Economic Overview - Delta Associates · 2018-02-02 · Top Destination Markets | First Half 2017...

Economic Overview

GET OFF OF MY CLOUD

IPSOS GLOBAL CONFIDENCE INDEXDecember 2017

Source: IPSOS, Sage Policy Group; February 2018.

94

95

96

97

98

99

100

101

102

103

104

Nov

-00

May

-01

Nov

-01

May

-02

Nov

-02

May

-03

Nov

-03

May

-04

Nov

-04

May

-05

Nov

-05

May

-06

Nov

-06

May

-07

Nov

-07

May

-08

Nov

-08

May

-09

Nov

-09

May

-10

Nov

-10

May

-11

Nov

-11

May

-12

Nov

-12

May

-13

Nov

-13

May

-14

Nov

-14

May

-15

Nov

-15

May

-16

Nov

-16

May

-17

Nov

-17

OECD - Total Euro area (19 countries) United States China

The business confidence index (BCI) is based on enterprises’ assessment of production, orders and stocks, as well as its current position and expectations for the immediate future. Opinions compared to a “normal” state are collected and the difference between positive and negative answers provides a qualitative index on economic conditions.

OECD BUSINESS CONFIDENCE INDEXSelect Regions / Countries

Source: OECD, Sage Policy Group; February 2018.

2018 Proj. Global Output Growth: +3.9%

2017 Growth (Estimate)

World: 3.7% Euro Area: 2.4%

United States: 2.3% Japan: 1.8%

ESTIMATED GROWTH IN OUTPUT Select Global Areas | 2018 Projected

Source: International Monetary Fund: World Economic Outlook Update January 2018, Sage Policy Group; February 2018.

A N N U A L % C H A N G E

1.9%2.3%

1.9%3.6%

7.4%6.6%

6.5%1.7%

4.0%3.3%

4.9%2.7%

2.3%2.9%

1.2%1.4%1.5%

1.9%2.3%2.4%

2.2%2.3%

0% 2% 4% 6% 8% 10%

BrazilMexico

Latin America & the CaribbeanMiddle East, North Africa, Afghanistan, & Pakistan

IndiaChina

Emerging & Developing AsiaRussia

Emerging & Developing EuropeSub-Saharan Africa

Emerging Market & Developing EconomiesUnited States

CanadaAustralia

JapanItaly

United KingdomFrance

GermanySpain

Euro AreaAdvanced Economies

0

20

40

60

80

100

120

140

2005

Feb-

08Ju

n-08

Oct

-08

Feb-

09Ju

n-09

Oct

-09

Feb-

10Ju

n-10

Oct

-10

Feb-

11Ju

n-11

Oct

-11

Feb-

12Ju

n-12

Oct

-12

Feb-

13Ju

n-13

Oct

-13

Feb-

14Ju

n-14

Oct

-14

Feb-

15Ju

n-15

Oct

-15

Feb-

16Ju

n-16

Oct

-16

Feb-

17Ju

n-17

Oct

-17

January 2018 = 125.4

CONSUMER CONFIDENCE INDEXUnited States

Source: Conference Board, Sage Policy Group; February 2018. Note: 1985 = 100.

December 2017 = 104.9

80

85

90

95

100

105

110

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

NFIB INDEX OF SMALL BUSINESS OPTIMISMUnited States

Source: National Federation of Independent Business, Sage Policy Group; February 2018. Note: Data is seasonally adjusted 1986 = 100.

$0

$400

$800

$1,200

$1,600

$2,00019

5019

5219

5419

5619

5819

6019

6219

6419

6619

6819

7019

7219

7419

7619

7819

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

0020

0220

0420

0620

0820

1020

1220

1420

16

Q3 2017 = $1.74 Trillion

PAINT IT BLACK – CORPORATE PROFITSUnited States

Source: Bureau of Economic Analysis, Sage Policy Group; February 2018. Note: After tax with IVA and CCAdj .

IN B

ILL

ION

S

November 2017 = 5.88

2

3

4

5

6

7

Nov

-01

May

-02

Nov

-02

May

-03

Nov

-03

May

-04

Nov

-04

May

-05

Nov

-05

May

-06

Nov

-06

May

-07

Nov

-07

May

-08

Nov

-08

May

-09

Nov

-09

May

-10

Nov

-10

May

-11

Nov

-11

May

-12

Nov

-12

May

-13

Nov

-13

May

-14

Nov

-14

May

-15

Nov

-15

May

-16

Nov

-16

May

-17

Nov

-17

JOB OPENINGSUnited States

Source: Bureau of Labor Statistics, Sage Policy Group; February 2018.

IN M

ILL

ION

S

-40

42

59

74

109

134

196

210

306

438

527

-100 0 100 200 300 400 500 600

Information

Government

Mining and Logging

Trade, Transportation, and Utilities

Other Services

Financial Activities

Manufacturing

Construction

Leisure and Hospitality

Education and Health Services

Professional and Business Services

2,055K jobs gained

BEASTS OF BURDEN – NONFARM EMPLOYMENTUnited States | December 2016 vs. December 2017

Source: Bureau of Labor Statistics, Sage Policy Group; February 2018. Note: Data is seasonally adjusted.

I N T H O U S A N D S

0.6%

1.7%

3.8%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

BaltimoreChicago

New YorkPhiladelphia

St. LouisLos Angeles

HoustonSan Diego

DetroitSan Francisco

WashingtonCharlotte

PhoenixAtlantaBostonDenverTampa

Minneapolis-St. PaulMiami

Dallas-Fort WorthPortland

Seattle-BellevueSan Antonio

Riverside-San BernardinoOrlando

EMPLOYMENT GROWTH - PERCENT CHANGE25 Largest Metros | December 2016 vs. December 2017

Source: Bureau of Labor Statistics – CES Survey, Sage Policy Group; February 2018. Note: Data is not seasonally adjusted.

2.4%

3.6%

4.1%

4.7%

2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%

Minneapolis-St. PaulSan Francisco

DenverBoston

San AntonioDallas-Fort Worth

San DiegoSt. LouisOrlandoPortland

TampaWashington

DetroitPhoenix

Los AngelesBaltimore

MiamiRiverside-San Bernardino

Seattle-BellevueAtlanta

CharlotteHouston

New YorkPhiladelphia

Chicago

Source: Bureau of Labor Statistics, Sage Policy Group; February 2018. Note: Data is not seasonally adjusted and area boundaries do not reflect official OMB definitions.

UNEMPLOYMENT RATES25 Largest Metros | November 2017

United States = 4.1%

GIMME SHELTER

MEGATREND ONE

The Revenge of Homeownership

3.62%

4.15%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Jan-

95Ju

l-95

Jan-

96Ju

l-96

Jan-

97Ju

l-97

Jan-

98Ju

l-98

Jan-

99Ju

l-99

Jan-

00Ju

l-00

Jan-

01Ju

l-01

Jan-

02Ju

l-02

Jan-

03Ju

l-03

Jan-

04Ju

l-04

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08Ju

l-08

Jan-

09Ju

l-09

Jan-

10Ju

l-10

Jan-

11Ju

l-11

Jan-

12Ju

l-12

Jan-

13Ju

l-13

Jan-

14Ju

l-14

Jan-

15Ju

l-15

Jan-

16Ju

l-16

Jan-

17Ju

l-17

Jan-

18*

15-Year

30-Year

Source: Freddie Mac, Sage Policy Group; February 2018. *Week ending 1/25/2018.

15-YEAR AND 30-YEAR FIXED MORTGAGE RATES United States

• From 2006-2016 the number of households headed by owners remained relatively flat.

• At the same time, the number of households renting their home increased significantly (+26.5%).

• The share of renter households also increased—from 31.2% of households in 2006 to 36.6% in 2016.

HOUSEHOLDS: OWNER VS. RENTER OCCUPIEDUnited States

Source: Census Bureau; Pew Research Center, Sage Policy Group; February 2018.

36.2

75.4 75.0

21.3

34.2

43.3

0

10

20

30

40

50

60

70

80

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

Owner Occupied

Renter Occupied

NU

MB

ER

OF

HO

US

EH

OL

D H

EA

DS

IN

MIL

LIO

NS

Q4 2017 = 64.2%

58%

60%

62%

64%

66%

68%

70%

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source: Census Bureau, Sage Policy Group; February 2018. Note: Data is not seasonally adjusted.

HOMEOWNERSHIPUnited States

Source: Census Bureau, Sage Policy Group; February 2018.

PRIVATE NEW MULTIFAMILY CONSTRUCTIONUnited States

IN B

ILL

ION

S

Note: Data is seasonally adjusted annual rate.

November 2017 = $60.5

$0

$10

$20

$30

$40

$50

$60

$7019

93

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

December 2017 = 836

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000N

ov-9

9M

ay-0

0N

ov-0

0M

ay-0

1N

ov-0

1M

ay-0

2N

ov-0

2M

ay-0

3N

ov-0

3M

ay-0

4N

ov-0

4M

ay-0

5N

ov-0

5M

ay-0

6N

ov-0

6M

ay-0

7N

ov-0

7M

ay-0

8N

ov-0

8M

ay-0

9N

ov-0

9M

ay-1

0N

ov-1

0M

ay-1

1N

ov-1

1M

ay-1

2N

ov-1

2M

ay-1

3N

ov-1

3M

ay-1

4N

ov-1

4M

ay-1

5N

ov-1

5M

ay-1

6N

ov-1

6M

ay-1

7N

ov-1

7

SINGLE-FAMILY HOUSING STARTSUnited States


IN T

HO

US

AN

DS

Note: Data is seasonally adjusted annual rate.

3.3% 3.6%4.1%

5.2%5.7%

6.3% 6.4%6.9% 7.0% 7.0% 7.0%

9.1%

10.6%

0%

2%

4%

6%

8%

10%

12%

S&P/CASE-SHILLER HOME PRICE INDICES Select Metro Areas | 12-Month Ending November 2017

Source: Standard & Poor’s, Sage Policy Group; February 2018.

PE

RC

EN

T C

HA

NG

E

-18.4%-14.9%-14.2%

-8.4%-8.3%

-5.6%2.4%

7.1%7.2%7.7%

26.5%29.1%29.6%

33.9%45.2%

58.9%

-30% -20% -10% 0% 10% 20% 30% 40% 50% 60%

Water SupplySewage and Waste Disposal

ManufacturingReligious

Public SafetyConservation and Development

Highway and StreetPower

TransportationHealth CareEducational

Amusement and RecreationCommercial

CommunicationOffice

Lodging

Total Nonresidential Construction:

+$81.5 Billion; +12.8%


NONRESIDENTIAL CONSTRUCTION SPENDINGUnited States | November 2014 vs. November 2017

T H R E E - Y E A R P E R C E N T C H A N G E

$0

$10

$20

$30

$40

$50

$60

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Foreign investment increased 85.1% in 2015

Cross-border investment remained elevated in 2016: Although down relative to a record 2015, offshore investment levels still exceeded the pre-2015 high in 2007.

Source: Jones Lang LaSalle, Real Capital Analytics, Sage Policy Group; February 2018. Note: Among transactions larger than $5.0 million.

COMMERCIAL/MULTIFAMILY OFFSHORE INVESTMENT Sales Volume Reaches New Heights in 2015/2016

IN B

ILL

ION

S O

F U

.S.

DO

LL

AR

S

2.2%

2.3%

2.6%

3.0%

3.4%

4.2%

6.9%

7.6%

9.7%

17.4%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Austin

Houston

Seattle-Bellevue

Dallas-Ft. Worth

Chicago

San Francisco

Los Angeles

Boston

Washington

New York

FOREIGN INVESTMENT IN U.S. CRETop Destination Markets | First Half 2017

Source: Jones Lang LaSalle, Real Capital Analytics, Sage Policy Group; February 2018. Note: Among transactions larger than $5.0 million, includes portfolio, entity-level transactions.

I N V E S T M E N T A S P E R C E N T A G E O F T O T A L

MEGATREND TWO

Capitalization Rates: Red Flag or New Normal?

December 2017 = 126.0

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

Dec-

97M

ay-9

8O

ct-9

8M

ar-9

9Au

g-99

Jan-

00Ju

n-00

Nov

-00

Apr-

01Se

p-01

Feb-

02Ju

l-02

Dec-

02M

ay-0

3O

ct-0

3M

ar-0

4Au

g-04

Jan-

05Ju

n-05

Nov

-05

Apr-

06Se

p-06

Feb-

07Ju

l-07

Dec-

07M

ay-0

8O

ct-0

8M

ar-0

9Au

g-09

Jan-

10Ju

n-10

Nov

-10

Apr-

11Se

p-11

Feb-

12Ju

l-12

Dec-

12M

ay-1

3O

ct-1

3M

ar-1

4Au

g-14

Jan-

15Ju

n-15

Nov

-15

Apr-

16Se

p-16

Feb-

17Ju

l-17

Dec-

17

COMMERCIAL PROPERTY PRICE INDEXUnited States

Source: Green Street Advisors, Sage Policy Group; February 2018. Note: Indexed to 100 in August 2007.

MONETARY POLICY TIGHTENING/EASINGGlobal | December 2017

Source: Council on Foreign Relations, Global Monetary Policy Tracker, Sage Policy Group; February 2018.

6.45% 6.22%

1.91% 2.24%

4.54%

3.98%

1%

2%

3%

4%

5%

6%

7%

8%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

STNL Cap Rates 10-Year Treasury Rates Spread

STNL* CAP RATES VS. 10-YEAR TREASURY RATESUnited States

Source: Federal Reserve Bank of St. Louis, Calkain Companies, Sage Policy Group; February 2018. *Single Tenant Net-Leased.

2013 2014 2015 2016 2017

19TH

NERVOUS BREAKDOWN

Q4 2017 = 2.6%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%19

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

GROSS DOMESTIC PRODUCTUnited States

Source: Bureau of Economic Analysis, Sage Policy Group; February 2018. Note: 1st (advance) estimate at Q4 2017; data is seasonally adjusted annual rate.

PE

RC

EN

T C

HA

NG

E F

RO

MP

RE

CE

DIN

G P

ER

IOD

December 2017 = 0.6%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%Au

g-07

Dec-

07Ap

r-08

Aug-

08De

c-08

Apr-

09Au

g-09

Dec-

09Ap

r-10

Aug-

10De

c-10

Apr-

11Au

g-11

Dec-

11Ap

r-12

Aug-

12De

c-12

Apr-

13Au

g-13

Dec-

13Ap

r-14

Aug-

14De

c-14

Apr-

15Au

g-15

Dec-

15Ap

r-16

Aug-

16De

c-16

Apr-

17Au

g-17

Dec-

17

Index at December 2017: 107.0 where 2010: 100

LEADING ECONOMIC INDICATORS INDEXUnited States

Source: Conference Board, Sage Policy Group; February 2018.

ON

E-M

ON

TH

PE

RC

EN

T C

HA

NG

E

December 2017 = 2.4%

0%

2%

4%

6%

8%

10%

12%

Dec-

05Ap

r-06

Aug-

06De

c-06

Apr-

07Au

g-07

Dec-

07Ap

r-08

Aug-

08De

c-08

Apr-

09Au

g-09

Dec-

09Ap

r-10

Aug-

10De

c-10

Apr-

11Au

g-11

Dec-

11Ap

r-12

Aug-

12De

c-12

Apr-

13Au

g-13

Dec-

13Ap

r-14

Aug-

14De

c-14

Apr-

15Au

g-15

Dec-

15Ap

r-16

Aug-

16De

c-16

Apr-

17Au

g-17

Dec-

17

SAVING RATE United States

Source: Bureau of Economic Analysis, Sage Policy Group; February 2018. Note: Savings as percentage of personal disposable income.

• According to the International Institute of Finance (IIF), global debt has reached an all-time high in 2016

• At $215 trillion, global debt—including household, government, and corporate—now represents 325% of global GDP

• Last year, the IMF warned of risks to the global economy:• “sheer size of debt could set the stage for an unprecedented

private deleveraging process that could thwart the fragile economic recovery”

Source: Institute of International Finance, Global Debt Monitor, Business Insider, The Telegraph, Reuters, Sage Policy Group; February 2018.

GLOBAL DEBT REACHES ALL-TIME HIGHS

December 2017 = 32.44

0

10

20

30

40

50

Dec-

80De

c-81

Dec-

82De

c-83

Dec-

84De

c-85

Dec-

86De

c-87

Dec-

88De

c-89

Dec-

90De

c-91

Dec-

92De

c-93

Dec-

94De

c-95

Dec-

96De

c-97

Dec-

98De

c-99

Dec-

00De

c-01

Dec-

02De

c-03

Dec-

04De

c-05

Dec-

06De

c-07

Dec-

08De

c-09

Dec-

10De

c-11

Dec-

12De

c-13

Dec-

14De

c-15

Dec-

16De

c-17

SHILLER PRICE-EARNINGS RATIOUnited States

Source: Robert J. Shiller Data used in his book, "Irrational Exuberance" Princeton University Press, Sage Policy Group; February 2018.

1/28/18 = $11.8K

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

1/1/

14

3/1/

14

5/1/

14

7/1/

14

9/1/

14

11/1

/14

1/1/

15

3/1/

15

5/1/

15

7/1/

15

9/1/

15

11/1

/15

1/1/

16

3/1/

16

5/1/

16

7/1/

16

9/1/

16

11/1

/16

1/1/

17

3/1/

17

5/1/

17

7/1/

17

9/1/

17

11/1

/17

1/1/

18

SHATTERED! – BITCOIN PRICE

Source: CoinMarketCap.com, Sage Policy Group; February 2018.

• U.S. setting up for best year since ’05. . .

• Global economy also picking up momentum, in large measure due to policymaking

• Job opportunities are abundant

• Corporate profitability elevated

• Consumer and business confidence has been surging. . .

• And now tax cuts, including major reductions in corporate taxes . . . What could go wrong?

• A lot can go wrong – that’s always true –first there are the Black Swan threats –cyber, contagion, conflict, Korea, EMP, trade war:

• “I’m forever blowing bubbles, pretty bubbles in the air, they fly so high, nearly reach the sky, and like my dreams, they fade and die”

• Equity markets? U.S. bond market? Commercial real estate? Bitcoin? Where are all the pretty bubbles?

• 2018 will be fine – better than fine – 2019 might be, too, but beyond that, possible deleveraging cycle prompted by a repricing of assets – Bad!!!!

TIME IS ON MY SIDE, AT LEAST IN THE NEAR-TERM

Source: Sage Policy Group; February 2018.

MEGATREND THREE

Elevated Apartment Absorption – Will it Continue?

Source: Delta Associates; February 2018.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2013 2014 2015 2016 2017

Long-term Annual Average Absorption = 7,096

NU

MB

ER

OF

UN

ITS

CLASS A APARTMENT ABSORPTIONWashington Metro Area

District of Columbia Northern Virginia Suburban Maryland

Source: Grosvenor, McCaffery Interests, Insight Property Group; February 2018.

APARTMENT ABSORPTION LEADERSDistrict of Columbia – Capitol Hill/Riverfront/SW & NoMa/H St.

F1RST Residences, 1263 1st Street, SE

The Apollo, 600 H Street, NE

Source: Clark Realty Corp, Kettler; February 2018.

APARTMENT ABSORPTION LEADERSNorthern Virginia – RCB Corridor and Tysons

Ten at Clarendon, 3110 10th Street N

Highgate at the Mile, 7915 Jones Branch Drive

Source: Berman Enterprises, Monument Realty; February 2018.

APARTMENT ABSORPTION LEADERSuburban Maryland – North Prince George’s County

The Remy, 7730 Harkins Road

Monument Village, 9122 Baltimore Avenue

Source: The Bozzuto Group, Delta Associates; February 2018.

CLASS A APARTMENT RENTER TYPESUrban Locations in Washington Metro Area | 2015

MILLENNIALS

GEN X

BABY BOOMER

TRADITIONALIST

60%

2%

13%

25%


AV

ER

AG

E M

ON

TH

S O

CC

UP

IED

CLASS A APARTMENT AVERAGE TENURE BY RENTER TYPEUrban Locations in Washington Metro Area | 2017

0

10

20

30

40

50

60

Millennials Gen X Baby Boomer Traditionalist

% O

F 2

5-

TO

35

-YE

AR

-OL

DS

WH

O

MO

VE

D I

N T

HE

PR

EV

IOU

S Y

EA

RMOBILITY BY GENERATION OF 25 TO 35-YEAR OLDSUnited States

15%

20%

25%

30%

Millennials in 2016 Early Boomers in1981

Traditionalists in1963

Gen X in 2000 Late Boomers in1990

Source: Pew Research Center, American Community Survey, Delta Associates; February 2018.


CLASS A APARTMENT RENTER TYPESUrban Locations in Washington Metro Area

60%25%

13%2%

2015Average Tenant Tenure

= 22.1 Months

Millennials Gen X Baby Boomer Traditionalist

59%27%

12%2%

2017Average Tenant Tenure

= 22.1 Months


APARTMENT MARKET OPPORTUNITIESWashington Metro Area

Co-Living Apartments

Rise in Popularity

Among Millennials

Invest in Cutting-

Edge Technology

Go with Smaller and More

Efficient Unit Designs

Look Beyond Fitness

Facilities and Pools

MEGATREND FOURThe Beginning of the End of Boutique Condominium Development?

AVERAGE UNIT COUNT OF NEW CONDO PROJECTSWashington Metro Area

0

20

40

60

80

100

120

140

160

180

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Note: Includes condo projects actively selling, under construction, and/or pre-marketing. Data is of year-end for each year.


NU

MB

ER

OF

UN

ITS 74

0

10

20

30

40

50

60

70

80

90

100

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

NU

MB

ER

OF

UN

ITS

AVERAGE UNIT COUNT OF NEW CONDO PROJECTSDistrict of Columbia

Source: Delta Associates; February 2018. Note: Includes condo projects actively selling, under construction, and/or pre-marketing. Data is of year-end for each year.

50

SHARE OF CONDOMINIUM SALES ACTIVITYWashington Metro Area

Note: Includes condo projects actively selling, under construction, and/or pre-marketing. Source: Delta Associates; February 2018.

2009

37%

46%

17%

2017

23%

64%

13%

2009

District of Columbia Northern Virginia Suburban Maryland

Source: Monument Realty; February 2018.

NEW CONDOMINIUM PROJECTSDistrict of Columbia

Avidian, 1210 Van Street, SE

624 Eye Street, NW

Source: Meridian Group, Kettler, Renaissance Centro; February 2018.

NEW CONDOMINIUM PROJECTSNorthern Virginia

Verse, The Boro - Tysons

The Arbor, Arbor Row - Tysons

Source: Peterson Cos; February 2018.

NEW CONDOMINIUM PROJECTSSuburban Maryland

The Haven at National Harbor

NEW CONDO SALES VS. APARTMENT ABSORPTION Washington Metro Area

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

New Condo Sales Apartment Absorption



CONDOMINUM MARKET OPPORTUNITIESWashington Metro Area

Build in Supply-

Constrained Submarkets

Condo Project Size Should Not Be Too Large,

Avoiding Longer Sales Programs

Target First-Time Millennial

Homebuyers in Select Submarkets

Create Mixed-Use Buildings to Allow

for High-Rise Condo

Construction

MEGATREND FIVE

Battle of the Fittest – The Office Amenities War

VA

CA

NC

YR

AT

E

18.5%

15.3%

10.3%

6%

8%

10%

12%

14%

16%

18%

20%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

New Construction

Class A - 2nd Generation

Class B

Source: CoStar, Transwestern; February 2018.

OFFICE VACANCY RATEWashington Metro Area

26.8 Million SF


CLASS B/C OFFICE INVENTORY REMOVEDWashington Metro Area | 2010 - 2020

DEMOLISHED TO NEW OFFICE

18%

CONVERTED TO ANOTHER

PROPERTY TYPE

RENOVATED TO CLASS A

OFFICE

28%

54%

Source: Transwestern; February 2018.

OFFICE MARKET OPPORTUNITIESWashington Metro Area

Success will go to assets with unique and above-average amenities and design:

Differentiate Buildings Using

Lobby Space Make Room for Coworking, Lounges, and Spec Suites

Amenitize with Unique, Tenant-

Focused Offerings

Terrell Place, 575 7th Street, NW

80 M Street, SE

OFFICE MARKET OPPORTUNITIESDifferentiate Buildings Using Lobby Space

Source: ESI Design, Slate, Columbia Property Trust; February 2018.

OFFICE MARKET OPPORTUNITIESMake Room for Coworking, Lounges, and Spec Suites

Source: MRP Realty; February 2018.

8614 Westwood Center Drive

OFFICE MARKET OPPORTUNITIESMake Room for Coworking, Lounges, and Spec Suites

Source: Boston Properties, Transwestern; February 2018.

Spec Suite: Metropolitan Square, 655 15th Street, NW3.1 MONTHS OF DOWNTIME

POST CONSTRUCTION

TENANTS PAY A 3% PREMIUM

AVERAGE SPEC SUITE (3,500 SF) ALIGNS WITH TENANTS IN THE

MARKET

Market Square, 701/801 Pennsylvania Avenue, NW

OFFICE MARKET OPPORTUNITIESAmenitize with Unique, Tenant-Focused Offerings

Source: Blackstone Group; February 2018.

MEGATREND SIX

Barriers to Entry = Flex / Industrial Rent Spikes

Source: Federal Reserve Bank of St. Louis, Transwestern; February 2018.

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

E-Commerce Retail Sales

Department Store Sales

IN B

ILL

ION

SRETAIL SALESUnited States

Source: CoStar, Amazon, Transwestern; February 2018.

0

1

2

3

4

5

6

7

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

LE

AS

ED

SF

IN

MIL

LIO

NS

FLEX / INDUSTRIAL LEASED BY AMAZONWashington / Baltimore Region

Source: CoStar, RCA, Transwestern; February 2018.

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

1998 to 2002 2003 to 2007 2008 to 2012 2013 to 2017

Last Mile

Non-Last Mile

AV

ER

AG

E P

RIC

E P

ER

AC

RE

INDUSTRIAL LAND SALES PRICEWashington / Baltimore Region


FLEX / INDUSTRIAL CONVERSIONWashington / Baltimore Region | 2005 to 2020

29.9 Million SF

MULTIFAMILY

OFFICEHOTEL

RETAIL

FLEX/INDUSTRIAL

SELF STORAGE10%

16%

7%

3%

1%

63%


FLEX / INDUSTRIAL MARKET OPPORTUNITIESWashington / Baltimore Region

Select Submarkets with the Best

Supply/Demand Balance

Focus on Fulfillment and Warehouse Space

BUY / HOLD / SELL RECOMMENDATIONSUnited States | 2018

Source: Emerging Trends in Real Estate 2018 Survey, Transwestern; February 2018.

14.2%

24.2%

29.8%

56.8%

64.4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Manufacturing

Flex

R&D

Warehouse

Fulfillment

Buy Hold Sell

S H A R E O F R E S P O N D E N T S


-0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%

Baltimore Metro Area - Non-Last Mile

Baltimore Metro Area - Last Mile

Northern Virginia - Non-Last Mile

Suburban Maryland - Non-Last Mile

Suburban Maryland - Last Mile

District of Columbia - Last Mile

Northern Virginia - Last Mile

A N N U A L C H A N G E I N A S K I N G R E N T

FLEX / INDUSTRIAL ASKING RENTWashington / Baltimore Region | Through 2019

10-Year Historical Annual Growth

0.6%

2.1%

1.2%

-1.1%

-0.2%

-0.9%

-0.9%

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