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Emerging Trends in Real Estate 2019 A New Era Demands New Thinking
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Emerging Trends in Real Estate 2019A New Era Demands New Thinking

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

What does disruption look like ?

Emerging Trends in Real Estate 2019 19

Their Biggest issues – people didn’t rewind these

Emerging Trends in Real Estate 2019 20

Taking their eye off the ball

Emerging Trends in Real Estate 2019 21

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

© 2018 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimesrefer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

Contact us

www.pwc.com

Andy WarrenDirector, Real Estate Research515 314 [email protected]

Download the report

pwc.com/us/etre


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