It has been well documented that rents for multi-family properties have “spiked” sharply as a result of limited new product (supply) and continued growth (demand) in the past 2-3 years.  In recent projects, RCDH has confronted an unusual dilemma:  unit value results via the Income Approach are or can be radically different from unit values indicated by sales data.  This is especially true in downtown Washington or in other markets (e.g., Arlington; Tysons Corner; Montgomery County) where high-rise product exists.  How is “the gap” reconciled?  Leaving aside the issue of “cost” for discussion purposes, this question will be answered in the following paragraphs. RCDH has conducted an extensive search for comparable hi-rise apartment complexes recently sold in Washington DC Metro and nationwide. In certain local cases, the application of the Income Approach indicates market values of +/-$300,000/DU.  In other more “suburban” cases, market values can equate to +-$200,000/DU. In both

As anticipated, 1st Quarter NPI Office returns came in at a pedestrian 1.96%, continuing a downward trend.  From a regional perspective, the South region posted the highest total quarterly return at 2.14%, while the Mid-West region continued to lag the pack.  CBD office assets again outperformed their suburban counterparts.  The 1st Q 2008 office sector results are off sharply from returns posted earlier in 2007, but still outpaced all other property types over the trailing 12-months. Relative Valuation…How low is too low? Income return spreads to 10-Year Treasuries have fallen steadily over the past several years for those areas with the largest inventory of office space.  In the most recent quarter, income spreads “jumped”, perhaps impacted by a valuation “lag” created by the rapid decline in Treasuries yields from quarter-to-quarter or a sign of a downward valuation correction in the offing.  Our interpretation of historical NPI relative returns in combination

The office property component of the NCREIF Property Index (NPI) returned 3.37% in the second quarter 2010, compared to 0.86% in the prior quarter and -0.07% a year-ago.  The income return was 1.78%, the same as the prior quarter and 22 basis points above the year-ago level.  The capital return, however, was 1.59%, a surge from -0.83% in the prior quarter and -8.65% a year-ago.  With two consecutive quarters of increasingly positive returns, the initial take-away is that U.S. office markets have hit bottom.  Some dissection of the results, however, reveals flimsy support for this claim. Counterintuitive as it may seem, while the capital return component jumped, the market value of office properties in the index and the denominator in the return measures decreased to levels not seen since the second quarter of 2006.  Blame the paradox on a high amount of partial office property dispositions in the quarter.  By