Colliers analysis: 10 predictions for 2012

January 24, 2012James Cook– U.S. Director of Research

Ten Predictions for 2012

Forecasts and predictions from Colliers International researchers and data providers.

Top 10 Predictions for 2012

1. Eurozone Headed For a Second Dip

Austerity will be the name of the game, with tight bank credit and plummeting confidence.

• Eurozone GDP will (at best) contract by 0.7% in 2012

•UK might be able to eke out 0.3% growth

Prediction made by: Nariman Behravesh, Chief Economist, IHS


2. U.S. GDP Will Grow by 1.5% ‐ 2%

•EU austerity will reduce demand for American goods

•US would require job growth of over 2k per month to beat 2% GDP growth – an unlikely event

•Govt spending at all levels will decline

•Construction (with the exception of apartments) will remain in the doldrums

Prediction made by: KC Conway, Executive Managing Director, Market Analytics


3. Interest Rates will Remain Low

•Interest rates will remain historically low, artificially buoying asking prices.

•However, appraisal, underwriting and lending will keep prices flat.

Prediction made by: Douglas Garcia, Director, Research, Northern California & Nevada


4. Taxes will Rise

•Federal, state and local legislatures will expand their creativity for balancing budgets and request additional funds.



5. Food Prices Will Drop

•Food prices will drop, following the expiration of the $6B federal ethanol subsidies, as corn and other agricultural prices reset to market levels.



6. Residential Property Values Will Remain Stagnant

• National home prices have been dropping less sharply since 2008, but haven’t bottomed out yet.

• National home prices will decline another 3-5% and finally bottom out in 2012

Prediction made by: Sean O’Neill, Research Director, BaltimoreKC Conway, Executive Managing Director, Market Analytics

Chart Source: Zillow


7.Warehouse Will Be the New Star Performer


• There is less distressed warehouse debt than other property types.

•The least amount of new construction still underway among the major CREproperty types.

•Has yet to see major cap rate compression. Cap rates are still above 6% for even Class A in core port markets.


8. Hotel Revenues Will Rise

Prediction made by: Robert Mandelbaum, Director of Research Information Services, PKF Hospitality Research

• U.S. hotel revenues will grow 6.1 percent in 2012, the result of a 1.3 percent rise in the number of occupied rooms and a 4.7 percent increase in average daily room rates.


9. Investment Volume to Grow by 50%

Prediction made by: Real Capital AnalyticsChart Source: Real Capital Analytics

• Investment sales will hit $300 billion in 2012.

• Lenders have $160 billion in distressed commercial loans that need resolving.

• REITs raised a record $37.5 billion in 2011


10. Most Cap Rate Compression Will End


Chart Source: Real Capital Analytics

• Cap rate compression has run its course for all but Warehouse. Cap rates will rise in 2012 as the volume of assets coming to market from failed CRE refinancings, EU asset sales, and US failure to gets its fiscal house in order.

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EconoFocus

James Cook

U.S. Director of Research

[email protected]

Colliers analysis: 10 predictions for 2012

Real Estate

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