Portland State of the Market 2016

Size: px

Start display at page:

Download "Portland State of the Market 2016"

Marjorie Weaver
6 years ago
Views:

1 RESILIENT & RISING Portland State of the Market 2016

2 Portland why all the hype? Source: JLL Research Highest GDP Growth Oregon has the fastest real GDP growth in the nation at 3.9% in Q Highest Job Growth Oregon has the highest employment growth in the nation at 3.5% for September 2016 Best Food City in America Washington Post #1 #1 #1 #1 #1 Best Airport Travel + Leisure America s Best Airports #3 Overall real estate prospects ULI Emerging Trends in Real Estate 2017 #1 #1 Healthiest Economy Bloomberg - Economic Evaluation of States 2016 #1 Top Moving Destination United Van Lines National Movers Study Most Craft Breweries Currently 105 microbreweries in the PDX Metro, the most of any American city Hottest Housing Market Standard & Poor's/Case Shiller home-price index October 2015-September

3 Acknowledging the elephant in the room =? Source: JLL Research 2

Moderating volatility spurring reemergence of cautious optimism VIX (Max / Avg) Volume declines Secondary volumes (%) Pricing gap (Primary- Secondary) Q2

4 Moderating volatility spurring reemergence of cautious optimism VIX (Max / Avg) Volume declines Secondary volumes (%) Pricing gap (Primary- Secondary) Q2 25 / % 26.9% 106 bps Q3 18 / % 41.4% 111 bps Source: JLL Research, Bloomberg, NCREIF, Real Capital Analytics (Transactions larger than $5.0m) 2

5 Secondary markets are the new norm 1

6 A new hierarchy emerging for CRE investment High-growth secondary markets notably, Portland and Charlotte emerging as transitional markets between old and new guard 230 JLL Office Market Momentum Index (100 = 2003) San Francisco, New York, Boston, Seattle United States Portland Charlotte, Atlanta, Denver Raleigh, Dallas Minneapolis Source: JLL Research 7

7 These factors in aggregate are supporting strong total and appreciation returns Total returns (3-year avg.) Appreciation returns (3-year avg.) San Francisco Charlotte Portland Los Angeles Dallas Atlanta Denver Boston Chicago New York Seattle Raleigh Minneapolis 0.0% 10.0% 20.0% 30.0% San Francisco Los Angeles Portland Charlotte Boston Dallas Atlanta New York Denver Chicago Seattle Raleigh Minneapolis -5.0% 0.0% 5.0% 10.0% 15.0% Current peak Prior peak Current peak Prior peak Source: JLL Research, NCREIF 8

8 The other key word Stability Volatility indices across total returns, rent growth and absorption (sorted by highest to lowest) Los Angeles New York Chicago Boston Atlanta Denver Seattle Charlotte Dallas San Francisco Raleigh Portland Minneapolis Total return volatility Rent growth volatility Absorption volatility Source: JLL Research 9

9 A rising tide does not lift all boats 2

10 Divergent office pricing dynamics emerging across secondary markets Volatility indices across total returns, rent growth and absorption (sorted by highest to lowest) Salt Lake City Orlando Philadelphia Nashville Portland San Diego Austin Charlotte Phoenix Minneapolis Denver Atlanta Miami Fort Lauderdale Dallas Orange County Raleigh-Durham Houston Sustained cap rate compression in Portland Compressing Stable Softening Source: JLL Research, NCREIF month cap rate change (basis points) 11

11 The herd will come 3

With this, office ownership composition has shifted dramatically Ownership landscape, Class A & B CBD office buildings greater than 50,000 square feet 20 18

12 With this, office ownership composition has shifted dramatically Ownership landscape, Class A & B CBD office buildings greater than 50,000 square feet CBD office inventory (millions of square feet) % 49.2% 57.5% +50% 2 0 Source: JLL Research Today Non-Institutional Institutional 13

13 Structural shift in tenant profiles supporting resilient fundamentals Office tenants are getting bigger and the economy is diverse 14, ,000 12,000 11,000 Avg Size Tenant (s.f.) Avg Size CBD Tenant (s.f.) 13, % Denver Phoenix Portland Oakland 10,000 9,000 8,000 7,000 6,000 5,000 6,766 8,081 9, % San Francisco Los Angeles Seattle 4,000 Source: JLL Research, Moody s

14 Has the window closed in Portland? 2017 presents opportunities for new and existing investors $2,000 Forecast Investment sale volumes (millions of $US) $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 Sales will come from the following Stabilized new construction Repositioned creative Core suburban $ P 2017 F 2018 F 2019 F 2020 F 2021 F Source: JLL Research; Includes office investment sales over $10.0m 15

15 Redefining the core 4

16 Redefining the core in Portland Portland s expanding core Source: JLL Research, Includes sales greater than $10.0m 17

17 Redefining the core in Portland Portland s expanding core Source: JLL Research, Includes sales greater than $10.0m 18

18 Redefining the core in Portland Portland s expanding core Source: JLL Research, Includes sales greater than $10.0m 19

19 and then there were kids 5

20 Rent growth opportunity in desirable suburban locations $42 Prior-to- Current Peak YoY Change $40.11 $38 +17% +1% Net effective rents (p.s.f.) $34 $30 $26 $33.13 $29.30 $ % +4% +14% +1% $22 $18 +21% -1% Trophy Class A, CBD Class B, CBD Class A, Kruse Way $ Source: JLL Research 21

21 Closing thoughts

22 THANK YOU! Buzz Ellis Managing Director Sean Coghlan Director, Research

U.S. Economic, Office and Industrial Market Overview and Outlook. July 16, 2014

2014 U.S. Economic, Office and Industrial Market Overview and Outlook July 16, 2014 U.S. Economic Overview U.S. GDP Growth Persistent Despite 1Q Polar Vortex Annualized Quarterly Percent Change 10% 5%