2
40 years and counting
“Real estate as an asset class has matured. Market participants need to realize this and make the appropriate adjustments.”
3
Market sentiment
“Sure it feels like the activity level will moderate, but more like a plateau and not a sharp downhill slide.”
What word would you use to describe the 2019 real estate market?
Emerging Trends in Real Estate 2019 4
#1
Top 5
#2
#3
#4
#5 Overheated
Evolving
Cautious
Competitive
Plateau
2019 Expected Profitability
5Emerging Trends in Real Estate 2019 Online Survey
Poor, 1.1%
Fair, 19.3%
Good, 62.8%
Excellent, 16.8%
Abysmal Poor Fair Good Excellent
2018Poor, 0.8%
Fair, 20.4%
Good, 61.8%
Excellent, 17.0%
Abysmal Poor Fair Good Excellent
2019
2019 Expected Profitability
6Emerging Trends in Real Estate 2019 Online Survey
Poor, 0.8%
Fair, 20.4%
Good, 61.8%
Excellent, 17.0%
Abysmal Poor Fair Good Excellent
Fair, 19.2%
Good, 57.7%
Excellent, 23.1%
Abysmal Poor Fair Good Excellent
Triangle Region
Total Market
2019 Market Outlook
7
Opinion of current pricing doesn’t
appear to indicate a
market peak
Emerging Trends in Real Estate 2019 Online Survey
38.8%
41.6%
36.1%
29.1%
50.8%
48.8%
57.9%
64.7%
10.4%
9.6%
6.0%
6.3%
Office
Retail
Multifamily
Industrial
Over Priced Fairly Priced Under Priced
Market Outlook
8Source: OECD
1961 - 1970 - 5.1% Avg - 106
Since 2009 - 2.3% Avg - 114
1991 - 2001 - 3.8% Avg - 120
1991 - 2008 - 2.7% Avg - 204
1981 - 2003 - 2.9% Avg - 228
1986 - 2007 - Ireland 5.9% Avg - 234
Since 1998 - 4.4% Avg - 240
Since 1991 - 3.2% Avg - 324
0 50 100 150 200 250 300 350
US
US
US
Canada
Netherlands
Ireland
South Korea
Australia
Long economic
expansions aren’t that uncommon
What inning are we in?
9
25 innings Longest major league game in baseball history. On May 8, 1984 the Chicago White Sox defeated the Milwaukee Brewers, 7 – 6.
10
A changing industry
Intensifying transformation
Easing into the future
“Demographic growth is slowing and you can’t deny it will have an impact on the real estate industry. Making the right choices will be key.”
Intensifying Transformation
11Source: BEA, IHS Markit
Slower GDP growth
projected to be the norm, but contribution
by component remains stable
4.4
3.43.3 3.3
1.8
2.32.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1960s 1970s 1980s 1990s 2000s 2010 to2018
2018 to2028
Ave
rage
Ann
ual G
DP
Gro
wth
%
Con
trib
utio
n by
Com
pone
nt %
Fixed Investment: Residential Fixed Investment: Nonresidential Consumption Total
Intensifying Transformation
12Source: BEA, IHS Markit
Slower GDP growth
projected to be the norm, but contribution
by component remains stable
4.4
3.4 3.3 3.3
1.8
2.32.0
6.7
3.3 3.5 3.3
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1960s 1970s 1980s 1990s 2000s 2010 to2018
2018 to2028
Ave
rage
Ann
ual G
DP
Gro
wth
%
Con
trib
utio
n by
Com
pone
nt %
Fixed Investment: Residential Fixed Investment: NonresidentialConsumption TotalTriangle GMP
Triangle Region continues to exceed the US rate
Intensifying Transformation
13Source: BLS, IHS Markit
Triangle RegionAnnual
Employment Growth
Versus the US
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027
Recession Forecast US Triangle Region
Easing into the Future
14Source: Census Bureau, IHS Markit
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
2041
2043
2045
(000
s)
Forecast
Deaths
Natural Change
Births
Natural population
change
Easing into the Future: More workers leaving the workforce
(150,000)
(100,000)
(50,000)
-
50,000
100,000
150,000
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Age 18 Age 65
Population turning 18 and 65 by year
Source: US Census Bureau
16
Dealing with disruption
“Someday, the most valuable component of an office building may be the data it generates.”
Accelerating Digital Transformation
41%Annual increase
in global real estate tech
investment over the past 4 years
Source: CB Insights 17
$1.3
$2.5$2.9
$3.4
$5.2
208
454
0
50
100
150
200
250
300
350
400
450
500
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
2014 2015 2016 2017 2018*
Real Estate Tech Financing
Disclosed funding ($Billion USD) Deals
Accelerating Digital Transformation
Nearly $7.0 trillion asset class
13.2% - real estate rental and leasing value add contribution to GDP
Technology attracted to fragmented nature of the industry: Asset Management, Brokerage, Development, Due Diligence, Finance, Facility Management
Key industry companies have begun their own investment
Maybe…
Emerging Trends in Real Estate 2019 18
22
Markets to watch
18-hour city 3.0
“The competition for talent makes being in the right market of vital importance.”
Markets to Watch
23Emerging Trends in Real Estate 2019 Online Survey
Overall Real Estate Prospects
#1 Dallas/Ft. Worth#2 Brooklyn#3 Raleigh/Durham#4 Orlando#5 Nashville#6 Austin#7 Boston#8 Denver#9 Charlotte#10 Tampa/St. Petersburg
#8
#1
#6 #4#10
#5 #3#9
#7#2
What Makes the Triangle Region #3?
Office#1
Retail#8
Multifamily #8
Industrial #24
Single Family
#7
24
2019 Property Type Ranks
Source: 2019 Emerging Trends in Real Estate Online Survey
Good to Excellent outlook
for investment and development by property type
What Makes the Triangle Region #3?
Capital Availability
#6
Investor Demand
#14
Local Economy #4
Development Community
#12
Opportunity #6
25
Investment Feasibility
#6
Source: 2019 Emerging Trends in Real Estate Online Survey
Not just a desirable place to invest, but a real chance that you could
26
“The pace of change faced by all property types is making the future viability of each asset increasingly important.”
Property type outlook
Retail transforms
Myth of free delivery
Property Type Outlook
27Emerging Trends in Real Estate 2019 Online Survey
Hotels
Retail
Office
MF housing
Industrial
SF housing
Triangle Region Total
Poor Fair Good Excellent
Investment
Retail
Hotels
Office
MF housing
Industrial
SF housing
Triangle Region Total
Poor Fair Good Excellent
Development
Why Do We Care About Technology?
70%The percent of survey respondents who felt
technology would have no impact on the demand for retail
space.
Emerging Trends in Real Estate 2004 Online Survey 28
Retail Transforming to a new Equilibrium
29Source: REIS, Inc
Retail sector responds quickly to slowing demand
206,136,223
29,218,268
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Shopping center GLA (Sq.Ft) added by year
25-Year Average, 112,000,000 (Sq.Ft.)
Retail Transforming to a new Equilibrium
30Source: REIS, Inc
Transformation to less square feet per capita continues
0.00 0.50 1.00 1.50 2.00 2.50 3.00
US Metro TotalHouston
CharlotteDallas
Fort WorthSuburban Maryland
NashvilleOklahoma City
Raleigh-DurhamTampa-St. Petersburg
AustinCharleston
AtlantaPhoenix
Palm BeachOrlando
Suburban VirginiaFort Lauderdale
Las VegasJacksonville
Denver
Decrease in retail Sq.Ft. per
The Myth of “Free Delivery”
31Source: CSCMP
Estimated last mile cost per package in a urban, high-
density, e-commerce
route
An average of 30% of online
purchases will be returned
$2.10
$0.20 $0.20 $0.40
$2.90
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
Average value of an online
purchase $82
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Andy WarrenDirector, Real Estate Research515 314 [email protected]
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