CAP Rates, Employment and Commercial Real Estate Impact

Source:  Marcus & Millichap – Special Report Emerging Trends 4Q 2016

Comparative MSA’s 5‐year Job Growth Trends

Source:  Pittsburgh Today, Bureau of Labor Statistics

Percent Changein Jobs

November 2008to

November 2013Total Nonfarm

Year‐over‐Year Job GrowthPittsburgh vs. Benchmark Average

Source:  Pittsburgh Today, Bureau of Labor Statistics

Comparative MSA’s 5‐year Job Growth Trends

Source:  Pittsburgh Today, Bureau of Labor Statistics

Percent Changein Jobs

September 2011to

September 2016Total Nonfarm

Comparative Job Growth Trends

Percent Changein Jobs

December 2015to

December 2016Total Nonfarm

Source:  Pittsburgh Today, Bureau of Labor Statistics

Pittsburgh Regional Employment1

1,200,000

1,150,000

1,100,000

1,050,000

1,000,000

950,000

900,000

1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

Pre‐CollapseHigh

(1,091)

Steel IndustryCollapse(954.6)

Peak ofTech Boom(1,152)

Peak BeforeRecession(1,148.9)

New High(1,179.3)

Source:  United States Bureau of Labor Statistics

2016

Recession(1,120.7)

(1) Data represents November employment in each year.

(1,157.14)

Where Are The Jobs?2015 ‐ 2016

SERVICE PROVIDING• Leisure and Hospitality • Education and Medical• Professional and Business Services

• Mining/Construction+1.5K+2.3K+5.6K

GOODS PRODUCING(4.0K)

Source:  Pittsburgh Today, Bureau of Labor Statistics

OFFICE• Steady demand in CBD and Suburbs with greatest potential in Parkway West

• Cap rates remain relatively flat, although upward pressure increases

RETAIL• Limited new development• Repositioning of existing centers/malls continue as anchor tenants close stores

Conclusions ‐ 2017 Pittsburgh CRE Market

MULTIFAMILY• New supply in 2017 and overhang of some 2016 deliveries may slow multifamily market

• Cap rates remain flat

INDUSTRIAL• Optimism for this product as E‐commerce creates new demand and Cracker Plant construction commences

HOSPITALITY• After six years of growth, supply is outpacing demand causing declining occupancies and RevPar

Conclusions ‐ 2017 Pittsburgh CRE Market

• Employment growth is negligible and expected to be slow

• Trump effect; tax rates, capital repatriotization, infrastructure plans, regulation constraints removed, foreign affairs risks, market instability

• Cracker Plant, energy sector rebound, tech employment growth

• Higher interest rates, cap rate increase• Oversupply; hospitality, multifamily

2017 Summary

Integra Realty Resources, Inc. irr.com 7878

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(724) 742-3381dherold@irr.com

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(724) 742-3328mdroney@irr.com

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