New York, January 20, 2011 -- Commercial real estate markets across the U.S. either improved
moderately or were stable, according to Moody's Investors
Service's Red-Yellow-Green® study for fourth quarter
2010. Most property types in U.S. CMBS showed small
improvements in strength.
"The commercial real estate markets are continuing down the road
to recovery, though the fact that most markets remain yellow indicates
that a comfortable point of stability has not yet been reached,"
says Moody's Vice President Keith Banhazl.
Yellow scores show middling strength. Six of seven property types
in U.S. CMBS had yellow scores last quarter, with
the six also showing some improvement. Only the multifamily sector
has a green or strong score, but its score did not change during
the fourth quarter.
"Red markets are growing increasingly rare," says Banhazl.
"Though the concentration of markets across the property types still
lies in yellow territory, it is now closer to the higher end of
the yellow spectrum, with spillover into green territory."
Specifically, 55% of all U.S. markets were
in yellow territory during both the third and fourth quarters.
However, in the third quarter 18% were in red and 27%
were green, while in the fourth quarter 12% were red and
33% were green.
Moody's Red-Yellow-Green® report scores markets
on a scale of 0 (weak) to 100 (strong) and describes them in traffic light
colors, with scores of 0-33 identified as red, 34-66
as yellow, and 67 -- 100 as green. The new 2010 fourth
quarter study reflects data from the third quarter of 2010.
SECTOR BY SECTOR ANALYSIS
During the third quarter, the limited-service hotel sector
showed the most improvement of any of the property types, experiencing
a moderate seven-point rise to Yellow 53. Moody's
notes that year-over-year RevPar grew significantly during
the quarter for the limited service hotel sector, from 5.1%
to 9.1%.
The full-service hotel sector rose three points during the quarter
to Yellow 57. RevPAR was up 10.3% over the same quarter
last year. The sector has a positive supply-demand imbalance
of 1.1%.
The industrial sector picked up two points in the quarter to inch up to
Yellow 59. The already high vacancy rate remained stable at 14.1%
The suburban office sector improved five points to Yellow 45 in the fourth
quarter. The quarter saw the end of 10 consecutive months of the
vacancy rate increasing.
The offices in central business districts (CBDs) improved two points to
Yellow 62. While vacancy inched upward from 13.0%
to 13.1%, projected demand grew from 0.1%
to 0.3%.
Retail gained two points to move to Yellow 64. Despite a slight
uptick in supply, demand increased to outpace projected supply by
0.1%.
The multifamily property type remained at Green 88, with the vacancy
rate dropping slightly from 6.0% to 5.8%.
METROPOLITAN MARKET ANALYSIS
Overall, the composite score for the U.S. was Yellow
64, a three-point improvement from the 61 score of the previous
quarter.
The scores of the top 10 cities found most frequently in CMBS, based
on dollar volume, are as follows, with the previous quarter's
score in parenthesis: New York 77 (76), Los Angeles 75 (73),
Washington DC 74 (71), San Francisco 69 (66), Philadelphia
65 (62), Miami 66 (60), Chicago 58 (55), Houston 57
(50), Atlanta 51 (45), and Dallas 51 (47).
The five best markets in the U.S. are: Honolulu 81
(78), New York 77 (76), Los Angeles 75 (73), Washington
DC 74 (71), and Orange County CA 73 (68).
The five worst markets in the U.S. are: Trenton 37
(35), Detroit 41 (32), Phoenix 43 (41), Las Vegas 45
(44), and Indianapolis 48 (45).
The rating agency's report, "US CMBS: Red --Yellow
-- Green™ Update, Fourth Quarter 2010 Quarterly Assessment
of U.S. Property Markets" is available on the company's
web site, www.moodys.com.
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New York
Keith Banhazl
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Jared Noordyk
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
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Moody's: U.S. Commercial real estate markets show moderate improvement