IREM-PresentationJanuary2013

8/13/2019 IREM-PresentationJanuary2013

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The Global Economy and

Real Estate Markets

Asieh Mansour, PhDHead of Americas Research

January 2013


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The Global Economy


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CBRE | Page 3

Four Forces Shaping Global Economy

Austerity

Deleveraging

Monetary Reflation

US Labor Market Weakness


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CBRE | Page 5

2013: Diminished Growth Expectations

A synchronized deceleration in growth

European debt crisis

Slowdown in Emerging Markets, no decoupling

Debt-ceiling and spending cliff concerns in the U.S.

.


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CBRE | Page 6

2014: A Multi-Speed Global Recovery

Source: IHS Global Insight, December 2012.

(Real GDP, Annual % Change)

4.4%

3.4%

2.6%

1.9%

1.0%

5.4%

4.4%

3.4%

2.7%

1.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Asia-Pacific Latin America World United States EMEA

2013 2014


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The U.S. Economy


8/26CBRE | Page 8

(Annual % Change)

US Economic Outlook: Consumers More Upbeat than Business

8

Source: Global Insight, December 2012.

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Real Private Consumption Real GDP Growth


9/26CBRE | Page 9

Lackluster Employment Trends

9

Source:IHS Global Insight, December 2012.

0%

2%

4%

6%

8%

10%

12%

-6

-5

-4

-3

-2-1

0

1

23

4

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Net Jobs (Millions), Left-Hand Side


10/26CBRE | Page 10

Net Job Gains (1000s)

Where will the jobs come from?

10

Source:Moodys Economy.com, January 2013.

-100 0 100 200 300 400 500

Federal Government

Natural Resources & MiningUtilities

Real Estate

Manufacturing

Information

Construction

Transportation & WarehousingEducational Services

Wholesale Trade

Finance & Insurance

Other Services

Retail Trade

Leisure & HospitalityProfessional & Business Services

Health Care & Social Assistance 2.7%

2.3%2.3%

1%

1.4%

1.2%

1.1%

1.3%1%

0.5%

0.9%

0.2%

1%

0.6%-0.7%

-0.6%


11/26CBRE | Page 11

Net Job Creation in 2013 (1000s), Top 25 Markets

Where are the jobs?

11

Source:Moodys DataBuffet.com, November 2012

0 20 40 60 80 100 120 140

St. Louis

San Jose

Tampa

Portland, OR

Chicago

Miami

Riverside, CA

Detroit

Washington D.C.

Philadelphia

Denver

OrlandoSan Diego

San Antonio

Austin

Seattle

Minneapolis

Boston

Phoenix

San Francisco

Atlanta

Los Angeles

HoustonDallas

New York


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The Capital Markets


13/26CBRE | Page 13

Real Estate Comparative Returns (Annualized Returns)33.8%

30.2%

11.0%

3.0%2.0%

0.1%

11.5%

8.0% 8.4%

4.7%

2.5% 1.7%

0%

5%

10%

15%

20%

25%

30%

35%

REITs Equities Real Property GovernmentBonds

CPI T-Bills

1 Year 10 Year

(1) NAREIT Equity REIT Index(2) Standard & Poors 500 Index(3) NCREIF Property Index(4) Barclays Capital Govt Bond(5) Consumer Price Index(6) 90-day T-Bills

Source: NCREIF, Q3 2012.Note: Data through September 30, 2012.


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15/26CBRE | Page 15

National Investment Sales

Source: Real Capital Analytics, Q3 2012

(Sales Volume, in Billions)

$0

$20

$40

$60

$80

$100

$120

$140

$160

2005 2006 2007 2008 2009 2010 2011 2012

Hotel Apartment Retail Industrial Office


16/26CBRE | Page 16

Cap Rate Forecast by Property Type

Source: Real Capital Analytics, Q3 2012

5%

6%

7%

8%

9%

10%

2005 2006 2007 2008 2009 2010 2011 2012

Office Industrial Retail Apartment Hotel


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18/26CBRE | Page 18

Property Sector Trajectory

2011.4

2012Q4

Past Cyclic

High

Natural

RateYear Back to

"Natural Rate"

Office Vacancy Rate 15.4% 16.9 / 2010 13 to 15 2013

IndustrialAvailability Rate 12.8% 14.5 / 2010 9 to 10 2015

RetailAvailability Rate 12.8% 13.2 / 2011 9 to 10 2016

Multifamily Vacancy Rate 5.0% 7.44 / 2009 5 to 6 2010

Full ServiceHotels Vacancy Rate 33.7%* 43 / 2009 34 to 38 2010

*Q3 2012 data.

Source: CBRE Econometric Advisors, Q4 2012


19/26CBRE | Page 19

Property Fundamentals: Uneven Recovery

Apartment market is back in equilibrium

Office, industrial, retail sectors affected by overhangof vacant space

Over-building has not been an issue for all propertysectors this cycle

Some speculative construction is coming back for

apartments and industrial

Job growth will ultimately determine real estatemarket performance


20/26CBRE | Page 20

2013 US Office Supply & Demand Outlook Remains Tepid

20

Source:CBRE EA, Q3 2012.

(SF x Million) (Vacancy Rate, %)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

-60

-40

-20

0

20

40

60

80

100

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Completions (SF x Million) Net Absorption (SF x Million) Vacancy Rate (%)


21/26CBRE | Page 21

US Multifamily Housing Supply & Demand Outlook

21

Source:CBRE EA, Q3 2012.

0%

1%

2%

3%4%

5%

6%

7%

8%

-200

-100

0

100

200

300

400

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Rentable Completions (Units x 1000) Net Absorption (Units x 1000)Vacancy Rate (%)

(Units x 1000) (Vacancy Rate, %)

A i Offi M k R C l Q3 2012


22/26CBRE | Page 22

Global Research and Consulting

Rental Decline Accelerating Rental Decline Slowing Rental Growth Accelerating Rental Growth Slowing

Americas Office Market Rent Cycle, Q3 2012

V Vancouver

Philadelphia

Seattle

Buenos Aires

Santiago

New York

Washington D.C.

Dallas

San Francisco

Houston

Calgary

Montreal

Orange County

Chicago

Northern NewJersey

Los Angeles

Miami

Panama City

Austin

Atlanta

San Diego

Boston

Denver

Lima

Toronto

Mexico City

Source: CBRE Research, Q3 2012.

DO

Phoenix

Sao Paulo

R Rio de Janeiro

B

S

S

S

S

H

T

M

M

M

W

C

C

L

L

N

NP

P

P

A

A

D

B

S

I li ti f I t d O i


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CBRE | Page 23

Implication for Investors and Occupiers

Highest probability is for the North American economy tocontinue modest growth.

Debt markets remain open

Interest rates remain low for now.

Global equity markets remain highly volatile.

Demand for core assets is strong. Investors searching for yield

are beginning to fan out to secondary markets and non-coreassets.

Investors have begun to focus on development and

build-to-core strategies as well.

Occupiers should lock in long-term leases while investors want toshorten duration. Rents have begun to rise across certainmarkets.


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Los Angeles: MarketFundamentals

O L l b P t T


25/26

CBRE | Page 25

75%

80%

85%

90%

95%

100%

2005 2006 2007 2008 2009 2010 2011 2012

Office Industrial Retail Apartment

Occupancy Levels by Property Type


Note: Apartment data from CBRE EA, Q3 2012.

YOY R t G th b P t T


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-30%

-20%

-10%

0%

10%

20%

30%

2005 2006 2007 2008 2009 2010 2011 2012

Office Industrial Retail Apartment

YOY Rent Growth by Property Type


Note: Apartment data from CBRE EA, Q3 2012.

IREM-PresentationJanuary2013

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