CBRE Cap Rate Survey. A CBRE Publication. Second Half Click to Enter

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1 CBRE Cap Rate Survey A CBRE Publication pg 2 pg 8 Multi-housing pg 17 pg 26 pg 36 pg 41 pg 45 Click to Enter

2 United States The financial markets have seen a whirlwind of volatility in early In January, fears of slowing growth in the developing countries translated to sharp declines in equity markets. From mid-january to early February, the S&P 500 fell 5.8% before making up for these losses in the latter part of the month. This volatility is part of the nature of publicly traded markets and it is unclear if it was reflected in the performance of commercial real estate. The REIT world provides a high-frequency view towards the pricing of commercial real estate. As shown in the chart below, pricing trends from the FTSE NAREIT index did not mirror those from the S&P 500 Index during this period of volatility. While the S&P 500 was down 3.6% from December until the end of January, the FTSE NAREIT Index was up 3.2%. In this case, the REIT market simply took a hit earlier than the developing world Fears and Stock Market Volatility Not Hitting REIT World Month-to-Month Growth, % Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 FTSE NAREIT Price Index Jul-13 Aug-13 Sep-13 Source: NAREIT and Standard & Poors 500, February Oct-13 Nov-13 Dec-13 S&P 500 Price Index Jan-14 Feb-14 Fear of slowing growth in the developing markets and the fall that the REIT sector experienced in mid-2013 are both tied to the same event: the mid-year taper-tantrum. When the Federal Reserve Bank announced its intention to begin unwinding the Quantitative Easing (QE) program, the financial markets reacted sharply with quick upward movements along most of the yield curve. Based on fears that increases in interest rates would lead to rising debt costs and declining asset values, the REIT world took a pricing hit, with a 15.7% decrease from the end of April until the end of August. This process took longer in the developing world, but fundamentally, the same fears were at play with hot money that flowed into the developing world in search of high yields now pulling out of these countries. These capital outflows increased the cost of capital in these countries and limited the pace of investment and growth. 2

3 United States (continued) In the U.S., an odd thing happened in reaction to those fears of falling asset value: not much. The Cap Rate Survey shows that there was virtually no change in cap rates for 2H 2013 from the levels seen 1H As seen in the following charts, capitalization rate spreads to the 10-year Treasury narrowed in reaction to interest rate shock. The 10-year Treasury averaged 1.99% in the second quarter of 2013, before fears of the impact of QE tapering pushed the benchmark rate up close to 3% in the fourth quarter. The 10-year Treasury averaged 2.74% in the fourth quarter. While the 10-year Treasury saw an upward movement of 75 basis points (bps), the spread to cap rates narrowed to a greater degree in most cases. BPS Spread to Ten Year Treasury Cap Rate Spreads Narrowed from First Half CBD - Suburban -Neighborhood Centers -Power Centers -High Street - Infill Multil-Housing - Suburban 1H2013 2H2013 Source: Federal Reserve Bank & CBRE Cap Rate Survey,

4 United States (continued) Hotel Cap Rate Spreads Also Narrowed from First Half 2013 CBD Suburban Economy Full Service Luxury Select Service Economy Full Service Luxury Select Service 1H2013 2H2013 Source: Federal Reserve Bank & CBRE Cap Rate Survey, Across all property sectors, multi-housing is the only sector where we see any signs of upward pressure on capitalization rates. In eight of the 41 markets surveyed, capitalization rates for Class A infill/urban product increased from 1H Given the size of the markets with increases, the average national capitalization rate was essentially unchanged. 4

5 United States (continued) National Level Capitalization Rates (by section, class and/or segment) Sector Class / Segment 1H H 2013 BPS Change A 5.58% 5.49% -9 CBD B 7.10% 6.92% -18 C 9.22% 8.95% -27 A 6.78% 6.67% -11 Suburban B 8.14% 7.95% -19 C 9.59% 9.41% -18 A 6.32% 6.25% -7 B 7.26% 7.36% 10 C 8.73% 8.56% -17 A 6.26% 6.25% -1 -Neighborhood Centers B 7.21% 7.15% -6 C 8.56% 8.43% -13 A 6.86% Power Centers B 7.73% 7.72% -1 C 8.93% 8.71% -22 -High Street A 4.93% 4.81% -12 A 4.57% 4.64% 7 - Infill B 5.19% 5.16% -3 C 6.08% 5.93% -15 A 5.31% 5.32% 1 - Suburban B 6.00% 5.93% -7 C 6.99% 6.89% -10 Economy 9.28% 9.03% -25 CBD Full Service 7.54% 7.54% 0 Luxury 6.99% Select Service 8.19% 8.06% -13 Economy 9.66% 9.62% -4 Suburban Full Service 8.06% 8.03% -3 Luxury 7.49% 7.48% -1 Select Service 8.54% 8.38% -16 Source: CBRE Cap Rate Survey,

6 United States (continued) In 2013, the office vacancy rate came in at 14.9% nationally, compared to 15.4% from the previous year. This 50 bps decline is due to declining vacancy in both central business district (CBD) and suburban submarkets though the bulk of the decline stemmed from the suburban submarkets. The vacancy rate for CBD submarkets fell 10 bps from the previous year to 12.3%. The vacancy rate for suburban submarkets fell more drastically, dropping 80 bps from the previous year to 16.3%. Overall, there is still more slack capacity in the suburban submarkets. While the current 16.8% is much better than the 18.7% level seen in 2010, it is still slightly higher than the 16.1% average recorded since CBD vacancy rates, by contrast, are now below the long-term average of 12.8%. The increasing pace of suburban vacancy declines and the slack capacity that still exists provide an opportunity for investors looking to generate additional income by taking on the leasing risks of office assets in suburban submarkets. availability fell to 11.3% nationally in This level is well above the long-term average availability rate of 10%. While these figures suggest a fair amount of slack capacity in the industrial markets, average asking rents are actually rising, with a 2.9% increase from the previous year. One of the issues influencing the availability rate is the significant amount of functionally obsolete space built into the overall availability figure. While the national availability rate fell 140 bps from the previous year, key distribution hubs saw sharper declines. Dallas and the Inland Empire saw declines of 290 and 260 bps, respectively. High-tech driven markets like San Francisco and Boston also saw larger declines than the national average, at 230 bps and 180 bps, respectively. While the retail sector has trailed behind other property types throughout the recovery period, retail leasing is beginning to catch up with other property sectors; availability rates were down 70 bps from the previous year, dropping to 12% at year-end This improvement has come despite a fairly weak recovery in demand; net absorption for the year was roughly half that of the peak levels seen from Still, while demand remains tepid, the growth in supply has been even weaker only 12.5% of the levels. The lowest cap rates were seen in the High Street component of the retail sector, with an average of 4.8% for the year-end values for Class A stabilized assets. This level is comparable to that of the highest quality multi-housing assets, which highlights the extent of investor demand for this asset class. Multi-housing assets receive assistance for such low cap rates with the financing available from government-sponsored enterprises (GSEs), but this segment of retail does not. 6

7 United States (continued) Multi-housing continues to enjoy the healthiest fundamentals among the main property sectors. Vacancy stood at 4.8% at year-end 2013, the same level as the previous year. The long-term average vacancy rate for the sector is between 5% and 6%; and as demand continues to grow, rents will increase as well, albeit at a slower pace. Effective market rents are up 2.3% from the previous year, compared to 4.6% per year in 2011 and Renters can absorb only so much of a rent increase. Still, while rents are not growing as quickly as they had in the past, cap rates for the multi-housing sector are the lowest among the major property sectors. For Class A stabilized assets in urban locations, cap rates came in at 3.75% for San Francisco and 4.13% in Southern California. Cap rates for suburban assets in San Francisco came in at 4%, while cap rates in the Southern California markets came in at 5%. In the hotel sector, the revenue per available room (RevPAR) continued to grow in 2013, reflecting four years of above-inflation growth. In the full-service segment, RevPAR was up 6% from the previous year, while the limited-service sector was up 6.8% from This pace of RevPAR growth is down somewhat since the start of the economic recovery in In the limited-service sector, for instance, the average pace of annual RevPAR growth from mid-2010 through mid-2012 was 9%. However, the supply of rooms was fairly constrained during that time frame. The CBRE Cap Rate Survey shows that investors are placing the most value on the RevPAR trends from the luxury segments for assets in CBD locations, with an average 6.9% cap rate across markets. The economy segments have an average cap rate of 9%, though the range is fairly wide, with markets falling anywhere from 6.5% to 11% in the spectrum. 7

8 Investment volume in the office sector was up 28% in 2013, with total volume of $102 billion, according to Real Capital Analytics (RCA). To put this figure into perspective, office transaction volume averaged about $108 billion per year from Volume is still down from the average pace of $178 billion per year recorded in 2006 and 2007, but those figures represented an artificial high. Suburban submarkets accounted for about 49% of the volume during the past year. This shift is significant, as this segment saw sales grow at a slower pace in the early stages of the economic recovery when investors were mostly focused on CBD office investments. The CBRE Cap Rate Survey provides insight into how these trends will evolve over the next six months. CBRE Capital Markets and Valuation professionals expect that across the 40 suburban markets surveyed, cap rates for stabilized Class A assets will remain flat or show slight decreases of fewer than 20 bps in 33 markets. There are a handful of markets where stronger declines in cap rates are expected, generally those where the economic recovery has yet to strongly take root. These include some of the manufacturing markets in the Midwest and markets in the Southeast that were hit hard in the housing bust. In CBD submarkets, the same basic pattern is in place; but with so much investor interest in assets in these submarkets early in the recovery, the expectation is that there is generally less room for cap rate compression. click to download Select from the list below to access the current CBD office key ratios, forecast and interactive map. Download a Complete CBD Current Key Ratios Chart (PDF) Download a Complete CBD Current Forecast Chart (PDF) Download the Complete CBD Current Key Ratios Map (Interactive PDF) Select from the list below to access the current suburban office key ratios, forecast and interactive map. Download a Complete Suburban Current Key Ratios Chart (PDF) Download a Complete Suburban Current Forecast Chart (PDF) Download the Complete Suburban Current Key Ratios Map (Interactive PDF) 8

9 CBD Eastern Region Baltimore 6.25% % 8.75% % 7.75% % 9.50% % 10.00% % + Boston 4.50% % 6.00% % 5.25% % I 7.00% % 6.50% % 10.00% % Charlotte 6.25% % 8.50% % 7.00% % 9.00% % 8.00% % 10.00% + New York 4.00% % 5.50% % 4.50% % 6.00% % N/A N/A N/A N/A Philadelphia 6.50% % 7.50% % 7.50% % 8.50% % 8.75% % 9.25% % Pittsburgh 7.50% % I 8.25% % I 8.50% % I 9.25% % I 11.00% % I 11.00% % I Raleigh 6.25% % 7.50% % 7.50% % 8.50% % 8.50% % 10.00% % Washington, DC 4.50% % 5.75% % 5.25% % 6.75% % 7.75% % 8.25% % * Compared to 1st Half of 2013 Baltimore Boston Charlotte New York Philadelphia Pittsburgh Raleigh Washington, DC 9

10 CBD Midwestern Region Chicago 5.75% % I 7.50% % 7.00% % I 8.75% % 7.75% % 9.00% % Cincinnati 8.00% % 9.00% % 9.00% % I 10.00% % 10.00% % 12.00% % Cleveland 9.50% % 9.50% % N/A 10.00% % N/A 10.00% % 10.75% % N/A 10.75% % Columbus 7.50% % I 9.00% % I 8.50% % I 9.75% % I 10.00% % I 11.00% % I Detroit 9.00% % I 9.50% % I 10.00% % I 10.00% % I 12.00% % I 12.00% % I Indianapolis 8.00% % I 9.50% % 9.00% % 10.00% % 9.50% % 10.50% % Kansas City 8.25% % I 8.25% % 9.50% % I 9.50% % 11.00% % I 11.00% % Minneapolis 6.50% % I 8.00% % 8.00% % I 9.50% % 10.00% % 12.00% % St. Louis 8.00% % 7.50% % 8.50% % 8.00% % 9.50% % 9.00% % Chicago Cincinnati Cleveland Columbus Detroit Indianapolis Kansas City Minneapolis St. Louis 10

11 CBD Southern Region * Compared to 1st Half of 2013 Atlanta 6.25% % 7.00% % 7.25% % 7.50% % 8.00% % 8.50% % Austin 5.75% % 6.75% % 7.00% % I 8.00% % 7.75% % 8.75% % Dallas 6.50% % 6.75% % 8.00% % I 8.00% % 9.00% % I 9.00% % Houston 5.75% % 6.50% % I 6.50% % 8.00% % 8.00% % 10.00% % Jacksonville 8.00% % 9.50% % 9.00% 10.00% % 11.00% 12.00% + Memphis 8.50% % 9.00% % I 9.00% % I 10.00% % I 11.00% % I 12.00% + I Miami 5.50% % I 6.50% % I 6.25% % I 6.75% % I 7.00% % 7.50% % I Nashville 6.50% % I 7.50% % I 8.00% % I 9.00% % I 9.00% % I 10.00% % I Orlando 6.00% % 7.00% % 7.00% % 8.00% % I 8.00% % I 9.00% % I San Antonio 6.00% % 7.75% % 6.50% % 8.25% % 7.50% % + Tampa 6.50% % I 7.50% % I 8.00% % 8.50% % 8.75% % 9.50% % Atlanta Austin Dallas Houston Jacksonville Memphis Miami Nashville Orlando San Antonio Tampa 11

12 CBD Western Region Albuquerque 7.50% % 8.50% % N/A 8.25% % 9.50% % N/A 9.50% % 11.00% % N/A Denver 5.75% % 7.25% % 6.50% % I 8.25% % 8.85% % 10.00% % Las Vegas 7.50% % 8.50% % 7.50% % 8.50% % 8.00% % 9.50% % I Los Angeles 4.50% % I 7.50% % I 5.50% % I 8.00% % 6.50% % I 9.00% % I Orange County 5.50% % I 6.75% % 6.75% % I 8.00% % 8.00% % 9.75% % Phoenix 6.25% % 7.00% % I 7.00% % I 8.00% % 8.00% % I 10.00% % Portland 6.00% % 6.75% % I 7.00% % I 7.50% % I 8.00% % I 8.50% % I Sacramento 6.50% % 7.50% % I 7.25% % 8.00% % I 8.00% % I 9.00% % I Salt Lake City 6.00% % 7.25% % 7.00% % 7.75% % 8.00% % 9.00% % San Diego 6.25% % 6.50% % 6.50% % 7.00% % 7.50% % 8.50% % San Francisco 3.00% % 5.00% % 4.00% % 6.00% % 6.50% % 7.50% % San Jose 6.50% % I 7.00% % I 7.00% % I 7.50% % I 8.00% % I 9.00% + Seattle 5.00% % I 6.00% % 6.00% % 7.00% % I 7.00% % 8.50% % Albuquerque Denver Las Vegas Los Angeles Orange County Phoenix Portland Sacramento Salt Lake City San Diego San Francisco San Jose Seattle 12

13 Suburban Eastern Region Baltimore 6.50% % 8.75% % 7.50% % 9.50% % 9.50% % + Boston 6.00% % 6.00% % 7.00% % 8.00% % 9.00% % 10.00% % Charlotte 6.75% % 9.00% % 7.25% % I 9.50% % 8.50% % 10.00% + Philadelphia 7.00% % 7.50% % 7.50% % 8.50% % 8.50% % 9.50% % Pittsburgh 7.75% % 8.50% % I 8.75% % I 9.50% % I 11.00% % I 11.00% % I Raleigh 6.25% % 7.50% % 7.50% % 9.00% % 8.50% % 12.00% + Washington, DC 5.50% % I 6.50% % 6.50% % I 7.75% % 8.00% % 9.50% % Baltimore Boston Charlotte Philadelphia Pittsburgh Raleigh Washington, DC 13

14 Suburban Midwestern Region Chicago 7.25% % 9.00% % 8.00% % 10.00% % 10.25% % 12.00% % Cincinnati 8.00% % I 9.00% % 9.50% % 10.50% % 10.50% % 13.00% % Cleveland 9.50% % 10.50% % N/A 10.25% % N/A 12.00% % 10.50% % N/A 13.00% + Columbus 8.00% % I 9.00% % I 9.00% % I 9.75% % I 10.75% % I 11.00% % I Detroit 8.75% % I 9.50% % I 9.50% % I 10.50% % 10.00% % I 12.00% % I Indianapolis 8.50% % I 9.50% % 9.50% % 10.50% % 10.00% % 11.00% % Kansas City 7.25% % I 8.25% % 8.50% % 10.00% % 10.00% % I 12.00% % I Minneapolis 6.75% % 8.50% % 9.00% % 10.50% % 11.00% % 12.00% % St. Louis 7.00% % 8.00% % 8.00% % 10.00% % 9.00% % 12.00% + I Chicago Cincinnati Cleveland Columbus Detroit Indianapolis Kansas City Minneapolis St. Louis * Forecast trends represent the CBRE professionals opinion on where ratios are likely to trend in 1st half of 2014 in their local market. 14

15 Suburban Southern Region Atlanta 6.75% % 7.75% % 8.00% % 8.50% % 8.50% % 9.50% % Austin 5.75% % 7.00% % 7.00% % 8.50% % 7.75% % 9.00% % Dallas 6.50% % 6.75% % 7.25% % 7.50% % 8.50% % 9.00% % Houston 5.75% % 7.00% % 6.75% % 8.50% % 8.50% % I 10.00% % I Jacksonville 7.80% % 9.00% % 9.00% % I 10.50% % 10.00% % I 12.00% + I Memphis 7.50% % I 8.25% % I 8.50% % 9.00% % 9.00% % I 11.00% % I Miami 6.50% % I 7.00% % 7.00% % 8.00% % 8.00% % I 9.00% % I Nashville 6.50% % I 7.50% % I 8.00% % I 9.00% % I 9.00% % I 10.00% % I Orlando 7.50% % 8.50% % 8.50% % 9.00% % 10.00% % I 12.00% % I San Antonio 7.00% % 8.00% % I 7.25% % 8.50% % 8.50% % + Tampa 7.00% % I 7.75% % 8.25% % 8.75% % 9.00% % 9.75% % Atlanta Austin Dallas Houston Jacksonville Memphis Miami Nashville Orlando San Antonio Tampa 15

16 Suburban Western Region Albuquerque 7.50% % 8.50% % N/A 8.25% % 9.50% % N/A 9.50% % 11.00% % N/A Denver 6.50% % 8.00% % 7.25% % 9.00% % 9.25% % 11.25% % I Las Vegas 7.00% % 7.50% % 7.50% % 7.50% % 8.00% % 10.00% % Los Angeles 4.50% % I 7.00% % I 5.50% % I 7.50% % I 6.50% % I 8.50% % I Orange County 5.50% % I 6.75% % 6.75% % I 8.00% % 8.00% % 9.75% % Phoenix 6.25% % 7.00% % 7.00% % I 8.00% % I 9.50% % I 11.00% % Portland 7.25% % I 7.75% % I 8.00% % I 8.50% % I 8.75% % I 8.50% % I Sacramento 7.00% % I 7.75% % I 8.00% % I 8.75% % I 9.00% % I 9.75% % I Salt Lake City 7.00% % 7.50% % 7.50% % I 8.00% % I 8.75% % 9.25% % San Diego 5.75% % 6.00% % 6.50% % 6.50% % 7.25% % 7.75% % San Francisco 5.50% % I 6.50% % I 6.50% % 7.00% % I 7.50% % 8.50% % I San Jose 5.80% % 7.00% % 6.50% % 7.50% % 8.00% % + Seattle 6.00% % I 7.50% % 6.50% % 8.25% % 7.25% % 9.00% % Albuquerque Denver Las Vegas Los Angeles Orange County Phoenix Portland Sacramento Salt Lake City San Diego San Francisco San Jose Seattle 16

17 Among all sectors of commercial real estate investment, multi-housing saw the earliest turnaround in investor interest. The stabilizing influence of the debt provided by the GSEs, such as Freddie Mac and Fannie Mae, was an enormous boost to market liquidity. Multi-housing transaction volume for 2013 totaled $104.5 billion, according to RCA. Total sales volume was up $17.0 billion from the previous year, but represents a slowing pace of growth. Volume grew 19.4% in 2013, down from the average 52.8% pace of growth in 2011 and CBRE Capital Markets and Valuation professionals expect that of the 41 markets surveyed, only seven will experience compression in cap rates for Class A stabilized assets in infill locations over the next six months. The markets where further compression is expected are secondary and tertiary markets. However, CBRE does not expect further compression in all secondary and tertiary markets. The expectation for cap rates trends for Class A stabilized assets in suburban submarkets is roughly the same as that for such assets in urban/infill locations. One primary market that stands out is Atlanta, where the expectation is that cap rates for suburban assets will see further cap rate compression over the next six months. click to download Select from the list below to access the current multi-housing infill/urban key ratios, forecast and interactive map. Download a Complete Infill/Urban Current Key Ratios Chart (PDF) Download a Complete Infill/Urban Current Forecast Chart (PDF) Download the Complete Infill/Urban Current Key Ratios Map (Interactive PDF) Select from the list below to access the current multi-housing suburban key ratios, forecast and interactive map. Download a Complete Suburban Current Key Ratios Chart (PDF) Download a Complete Suburban Current Forecast Chart (PDF) Download the Complete Suburban Current Key Ratios Map (Interactive PDF) 17

18 Infill/Urban Eastern Region Baltimore 4.25% % 4.75% % 5.50% % 6.25% % 6.75% % 7.25% % Boston 4.00% % I 5.50% % 4.50% % 6.00% % N/A N/A 6.25% % Charlotte 4.75% % I 5.25% % I 5.50% % I 5.75% % I 6.50% % 6.75% % I New York 4.00% % 5.00% % I 4.50% % I 5.50% % I 5.00% % I 6.00% % I Philadelphia 5.00% % I 6.20% % 6.25% % I 7.00% % 6.75% % 7.50% % Pittsburgh 6.00% % I 6.50% % I 6.50% % I 7.00% % I 8.00% % I 8.50% % I Raleigh 4.50% % I 5.25% % 5.50% % N/A N/A 6.50% % N/A N/A N/A Washington, DC 4.25% % 4.75% % N/A 5.50% % 5.75% % 6.75% % N/A 7.00% % I Baltimore Boston Charlotte New York Philadelphia Pittsburgh Raleigh Washington, DC 18

19 Infill/Urban Midwestern Region Chicago 4.25% % I 4.50% % I 4.75% % 5.00% % 5.50% % I 5.75% % I Cincinnati 5.25% % 6.00% % 6.00% % 7.00% % 7.50% % 8.00% % Cleveland 6.00% % N/A N/A 7.50% % N/A N/A N/A N/A N/A N/A N/A Columbus 5.75% % 6.00% % 6.75% % 7.00% % 7.50% % 8.75% % Detroit 6.75% % I 7.75% % 7.50% % I 8.25% % 8.75% % I 10.00% % Indianapolis 5.75% % 6.50% % 6.75% % 7.50% % 7.50% % 9.00% % Kansas City 5.25% % N/A N/A N/A 6.25% % N/A N/A 7.50% % N/A N/A N/A Minneapolis 4.50% % 5.00% % 5.00% % 5.25% % 5.75% % 6.50% % I St. Louis 5.50% % N/A N/A 6.50% % N/A N/A 7.75% % N/A N/A Chicago Cincinnati Cleveland Columbus Detroit Indianapolis Kansas City Minneapolis St. Louis 19

20 Infill/Urban Southern Region Atlanta 4.30% % 5.00% % 5.00% % 5.50% % 6.50% % 6.50% % Austin 4.25% % I 4.50% % 4.75% % 5.00% % 5.00% % 5.00% % Dallas 4.25% % 4.50% % N/A 5.75% % 6.00% % N/A 6.00% % 6.25% % N/A Houston 4.50% % I 4.75% % I 5.50% % 5.75% % 6.00% % 6.25% % Jacksonville 4.50% % 5.75% % 5.00% % 6.00% % N/A 6.50% % 6.50% % N/A Memphis 5.75% % I 5.50% % 6.00% % 5.75% % 8.00% % + Miami 4.25% % 4.75% % 4.75% % 5.00% % I 6.50% % I 6.50% % Nashville 5.00% % I 5.75% % 6.00% % I 6.50% % 7.00% % 7.25% % I Oklahoma City 6.00% % I N/A N/A 6.75% % I N/A N/A 7.75% % N/A N/A Orlando 4.75% % 5.00% % 5.50% % 6.00% % 6.75% % 7.00% % San Antonio 5.50% % I N/A N/A 6.00% % I 6.25% % I 6.50% % I 7.00% % Tampa 4.50% % 5.00% % I 5.25% % 5.75% % 6.50% % 7.00% % Atlanta Austin Dallas Houston Jacksonville Memphis Miami Nashville Oklahoma City N/A N/A N/A Orlando San Antonio Tampa 20

21 Infill/Urban Western Region Albuquerque 5.95% % N/A N/A 6.15% % 8.00% % 6.75% % 10.00% % Denver 4.75% % I 5.10% % 5.35% % I 5.75% % 6.00% % 6.40% % Inland Empire 4.75% % I 5.00% % 5.00% % 6.00% % 5.50% % 6.50% % I Los Angeles 4.00% % 4.25% % 4.25% % 4.50% % 4.50% % 5.00% % N/A Orange County 4.00% % N/A 4.25% % N/A 4.25% % N/A 4.50% % N/A 4.50% % N/A 5.00% % N/A Phoenix 4.75% % I 5.25% 5.25% % I 5.50% % 6.00% % I 6.25% % Portland 4.25% % 4.25% % 4.50% % 5.00% % 5.00% % 6.25% % Sacramento 4.25% % 4.75% % 5.25% % I 5.50% % I 5.75% % 6.25% % Salt Lake City 5.25% % 5.75% % I 5.75% % I 6.00% % 6.00% % I 6.25% % I San Diego 4.00% % 4.25% % I 4.50% % I 5.00% % I 5.75% % I 6.00% % I San Francisco Bay Area 3.50% % 4.50% 4.00% % 5.00% 4.50% % 5.50% Seattle 4.00% % I 4.50% % I 4.75% % I 5.00% % I 5.50% % 5.75% % I Albuquerque Denver Inland Empire Los Angeles Orange County Phoenix Portland Sacramento Salt Lake City San Diego San Francisco Bay Area Seattle 21

22 Suburban Eastern Region Baltimore 4.75% % 5.25% % N/A 6.00% % 6.25% % 6.75% % N/A 7.25% % Boston 4.50% % 5.75% % 5.00% % 6.50% % 6.25% % 7.00% % Charlotte 5.25% % I 5.50% % I 5.75% % I 6.00% % I 6.75% % 7.00% % I Philadelphia 5.00% % 6.40% % 6.25% % I 7.00% % 6.75% % 7.50% % I Pittsburgh 6.00% % I 6.50% % I 6.50% % I 7.00% % I 8.00% % I 8.50% % I Raleigh 5.00% % I 5.25% % 6.00% % 6.25% % N/A 7.00% % 7.50% % N/A Washington, DC 4.75% % 5.00% % N/A 5.75% % 6.00% % 7.50% % N/A 7.50% % I Forecast trends* Baltimore Boston Charlotte Philadelphia Pittsburgh Raleigh Washington, DC 22

23 Suburban Midwestern Region Chicago 5.25% % 5.50% % 5.75% % 6.00% % 6.75% % 7.00% % Cincinnati 5.50% % 6.50% % 6.50% % 7.50% % 8.00% % 8.50% % Cleveland 6.00% % N/A N/A 7.25% % N/A N/A 8.50% % N/A N/A Columbus 6.00% % 6.25% % 7.00% % 7.25% % 8.00% % 8.75% % Detroit 6.75% % I 7.75% % 7.50% % I 8.25% % I 8.75% % I 10.00% % Indianapolis 6.00% % 6.75% % 7.00% % 7.75% % 8.00% % 8.75% % Kansas City 5.50% % I 6.50% % 6.00% % I 7.50% % 7.25% % 9.00% % Minneapolis 5.25% % 5.50% % 5.75% % 6.00% % 6.50% % 7.00% % I St. Louis 5.50% % I N/A N/A 6.50% % N/A N/A 7.75% % N/A N/A Chicago Cincinnati Cleveland Columbus Detroit Indianapolis Kansas City Minneapolis St. Louis 23

24 Suburban Southern Region Atlanta 5.00% % 6.00% % 5.50% % 6.50% % I 6.50% % 7.50% % Austin 5.00% % I 5.25% % I 5.75% % I 6.00% % I 6.25% % I 6.50% % I Dallas 5.25% % 6.25% % N/A 6.25% % 6.50% % N/A 7.25% % 7.50% % N/A Houston 5.50% % I 6.25% % 6.25% % 6.50% % 7.25% % 7.50% % Jacksonville 5.25% % 6.00% % 6.00% % N/A N/A 6.75% % N/A N/A Memphis 5.75% % I 6.25% % 6.50% % 7.00% % I 8.00% % % Miami 4.50% % 5.00% % 5.00% % 5.25% % 6.50% % I 6.50% % Nashville 5.50% % 5.75% % I 6.00% % I 6.50% % I 7.00% % I 7.50% % I Oklahoma City 6.25% % I N/A N/A 7.00% % I N/A N/A 7.75% % N/A N/A Orlando 4.75% % 5.25% % I 5.75% % 6.00% % 6.75% % 7.00% % I San Antonio 5.50% % I 6.25% % N/A 6.00% % I 7.00% % 7.00% % I 7.50% % Tampa 5.00% % 5.25% % 5.75% % I 6.00% % I 7.00% % 7.25% % Atlanta Austin Dallas Houston Jacksonville Memphis Miami Nashville Oklahoma City N/A N/A N/A Orlando San Antonio Tampa * Forecast trends represent the CBRE professionals opinion on where ratios are likely to trend in the1st half of 2014 in their local market. 24

25 Suburban Western Region Albuquerque 5.75% % 6.75% % 6.25% % 7.50% % 7.00% % 8.50% % Denver 4.90% % 5.50% % I 5.50% % I 6.10% % 6.10% % 7.00% % Inland Empire 4.85% % 5.25% % 5.00% % 6.00% % 5.75% % 6.75% % Las Vegas 5.00% % 5.50% % I 5.25% % 5.75% % 6.75% % 7.00% % Los Angeles 4.75% % 5.25% % 4.75% % 5.50% % 5.50% % 6.25% % N/A Orange County 4.75% % 5.25% % N/A 4.75% % I 5.50% % 5.50% % 6.25% % Phoenix 5.00% % I 5.50% % 5.00% % 5.75% % 6.00% % I 6.50% % Portland 5.00% % 5.50% % I 5.50% % I 6.00% % 5.75% % 6.75% % Sacramento 5.00% % I 5.50% % I 5.50% % I 6.00% % I 6.00% % 6.50% % Salt Lake City 5.25% % 5.75% % I 5.75% % I 6.00% % 6.00% % I 6.25% % I San Diego 4.75% % 5.25% % 4.75% % 5.50% % I 5.50% % 6.25% % San Francisco Bay Area 3.75% % 5.00% 4.25% % 5.50% 4.75% % 6.00% Seattle 4.25% % 4.75% % I 5.00% % I 5.25% % I 5.00% % 6.00% % I Albuquerque Denver Inland Empire Las Vegas Los Angeles Orange County Phoenix Portland Sacramento Salt Lake City San Diego San Francisco Bay Area Seattle * Forecast trends represent the CBRE professionals opinion on where ratios are likely to trend in 1st half of 2014 in their local market. 25

26 The retail sector continues to see increases in sales volume, despite lagging behind other property sectors in the early stages of the recovery. Sales volume hit $61.6 billion in 2013, up from $56.6 billion in This 8.8% increase for retail overall is split between growth in some subtypes and pullback in others. Sales volume for strip-center retail was up 28.2% from the previous year, hitting $27.7 billion for the year. The mall segment saw volume of $33.9 billion for the year, down from $35 billion in Our survey results suggest that the cap rate compression in the retail sector that began in mid-2010 is now largely over. For Class A stabilized neighborhood center assets, CBRE professionals expect that over the course of the next six months, cap rates will remain flat or increase in 28 of the 41 markets surveyed. The same patterns are seen in the power center subtypes. As one moves up the risk spectrum to lower-grade assets, expectations for cap rate compression are less common. click to download Select from the list below to access the current neighborhood/community center (grocery anchored) retail key ratios, forecast and interactive map. Download a Complete Neighborhood/Community Center (Grocery Anchored) Current Key Ratios Chart (PDF) Download a Complete Neighborhood/Community Center (Grocery Anchored) Current Forecast Chart (PDF) Download the Complete Neighborhood/Community Center (Grocery Anchored) Current Key Ratios Map (Interactive PDF) Select from the list below to access the current power center retail key ratios, forecast and interactive map. Download a Complete Power Center Current Key Ratios Chart (PDF) Download a Complete Power Center Current Forecast Chart (PDF) Download the Complete Power Center Current Key Ratios Map (Interactive PDF) Select from the list below to access the current high street retail key ratios, forecast and interactive map. Download the Complete High Street Current Key Ratios and Forecast Charts (PDF) Download the Complete High Street Current Key Ratios Map (Interactive PDF) 26

27 Neighborhood/Community Center (Grocery Anchored) Eastern Region Baltimore 6.00% I 7.00% % I 6.50% 8.00% % I 9.00% 9.00% % Boston 5.00% % 5.50% % 6.25% % 7.00% % I 9.00% % N/A N/A Charlotte 5.75% % 7.50% % 7.50% % 8.00% % I 8.50% % 9.00% % New York 4.00% % N/A 5.00% % N/A 4.50% % N/A 5.50% % N/A 5.00% % N/A 6.00% % N/A Philadelphia 6.50% % 7.50% % 7.50% % 9.00% % 9.00% % 11.00% % Pittsburgh 6.75% % I 8.00% % I 8.00% % I 9.00% % I 9.50% % I 11.00% % I Raleigh 6.00% % 7.00% % 7.25% % 9.00% % 8.00% % 10.00% % Washington, DC 5.50% % 7.00% % 6.00% % 8.00% % 6.75% % 9.00% % Baltimore Boston Charlotte New York Philadelphia Pittsburgh Raleigh Washington, DC 27

28 Neighborhood/Community Center (Grocery Anchored) Midwestern Region Chicago 5.75% % 6.50% % I 6.75% % I 7.25% % 7.75% % 8.25% % Cincinnati 6.00% % 6.75% % 7.00% % 7.50% % 8.00% % 8.50% % Cleveland 6.25% % 7.00% % I 7.25% % 7.75% % 8.25% % 8.75% % Columbus 6.25% % 7.00% % 7.00% % I 7.50% % 8.00% % I 8.50% % Detroit 7.00% % 8.00% % 8.00% % 9.00% % 9.50% % 10.00% % Indianapolis 6.00% % 6.75% % I 7.00% % I 7.50% % 8.00% % I 8.50% % Kansas City 6.00% % 6.75% % I 7.00% % I 7.50% % 8.00% % I 8.50% % Minneapolis 5.75% % 6.50% % 6.75% % 7.25% % 7.75% % 8.25% % St. Louis 6.10% % I 6.75% % I 7.00% % 7.75% % 8.75% % 9.25% % Chicago Cincinnati Cleveland Columbus Detroit Indianapolis Kansas City Minneapolis St. Louis 28

29 Neighborhood/Community Center (Grocery Anchored) Southern Region Atlanta 6.50% % 6.50% % 6.75% % 7.50% % 8.00% + I 8.50% + Austin 5.25% 7.00% 6.75% 8.00% 9.00% 10.00% Dallas 5.00% % 7.00% 6.50% % 8.00% 8.50% % 10.00% Houston 6.50% % 8.50% % 7.50% % 9.50% % 8.50% % 10.50% % Jacksonville 6.00% % 6.50% % 7.00% % 7.00% % 9.00% 9.50% % Memphis 7.00% % I 8.00% % I 7.50% % I 8.50% % I 10.00% % I 11.00% % I Miami 5.75% % 6.50% % 6.25% % 7.00% % 7.50% % I 8.00% % Nashville 7.00% % I 8.00% % I 8.00% % I 9.00% % I 9.00% % I 10.00% % I Orlando 6.00% % 7.25% % 6.50% % 8.25% % 8.00% % 10.00% + I San Antonio 5.75% 8.00% 7.25% 9.00% 9.50% 11.00% Tampa 6.25% % 7.50% % 7.00% % 8.00% % I 8.00% % 9.00% % I Atlanta Austin Dallas Houston Jacksonville Memphis Miami Nashville Orlando San Antonio Tampa 29

30 Neighborhood/Community Center (Grocery Anchored) Western Region Albuquerque 7.00% % N/A 8.00% % N/A 8.00% % N/A 8.50% % N/A 9.00% % N/A 10.00% % N/A Denver 5.75% % 7.25% % N/A 6.75% % 8.25% % 8.25% % 9.25% % Las Vegas 6.75% % 8.00% % 7.25% % 9.00% % 8.00% % 10.00% % Los Angeles 6.25% % 7.00% % 6.75% % 7.50% % I 8.00% % + Orange County 6.25% % 7.00% % 6.75% % 7.50% % I 8.00% % + Phoenix 5.75% % I 7.00% % 6.50% % I 8.00% % I 8.00% % I 9.50% % Portland 5.50% % 6.50% % 6.50% % I 8.00% % I 7.50% % 9.50% % N/A Sacramento 6.50% % 7.00% % I 7.00% % 8.00% % I 8.00% % 9.00% % I Salt Lake City 6.75% % 7.25% % 7.25% % 7.75% % 7.50% % 8.00% % San Diego 6.25% % 7.00% % 6.75% % 7.50% % I 8.00% % + San Francisco 5.00% % 6.00% % 6.00% % 7.00% % 8.00% 8.00% % San Jose 5.00% % 6.00% % 6.00% % 7.00% % I 8.00% 8.00% % Seattle 5.00% % 6.00% % I 6.00% % 7.00% % I 7.00% % 8.00% % I Albuquerque Denver Las Vegas Los Angeles Orange County Phoenix Portland Sacramento Salt Lake City San Diego San Francisco San Jose Seattle 30

31 Power Center Eastern Region Baltimore 6.00% 7.00% % 7.00% 8.50% % I 9.50% I 10.50% % I Boston 5.50% % 6.50% % 7.00% % 7.50% % 8.50% % 10.00% % I Charlotte 6.75% % 7.75% % 7.50% % 8.50% % 8.00% % 8.00% % I Philadelphia 8.00% % 9.00% % 8.50% % 10.00% % 9.00% % 11.00% % I Pittsburgh 7.75% % I 9.00% % I 9.00% % I 10.00% % I 11.00% % I 12.00% % I Raleigh 6.00% % 8.00% % 7.25% % 9.00% % 8.00% % I 12.00% % I Washington, DC 6.00% % 7.50% % 6.50% % 8.50% % 7.00% % 9.50% % I Baltimore Boston Charlotte Philadelphia Pittsburgh Raleigh Washington, DC 31

32 Power Center Midwestern Region Chicago 6.25% % 7.00% % 7.00% % 7.75% % I 7.75% % 8.50% % I Cincinnati 6.50% % 7.25% % 7.25% % 8.00% % 8.00% % 8.75% % I Cleveland 6.75% % I 7.50% % 7.50% % I 8.25% % I 8.25% % I 9.00% % I Columbus 6.75% % 7.50% % 7.25% % I 8.00% % I 8.00% % I 8.75% % I Detroit 7.00% % 8.00% % 8.00% % 9.00% % 9.50% % I 10.00% % I Indianapolis 6.50% % I 7.25% % 7.25% % I 8.00% % I 8.00% % I 8.75% % I Kansas City 6.50% % I 7.25% % 7.25% % I 8.00% % I 8.00% % I 8.75% % I Minneapolis 6.25% % 7.00% % 7.00% % 7.75% % 7.75% % 8.50% % I St. Louis 6.25% % 6.90% % I 7.10% % 8.00% % 8.50% % 9.45% % I Chicago Cincinnati Cleveland Columbus Detroit Indianapolis Kansas City Minneapolis St. Louis 32

33 Power Center Southern Region Atlanta 6.75% % I 7.00% % 7.50% % 8.00% % I 8.00% % + I Austin 6.50% 7.00% % I 7.75% I 8.50% % 9.00% 10.00% I Dallas 6.00% % N/A N/A 7.50% % N/A N/A 8.50% % N/A I Houston 7.50% % 9.00% % 8.00% % 9.50% % 8.50% % 11.00% % I Jacksonville 6.75% % 7.00% % 7.50% % 8.00% % 9.00% % + I Memphis 7.75% % 8.25% % 8.75% % 9.50% % I 10.00% % I 11.00% % I Miami 6.25% % 7.00% % 7.00% % 7.50% % 7.50% % N/A 8.00% % I Nashville 7.00% % I 8.00% % I 8.00% % I 9.00% % I 9.00% % I 10.00% % I Orlando 6.50% % 7.50% % 7.50% % 8.50% % 8.00% % 10.00% I San Antonio 7.00% 8.00% 8.25% 9.00% % 9.50% 10.00% % I Tampa 6.50% % 7.75% % 7.25% % 8.25% % 8.25% % 9.25% % I Atlanta Austin Dallas Houston Jacksonville Memphis Miami Nashville Orlando San Antonio Tampa 33

34 Power Center Western Region Albuquerque 7.00% % N/A 8.00% % N/A 8.00% % N/A 8.50% % N/A 9.00% % N/A 10.00% % I Denver 6.00% % I 7.50% % N/A 6.75% % 8.50% % 8.75% % 9.00% % I Las Vegas 7.50% % 8.00% % 7.75% % 9.50% % 8.25% % 12.00% % I Los Angeles 6.50% % 7.50% % 7.00% % I 8.00% % I 8.00% % + I Orange County 6.50% % 7.50% % 7.00% % I 8.00% % I 8.00% % + I Phoenix 5.75% % 8.00% % 7.50% % 8.00% % 8.50% % 10.00% % I Portland 6.00% % 7.00% % 7.00% % I 8.00% % 8.50% % 9.50% % I Sacramento 6.50% % 7.00% % I 7.00% % 8.00% % I 8.00% % 9.00% % I Salt Lake City 6.75% % 7.25% % 7.25% % 7.75% % 7.50% % 9.00% % I San Diego 6.50% % 7.50% % 7.00% % I 8.00% % I 8.00% % + I San Francisco 5.50% % 6.50% % 7.50% % 8.50% % 8.00% % I 9.50% % I San Jose 5.50% % 6.50% % 7.50% % 8.50% % 8.00% % 9.50% % I Seattle 6.00% % I 7.00% % I 6.75% % 8.50% % I 7.50% % 9.50% % I Albuquerque Denver Las Vegas Los Angeles Orange County Phoenix Portland Sacramento Salt Lake City San Diego San Francisco San Jose Seattle 34

35 High Street National Class A Boston 4.00% % Chicago 4.50% % I Los Angeles 4.25% % Manhattan 3.50% % Miami 4.50% % Philadelphia 5.50% % San Francisco 4.25% % Seattle 4.25% % Washington, DC 5.25% % I Boston Chicago Charlotte Los Angeles Manhattan Miami Philadelphia San Francisco Seattle Washington, DC Class A * Forecast trends represent the CBRE professionals opinion on where ratios are likely to trend in the1st half of 2014 in their local market. 35

36 Sales transaction activity in the industrial sector hit $47 billion in 2013, up 16.2% from the previous year. All of this growth is attributed to warehouse segments, which saw volume increase to $33.3 billion for the year, up $6.7 billion from the previous year. The flex segment, by contrast, saw no growth, with $14.1 billion in volume in 2012 and By comparison, the average annual pace set from was roughly $41.7 billion. CBRE Capital Markets and Valuation professionals expect that cap rates for stabilized Class A industrial assets have largely reached the end of the compression that began in early In 29 of the 41 markets surveyed, Class A stabilized cap rates are expected to be flat or increase over the next six months. However, moving into lower grade assets changes the picture, with expectations that cap rates for stabilized Class B assets will see further cap rate decreases in 20 out of the 41 markets surveyed. click to download Select from the list below to access the current industrial key ratios, forecast and interactive map. Download a Complete Current Key Ratios Chart (PDF) Download a Complete Current Forecast Chart (PDF) Download the Complete Current Key Ratios Map (Interactive PDF) 36

37 Eastern Region Baltimore 5.65% % I 6.75% % 6.50% % 7.75% % 8.00% % + Boston 7.00% % 8.00% % 8.00% % 9.00% % 10.00% 11.00% + Charlotte 6.50% % I 7.00% % 7.50% % 8.00% % 7.25% % 8.00% % Northern New Jersey 5.00% % 6.25% % 6.25% % 7.50% % 7.50% % N/A 9.00% % N/A Philadelphia 6.00% % 6.50% % 7.00% % I 7.50% % 9.00% % 9.50% % Pittsburgh 7.50% % 7.75% % 8.50% % I 8.75% % 9.50% % 10.50% % Raleigh 6.25% % 7.75% % 7.50% % N/A 8.25% % N/A 8.50% % N/A 10.50% % N/A Washington, DC 5.50% % 7.55% % 6.75% % I 8.25% % 8.25% % 9.25% Baltimore Boston Charlotte Northern New Jersey Philadelphia Pittsburgh Raleigh Washington, DC 37

38 Midwestern Region Chicago 5.40% % 6.75% % I 6.75% % I 8.00% % I 8.50% % I 10.00% % Cincinnati 7.00% % I 8.50% % 8.00% % 9.50% % 9.00% % I 11.00% % Cleveland 7.50% % 9.00% % 8.00% % I 12.00% % 9.00% % 14.00% % I Columbus 6.75% % I 8.00% % I 8.50% % I 10.00% % I 9.50% % I 10.75% % I Detroit 8.10% % I 9.25% % 8.70% % 9.50% % 9.10% % 10.00% % Indianapolis 6.25% % 6.50% % 8.00% % 9.00% % 9.00% % 11.00% % Kansas City 6.75% % I 8.00% % 8.00% % 9.00% % 9.00% % I 10.00% % I Minneapolis 6.25% % I 7.25% % 7.50% % 8.50% % 8.50% % 10.00% % St. Louis 6.10% % 7.25% % I 8.00% % 8.50% % 9.00% % 10.00% % Chicago Cincinnati Cleveland Columbus Detroit Indianapolis Kansas City Minneapolis St. Louis * Forecast trends represent the CBRE professional's opinion on where ratios are likely to trend in the 1st half of 2014 in their local market. 38

39 Southern Region Atlanta 5.85% % 6.75% % 6.75% % 7.50% % 8.00% % 10.00% + Austin 6.25% % 6.50% % 7.50% % 7.75% % 8.50% % 8.75% % Dallas 5.50% % 6.00% % 6.50% % 7.00% % 8.00% % I 9.00% % Houston 5.00% % 5.50% % 6.00% % 7.00% % 8.00% % I 8.00% % Jacksonville 7.00% % 8.00% % 8.50% % 10.00% % 10.50% % I 12.00% % I Memphis 6.75% % I 8.00% % I 8.00% % I 8.50% % I 9.00% % I 10.00% % I Miami 5.25% % I 6.25% % I 5.50% % I 6.50% % I 6.00% % I 7.00% % I Nashville 6.50% % I 7.50% % I 8.00% % I 9.00% % I 9.00% % I 10.00% % I Orlando 6.00% % 7.00% % I 7.00% % 9.00% % I 9.00% % 10.00% % I San Antonio 6.75% % 7.75% % 7.00% % 8.00% % 8.00% % % Tampa 6.50% % I 7.25% % I 8.00% % 8.50% % I 9.00% % I 9.50% % I Atlanta Austin Dallas Houston Jacksonville Memphis Miami Nashville Orlando San Antonio Tampa 39

40 Western Region Albuquerque 7.75% % I 8.50% % 8.00% % 9.00% % 9.00% % 10.00% % Denver 6.50% % 7.50% % 7.50% % 8.50% % 8.50% % 9.50% % Inland Empire 4.75% % 5.75% % 5.85% % 7.00% % 6.00% % 7.50% % Las Vegas 6.75% % 7.00% % 7.00% % 7.50% % 8.00% % 8.00% % Los Angeles 4.75% % 5.75% % 5.85% % 7.00% % 6.00% % 7.50% % Orange County 4.90% % I 6.50% % 5.25% % I 7.00% % 6.00% % 8.00% % Phoenix 6.25% % 6.75% % 7.00% % 7.50% % I 8.00% % I 9.00% % Portland 6.00% % 7.00% % 7.00% % 8.00% % 8.50% % 9.50% % Sacramento 6.50% % 7.25% % 7.00% % 8.25% % 8.00% % 9.25% % Salt Lake City 6.00% % 6.50% % 6.50% % 7.00% % 7.00% % 7.50% % San Diego 5.75% % I 6.25% % I 6.25% % I 6.50% % I 7.25% % 7.75% % I San Francisco Bay Area 4.50% % 5.00% % 6.00% % 6.50% % 8.00% % 9.00% + Seattle 5.00% % I 6.50% % I 5.50% % 7.00% % 6.00% % 7.50% % I Albuquerque Denver Inland Empire Las Vegas Los Angeles Orange County Phoenix Portland Sacramento Salt Lake City San Diego San Francisco Bay Area Seattle 40

41 The CBRE Cap Rate Survey provides information on the hotels sector that is unavailable elsewhere. With transaction volume representing less than 10% of total activity across all commercial property types, the hotel sector often does not offer a sufficient number of transactions to develop reliable benchmarks of sales comparables. For markets in which comparable sales are thin, we combine the insight of CBRE Capital Markets and Valuation professionals to gauge the levels at which assets will trade. Hotel transaction activity for 2013 was up 28.8% from the previous year, according to RCA. Investment volume for the year came in at $26.3 billion. This increased activity was heavily weighted in the full-service sector, with total volume of $18.8 billion, up $4.4 billion from the previous year. The limited-service sector only saw $1.5 billion in volume growth. Data from the CBRE Cap Rate Survey suggest that the cap rate compression seen in the hotel sector starting in 2009 is now at an end. The Capital Markets and Valuation teams expect the CBD luxury segment to see ongoing decreases in cap rates over the next six months in only four of the 38 markets surveyed. Even in the economy segments, to which investors have only recently returned, there is little expectation of ongoing cap rate compression; only four of the 38 surveyed CBD markets are expected to see declines. click to download Select from the list below to access the current hotels key ratios, forecast and interactive map. Download a Complete Current Key Ratios Chart (PDF) Download a Complete Current Forecast Chart (PDF) Download the Complete Current Key Ratios Map (Interactive PDF) 41

42 National CBD Albuquerque 8.00% % Atlanta 6.00% % Austin 6.75% % Baltimore 6.50% % Boston 5.00% % Charlotte 7.00% % Luxury Suburban 8.00% % 7.00% % 7.00% % 7.00% % CBD 8.50% % 7.50% % 7.00% % 7.00% % Full Service Suburban 8.50% % 8.00% % I 7.25% % 7.00% % 8.50% % I 8.00% % I N/A N/A 6.00% % 7.50% % 7.50% % Chicago 6.00% % I 7.00% % I 7.00% % 7.50% % Cincinnati 7.50% % I 8.50% % 8.00% % 8.50% % Cleveland 7.50% % I 8.50% % 8.00% % 8.50% % Columbus 7.50% % 8.50% % 8.00% % 8.50% % Dallas 7.25% % I 7.25% % I 7.50% % I 7.50% % I Denver 6.75% % 7.25% % I 6.75% % I 7.75% % Detroit 8.00% % 8.50% % 8.50% % I 9.50% % I Houston 7.00% % N/A 7.50% % N/A 7.25% % N/A 7.75% % N/A Jacksonville 7.00% % I 7.00% % I 7.75% % I 8.00% % I Kansas City 8.00% % I 8.00% % I % I 9.25% % I Las Vegas 7.00% % I 7.00% % 7.50% % 7.50% % I Los Angeles 6.50% % 7.00% % 6.50% % 7.00% % Miami 5.50% % 6.00% % 7.00% % 7.50% % Minneapolis 6.50% % I 7.00% % 7.00% % 7.50% % Nashville 7.50% % I 8.00% % 8.00% % 8.50% % New York 4.00% % I 5.50% % I 5.50% % I 6.50% % I Orange County 6.50% % 7.00% % 6.50% % 7.00% % Orlando 6.00% % 6.25% % 7.00% % I 7.25% % I Philadelphia 6.50% % 7.00% % 7.00% % 7.50% % Phoenix 8.00% % 7.50% % 8.00% % 8.00% % Pittsburgh 7.00% % 8.00% % 7.50% % I 8.00% % Portland 7.00% % 7.50% % 7.50% % 8.00% % Raleigh 7.00% % 7.50% % 7.50% % 8.00% % I Sacramento N/A N/A N/A N/A 8.00% % I 9.00% % Salt Lake City 6.00% % 6.50% % 8.00% % 8.50% % San Antonio 7.50% % I 7.50% % I 7.75% % I 7.75% % I San Diego 6.50% % 7.00% % 6.50% % 7.00% % San Francisco 5.00% % 6.00% % I 6.00% % 7.50% % I San Jose 6.50% % 6.50% % I 7.00% % I 6.00% % Seattle 6.75% % 7.50% % 7.50% % 8.00% % St. Louis 7.00% % 8.00% % I 7.50% % 8.00% % Tampa 6.00% % I 6.50% % I 7.00% % I 7.50% % I Washington, DC 6.00% % I 6.00% % 6.50% % 7.00% % I 42

43 National CBD Albuquerque 8.50% % Select Service Suburban 8.50% % CBD 9.00% % Economy Suburban 9.00% % Atlanta 8.00% % I 8.50% % 9.00% % 9.00% % Austin 6.75% % 7.00% % 8.00% % I 8.25% % I Baltimore 7.50% % 7.50% % 8.50% % 9.00% % Boston 7.00% % 7.50% % N/A N/A 10.00% % Charlotte 8.00% % I 8.50% % 8.50% % 9.00% % Chicago 7.50% % 7.50% % 8.00% % I 8.50% % Cincinnati 8.50% % 9.00% % 9.00% % 10.00% % Cleveland 8.50% % 9.00% % 9.00% % 10.00% % Columbus 8.50% % 9.00% % 9.00% % 10.00% % Dallas 7.25% % I 7.25% % I 8.25% % I 8.25% % Denver 7.50% % 7.75% % 8.00% % 8.25% % Detroit 9.00% % I 9.25% % 10.50% % 10.50% % Houston 7.00% % N/A 7.50% % N/A 8.25% % N/A 8.50% % N/A Jacksonville 9.00% % I 9.25% % I 10.00% % I 10.00% % I Kansas City 8.50% % I 8.50% % I 10.00% % I 10.00% % I Las Vegas 8.50% % 8.50% % 8.75% % 8.75% % Los Angeles 6.50% % 7.00% % I 7.00% % N/A 7.25% % Miami 7.50% % 7.75% % 8.00% % 8.50% % Minneapolis 7.50% % 8.00% % I 9.00% % 9.00% % Nashville 8.50% % 9.00% % 9.00% % 9.50% % New York 7.00% % I 7.00% % I 6.00% % 8.50% % Orange County 6.50% % 7.00% % I 7.00% % 7.25% % Orlando 8.00% % I 8.28% % I 9.00% % I 9.25% % I Philadelphia 7.00% % 8.50% % 8.00% % 9.00% % Phoenix 7.50% % 7.25% % 9.50% % I 9.50% % I Pittsburgh 8.00% % 8.50% % 8.50% % 9.50% % Portland 8.00% % 8.50% % 9.00% % 9.50% % Raleigh 8.00% % I 8.50% % 8.50% % 9.00% % Sacramento 8.00% % 9.50% % 9.00% % I 9.00% % I Salt Lake City 7.00% % 7.50% % 8.00% % 8.50% % San Antonio 7.50% % I 7.50% % I 8.50% % I 8.50% % I San Diego 6.50% % 7.00% % I 7.00% % 7.25% % San Francisco 7.00% % 8.00% % I 8.00% % 9.00% % I San Jose 7.50% % I 7.00% % 9.00% % I 9.00% % I Seattle 8.00% % 8.50% % 9.00% % 9.50% % St. Louis N/A N/A N/A N/A 9.50% % 9.50% % Tampa 8.00% % I 8.50% % I 9.00% % I 9.50% % I Washington, DC 7.00% % I 7.00% % 8.00% % I 8.50% % 43

44 National CBD Luxury Full Service Select Service Economy Suburban CBD Suburban CBD Suburban CBD Albuquerque Atlanta Austin Baltimore Boston N/A N/A Charlotte Chicago Cincinnati Cleveland Columbus Dallas Denver Detroit Houston Jacksonville Kansas City Las Vegas Los Angeles Miami Minneapolis Nashville New York Orange County Orlando Philadelphia Phoenix Pittsburgh Portland Raleigh Sacramento N/A N/A Salt Lake City San Antonio San Diego San Francisco San Jose Seattle St. Louis N/A N/A Tampa Washington, DC Suburban 44

45 Definitions (,,, and Hotel) Cap rate ranges are best estimates provided by CBRE professionals based on recent trades in their respective markets as well as recent communication with investors. The ranges represent those cap rates that a given property will trade at in the current market assuming that the asset is leased at current market rents with typical market lease terms. Use this assumption of leasing to current market rents to calculate gross rent potential, then subtract the standard economic loss factors, including vacancy, that would be considered representative of a stable property in your market to achieve the effective gross income estimate. Reduce the effective gross income by the projected stabilized expenses to derive the NOI. The cap rate is then calculated as the NOI divided by the purchase price. The going-in cap rate refers to the initial yield and is calculated as the ratio of the projected net income in the first year of the holding period over the acquisition price of the property. This measure also represents the investor s income return in the first year. Cap rates within each subtype will vary, occasionally falling outside of the stated ranges, based on asset location/quality and property-specific opportunities for NOI enhancement. Equation - 1 st year proforma NOI divided by purchase price. (Multi-housing only) Cap rate ranges are based on an estimated NOI derived by annualizing the last 90 days of revenue and subtracting buyer s estimated stabilized year-one expenses after adjustments for real estate taxes and reserves. Cap rates within each subtype will vary, occasionally falling outside of the stated ranges, based on asset location/quality and property-specific opportunities for NOI enhancement. Equation - NOI includes the 90-day trailing gross revenue annualized less stabilized first-year expenses divided by the purchase price. 45

46 Definitions (continued) Return-on-Costs Properties Return-on-Cost Calculation The return-on-cost calculation is based upon the investor s projected gross revenue assumption at stabilization, less the standard economic loss factors, including vacancy, to achieve the effective gross income estimate. Reduce the effective gross income by the projected stabilized expenses to derive the NOI. The NOI becomes the numerator for the Return-on-Cost calculation. The denominator is the investor s purchase price plus all capital improvements incurred to reach the stabilized NOI (tenant improvement cash outlay, commissions and property upgrades). Typically, for a value-add investment, capital expenditures will be approximately 10% to 20% of the purchase price of the asset. The return on these costs once leased at market rents is a measure investors can use to estimate the arbitrage opportunity that exists in stabilizing a value-add property. The measure is directly comparable to the market cap rate of comparable stabilized assets with the spread between the two indicating the arbitrage opportunity. Equation - Projected NOI at stabilization divided by the sum of the purchase price plus all capital costs incurred to achieve the stabilized NOI. Property A property that has an occupancy level at or above the local average and is leased at market rents. CBD The Central Business District of a major city. Suburban Mainly residential area proximate to a major city. Class A The most prestigious buildings competing for higher-quality tenants with above-average rental rates for the area, along with high-quality finishes, state-of-the-art systems, exceptional accessibility and a definite market presence. 46

47 Definitions (continued) Class B Buildings competing for a wide range of tenants with rents in the average range for the area. Building finishes are fair to good for the area and the systems are adequate, but the building does not compete with Class A at the same price point. Class C Buildings competing for tenants requiring functional space at rents below the average for the area. Hotel-Specific Definitions Full Service A hotel property with more than 150 rooms, room service, an on-site restaurant and a concierge service. Luxury Hotel chains that are priced in the top 15.0% in terms of average annual room rates, according to Smith Travel Research. Select Service A hotel property with less than 150 rooms, no room service and no on-site restaurant or concierge service. Economy Hotel chains that are priced within the 20.0% to 40.0% range in terms of average annual room rates, according to Smith Travel Research. -Specific Definitions Neighborhood/Community Center (Grocery Anchored) Open-air retail center that is anchored by a grocery store and, in the case of community centers, a second major retail anchor. Can range from 75,000 to 350,000 square feet. 47

48 Definitions (continued) Power Center Open-air retail center typically occupied by large-format, big-box and value-oriented retailers, with very limited small-shop tenant space. Can range in size from 100,000 square feet to over 600,000 square feet. High Street The primary retail shopping thoroughfare in the premiere location of an urban submarket, serving as a focal point for high-end shops and luxury retailers. Multi-housing-Specific Definitions Infill/Urban Area considered inner-city plus built up environs, characterized by high population density and vast human features in comparison to surrounding areas. Suburban Surrounding residential areas of a larger city. Outer edge of a large city, or several aggregates of distant residential area. 48

49 Chris Ludeman Global President CBRE Capital Markets Brian Stoffers Chief Operating r, Capital Markets President, Debt & Structured Finance CBRE Capital Markets Thomas McDonnell President CBRE Valuation and Advisory Services Jim Costello Managing Director, Americas Research CBRE Global Research & Consulting Ray Wong Executive Director, Americas Research CBRE Global Research & Consulting Copyright 2014 CBRE Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of the CBRE Global Chief Economist.