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Announcement:

Moody's: US commercial property market outlook broadly stable in 1Q 2013

Global Credit Research - 08 May 2013

New York, May 08, 2013 -- The outlook for the major US property markets was broadly stable in the first quarter, consistent with the generally slow pace of both construction and absorption, the supply and demand components of real estate, according to Moody's Investors Service's Red-Yellow-Green® quarterly property assessment.

"While overall levels of construction and absorption remained modest, strong revenue per available room or RevPAR growth from the hotel sectors pushed the overall composite score up to Green 68, a one-point increase over the prior quarter," said Moody's Vice President - Senior Credit Officer Keith Banhazl.

Moody's Red-Yellow-Green® report scores commercial real estate markets on a scale of 0 (weak) to 100 (strong) and describes them by traffic light colors, with scores of 0-33 identified as Red, 34-66 as Yellow, and 67-100 as Green. The latest report reflects data from the fourth quarter of 2012.

The full-service hotel score jumped four points, to Green 67 from Yellow 63. RevPAR increased by 7.8% compared to the same quarter last year. Construction activity in the sector is still low, but increased. Upcoming supply increased to 1.5% from 1.2% last quarter. Twelve markets now have upcoming supply in excess of 2.5% of inventory.

The limited-service hotel sector experienced the greatest score change by gaining six points, to Green 72 from Yellow 66. RevPAR increased by 9.8% compared to the same quarter last year but still lags its baseline target. The 2.2% lag is the smallest since the third quarter of 2008.

The outlook for the six major gateway cities (Boston, Chicago, Los Angeles, New York, San Francisco and Washington, DC) is also broadly stable. Washington, DC is the exception.

"The Washington, DC market is expected to underperform the major gateway cities as sequestration and Defense Base Closure and Realignment (BRAC) effects begin to show," Banhazl.

Other conclusions from the Moody's report include:

-- The multifamily composite score dropped four points, to Green 81 from Green 85, while remaining the highest-scoring sector. Vacancy worsened to 5.0% from 4.5% as supply exceeded demand for the sixth consecutive quarter.

-- Suburban and CBD office each dropped two points as upcoming supply increased by 0.1% in each office sector. CBD office, Green 68, still leads suburban office, Yellow 53, by a considerable margin.

-- Retail remained at Yellow 66. Two new retail markets, Memphis and Tulsa, were added.

-- Industrial increased two points to Yellow 65 as vacancy edged downward to 12.8% from 13.1% the previous quarter.

-- Miami was the only market to top more than one sector. It led the multifamily sector at Green 97, and tied San Francisco to lead the retail sector at Green 86.

METROPOLITAN MARKET ANALYSIS

Below is a list of the scores of the top 10 cities found most frequently in CMBS based on dollar volume, with the previous quarter's scores in parentheses:

New York: 73 (73)

Los Angeles: 78 (79)

Washington, DC: 61 (64)

Chicago: 62 (65)

Dallas: 58 (58)

Miami: 76 (73)

Philadelphia: 63 (63)

Atlanta: 58 (57)

Houston: 67 (71)

Boston: 66 (69)

The five highest scoring markets in the US:

Honolulu: 81 (78)

San Francisco: 78 (79)

Los Angeles: 78 (79)

Miami: 76 (73)

New York: 73 (73)

And the five lowest scoring:

Trenton: 44 (38)

Detroit: 49 (48)

Phoenix: 50 (50)

Jacksonville: 51 (57)

Las Vegas: 52 (51)

The report, "CMBS: Red -- Yellow -- Green Update First-Quarter 2013 Assessment of US Property Markets," is available to Moody's subscribers at

http://www.moodys.com/research/CMBS-Red-Yellow-Green-Update-First-Quarter-2013-Assessment-of--PBS_SF327470.

An Excel file, which allows filtering of scores by region, state, and market and property type, is available to subscribers at

http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF327471

***

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Keith Banhazl
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Tad Philipp
SVP - Director CMBS Research
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's: US commercial property market outlook broadly stable in 1Q 2013
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