Emerging Trends in Real Estate 2016 uli.org/et16 u.
uuorg/et16
uli.org/et16
Coordinating Offense and Defense in 2016
uli.org/et16
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Profitability outlook
2010 17.7%
21.6%
Abysmal to Poor Fair
60.6%
Source: Emerging Trends in Real Estate 2015
Good to Excellent
Profitability outlook improving
2.4% 55.9%
2013
41.8%
Abysmal–poor Modestly poor– modestly good Good–excellent
Source: Emerging Trends in Real Estate 2016
Profitability outlook still improving
1.1%
2015
24.9% 74.0%
Abysmal–poor Modestly poor– modestly good Good–excellent
Source: Emerging Trends in Real Estate 2016
Profitability outlook still Expectations improving are high
1.1%
2016
14.9% Abysmal–poor
84.0%
Modestly poor– modestly good
Good–excellent
Source: Emerging Trends in Real Estate 2016
Look what we found
2016
Expectations are high
????
1.1%
1.6% 14.4%
14.9%
84.0%
84.0%
Abysmal–poor
Abysmal–poor
Modestly poor–modestly good
Modestly poor–modestly good
Good–excellent
Good–excellent
Source: Emerging Trends in Real Estate 2016
Deja Vu all over again?
2016
Expectations are high
2006
1.1%
1.6% 14.4%
14.9%
84.0%
84.0%
Abysmal–poor
Abysmal–poor
Modestly poor–modestly good
Modestly poor–modestly good
Good–excellent
Good–excellent
Source: Emerging Trends in Real Estate 2016
2016 Emerging Trends
18-Hour cities 2.0
Next stop: The suburbs
Office: A Barometer of Change A housing option for everyone Parking for change
9
Infrastructure: Network it! Brand it!
2016 Emerging Trends
Food is getting bigger and closer
Consolidation breeds specialization We raised the capital, now what do we do with it?
The return of the human touch 10
18-Hour Cities 2.0
Emerging Trends outlook ranking change 2010 - 2016 30
20
Markets moving up
Survey respondents favor growth and competitive business and living costs
10
0
-10
-20
Markets moving down
-30
Source: Emerging Trends in Real Estate 2016
Top ten markets in 2013? San Francisco New York City San Jose Austin Houston Boston Washington D.C. Dallas/Fort Worth
Orange County
Source: Emerging Trends in Real Estate 2016
Top ten markets in 2016? Dallas/Fort Worth Austin Charlotte Seattle Atlanta Denver Nashville San Francisco Portland Los Angeles Raleigh/Durham
Source: Emerging Trends in Real Estate 2016
Out of the top 10 in 2016? Washington D.C. (24) New York City (15) Orange County (14) Miami (19) Houston (30) Boston (13) Raleigh/Durham (11)
Transaction Volume in Top 10 Markets 18-Hour cities 2.0 2010 v 2016 Recovery: 2010-2011
350%
300%
250%
Change from Previous Cycle
200%
150%
|
Expansion: 2012-2015
100%
50%
Recession: 2008-2009
0%
-50%
-100%
Top 10 markets Top 10 markets in 2016 in 2010
-150%
Source: Moody’s Analytics, Real Capital Analytics
Cost of doing business 112% | 99% Cost of living 119% | 112%
Next stop: The suburbs…
Generations are on the move, with millennials the most footloose
Next stop: The suburbs…. Where do people currently live? Where Do People Currently Live? 80% 70%
67%
62%
71%
60%
40%
20%
City
30%
Suburbs
50%
10% 0%
Millenials (18 to 35)
Generation X (36 to 49)
City Source: U.S. Census Bureau
Suburb
Baby Boomers (50 to 69)
Next stop: The suburbs…. Metropolitan mobility by location 4.50 4.00
TOTAL, 3 GENERATIONS: 6.33 MILLION PEOPLE
TOTAL: 6.28 MILLION PEOPLE
3.00 2.50
TOTAL: 2.27 MILLION PEOPLE
2.00
0.50 0.00
TOTAL: 1.51 MILLION PEOPLE
Boomers
1.00
Gen. X
1.50
Millennials
Millions of people
3.50
Metropolitan Mobility, 2013 to 2014
Between Suburbs
Within City
Source: U.S. Census Bureau
City to Suburb Suburb to City
Next stop: The suburbs…. Metropolitan mobility by generation 4.50 4.00
TOTAL, 3 GENERATIONS: 6.33 MILLION PEOPLE
TOTAL: 6.28 MILLION PEOPLE
3.00 2.50
TOTAL: 2.27 MILLION PEOPLE
2.00
0.50 0.00
TOTAL: 1.51 MILLION PEOPLE
Boomers
1.00
Gen. X
1.50
Millennials
Millions of people
3.50
Metropolitan Mobility, 2013 to 2014
Between Suburbs
Within City
Source: U.S. Census Bureau
City to Suburb Suburb to City
Next stop: The suburbs…. It may be all about the kids! It may be all about the kids! 30.00
(millions)
(average age)
28.5
National probability of Living in city center by age of child
28 25.00 20.00 15.00 10.00 5.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
-
Female Millenials (Ages 25 - 35)
27.5
43%
27
41%
26.5
39%
26
37%
25.5
35%
25
33%
24.5
31%
24
29%
23.5
27% 25% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Average Age of First Birth
Source: City Observatory, National Vital Health Statistics, U.S. Census Bureau
Age
Next stop: The suburbs…. Millennials within cities. Where millennials live within cities Other city neighborhoods
Downtown/near downtown
0%
20%
40%
60%
Source: U.S. Census Bureau, UDR/Lachman Associates Survey, Gen Y and Housing, Urban Land Institute, November 2014
80%
Offices: A Barometer of Change
2000
2010
253 sf per worker
225 sf per worker
Number of workers per 1,000 sf Source: Corenet Global, PwC
2020 ?
138 sf per worker
10-year labor force poses the question…
…Who is in charge?
persons
600,000
410,616 400,000
2026
2016 - 2026
11.3% 13.8%
200,000 -
44.3%
30.6%
00’s
(200,000)
10’s
(400,000)
(483,520)
(600,000)
% of total labor market
(800,000) (1,000,000)
(894,136)
Leaving
Joining
Shortage
Source: U.S. Census Bureau, Bureau of Labor Statistics, PwC
Millennials
Gen X
Boomers
Gen Z
Small business, big impact 6.0%
9.8%
1 to 49
46.5% 90’s
50 to 499 500 to 999
37.8%
10’s
1,000 +
% of total employment change by company size since 2013
Source: Bureau of Labor Statistics, PwC
30.0%
35,000
80’s
25.0%
30,000 25,000
20.0%
40’s
70’s
15.0% 10.0%
50’s
60’s
90’s 90s
20,000
00’s 00s
15,000
10’s 10s
5.0% 0.0%
10,000 5,000 -
Total Office Employment (000s) Percent of Total Office Inventory by Decade of Construction Office Using Jobs as % of all jobs
Source: U.S. Energy Information Administration, Bureau of Labor Statistics, PwC
A Housing Option for Everyone
Can you rent the American dream?
Decline in Home Ownership % by Generation 95
85
75
77.4 70.1
69.2
82.4
81.8
75.4
77.2
69.9
65
63.4 55
58 43.6
45
35
34.6 25 U.S. - Total
Under 35 Millennials
Source: U.S. Census Bureau
35 to 44 - Gen X
45 to 54 - Gen X and 55 to 64 - Boomers 65 and Over Boomers Boomers and Older
A Housing Option for Everyone Rent and Income Average Rent as % of Median Income 27.6 % Raleigh/Durham Detroit 31.4% USUS Providence CapeCoral/Fort Myers/Naples Honolulu Portland, ME Inland Empire Boston San Jose Palm Beach Orange County San Francisco San Diego Fort Lauderdale New York-Manhattan Oakland/East Bay Miami New York -other boroughs Los Angeles New York-Brooklyn
25% 35% 45% 55% 65% 75%
Source: U.S. Census Bureau, Core Logic
Own as % of Median Income Detroit US 37.6% USOR Portland, Sacramento Denver Northern New Jersey Washington DC-District Boston Inland Empire Fort Lauderdale Palm Beach Seattle Westchester/Fairfield, NY/CT Miami CapeCoral/Fort Myers/Naples New York -other boroughs Los Angeles San Diego New York-Brooklyn Orange County Honolulu San Jose Oakland/East Bay San Francisco New York-Manhattan
30% 60% 90% 120% 150% 180%
Parking for Change
Parking was once a must-have…. ….building owners will now have options
Parking for Change
Parking- free commuting (change 2000 to 2013)
Percent of Drivers Commuting by Automobile 90.0% 86.5%
100.0%
87.9%
86.7%
86.3%
85.8%
2010
2013
84.1%
85.0% 75.0%
80.0%
77.7%
50.0%
00’s
75.0%
10’s
25.0%
0.0%
-25.0%
70.0%
65.0%
64.0%
60.0% 1960
1970
1980
1990
2000
Source: U.S. Census Bureau, U.S. Department of Commerce, Department of Transportation
2006
Delaying Licensure Top Reasons for not getting a drivers license: Only 44% obtained a driver’s license within 12 months of the minimum age Only 72% obtained a license before turning 18
Source: AAA Foundation for Traffic Safety
1. Not having a car 2. Ability to get around without driving 3. The cost of gasoline
4. Driving was too expensive 5. “Just didn’t get around to it”
We raised the capital, now what do we do with it?
We raised the capital … Dry Powder $300 $250
Institutional dry powder and REIT Cash
$ millions
$200 $150 $100 $50 $0 2010
2011
2012
2013
2014
Source: Prequin, Quarterly real estate update, Q2 2015, Federal Reserve Flow of Funds
2015
Emerging Trends Barometer: Buy? Hold? Sell? 4.50
Peak Hold
Peak Sell
4.00
Peak Buy 3.50
3.00 2.50 2.00 1.50
1.00 2010
2011
2012 Buy
Source: Emerging Trends in Real Estate 2016
2013 Sell
Hold
2014
2015
2016
And a few other Issues…. Interest rates Water Gen X The Fair Housing Act and the affordability crisis Good jobs and income mobility
Prospects for Commercial/Multifamily Subsectors in 2016 Fulfillment Center Warehouse industrial Medical office Apartment rental—moderate Apartment rental—high Limited-service hotels Neighborhood/comm. shopping centers Central city office R&D Industrial Student housing Full-service hotels Apartment rental—affordable Suburban office Institutional rentals of SF houses
Warehouse industrial Fulfillment Center Medical office Apartment-high income Limited-service hotels Apartment rental—moderate Student housing Central city office R&D Industrial Neighborhood/community shopping centers Apartment rental—affordable Full-service hotels Institutional rentals--SF houses Suburban office
Power centers
Power centers
Regional malls
Regional malls
Raleigh/Durham Investment Prospects
2016 Local Outlook: Raleigh/Durham
5.00 4.00 3.00 2.00 1.00 -
2016 Sector Outlook: Raleigh/Durham
4.00
3.00
2.00
1.00
0.00 Housing
Hotel
Office
Multifamily
Retail
Industrial
2016 South: Local Economy
5.00 4.00 3.00 2.00 1.00 -
2016 South: Investor Demand
5.00 4.00 3.00 2.00 1.00 -
2016 South: Capital Availability
5.00 4.00 3.00 2.00 1.00 -
2016 South: Development Opportunity
5.00 4.00 3.00 2.00 1.00 -
2016 South: Public/Private Investment
5.00 4.00 3.00 2.00 1.00 -
2016 South: Local Development Community
5.00 4.00 3.00 2.00 1.00 -
2016 South: Local Outlook
5.00 4.00 3.00 2.00 1.00 -
2016 Expected Best Bets Go to Key Secondary Markets
Take a Deep Dive into the Data
Middle-Income Multifamily Housing
Plan Your Parking For Change
Emerging Trends in Real Estate 2016 uli.org/et16 u.
uuorg/et16
uli.org/et16
Coordinating Offense and Defense in 2016
uli.org/et16
