Post on 31-Jan-2020
transcript
Commercial Real Estate Outlook
Paul FiorillaAssociate Director of ResearchPaul.Fiorilla@Yardi.com, 1-800-866-1124 x5764
U.S. Retail Sector DynamicsAs of Q1 2018
Source: Reis, Cushman & Wakefield Research
• While many retail categories are in contraction mode and some iconic retailers are facing major challenges, not all categories are shrinking.
• Dollar stores, discounters, off-price apparel concepts are aggressively growing. Food related retail also remains in expansion mode, but growth is slowing.
• These trends have equated to tepid demand and an extremely bifurcated marketplace where Class A projects are accounting for nearly all of the nation’s occupancy growth.
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U.S. Industrial Sector DynamicsAs of Q1 2018
Source: Cushman & Wakefield Research
• We expect the record-setting industrial run to continue, with net absorption tallying over 400 msf for the next two years.
• Despite an active development pipeline, which is expected to peak in 2018, vacancy rates are not expected to rise by much.
• Developers will continue exercising caution, with deliveries modestly outpacing demand, thus allowing vacancy rates to hover in the 5% range through 2020.
• Growth in asking rents is expected to soften but rents will continue to rise.
Net Absorption, msf Vacancy Rate
New Completions, msf Asking Rents
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Robust demand continues
Vacancy to inch up but remains tight
Supply finally keeping pace
Slower rent growth
Office Using Employment
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155
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
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U.S. Employment, Total and Office-Using
Office-Using Jobs (r) Total Jobs (l)
-5%
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-1%
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2%
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4%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Job Growth YOY Change
Office-Using Jobs Total Jobs
National Office Supply Pipeline
*National supply is the total of 114 Matrix office marketsSource: Yardi®Matrix
0.0%
0.5%
1.0%
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140
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019(F)
% o
f St
ock
Squ
are
Feet
(in
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ion
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Square Feet Completed % of Stock
Top 15 Markets 2017-2018 Completions (Mil SF)
*Top supply markets are out of 114 Matrix office marketsSource: Yardi®Matrix
Market2017 Inventory
(Millions of Sq. Ft.)2017-2018 Completions
(Millions of Sq. Ft.)New Supply as a% of 2017 Stock
Bay Area 191.8 14.4 7.5%
Dallas - Fort Worth 261.3 13.3 5.1%
San Francisco 161.5 9.0 5.5%
Washington, D.C. 364.1 8.8 2.4%
Manhattan 482.8 8.5 1.8%
Los Angeles 303.2 7.0 2.3%
Chicago 291.7 6.9 2.4%
Denver 137.3 6.4 4.6%
Philadelphia 172.3 6.3 3.7%
Seattle 125.1 6.1 4.9%
Atlanta 177.4 5.7 3.2%
Boston 211.2 5.5 2.6%
Houston 230.1 5.1 2.2%
Austin 62.0 4.9 8.0%
Phoenix 113.6 4.1 3.6%
Top 15 Markets 2017-2018 New Supply as % of Stock
*Top supply markets are out of 114 Matrix office marketsSource: Yardi®Matrix
Market2017 Inventory
(Millions of Sq. Ft.)2017-2018 Completions
(Millions of Sq. Ft.)New Supply as a% of 2017 Stock
Brooklyn 30.2 4.1 13.7%
Austin 62.0 4.9 8.0%
Nashville 44.1 3.3 7.6%
Bay Area 191.8 14.4 7.5%
Memphis 26.7 1.9 7.0%
Miami 57.8 3.7 6.4%
Charlotte 61.2 3.8 6.2%
Raleigh - Durham 54.6 3.1 5.7%
San Francisco 161.5 9.0 5.5%
Milwaukee 47.3 2.5 5.4%
Dallas - Fort Worth 261.3 13.3 5.1%
North Central Florida 7.4 0.4 5.1%
Seattle 125.1 6.1 4.9%
Denver 137.3 6.4 4.6%
Corpus Christi 6.2 0.3 4.5%
Office Asking Rates and Vacancy by Metro
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Average Vacancy Rate
Source: Yardi®Matrix
Coworking Space by Market
0.0%
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% C
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Squ
are
Foo
tage
(in
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Total Office Space vs. Percent Coworking
Total Office Space % Coworking
Market Total # of Tenants Square Feet
Manhattan 245 7,650,722
Los Angeles 158 3,702,972Dallas-Fort Worth 88 1,565,144
Atlanta 76 1,519,969
Bay Area 48 1,485,882San Francisco 50 1,416,292
Miami 59 1,379,098Houston 71 1,295,804Denver 67 1,164,063Orange County 55 1,032,568Seattle 40 1,004,705
Phoenix 42 789,644San Diego 41 749,735Austin 20 395,500West Palm Beach 25 376,975Sacramento 12 375,587
Portland 19 340,000Fort Lauderdale 22 305,927San Antonio 18 194,375Inland Empire 10 123,458
Source: Yardi®Matrix, as of January 2018
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Med
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Tho
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Median Single Family Home Price
New Homes (1-Yr Rolling Avg)
Existing Homes (1-Yr Rolling Avg)
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Mill
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Housing Completions vs. Household Formations
Multi-Family Completions
Single-Family Completions
Household Formations (4-Yr Rolling Avg)
Apt. Construction Just Catching Up to HH Formation; Builders Focusing on Higher Priced Homes
Source: Moody’s Analytics; National Association of Realtors (NAR); U.S. Census Bureau (BOC)
+29%
+7%
Multifamily Rent and Occupancy Leveling Off
93.5%
94.0%
94.5%
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Occupancy
Renter-by-Necessity Overall Lifestyle
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Year-Over-Year Rent Growth
Renter-by-Necessity Overall Lifestyle
Source: Yardi®Matrix
New Multifamily Supply Robust, Held Back by Labor Shortage
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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Un
its
Source: Yardi®Matrix
Apt. Supply and Demand by Metro (2 Years)
Source: Yardi®Matrix
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Un
its
Excess Supply (Units) Excess Supply (%)
Secondary Tech Cities at Risk of Oversupply in the Next Two Years (Margin of Error +/- 1.0%)
*Demand is a function of renter households growth and apartments as a % of the rental marketSource: Moody’s Analytics; U.S. Bureau of Labor Statistics (BLS); Yardi®Matrix
Market
CurrentInventory
(000’s units)
2-YearSupply Growth
2-YearDemandGrowth
Net %
Excess Units
Denver 252 9.7% 4.5% (5.2%) 13,692
Seattle 231 9.0% 4.4% (4.6%) 11,192
Charlotte 163 7.0% 2.7% (4.3%) 7,190
Dallas 709 5.4% 2.2% (3.3%) 23,953
Phoenix 295 4.5% 1.9% (2.6%) 7,876
Miami 275 8.3% 5.7% (2.5%) 7,756
Kansas City 149 4.3% 2.3% (2.1%) 3,286
Atlanta 424 3.6% 1.6% (2.0%) 8,736
Pittsburgh 89 2.5% 0.8% (1.7%) 1,531
Boston 214 6.1% 4.5% (1.6%) 3,805
Portland 147 4.8% 3.4% (1.4%) 2,306
Washington DC 510 4.5% 3.3% (1.1%) 6,727
Twin Cities 199 3.3% 2.3% (1.0%) 2,095
Orlando 204 4.2% 3.3% (1.0%) 2,253
San Antonio 189 3.1% 2.3% (0.8%) 1,816
Market
Current Inventory
(000’s units)
2-YearSupply Growth
2-YearDemandGrowth
Net %
Excess Units
St Louis 120 2.5% 1.8% (0.7%) 978
Baltimore 217 1.9% 1.4% (0.4%) 1,114
Philadelphia 288 2.3% 2.0% (0.3%) 1,006
Tampa 206 3.2% 3.4% 0.2% 10
Cincinnati 108 1.6% 1.9% 0.2% (157)
San Francisco 248 5.7% 6.1% 0.4% (274)
Detroit 208 0.9% 1.3% 0.4% (752)
Las Vegas 169 1.8% 2.3% 0.5% (661)
Chicago 333 3.9% 4.6% 0.7% (1,328)
San Diego 181 3.2% 4.2% 1.0% (1,516)
New York 1,000 4.3% 5.4% 1.1% (10,384)
Sacramento 128 1.3% 2.6% 1.3% (1,486)
Houston* 629 1.0% 2.6% 1.6% (8,974)
Inland Empire 150 1.5% 3.8% 2.3% (3,281)
Los Angeles 410 5.7% 9.2% 3.5% (13,047)
Apt. Supply and Demand by Metro (5 Years)
Source: Yardi®Matrix
-8%
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(30,000)
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Un
its
Excess Units Excess Supply (%)
Risk of Oversupply Slightly Less Concerning Over 5 Years
*Demand is a function of renter households growth and apartments as a % of the rental marketSource: Moody’s Analytics; U.S. Bureau of Labor Statistics (BLS); Yardi®Matrix
Market
Current Inventory
(000’s units)
5-YearSupply Growth
5-YearDemandGrowth
Net %
Excess Units
Seattle 231 14.3% 10.0% (4.3%) 11,017
Charlotte 163 9.4% 6.4% (2.9%) 5,326
Dallas 709 6.6% 4.5% (2.2%) 17,247
St Louis 120 6.6% 4.6% (2.0%) 2,711
Phoenix 295 5.4% 3.9% (1.5%) 4,907
Miami 275 14.3% 13.0% (1.3%) 5,228
Twin Cities 199 6.9% 5.8% (1.1%) 2,533
Washington DC 510 8.6% 7.6% (1.0%) 6,860
Pittsburgh 89 3.0% 2.2% (0.8%) 815
Boston 214 11.6% 10.8% (0.7%) 2,409
Denver 252 10.9% 10.3% (0.6%) 2,912
Cincinnati 108 4.4% 3.9% (0.5%) 778
Philadelphia 288 5.2% 4.7% (0.5%) 2,047
Kansas City 149 5.9% 5.4% (0.5%) 1,108
Atlanta 424 4.1% 3.9% (0.2%) 1,887
Market
Current Inventory
(000’s units)
5-YearSupply Growth
5-YearDemandGrowth
Net %
Excess Units
San Francisco 248 14.0% 14.2% 0.2% 1,053
San Antonio 189 4.8% 5.1% 0.3% 197
Portland 147 6.8% 7.3% 0.5% (187)
Baltimore 217 2.7% 3.4% 0.7% (997)
Orlando 204 6.2% 7.4% 1.2% (1,860)
Detroit 208 1.3% 3.5% 2.2% (4,234)
Sacramento 128 3.8% 6.2% 2.3% (2,679)
Tampa 206 5.2% 7.6% 2.4% (4,131)
Las Vegas 169 2.9% 5.3% 2.4% (3,569)
New York 1,000 9.9% 13.1% 3.2% (30,173)
Chicago 333 7.8% 11.5% 3.7% (10,166)
Houston 629 1.6% 5.8% 4.1% (23,739)
San Diego 181 4.3% 9.9% 5.7% (9,586)
Inland Empire 150 2.1% 9.1% 6.9% (9,874)
Los Angeles 410 14.5% 21.9% 7.4% (27,171)
*Markets with severe shortages will elicit a greater supply response
YOY Change Commercial Bank Mortgage Holdings
Source: Yardi®Matrix, BankRegData
-4%
-2%
0%
2%
4%
6%
8%
10%
-$40
-$20
$0
$20
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$80
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$140
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Total YOY Change % YOY Change
Commercial Mortgage Holdings by Bank Size (Bil)
Source: BankRegData, Yardi®Matrix
$296.92 $227.49 $229.93
$306.78
$175.07 $212.81
$471.24
$315.88 $251.05
$720.10
$588.31
$484.29
$-
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2017201620152014201320122011201020092008200720062005
$Trillion+ $100B-$1T $10B-$100B Under $10B
37.4% Growth Since 2012
75.2% - $100-$999B49.2% - $10-$99B30.5% - $1 Trillion+22.4% - Under $10B
CRE Loans as a % of Bank Assets, by Bank Size
Source: BankReg Data, Yardi®Matrix
4.1%
3.6%2.9%
6.4%6.4%6.1%
18.2%
12.2%
9.6%
25.3%
21.5%19.3%
0%
5%
10%
15%
20%
25%
30%
2017201620152014201320122011201020092008200720062005
$Trillion+ $100B-$1T $10B-$100B Under $10B
Bank Commercial Mortgages as a % of GDP
Source: BankRegData, Yardi®Matrix
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
20172016201520142013201220112010200920082007
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