GEORGE RATIU Director, Quantitative & Commercial Research National Association of REALTORS

Transcription

1 GEORGE RATIU Director, Quantitative & Commercial Research National Association of REALTORS 2015 CCIM Commercial Real Estate Outlook Conference Wednesday, January 21, 2015 Coral Gables, FL

2 Where Are We at the Dawn of 2015? ECONOMIC OVERVIEW - Global Economies: Highlights - U.S. Economic Landscape: - 5 Years After the Great Recession - Lingering Impacts - Outlook - Florida Economy & Employment CRE OVERVIEW - Fundamentals - Investments - Lending - Outlook

3 Global Economies 14.0% GDP (2014) Unemployment Rate* 12.0% 10.0% 8.0% 6.0% 7.3% 6.0% 4.0% 2.0% 0.0% 2.3% 2.3% 0.8% U.S. Canada Euro area *Reporting period varies by country 3.0% 0.5% 0.2% 0.6% Britain Japan Brazil Russia China India Source: Economist Intelligence Unit

4 European Groundhog Day 30.0% GDP (2014) Unemployment Rate* 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 0.9% 1.1% 2.4% 0.9% 0.4% 1.4% 0.8% 3.0% -0.3% 0.7% 2.3% 3.3% 1.3% 2.0% 1.6% 3.0% -5.0% *Reporting period varies by country Source: Economist Intelligence Unit

5 Asian Economies 10.0% 9.0% GDP (2014) Unemployment Rate* 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 3.1% 2.4% 6.0% 5.0% 6.0% 3.1% 3.5% 3.6% 7.3% 2.0% 1.0% 0.7% 0.0% *Reporting period varies by country Source: Economist Intelligence Unit

6 Central/South American Economies GDP (2014) Unemployment Rate* 10.0% 8.0% 6.0% 5.0% 4.0% 2.0% 0.0% 0.2% 2.0% 2.1% -2.0% -4.0% -0.6% Argentina Brazil Chile Colombia Mexico Venezuela -3.1% *Reporting period varies by country Source: Economist Intelligence Unit

7 U.S. Economic Landscape

8 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3 $ Billions Percentage About every ten years, we have the biggest crisis in 50 years. - Paul Volcker (Chairman of the Federal Reserve: Aug to Aug. 1987) GDP, Annualized % Growth Real GDP Source: BEA -15.0

9 U.S. Population Grows 139%: Source: Census Bureau <- 37% -> <- 25% -> <- 24% -> <- 8% -> <- 4% ->

10 U.S. Labor Force Grows 154%: Source: BLS <- 15% -> <- 53% -> <- 34% -> <- 8% -> <- 1% ->

11 2000.Jan 2000.May 2000.Sep 2001.Jan 2001.May 2001.Sep 2002.Jan 2002.May 2002.Sep 2003.Jan 2003.May 2003.Sep 2004.Jan 2004.May 2004.Sep 2005.Jan 2005.May 2005.Sep 2006.Jan 2006.May 2006.Sep 2007.Jan 2007.May 2007.Sep 2008.Jan 2008.May 2008.Sep 2009.Jan 2009.May 2009.Sep 2010.Jan 2010.May 2010.Sep 2011.Jan 2011.May 2011.Sep 2012.Jan 2012.May 2012.Sep 2013.Jan 2013.May 2013.Sep 2014.Jan 2014.May 2014.Sep Employment Lags Population Growth In Labor Force > Unemployed: 16 Yr + (SA, '000s) Not in Labor Force > Want a Job Now: 16 Yr + (SA, '000s) : 8.7 M : 6.5 M Source: BLS

12 2000.Jan 2000.May 2000.Sep 2001.Jan 2001.May 2001.Sep 2002.Jan 2002.May 2002.Sep 2003.Jan 2003.May 2003.Sep 2004.Jan 2004.May 2004.Sep 2005.Jan 2005.May 2005.Sep 2006.Jan 2006.May 2006.Sep 2007.Jan 2007.May 2007.Sep 2008.Jan 2008.May 2008.Sep 2009.Jan 2009.May 2009.Sep 2010.Jan 2010.May 2010.Sep 2011.Jan 2011.May 2011.Sep 2012.Jan 2012.May 2012.Sep 2013.Jan 2013.May 2013.Sep 2014.Jan 2014.May 2014.Sep Unemployment In Labor Force > Unemployed: 16 Yr + (SA, '000s) Not in Labor Force > Want a Job Now: 16 Yr + (SA, '000s) : 8.7 M : 6.5 M Source: BLS

13 2000.Jan 2000.May 2000.Sep 2001.Jan 2001.May 2001.Sep 2002.Jan 2002.May 2002.Sep 2003.Jan 2003.May 2003.Sep 2004.Jan 2004.May 2004.Sep 2005.Jan 2005.May 2005.Sep 2006.Jan 2006.May 2006.Sep 2007.Jan 2007.May 2007.Sep 2008.Jan 2008.May 2008.Sep 2009.Jan 2009.May 2009.Sep 2010.Jan 2010.May 2010.Sep 2011.Jan 2011.May 2011.Sep 2012.Jan 2012.May 2012.Sep 2013.Jan 2013.May 2013.Sep 2014.Jan 2014.May 2014.Sep Labor Force Participation Declines Labor Force Participation Rate: 16 yr + (SA, %) % in Jan % in Dec Source: BLS

14 How is U.S. Economy at ½ Workforce?

15 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 Economic Growth Modestly Positive GDP Actual GDP Trend Real GDP (SAAR, Chn.2009$) % Chg - Annual Rate Impact on U.S. Economy: $2.5 Trillion Missing Source: BEA

16 Consumers Remain Growth Engine Real GDP (SAAR, Bil.Chn.2009$) Consumer Spending Investments Net Exports Government Spending Q4: $15.0 T 2014.Q3: $16.2 T CONSUMER CONSUMPTION = 70% of ECONOMY Source: BEA

17 2000.Jan 2000.Aug 2001.Mar 2001.Oct 2002.May 2002.Dec 2003.Jul 2004.Feb 2004.Sep 2005.Apr 2005.Nov 2006.Jun 2007.Jan 2007.Aug 2008.Mar 2008.Oct 2009.May 2009.Dec 2010.Jul 2011.Feb 2011.Sep 2012.Apr 2012.Nov 2013.Jun 2014.Jan 2014.Aug 2000.Jan 2000.Aug 2001.Mar 2001.Oct 2002.May 2002.Dec 2003.Jul 2004.Feb 2004.Sep 2005.Apr 2005.Nov 2006.Jun 2007.Jan 2007.Aug 2008.Mar 2008.Oct 2009.May 2009.Dec 2010.Jul 2011.Feb 2011.Sep 2012.Apr 2012.Nov 2013.Jun 2014.Jan 2014.Aug I.V. Drip of Free Money Continues Boosting Confidence FRB Fed Funds Target Rate (EOP, %) Consumer Confidence (SA, 1985=100) Consumer Sentiment (NSA, Q1.66=100) Source: Federal Sources: The Conference Board, University of Michigan

18 2000.Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 Growth of Household Assets Also Boosts Confidence Households & Nonprofit Org: Total Financial Assets (NSA, Bil.$) Households & Nonprofit Organizations: Total Real Estate Holdings (NSA, Bil.$) FRB Q3: $52.6 > 2014.Q2: $66.8T Q4: $25.0 > 2014.Q3: $23.2T Source: Federal Reserve Board

19 Jan.2000 Sep.2000 May.2001 Jan.2002 Sep.2002 May.2003 Jan.2004 Sep.2004 May.2005 Jan.2006 Sep.2006 May.2007 Jan.2008 Sep.2008 May.2009 Jan.2010 Sep.2010 May.2011 Jan.2012 Sep.2012 May.2013 Jan.2014 Sep Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q1 Earnings and Credit 2015 Signs of Hope Real Personal Income Excluding Transfer Receipts (SAAR, Chn.2009$) %Chg YoY CONSUMER CREDIT - YoY % Change (EOP, SA, Bil.$) Revolving Nonrevolving Source: BEA Source: Federal Reserve Board

20 Consumer Spending Moderate, Steady Real Personal Consumption Expenditures: Services (SAAR, Chn.2009$) % Change - Annual Rate Real Personal Consumption Expenditures: Nondurable Goods (SAAR, Chn.2009$) % Change - Annual Rate Real Personal Consumption Expenditures: Durable Goods (SAAR, Chn.2009$) % Change - Annual Rate Source: BEA

21 2000.Jan 2000.Sep 2001.May 2002.Jan 2002.Sep 2003.May 2004.Jan 2004.Sep 2005.May 2006.Jan 2006.Sep 2007.May 2008.Jan 2008.Sep 2009.May 2010.Jan 2010.Sep 2011.May 2012.Jan 2012.Sep 2013.May 2014.Jan 2014.Sep 2000.Jan 2000.Sep 2001.May 2002.Jan 2002.Sep 2003.May 2004.Jan 2004.Sep 2005.May 2006.Jan 2006.Sep 2007.May 2008.Jan 2008.Sep 2009.May 2010.Jan 2010.Sep 2011.May 2012.Jan 2012.Sep 2013.May 2014.Jan 2014.Sep Business Activity Expanding Manufacturers' Activity (EOP, SA, Mil.$) ISM Index (SA, 50+ Increasing) Shipments New orders Inventories 65.0 ISM Manufacturing ISM Nonmanufacturing Source: Census Bureau Source: Institute for

22 2000.Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 Trade and Productivity Boost Bottom Line International Trade (SAAR, Bil.Chn.2009$) Real Exports Real Imports Productivity: Real Output (2005=100, SA) Business Sector Manufacturing Sector Nonfinancial Corporations Source: BEA Source: BLS

23 2000.Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 Corporate Balance Sheets Healthy Real Corporate Profits After Tax (SAAR, Bil.Chn.2009$) 2500 Corporate Cash/Cash Equivalent Holdings (NSA, Bil.$) Q3: $1.78 Trillion Q2 = $1.86 Trillion Source: BEA Source: Federal Reserve Board

24 2000.Jan 2000.Oct 2001.Jul 2002.Apr 2003.Jan 2003.Oct 2004.Jul 2005.Apr 2006.Jan 2006.Oct 2007.Jul 2008.Apr 2009.Jan 2009.Oct 2010.Jul 2011.Apr 2012.Jan 2012.Oct 2013.Jul 2014.Apr 2000.Jan 2000.Sep 2001.May 2002.Jan 2002.Sep 2003.May 2004.Jan 2004.Sep 2005.May 2006.Jan 2006.Sep 2007.May 2008.Jan 2008.Sep 2009.May 2010.Jan 2010.Sep 2011.May 2012.Jan 2012.Sep 2013.May 2014.Jan 2014.Sep Equity/Bond Markets S&P 500 (EOP, =10) NASDAQ (EOP, Feb 5, 1971=100) DJIA (EOP, May 26, 1896=40.94) Dow Jones Corp Bond Index (EOP, 12/31/96=100) Industrial Financials Utility Source: Wall Street Source: Dow

25 Business Investments Rising Confidence Real Private Nonresidential Investment (SAAR, Chn2009$, %Chg Annual Rate) Structures Equipment Intellectual Property Source: BEA

26 2000.Jan 2000.May 2000.Sep 2001.Jan 2001.May 2001.Sep 2002.Jan 2002.May 2002.Sep 2003.Jan 2003.May 2003.Sep 2004.Jan 2004.May 2004.Sep 2005.Jan 2005.May 2005.Sep 2006.Jan 2006.May 2006.Sep 2007.Jan 2007.May 2007.Sep 2008.Jan 2008.May 2008.Sep 2009.Jan 2009.May 2009.Sep 2010.Jan 2010.May 2010.Sep 2011.Jan 2011.May 2011.Sep 2012.Jan 2012.May 2012.Sep 2013.Jan 2013.May 2013.Sep 2014.Jan 2014.May 2014.Sep Employment Recovery Gains Momentum One-month Payroll Job Changes (in thousands) J.08-D.09: 8.7M jobs cut ytd: 11.2M jobs added Source: BLS

27 Service Industries Drive Growth : Payroll Employment Growth by Sector (SA, 000s) Government Other services Leisure & hospitality Education & health services Prof & business services Financial activities Information Trade, transportation & utilities Manufacturing Construction Mining & Logging Source: BLS

28 2000.Jan 2000.May 2000.Sep 2001.Jan 2001.May 2001.Sep 2002.Jan 2002.May 2002.Sep 2003.Jan 2003.May 2003.Sep 2004.Jan 2004.May 2004.Sep 2005.Jan 2005.May 2005.Sep 2006.Jan 2006.May 2006.Sep 2007.Jan 2007.May 2007.Sep 2008.Jan 2008.May 2008.Sep 2009.Jan 2009.May 2009.Sep 2010.Jan 2010.May 2010.Sep 2011.Jan 2011.May 2011.Sep 2012.Jan 2012.May 2012.Sep 2013.Jan 2013.May 2013.Sep 2014.Jan 2014.May 2014.Sep Inflation Remains Contained for Now 6.0 Overall CPI Core CPI ( =100, %Chg YoY) Source: BLS

29 2000.Jan 2000.Oct 2001.Jul 2002.Apr 2003.Jan 2003.Oct 2004.Jul 2005.Apr 2006.Jan 2006.Oct 2007.Jul 2008.Apr 2009.Jan 2009.Oct 2010.Jul 2011.Apr 2012.Jan 2012.Oct 2013.Jul 2014.Apr 2000.Jan 2000.Sep 2001.May 2002.Jan 2002.Sep 2003.May 2004.Jan 2004.Sep 2005.May 2006.Jan 2006.Sep 2007.May 2008.Jan 2008.Sep 2009.May 2010.Jan 2010.Sep 2011.May 2012.Jan 2012.Sep 2013.May 2014.Jan 2014.Sep Energy Costs Reflect Rising U.S. Supply Brent Nominal (EU Mkt Price, $/Barrel) Cushing West Texas Intermediate (Spot FOB, EOP, $/Barrel) Dec 2014: $ Natural Gas Price (Henry Hub, LA, $/mmbtu) Dec 2014: $ Source: Wall Street Journal

30 U.S. Economic Outlook DECEMBER Annual Growth Rate, % Real GDP Nonfarm Payroll Employment Consumer Prices Level Consumer Confidence Percent Unemployment Fed Funds Rate Month T-bill Rate Corporate Aaa Bond Yield Year Gov t Bond Year Gov t Bond Source: National Association of REALTORS

31 Florida Economy & Employment

32 Jan Sep May Jan Sep May Jan Sep May Jan Sep May Jan Sep May Jan Sep May Jan Sep May Jan Sep Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug July 1992 = 100 Florida Economy Growing Philadelphia FRB Coincident Economic Activity Index U.S. Florida 4 Philadelphia FRB Leading Economic Activity Index (6-Mo % Chg Forecast Of Coincident Ind.) U.S. Florida Nonfarm payroll employment Unemployment rate Avg. hours worked in manufacturing Wages and salaries Source: Federal Reserve Bank of Philadelphia -6 Source: Federal Reserve Bank of Philadelphia

33 CCIM Quarterly Market Trends Sources: CCIM, NAR

34 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Florida Employment Recovery 100 One-month Payroll Job Changes (in thousands) Source: BLS

35 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Florida Employment: Selected Industries Florida Payroll Nov 2014: 7.9M Payroll Employment (in thousands) Construction Manufacturing Trade, Transp., Utilities Financial Ed & Health Leisure & Hospitality Information Other Government Source: BLS

36 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Florida Employment MSAs Private Payroll Employment Change (period-to-period, thousands) Jacksonville Orlando Miami-Ft Lauderdale-Miami Beach Tampa-St Petersburg-Clearwater Miami lost 236,800 jobs in Miami added 247,100 net jobs over Source: BLS

37 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Florida Unemployment Matches U.S. 14 Unemployment Rate U.S. Florida Miami-M.Beach-Kendall Source: BLS

38 Commercial Real Estate

39 % Change, Quarter-over-quarter Percent Change, Quarterly 2008.Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3 CRE Fundamentals in Line with Economy 10% 5% New Construction Leasing Volume 20% REALTOR Commercial Leasing Trends Leasing Volume Leasing Rates Lease Concessions 0% 15% -5% 10% -10% 5% -15% 0% -20% -5% -25% -10% -30% Source: National Association of Realtors -15% Source: National Association of Realtors

40 Square Feet Office Lags: Employment/Efficiencies U.S. Office Fundamentals Completions Net Absorption Vac % 150,000, ,000,000 50,000, ,000, ,000, ,000, Source: NAR, Reis

41 Square Feet Industrial: International Trade/Online Commerce U.S. Industrial Fundamentals Completions Net Absorption Vac % 150,000, ,000, ,000, ,000, ,000, Source: NAR, Reis

42 Square Feet Retail: Consumer Confidence U.S. Retail Fundamentals Completions Net Absorption Vac % 40,000, ,000, ,000,000 10,000, ,000, ,000, ,000, Source: NAR, Reis

43 Square Feet Apartment: Population Growth U.S. Apartment Fundamentals Completions Net Absorption Vac % 250, , , , , , Source: NAR, Reis

44 Rents Bode Well for Investments U.S. Asking Rents % Chg Office Industrial Retail Apartment Source: NAR, Reis

45 00.December June December June December June December June December June December June December June December June December June December June December June December June December June December CRE Volume and Prices Advance Billions $ Volume $180.0 $160.0 $140.0 $120.0 $100.0 $80.0 $60.0 $40.0 $20.0 $- '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 ' Moody's/RCA CPPI - Composite Apartment Retail Industrial Office Year-Over-Year % Change 200% 150% 100% 50% 0% -50% -100% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Source: Real Capital Analytics Source: Real Capital Analytics

46 CRE Recovery Broadens Across Markets Sales Volume (YoY % Chg) Sales Prices (YoY % Chg) Major CRE Markets REALTOR CRE Markets Moody s/rca CPPI - Major Markets 200% Deals > $2.5M 10.0% REALTOR CRE Markets 150% 5.0% 100% 0.0% 50% -5.0% 0% -10.0% -15.0% -50% -20.0% -100% -25.0% Sources: NAR, Real Capital Analytics

47 CCIM Quarterly Market Trends Highlights Sources: CCIM, NAR

48 CRE Lending Rebounds 100% Change in Lending Conditions over Past Year 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Eased Significantly Eased Somewhat Not Changed Tightened Somewhat Tightened Significantly Source: NAR

49 CRE Lending Sources Diversify Lenders - Real Capital Analytics REALTORS Lending Sources 100% 90% Private/Other 100% 90% Small Business Administration REITs 80% 70% 60% 50% 40% Reg'l/Local Bank National Bank Int'l Bank Insurance Co. Gov't Agency 80% 70% 60% 50% 40% Regional Banks Public Cos. Private Investors Other National Banks Local/Comm. Banks 30% Financial Inst. 30% Life Insurance Cos. 20% 10% CMBS 20% 10% International banks Credit Unions 0% Source: Real Capital Analytics 0% CMBS Source: NAR

50 Commercial Outlook: Positive OFFICE Vacancy Rate 16.2% 15.7% 15.6% Net Absorption ('000 sq. ft.) 35,586 48,841 55,026 Completions ('000 sq. ft.) 27,073 42,154 44,460 Rent Growth 2.6% 3.3% 3.6% INDUSTRIAL Vacancy Rate 8.9% 8.5% 8.1% Net Absorption ('000 sq. ft.) 110, , ,780 Completions ('000 sq. ft.) 81,009 71,349 62,097 Rent Growth 2.4% 2.9% 3.1% RETAIL Vacancy Rate 9.8% 9.6% 9.4% Net Absorption ('000 sq. ft.) 11,350 18,871 23,792 Completions ('000 sq. ft.) 7,747 11,711 15,924 Rent Growth 2.0% 2.5% 3.0% MULTI-FAMILY Vacancy Rate 4.0% 4.1% 4.2% Net Absorption (Units) 216, , ,626 Completions (Units) 180, , ,339 Rent Growth 4.0% 3.9% 3.5% Sources: NAR / Reis, Inc. 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 10yr UST* Cap Rate Spread (bps) '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Source: Real Capital Analytics

51 / research-and-statistics GEORGE RATIU Director, Quantitative & Commercial Research National Association of REALTORS 2015 CCIM Commercial Real Estate Outlook Conference Wednesday, January 21, 2015 Coral Gables, FL