Presented By: Doug Herzbrun Managing Director January 26, 2000

Transcription

1 NORTHWEST CONSTRUCTION CONSUMER COUNCIL Presented By: Doug Herzbrun Managing Director January 26, 2000

2 U.S. Real Estate Capital Markets Overview

3 INVESTABLE UNIVERSE $1.1 TRILLION 3

4 INVESTABLE UNIVERSE INVESTABLE INVENTORY 12.3 Billion Square Feet source: Torto Wheaton Research; CB Richard Ellis Investors X VALUE PER SQ. FT. $87.00 Per Square Foot source: CB Richard Ellis National Real Estate Index = $1,066,700,000,000 4

5 INVESTABLE UNIVERSE CRITERIA TWR MARKETS - INSTITUTIONAL SIZE AGE OFFICE 50,000 SF+ Built or Renovated since 1968 INDUSTRIAL 50,000 SF+ Built Since 1968 RETAIL 30,000 SF+ None (Shopping Centers) APARTMENTS None Built Since

6 INVESTABLE UNIVERSE BY PROPERTY TYPE Office 2,103.5 Apartments 3,986.2 SQUARE FEET (Millions) Industrial 3,950.9 Retail 2,342.0 AVERAGE PRICE PER SQUARE FOOT OFFICE $176 INDUSTRIAL $46 RETAIL $117 APARTMENTS $62 Apartments $246.3 VALUE (Billions) Office $369.3 Retail $275.0 Industrial $

7 INVESTABLE UNIVERSE CRITERIA Investable Universe NCREIF Contributors REITs Billions of $'s % 14% 7% 11% 6% 28% 5% 20% Office Industrial Retail Apartments 7

8 INVESTABLE INSTITUTIONAL BREAKDOWN BY OWNERSHIP NCREIF Contributors 7% Other Pension Fund 6% REITs 14% Other 69% Foreign 4% 8

9 ANNUAL REAL ESTATE RETURNS PUBLIC & PRIVATE 40% 30% 20% 10% 0% -10% -20% -30% * Public (NAREIT) Private (NCREIF) * Estimated for NCREIF Source: NAREIT; NCREIF 9

10 PUBLIC & PRIVATE REAL ESTATE YIELDS 12% 10% 8% 6% 4% 2% Public NAREIT Equity Dividend Yield Private NCREIF Income Return 10-Year Treasuries 0% Source: NAREIT, NCREIF 10

11 PRICING INDICATORS PRICES PER SQ. FT. - LONG-TERM TREND Apartments Warehouse Retail CBD Office * As of second quarter Source: CB Richard Ellis National Real Estate Index 11

12 PRICING INDICATORS PRICES PER SQ. FT. - SHORT-TERM TREND =100 CBD Office Suburban Office Apartments Warehouse Retail Source: CB Richard Ellis National Real Estate Index 12

13 U.S. Property Market Overview

14 Office: Is There Life After Recovery? 14

15 ECONOMIC OVERVIEW GDP VS. EMPLOYMENT GROWTH 8% 6% 4% FORECAST 2% 0% -2% -4% Total Non-Agricultural Employment GDP Source: Regional Financial Associates 15

16 U.S. OFFICE MARKET ABSORPTION IN SQUARE FEET Square Feet (millions) st 1/2 of 1999 Source: CBRE Torto Wheaton Research 16

17 OFFICE EMPLOYMENT VS. NET ABSORPTION RATE 10% 8% 6% 4% FORECAST 2% 0% -2% -4% Source: CBRE Torto Wheaton Research; RFA Net Absorption Rate Office Employment 17

18 OFFICE ABSORPTION RATE VS. CONSTRUCTION RATE 12% 10% 8% FORECAST 6% 4% 2% 0% Source: CBRE Torto Wheaton Research Absorption Rate Construction Rate 18

19 OFFICE CONSTRUCTION VS. VACANCY Construction (millions of SF) FORECAST 25% 20% 15% 10% 5% Vacancy % Source: CBRE Torto Wheaton Research Office Construction Office Vacancy Rate 19

20 OFFICE VACANCY VS. RENT GROWTH 25% 20% 15% 10% FORECAST 5% 0% -5% -10% Office Rent Growth Office Vacancy Rate Source: CBRE Torto Wheaton Research, RFA CPI Inflation 20

21 OFFICE RENT GROWTH VS. RETURNS 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% FORECAST NCREIF Returns Nominal Rent Growth Source: CBRE Torto Wheaton Research; NCREIF 21

22 RECENT TOP OFFICE RENT GROWTH MARKETS San San Francisco, CA CA San Jose, CA CA Boston, MA Dallas, TX TX Fort Worth, TX San Diego, CA Orange County, CA West Palm Beach, FL New York, NY Oklahoma City, OK Houston, TX Seattle, WA Oakland, CA Phoenix, AZ Baltimore, MD Nation 3-Year High Rent Growth Tech Centers Source: CBRE Torto Wheaton Research; Milken Institute 0% 20% 40% 60% 80% 100% Cumulative Change In In Rents 22

23 PROJECTED OFFICE RENT GROWTH TOP TEN CITIES Orange County, CA New York, NY Oakland/East Bay, CA Chicago, IL Honolulu, HI San Diego, CA Washington, DC/VA/MD Phoenix, AZ Northern New Jersey Stamford/Fairfield County, CT Source: CBRE Investors; CBRE Torto Wheaton Research 23

24 INVESTMENT MATRIX QUADRANTS High RETURN BLUE CHIP INCOME HIGH YIELD CONTRARIAN Low RISK High 24

25 OFFICE INVESTMENT MATRIX West Coast Markets By Quadrant High BLUE CHIP HIGH YIELD RETURN Los Angeles Orange County Sacramento Portland San Francisco Inland Empire Oakland/East Bay San Diego San Jose Seattle INCOME CONTRARIAN Low RISK High 25

26 Industrial: Still Stable After All These Years? 26

27 INDUSTRIAL ABSORPTION VS. GDP GROWTH 8% 6% 4% FORECAST 2% 0% -2% GDP Absorption Rate Source: CBRE Torto Wheaton Research; RFA 27

28 INDUSTRIAL CONSTRUCTION VS. VACANCY Construction (in millions of square feet) Vacancy FORECAST 12% 10% 8% 6% 4% 2% % Source: CBRE Torto Wheaton Research Construction Vacancy Rate 28

29 INDUSTRIAL VACANCY VS. RENT CHANGE 11% 9% 7% 5% 3% 1% -1% -3% -5% FORECAST Rent Change Vacancy Rate Source: CBRE Torto Wheaton Research CPI Inflation 29

30 INDUSTRIAL RENT GROWTH VS. RETURNS 20% 15% 10% FORECAST 5% 0% -5% Source: CBRE Torto Wheaton Research; NCREIF; CBRE Investors NCREIF Industrial Return Nominal Rent Change 30

31 PROJECTED INDUSTRIAL RENT GROWTH: TOP TEN CITIES Washington, DC/VA/MD Houston, TX Boston, MA Oakland/ East Bay, CA Stamford/Fairfield County, CT Orlando, FL Los Angeles, CA Baltimore, MD San Francisco, CA San Diego, CA Source: CBRE Investors; CBRE Torto Wheaton Research 31

32 INDUSTRIAL INVESTMENT MATRIX West Coast Markets By Quadrant High BLUE CHIP HIGH YIELD RETURN Los Angeles Seattle Orange County Portland Sacramento Oakland/East Bay San Diego San Francisco Inland Empire San Jose INCOME CONTRARIAN Low RISK High 32

33 Retail: Which Bricks Beat Clicks? 33

34 RETAIL SALES CHANGE Total Less Auto Source: CBRE Torto Wheaton Research; U.S. Department of Census; RFA Change From Previous Year 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% FORECAST p 34

35 VACANCY RATE BY CENTER TYPE 14% 12% 10% 8% 6% 4% 2% 0% Non Regional Centers Regional Malls Source: CB Richard Ellis Investors, L.L.C Source: CB Richard Ellis Investors, L.L.C. 35

36 RETAIL CENTERS - FORMAT PROSPECTS MORE PROMISING 24-HOUR DOWNTOWNS DOMINANT REGIONAL MALLS NEIGHBORHOOD CENTERS LIFESTYLE VILLAGES LESS PROMISING -POWER CENTERS -FACTORY OUTLET CENTERS 36

37 RETAIL CENTERS - MORE PROMISING HOUR DOWNTOWNS Upscale department stores and retailers (Saks Fifth Avenue, Gucci) Customers are tourists, residents and office workers 37

38 RETAIL CENTERS -...MORE PROMISING DOMINANT REGIONAL MALLS One million sq. ft. + centers with 3 or more department stores Large selection of brand name and fashion tenants 38

39 RETAIL CENTERS -...MORE PROMISING NEIGHBORHOOD CENTERS Open air centers with a supermarket (Safeway) Provides convenience goods and services to local area residents 39

40 RETAIL CENTERS -...MORE PROMISING LIFESTYLE VILLAGES Open air centers with name brand tenants (Gap), large bookstores (Barnes & Noble) and restaurants Provides fashion goods in a convenient, social setting 40

41 RETAIL CENTERS - LESS PROMISING POWER CENTERS Large open-air centers anchored by big box stores (Wal-Mart, Circuit City, Toys R Us) Risky due to evolving store concepts and threat of Internet competition 41

42 RETAIL CENTERS - LESS PROMISING FACTORY OUTLET CENTERS Open-air centers tenanted by manufacturers stores (Polo Ralph Lauren, Nike) Large tourist draw, vulnerable to newer, larger centers closer to major metropolitan areas 42

43 Looking Forward: Investment Market Outlook 43

44 NCREIF RETURNS BY PROPERTY TYPE Source: NCREIF; CBRE Investors 20% FORECAST 15% 10% 5% 0% -5% -10% -15% Office Industrial Retail Apartments 44

45 Presented By: Doug Herzbrun Managing Director CB Richard Ellis Investors January 26, 2000