Kansas City • Milwaukee • Minneapolis • Omaha • St. Louis • Toledo MidwestRegionTransactionBreakdown n CCIM Institute designees and candidates rated the eco- dition, the weighted average capitalization rates for each nomic performance in the Midwest region at 5.6 on a scale property sector in the Midwest region, with the exception of 1 to 10, with 10 being high, for first quarter 2008. This of the retail sector, were higher than the national averag- was the lowest rating of the four regions, but was higher es. than the rating given to the nation as a whole. n In contrast to trends where slow consumer spending is n The size- and price-weighted average prices per square negatively affecting retail property fundamentals, retail foot or unit of space in the Midwest regional commercial space showed the most improvement among the major real estate market were well below those same averages property sectors in the Midwest region during first quarter for the nation during first quarter 2008, except for several 2008. of the higher-volume averages in the retail sector. In ad- Regional Transaction Price Breakdown/Tiers Midwest Transaction Breakdown (4/1/07 - 3/31/08) “Small industrial prop- erties on the edge of Office Industrial Retail Apartment Hotel residential development < $2 Million offer good investment Volume (Mil) $386 $757 $786 $361 $43 opportunities.” Size Weighted Avg. ($ per sf/unit) $75 $39 $76 $34,951 $20,612 -Chicago Price Weighted Avg. ($ per sf/unit) $99 $56 $116 $44,074 $23,973 Median ($ per sf/unit) $75 $42 $74 $36,100 $21,734 $2 - $5 Million Volume (Mil) $643 $1,238 $1,288 $554 $309 “It looks like apart- Size Weighted Avg. ($ per sf/unit) $93 $46 $113 $40,207 $35,093 ments are starting to Price Weighted Avg. ($ per sf/unit) $149 $71 $214 $59,547 $39,667 fill up because of the Median ($ per sf/unit) $115 $55 $180 $46,528 $37,006 mortgage crisis.” > $5 Million – Milwaukee Volume (Mil) $15,246 $5,760 $7,185 $6,083 $5,739 Size Weighted Avg. ($ per sf/unit) $153 $58 $175 $75,448 $146,757 Price Weighted Avg. ($ per sf/unit) $201 $84 $324 $115,594 $448,736 Median ($ per sf/unit) $133 $60 $159 $66,967 $104,008 “Office is overbuilt.” All Transactions – Columbus Volume (Mil) $16,274 $7,755 $9,258 $6,998 $6,092 Size Weighted Avg. ($ per sf/unit) $146 $53 $147 $66,812 $121,770 Price Weighted Avg. ($ per sf/unit) $196 $79 $291 $107,461 $424,935 Median ($ per sf/unit) $106 $49 $106 $46,267 $72,871 “Small retail centers Capitalization Rates (All Transactions) that cater to ‘mom and Range (%) 4.3 - 9.6 5.4 - 11.7 5.0 - 11.0 4.5 - 10.0 6.8 - 12.0 pop’ shops should be Weighted Avg. (%) 6.6 7.7 6.3 6.5 8.2 avoided at all costs.” Median (%) 7.5 8.1 7.0 7.2 9.5 - Chicago Source: RERC. Investment Trends Copyright© 2008 by Real Estate Research Corporation (RERC) and the CCIM Institute. 98 Quarterly MidwestOfficePropertySector RERC Weighted Avg. Cap Rate - 1Q 2008 9.0% Midwest U.S. Total 8.5% Avg. Capitalization Rate n Survey respondents had mixed opinions about the Mid- 8.0% west region’s office market. Several respondents stated 7.5% that the sector is among the worst for investment opportu- 7.0% nities due to over-supply, while others stated that it offered good opportunities (specifically medical offices). 6.5% 6.0% n Office transaction volume declined during first quarter 2008. Although size- and price-weighted average prices 5.5% in the less than $2 million and $2 to $5 billion volume cat- egories increased, average prices in the greater than $5 Chicago Cleveland Milwaukee Kansas City Minneapolis million volume category declined. RERC Size-Weighted Avg. PPSF - 1Q 2008 RERC Price-Weighted Avg. PPSF - 1Q 2008 $300 $550 Midwest Midwest U.S. Total U.S. Total Size-Weighted Average PPSF Price-Weighted Average PPSF $250 $450 $200 $350 $150 $250 $100 $150 $50 $50 Detroit Toledo Detroit Toledo Chicago Cleveland Omaha St. Louis Chicago Omaha St. Louis Cincinnati Columbus IndianapolisKansas CityMilwaukeeMinneapolis Cincinnati Cleveland Columbus IndianapolisKansas CityMilwaukeeMinneapolis Midwest Office Transactions (4/1/07 - 3/31/08) Volume Size-weighted Price-weighted Median Average (millions) Average ($/sf) Average ($/sf) ($/sf) Cap Rate (%) Chicago $8,058 $202 $250 $150 6.1 Cincinnati $122 $97 $118 $85 – Cleveland $756 $106 $116 $84 8.0 Columbus $370 $104 $134 $111 – Detroit $616 $84 $120 $105 – Indianapolis $283 $99 $108 $97 – Kansas City $771 $147 $169 $120 7.1 Milwaukee $413 $116 $144 $87 7.4 Minneapolis $2,042 $124 $139 $127 6.8 Omaha $190 $87 $126 $84 – St. Louis $1,448 $131 $156 $124 – Toledo $118 $67 $108 $74 – Midwest Total $16,274 $146 $196 $106 6.6 U.S. Total $165,414 $240 $396 $152 5.6 Source: RERC. Investment Trends Copyright© 2008 by Real Estate Research Corporation (RERC) and the CCIM Institute. 99 Quarterly MidwestIndustrialPropertySector RERC Weighted Avg. Cap Rate - 1Q 2008 10% Midwest U.S. Total Avg. Capitalization Rate n Many survey respondents stated that the Midwest region’s 9% industrial sector (along with the apartment sector) showed the greatest opportunity for investment during the next 8% year due to the amount of established infrastructure typi- cally in place and stable rent income. 7% n The industrial sector saw small increases in both size- and price-weighted average prices per square foot during first 6% quarter 2008. The weighted average capitalization rate in- creased 30 basis points from fourth quarter 2007. Chicago Detroit Cleveland Minneapolis RERC Size-Weighted Avg. PPSF - 1Q 2008 RERC Price-Weighted Avg. PPSF - 1Q 2008 $100 Midwest $150 Midwest U.S. Total U.S. Total Price-Weighted Average PPSF Size-Weighted Average PPSF $125 $75 $100 $50 $75 $50 $25 $25 $0 $0 Detroit Toledo Detroit Toledo Chicago Cleveland Omaha St. Louis Chicago Cleveland Omaha St. Louis Cincinnati Columbus IndianapolisKansas CityMilwaukeeMinneapolis Cincinnati Columbus IndianapolisKansas CityMilwaukeeMinneapolis Midwest Industrial Transactions (4/1/07 - 3/31/08) Volume Size-weighted Price-weighted Median Average (millions) Average ($/sf) Average ($/sf) ($/sf) Cap Rate (%) Chicago $2,859 $60 $86 $63 7.2 Cincinnati $404 $47 $58 $45 7.7 Cleveland $443 $49 $69 $42 7.2 Columbus $266 $37 $45 $41 – Detroit $520 $63 $92 $51 8.2 Indianapolis $94 $39 $47 $42 – Kansas City $298 $69 $115 $54 – Milwaukee $285 $40 $58 $47 – Minneapolis $542 $60 $86 $58 – Omaha $64 $45 $70 $49 – St. Louis $488 $52 $71 $54 – Toledo $13 $36 $45 $32 – Midwest Total $7,755 $53 $79 $49 7.7 U.S. Total $51,426 $74 $126 $75 6.7 Source: RERC. Investment Trends Copyright© 2008 by Real Estate Research Corporation (RERC) and the CCIM Institute. 100 Quarterly MidwestRetailPropertySector RERC Weighted Avg. Cap Rate - 1Q 2008 8.0% Midwest U.S. Total n The majority of survey respondents from the Midwest region 7.5% Avg. Capitalization Rate stated that the retail sector offers the least favorable invest- 7.0% ment conditions over the next year due to the weakening economy, national uncertainty prior to elections, and small 6.5% businesses with marginal profits being forced to shut their doors. 6.0% n Despite the adverse outlook highlighted by survey respon- 5.5% dents, the Midwest region’s retail sector performed compara- tively well during first quarter 2008. The weighted average 5.0% and median capitalization rates remained steady, while both size- and price-weighted average prices per square foot in- Detroit Chicago Cleveland Cincinnati Columbus Kansas City Milwaukee Minneapolis creased from the previous quarter. Notably, the Midwest re- gion’s price-weighted average price per square foot of retail space crept above the national average. RERC Size-Weighted Avg. PPSF - 1Q 2008 RERC Price-Weighted Avg. PPSF - 1Q 2008 $200 $350 Midwest Midwest U.S. Total U.S. Total $175 Size-Weighted Average PPSF $300 Price-Weighted Average PPSF $150 $250 $125 $200 $100 $150 $75 $100 $50 $50 Chicago Detroit Omaha St. Louis Toledo Chicago Detroit Omaha St. Louis Toledo Cincinnati Cleveland Columbus IndianapolisKansas CityMilwaukeeMinneapolis Cincinnati Cleveland Columbus IndianapolisKansas CityMilwaukeeMinneapolis Midwest Retail Transactions (4/1/07 - 3/31/08) Volume Size-weighted Price-weighted Median Average (millions) Average ($/sf) Average ($/sf) ($/sf) Cap Rate (%) Chicago $4,271 $218 $418 $163 5.7 Cincinnati $227 $114 $154 $106 6.7 Cleveland $276 $104 $135 $81 – Columbus $316 $120 $158 $103 – Detroit $341 $138 $174 $112 7.7 Indianapolis $69 $82 $128 $85 – Kansas City $436 $133 $180 $97 – Milwaukee $211 $117 $185 $82 7.0 Minneapolis $393 $112 $172 $88 7.0 Omaha $65 $88 $202 $111 – St. Louis $990 $182 $206 $111 – Toledo $24 $81 $126 $81 – Midwest Total $9,258 $147 $291 $106 6.3 U.S. Total $59,915 $159 $282 $135 6.4 Source: RERC. Investment Trends Copyright© 2008 by Real Estate Research Corporation (RERC) and the CCIM Institute. 101 Quarterly MidwestApartmentPropertySector RERC Weighted Avg. Cap Rate - 1Q 2008 8.0% Midwest 7.5% U.S. Total Avg. Capitalization Rate n The majority of survey respondents from the Midwest 7.0% region believe the apartment sector shows the greatest 6.5% investment opportunity for the next year, primarily due to 6.0% the ever-present need for housing (and especially when foreclosures are high) and the reduced availability of loans 5.5% at or near 100-percent loan-to-value ratios. 5.0% 4.5% n The volume of apartment sales in the Midwest region de- 4.0% clined by about 30 percent during first quarter 2008 from the previous quarter.