Abstract
Both commercial and residential investment real estate sectors are driven by similar, as well as differing fundamentals. Broader economic indicators, such as interest rates and employment numbers, will impact all segments, while more specific factors (such as levels of international trade) will have a more immediate impact on individual sectors. This report looks at the influence of these industry fundamentals in the primary real estate investment categories. These include residential and multifamily; commercial (office, industrial, retail and hospitality); Real Estate Investment Trusts (REITs); Residential Mortgage Backed Securities (RMBS); and Commercial Mortgage Backed Securities (CMBS). The discussion is augmented further by in-depth interviews with industry experts in the industry.
Mintel�fs exclusive consumer survey in this report also looks at these investors and their attitudes and expectations. What is the current sentiment concerning differing types of real estate? What return on investment are survey respondents expecting?
Other critical investment factors that will be discussed at length include:
- The strength of the local and national economies
- Rental markets, and the impact on real estate
- Tax legislation and regulatory changes
- Other supply and demand factors
- The impact of location--for example, investment property owners, more so than vacation-home owners, tend to choose properties near their primary residence
- Demographics--The demographics for the investment real estate market has historically been primarily late 40s to early 50s (which is now the Baby Boomer generation), but other age groups have and will be a factor also
This report analyzes the marketplace for investment real estate, including residential, multifamily, commercial, hospitality, REITs, Residential Mortgage Backed Securities (RMBSs) and Commercial Mortgage Backed Securities (CMBSs). Drivers impacting the market include demographic changes, economic factors, product innovations and securitization trends. Investor behavior and expectations concerning the commercial and residential housing market are also discussed.
Table of Contents
- Introduction and Abbreviations
- Introduction
- Scope of the report
- Abbreviations and terms
- Abbreviations
- Terms
- Executive Summary
- Summary--top trends in investment real estate markets
- Overview of the markets
- Factors impacting profitability
- Other markets--REIT; RMBS; CMBS
- The real estate investor
- Emerging real estate trends
- Market Drivers
- Fear can also be a moderating influence: bubble or not?
- "Marginal" margins
- Demographic drivers
- Boomers, Boomers, and Boomers
- Characteristics of Baby Boomers
- Characteristics of Boomers who own rental investment property
- Baby Boomer retirement plans
- Baby Boomer investment strategy
- The Echo Boomers
- Demographics by ethnicity
- Tax drivers
- Legal/regulatory drivers
- Residential investment drivers
- Recent residential trends
- Figure 1: Characteristics of second home buyers, 2006
- Figure 2: Weekly mortgage interest rates, 1997-2006
- Figure 3: Primary mortgage market survey summary, U.S. averages, 2006
- Piggyback and IO loans
- Mortgage marketing channels
- The Internet
- Methods used to search for properties to purchase
- The real estate professional's role
- Figure 4: What second home/investment property owners want most from
real estate professionals, 2006
- Figure 5: Method of second home purchase (percentage distribution), 2006
- Commercial real estate drivers
- Figure 6: Commercial real estate capitalization rate characteristics,
2005
- Office market drivers
- Industrial drivers
- Retail drivers
- Multifamily drivers
- Hospitality drivers
- Figure 7: Travel expenditures in the U.S., at current and constant
prices, 1999-2005
- REITs drivers
- CMBS drivers
- Figure 8: Quarterly gross issuance of U.S. CMBS, 1990--Q2 2006
- Market Size and Segmentation
- Residential
- Figure 9: Investor and second-home share of prime loan origination
volume (percentage), 1999-2005
- Figure 10: Investor and second home share of prime conforming mortgage
loans, 1999-Q1 2005
- Metropolitan statistical areas
- Figure 11: Metropolitan statistical areas with the highest second home
and investor share, Q1 2005
- Commercial real estate
- Figure 12: Change in demand for commercial real estate loans, Q2 1995Q1
2006
- The office sector
- Figure 13: U.S. downtown office market summary statistics, 1999-2005
- Figure 14: U.S. suburban office market summary statistics, 1999-2005
- Figure 15: U.S. office market summary statistics, Q1 2006
- The industrial sector
- Figure 17: U.S. industrial market summary statistics, 1999-2005
- Figure 18: U.S. industrial market summary statistics, Q1 2006
- The retail sector
- Figure 19: U.S. retail sales by sector, 2004-05
- Figure 20: U.S. shopping center--inclined sales, 1996-2005
- The multifamily sector
- Figure 21: U.S. number of multifamily buildings completed, by number of
units per building built for rent, 1999-2005
- The hospitality sector
- Figure 22: U.S. hospitality sector construction pipeline, June 2006
- REITs
- Figure 23: Historical REIT industry market capitalization, 1971-2005
- Figure 24: Property acquisitions by REITs, 1992--Q2 2006
- Figure 25: Twenty-year average annual total return of REITs and other
investment classes, May 1987-May 2006
- Figure 26: REIT Investment performance by property sector and
subsector, June 2006
- REIT bonds and REIT stocks
- REIT requirements
- REITs rating agency performance
- Figure 27: REIT upgrades and downgrades by S&P, 1999-Q2 2006
- Recent REIT evolutions
- The securitization sector
- Introduction
- RMBS
- CMBS
- Figure 28: Issuance of commercial mortgage-backed securities, 2001-06
- Competitive Landscape
- Figure 29: Realtor magazine's top 100 companies, 2005
- Figure 30: Real estate firms ranked by growth in sales volume, 2004-05
- Figure 31: Real estate firms ranked by growth in transaction sides,
2004-05
- Figure 32: Real estate agents and brokers sole proprietorships, U.S.
industry profitability averages, 2006
- Figure 33: Real estate managers sole proprietorships, U.S. industry
profitability averages, 2006
- Figure 34: Real estate agents, brokers and managers partnerships, U.S.
industry profitability averages, 2006
- Figure 35: Risk index of real estate related industries, 2006
- Figure 36: Employee productivity, real estate & other activities
related to real estate, U.S. national averages, 2006
- Advertising and Promotion
- Online Marketing
- Keyword searches
- Print Advertising
- Non-Newspaper Print Advertising
- The Consumer
- Summary of consumer survey findings
- Who owns investment real estate?
- Figure 37: Type of real estate investment, by income, 2006
- Figure 38: Type of real estate investment, by employment status, 2006
- Figure 39: Type of real estate investment, by ethnicity, 2006
- How much do investors own?
- Figure 40: Percentage of portfolios in real estate or REITs, by gender,
2006
- Figure 41: Percentage of portfolios in real estate or REITs, by income,
2006
- Primary reasons for investing in real estate
- Figure 42: Primary reason respondent owns investment real estate or
REITs, by gender, 2006
- Figure 43: Primary reason respondent owns investment real estate or
REITs, by income, 2006
- Figure 44: Primary reason respondent owns investment real estate or
REITs, by age, 2006
- Methods for finding properties
- Figure 45: Primary method used to find properties or REITs, by gender,
2006
- Figure 46: Primary method used to find properties or REITs, by income,
2006
- Figure 47: Primary method used to find properties or REITs, by age, 2006
- Methods for investing
- Figure 48: Primary method used to invest in properties or REITs, by
gender, 2006
- Expected returns
- Figure 49: Annual rate of return expected on real estate investment, by
gender, 2006
- Figure 50: Annual rate of return expected on real estate investment, by
income, 2006
- Figure 51: Annual rate of return expected on real estate investment, by
age, 2006
- Methods for financing
- Figure 52: How property was financed, by gender, 2006
- Figure 53: How property was financed, by age, 2006
- Figure 54: How property was financed, by income, 2006
- Future Trends
- Introduction
- Residential real estate
- Markets to watch
- Expected returns by property/investment type and sources of capital
- Increasing foreclosure rates may provide incentive to invest
- Raw land transactions
- College town properties
- Economic trends
- Figure 55: NAR Economic Forecast, 2004-07
- Home sales projections
- Commercial investment real estate
- Figure 56: National Association of Realtors Commercial Real Estate
Forecast, 2005-07
- Figure 57: Total expected unleveraged returns by asset class, 2006
- Office sector
- Office sector buy/hold/sell
- Figure 58: Expectations for office real estate performance in major
metropolitan areas, 2006
- Industrial sector
- Infrastructure rebuilding affects industrial sector
- Warehouse sector buy/hold/sell
- Figure 59: Expectations for warehouse real estate performance in major
metropolitan areas, 2006
- Retail forecast
- Entertainment/lifestyle center concerns
- Retail shopping malls
- Retail sector buy/hold/sell
- Figure 60: Expectations for retail real estate performance in major
metropolitan areas, 2006
- Multifamily forecast
- Multifamily buy/hold/sell
- Figure 61: Expectations for multifamily real estate performance in
major metropolitan areas, 2006
- Hospitality forecast
- Overbuilding and wear & tear plague hospitality
- Hospitality forecast
- Figure 62: U.S. Hotel construction forecast, 2006-08
- REITs forecast
- Figure 63: REIT sector outlook, 2006
- REITs stability in ratings
- CMBS forecast
- Figure 64: U.S. CMBS outlook, 2006
- RMBS forecast
- Figure 65: U.S. RMBS outlook, 2006
- Technology trends
- Appendix: Trade Associations
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