Real Estate Markets in a Tentative Economic Landscape

Real Estate Markets in a Tentative Economic Landscape GEORGE RATIU Director, Quantitative & Commercial Research National Association of REALTORS Bay Area Real Estate Council Annual Economic Outlook Tampa, FL February 17, 2016

There are two kinds of forecasters: those who don t know, and those who don t know they don t know. U.S. Economy Secular Stagnation? The New Normal? Centennial Transition Real Estate Markets Residential Renewal Commercial Ascent Capital Trends Outlook John Kenneth Galbraith

1901 1904 1907 1910 1913 1916 1919 1922 1925 1928 1931 1934 1937 1940 1943 1946 1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 U.S. Population Grows by 26M in Last Decade 350000 300000 U.S. Estimate of Resident Population ('000) 2015: 321 million 250000 200000 150000 100000 50000 0

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 2015.Jan 2015.May 2015.Sep U.S. Labor Force Grows by 8M in Last Decade 160000 Civilian Labor Force: 16 Yr + (SA, '000s) 155000 2015.12: 158 million 150000 145000 140000 135000 130000 Source: BLS

U.S. Economy Trickle-down theory - the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows. John Kenneth Galbraith

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 2015.Jan 2015.Oct Monetary policy designed to bring economy out of Great Recession Quantitative easing / low cost of money designed to stabilize banks Stable bank balance sheets translate into lending Increased credit boosts consumer/business spending Consumer/business spending drives economic growth 7.0000 6.0000 5.0000 4.0000 3.0000 2.0000 1.0000 0.0000 FRB Funds Target Rate (EOP, %) Source: Federal Reserve Board

Subpar GDP growth despite unprecedented monetary policy 2000.Q1 2000.Q3 2001.Q1 2001.Q3 2002.Q1 2002.Q3 2003.Q1 2003.Q3 2004.Q1 2004.Q3 2005.Q1 2005.Q3 2006.Q1 2006.Q3 2007.Q1 2007.Q3 2008.Q1 2008.Q3 2009.Q1 2009.Q3 2010.Q1 2010.Q3 2011.Q1 2011.Q3 2012.Q1 2012.Q3 2013.Q1 2013.Q3 2014.Q1 2014.Q3 2015.Q1 2015.Q3 10.00 8.00 6.00 4.00 2.00 0.00-2.00-4.00-6.00-8.00 Real GDP (SAAR, Chn.2009$) % Chg - Annual Rate -10.00 Source: BEA

Consumers remain economic growth engine Real GDP (SAAR, Bil.Chn.2009$) Consumer Spending Investments Net Exports Government Spending 18000.0 16000.0 14000.0 12000.0 10000.0 8000.0 6000.0 2007.Q4: $15.0 T 2015.Q4: $16.5 T 4000.0 2000.0 CONSUMER CONSUMPTION = 70% OF ECONOMY 0.0-2000.0 Source: BEA

2000 - Jan 2000 - Jun 2000 - Nov 2001 - Apr 2001 - Sep 2002 - Feb 2002 - Jul 2002 - Dec 2003 - May 2003 - Oct 2004 - Mar 2004 - Aug 2005 - Jan 2005 - Jun 2005 - Nov 2006 - Apr 2006 - Sep 2007 - Feb 2007 - Jul 2007 - Dec 2008 - May 2008 - Oct 2009 - Mar 2009 - Aug 2010 - Jan 2010 - Jun 2010 - Nov 2011 - Apr 2011 - Sep 2012 - Feb 2012 - Jul 2012 - Dec 2013 - May 2013 - Oct 2014 - Mar 2014 - Aug 2015 - Jan 2015 - Jun 2015 - Nov Florida outpaces U.S. economic activity 190 Philadelphia FRB: Coincident Economic Activity Index U.S. Florida 180 170 160 150 140 130 120 Nonfarm payroll employment Unemployment rate Avg. hours worked in manufacturing Wages and salaries

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 2015 - Jan 2015 - Oct Thousands Housing recovery boosts economic activity 8000 7000 6000 EHS (SAAR, Units) Distressed Sales (%) 60 50 Housing supply continues to hover below 6-7 month equilibrium 5000 4000 3000 2000 1000 40 30 20 10 Distressed properties decline: only 6% of total sales in 2015, down from high of 40% in 2008 and 2009 0 0

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 2015.May Housing supply does not keep pace with population 2000 1800 1600 New SF Home Sales (SAAR, '000s) SF Housing Starts (SAAR, '000s) 2500 2000 Net Household Formation ('000) 1400 1200 1500 1000 800 1000 600 400 500 200 0 0 Source: Census Bureau -500 Source: Census

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 2015 - Jan 2015 - May 2015 - Sep Shortage of inventory pushes home prices upward 250000 EHS Median Sales Price ($) 200000 150000 100000 50000 Home prices rose 11.5%, 5.7%, and 5.9% over the past 3 years while wages have only been rising around 2% 0

2003 - Q1 2003 - Q3 2004 - Q1 2004 - Q3 2005 - Q1 2005 - Q3 2006 - Q1 2006 - Q3 2007 - Q1 2007 - Q3 2008 - Q1 2008 - Q3 2009 - Q1 2009 - Q3 2010 - Q1 2010 - Q3 2011 - Q1 2011 - Q3 2012 - Q1 2012 - Q3 2013 - Q1 2013 - Q3 2014 - Q1 2014 - Q3 2015 - Q1 2015 - Q3 2000 - Q1 2000 - Q4 2001 - Q3 2002 - Q2 2003 - Q1 2003 - Q4 2004 - Q3 2005 - Q2 2006 - Q1 2006 - Q4 2007 - Q3 2008 - Q2 2009 - Q1 2009 - Q4 2010 - Q3 2011 - Q2 2012 - Q1 2012 - Q4 2013 - Q3 2014 - Q2 2015 - Q1 Tampa MSA Housing 250 Tampa-St Petersburg-Clearwater: Median Price ($, '000) SF Home Condo 25 Tampa-St Petersburg-Clearwater: Months' Supply of Homes 200 20 150 15 100 10 50 5 0 0

2000.Q1 2000.Q4 2001.Q3 2002.Q2 2003.Q1 2003.Q4 2004.Q3 2005.Q2 2006.Q1 2006.Q4 2007.Q3 2008.Q2 2009.Q1 2009.Q4 2010.Q3 2011.Q2 2012.Q1 2012.Q4 2013.Q3 2014.Q2 2015.Q1 2000.Q1 2000.Q4 2001.Q3 2002.Q2 2003.Q1 2003.Q4 2004.Q3 2005.Q2 2006.Q1 2006.Q4 2007.Q3 2008.Q2 2009.Q1 2009.Q4 2010.Q3 2011.Q2 2012.Q1 2012.Q4 2013.Q3 2014.Q2 2015.Q1 Capital holders ride growth wave 80000.000 70000.000 Households & Nonprofit Org: Total Financial Assets (NSA, Bil.$) 2007.Q3: $52.6 > 2014.Q3: $68.9T 30000.000 25000.000 Households & Nonprofit Organizations: Total Real Estate Holdings (NSA, Bil.$) FRB 2006.Q4: $25.0 > 2015.Q3: $24.9T 60000.000 50000.000 20000.000 40000.000 15000.000 30000.000 20000.000 10000.000 10000.000 5000.000 0.000 0.000 Source: Federal Reserve Board

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 2015.May 1960.Q1 1962.Q2 1964.Q3 1966.Q4 1969.Q1 1971.Q2 1973.Q3 1975.Q4 1978.Q1 1980.Q2 1982.Q3 1984.Q4 1987.Q1 1989.Q2 1991.Q3 1993.Q4 1996.Q1 1998.Q2 2000.Q3 2002.Q4 2005.Q1 2007.Q2 2009.Q3 2011.Q4 2014.Q1 Consumers without assets lag on low wages 10.00 Real Personal Income Excluding Transfer Receipts (SAAR, Chn.2009$) %Chg YoY 160.0 Consumer Confidence (SA, 1985=100) Consumer Sentiment (NSA, Q1.66=100) 140.0 8.00 120.0 6.00 100.0 4.00 80.0 2.00 60.0 0.00-2.00-4.00 40.0 20.0 0.0-6.00-8.00 Source: BEA Sources: The Conference Board, University of Michigan

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 2015 - Jan 2015 - May 2015 - Sep Employment maintains momentum Chg in Total Nonfarm Employment (SA, '000s) Unemployment Rate (SA, %) 600 400 J.08-D.09: 8.7M jobs cut 12 10 200 0 8-200 6-400 4-600 -800 2010-15: 13.8M jobs added 2-1000 0

With service industries driving employment gains 2010-15: 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 -1000-500 0 500 1000 1500 2000 2500 3000 3500 4000

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 2015 - May 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 2015 - May Tampa MSA employment Payroll Employment YoY Chg (SA, '000) FL Tampa MSA Unemployment Rate (%) U.S. FL Tampa MSA 600 14 400 TPA 2010-15: 1.5M new jobs 12 200 10 8 0 6-200 4-400 2-600

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 2015 - Jan 2015 - May 2015 - Sep Labor force participation returns to 1970s level Labor Force Participation Rate (%) 68 67 66 65 64 63 62 61 60 59 Source: Bureau of Labor Statistics

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.2014 May.2015 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.2014 May.2015 Consumer credit grows as does student debt Commercial Banks Savings Institutions 20.00 Consumer Credit - YoY % Change (EOP, SA, Bil.$) Revolving Nonrevolving 1400.00000 Finance Companies Federal Government Securitized Assets Credit Unions Nonfinancial Businesses 2015: $946B 15.00 1200.00000 10.00 1000.00000 800.00000 2000: $84B 5.00 600.00000 0.00 400.00000-5.00 200.00000-10.00 0.00000-15.00 Source: Federal Source: Federal Reserve Board

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.2014 May.2015 Jan.2016 2000.Q1 2000.Q4 2001.Q3 2002.Q2 2003.Q1 2003.Q4 2004.Q3 2005.Q2 2006.Q1 2006.Q4 2007.Q3 2008.Q2 2009.Q1 2009.Q4 2010.Q3 2011.Q2 2012.Q1 2012.Q4 2013.Q3 2014.Q2 2015.Q1 2015.Q4 Consumer spending concentrated on durable goods Personal Consumption (SAAR, Chn.2009$) % Chg Annual Rate Total Light Truck Retail Sales [Imported+Domestic] (SAAR, Mil. Units) Total Car Retail Sales [Imported+Domestic] (SAAR, Mil. Units) 50.00 Durable goods Nondurable goods Services 25.0000 Total Light Vehicle Retail Sales [Imported+Domestic] (SAAR, Mil. Units) 40.00 20.0000 30.00 20.00 15.0000 10.00 10.0000 0.00-10.00 5.0000-20.00 0.0000-30.00-40.00 Source: BEA Source: Autodata

Business investments lose momentum 25.00 Real Business Spending (SAAR, Chn2009$) % Chg Annual Rate 20.00 15.00 10.00 5.00 0.00-5.00-10.00-15.00-20.00-25.00-30.00 Source: BEA

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 2015.May 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 2015.May 2016.Jan As activity throttles back Manufacturers' Activity (EOP, SA, Mil.$) ISM Index (SA, 50+ Increasing) Shipments New orders Inventories ISM Manufacturing ISM Nonmanufacturing 700000 65.0 650000 60.0 600000 550000 500000 450000 400000 350000 55.0 50.0 45.0 40.0 35.0 300000 30.0 Source: Census Bureau Source: Institute for

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 2015.May 2016.Jan 2000.Q1 2000.Q4 2001.Q3 2002.Q2 2003.Q1 2003.Q4 2004.Q3 2005.Q2 2006.Q1 2006.Q4 2007.Q3 2008.Q2 2009.Q1 2009.Q4 2010.Q3 2011.Q2 2012.Q1 2012.Q4 2013.Q3 2014.Q2 2015.Q1 2015.Q4 And net exports feel the squeeze of a strong dollar 1.7000 Exchange Rate: US$/Euro (EOP) International Trade (SAAR, Bil.Chn.2009$) Real Exports Real Imports 1.6000 1.5000 1.4000 1.3000 1.2000 1.1000 1.0000 0.9000 0.8000 2800.0 2600.0 2400.0 2200.0 2000.0 1800.0 1600.0 1400.0 1200.0 1000.0 source: Federal Source: BEA

2000.Q1 2000.Q4 2001.Q3 2002.Q2 2003.Q1 2003.Q4 2004.Q3 2005.Q2 2006.Q1 2006.Q4 2007.Q3 2008.Q2 2009.Q1 2009.Q4 2010.Q3 2011.Q2 2012.Q1 2012.Q4 2013.Q3 2014.Q2 2015.Q1 2000.Q1 2000.Q4 2001.Q3 2002.Q2 2003.Q1 2003.Q4 2004.Q3 2005.Q2 2006.Q1 2006.Q4 2007.Q3 2008.Q2 2009.Q1 2009.Q4 2010.Q3 2011.Q2 2012.Q1 2012.Q4 2013.Q3 2014.Q2 2015.Q1 Corporate balance sheets remain healthy 2000.0 Real Corporate Profits After Tax (SAAR, Bil.Chn.2009$) 2500 Corporate Cash/Cash Equivalent Holdings (NSA, Bil.$) 1800.0 1600.0 2000 1400.0 1200.0 1500 1000.0 800.0 1000 600.0 400.0 500 200.0 2015.Q3: $1.67 Trillion 2015.Q3 = $2.00 Trillion 0.0 0 Source: BEA Source: Federal

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 2015.Jan 2015.May 2015.Sep Inflation remains contained Overall CPI Core CPI (1982-84=100, %Chg YoY) 6.0 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0-3.0 Source: BLS

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 2015.May 2016.Jan 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 2015.May 2016.Jan Aided by dropping oil/gas prices 160.00 140.00 120.00 100.00 80.00 60.00 Brent Nominal (EU Mkt Price, $/Barrel) Cushing West Texas Intermediate (Spot FOB, EOP, $/Barrel) Jan 2016: $32 16.00 14.00 12.00 10.00 8.00 6.00 Natural Gas Price (Henry Hub, LA, $/mmbtu) 40.00 20.00 Jan 2016: $34 4.00 2.00 0.00 0.00 Source: EIA Source: Wall Street

Rents and Owners Equivalent Rent components of CPI rising at over 3.0% 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 2015.Jan 2015.May 2015.Sep 5.0 CPI-U Commodities ex F&E CPI-U Services ex Energy (1982-84=100, % Chg YoY) 4.0 3.0 2.0 1.0 0.0-1.0-2.0-3.0 Source: BLS

Economic outlook moderately positive JANUARY 2016 2013 2014 2015 2016 Annual Growth Rate, % Real GDP 2.2 2.4 2.4 2.8 Nonfarm Payroll Employment 1.7 1.9 2.1 1.3 Consumer Prices 1.5 1.6 0.2 2.5 Level Consumer Confidence 73 87 98 96 Percent Unemployment 7.4 6.2 5.3 4.9 Fed Funds Rate 0.1 0.1 0.1 0.9 3-Month T-bill Rate 0.1 0.1 0.1 0.9 Corporate Aaa Bond Yield 4.3 4.2 3.9 4.4 10-Year Gov t Bond 2.6 2.5 2.1 2.6 30-Year Gov t Bond 3.4 3.3 2.8 3.5 Source: National Association of REALTORS

Commercial Real Estate Markets

% Change, Quarter-over-quarter Percent Change, Quarterly 2009.Q2 2009.Q3 2009.Q4 2010.Q1 2010.Q2 2010.Q3 2010.Q4 2011.Q1 2011.Q2 2011.Q3 2011.Q4 2012.Q1 2012.Q2 2012.Q3 2012.Q4 2013.Q1 2013.Q2 2013.Q3 2013.Q4 2014.Q1 2014.Q2 2014.Q3 2014.Q4 2015.Q1 2015.Q2 2015.Q3 2015.Q4 CRE fundamentals in line with economy 10% New Construction Leasing Volume REALTOR Commercial Leasing Trends Leasing Volume Leasing Rates Lease Concessions 5% 20% 0% 15% -5% 10% -10% 5% -15% 0% -20% -5% -25% -10% -30% Source: National Association of Realtors -15% Source: National Association of Realtors

As rising demand leads to lower vacancies 30.0% REALTORS Commercial Vacancy Rates Office Industrial Retail Multifamily Hotel 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Source: National Association of Realtors

CRE investment sales close 2015 at $504 B billions $600 Individual Portfolio Entity CPPI* 240 $500 $400 180 $300 120 $200 $100 60 $0 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Source: Real Capital Analytics, Moody's/RCA CPPI 0

Tampa CRE sales up 25% YoY in 2015 Tampa Raleigh/Durham Palm Beach Orlando Nashville Miami Memphis Jacksonville Charlotte Broward Atlanta CRE Sales Volume: Southeast 2015 ($M) 5,685.3 Tampa Sales by Property: 2015 ($M) 109.0 684.5 2,468.0 915.9 509.2 998.7 Dev Site Hotel Apartment Retail Industrial Office Source: Real Capital Analytics

Capital in search of yield drives prices 10.0% Capitalization Rates 300 Commercial Property Price Index CBD-Office 9.0% 250 Apartment 8.0% Hotel 200 Retail 7.0% 6.0% Sub-Office Industrial Retail Apartment 150 100 Industrial Hotel Sub-Office 5.0% '09 '10 '11 '12 '13 '14 '15 CBD-Office 50 '09 '10 '11 '12 '13 '14 '15 Source: Real Capital Analytics, Moody's/RCA CPPI

2008.Q4 2009.Q2 2009.Q4 2010.Q2 2010.Q4 2011.Q2 2011.Q4 2012.Q2 2012.Q4 2013.Q2 2013.Q4 2014.Q2 2014.Q4 2015.Q2 2015.Q4 2008.Q4 2009.Q2 2009.Q4 2010.Q2 2010.Q4 2011.Q2 2011.Q4 2012.Q2 2012.Q4 2013.Q2 2013.Q4 2014.Q2 2014.Q4 2015.Q2 2015.Q4 CRE remains a tale of two markets 200% Sales Volume (YoY % Chg) Real Capital Analytics CRE Markets REALTOR CRE Markets 20.0% Sales Prices (YoY % Chg) Real Capital Analytics CRE Markets REALTOR CRE Markets 150% 10.0% 100% 0.0% 50% -10.0% 0% -20.0% -50% -30.0% -100% -40.0% Sources: NAR, Real Capital Analytics

10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 Smaller markets offer yield premium RCA Markets Cap Rates - 2015.Q4 REALTOR Markets CRE Spreads: Cap Rates to 10-Yr. T-Notes (bps) RCA Cap Rates REALTORS Cap Rates 9.0% 8.0% 7.0% 1200 1000 6.0% 5.0% 4.0% 3.0% 800 600 400 2.0% 200 1.0% 0.0% Office Industrial Retail Apartment Hotel 0 Sources: NAR, Real Capital Analytics

Capital markets flush with liquidity at high end Commercial Real Estate Debt: $3.54 Trillion Commercial Real Estate Equity: $2.64 Trillion

Lending conditions improve Change in Lending Conditions over Past Year Average Loan-to-Value for CRE Transactions 100% 100% 90% 90% 80% 70% 60% 50% Eased Significantly Eased Somewhat Not Changed 80% 70% 60% 50% Other 100% Cash 50% 55% 60% 65% 40% 30% 20% Tightened Somewhat Tightened Significantly 40% 30% 20% 70% 75% 80% 85% 10% 10% 90% 0% 2011 2012 2013 2014 2015 0% 2011 2012 2013 2014 2015

But capital landscape remains bifurcated REALTORS - CRE Financing Real Capital Analytics CRE Financing 100% 90% Small Business Administration REITs 100% 90% 80% 70% 60% 50% 40% Regional Banks Public Cos. Private Investors Other National Banks Local/Comm. Banks 80% 70% 60% 50% 40% Pvt/Other Reg'l/Local Bank Nat'l Bank Int'l Bank Insurance Gov't Agency 30% 20% 10% 0% 2011 2012 2013 2014 2015 Life Insurance Cos. International banks Credit Unions CMBS 30% 20% 10% 0% 2011 2012 2013 2014 2015 Financial CMBS

Commercial real estate outlook Commercial Real Estate Vacancy Forecast (%) 2015.Q2 2015.Q3 2015.Q4 2016.Q1 2016.Q2 2016.Q3 2016.Q4 2017.Q1 2014 2015 2016 Office 15.9 16.0 15.6 15.2 14.9 14.8 14.8 14.6 16.0 15.6 14.9 Industrial 10.8 11.5 11.1 10.9 10.5 10.1 9.7 9.5 12.0 11.2 10.3 Retail 13.2 13.0 12.6 12.2 11.8 11.6 11.3 11.0 13.8 13.1 11.7 Multifamily 6.6 7.4 6.1 7.0 6.9 7.1 7.3 8.3 6.6 7.1 7.1 Source: National Association of REALTORS NAR Commercial Property Price Forecast 2008 2009 2010 2011 2012 2013 2014 2015 2016 NCREIF 215.2 165.1 168.2 186.5 195.2 211.9 224.9 249.6 245.3 Green St. Advisors 86.1 63.5 74.4 87.1 92.2 99.4 106.7 118.0 116.0 Sources: NAR, NCREIF, Green Street Advisors, Real Capital Analytics

www.realtor.org/reports/expectations-and-market-realities-in-real-estate In-depth analyses: Economy Capital markets Property markets Office Industrial Retail Apartment Hotel Outlook scenarios

/ research-and-statistics GEORGE RATIU @GeorgeRatiu Director, Quantitative & Commercial Research National Association of REALTORS