Survey of Emerging Market Conditions

Transcription

1 Survey of Emerging Market Conditions Quarter Data collected May 2008 Published July 7, 2008 Lead Researcher and Analyst Dr. Wayne R. Archer, Executive Director University of Florida Bergstrom Center for Real Estate Studies Professor of Real Estate and Wachovia Fellow - Warrington College of Business Administration Editorial Board Mr. Lewis Goodkin, President Goodkin Consulting, Miami, FL Dr. Hank Fishkind, President Fishkind & Associates, Inc., Orlando, FL Mr. Steve Cohen, Senior Vice President Commercial Real Estate American Momentum Bank, Orlando, FL For more information about the survey or the Bergstrom Center for Real Estate Studies, visit our website at University of Florida Bergstrom Center for Real Estate Studies

2 Survey of Emerging Market Conditions May 2008 Executive Summary & Conclusions If our survey respondents were physicians, they would be telling us that Florida s condominium markets and some single family development markets have pneumonia, and Florida s rental real estate markets have the flu. That is to say, the condominium markets and some single family development markets are very sick, and there may be casualties. Meanwhile rental markets apartments, industrial, office and retail will suffer varying degrees of pain and discomfort in the months ahead, but are basically healthy and destined to recover. Probably because Florida s longterm growth outlook remains fundamentally stronger than most regions, our respondents are reporting that the basic real estate values and investment outlook remain solid despite a gloomy near-term prognosis. Prominent Features The Survey The general investment outlook remains remarkably stable in the face of the gloomy media picture of real estate and a now evident decline in near-term rental real estate performance. In virtually all forms of rental real estate apartments, office, industrial and retail respondents now report declining rental performance in the months ahead; that is, declining occupancy and little or no growth in rental rates. Despite a drift downward in rental performance, the overall outlook for office and retail can still be described as mixed. The outlook for absorption of new single family development is now steady; that is, no further decline, but improvement. The expectation for condominium development still is for declines in absorption. Prices are still expected to decline. The availability of capital is still reported to be ample, but restricted by severely increased underwriting requirements. Respondents own business outlook continues an eleven quarter decline, though the decline from last quarter was among the smallest. The stability of cap rates, a fundamental measure of real estate value, is a strong indicator that Florida real estate is perceived to remain a solid investment asset class. Our quarterly survey, conducted by the Bergstrom Center for Real Estate Studies, Warrington College of Business Administration, University of Florida is in its eleventh fielding. The total number of participants, at 282, is the most extensive survey of Florida professional real estate analysts and investors conducted on an ongoing basis. It includes respondents representing thirteen urban regions of the state and up to fifteen property types. General Investment Outlook Our general index of real estate investment outlook, weighted 40 percent for single family and condo development, 40 percent for apartments and commercial rental property and 20 percent for developable land, shows remarkable continuing stability and resilience in contrast to the gloomy media picture of Florida real estate, and cautious near-term expectations for rental performance. Investment expectations continue to be neutral or mixed, with a very small drift upward University of Florida Bergstrom Center for Real Estate Studies 2

3 Survey of Emerging Market Conditions May 2008 Single Family & minium Development The outlook for absorption of new single family homes, is the best it has been in over two years, with an expectation of no change. This is up from nine straight quarters of expected decline. While the outlook for absorption of new condominiums remains more pessimistic, it holds steady for the second quarter at its least pessimistic assessment in two years. The expectation for prices is more pessimistic. Both for new single family and for condominiums, expectations have continued a five quarter decline, and a majority of respondents continue to expect price declines ahead. Despite the sober outlook for prices, the outlook for investment in single family and condo development remained steady, suggesting that an increasing number of respondents are seeing relief ahead for residential development. Our respondents continue to see both single family development and condominiums, in Florida as a whole, as a mixed investment opportunity. Apartments Respondents indicate a sharp negative reversal in the expectation for apartment occupancy. For both market rate apartments and apartments for condo conversion, the outlook for occupancy plunged into decline for the first time in over two years of our survey. Similarly, the expectation for rental rate increases continued to fall well below the rate of inflation, and even towards expectation of decline. Despite this growing pessimism for immediate performance, the outlook for investment in market rent apartments remains positive and steady, while the outlook for investment in apartments for condo conversion improved noticeably. Still, the investment outlook for both types of apartments remains in the mixed zone. Industrial The outlook for occupancy in industrial property has declined for a fifth consecutive quarter, to the point where most respondents expect actual declines in occupancy. The outlook for rental rate growth in Warehouse and Distribution plunged further below the rate of inflation, while the almost equally negative expectation for rental rate growth in Flex Space, etc. stabilized somewhat. Despite these continued weakening expectations, the outlook for investment in industrial property remains mixed to positive. The investment outlook for Warehouse and Distribution drifted upward slightly, while the investment outlook for Flex Space, etc. drifted downward slightly. Office After six straight quarters of falling expectations for occupancy, the outlook for both Class A and Class B Office occupancy improved slightly, rising toward an expectation of no change. The outlook for rental rate growth, after turning sharply downward into low growth or decline, remained stable from last quarter, though still pessimistic. Though still mixed, the investment outlook has diverged slightly from last quarter, with improved outlook for Class A and weakened outlook for Class B. Retail The outlook for retail occupancy was mixed. While respondents still lean slightly toward declines in occupancy, there was notable improvement in the outlook for Large. On the other hand, there was notable decline in expectations for Neighborhood, with roughly half of respondents now expecting declines. The outlook for rental rate growth has now declined for all types of retail, with expectations uniformly for rental rate growth well below the rate of inflation. Despite declining expectations for near-term operations - occupancy and rental rate 2008 University of Florida Bergstrom Center for Real Estate Studies 3

4 Survey of Emerging Market Conditions May 2008 growth - respondents continue to view investment in retail as mixed. In all cases the investment outlook has remained steady from first quarter. Land Investment The outlook for investment for all categories of land has continued a five quarter downward drift. The outlook is now mixed to slightly negative for all categories of land, with unentitled land and land with residential entitlement suffering the poorest outlook and land with office and warehouse entitlements having the best outlook. Capital Availability Once again, in contrast to capital for single family mortgages, our respondents see no decline in availability of capital for acquisition of existing investment property. With capital for development there remains more pessimism, and some respondents continue for the fourth quarter running to believe the availability of capital for development has declined. In all cases, however, our respondents report that increased restrictions in underwriting are narrowing the door to debt financing. Cap Rates & Yields With the exception of apartment cap rates, our respondents report cap rates that are little changed since first quarter of For market rent apartments, cap rates are reported to have increased roughly 100 basis points (one full percentage point) since first quarter of With apartments for conversion, increases over the two years exceed 200 basis points. In the past, the steadiness of reported cap rates has defied our respondents, who have always expected increases. In this quarter, their expectations settled in the direction of no change. Required yields have increased notably for apartments targeted for conversion. Otherwise expected yields have remained very steady for all property types. Own Business Outlook The own business outlook of our respondents, which has declined in all but one quarter since early 2006, continued a steady path downward, though the decline was notably smaller from last quarter. The contrast between this outlook and all the other results of the survey may be, in part, because many of our respondents derive a significant portion of their income from housing transactions, but it also may reflect the now declining expectation for near-term rental performance University of Florida Bergstrom Center for Real Estate Studies 4

5 Survey of Emerging Market Conditions May 2008 Table of Contents Executive Summary & Conclusions... 2 Prominent Features... 2 The Survey... 2 General Investment Outlook... 2 Single Family & minium Development... 3 Apartments... 3 Industrial... 3 Office... 3 Retail... 3 Land Investment... 4 Capital Availability... 4 Cap Rates & Yields... 4 Own Business Outlook... 4 Section 1: Overall Investment Outlook... 7 Section 2: Residential Development... 8 Expected Absorption Rates... 8 Expected Price Changes... 8 Investment Outlook... 9 Section 3: Apartments Expected Occupancy Expected Rental Rates Investment Outlook Cap Rates Required Yields Section 4: Industrial Expected Occupancy Expected Rental Rates Investment Outlook Cap Rates Yields Section 5: Office Expected Occupancy Expected Rental Rates University of Florida Bergstrom Center for Real Estate Studies 5

6 Survey of Emerging Market Conditions May 2008 Investment Outlook Cap Rates Yields Section 6: Retail Expected Occupancy Expected Rental Rates Investment Outlook Cap Rates Yields Section 7: Outlook for Investment in Undeveloped Land Land Without or with Residential Land With Office or Retail Hospitality for Warehouse or R & D Land for Urban Renewal Section 8: Business and Capital Availability Outlook Capital Availability Outlook of Own Business Section 9: Dominant Investors Section 10: Characteristics of Survey Respondents Profession of Respondents Markets of Familiarity Property Types of Familiarity Section 10: Details of Cap Rates, Yields and Expected Changes University of Florida Bergstrom Center for Real Estate Studies 6

7 Survey of Emerging Market Conditions May 2008 Section 1: Overall Investment Outlook For yet another quarter, our survey respondents continue to defy media reports on Florida real estate in their general outlook for investing in property. Despite the continuing pessimistic picture of conditions in Florida s housing markets, the outlook for investment in rental property and developable land remains mixed and stable, with even a slight upward trend. While the index changed little, the change was positive. This investment index is weighted 40 percent on single family and residential condominium development, 40 percent on rental property of all types, and 20 percent on undeveloped land. Thus, it is at least fifty percent driven by the residential development outlook. This means that the stability in views of our survey respondents is particularly noteworthy as a contrast to media images of Florida residential real estate University of Florida Bergstrom Center for Real Estate Studies 7

8 Survey of Emerging Market Conditions May 2008 Section 2: Residential Development Expected Absorption Rates The outlook for absorption rates in single family development has remained relatively stable for the past five quarters, as respondents continue to expect no change in the immediate future. While expectations for absorption rates in condominium development remain more pessimistic than those in single family, a return to neutral expectations appears to be near. Expected Price Changes Consistent with the weakening trend of the past two years, price increases of new residences are expected to continue to lag inflation. However, in the last quarter, expectations for single family development have shown a slight indication that a less negative outlook may be on the horizon University of Florida Bergstrom Center for Real Estate Studies 8

9 Survey of Emerging Market Conditions May 2008 Investment Outlook Following two quarters of increasing optimism, the outlook for investment in residential development appears to have leveled off. The outlook for single family development remains more optimistic than that for condominium development University of Florida Bergstrom Center for Real Estate Studies 9

10 Survey of Emerging Market Conditions May 2008 Section 3: Apartments Expected Occupancy Despite an apparent return to neutral expectations in the first quarter of 2008, the outlook for occupancy in apartments has declined significantly over the last quarter. Occupancy rates for both market rent and condo conversion are expected to decrease. Expected Rental Rates Although it appeared last quarter that expectations for apartment rental rates in Florida had begun to exhibit less volatility, this quarter s results indicate another dramatic shift in investor outlook. The outlook for rental rates has declined significantly for both market rent and condo conversion, indicating that rate increases are expected to lag inflation University of Florida Bergstrom Center for Real Estate Studies 10

11 Survey of Emerging Market Conditions May 2008 Investment Outlook Following a decline in early 2007, the outlook for investment in market rent apartments appears to have leveled off as neutral expectations appear to be prevailing. In contrast to last quarter s move toward negative expectations, the outlook for condo conversion appears to have improved significantly. However, it remains a mixed time to buy for both market rent and condo conversion apartments University of Florida Bergstrom Center for Real Estate Studies 11

12 Survey of Emerging Market Conditions May 2008 Cap Rates Cap rates are a significant indicator of fundamental condition in real estate markets. The fact that apartment cap rates in Florida have remained at a relatively low level, with virtually no movement over the past two quarters, signals that investors have remained steady in their confidence and risk perceptions of apartments during that time. Despite the relative stability that has been witnessed over the past few quarters, our respondents expectations still vary. Expectations for market rental apartment cap rates appear to indicate a possible move toward neutral expectations, while those for condo conversion indicate potential for future increases University of Florida Bergstrom Center for Real Estate Studies 12

13 Survey of Emerging Market Conditions May 2008 Required Yields While required yields for market rent apartments continue to remain steady at around ten percent, yields for condo conversion have increased significantly over the past two quarters. Respondents indicate that this relationship is likely to continue as yields for condo conversion are expected to increase yet again, while yields for market rent apartments are not expected to change University of Florida Bergstrom Center for Real Estate Studies 13

14 Survey of Emerging Market Conditions May 2008 Section 4: Industrial Expected Occupancy The outlook for occupancy rates in industrial properties has become extremely pessimistic over the past year. Expectations of occupancy rates in warehouse / distribution and flex space, have experienced sharp declines since the fourth quarter of Overall, there is a strong indication of future occupancy rate decreases. Expected Rental Rates Rental rate expectations for the industrial sector appear to indicate that growth will occur at a rate that lags inflation. While the outlook for rental rates in flex space appears to have remained consistent with the previous quarter s expectations, those for warehouse / distribution have become more pessimistic University of Florida Bergstrom Center for Real Estate Studies 14

15 Survey of Emerging Market Conditions May 2008 Investment Outlook While the overall outlook for industrial investment continues to indicate a mixed time to buy, expectations for warehouse / distribution appear to be more optimistic than for Flex Space University of Florida Bergstrom Center for Real Estate Studies 15

16 Survey of Emerging Market Conditions May 2008 Cap Rates Over the last ten quarters, actual cap rates for industrial properties have remained relatively stable. However, expectations over the same period have not been as consistent. As has been the case for the past six quarters, respondents continue to indicate that they expect future cap rates to increase for both warehouse/distribution and flex space University of Florida Bergstrom Center for Real Estate Studies 16

17 Survey of Emerging Market Conditions May 2008 Yields Over the past ten quarters, required yields have shown slight volatility from quarter to quarter. Most recently, yields have increased in both warehouse/distribution and flex space. Despite a return to neutral expectations in the previous quarter, respondents indicate that yields are expected to increase further for both warehouse/distribution and flex space University of Florida Bergstrom Center for Real Estate Studies 17

18 Survey of Emerging Market Conditions May 2008 Section 5: Office Expected Occupancy Following a dramatic decrease in expectations for occupancy rate increases in Class A and Class B office space throughout 2007, the outlook thus far in 2008 appears to indicate that rates will not change. Expected Rental Rates Following last quarter s dramatic change in expectations, respondents continue to indicate that rental rates will rise slower than inflation for both Class A and Class B office space University of Florida Bergstrom Center for Real Estate Studies 18

19 Survey of Emerging Market Conditions May 2008 Investment Outlook The investment outlook for Class A office space increased significantly this quarter and provides indications that a good time to buy may be on the horizon. However, the outlook for Class B office investment is not as optimistic, as it has weakened again for the second straight quarter. It remains a mixed time to buy for Class B office space University of Florida Bergstrom Center for Real Estate Studies 19

20 Survey of Emerging Market Conditions May 2008 Cap Rates Cap rates for office space have remained virtually unchanged since the first quarter of However, the expectation for future cap rates continues to be volatile. This quarter, respondents expect cap rates for both Class A and Class B office space to increase University of Florida Bergstrom Center for Real Estate Studies 20

21 Survey of Emerging Market Conditions May 2008 Yields While perceptions of required yields for offices have shown some volatility throughout 2006, there appears to have been more stability throughout 2007 and into the first two quarters of Over this period, Class B yields have been slightly higher than those of Class A, reflecting more perceived risk in Class B. Consistent with last quarter s expectations, respondents believe that yields for Class A office space may increase. While last quarter s expectations for yields in Class B office space indicated a return to neutrality, this quarter s results appear to signal that required yields may increase here as well University of Florida Bergstrom Center for Real Estate Studies 21

22 Survey of Emerging Market Conditions May 2008 Section 6: Retail Expected Occupancy Over the previous three quarters, the outlook for occupancy rates in all four types of retail (large centers, neighborhood centers, strip centers and free standing) appeared to indicate expectations of potential rate decreases in the future. However, the outlook for retail occupancy rates in the most recent quarter is now mixed across types. While expectations in free standing and neighborhood centers appear to continue their declining trend, strip centers and large centers have reverted toward a more neutral outlook in the latest quarter. Expected Rental Rates The outlook for expected rental rates has weakened considerably over the past quarter for all four types of retail. The most notable shift in expectations occurred for large centers, which appeared to indicate more promise than its counterparts in the previous quarter. It appears that rental rates are expected to increase at a rate that lags inflation for each classification University of Florida Bergstrom Center for Real Estate Studies 22

23 Survey of Emerging Market Conditions May 2008 Investment Outlook Despite the sharp volatility that occurred throughout 2007, the investment outlook has tended toward neutrality for all four retail types. As a result, it appears that it is currently a mixed time to buy within this market University of Florida Bergstrom Center for Real Estate Studies 23

24 Survey of Emerging Market Conditions May 2008 Cap Rates Over the past ten quarters, expected changes in cap rates have experienced a great deal of volatility, despite the fact that actual cap rates have remained virtually unchanged since the first quarter of Nonetheless, respondents still appear to expect cap rates to increase for each of the main types of retail University of Florida Bergstrom Center for Real Estate Studies 24

25 Survey of Emerging Market Conditions May 2008 Yields The relative stability that required yields have displayed since early 2007 has continued into the second quarter of 2008 for three of the four main types of retail. A notable change from last quarter occurred for neighborhood centers in which required yields increased above ten percent. Expectations of yield changes have been extremely volatile over this same time period in which actual rates have remained fairly consistent. Respondents presently expect cap rates to increase for all classifications except free standing, for which no change is anticipated University of Florida Bergstrom Center for Real Estate Studies 25

26 Survey of Emerging Market Conditions May 2008 Section 7: Outlook for Investment in Undeveloped Land Land Without or with Residential The outlook for investment in land without entitlements and with residential entitlements has weakened significantly since 2006, but appears to have leveled off in the first two quarters of It currently remains a mixed time to buy in this market. Land With Office or Retail While the outlook for investment in land with office or retail entitlements remained positive and steady throughout 2006, it has weakened significantly over the past five quarters. It is currently a mixed time to buy in this market, but the downward trend has not yet shown any indication of stabilizing University of Florida Bergstrom Center for Real Estate Studies 26

27 Survey of Emerging Market Conditions May 2008 Hospitality The outlook for land with hospitality entitlements continued to decline for the second straight quarter. It still remains a mixed time to buy in this market. for Warehouse or R & D Volatility in this market throughout 2006 and early 2007 has apparently given way to a significant downward trend over the past five quarters. It still is a mixed time to buy in this market. Land for Urban Renewal The outlook for investment in this market has been trending downward since the first quarter of 2007, although this quarter s results seem to indicate some stabilization. It remains a mixed time to buy in this market University of Florida Bergstrom Center for Real Estate Studies 27

28 Survey of Emerging Market Conditions May 2008 Section 8: Business and Capital Availability Outlook Capital Availability While the past has shown some volatility in expectations of capital availability, results for the first two quarters of 2008 indicate that there has been little or no change in the perception of capital availability for either development or capital acquisitions at this time. Outlook of Own Business The survey respondents perception of their own business outlook has continued its dramatic decline over the past ten quarters. However, it should be noted that in the last two quarters the magnitude of this change has not been as significant as it was in the previous two years University of Florida Bergstrom Center for Real Estate Studies 28

29 Survey of Emerging Market Conditions May University of Florida Bergstrom Center for Real Estate Studies 29

30 Survey of Emerging Market Conditions May 2008 Section 9: Dominant Investors Respondents were asked to indicate which of five investor groups they perceived to be the most active for the types of properties they analyze. For twelve of fifteen property types, private investors were the most dominant. The exceptions included hospitality-business, large retail, and warehouse/distribution. REITs were perceived to be the most active in hospitality-business and warehouse/distribution. Institutional investors played a large part in large retail. Foreign investment was perceived to remain limited, though increased participation was observed in Class A office and condominiums University of Florida Bergstrom Center for Real Estate Studies 30

31 Survey of Emerging Market Conditions May 2008 Section 10: Characteristics of Survey Respondents In the latest survey, approximately 55 percent of the 278 respondents reported being an appraiser, over half with designations of MAI, SREA or SRPA. The next largest groups, each representing about fifteen and twelve percent of respondents respectively, were brokers and consultants. Profession of Respondents Markets of Familiarity Each respondent was asked to select up to four regional markets with which they are familiar. In the latest survey, these choices accumulated to 526 observations. Every region, with the exception of Gainesville Ocala, was represented by a minimum of 20 observers, five of which had greater than 50 observers. The highest number of responses was for the Tampa St. Petersburg market, which had 72 representatives. The lowest respondent support came from Gainesville-Ocala with University of Florida Bergstrom Center for Real Estate Studies 31

32 Survey of Emerging Market Conditions May 2008 Property Types of Familiarity Each respondent was asked to select up to three property types with which they were familiar. Altogether, 643 selections were made in the latest survey round. Single family development was selected by 105 respondents while condominium development was selected by 72. Ten property types were selected by at least 30 respondents University of Florida Bergstrom Center for Real Estate Studies 32

33 Survey of Emerging Market Conditions May 2008 Section 10: Details of Cap Rates, Yields and Expected Changes Table 1 summarizes estimates of cap rates and yields for twelve property types over the last four quarters of the survey. In addition, this table shows the distribution of expectations for changes in each reported cap rate and yield. In particular, the table reports the percent of respondents expecting each cap rate and yield to either rise or fall in the future. Excluded from this table is the percentage of respondents whom are expecting no change. This third percentage can be computed as 100 less the two percentages reported. Since prior sections discuss the content of Table 1, further comment is not given here. The table is simply provided as a reference to facilitate application of the survey results University of Florida Bergstrom Center for Real Estate Studies 33

34 Survey of Emerging Market Conditions June 2008 Table 1: Detailed Cap Rates, Yields and Expectations for Change Florida Cap Rates Apartments - Market Rental Conversion Warehouse and Dist. Flex Space, R & D Class A Class B Retail - Large Neighborhood Strip Hospitality Business Hospitality Economy Free Standing Value 6.6% 6.8% 7.5% 7.8% 7.2% 7.9% 6.9% 7.1% 7.8% 8.2% 9.5% 7.9% Percent Expecting Rise 35.3% 30.8% 57.5% 59.6% 62.9% 55.7% 66.7% 48.9% 53.1% 40.0% 50.0% 44.4% Percent Expecting Fall 9.8% 7.7% 5.0% 2.1% 2.9% 2.9% 11.1% 4.4% 4.1% 0.0% 0.0% 11.1% Value 7.0% 7.1% 7.0% 7.7% 7.0% 8.1% 6.6% 6.9% 7.8% 9.0% 10.1% 7.5% Percent Expecting Rise 43.4% 27.8% 42.4% 40.4% 45.7% 37.5% 57.1% 51.6% 41.5% 37.5% 40.0% 40.6% Percent Expecting Fall 5.7% 22.2% 3.0% 6.4% 2.9% 7.8% 4.8% 0.0% 5.7% 0.0% 0.0% 9.4% Value 7.0% 7.1% 7.6% 7.7% 6.8% 7.7% 6.6% 7.0% 7.9% 8.9% 10.1% 7.5% Percent Expecting Rise 55.2% 47.1% 39.6% 45.5% 58.3% 35.5% 59.1% 58.8% 40.9% 38.5% 40.0% 37.8% Percent Expecting Fall 1.7% 23.5% 2.1% 7.3% 0.0% 2.6% 4.5% 3.9% 1.5% 7.7% 20.0% 2.2% Q3-07 Q3-07 Value 6.3% 6.0% 7.1% 7.4% 7.3% 7.8% 6.9% 6.9% 7.8% 8.8% 9.3% 7.4% Percent Expecting Rise 44.7% 56.5% 33.3% 40.0% 48.6% 40.3% 59.1% 51.4% 48.3% 25.0% 33.3% 56.0% Percent Expecting Fall 6.4% 8.7% 4.4% 2.0% 0.0% 4.8% 0.0% 2.7% 3.4% 0.0% 0.0% 0.0% Yields Value 10.3% 19.1% 10.9% 11.8% 10.1% 10.8% 9.2% 10.4% 10.4% 12.3% 14.0% 10.2% Percent Expecting Rise 21.6% 30.8% 30.0% 36.2% 42.9% 37.1% 61.1% 42.2% 30.6% 60.0% 50.0% 19.4% Percent Expecting Fall 5.9% 0.0% 5.0% 6.4% 5.7% 4.3% 11.1% 6.7% 4.1% 0.0% 0.0% 13.9% Value 9.4% 18.6% 10.0% 10.0% 9.9% 10.4% 9.5% 9.6% 10.8% 11.6% 12.3% 10.7% Percent Expecting Rise 28.3% 5.6% 18.2% 25.5% 40.0% 26.6% 47.6% 41.9% 24.5% 37.5% 40.0% 15.6% Percent Expecting Fall 3.8% 27.8% 3.0% 8.5% 8.6% 10.9% 4.8% 9.7% 11.3% 0.0% 0.0% 9.4% Value 9.7% 15.3% 10.1% 10.1% 10.1% 10.9% 9.9% 10.0% 10.9% 10.8% 11.5% 10.6% Percent Expecting Rise 44.8% 29.4% 25.0% 32.7% 36.1% 26.3% 36.4% 35.3% 28.8% 46.2% 40.0% 24.4% Percent Expecting Fall 5.2% 5.9% 0.0% 3.6% 2.8% 3.9% 22.7% 11.8% 3.0% 0.0% 0.0% 6.7% Q3-07 Q3-07 Value 10.5% 14.5% 10.5% 11.1% 10.0% 10.2% 9.3% 9.4% 10.2% 11.7% 13.0% 9.6% Percent Expecting Rise 34.0% 43.5% 15.6% 28.0% 21.6% 22.6% 40.9% 27.0% 29.3% 25.0% 33.3% 40.0% Percent Expecting Fall 6.4% 8.7% 0.0% 2.0% 8.1% 1.6% 4.5% 2.7% 5.2% 0.0% 0.0% 4.0% 2008 University of Florida Bergstrom Center for Real Estate Studies

35 Dade County Cap rates in Dade County, on average, are lower than the state mean (0.76 percentage points) and range from 6.0% (Apartment) to 7.5% (Free Standing) Over the past quarter, cap rates have decreased across most property types with Apartments (-0.28 percentage points) and Class B (-0.28 percentage points) representing the largest negative changes. Also worth noting, however, is an increase in cap rates over the last quarter in Free Standing (+0.57 percentage points) Cap rate outlooks for the next quarter appear to favor rate increases, with Warehouse and Distribution and Flex Space showing the most respondent support. Required yields for Dade County (10.40%) are, on average, lower (1.21 percentage points) than the state mean (11.61%). Required yields have decreased, on average, over the last quarter from 10.83% to 10.40%. The largest shifts in required yields occurred in Conversion ( -1.29% change) and Flex Space ( change) The investment outlook across property types is mixed. The most puzzling information is for Conversion, where the investment outlook is reported to shift in a positive direction. The investment outlook for Land Development appears to be negative for both out and Residential. The outlook for the four remaining land classifications is neutral to negative. Expectations of future occupancy rates in Dade County are neutral to negative for most property types. Apartment and Conversion show the strongest expectation for lower future occupancy rates. On average, rental rates are expected to increase at a rate slower than inflation, with Office Space: Class B receiving the most respondent support. Future absorption rates are expected to remain neutral in Single Family and decrease in minium Development. Future price increases are expected to occur slower than inflation in both Single Family and minium Development.

36 Table 2a Dade County Apartments - Market Rental Conversion Warehouse and Dist. Flex Space, R & D Class A Class B Retail - Large Neighborhood Strip Free Standing Cap Rates Value Percent Expecting Ris 38% 25% 73% 73% 55% 60% 63% 36% 63% 67% Percent Expecting Fal 8% 13% 0% 0% 0% 0% 0% 0% 0% 0% Value Percent Expecting Ris 53% 33% 50% 50% 45% 44% 45% 58% 40% 100% Percent Expecting Fal 13% 17% 0% 8% 9% 11% 9% 0% 10% 0% Value Percent Expecting Ris 60% 67% 55% 67% 56% 40% 55% 64% 56% 29% Percent Expecting Fal 5% 22% 0% 11% 0% 10% 9% 7% 0% 0% Yields Value Percent Expecting Ris 31% 13% 36% 55% 55% 53% 63% 45% 13% 33% Percent Expecting Fal 8% 0% 0% 0% 0% 0% 0% 0% 0% 0% Value Percent Expecting Ris 33% 17% 30% 42% 36% 22% 45% 50% 30% 100% Percent Expecting Fal 7% 17% 0% 8% 9% 33% 9% 0% 20% 0% Value Percent Expecting Ris 50% 44% 27% 44% 44% 30% 45% 43% 22% 14% Percent Expecting Fal 0% 0% 0% 11% 0% 10% 27% 14% 0% 0% Investment Outlook Fair to Good 38% 67% 36% 9% 27% 27% 13% 36% 25% Bad to Poor 15% 22% 9% 18% 18% 47% 25% 27% 38% Fair to Good 47% 33% 45% 33% 36% 11% 58% 38% 36% 50% Bad to Poor 27% 67% 9% 33% 45% 22% 17% 38% 18% 0% Fair to Good 35% 36% 36% 33% 36% 30% 31% 33% 22% 25% Bad to Poor 40% 55% 18% 0% 27% 20% 31% 7% 22% 0%

37 Outlook for Land Development Dade County out Residential Table 2b Commercial Hospitality Industrial Land for Urban Redevelopment Fair to Good 17% 15% 17% 19% 22% 19% Bad to Poor 63% 63% 44% 46% 37% 50% Fair to Good 28% 24% 38% 28% 48% 29% Bad to Poor 59% 66% 28% 31% 26% 41% Fair to Good 15% 15% 35% 32% 36% 21% Bad to Poor 61% 62% 24% 23% 21% 38% Investors by Property Type Dade County Single Family Dev. Dev. Apartments - Market Rental Conversion Table 2c Warehouse and Dist. Flex Space, R & D Class A Class B Retail - Large Neighborhood Strip Private Buyers 69% 58% 46% 78% 27% 45% 18% 73% 13% 55% 75% 67% R.E. Companies 15% 8% 8% 22% 9% 9% 7% 38% 27% 25% 33% REITs 8% 45% 27% 7% 13% 17% Institutions 17% 38% 18% 18% 45% 7% 25% 18% Foreign Buyers 15% 17% 36% 7% 13% Private Buyers 65% 57% 40% 83% 18% 25% 18% 56% 17% 31% 73% 25% R.E. Companies 5% 4% 7% 18% 18% 33% 8% 27% 25% REITs 5% 4% 7% 18% 33% 8% 17% Institutions 5% 4% 27% 45% 33% 64% 42% 23% 50% Foreign Buyers 20% 30% 20% 17% 8% 11% 25% 15% Private Buyers 68% 71% 40% 64% 18% 44% 9% 70% 15% 7% 89% 63% R.E. Companies 23% 10% 15% 27% 18% 33% 18% 15% 27% 11% 25% REITs 5% 27% 22% 18% 10% 8% 17% Institutions 10% 35% 9% 36% 45% 20% 46% 40% 13% Foreign Buyers 9% 5% 10% 9% 15% Free Standing

38 Table 2d Dade County Apartments - Market Rental Conversion Warehouse and Dist. Flex Space, R & D Class A Class B Retail - Large Neighborhood Strip Free Standing Future Occupancy Higher 0% 0% 33% 0% 0% 25% 17% 0% 0% Lower 60% 60% 0% 50% 29% 25% 50% 0% 50% Higher 29% 0% 0% 33% 0% 29% 25% 8% 0% 25% Lower 14% 80% 50% 0% 43% 57% 25% 46% 38% 50% Higher 30% 9% 27% 33% 27% 30% 8% 27% 11% 13% Lower 40% 45% 0% 11% 18% 20% 31% 27% 33% 25% Rental Rate Increases Faster than Inflation 20% 20% 33% 0% 0% 25% 17% 33% 50% Slower than Inflation 80% 80% 33% 50% 100% 75% 83% 67% 50% Faster than Inflation 29% 20% 17% 17% 0% 0% 38% 31% 25% 75% Slower than Inflation 71% 60% 33% 0% 57% 29% 25% 15% 50% 25% Faster than Inflation 20% 27% 55% 67% 73% 40% 62% 67% 44% 38% Slower than Inflation 55% 45% 27% 22% 0% 40% 31% 27% 44% 63% Table 2e Dade County Future Absorption Rates Single Family Development minium Development Higher 38% 0% Lower 8% 55% Higher 10% 9% Lower 50% 65% Higher 9% 10% Lower 59% 62% Future Price Increases Faster than Inflation 8% 0% Slower than Inflation 77% 91% Faster than Inflation 5% 0% Slower than Inflation 95% 100% Faster than Inflation 14% 10% Slower than Inflation 86% 90%

39 Broward County Cap rates in Broward County are, on average, lower than the rest of the state (7.0% compared to 7.65%) and range from 6.2% (Apartment) to 7.7% (Free Standing). Cap rates increased across the majority of property types, with the largest positive movements appearing in Warehouse and Distribution (+0.59% change) and Free Standing (+0.76% change). Cap rates are expected to increase over the next quarter, with Large Retail, Strip, and Free Standing receiving the most support for higher future rates. Required yields for Broward County are, on average, lower than that of the state, 10.4% compared to 11.61% statewide. Required yields are highest for Conversion at 17.8% and lowest for Retail-Large at 8.5%. Over the past quarter, required yields have decreased across property types, with the largest downward shifts occurring in Conversion (-1.04% change) and Strip (-0.95% change). It should be noted that yields for Flex Space and Warehouse and Distribution increased by 1.55% and 0.59%, respectively. The investment outlook across property types is mixed. The most notable negative outlook occurs for Class B while the most positive outlook occurs for Conversion. The investment outlook for Land Development appears to be negative for out and Residential. However, there is a more neutral outlook for the four remaining land classifications. In Broward Country, respondents expect occupancy rates to decrease over the next quarter for the majority of property types. Free Standing and Conversion show the strongest indication of lower future occupancy. Rental rates are expected to increase at a rate that is slower than inflation for most property types, with Class B and Free Standing receiving the most respondent support. Future absorption rates are expected to be neutral in both Single Family and minium Development. Future price increases are expected to occur slower than inflation in both Single Family and minium Development.

40 Table 3a Broward County Apartments - Market Rental Conversion Warehouse and Dist. Flex Space, R & D Class A Class B Retail - Large Neighborhood Strip Free Standing Cap Rates Value Percent Expecting Rise 40% 17% 67% 54% 54% 59% 75% 27% 71% 71% Percent Expecting Fall 0% 17% 0% 0% 0% 0% 0% 0% 0% 0% Value Percent Expecting Rise 67% 25% 55% 42% 50% 47% 50% 58% 45% 67% Percent Expecting Fall 11% 25% 0% 8% 0% 13% 10% 0% 0% 17% Value Percent Expecting Rise 58% 63% 30% 58% 40% 44% 50% 68% 58% 45% Percent Expecting Fall 4% 25% 0% 8% 0% 6% 13% 5% 0% 0% Yields Value Percent Expecting Rise 33% 0% 40% 38% 54% 45% 75% 40% 36% 29% Percent Expecting Fall 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Value Percent Expecting Rise 44% 25% 36% 33% 43% 27% 40% 42% 18% 67% Percent Expecting Fall 6% 25% 0% 8% 14% 27% 10% 8% 27% 0% Value Percent Expecting Rise 50% 50% 20% 50% 30% 39% 38% 32% 42% 18% Percent Expecting Fall 4% 0% 0% 17% 0% 6% 25% 27% 8% 9% Investment Outlook Fair to Good 40% 57% 40% 15% 31% 23% 25% 33% 29% 29% Bad to Poor 13% 29% 20% 15% 23% 45% 25% 20% 29% 14% Fair to Good 39% 25% 27% 33% 29% 19% 60% 31% 27% 50% Bad to Poor 28% 75% 18% 33% 50% 25% 20% 46% 27% 0% Fair to Good 38% 33% 40% 15% 46% 28% 30% 30% 15% 36% Bad to Poor 33% 56% 10% 15% 8% 11% 20% 22% 15% 9%

41 Outlook for Land Development Table 3b Broward County out Residential Commercial Hospitality Industrial Land for Urban Redevelopment Fair to Good 20% 16% 17% 17% 22% 17% Bad to Poor 61% 65% 48% 51% 42% 54% Fair to Good 23% 20% 29% 18% 39% 20% Bad to Poor 59% 65% 30% 39% 29% 39% Fair to Good 13% 9% 29% 23% 34% 17% Bad to Poor 59% 64% 24% 26% 21% 40% Investors by Property Type Broward County Single Family Dev. Dev. Apartments - Market Rental Conversion Table 3c Warehouse and Dist. Flex Space, R & D Class A Class B Retail - Large Neighborhood Private Buyers 78% 80% 47% 71% 20% 46% 8% 64% 13% 33% 71% 86% R.E. Companies 6% 13% 29% 13% 8% 18% 13% 40% 29% 14% REITs 6% 7% 40% 23% 5% 25% 14% Institutions 7% 27% 13% 23% 46% 5% 38% 20% Foreign Buyers 11% 13% 7% 13% 46% 9% 13% Private Buyers 68% 54% 44% 75% 9% 42% 21% 50% 31% 73% 50% R.E. Companies 5% 6% 27% 14% 31% 20% 8% 27% 17% REITs 6% 9% 25% 10% 14% Institutions 9% 4% 22% 45% 33% 57% 6% 50% 23% 33% Foreign Buyers 18% 42% 17% 25% 9% 7% 13% 20% 8% Private Buyers 61% 81% 42% 78% 20% 54% 8% 72% 10% 22% 77% 82% R.E. Companies 21% 7% 17% 22% 10% 15% 15% 10% 22% 8% 18% REITs 3% 4% 30% 8% 15% 17% 20% 14% 8% Institutions 6% 4% 33% 40% 8% 54% 11% 50% 26% Foreign Buyers 9% 4% 8% 15% 8% 10% 4% 8% Strip Free Standing

42 Table 3d Broward County Apartments - Market Rental Conversion Warehouse and Dist. Flex Space, R & D Class A Class B Retail - Large Neighborhood Strip Free Standing Future Occupancy Higher 14% 0% 33% 0% 0% 33% 13% 0% 0% Lower 71% 75% 0% 0% 50% 67% 50% 0% 75% Higher 20% 33% 0% 25% 0% 25% 17% 8% 0% 0% Lower 10% 33% 17% 0% 56% 67% 17% 38% 33% 83% Higher 33% 22% 30% 23% 31% 11% 10% 17% 8% 9% Lower 25% 22% 10% 38% 15% 22% 30% 30% 38% 36% Rental Rate Increases Faster than Inflation 14% 25% 33% 0% 0% 33% 25% 40% 0% Slower than Inflation 71% 75% 33% 0% 100% 67% 75% 60% 100% Faster than Inflation 20% 33% 17% 25% 0% 8% 17% 23% 11% 50% Slower than Inflation 60% 33% 50% 0% 44% 42% 50% 15% 33% 50% Faster than Inflation 33% 22% 40% 31% 46% 44% 50% 57% 62% 45% Slower than Inflation 50% 44% 30% 54% 15% 28% 40% 35% 31% 55% Table 3e Broward County Future Absorption Rates Single Family Development minium Development Higher 39% 21% Lower 17% 43% Higher 10% 8% Lower 43% 65% Higher 9% 7% Lower 42% 70% Future Price Increases Faster than Inflation 0% 0% Slower than Inflation 89% 93% Faster than Inflation 5% 0% Slower than Inflation 95% 100% Faster than Inflation 12% 4% Slower than Inflation 82% 93%

43 Palm Beach County Cap Rates in Palm Beach County are, on average, lower than that of the state (0.56 percentage points) and range from 6.2% (Apartments) to 7.7% (Free Standing). Changes in cap rates from last quarter are positive across all property types, with the largest changes being seen in Free Standing (+0.88% change) and Warehouse and Distribution (+0.70% change). Cap rates are expected to increase across most property types in the next quarter, with Large Retail and Free Standing showing the highest proportion of respondent support. Required yields for Palm Beach County are, on average, lower than that of the state, 10.6% compared to 11.61% statewide. Required yields are highest for Conversion at 18.0% and lowest for Large Retail at 8.6%. Changes in required yields have been mixed across property types over the last quarter. The largest shifts occurred in Flex Space (+1.63% change) and Conversion (-0.97% change). The investment outlook is mixed across property types. The most notable negative outlook occurs for Class B while the most positive outlook occurs for Conversion. The outlook for Land Development is neutral to negative across all classifications. It appears that the most negative outlooks occur for out and Residential. Expectations of future occupancy rates are neutral to negative for most property types. The most respondent support for rate decreases occur in Apartments and Conversion. On average, rental rates are expected to increase at a rate that is slower than inflation. The most notable respondent support occurs for Class B and Free Standing. Future absorption rates are expected to remain neutral in Single Family and minium Development. Future price increases are expected to occur slower than inflation in both Single Family and minium Development.

44 Table 4a Palm Beach County Apartments - Market Rental Conversion Warehouse and Dist. Flex Space, R & D Class A Class B Retail - Large Neighborhood Strip Free Standing Cap Rates Value Percent Expecting Rise 38% 17% 43% 36% 56% 48% 67% 36% 60% 67% Percent Expecting Fall 0% 0% 0% 0% 0% 5% 0% 0% 0% 0% Value Percent Expecting Rise 67% 20% 64% 50% 44% 36% 40% 64% 44% 80% Percent Expecting Fall 6% 40% 9% 17% 0% 14% 10% 0% 0% 0% Value Percent Expecting Rise 59% 50% 33% 60% 43% 44% 43% 77% 71% 50% Percent Expecting Fall 0% 25% 0% 10% 0% 6% 14% 8% 0% 0% Yields Value Percent Expecting Rise 38% 0% 43% 36% 44% 38% 67% 36% 30% 17% Percent Expecting Fall 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Value Percent Expecting Rise 39% 20% 27% 33% 33% 21% 30% 45% 11% 80% Percent Expecting Fall 6% 40% 9% 17% 11% 29% 10% 0% 11% 0% Value Percent Expecting Rise 35% 36% 13% 42% 29% 25% 60% 38% 30% 0% Percent Expecting Fall 0% 9% 0% 0% 0% 0% 0% 0% 0% 0% Investment Outlook Fair to Good 36% 57% 43% 18% 22% 19% 11% 27% 20% 17% Bad to Poor 21% 29% 14% 9% 33% 43% 22% 18% 20% 17% Fair to Good 28% 40% 36% 42% 33% 13% 60% 33% 22% 60% Bad to Poor 28% 60% 9% 25% 44% 27% 10% 33% 22% 0% Fair to Good 35% 30% 44% 27% 44% 19% 33% 14% 13% 33% Bad to Poor 35% 60% 11% 27% 11% 13% 22% 29% 27% 0%

45 Outlook for Land Development Table 4b Palm Beach County out Residential Commercial Hospitality Industrial Land for Urban Redevelopment Fair to Good 14% 12% 12% 16% 17% 17% Bad to Poor 66% 72% 55% 47% 43% 55% Fair to Good 19% 17% 23% 17% 31% 19% Bad to Poor 58% 63% 34% 36% 31% 36% Fair to Good 12% 13% 32% 30% 41% 17% Bad to Poor 57% 67% 20% 20% 17% 41% Investors by Property Type Palm Beach County Single Family Dev. Dev. Apartments - Market Rental Conversion Table 4c Warehouse and Dist. Flex Space, R & D Class A Class B Retail - Large Neighborhood Private Buyers 78% 82% 57% 71% 29% 64% 11% 71% 22% 55% 80% 83% R.E. Companies 11% 14% 29% 14% 9% 14% 22% 27% 20% 17% REITs 6% 7% 29% 9% 11% 13% Institutions 9% 14% 14% 18% 44% 5% 33% 9% Foreign Buyers 6% 9% 7% 14% 44% 10% 11% Private Buyers 76% 57% 44% 80% 27% 50% 11% 53% 25% 78% 40% R.E. Companies 5% 11% 18% 22% 27% 20% 22% 20% REITs 6% 9% 33% 10% 13% Institutions 5% 10% 22% 36% 17% 56% 7% 50% 33% 40% Foreign Buyers 14% 33% 11% 20% 9% 11% 13% 20% 8% Private Buyers 66% 82% 41% 70% 33% 55% 11% 81% 22% 14% 73% 67% R.E. Companies 24% 6% 18% 30% 11% 18% 22% 11% 14% 13% 33% REITs 11% 9% 22% 13% 11% 13% 7% Institutions 7% 12% 35% 44% 44% 6% 44% 36% Foreign Buyers 3% 6% 18% 11% 7% 7% Strip Free Standing

46 Table 4d Palm Beach County Apartments - Market Rental Conversion Warehouse and Dist. Flex Space, R & D Class A Class B Retail - Large Neighborhood Strip Free Standing Future Occupancy Higher 0% 0% 50% 0% 0% 50% 0% 0% 0% Lower 80% 67% 50% 0% 50% 50% 17% 40% 50% Higher 22% 0% 0% 0% 13% 18% 17% 8% 0% 0% Lower 11% 25% 50% 25% 75% 55% 17% 50% 43% 80% Higher 18% 20% 22% 18% 22% 25% 11% 14% 13% 0% Lower 41% 30% 11% 45% 33% 31% 22% 43% 40% 50% Rental Rate Increases Faster than Inflation 20% 33% 0% 0% 0% 25% 50% 40% 0% Slower than Inflation 80% 67% 50% 0% 88% 75% 50% 60% 100% Faster than Inflation 22% 25% 0% 0% 0% 9% 17% 25% 14% 60% Slower than Inflation 56% 25% 67% 25% 38% 36% 33% 17% 29% 40% Faster than Inflation 29% 30% 44% 18% 44% 44% 56% 57% 33% 33% Slower than Inflation 65% 30% 33% 64% 44% 44% 33% 36% 53% 67% Table 4e Palm Beach County Future Absorption Rates Single Family Development minium Development Higher 33% 20% Lower 11% 30% Higher 10% 10% Lower 43% 71% Higher 7% 6% Lower 34% 65% Future Price Increases Faster than Inflation 6% 0% Slower than Inflation 83% 90% Faster than Inflation 0% 0% Slower than Inflation 100% 100% Faster than Inflation 14% 12% Slower than Inflation 86% 88%

47 Treasure Coast Cap Rates in the Treasure Coast area are, on average, lower than that of the state (0.46 percentage points) and range from 6.3% (Apartments) to 7.8% (Free Standing) Cap rates have increased in all property types over the past quarter. The largest changes have occurred in Free Standing (+0.87% change) and Warehouse and Distribution (+0.70% change). Cap rate outlooks for this quarter indicate potential rate increases across most property types, with Conversion and Class A receiving the most respondent support. Required yields for the Treasure Coast are lower, on average, than that of the state, 11.15% compared to 11.61% statewide. Required yields are highest for Conversion at 18.5% and lowest for Flex Space at 11.8%. The change in required yields was mixed across property types last quarter, with the largest shifts occurring in Flex Space (+1.77% change) and Conversion (-0.82% change). For available property types, the investment outlook is mixed. The most positive expectations appear to be for Neighborhood, while Flex Space carries a more negative outlook. The outlook for Land Development is neutral to negative across classifications. It appears that the most negative outlooks occur for Land with Residential and out. For the majority of available property types, future occupancy rates are expected to decrease. The one exception is Large Retail where rate increases are expected. For the majority of property types, rental rate increases are expected to occur at a rate that is slower than inflation. The one notable exception is Large Retail for which all respondents expect rental rates to increase at a rate that is faster than inflation. Future absorption rates are expected to potentially increase in Single Family Development and decrease in minium Development. Future price increases are expected to occur slower than inflation in both Single Family and minium Development.