The State of the Commercial Real Estate Industry: Mid-Year 2011 Retail Review & Outlook

Transcription

1 The State of the Commercial Real Estate Industry: Mid-Year 2011 Retail Review & Outlook Copyright 2011 CoStar Realty Information, Inc. No reproduction or distribution without permission. The following information includes projections and analyses that are based on various assumptions by CoStar concerning future events and circumstances, as well as historical and current data maintained in CoStar s database, obtained from public sources or provided by proprietary sources. Actual results may vary materially from the projections presented. The information in this presentation speaks only as of the date(s) referenced and is provided as is. CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of merchantability and fitness for a particular purpose. You should not construe any of the information herein as investment, tax, accounting or legal advice L Street, NW, Washington, DC 20005, USA (800) NASDAQ: CSGP

2 Today Economy Leasing Fundamentals Capital Markets Sales Trends Summary and Q&A

3 Economy

4 Leading Indicators Still Generally Positive 15% Leading Economic Indicators (LEI) GDP Growth 10% 10% 8% 6% 5% 4% 0% 2% (5%) 0% (2%) (10%) (4%) (15%) LEI GDP Sources: Conference Board; BEA (6%)

5 Government Job Losses Weighing On Labor Market 1,000 Jobs (500) (1,000) (1,500) (2,000) (2,500) Private Government Total Sources: BLS

6 A Double Dip in Housing 220 Index NAR FHFA (Purchase Only) Case-Shiller 20-City Sources: NAR; FHFA; Case-Shiller

7 Inflation is Killing Consumer Spending 8% Consumption Retail Sales 20% 6% 15% 4% 10% 2% 5% 0% (2%) (4%) (6%) 0% (5%) (10%) (15%) (20%) (8%) (25%) (10%) (30%) (12%) (35%) Sources: BEA; Census Bureau Real Consumption Inflation Nominal Consumption Nominal Retail Sales

8 Federal Debt is Ballooning 4% Deficit (% of GDP) Debt (% of GDP) 80% 2% 70% 0% (2%) 60% (4%) 50% (6%) 40% (8%) (10%) 30% (12%) % Sources: Bureau of the Public Debt; BEA; Moody s Analytics Deficit Debt

9 Housing Shortage 2,500 Household Formation and Housing Stock Change (Thousands) Housing (Units/Household) , , , Household Formation Housing Stock Change Housing/Household Historical Average Sources: Census Bureau; Moody s Analytics; PPR

10 Global Growth Will Drive Exports 5% World ex U.S. GDP Growth Export Growth 20% 4% 15% 3% 10% 2% 5% 1% 0% 0% (5%) (1%) (10%) (2%) (15%) Sources: BEA; Global Insight; Moody s Analytics World ex U.S. GDP Growth Exports

11 There Are Risks To The Outlook 4.5% GDP Growth Job Creation (Millions) % % % % % % % % % Average ( ) GDP (Base) GDP (Slow Growth) New Jobs (Base) New Jobs (Slow Growth) 0.0 Sources: Moody s Analytics

12 Leasing Fundamentals

13 Retail Sales Push Forward page 15 Source: U.S. Census Bureau

14 A Recovery For Most page 16 Source: U.S. Census Bureau

15 Vacancy Forecast

16 Vacancy Trending Down, More Space Becoming Available

17 To The Victor Goes The Spoils Retail Vacancy Index page 19 Source: U.S. CoStar Census GroupBureau

18 Construction Still Muted RBA Under Construction By Subtype

19 Leasing Activity Heating Up 70 Leasing Activity by Quarter 60 Millions of Square Feet Source: CoStar Group

20 Demand Growth Remains Cautiously Positive Net Absorption by Quarter

21 Demand Gathering Momentum Net Absorption (Percent of Inventory)

22 Getting Healthier Percentage of Submarkets With Declining Vacancy Rates

23 Housing Bust Metros Fighting Excessive Vacancies Average Vacancy Rate ( Q2) Source: CoStar Group Current Vacancy Rate

24 Power Centers Pulling Back From The Peak Retail Vacancy Rates by Shopping Center Type ( Q2) Source: CoStar Group

25 Rent Forecast

26 Rents Still in the Red Dallas/Ft Worth Boston Long Island (New York) Houston Cleveland Northern New Jersey Philadelphia Minneapolis Detroit Chicago Washington Westchester/So Connecticut Los Angeles Seattle/Puget Sound Denver Atlanta San Francisco Bay Area Tampa/St Petersburg Inland Empire (California) Phoenix Source: CoStar Group Annual Change in Average Quoted Rental Rate -6.5% -7.0% -7.2% -7.7% -3.6% -3.6% -3.9% -4.2% -4.3% -4.6% -4.9% -0.5% -0.8% -1.0% -1.0% -1.4% -1.6% -2.2% -2.3% -2.9% -9% -8% -7% -6% -5% -4% -3% -2% -1% 0%

27 But Approaching an Inflection Point Quarterly Change in Average Quoted Rental Rate Source: CoStar Group

28 Capital Markets and Sales

29 Removing Leverage From the System Source: Federal Reserve, Moody s Analytics

30 True Modifications Are Beginning To Ramp Up Special Servicer Modifications By Quarter Source: Trepp

31 CRE Lenders Have Turned the Corner CRE Lending Index by Source of Capital Source: ACLI, Moody s Analytics, Commercial Mortgage Alert, MBA

32 Can Lenders Handle the Tidal Wave of Maturing Loans? CRE Maturing Loans By Year Sources: PPR; Federal Reserve; Trepp; ACLI Source: PPR, Federal Reserve, Trepp, ACLI

33 Capital Flowing Back to Real Estate Cheap Trigger = 6/95 End Trigger = 9/99 Cheap Trigger = 3/01 End Trigger = 12/05 Pricey Trigger = 9/99 End Trigger = 3/01 Pricey Trigger = 12/05 End Trigger = 3/10 Source: Federal Reserve, NCREIF, NAREIT page 35 Source: Federal Reserve, NCREIF, NREIT

34 Retail Real Estate Relatively Attractive Cap Rate Spread Over 10-Year Treasuries (Basis Points) Source: CoStar Group, Moody s Analytics

35 Sales Transactions

36 Retail Sales Volume Has Picked Up Source: CoStar Group

37 Year-to-Date Sales Volume in 20 Largest Markets Source: CoStar Group

38 Retail Not The Worst Offender Office Industrial Retail Multifamily Hospitality Distressed Sales Volume (%of Total Transaction Volume) 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Source: CoStar Group

39 Percentage of Dollar Volume Sold That's Part of a Portfolio 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Source: CoStar Group

40 REITs Were Sellers $10,000,000,000 Ins tu onal Retail Net Buying in 2011 $5,000,000,000 $0 -$5,000,000,000 -$10,000,000,000 -$15,000,000,000 Institutional Private Equity User Private REIT/Public Source: CoStar Group

41 Top Retail Deals Closed 2Q2011 Centro Portfolio 39 States Centro Property Group 585 community/neighborhood shopping centers to The Blackstone Group for $9 billion million square feet. Mayflower Portfolio-New England, VA JP Morgan sold 36.9% interest to Canada Pension Plan Investment Board for $350 million million square feet Charter Hall REIT-Portfolio 28 properties Charter Hall REIT sold it s JV Interest of 60% to The Desco Group for $168 million. Prime Outlets- Jefferson, OH Simon Property Group sold to Tanger Factory Outlet Centers for $134 million. 410,000 square feet Lincoln Square-Arlington, TX Lincoln Square LTD sold to JV of Dunhill Partners and RioCan REIT for $70.7 million 444,500 square feet Source: CoStar Group

42 Properties Still Sitting Days on Market Source: CoStar Group

43 Cap Rates On Bigger Deals Compressing 12.0 Average Cap Rate Weighted Average Cap Rate q q q q q q q q q q q q q q q q Source: CoStar Group

44 CoStar's Quarterly Repeat Sale Index Source: CoStar Group

45 Summary