Vital Signs: 2015 Market Update (Denver)
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Transcript of Vital Signs: 2015 Market Update (Denver)
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1. MARKET INDICATORS POINT TO CONTINUED RECOVERY.
2. OPPORTUNITIES ARE BEING CREATED FOR ALL OF US.
3. FORECAST FOR STEADY, MODERATE GROWTH OVER NEAR TERM.
TODAY’S THEMES
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DRIVERS FOR PROPERTY DEMAND TRENDING IN THE RIGHT DIRECTION: • PROPERTY INVESTMENT CONTINUES ITS SLOW CLIMB.• HOUSING MARKETS RECOVERING NICELY. • JOB GROWTH BACK TO PRIOR PEAK LEVELS.• INTEREST RATES STILL EXTREMELY LOW.• RECORD-HIGH NEW CONSTRUCTION/DEVELOPMENT.• SECONDARY METROS RALLYING BACK.
PATIENT’S VITAL STATS
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SMALL CAP SALES:• Up 30% in 1Q15
LARGE CAP SALES: • Up 45% in 1Q15
THE HIGHLIGHT OF THIS RECOVERY: PROPERTY TRANSACTIONS GROWTH
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• MAJOR BUYING CLASSES• Real estate investment trusts (REITs)• Foreign investors** • Private equity funds• Hedge funds• Traditional developer/owner/operators
DEAL MAKING: WHO’S INVESTING?
2014 TOP BUYERSARCP
Blackstone
JP Morgan
Norges Bank Investment Mgt
Hines
OMERS
Starwood Capital Group
MetLife
Essex Property Trust
David Werner Real Estate
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• SMALLER SECONDARY METROS WITH STRONG GROWTH PROFILES ARE SEEING INVESTOR INTEREST:• Portland, Seattle, Denver, Austin, Nashville, Atlanta, Las Vegas, etc.
• COMMON DENOMINATORS:• Strong job growth• Growing technology sectors, healthcare and financial services
industries
EXPANDING UNIVERSE OF METROS: SMALLER MARKETS HEATING UP
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• FINANCING MARKET IS INCREASINGLY COMPETITIVE.
• BANKS HAVE $ TO LEND, UNDERWRITING STILL VERY CAUTIOUS.
• UPTICKS IN LENDING VOLUMES SUPPORT POSITIVE INVESTMENT TRENDS.
• REGIONAL/MID-SIZED BANKS ARE GAINING MARKET SHARE...
LENDING TRENDS IN 2015
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• A POSITIVE TRAJECTORY IN LENDING• 2014 VOLUMES:
• 6.5% ANNUAL GROWTH (FDIC)• STILL 25% BELOW 2007 PEAK, EXCEPT MULTI-
FAMILY LENDING• WIDE VARIABILITY IN GROWTH BY BANK SIZE…
PROPERTY LENDING:SLOW PACE OF GROWTH IN ORIGINATIONS
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• U.S. AVERAGE GROWTH IN LOAN PORTFOLIOS: 6.5% • STRONGEST GROWTH:
• Largest regional banks • Mid-sized banks
• PARTICULARLY STRONG GROWTH IN:• Construction/development loans fastest-growing category• Multifamily loans still strong
VARIANCE IN GROWTH BY BANK SIZE
Growth in CRE Loan Portfolios (2014 vs. 2013)
All banks 6.5%Assets >$50B 4.1%$10B-$50B 16.8%$1B-$10B 10.5%<$1B -1%
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• HEADING INTO NEW ROUND OF REFINANCING, PEAKING IN 2017 • LENDERS VIEW AS OPPORTUNITY TO INCREASE VOLUMES.• EXCESS CAPITAL LOOKING TO FINANCE SOLID REAL ESTATE.• SURGE IN REFINANCING ACTIVITY FROM NOW THROUGH 2017.
LENDING OPPORTUNITY:NEW ROUND OF REFI’S
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• CONSTRUCTION SPENDING• 2014: HIGHEST LEVEL SINCE
DOWNTURN• APRIL: FASTEST MONTHLY
PACE IN MORE THAN 6 YEARS • POINTS TO MARKED INCREASE
IN U.S. DEVELOPMENT IN 2015• EXPANDING TO SMALLER
METROS…
2015: THE YEAR FOR NEW DEVELOPMENT
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METRO MAGNETS: 1. Denver2. Raleigh-Durham3. Suburban VA4. Oakland5. Las Vegas6. Austin7. San Jose8. Miami9. Seattle10.Portland
THE CONSTRUCTION/DEVELOPMENT OPPORTUNITY
MOST ACTIVE GROUPS ACQUIRING SITES FOR DEVELOPMENTHFZ Capital Group
Greenland Group
Tishman Speyer
Carmel Partners
Oceanwide Real Estate Group
Crown Resorts
Oaktree
Mitsui Fudosan
Fortis Property Group
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METRO MAGNETS: 1. Denver2. Raleigh-Durham3. Suburban VA4. Oakland5. Las Vegas6. Austin7. San Jose8. Miami9. Seattle10.Portland
THE CONSTRUCTION/DEVELOPMENT OPPORTUNITY
MOST ACTIVE GROUPS ACQUIRING SITES FOR DEVELOPMENTHFZ Capital Group
Greenland Group
Tishman Speyer
Carmel Partners
Oceanwide Real Estate Group
Crown Resorts
Oaktree
Mitsui Fudosan
Fortis Property Group
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Region 1Q Growth YonYNortheast 2%West 14%MidAtlantic -4%South 1%Midwest 1%California 6%North Atlantic 8%South Atlantic -1%U.S. AVERAGE 4%
SCOREKEEPER: REGIONAL GROWTH 1Q2015
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SCOREKEEPER: GROUND-TRUTHING THE MIGRATION TO SECONDARY METROS
TOP 10 HIGH-GROWTH METROS FOR PHASE I ESA GROWTH:
1Q2015 (YonY)
Las Vegas, NV 52%
Columbia, SC 42%
San Antonio, TX 38%
Charleston, SC 26%
Milwaukee, WI 22%
San Francisco, CA 20%
Sacramento, CA 19%
Stamford, CT 16%
Portland, OR 14%
Raleigh, NC 13%
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DENVER’S CURRENT INVESTMENT CLIMATE
5th hottest retail market in the U.S.6th for office7th for hotel
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• STILL A LOT OF ROAD TO RUN IN THIS RECOVERY.• TRANSACTION VOLUME REMAINS ON THE MEND.• MODERATE GROWTH IN NEW ORIGINATIONS. • CONTINUED MIGRATION TO SECONDARY AND TERTIARY METROS.• FAVORABLE LOW INTEREST RATE ENVIRONMENT. • PHASE I ESA FORECAST: 4 TO 8% RANGE NEXT 2 YEARS.
“2015 WILL BE ONE OF THE STRONGEST YEARS WE’VE SEEN IN COMMERCIAL REAL ESTATE SINCE THE CREDIT CRISIS AND IT’S FOR
ALL THE RIGHT REASONS.” ~KEN RIGGS, RERC
“OPTIMISM IS THE HIGHEST IT’S BEEN SINCE THE DOWNTURN.” ~RYAN SEVERINO, REIS
THE NEAR-TERM MARKET FORECAST
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• RISK MANAGEMENT IS NOW EVERYONE’S BUSINESS.
• PAST “DEAL KILLERS” ARE NOW BEING MANAGED.
• FAILED PROPERTIES/PROJECTS ARE MOVING BACK INTO PLAY.
• EFFICIENCY IN DUE DILIGENCE IS PARAMOUNT.
THE FORECAST FOR RISK MANAGEMENT