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                                  February 22, 2013 


If you don't know where you are going, you'll end up someplace else. -- Yogi Berra
In This Issue
Regional Events
CRE Investors Eager to "Turn The Page"
CRE Going Mobile in 2013
Banks Have Nothing Bad ToSay
Recovering Office Demand Sets Stage For Rent Growth
E-Commerce Plays Major Role In Industrial Growth
Big Box Outlook
Shopping Centers Post NOI Gains
Farmland Rental Rates Lagging Rising Land Values
MultiFamily Poised For Solid Future
Investors Set Sights On Industrial Sector
Office Sector Waits For Benefits of Employment Gains
Multifamily Lending Expected To Climb
Study Analyzes Planning Time for CRE Projects
Institutional Capital Chasing CRE As Safe Haven
9 Business Books
Norway Off and Running To Invest in U.S.
Global Investment Trends


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by George Ratiu

Commercial REALTOR® markets posted accelerating growth in sales and leasing activity during the fourth quarter of 2012. Based on the results of the January Commercial Real Estate Market Survey, commercial practitioners closed the year on a more upbeat note. Commercial REALTORS® rated business opportunities in the fourth quarter 6% higher than the previous quarter. 


On the leasing side, activity rose 3% over the previous quarter, indicating rising demand. On the supply side, new construction was down only 1% from the third quarter.
Vacancies declined for all property types, except hotels, which rose to 20.8%. Industrial rates declined 240 basis points, to 15.7% while retail rates decreased 130 basis points, to 16%. Availability for multifamily properties continued on a downward path, with vacancies at 7.3% in the fourth quarter. After a midyear bump, office availability rates slid from 19.3% in the third quarter to 18.2% in the fourth quarter.

With declining availability, landlords were in a position to offer fewer rent concessions. However, rental rates have yet to recover in most REALTOR® markets. In terms of space size, tenant demand was strongest in the 5,000 square feet and below properties. The fourth quarter witnessed growth in demand for spaces in the 7,500-9,999 square foot range. Lease terms remained steady, with 36-month and 60-month leases capturing the bulk of the market.
Investors have actively turned their attention towards secondary and tertiary markets, seeking higher yields in growing markets. Investment sales rose 11% from the third quarter, and a noticeable 18% year-over-year. Nationally, 68% of REALTORS® reported completing a sales transaction during the quarter. Prices decreased 4% compared with a year ago. Cap rates rose for all office properties, except hotels. 


 Commercial Logo

The SAR Commercial Division has a new logo! The logo change marks the 7th year of the Division's existence and represents the next forward-thinking chapter in our organization's evolution.


"We've given the logo a meaningful update to ensure that the Commercial Division continues to grow and embrace our evolving industry plus remain relevant and poised for future growth," says Anthony Scotch, SAR's 2013 Commercial Division Chair.



Recent Liability Law Impacting Commercial Practitioners

Commercial Lunch & Learn

Wednesday, March 6 -- 11:30 a.m. - 1:00 p.m.

Speaker: Christopher Hanson, Esquire

Cost: $15 SAR Members/$20 Non-Members 



This lunchtime event will include a review of cases involving liability for brokers, disclosure obligations to non-clients, insurance coverage and denials for E&O claims, and deficiency liability for borrowers on foreclosed out debt. Time will be allotted for Q & A. One thing is for sure, no matter what the title of the seminar, it won't be boring! Register early by calling Brian at (916) 437-1210. Save your spot and reserve your lunch today!   Registration Form


A Legal Perspective and Review of the California Association of REALTORS (C.A.R) Commercial Property Purchase Agreement

Wednesday, April 3 -- 10:00 - 11:30 a.m.

Speaker: Robert McCormick, Esquire

Cost: $10 SAR Members/$15 Non-Members


This class will review the C.A.R approach to commercial purchase and sale transactions embodied in the C.A.R Commercial Property Purchase Agreement (CPA). Bob will provide a practical guide for the use of the C.A.R.-CPA form plus identify the strengths and weaknesses of this form in comparison to the AIR form and custom attorney-prepared documents. Attendees will get a better understanding of the special aspects of commercial real estate purchase and sale transactions that should be considered when choosing a purchase and sale agreement form and be able to determine when it is appropriate to specifically utilize the C.A.R.-CPA.  Registration form coming soon.




Investment Forum 

Tuesday, March 12 -- 7:30 a.m.
R.J. Grins In The DoubleTree Hotel for additional information


Sacramento Real Estate Exchange 

Friday, March 15 -- 10:30 a.m.

China Buffet in Citrus Heights

Call Ben Couch at (916)989-4652 for additional information


ACRE -- Broker of The Year Event

Thursday, March 28 

Hyatt Regency, Sacramento



What's the Impact of Social Media on Commercial Practitioners?
Continued conversation with Todd Clarke, CCIM to discuss the role of social media and other online tools, and how they have changed the way commercial real estate practitioners interact with each other globally. Download here

2013 Market Forecast


Ken Riggs, CCIM, CRE, MAI, Chairman and President of Real Estate Research Corp., discusses the factors that will shape the commercial real estate investment landscape this year. Download here 




Lead Paint in Commercial Buildings-EPA Request for Information

The U.S. Environmental Protection Agency is exploring new regulations that would create rigorous lead abatement practices in commercial buildings, similar to those that exist for residential properties. These potential new rules would apply to a myriad of real estate industry practitioners.


The EPA announced on Dec. 31, 2012 that they will begin collecting information from property owners and managers, construction and real estate contractors, and other industry professionals. This information collection period will assist the EPA in the rule-making process with regard to lead based paint and commercial buildings.

The EPA would like to receive information on the manufacture, sale, and use of LBP post-1978; use of LBP in or on public and commercial properties; how often renovations were done on public and commercial properties and the practices used in such renovations; and estimates of the amount of dust created and possibly transported from the outside to the inside of the building. It is expected the EPA will move forward with the process of creating formal rules and will be releasing a proposed rule no later than July 1, 2015. Final rules are to be completed by Dec. 31, 2016. (CCIM) Read more on the EPA request for information.  



by Walter Molony

Frustrated by continued uncertainty, a sluggish recovery, and a challenging investment environment, investors generally appear eager to put the past behind them and adjust to the new normal, as outlined in Expectations & Market Realities in Real Estate 2013, a new annual report published jointly by Real Estate Research Corporation (RERC), Deloitte, and the National Association of REALTORS® (NAR). According to the report, investors appear to realize that this environment will likely be with us for the foreseeable future, and that adjustments may need to be made to maximize commercial real estate investment performance and yield in our continuing slow-growth economy.

The three organizations have drawn on their respective capabilities to examine the economy, capital markets, and commercial real estate property markets; to thoroughly assess and analyze existing research; and to offer an outlook for commercial real estate for 2013 and beyond. Findings indicate that the economy is expected to improve only modestly in 2013, with the budget deficit, tax increases, and cuts in government spending expected to continue the economic uncertainty. In general, capital remains available for commercial property investments, but the discipline for capital has been inching upward and is becoming more selective. The report also carefully analyzes and offers an assessment of the office, industrial, apartment, retail, and hotel property sectors, as well as for commercial real estate as an asset class, for 2013.

"It is time to stop waiting for the economy and the investment environment to get better. This is it -- this is the new normal-and we need to turn the page on the past and make the adjustments needed to be successful for the balance of this decade," stated Kenneth Riggs, Jr., Chairman and President of RERC. "Investors are facing the challenges ahead, and commercial real estate continues to be an attractive investment for a variety of reasons in this economic climate." (NAR) Full Story



Mobile MarketingReal Estate Insider recently published a new report on how the commercial real estate industry is rapidly turning toward mobile marketing.

Based on the findings of inMotion Real Estate, commercial practitioners have "plunged into mobile marketing" in greater numbers than ever. Last year, for example, showed a 61% increase from 2011 in mobile use among commercial industry professionals alone.

The report also states that there was a 225% increase in mobile visits as a total share of website visits in 2012. Commercial real estate websites can now expect almost a tenth of their traffic from mobile devices.

"Residential and vacation real estate agents have long known the potential of mobile devices," reads a statement from Real Estate Marketing Insider. "From vacation rentals San Diego to New York condos, nearly every real estate expert has a mobile-ready presence and a website. However, in commercial real estate, such a presence has been less important. Commercial clients are traditionally older, less tech-savvy, and more methodical about their real estate buying decisions.


That's shifting though, as the tech industry grows and the average small business changes its look. Most new companies work in smaller offices. Tech start-ups are often completely online, with very few maintaining landlines at all. Increasingly, a mobile-ready advertising setup is becoming necessary for commercial real estate."

REMI believes that commercial brokers should be implementing mobile marketing strategies, and urges its readers to begin doing so before they fall behind their competition. (Marketing Watch)

by Mark Heschmeyer
When it comes to bankers and CRE loans, no news is good news. 
As the economic recovery continues, the nation's bankers are spending noticeably less and less time in their quarterly conference earnings conference calls talking about commercial real estate as a factor in the underperformance of their loan portfolios. It was hardly a topic at all in the most recent round of calls, which wrapped up this past week. 
The change denotes the growing point that commercial real estate has become much less of a drag on bank performance. At the same time, though, CRE lending has not yet become a positive either.
"If you look at overall attitudes today versus a year ago, I'd say across the board it's more positive, just because, and frankly as time goes on, people kind of get tired of feeling bad and they start turning a little positive just with the passage of time," said Kelly S. King, Chairman and CEO of BB&T Corp., adding that the certainty following the election is also helping banks move forward in the new environment. 
Clarke R. Starnes III , Senior Executive Vice President and Chief Risk Officer of BB&T Corp., was quick to add that plenty of uncertainty exists. "This whole fiscal cliff debate, what was going on with taxes, now the debt ceiling, the general economy, the world's geopolitical situation, the world economy pending health care cost is coming in 2014. All that still is weighing on business," said Starnes. 
"I think businesses are still a bit cautious. They are being very careful and I think that manifests itself in just being very careful about what they borrow," he added. "We are seeing increased borrowings and that's good, but they are not borrowing what they are signing the notes for. We are not seeing significant increases in utilization." (CoStar)

by Randyl Drummer

Tenant demand for office space ended 2012 on a strong note as occupancy gains spread across a broadening array of U.S. markets, opening the door for widespread rental rate increases this year, CoStar Group reported in the company's Year-End 2012 Office Review & Outlook.

While overall leasing volume appeared to be somewhat lower in 2012 from the previous year, strong absorption and very limited new construction -- combined with a significant number of demolitions/removals of antiquated buildings -- helped to push the U.S. office vacancy rate down 50 basis points over the past year to 12.3% at the end of fourth-quarter 2012, according to CoStar analysts.

In the fourth quarter, tenants absorbed a net 24 million square feet of space, for a total of 59 million square feet of net absorption for the year. The figure is slightly less than CoStar originally forecast but very strong compared to 2011, which rallied from a very slow first half to post 41 million square feet.

Nearly every U.S. office market enjoyed absorption gains in 2012. Joining perennially strong markets such as Houston and Dallas-Fort Worth in full recovery were the former housing-bust metros of Phoenix, Atlanta and Orange County, CA, where the local economies have benefited from increased office hiring and a gradually improving housing market.

Absorption numbers show that companies are adjusting their decisions on where to lease space based on local employment, economic and regulatory conditions, Nordby noted. (CoStar)  



E-commerce By Robert Carr

After rising to the top, in retail store battles, major chains such as Best Buy and Barnes & Noble are still planning to cut hundreds of stores in 2013-but with the help of the e-commerce boom, the supporting industrial market has emerged strong this year with declining vacancy and modest rent growth in most markets.


Regardless of the destruction it's causing to the bricks-and-mortar retail industry, e-commerce development helped prevent the downfall of the national industrial market. Global e-commerce is expected to double to $1 trillion in three years, with Amazon taking at least a quarter chunk of that market. Demand for new distribution centers today is strongest around the ports, but is also expanding in major population centers such as large cities in California, Texas, New York and New Jersey, as Amazon and other large retailers prepare massive distribution facilities to reach local online shoppers, according to Cushman & Wakefield's 2013-2016 Industrial Forecast Report.

Amazon has continued to announce large new distribution facilities around the globe. Just in January, the Seattle-based firm said it signed lease agreements to fill three new fulfillment centers in Texas, one in Robbinsville, N.J. and one in Tracy, Calif. Each of the centers is being built at more than 1 million sq. ft. Amazon isn't looking weak, either, reporting a record high stock price of $284 per share on Jan. 25, even with the firm beginning late last year to charge customers sales taxes in states that were previously exempt.

Kris Bjorson, Jones Lang LaSalle's head of retail and e-commerce distribution, says that as Amazon continues its lead, other major retailers are going to fall in line with the new supply-chain model. Companies like Home Depot, Target and Walmart are evaluating their three-to-five year multichannel strategies, he notes. "They have to consider, do customers like coming into our stores or going online or coming into the store and then going online, etc. Where is the customer putting most of his or her money into this process?" Bjorson says.

However, as opposed to Amazon's brand new model, these companies already have the industrial supply chain in place, and they will have to evaluate how to alter that model, particularly how to rework distribution facilities to meet the likely-coming consumer demand of same-day delivery on all products. Challenges to changing over these existing distribution centers include a shortage of trained workers for the more automated processes, adding truck traffic and parking to meet increased shipping demands, and retooling the building's insides to handle single-item picking," Bjorson says. (NREIOnline) E-Commerce 


The major logistics hubs around the country are well established and unchallenged as the primary sites for 'big box' distribution. However, a new set of markets with growing populations and robust transportation connections are emerging as viable candidates for distributors and investors alike.
The 'big box' market serves the logistical necessity of transporting and storing goods as they move from production to consumption. It is shaped primarily by population centers, transportation assets and supply chain strategies. It is the sector where economies of scale come most into play. When we say 'big box' we are generally referring to warehouse and distribution facilities of at least 250,000 square feet whose primary function is to hold and distribute finished goods either downstream in the supply chain or directly to customers.
Modern 'big box' facilities are those built after 1990, with 28' or higher clearance, ESFR sprinklers and at least one dock door per 1,000 feet.
Since the nation exited recession in 2009, the 'big box' sector has consistently outperformed the remainder of the market. With the collapse in rents and competition from weaker players, large firms with access to capital have moved to take up the best product either through full-blown supply chain reorganizations or opportunism. By making moves during lean times, these firms have been able to lock in low long-term rates. Now, the market is shifting; several years without widespread construction has thinned out large blocks of the best product. As a result, we see a market with rising rents and supply growth as emergent factors.
Demand for 'big box' real estate has continued to act as the driving force for industrial real estate. While Amazon and multichannel retailers have been dominant, demand has been steadily broadening across industries.  State-of-the-art development has quickly moved past the 32' clear height standard and is now at 36' as users incorporate "each-picking" technology on multiple mezzanine levels.

Site selection for 'big boxes,' whether e-commerce or traditional, is a complex optimization problem involving transportation costs, labor, service level requirements, tax incentives and more. Access to rail has played a significant role in shaping the national 'big box' market over the past decade. With the steady growth in domestic intermodal volume and continued investment from the railroad companies, access to rail remains an important factor driving the market.

The traditionally dominant logistics markets continue to be excellent places for investment and distribution. However, rail hubs like Kansas City and Memphis warrant a look, as do markets with unique transportation assets like the Port of Houston. Major air and ground hubs with population density like Indianapolis and Phoenix catch overflow business from congested nearby markets also look like good options for investors and distributors. (NREIOnline)  
Net operating income for retail shopping centers rose 4.3% per square foot in 4Q12, according to an International Council of Shopping Centers and National Council of Real Estate Investment Fiduciaries joint report.

"Retail was the best performing property type in the NCREIF index for the fourth quarter and the year," says Jeffrey R. Havsy, Director of Research with NCREIF. "The strong returns were driven by improved fundamentals. Both NOI and occupancy improved from 2011's levels."

Power centers and super-regional malls posted the strongest year-over-year gains in 4Q12 with NOI rising 7.7% and 4.6% respectively. Neighborhood centers and convenience stores both posted 3.8% NOI gains, while the regional mall sector increased slightly by 0.4%.

East Coast shopping centers outperformed other regions with an 8.6%YOY gain in NOI. The West increased NOI by 4.4% while the South posted a 1.7% increase. The only region to report a decline in 4Q12 NOI was the Midwest, where retail centers dropped a modest 1.8%.  (CCIM)



FR The USDA's semi-annual survey on the state of farm finances, called the Agricultural Resource and Management Survey (ARMS) is "the only national survey that annually produces observations on field level farm practices, the economics of the farm operating the field, and the characteristics of farm operators and their households". This year's ARMS look at the economics of farm operations is showing a race between rented and purchased land prices, both rising, but one lagging the other significantly.


Ownership means less in the land use picture than in other lease-driven sectors. Typically, rented farmland is worked according to the needs of the renter, not the landlord. Leases are often informal. According to the most recent survey, 93% of producer/respondents say the landlords aren't involved in the decisions about land use, crop or livestock selection.


The average US farm has approximately three rental agreements in place. These might include fixed or flexible cash rent, crop share and even free rental agreements. As the farm size rises, the number of rental agreements increases. (  Farmland Rental Rates 



For several years now, the multifamily sector has been the golden child of commercial real estate.
While other property segments such as office and retail have struggled, the apartment market has seen vacancies basically evaporate, rents climb and investor interest soar.

The red-hot performance of the sector has left some to wonder how long the good times can last. A strong 12 to 18 months ahead for the apartment sector is projected plus a time period that will be marked by high occupancy levels, growing revenues and continued demand from buyers of commercial real estate. The following explains this forecast:

An Improving Economy
The economy has been slow to pick up, and it may not catch fire in the near future, but it's headed in the right direction, and that's a good thing for the apartment market. More people with jobs means a larger pool of renters, and an improved job market also would lead to those who are already renting being willing to pay more for larger and nicer apartments. Even in the face of modest expectations for the 2013 economy, apartment research firm Axiometrics is forecasting the national effective rent rate to grow by 3.6% this year. That would be a dip from 2011's increase of 4.8% and last year's rise of 3.9%, but historically it's still a very impressive number. The firm also says the national occupancy rate should rise about 60 basis points to 94.9% in 2013.

Attractive Financing
Apartments have proven extremely attractive to investors because not only have the properties enjoyed high occupancies and rent growth, but also historically low interest rates have made financing their acquisition fairly cheap. All indications point to interest rates remaining low for a while, at least through the end of this year and likely beyond that as well. But even if they begin to climb, that doesn't spell doom for investor interest in apartment acquisitions. Rising interest rates would be the result of an improving economy, and, as noted above, an improving economy should lead to greater rent collections - an attractive offset for higher financing costs.

Sensible New Construction
Like the other commercial real estate property types, the multifamily sector has seen relatively little new construction in recent years. In terms of raw numbers, that will begin to change this year. According to Axiometrics, more than 168,000 new units will be delivered across the nation this year - nearly double 2012's figure of 85,000 units.

Shift in Attitudes about Homeownership

It's no secret that one factor in the multifamily sector's surge was the collapse of the single-family market and the move away from homeownership. While the single-family sector finally appears to be on an upward trajectory, it won't recreate the madness of the early 2000s, when people who had no business buying homes were approved for mortgages. People with more moderate incomes will remain what they almost always have been: renters.

Much has also been made about the Millennials' preference for renting over homeownership.
I am skeptical that this will last past their 30s, when the demands of marriage and families will almost surely dictate the purchase of single-family homes. However, the apartment market will always benefit from whatever generation is currently in their 20s and just beginning to make their way through their careers. Add it all up, and I think the apartment market's future - just like its recent past - looks very bright indeed. (Biz Journals)



IPAmerican port cities are expected to see a rise in demand for industrial property, according to Colliers Turley's 2013 Market Predictions. Demand will be driven by new post-Panamax routes to East Coast ports as well as the Panama Canal's expansion.

Factors such as growing industrial demand, low construction output, and high industrial yields will also increase investor interest in the sector. Increasing trade with emerging foreign markets will also boost the need for warehouse space, according to the predictions.

Projections estimate gross domestic product will rise from 2 - 2.5% this year, with the majority of growth taking place in the latter part of the year. (CCIM) 



Despite an increase of 464,000 office-sector jobs in 2012, only 17 million square feet of net absorption was recorded, cutting the vacancy rate by a modest 30 basis points, according to a research brief by Hessam Nadji, Marcus & Millichap's managing director of research services. However, office vacancy is expected to decrease an additional 90 basis points through the end of this year due to slowing construction and growing demand.

The surge of office-using jobs comes on the heels of an overall employment growth trend across the country. Since the onset of the recession, 5.5 million jobs have been added, resulting in 65% of recessionary job losses restored. The numbers indicate that job market growth is surpassing original expectations, and emphasize overall growth in corporate profits and the housing market, according to the report. (CCIM)


The continued improvement in the commercial real estate market is reflected in a Mortgage Bankers Association (MBA) forecast that commercial and multifamily lending will increase 11% from last year, with origination volume reaching $254 billion in 2013.

The industry group projects that commercial and multifamily loans outstanding will grow 2% on an annual basis to $2.4 trillion. "Despite a 21% decline in the volume of commercial and multifamily mortgages maturing this year, we expect origination volumes and the amount of mortgage debt outstanding will both increase," said Jamie Woodwell, the Mortgage Bankers Association's Vice President of Commercial Real Estate Research.

MBA's Jamie Woodwell also notes that Fannie Mae, Freddie Mac, the FHA, and life insurers "continue to have strong appetites" for lending, which the organization expects to be enhanced by rising demand for securities backed by commercial mortgages. (American Banker)


The average planning time for commercial construction projects in the U.S. increased by three to four months from 1999 to 2010, according to a study by the American Enterprise Institute.
The study, which covered more than 80,000 construction projects, concluded that planning times averaged about 17 months per project. Large projects saw even longer time-to-plan lags, averaging more than 28 months. Planning times also varied depending on building characteristics, location, and regulatory scrutiny. The study found that the cities with the longest time-to-plan lags were located in the Northeast corridor and California. (American Enterprise Institute)  Download the study.
by Mark Heschmeyer 

An increasing number of institutional lenders are looking to park significant levels of capital into commercial real estate this year as a "safe haven." According to Jones Lang LaSalle's Capital Markets experts, real estate debt financing remains an attractive risk-return option for any lenders in spite of economic volatility.

"We saw the commercial mortgage-backed securities (CMBS) market make a formidable return to $48 billion in issuance last year and that additional liquidity led to improved pricing and terms for borrowers," said Mike Melody, Co-head and Executive Managing Director of Jones Lang LaSalle's Real Estate Investment Banking business. "This has drawn a tremendous amount of liquidity in both debt and equity into the commercial real estate funding arena from a broad spectrum of lenders. That availability is causing an expanded level of competition for core product."

With a continuum of low interest rates and government debt yields, Jones Lang LaSalle said it expects the broad availability and aggressive cost of capital to support a 15% to 20% growth in core real estate investment volume year-over-year in the United States.


The relatively low indices have created an attractive lending environment as all-in loan pricing remains attractive compared with alternative investments, according to Tom Melody, another Co-head and Executive Managing Director of Jones Lang LaSalle's Real Estate Investment Banking business. (CoStar) More Institutional Capital Chasing CRE

by Dave Kerpen

Great leaders learn every day, and reading great books is the one of the best ways to learn. I've been fortunate enough to read some excellent books over the last fifteen years -- books that have inspired me to change the way I see the world, my business, and the opportunities in front of me. In the order in which I've read them, here is a list of nine books which have changed my life. May they change yours as well:

1) What Color is Your Parachute? A Practical Manual for Job-Hunters and Career Seekers by Richard Bolles
2) Permission Marketing: Turning Strangers Into Friends & Friends Into Customers by Seth Godin
3) The Tipping Point: How Little Things Can Make a Big Difference by Malcolm Gladwell
4) Good to Great: Why Some Companies Make the Leap - and Others Don't by Jim Collins
5) Mastering the Rockefeller Habits: What You Must Do to Increase The Value of Your Growing Firm by Verne Harnish

6) The E-Myth: Why Most Small Businesses Don't Work, and What to Do About It by Michael Gerber
7) Built to Sell: Creating a Business That Can Thrive Without You by John Warrilow
8) Rework by Jason Fried and David Heinemeier Hansson
9) The Three Big Questions for a Frantic Family: A Leadership Fable About Restoring Sanity to The Most Important Organization in Your Life by Patrick Lencioni  (LinkedIn)  Full Story




by Mark Heschmeyer

The Norwegian Government Pension Fund Global has made its first investment in the U.S. property market. The giant, $665 billion pension fund bought a 49.9% ownership interest in five office properties in the U.S. from through a joint venture with New York-based financial services provider TIAA-CREF.


This past December, Norway's government approved a change in the law permitting its national pension fund to invest in property outside Europe for the first time. The fund's manager, Norges Bank Investment Management, said it could target up to $11 billion in the U.S.


At the end of the third quarter, the pension fund held less than 1% off its assets in real estate, well below its 5% targeted goal. Norwegian officials predicted it would take years before it would reach the planned level of off shore real estate investments. The fund is forecast to grow to $1.1 trillion by 2020, indicating it could hold $55 billion in real estate by then. (CoStar)



The global real estate market is expected to see a substantial rise in investment activity as institutional capital flows into major gateway cities such as New York, London, and San Francisco, according to an Ernst & Young report.

Chinese investors alone closed $4.5 billion in cross-border deals during the last 12 months, many of which were direct investments. "The scale of institutional and foreign investor interest in the gateway cities has also encouraged lenders back into the market," the report notes. "Loan-to-value ratios are generally being capped at 60 - 70%; however, with the highly competitive U.S. multifamily market being the notable exception." New lenders, such as insurance companies and sovereign wealth funds, will continue to emerge in 2013 due to the continuing gap in the debt markets.

The report also highlights the increased popularity of non-traditional real estate investment trusts. Driven by the REIT structure's reliable returns and low cost of capital, interest in private letter rulings has gained traction in many industries, including gaming, healthcare, timber, and data storage. Pension funds and endowments are now committing 7 -10% of their capital to REITs, up 2 percent from the historical average. (CCIM)