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Real Estate Bisnow
The largest commercial real estate publication in the United States.
   
January 18, 2012 
 
 
12 PREDICTIONS FOR 2012, PART ONE

 
If you’re anything like us, you’re ready for a killer year. (Literally... the Mayan apocalypse is upon us.) We got on the horn with the experts to determine 12 trends we can expect in 2012.
 
1. HOTELS IMPROVE
 
Omni Houston
Performance in the hospitality industry is on the up, according to Smith Travel Research and PKF Hospitality Research. Smith reports that Houston is doing particularly well; our hotels rank second in the US (behind Nashville) for year-over-year gain in room demand. (People are back to business trips, vacations, and raucous bachelor/bachelorette parties.) Houston saw a 10.5% increase in demand from January to October 2011; double the US average of 5.1%. PKF reports that RevPAR rose 8.1% across the US last year, and it forecasts another 6.1% jump in 2012. Upper-tier hotels continue to outperform the market; PKF predicts those assets will achieve occupancy above 70% this year, above long-term average. But lower-priced product will maintain occupancy below average through 2013. PKF projects ADR growth of 4.7% across the country this year—long-term average is 2.8% growth.
 
Brookfield Mini HOU
2. WESTCHASE RISES
 
Briarpark Green
With at least two spec office buildings slated to break ground in 2012, Westchase may just be the hottest submarket this year. Westchase District’s Sherry Fox tells us leasing volume in the submarket had topped 1M SF by Q3 ’11, well ahead of 2010 numbers. That put occupancy at 86.7% by the end of Q3, and Sherry says very big blocks are available. (Good luck finding a full floor.) Granite has a 14-story, 300k SF spec building in the works (Briarpark Green, rendered above), and DataVox is vacating a floor at Briarlake Plaza to build its own 48k SF HQ. And office doesn’t have a monopoly on activity: AmREIT is building a 45k SF LA Fitness to anchor its Westchase Pointe project, and Wood Partners is developing a 256-unit Class-A multifamily community near Woodlake Square.
3. FUNDS ARE UNPOPULAR
 
Archstone's Neil Bown, HFF's Jody Thornton, Ernst & Young's Mike Straneva
Ernst & Young American RE sector leader Mike Straneva (we snapped him at an E&Y/Baker Botts event in December to the right of Archstone's Neil Bown and HFF's Jody Thornton) says the recession taught people that they need to know who all investors are in a deal. That’s making them leery of funds, and investors prefer individual control. (As Mike recently discovered when he had lots of trouble raising a fund.) He thinks this trend is in for the long haul. That said, funds that do exist are attracted to RE because of returns.
4. CMBS IMPROVES, BUT IS THAT ENOUGH?
 
Patrick Hayes
CMBS values will be on the rise this year: Wells Fargo Securities expects $25B, and Credit Suisse Group AG and UBS AG predict as much as $45B issued in 2012. But Andrews Myers CRE attorney Patrick Hayes has less confidence. He likens CMBS to Harrison Ford in Regarding Henry; no one knows how he’s going to act, he keeps saying things nobody wants to hear, and he’s just not the same anymore. (We could probably use that analogy for the last few years of Harrison Ford's career.) Although Patrick has seen a resurgence of CMBS loans, he cautions borrowers that underwriting is tough to the point of being unreasonable. He suggests borrowers avoid that route unless they’re confident their properties can withstand the underwriting process.
 
5. INVESTORS COME TO CRE
 
John Cook and Mark Dotzour
Texas A&M Real Estate Center chief economist Mark Dotzour (right, we snapped him with John Cook—who clearly thinks the future looks bright—at an SIOR event in November) thinks US stocks and CRE broken deals are the most undervalued assets in the country right now. People are bound to catch on soon, making them the next investment trend. But Mark says people are very distrustful of stocks these days; he jokes they have even less confidence in Wall Street than in Congress. All told, Mark expects 2012 will look a lot like 2011, but he predicts a major inflection point in Q1 ’13.
 
6. AND TEXAS IN PARTICULAR
 
Zaya Younan
Houston and Dallas are among the top CRE hot spots (NY and DC are the others) generating investor interest, says Younan Properties chairman/CEO Zaya Younan. So long, LA—these days, foreign investors (including the Chinese and Europeans) only want to talk Texas because of its fast-growing, strong fundamentals. (They also love the heck out of some good barbeque.) Zaya thinks anybody with an institutional-quality high-rise will be able to move and sell it this year because of investor interest in buying key assets.

Bisnow
DRIVING AUSTIN
 
A problem everywhere: traffic congestion. For Austin and San Antonio, the problem compounds with 70% of the NAFTA truck traffic making its way up I-35. But, that also means opportunities, too, according to the experts at the Bisnow Future of the I-35 Corridor in Austin yesterday. Only 80 miles apart, the two major metro areas may one day mesh into one greater MSA with a population of about four million. Major universities, international airports, and the NAFTA superhighway are a recipe for growth between the two cities. (And from there they will continue to grow, overtaking all of the American Southwest, getting hungrier with each major metro they consume.) Read more Thursday in the Austin issue.
 
Look for six more predictions tomorrow! Who do you think is going to take home the Lombardi trophy? Now that the Packers, Saints, and Texans are out, we don't even know what to think. Email your pick and $5 bet to Catie Brubaker, catie@bisnow.com.
 
 
 
 
Avison Young 4
 
Brookfield (OneAllen2) HO
 
Kastle Systems2 HOU
 
Moody Rambin (Ashford)
 
Reznick Insights HOU
 
Moody Rambin (Ashford)
 
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