Emerging Trends in Real Estate 2015 Sustaining Momentum but Taking Nothing for Granted DALLAS November 6, 2014
36th annual outlook 1,400+ interviews and surveys of industry leaders
Rewind: 2014 Emerging Trends Scorecard Trend Yes No Industry profitability expected to continue to improve Interest rates expected to increase Dependence on cap rate compression to drive increase in value to be replaced by emphasis on asset management Markets are expected to be well supplied with both equity and debt capital
Rewind: 2014 Emerging Trends Scorecard Trend Yes No Opportunities to develop property finally appear in sectors other than multifamily Industry begins to notice and understand needs of both Millennials and the baby boomers Needs of end users of commercial space continue to evolve The single family housing market continues to make a positive contribution to the overall economy
Expectations for Profitability 2010 17.7% 21.6% 60.6% Abysmal to Poor Fair Good to Excellent
Expectations for Profitability 2011 33.6% 10.3% 56.1% Abysmal to Poor Fair Good to Excellent
Expectations for Profitability 2012 41.9% 7.6% 50.4% Abysmal to Poor Fair Good to Excellent
Expectations for Profitability 2.4% 2013 55.9% 41.8% Abysmal to Poor Fair Good to Excellent
Expectations for Profitability 1.4% 2014 30.8% 67.8% Abysmal to Poor Fair Good to Excellent
Expectations for Profitability 1.1% 2015 24.9% 74.0% Abysmal to Poor Fair Good to Excellent
2015 Emerging Trends 18 hour city comes of age The changing age game Labor markets trending toward tipping point Love/hate relationship with technology Event risk is here to stay
Moody s/rca Commercial Property Price Index, by Major/Nonmajor Markets Sources: Moody s and Real Capital Analytics. Notes: Major markets are defined here as Boston, Chicago, LA, SF, NYC, DC. Data through 6/14.
18 hour city comes of age Source: US Census Bureau, 2015 Emerging Trends in Real Estate
San Jose Honolulu San Francisco Wash DC - MD Suburbs Raleigh/Durham Seattle Wash DC - Northern VA Wash DC - District Charleston Houston Austin Oakland-East Bay Dallas/Ft. Worth Salt Lake Orange County Greenville San Diego Madison Albuquerque Portland Northern New Jersey Denver Indianapolis Minneapolis/St. Paul Philadelphia Kansas City Atlanta Baltimore West Chester/Fairfield Boise Chicago Oklahoma City Pittsburgh Cincinnati New Orleans Charlotte San Antonio Las Vegas Percent of total employment Jobs created 30.0% 300,000 25.0% 250,000 20.0% Technology/energy jobs as % of total employment Jobs created in last 2 years 200,000 15.0% 150,000 10.0% 100,000 5.0% 50,000 0.0% -
2015 Emerging Trends 18 hour city comes of age
2015 Emerging Trends The changing age game
Changing age game 100.0 Population that will be 80.0 making lifestyle decisions in the next five years 60.0 40.0 20.0 millions - Millennial (30 plus) Baby Boomers (55-64) Source: US Census Bureau
The changing age game 2015 U.S. Population by Age
The changing age game 2015 U.S. Population by Age
2015 Emerging Trends Average Home Size, by Country USA: 2,164 sf UK: 818 sf Sources: CommSec, Reserve Bank of Australia, United Nations, U.S. Census Bureau
2015 Emerging Trends Labor markets trending toward tipping point
Labor market trending toward tipping point 200 (000 s) 150 100 50 0-50 -100-150 -200-250 2015 2016 2017 2018 2019 2020 Growth in population turning 65 outpaces the growth in population turning 16 Leaving Entering Labor Force Impact Source: US Census Bureau
2015 2016 2025 Labor markets trending toward tipping point U.S. Labor Force Growth Sources: U.S. Bureau of Labor Statistics; Moody s Analytics (Economic & Consumer Credit Analytics) forecast
Labor market Jobs Will Chase People 0.0% Madison Honolulu Raleigh/Durham Minneapolis/St. Paul Tucson Charleston Omaha Boise Oklahoma City Portland Austin Norfolk Kansas City Denver Salt Lake City Des Moines Seattle All Market Average Memphis Atlanta Birmingham Cleveland Richmond Dallas/Ft. Worth Louisville Chicago Inland Empire Las Vegas Los Angeles Tampa/St. Petersburg Miami Providence Houston Philadelphia New York City -5.0% -10.0% -15.0% -20.0% -25.0% national average Percent of job opening estimated to require some college compared to the percent of total workforce with at least some college Source: Brookings Institution. Year-end 2012.
2015 Emerging Trends Technology: Love it or lose out
Technology disruption is everywhere 75 Years 4 Years 13 Years 3.5 Years 38 Years Reaching 50 Million Users 3 Years Real Estate is still analog in a digital world.. We need to evolve to meet market needs 2.5 Years 3 Days Source: Kofi Annan
Technology disruption is everywhere Industrial Office Retail Hotel Multifamily Same day delivery Shared workspace Omnichannel Shared lodging Enhanced amenities 3-D printing Flexible layout 3-D printing Personal systems Data security RFID Advanced building systems Onsite marketing Mobility Automated services
2015 Emerging Trends Event risk is here to stay
2015 Emerging Trends Darwinian market keeps squeeze on companies 900 pound gorilla swings into view Time for the U.S. to get serious about infrastructure Housing steps off the roller coaster Keeping an eye on the bubble emerging concerns
Average length of economic cycles Is the current cycle nearing an end? Trough to trough average economic cycle length 1854-2009 (33 cycles) 1854-1919 (16 cycles) Currently at 63 months and counting 1919-1945 (6 cycles) 1945-2009 (11 cycles) Average of the 3 cycles since 1990: 105 months 1990-2014 (3 cycles) 0 25 50 75 100125 Months Source: NBER
2015 Markets to Watch Rank Top 10 Markets Pop. Age Urban Home Price Bus. Cost Prod. Energy Tech 1 Houston 2 Austin 3 San Francisco 4 Denver 5 Dallas/Fort Worth 6 Los Angeles 7 Charlotte 8 Seattle 9 Boston 10 Raleigh/Durham 14 New York - Manhattan
Prospects for Commercial/Multifamily Subsectors in 2015
Rating 2015 Local Outlook: Dallas/Fort Worth 5.00 +21% 4.00 3.00 2.00 1.00 0.00
2015 Emerging Trends Dallas/Ft. Worth, by Sector Investment 4.00 3.00 #3 #2 #9 #12 #10 #37 2.00 1.00 0.00 Housing Industrial Office Multifamily Hotel Retail
2015 Emerging Trends Investment Ratings 3.76
2015 Expected Best Bets Seek Alpha Exploit Technology Refinance Develop Industrial Rediscover the Suburbs
Emerging Trends in Real Estate 2015 Sustaining Momentum but Taking Nothing for Granted DALLAS November 6, 2014