Bruce K. Erhardt, ALC Cushman & Wakefield of Florida, Inc. Tampa Bay Land Market Overview 4Q 2014

Transcription

1 Bruce K. Erhardt, ALC Cushman & Wakefield of Florida, Inc. Tampa Bay Land Market Overview 4Q 2014 The following represents excerpts from economic and real estate journals, notes from conventions, seminars and other meetings I attended, along with personal opinions of my own and others that affect the land market in the Tampa Bay Region. Previous Market Overviews can be found at. Erhardt s Quick Look at the Land Market Multifamily land Same as last quarter, rental continues to be very active. For sale townhomes and condominiums are under contract or construction in urban and suburban markets, and are gaining momentum. Single Family As for the last 21 quarters, builders and developers are closing and making offers on A and B locations. Starting to see some land buys outside the A/B market. This can provide entry level product. Retail Mainly tenant driven. In the fourth quarter, Taubman & Benderson opened an 800,000 sf GLA mall in Sarasota, and Simon broke ground on a 500,000 sf outlet mall at I-75 and S.R. 56, Wesley Chapel, Pasco County. Industrial New developers are contracting and closing land positions in Tampa and Lakeland. Office Same as last quarter, users and B-T-S only. Medical office building construction is active. Hospitality For the sixth quarter, development activity continues. Bank Deals Continues to slow down. Agricultural Land Active, but prices have leveled out for all but citrus, which is declining. More buyers than sellers. Cycle I m predicting the overall Tampa Bay land cycle has five to six years left, with solid growth for the next three years. Slow and steady is good. The Big Picture Cushman and Wakefield predicts 2015 will be a good year for real estate, January 7, 2015 The year 2015 is expected to be the strongest of the recovery so far. Real gross domestic product (GDP) is forecast to increase at a 3.3% rate, roughly 50% faster than the 2.2% average since the recovery began in mid Page 1 of 22

2 The drivers of growth will be consumer spending, business investment and, to a lesser extent, housing. Declining oil prices will be a net positive for the economy, boosting the income available for discretionary purchases and reducing costs in a wide range of industries. But the decline in oil prices is also creating some risk to the outlook as countries that are major exporters of petroleum may be faced with rising financial burdens. This anticipated acceleration will have a strong positive impact on the U.S. commercial real estate sector, leading to higher demand in all major sectors: office, industrial, retail, multifamily and hospitality. Click this link for the report: Florida Trend Afternoon Update Florida overtakes New York as third most populous state Florida has officially overtaken New York as the third most populous state in the country, the U.S. Census Bureau reported. Between July 1, 2013 and July 1, 2014, Florida added 293,000 residents, reaching 19.9 million. The population of New York increased by 51,000 to 19.7 million. California remains the nation s most populous state in 2014 with 38.8 million residents, followed by Texas with 27 million. Urban Land Institute ( October 23, 2014, New York City Global Cities: The developers perspective by Rob Speyer. Rob Speyer (President and Co-Chief Executor Officer of Tishman Speyer) stated that the estimate of 2.5 billion people moving into cities by 2050 represents the largest migration in history. Millennial talent base. Tech companies replacing financial services. Between 100 and 150 people in 1,000 sf of office space. November 4, 2014 NAIOP Weekly E-Newsletter Millennials will head for the suburbs. The suburbs are going to remain an important destination for young families, but the ideal suburban location for millennials may not be the same as it was for previous generations. While some millennials aspire to a more urban lifestyle, the large part of the cohart will seek benefits typical of the suburbs safer streets and better schools. Most millennials are fine with a short drive rather than walking distance from grocery stores, restaurants and the like. Page 2 of 22

3 Communities that can offer benefits of urban living (including convenience and walkability) with the best suburban living (particularly with schools and more open space) will thrive in the coming decade. Demand Institute - story.html Recently released U.S. Census numbers show that Florida had a net gain of 105,000 residents last year and 109,000 in % more than the previous two years. The population surge has accelerated this year, according to state estimates, growing at a rate of 700 new residents per day. Tampa Bay Times The last 12 months have been a banner year for construction in Tampa with builders pulling permits for more than two billion in projects. That s a record, city officials said, that surpasses the previous high mark of nearly 1.8 billion in permits issued in 2007 at the height of the real estate bubble. University of Florida John Reynolds, professor emeritus of Agricultural Economics at UF s Institute and Agricultural Sciences spreading suburbs could consume almost three million acres of Florida s farm land by the year 2020, a University of Florida researcher predicts. The more than one third of those losses will occur in six of Florida s most populated counties, where fast growing cities are encroaching on some of the state s most productive agricultural areas. Many of the biggest urban counties are also the biggest agricultural counties, like Hillsborough and Palm Beach. Though they are thought of as urban areas, they are among the most productive agricultural counties in the nation. Using population projections from the U.S. Census Bureau and information on per-capita land consumption by Florida land residents, Reynolds predicts the state s urbanization will grow by another 2.8 million acres by Six of the state s seven most populous counties Broward, Duval, Hillsborough, Miami- Dade, Orange and Palm Beach are projected to lose 1.16 million acres of land to urban development, or 38% of the total projected for the state. ERHARDT COMMENT: Assume the six counties lose an equal amount, that s 193,333 acres each, or 38,666 acres per year. Page 3 of 22

4 Cushman & Wakefield Research, Reevaluating Seven Industrial Real Estate Predictions For the entire report, please click this link: E-commerce growth will outpace growth and overall retail sales, causing fundamental shifts in order fulfillment strategies and models on track. To meet e-commerce service expectations for a new kind of shopper, DCs will be located closer to urban centers on track. o Currently Amazon can reach 15% of the U.S. population with same day delivery. Warehouse/Distribution centers will continue to grow bigger on track. o The need to improve supply chain fuel efficiency is a driving force behind the rise of the new mega development. Clear heights will continue to rise as fulfillment facilities require more sophisticated levels of automation and efficient use of space on track. o In the Inland Empire, five new speculative construction projects are under way that feather 36 clearance. Dallas/Fort Worth is another market where the trend is visible. Seven new spec projects totaling 7.2 msf offer clear heights greater than 36. Mezzanines support fulfillment center order picking. Demand for large, modern warehouse space will outweigh supply in primary hubs, pushing activity into secondary markets wait and see. o Limited availability and high land prices are making urban facilities more expensive, and neighboring submarkets are becoming more and more land constrained in many top markets. Construction costs, construction labor supply and growing product demand could present challenges to progress, both for developers and end users on track. o Construction costs have risen 10% in New York / New Jersey and 5% in Chicago. o Construction labor costs have risen 2.8% in the last year and are expected to continue moving up. o Bigger can be cheaper according to Oltmans Construction, the building costs for a 1,000,000 sf concrete tilt wall building with 32 clear and ESFR sprinkler system can be $21.25/psf in southern California compared to $30.00/psf for a 200,000 sf building. Reshoring will bring more jobs, capital investment and demand for industrial space back to the U.S. somewhere between wait and see and on track. o Not long ago, labor cost advantages of China and India made them prime candidates for outsourced operations. Now locales like Mexico, Canada and southeast U.S. are getting stronger consideration. Page 4 of 22

5 Dividend Capital Research Cycle Monitor Real Estate Market Cycles, Q3-2014, Physical Market Cycle Analysis of All Five Major Property Types in More Than 50 MSAs. Employment growth now appears to be solid at more than 200,000+ jobs per month on a consistent basis as the economy expands above the previous 2007 employment peak. Gross domestic product (GDP) has also responded with growth above 3%. Declining gas prices should motivate consumers to spend more during the holiday season, fueling more economic expansion. All these factors point to increased demand in all property types, while supply is still at historically low recovery phase levels in almost all cities with the exception of apartments, where new supply is approaching levels close to the last cycle peak. Office occupancies improved 0.2% in Q3-2014, and rents grew 0.8% for the quarter and 3.7% annually. Industrial occupancies improved 0.2% in Q3-2014, and rents grew 0.9% for the quarter and 4.3% annually. Apartment occupancies were flat in Q3-2014, but rents grew 0.2% for the quarter and 2.3% annually. Retail occupancy improved 0.1% in Q3-2014, and rents grew 0.6% for the quarter and 3.1% annually. Hotel occupancies improved 0.7% in Q3-2014, while rents grew 1.4% for the quarter and improved 6.2% annually. Office Market Cycle Analysis The national office market occupancy level improved 0.2% in Q3-2014, and was up 0.5% year over year. Total monthly employment is now growing consistently above 200,000 jobs per month, with more than half being office space jobs. However, much of the new space leased is now happening at an average of 150 square feet per person (SFPP), which is a 25% reduction per person from historic averages. Office absorption was almost 8 million square feet in Q with downtown outpacing suburban submarkets. Only seven markets inched forward in their cycle positions in the third quarter. These moderate improvements should continue over the next year as the economy expands. Average national rents were up 0.8% in Q and rents were up 3.7% year over year, almost keeping pace with inflation. For the seventh quarter, Tampa is at level three of the recovery cycle. With Tampa are Ft. Lauderdale, Orlando and Palm Beach. Ahead of Tampa are Atlanta, Jacksonville, Miami, Charlotte, Raleigh-Durham and Nashville. Industrial Market Cycle Analysis Industrial occupancies improved 0.2% in Q3-2014, and were up 0.8% year over year. Strong absorption continues in the majority of markets with new distribution space having the highest demand and thus highest new supply. New supply was about 10 million square feet higher than completions from a year ago. Low natural gas prices are driving manufacturing back to the United States. Improving consumer confidence and spending are helping to increase goods demand. The national average cycle position should be increasing above the long term average sometime in the next two quarters. The industrial national average rent index increased 0.9% in Q and was up 4.3% year over year. Page 5 of 22

6 Tampa for the second quarter, is at level six, at the beginning of the expansion phase. With Tampa are Ft. Lauderdale, Memphis, Orlando and Raleigh-Durham. Ahead of Tampa are Charlotte, Miami, Palm Beach and Nashville. Behind Tampa are Norfolk and Jacksonville. Apartment Market Cycle Analysis The national apartment occupancy average was flat in Q3-2014, and was down 0.1% year over year. Three more markets moved past their peak occupancy level into the hypersupply phase of the cycle. Supply is expected to grow by 1.5% in 2014, a rate that is 80% of the 2006 peak construction and that has not been seen since The risk is that the construction already underway translates into even higher completions in Most of this new construction is in or near city centers where the millennial generation wants to live. This growth pushes apartment markets further into the hypersupply phase of the cycle. Rents still grow in the hypersupply phase of the cycle (as occupancies are above the long term average), but the rate of growth slows down. Average national apartment rent growth was 0.2% in Q (a major slowdown) and was up 2.3% year over year. For the second quarter, Tampa is at position twelve, which is the beginning of the hypersupply phase. With Tampa are Memphis, Miami and Palm Beach. Ahead of Tampa are Charlotte, Raleigh-Durham and Norfolk. Behind Tampa are Orlando, Jacksonville, Ft. Lauderdale, and Atlanta. Retail Market Cycle Analysis Retail occupancies improved 0.1% in Q3-2014, and were up 0.3% year over year. Retail employment growth continues at a moderate pace of 40,000 jobs per month, which is a good indicator of demand for retail space. Retail sales also continued to grow at a moderate and potentially sustainable pace for the next year. The strong 2013 holiday sales caused many retailers to plan expansion in 2014 which should create positive occupancy increase in 2014 and National average retail rents increased 1.3% in Q and were up 3.0% year over year. Tampa, for the second quarter, is at level six, the beginning of the expansion phase. With Tampa is Palm Beach. Ahead of Tampa is Miami. Behind Tampa is Atlanta, Nashville, Memphis, Charlotte, Jacksonville, Ft. Lauderdale and Orlando. Hotel Market Cycle Analysis Hotel occupancies improved an average of 0.7% in Q3-2014, and were up 2.2% year over year. The strong recovery in hotel demand over the past four years has prompted many hotel chains to expand and it looks like supply may be up over 1% for the year in Operators have also been able to raise room rates in response to the increased demand in the marketplace from both business and leisure travelers. National average hotel rents improved 1.4% in Q and were up 6.2%. Tampa has jumped two levels, to level 10, one level away from peak. In this phase, we have declining vacancy and new construction. With Tampa are Ft. Lauderdale and Orlando. Ahead of Page 6 of 22

7 Tampa is Palm Beach. Behind Tampa are Atlanta, Charlotte, Nashville, Memphis, Richmond, Jacksonville and Raleigh-Durham. Tampa Bay Retail Market Overview Tampa/St. Petersburg Retail Market, CoStar Group Tampa/St. Petersburg s Vacancy Decreases to 6.3% Net Absorption Positive 1,316,979 SF in the Quarter The Tampa/St. Petersburg retail market did not experience much change in market conditions in Q The vacancy rate went from 6.4% in the previous quarter to 6.3% in the current quarter. Net absorption was positive 1,316,979 sf, and vacant sublease space increased by 25,282 sf. Quoted rental rates increased from third quarter 2014 levels, ending at $13.73/psf per year. A total of nine retail buildings with 1,155,882 sf of retail space were delivered to the market in the quarter, with 427,148 sf still under construction at the end of the quarter. Net Absorption Retail net absorption was strong in Tampa/St. Petersburg Q4-2014, with positive 1,316,979 sf absorbed in the quarter. In Q3-2014, net absorption was positive 349,022 sf, while in Q2-2014, absorption came in a positive 978,217 sf. In Q1-2014, positive 489,885 sf was absorbed in the market. Tenants moving into large blocks of space in 2014 include: Dillard s moving into 180,000 sf at The Mall at University Town Center; Macy s moving into 160,000 sf at The Mall at University Town Center; and Wal-Mart moving into 147,850 sf at N. Nebraska Av. Vacancy Tampa/St. Petersburg s retail vacancy rate decreased in Q4-2014, ending the quarter at 6.3%. Over the past four quarters, the market has seen an overall decrease in the vacancy rate, with the rate going from 6.9% in Q to 6.6% at the end of Q2-2014, 6.4% at the end of Q3-2014, to 6.3% in the current quarter. The amount of vacant sublease space in the Tampa/St. Petersburg market has trended up over the past four quarters. At the end of Q1-2014, there was 537,750 sf of vacant sublease space. Currently, there are 688,893 sf vacant in the market. Largest Lease Signings The largest lease signings occurring in 2014 included: the 96,312 sf renewal signed by Dillard s at 400 Southgate Mall, the 60,000 sf deal signed by Floor & Décor at Lakeland Park Center; and the 50,019 sf lease signed by Dick s Sporting Goods at Lakeland Park Center. Rental Rates Average quoted asking rental rates in the Tampa/St. Petersburg retail market are up over previous quarter levels, and up from their levels four quarters ago. Quoted rents ended Q at $13.73/psf per year. That compares to $13.71/psf in Q3-2014, and $13.57/psf at the end of Q This represents a 0.1% increase in rental rates in the current quarter, and a 1.17% increase from four quarters ago. Page 7 of 22

8 Inventory & Construction During Q4-2014, nine buildings totaling 1,155,882 sf were completed in the Tampa/St. Petersburg retail market. Over the past four quarters, a total of 1,845,136 sf of retail space has been built in Tampa/St. Petersburg. In addition to the current quarter, eight buildings with 45,205 sf were completed in Q3-2014, 10 buildings totaling 406,514 sf completed in Q2-2014, and 237,535 sf in 18 buildings completed in Q There was 427,148 sf of retail space under construction at the end of Q Some of the notable 2014 deliveries include: The Mall at University Town Center, an 880,000 sf facility that delivered in Q and is now 100% occupied, and Lakeland Park Center, a 238,422 sf building that delivered in Q and is now 100% occupied. Total retail inventory in the Tampa/St. Petersburg market area amounted to 218,226,069 sf in 17,944 buildings and 2246 centers as of the end of Q Shopping Center The Shopping Center market in Tampa/St. Petersburg currently consists of 2192 projects with 88,233,014 sf of retail space in 3,714 buildings. In this report, the Shopping Center market is comprised of all Community Center, Neighborhood Center, and Strip Centers. After absorbing 109,398 sf and delivering 9,000 sf in the current quarter, the Shopping Center sector saw the vacancy rate go from 9.8% at the end of Q to 9.7% this quarter. Over the past four quarters, the Shopping Center vacancy rate has gone from 10.3% at the end of Q1-2014, to 10.1% at the end of Q2-2014, to 9.8% at the end of Q3-2014, and finally to 9.7% at the end of the current quarter. Rental rates ended Q at $12.99/psf, down from the $13.09 they were at the end of Q Rental rates have trended down over the past year, going from $13.06/psf a year ago to their current levels. Net absorption in the Shopping Center sector has totaled 854,572 sf over the past four quarters. In addition to the positive 109,398 sf absorbed this quarter, positive 195,159 sf was absorbed in Q3-2014, positive 248,321 sf was absorbed in Q2-2014, and positive 301,694 sf was absorbed in Q Page 8 of 22

9 Power Centers The Power Center average vacancy rate was 4.4% in Q With positive 240,568 sf of net absorption and 238,422 sf in new deliveries, the vacancy rate went from 4.5% at the end of Q to 4.4% at the end of Q In Q3-2014, Power Centers absorbed positive 8,072 sf, delivered no new space, and the vacancy rate went from 4.6% to 4.5% over the course of the quarter. Rental started the quarter at $18.66/psf and ended the quarter at $18.40/psf. A year ago, in Q4-2013, the vacancy rate was 5.3%. Over the past four quarters, Power Centers have absorbed a cumulative 314,679 sf of space and delivered cumulative 238,422 sf of space. Vacant sublease space has gone from 0 square feet to 23,408 sf over that time period, and rental rates have gone from $18.07 to $ At the end of Q4-2014, there was no space under construction in the Tampa/St. Petersburg market. The total stock of Power Center space in Tampa/St. Petersburg currently sits at 9,649,728 sf in 28 centers comprised of 161 buildings. No space was under construction at the end of Q General Retail Properties The General Retail sector of the market, which includes all freestanding retail buildings, except those contained within a center, reported a vacancy rate of 4.1% at the end of fourth quarter There was a total of 4,099,295 sf vacant at that time. The General Retail sector in Tampa/St. Petersburg currently has average rental rates of $14.37/psf per year. There are 117,148 sf of space under construction in this sector, with 28,460 sf having been completed in Q In all, there are a total of 13,933 buildings with 101,001,140 sf of General Retail space in Tampa/St. Petersburg. Specialty Centers There are currently five Specialty Centers in the Tampa/St. Petersburg market, making up 1,136,773 sf of retail space. In this report, the Specialty Center market is comprised of Outlet Center, Airport Retail and Theme/Festival Centers. Specialty Centers in the Tampa/St. Petersburg market have experienced positive 9,536 sf of net absorption in The vacancy rate currently stands at 6.8%, and retail rates average $18.26/psf. Page 9 of 22

10 Malls Malls recorded net absorption of positive 890,708 sf in Q This net absorption number, combined with the 880,000 sf that was built in the quarter, caused the vacancy rate to go from 3.6% a quarter ago to 3.3% at the end of Q Rental rates went from $23.03/psf to $23.14/psf during that time. In this report, the Mall market is comprised of 21 Lifestyle Center, Regional Mall and Super Regional Malls. Tampa Bay Business Journal, Ashley Gurbal Kritzer, Simon Premium Outlet Mall Size is 440,000 sf with 110 retailers. The new mall under construction in Wesley Chapel, is large for a Simon Premium Outlet Center, which range in size from 350,000 to 440,000 sf. Construction will create 300 to 500 jobs and Simon project the center will employ 800 retail workers when it is built out. The center will be completed October Tampa Bay Single Family Market Overview MetroStudy, Posted November 21, 2014, Tampa While 3Q14 New Home Starts are up 10.8% over 3Q14, the annual starts rate is down 7% Product below $200k is squeezed, as starts in that price range are down over 18% YoY MetroStudy s 3Q14 survey of the Tampa housing market showed that 1,932 single-family units were started in the quarter, up 10.8% from 3Q13. Still, the annual starts rate, compared to last year, decreased by 7.0%, to 5,995 annual starts. Single-family quarterly closings totaled 1,499 units, which is 11.4% lower than the 1,692 closings during the 3rd Quarter of last year. The annual closings rate was 6,269 units which was 11.3% above the annual closings rate of 5,630 units for the twelve months ending 3Q13. Total single-family inventory, which is composed of units under construction, finished vacant and models equaled 3,889 units on the ground at the end of the 3rd Quarter of 2014; an 7.4- month supply. Compared to last year, the number of units under construction fell by 226 homes to 2,087 homes. Finished vacant inventory decreased by 8.1% from 1,590 units last year to 1,461 this year. However, the number of completions exceeded move-ins during the quarter and FV inventory increased by 137 units versus 2Q14. The FV months of supply grew from 1.8 to 2.1 months. Page 10 of 22

11 This quarter, 2,462 lots were delivered to the Tampa market. This same quarter a year ago, we delivered 1,142 lots. Vacant developed lot inventory stands at 29,489 lots, an increase of 4.6% compared to 28,183 lots last year. Based upon the annual start rate, this level of lot inventory represents a 59.0 month supply, an increase of 6.5 months compared to last year. ERHARDT COMMENT: If you take out Citrus and Hernando Counties, the VDL supply drops significantly. Annual Starts by Price Range For the twelve months ending September 2014, annual new home starts in price ranges under $200k totaled 1,639 units, said Tony Polito, Director of MetroStudy s Tampa region. This was down 18.4% from the 3Q 2013 annual activity in prices less than $200k. New home starts in prices over $200k were down 1.8% for 2014 versus The marginal 448 unit decrease in the annual start pace was split: 369 fewer units under $200k and 79 fewer units above $200k. The year over year starts pace is being compared to the strong spring of 2013 and is down 7%, said Polito. However, the 3Q increase in starts exceeded the 2Q13 peak of this recovery cycle and may be a sign of builders starting extra spec units in search of year end closings. A review of deed records thru September indicates price increases from 2013 had held, but the rate of pricing growth has slowed substantially. Additionally, we are seeing more incentives being offered. Tampa s new housing sector remains heavily reliant upon job creation and interest rates to drive demand. The other significant trends involve new housing inventory. Finished Vacant units grew by 137 units during 3Q 2014 and at 2.1 months, the supply of FV units still needs to come down nearer to 1.5 months. The backlog of under construction units grew from 1,837 units as of June 2014 to 2,087 units as of September The UC months of supply has grown from 3.4 months for 2Q 2014 to 4.0 months as of 3Q The Under Construction MOS have been trending up the Page 11 of 22

12 last two quarters. This was despite an increase in the number of units being completed; 1,682 units completed in 3Q versus 1,216 completions in 2Q. Market areas based on annual starts are shown below. Market Area Ann Starts (% Chg) Hillsborough.3,583 (-18.7%) Pasco.1,584 (+3.6%) Pinellas.513 (+66.0%) Hernando.180 (+48.8%) The table below ranks the top ten communities in the market by annual starts. Community (Area) Ann Starts Magnolia Park..185 FishHawk Ranch.175 Sun City Center..155 Valencia Lakes.151 Waterset 149 K-Bar Ranch.129 Lake Brandon..125 Seven Oaks..121 Concord Station..119 Citrus Hills.118 Hillsborough County remained the most active county within the Tampa market. However, Hillsborough County lost market share, down from 68.4% for 3Q13 to 59.8% for 3Q14. Market share in Pasco grew from 23.7% for 3Q13 to 26.4% for 3Q14 as quarterly starts increased from 376 in 2Q14 to 523 for 3Q14. The VDL supply throughout all of Hillsborough County stood at 28.2 months. The VDL supply in Pasco stood at 48.7 months as of September 30, These two major counties accounted for 86.2% of all annual start activity in Tampa Bay as of 3Q MetroStudy, Posted November 21, 2014, Sarasota/Bradenton Sarasota s new home starts for 3Q14 are up 20.4% over 3Q13; annualized rate is up 15.1% YoY We continue to see a squeeze on first time and lower income homebuyers as the annualized rate of new home starts under $250k is down 26.5% YoY Growth in starts is heading to the higher end: 193% of the growth came in price points above $250k MetroStudy s survey of the Sarasota-Bradenton housing market showed 1,032 single-family units were started in the third quarter of 2014, an increase of 20.4% over 3Q13. It marked the third time in the last four quarters that quarterly starts were over 1,000 units. The annual start rate compared to last year increased by 15.1%, to 3,975 annual starts. Single-family quarterly closings totaled 821 units, which was 5.8% higher than 3Q13. The annual closings rate was Page 12 of 22

13 3,585 units per year, which was 18.1% above the annual closings rate the same quarter last year. For the twelve months ending September 30, 2014, new homes starts in price ranges under $250k totaled 1,349 units down 26.5% from the 3Q2013 annual activity, said Tony Polito, Regional Director of MetroStudy s Sarasota market. Annual new homes starts in prices over $250k were up 62.2% for the twelve months ending September 30, 2014 versus 3Q2013. The marginal 521 unit increase in the annual start pace was split: 486 less units under $250k and 1,007 additional units above $250k. 193% of the growth came in price points above $250k. Inventories increased by 21.7% compared to the same quarter last year. Compared to last year, under construction inventory rose by 316 units to 1,638. Finished vacant inventory increased by 11.3% from 302 units last year to 336 this year. However, the number of move-ins exceeded completions during the quarter and FV inventory decreased by 45 units. Model home inventory was up 40 units from last year at 212 total models. The increased model count is a clear sign of builder confidence. This quarter 347 lots were delivered to the Sarasota- Bradenton market. Vacant developed lot inventory stands at 37,380 lots, a decrease of 1.9% compared to 38,098 lots last year. Based upon the annual start rate, this level of lot inventory represents a month supply, a decrease of 20 months compared to last year. At the end of 3Q2014, Manatee County had a 26.3-month supply, down from a 27.5-month supply of VDL in 3Q2013. Sarasota County had a 30.0-month supply at 3Q2014, down from month supply at 3Q2013. Housing activity increased in all three Counties, thereby reducing VDL months of supply. The double digit growth of 2012 and 2013 has moderated in 2014 and we suspect that housing starts growth will come in under 10% by year end, said Polito. National economic worries have keep interest rates low during the quarter which is a positive for demand. However, a large percent of housing demand comes from retirees and empty nesters, which are less interest rate sensitive. A review of deed records indicates that pricing remains up. The overall market saw a 19.5% increase in prices versus mid However, over the last 90 days prices are up just 2.5%. Compared to last year, the average home is 13% larger at 2,267 SF and the price per Page 13 of 22

14 square foot is up 5.6% to $130/SF. The winter forecast for much of the country is for temperatures colder than average, which is good for Florida builders. The final significant trend worth noting is new housing inventory. We consider FV equilibrium as between 1.5 and 2.0 months. The supply of finished vacant housing units has been dropping since 4Q2006. As of September 30, 2014, the months of supply of FV units for all of Sarasota/Bradenton stood at 1.1 months. We did see a 2Q increase in the number of units (up from 318 to 381) and the MOS (up to 1.3 months). That increase was erased in 3Q leaving a low supply going into season. The County by County finished vacant supply indicates that Manatee County is below equilibrium level of FV supply at 1.3 months. Sarasota County is even further below equilibrium level at 0.8 months. Charlotte County is now below equilibrium with a 1.2 month supply. The UC months of supply are up to 5.5 months from 4.5 months in 1Q2013. This should bring us some needed FV units by December, just in time for snowbird season. The top three market areas based on annual starts are shown below. Market Area Ann Starts (% Chg) Manatee.. 2,119 (+2.8%) Sarasota 1,450 (+29.7%) Charlotte (+41.5%) The table below ranks the top ten communities in the market by annual starts. Community (Area) Ann Starts Lakewood Ranch.514 The West Villages. 266 South Gulf Cove..173 Palmer Ranch..167 Grand Palm..155 Esplanade By Siesta Key..130 Heritage Harbour 126 Harrison Ranch. 94 Greyhawk Landing.. 87 Copperstone.. 66 During 3Q2014, Manatee County recorded 570 housing starts, down 2.2% versus 583 starts in 3Q2013. Sarasota County recorded 347 housing starts in 3Q2014 compared to 252 starts in 3Q2013, a 37.7% increase, as the West Villages, Palmer Ranch and Esplande by Siesta Key all saw new starts activity double from late For information contact: Tony Polito tpolito@metrostudy.com Page 14 of 22

15 The share of year olds is down by almost 48% for men and 43% for women, from This single fact is one of the biggest game changes in the housing industry. Delayed Marriage Equals Delayed Homeownership, John Burns Real Estate Consulting, The housing market is unquestionably fueled by life stage changes, particularly the change of marital status and the addition (and subtraction) of children. These changes significantly affect where consumers want to live and what kind of home and community they will choose. For example: Singles are more likely to rent and live in locations that are closer to entertainment and employment, and these areas are seeing more demand today than they have historically. Marriage usually ignites the desire to own a home with a variety of locational and housing choices depending on income and family present. Cohabitation has certainly been on the rise in recent decades, but homeownership rates for cohabiting couples are much lower than rates for married couples. The addition of children makes owning a home almost a necessity, given the need for yards, toys, education, and social circles. Children moving out often results in lifestyle changes, including different social circles, home size, and floor plan needs. Locational preferences also begin to shift. 55+ Buyer Survey Results, John Burns Real Estate Consulting Click to view video Here is a partial summary of the webinar we just did on 55+ buyers. More than 100 people followed up by requesting copies of the presentation. 55+ households are: 52% of current homeowners Page 15 of 22

16 43% of current households 26% of all home buying activity (even though only 3% of them buy a home each year) Those we surveyed (all had registered with a builder, developer, or Zillow so the survey represents those interested in moving) told us the following: 54% said they are not moving today because they can't find what they are looking for. 64% said they are considering buying outside the area where they currently live, and 53% said they are considering staying in their home so most need some convincing to move. 51% said proximity to grandchildren is a key motivator. 28% said they are considering owning 2 homes. 43% prefer an inner suburb (15 30 minutes from City Core) versus the City Core or a more outlying area. 8 11% want attached but 20 25% will consider it. 49% want a smaller home, 34% want the same size, and 27% want larger. 63% have pets and 22% say they treat them like royalty. The Boomers reported some interesting trends: 41% will accommodate an 18+ year old child. 33% are considering accommodating their parent. 23% want age-restricted. 44% want age-targeted or restricted, compared to 61% of the Silent Generation. 77% want single-story. Residential Economic Report, by Real Estate Economics, During recessionary years, the nations level of housing under valuation actually exceeded levels of housing over valuation recorded during the pre-recession bubble. After strong market conditions and hyper price appreciation from mid-year 2012 through Year 2013, sales volume and price appreciation are now slowing across the nation not because of reduced housing demand, but rather due to reduced affordability. Year over year price appreciation has averaged 5.2% in the nation, with price appreciation (in percentage terms) slightly skewed toward smaller homes. The rate of economic expansion in the nation slowed slightly during Q1-2014, but has since resumed at a healthier rate as the construction job base and the public sector jo0b base have begun to grow. Economic growth is likely to continue to increase at a faster rate during the next several quarters as the private sector continues to expand, as construction continues to recover and as both a public and private sector driven economic cycle continues to mature. During year 2014, the nation s housing market will rapidly head toward under supply. Between years 2015 and 2019, the housing market will become increasingly under supplied, but housing over valuation will arise by year Over valuation will continue from year 2017 through year 2019, but not at the dangerous levels associated with the pre-recession bubble as laws, private practices and regulations have been put in place Page 16 of 22

17 to avoid unsubstantiated housing demand and price appreciation. If a price correction occurs, it will be relative modest, and will likely occur sometime after the forecast period. Overall, the next five years will be typified by healthy housing market conditions chronic under supply of housing and a sustained period of some over valuation during the latter half of the five year forecast, with diminishing levels of price appreciation as the market rides a high price plateau. Tampa Urban Market Overview Prices continue to rise as evidenced by Jeff Vinik purchasing a little over four acres on the other side of the Expressway from his other land holdings, for $100/psf. Vinik also unveiled a billion dollar vision for his other 25 acre land holdings. The plan break-down is as follows: Channelside Bay Plaza: Plans are still in flux, with the team considering everything from complete teardown to a major renovation, but construction should begin in Hotel: 575,000 square feet, $270.7 million. USF buildings: 330,000 square feet, $156.7 million. Residential: 660,000 square feet, $136.1 million. Parking garages: 5,000 spaces, $80 million District cooling: 50,000 square feet, $20 million Tampa Bay Multifamily Market Overview Marcus & Millichap Q Tampa Bay Metro Area Market Overview Economy Outlook Employers in Tampa Bay will expand payrolls 1.7% in 2014, or by 20,000 jobs. Housing and Demographics In the 12 months ending in the third quarter, builders started construction on 11,200 units of single family and multifamily housing, with the latter accounting for an outsized 45% of all starts. The median price of an existing single family home rose 4% over the past 12 months to $153,600. The median price bottomed in early 2011 and has climbed 28% since. Outlook: Mediocre income growth potentially complicates prospective first time homebuyers efforts to save money for a down payment. Tenures in rental housing will likely lengthen as a result. Page 17 of 22

18 Construction Rental stock increased 1.8%, or by nearly 3,600 units, over the 12 months ending in the third quarter. In the preceding 12 month span, developers bought online 1,400 apartments. In excess of 2,200 apartments were placed in service in the first three quarters this year. Most of the new stock was delivered in the Central Tampa submarket and comprised primarily market rate rentals. Additionally, nearly 600 units were delivered in Pinellas County during the period. Approximately 1,300 market rate units in four projects will come online in St. Petersburg during the fourth quarter, the most significant expansion of stock in several years. Builders also remain active in Central Tampa and will deliver 581 units three in the final three months of Outlook: In 2014, 4,400 units will come online. Multifamily permits are on track to rise 30% to 6,400 units. Vacancy Despite a heightened pace of construction through the first three quarters this year, the vacancy rate decreased 90 basis points to 4.9%, outpacing the 70 basis point drop in the corresponding period of Demand for new rentals has been vigorous. For the entire market, vacancy in units built since 2000 decreased 90 basis points to 4.8% year to date. Central Tampa bucked the trend, registering an increase of 110 basis points to 6.0% that prompted greater use of concessions there. Only three submarkets posted a drop in occupied units during the first nine months of the year. However, top performing submarkets include Brandon/Southeast Hillsborough County, where tenants moved into an additional 400 rentals, and South St. Petersburg, where net absorption totaled 1,300 rentals. Outlook: Vacancy will decline 20 basis points this year to 5.6%. Net absorption will total 4,500 units, up from 2,400 units in Rents Tighter vacancy is supporting a high rate of rent growth. Following a 1.1% gain in the third quarter, the average rent of $931 per month is 4.3% more than the level at the end of last year. The average rent increased at less than half that rate during the first three quarters of Rents advanced across all vintages of properties thus far in Properties built during the 1980s posted a 3.8% rise during that time, but owners of 1970s era buildings leveraged tightening vacancy to lift the average rent 4.4%. In the Central Tampa submarket, properties constructed since 2000 were offering leasing incentives equal to one month free of rent during the third quarter, an increase from a nominal Page 18 of 22

19 level at the end of last year. In the entire market, concessions at all properties were less than three weeks of free rent in the third quarter. Outlook: The average rent in the metro will advance 4.9% during 2014 to $937 per month. Submarket Vacancy Rating Rank Submarket Vacancy Y-O-Y Basis Effective Y-O-Y Rate Point Change Rent % Change 1 South St. Petersburg 3.0% -400 $ % 2 Clearwater 3.8% -170 $ % 3 North St. Petersburg 4.1% -70 $ % 4 West Pasco County / 4.2% -260 $ % Hernando County 5 Peninsula 4.5% 110 $ % 6 Carrollwood/Citrus Park 4.7% 20 $ % 7 Egypt Lake / Lowry Park 4.7% 20 $ % 8 North Pinellas County 4.7% 0 $ % 9 Brandon/Southeast 4.8% -100 $ % Hillsborough County 10 New Tampa / East Pasco 4.9% 30 $ % County 11 Central Tampa 5.0% 140 $1, % 12 Largo / Seminole 5.4% 80 $ % 13 University 5.7% -120 $ % 14 Temple terrace 5.8% -200 $ % 15 Town and Country / 6.1% 50 $ % Westchase John Burns Real Estate Consulting, Rental Demand: Think Young and Old Apartment developers and operators should not ignore the quickly growing demographic of aging Americans. In the near future, when designing new apartment complexes, developers will most likely have to make a choice of which demographic to target: young or old. Your standard apartment renter has historically been young (25-34 years old is the biggest cohort) and either single or newly married, maybe with a young family. However, with the continued, projected growth of the 65+ population, there will be more demand for active adult rental communities. How do their tastes and desires differ from your standard renter? What appeals to Millennials, the 95 million Americans born who make up a large portion of renters: Doing everything online High speed internet access everywhere Pet friendly communities (dog park, dog trash bins) Walkability or bike-ability to restaurants, bars, and grocery stores Living green (electric car chargers, rain water collectors, solar power, recycling) Proximity to work and entertainment Communal onsite social areas (coffee bars, video games, large screen TVs) Page 19 of 22

20 Amenable to living alone in smaller units if close to work and play What the 65+ population is looking for in an active adult rental community: Safe living environment Proximity to healthcare Social programming (with an activities director) and making friends Recreational amenities (parks, trails, green spaces, gathering areas, pools, and fitness) Low maintenance (housekeeping and dining options onsite) Moderate cost housing Tampa Office Market Overview Cushman & Wakefield Market Overview Tampa Westshore Office Overview: Overall vacancy at the end of 4th quarter 2014 is 13.2% compared to 14.1% last year and 13.5% last quarter. Class A is at 12.7% compared to 15.4% last year and 12.4% last quarter. I-75 Office Overview: Overall vacancy at the end of the 4th quarter 2014 is at 20.7% compared to 17.1% a year ago and 20.0% last quarter. Class A is at 21.7% compared to 17.6% a year ago and 22.1% last quarter. Tampa Central Business District: Overall vacancy at the end of the 4 th quarter 2014 is at 12.8% compared to14.2% a year ago and 13.5% last quarter. Class A is at 10.4% compared to 13.1% a year ago and 11.5% last quarter. Tampa Industrial Market Overview Cushman & Wakefield Market Overview Tampa *Below are Q industrial stats, as Q industrial stats were not completed when this report was distributed. Effective 1/16/15, you may access Q industrial stats via West Tampa Industrial Overview: The overall vacancy at the end of the 4th quarter, 2014 is 5.9% compared to 6.8% a year ago and 5.9% last quarter. Warehouse distribution is at 3.7% vacancy compared to 4.6% a year ago and 4.0% last quarter. Office Service Center is at 12.5% vacancy compared to 13.6% a year ago and 11.7% last quarter. Page 20 of 22

21 East Tampa Industrial Overview: The overall vacancy at the end of the 4th quarter 2014 was 7.8% compared to 8.2% a year ago and 7.4% last quarter. Warehouse distribution is at 7.9% vacancy compared to 8.5% a year ago and 8.1% last quarter. Office Service Center is at 13.9% vacancy compared to 15.1% last year and 15.1% last quarter. Plant City Industrial Market Overview: The overall vacancy at the end of the 4th quarter 2014 was 3.2% vacancy compared to 1.2% a year ago and 1.8% last quarter. Warehouse distribution is at 4.4% vacancy compared to 1.8% a year ago and 2.2% last quarter. Lakeland Industrial Market Overview: The overall vacancy at the end of the 4th quarter 2014 was 4.7% vacancy compared to 4.1% a year ago and 5.1% last quarter. Warehouse distribution is at 5.8% vacancy compared to 4.8% a year ago and 6.2% last quarter. Service center is at 18.5% compared to 17.1% a year ago and 18.0% last quarter. Land Sales Single Family 1. Lennar Homes purchased 88 lots at the Preserve at Riverview, $2,738/per developed lot. 2. Taylor Morrison purchased five lots in northwest Hillsborough County for $206,914/per developed lot. These were half acre lots fronting on a lake. 3. McCrady Road Investment LLC (Cassidy Family) purchased 170 acres in south Hillsborough County for $12,179/per acre. Assuming the property will eventually have 700 homes, the purchase price was $6,428 per undeveloped lot. 4. Lennar purchased 291 home sites in the Belmont community of south Hillsborough County for $55,605/per lot. Homes will range from $229,000 to $300, Pulte purchased 643 acres, zoned for 1,300 units, for Del Webb at Lakewood Ranch for $24,000,000. This is $37,305/acre and $18,461/unit. Industrial 1. The Ruthvens purchased 22 acres on the Lakeland side of County Line Road for $1.31/sf semi-developed. Page 21 of 22

22 Mixed Use 1. Green Pointe Communities purchased the 15 acre, waterfront site in downtown Sarasota for $27,000,000 or $41.32/psf. The property is currently zoned for 695 residential units, 175 hotel rooms and 189,000 sf of commercial space. Multifamily 1. Iris Crosstown Apartments II, LLC purchased 7.8 acres entitled for 180 units for $15,555/unit. The site is contiguous to Phase I of Iris Crosstown Apartments. 2. Alta Terra Bella, L.P. purchased a 311 unit, 90% developed apartment site on the north side of S.R. 54, east of U.S. Highway 41 for $13,000/per unit. Cushman & Wakefield represented the seller. 3. Property Markets Group purchased two acres in downtown Miami for $927 cents per square foot. The property is entitled for 1,557 residential units, which equates to $51,380/per unit and 763 units per acre. Hotel 1. Wesley Chapel Hotels, LLC purchased a site in the northeast quadrant of I-75 and S.R. 56, Pasco County. 2.6 acres or $10.37/sf and $9,300/key. Senior 1. Lifestyle Corp. and AEW Capital Management purchased 6.99 acres in Lakewood Ranch for $21,067/per unit and $19,718 per bed, based on a 125 bed/117 unit assisted living apartment project. Will have 85 assisted living beds and 40 memory care beds. Retail 1. Simon Properties paid $14.6 million for acres at the northwest quadrant of I-75 and S.R. 56. It is equal to $5.88/sf, semi-developed. 2. Estuary Commercial Partners purchased approximately 60 gross acres (18 usable acres) on the east side of Falkenburg Road in front of the Bass Pro Shop and Top Golf for $4,600,000 or $5.87/usable square foot, not developed. Page 22 of 22