Recent fears that the economy would fall back into recession have been alleviated for the moment with increasing economic growth in the U.S. According to the Bureau of

Economic Analysis’ (BEA’s) advance estimate, the economy grew at an inflation-adjusted annual rate of 2.5 percent in third quarter 2011, rebounding from its shockingly low 0.4-percent growth in first quarter and 1.3-percent growth in second quarter. Third quarter gross domestic product (GDP) growth was due primarily to increases in consumer spending on durable equipment and services and to business

investment spending. With only 103,000 new jobs in September 2011, the unemployment rate remained at 9.1 percent, reported the Bureau of Labor Statistics (BLS). Job gains were in professional and business services, health care, and construction, while government employment trended downward. According

to the BLS, 14 million persons remain unemployed, and the U-6 unemployment

rate inched up to 16.5 percent. According to the Organization for Economic

Development and Cooperation’s (OEDC’s) October 2011 projection, the

U.S. economy is expected to grow 1.8 percent in 2012, less than the 3.1-percent

expansion it had forecast in May 2011, and GDP in Europe is expected to expand only 0.3 percent in 2012. The OEDC stated that advanced economies should expect the outlook to weaken even further if Europe fails to harness its debt.

• According to RERC’s investment survey results, distressed office property transactions were the most popular office transaction type during third quarter 2011 due to attractive pricing. The number of normal office property transactions was comparable to the number of foreclosed office property transactions.

• On a 12-month trailing basis, the total volume and the volume of office transactions greater than $5 million increased during third quarter 2011, along with the size-weighted average price per square foot of office space overall. However, the average price per square foot of office space for transactions less than $2 million and from $2 million to $5 million decreased. The weighted-average capitalization rate declined

10 basis points to 6.4 percent.

• According to Reis, Inc., office sector vacancy declined 20 basis points to 17.4 percent, with completions being exceeded by positive net absorption of 6.0 million square feet during third quarter 2011. In other good news, rents have consistently increased over the past four quarters, with asking and effective rents increasing by 0.4 percent and 0.6

percent, respectively.

• During third quarter 2011, the majority of RERC’s investment survey respondents noted that normal industrial property sales were the most common transaction type, despite the attractive pricing for distressed and foreclosed properties.

• While sales volume for the industrial sector increased for each of the individual

transaction categories, the overall size-weighted average price per square foot declined slightly for each category during third quarter 2011 on a 12-month trailing basis. However, the weighted-average capitalization rate declined 20 basis points to 7.4 percent on a 12-month trailing basis.

• The availability rate for industrial properties declined 30 basis points to 13.0 percent in third quarter 2011, according to Grubb & Ellis. New supply increased 5.3 million square feet. Asking net rents increased an annualized 0.6 percent after remaining unchanged for three consecutive quarters.

Retail:

• Distressed property sales were the most popular retail transactions during third quarter 2011, although normal and foreclosed retail property transactions also occurred, according to RERC’s investment survey respondents.

• Total transaction volume for the retail sector increased on a 12-month trailing basis during third quarter 2011. In addition, after declining this past year, the size-weighted average price per square foot of retail space increased for the sector overall and for transactions greater than $5 million during third quarter; however, the average price per square foot declined for transactions less than $2 million and for those between $2 million and $5 million. The weighted-average cap rate for the retail sector remained unchanged at 7.7 percent on a 12-month trailing basis. On a quarter-to-quarter basis, the retail sector showed the most significant change compared to the other property sectors.

• Despite a weak economy and slow consumer spending, the vacancy rate for the retail sector remained unchanged at 11.0 percent during third quarter, according to Reis, Inc. However, net absorption remained negative for the second consecutive quarter. Furthermore, asking and effective rents were both flat, and have been deteriorating in general since 2008.

Apartment:

• The majority of RERC’s investment survey respondents reported that normal sales were the most popular type of transaction for apartment properties during third quarter 2011. In addition, many respondents stated that it is a better time to sell apartment properties than to buy.

• On a 12-month trailing basis, total sales volume for the apartment sector increased, while the overall size-weighted average price per unit decreased during third quarter 2011. The weighted-average cap rate remained unchanged at 6.0 percent on a 12-month trailing basis. On a quarter-to-quarter basis, total volume and overall average

price per unit for the apartment sector increased during third quarter.

• According to Reis, Inc., the apartment sector vacancy rate fell 30 basis points to 5.6 percent during third quarter 2011. In addition, the apartment sector showed positive net absorption of roughly 36,000 units as new completions continued to track near record-low levels. Asking and effective rents continued to see increases of 0.6 percent and 0.7 percent, respectively.