The State of the Commercial Real Estate Industry: Mid-Year 2010 Retail Review & Outlook

Transcription

1 The State of the Commercial Real Estate Industry: Mid-Year 2010 Retail Review & Outlook Copyright 2010 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. 2 Bethesda Metro Center Bethesda, MD USA (800) NASDAQ: CSGP

2 Today The Economy Housing Market The Property Leasing Market The Capital Market Impact The Property Sales Market

3 The Economy

4 Expected Slowdown in GDP Growth 8% Annualized GDP Growth 6% 4% 2% 0% 2% 4% 6% 8% 1995 q q q q q q q q q q q q q q q q q q q4 Source: BLS, Economy.com

5 Strong Impetus for New Hires Millions Source: BLS, Economy.com

6 Employment Growth by Metro 14% Job Growth Weak Near Term, Strong Long Term Strong Near Term, Strong Long Term 12% 10% 8% 6% 4% Weak Near Term, Weak Long Term Las Vegas Detroit Atlanta Phoenix Denver San Francisco Inland Empire Houston Fort Lauderdale Miami Los Angeles Memphis Sacramento San Jose Washington - NoVA - Indianapolis MD Philadelphia Cleveland Cincinnati Boston Oklahoma City Tampa Palm Beach County San Diego San Antonio Orlando Nashville Portland Chicago New York Austin Dallas - Fort Worth Raleigh Seattle Orange County Minneapolis Long Island Charlotte Strong Near Term, Weak Long Term -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% Sources: Moody's Economy.com, BLS 2010 Job Growth South East MidWest West

7 Private Wage Growth Positive 800 Annual Change in Personal Income (200) (400) YTD Source: Bureau of Economic Analysis; All else Wages: Private industries Wages: Government Other Government Unemployment Benefits and Transfers page 7

8 Consumer Has Done Fair Share in Driving Rebound 15.0% Annual Growth in Retail Sales, Ex Auto Per Capita Retail Sales, Ex Auto (SAAR) 16,000 14, % 12, % 10,000 8, % 6,000 (5.0%) 4,000 2,000 (10.0%) Annual Change in Retail Sales, Ex Auto Sources: BEA; Census Bureau; Moody's Economy.com Retail Sales Per Capita 6/30/10

9 Recent Retail Sales Better than Headlines 2% Monthly Change in Retail Sales, Ex Auto 1% 0% (1%) (2%) Source: Census Bureau Apr - 09 Jun - 09 Auḡ09 Oct - 09 Dec - 09 Feb - 10 Apr - 10 Jun - 10 Retail Sales, Ex Auto Monthly % Change Retail Sales, Ex Auto and Gas Monthly % Change 6/30/10 page 9

10 Components of Growth Contribution To Year-Over-Year Retail Sales 10% 8% 6% 4% 2% 0% (2%) (4%) (6%) (8%) (10%) YTD General Merchandise Healthcare and Personal Care Furniture, Electronics, And Appliances Nonstore Retailers Source: U.S. Census Bureau; PPR Clothing, Sporting Goods, and Miscellaneous Food and Beverage Building Materials and Supplies Gas Stations page 10 6/30/10

11 Borrowing Shunned by Both Sides 25,000 Consumer Debt Outstanding Per Household ($) 20,000 15,000 10,000 5, Sources: PPR; Federal Reserve; Census Bureau May 2010

12 Housing

13 Residential Sales by Type $2,000,000 Regular Sales REO Sales Foreclosure Sales $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $ Q Q Q Q Q Q Q Q Q2 Source: Collateral Analytics

14 New Annualized Housing Starts By Month Since ,060 2,560 2,060 1,560 1,506 1, Source: U.S. Census

15 Housing Price Trends Vary By Market But Most Have Flattened Out $1,200 Chicago San Francisco Las Vegas Los Angeles Orlando Phoenix $1,000 $800 Price/SF $600 $400 $200 $ Q Q Q Q Q Q2 Source: Collateral Analytics

16 MBA Housing Purchase and Refinancing Data By Quarter 1,400 Purchases Refinancings 1,200 1,000 Number of Refinancings Source: MBA Q Q Q Q Q Q Q Q Q Q Q1

17 Leasing Fundamentals

18 Sales Growth Pushes Forward June Year -Over-Year Change in Same Store Sales -1 (35%) (25%) (15%) (5%) 5% 15% Specialty Apparel and Goods General Merchandise June Year -Over -Year Change in Same Store Sales -1 (35%) (30%) (25%) (20%) (15%) (10%) (5%) 0% 5% 10% 15% Specialty Apparel and Goods General Merchandise Source: The Bank of Tokyo -Mitsubishi UFJ, Ltd.

19 Historical Retail Net Absorption Millions of Sq Ft (10) (9.2) (20) (18.2) (30) q q q q q q q q q q q q q 2010 Source: CoStar Group

20 2009 Net Absorption 20 Largest Markets Houston Dallas/Ft Worth Westchester/So Connecticut Long Island (New York) Denver Boston Philadelphia Northern New Jersey Minneapolis Detroit Washington Seattle/Puget Sound Chicago Cleveland Tampa/St Petersburg Atlanta Inland Empire (California) Los Angeles San Francisco Bay Area Phoenix (2.4) (2.5) (2.5) (2.8) (3.0) (0.5) (0.6) (0.9) (0.9) (1.1) (1.2) (1.6) Millions of SF Source: CoStar Group (4.0) (3.0) (2.0) (1.0)

21 2010 Net Absorption - 20 Largest Markets Houston 1,998 Long Island (New York) 1,668 Northern New Jersey Boston 1,296 1,166 Denver South Florida Washington Westchester/So Connecticut Los Angeles Philadelphia Minneapolis Inland Empire (California) San Francisco Bay Area Atlanta Detroit Seattle/Puget Sound 63 Dallas/Ft Worth Tampa/St Petersburg Phoenix Chicago (425) (512) (556) (687) Thousands Thousands of SF (1,000) (500) ,000 1,500 2,000 2,500 Source: CoStar Group

22 Map of Net Absorption by Market Source: CoStar Group

23 Services Dominate Consumption 8,000 Goods Nondurable goods Services Durable goods Consumer Expenditures ($ Billions) 7,000 6,000 5,000 4,000 3,000 2,000 1, Source: Bureau of Economic Analysis

24 Tenants Selling Services Leasing Retail Space in 2010 Subway Verizon Wireless Dollar Tree Edward Jones Metro PCS Goodwill Little Caesars Pizza Five Guys Burgers & Fries State Farm Insurance Boost Mobile Sprint Cricket Wireless Liberty Tax Service Allstate Insurance Herbalife Planet Fitness Game Stop Great Clips Anytime Fitness T-Mobile Advanced Auto Parts Family Dollar AT&T Wireless Dollar General Sally Beauty Supply Source: CoStar Group Number of Leases

25 Retail Deliveries by Year 2.5% 3% Excess 1% Excess 4% Excess 1% Excess 1% Excess 2.0% Percent Increase 1.5% 1.0% 1.5% 0.5% 0.0% Source: CoStar Group

26 Under Construction As % Of Inventory 20 Largest Markets Westchester/So Connecticut Washington Northern New Jersey Philadelphia Long Island (New York) Los Angeles Dallas/Ft Worth Chicago Denver Minneapolis Atlanta San Francisco Bay Area Tampa/St Petersburg Detroit Phoenix Boston Seattle/Puget Sound Inland Empire (California) South Florida Houston 0.4% 0.4% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.0% 0.5% 0.6% 0.6% 0.8% 1.2% Historical U.S. Average Source: CoStar Group 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6%

27 Tight Lending Will Keep a Check on Speculative Development 100% Net % of Domestic Respondents Tightening Standards for CRE Loans 80% 60% 40% 20% 0% 20% 40% Source: PPR; Federal Reserve

28 Not Much More Coming 5,000 Expected Shopping Center Completions (000s SF) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 Big -Box/Power Center Grocery -Anchored Center Other Shopping Center Regional Mall Source: PPR As of 10Q2

29 Retail SF Per Capita Markets With Over 2.5 Million People Minneapolis-St. Paul-Bloomington, MN-WI Atlanta-Sandy Springs-Marietta, GA Miami-Fort Lauderdale-Miami Beach, FL Denver-Aurora, CO Dallas-Fort Worth-Arlington, TX San Francisco-Oakland-Fremont, CA Tampa-St. Petersburg-Clearwater, FL Houston-Baytown-Sugar Land, TX St. Louis, MO-IL U.S. Average Seattle-Tacoma-Bellevue, WA Chicago-Naperville-Joliet, IL-IN-WI Phoenix-Mesa-Scottsdale, AZ San Diego-Carlsbad-San Marcos, CA Baltimore-Towson, MD Detroit-Warren-Livonia, MI Riverside-San Bernardino-Ontario, CA Washington-Arlington-Alexandria, DC-VA-MD-WV Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Boston-Cambridge-Quincy, MA-NH Los Angeles-Long Beach-Santa Ana, CA New York-Newark-Edison, NY-NJ-PA SF Per Capita Source: CoStar Group; U.S. Census

30 Retail Total Available % vs. Vacant % 11.0% Vacancy Rate Availability Rate 10.0% 9.9% 10.0% 9.0% 8.0% 7.6% 7.0% 7.5% 6.0% 5.0% q q q q q q q q q Source: CoStar Group

31 Vacancy Rates By Shopping Center Type 14% 12% 10% 8% 6% 4% 2% 0% Super Regional Mall Outlet Center Power Center Regional Mall Lifestyle Center Community Center Neighborhood Center Theme/Festival Center Strip Center Peak Trough Current Source: CoStar Group

32 Quarter-Over-Quarter Change in Vacancy Rates 20 Largest Markets Houston Boston Northern New Jersey South Florida Minneapolis Inland Empire (California) Denver Los Angeles Detroit Westchester/So Connecticut Atlanta Long Island (New York) Seattle/Puget Sound Philadelphia Phoenix San Francisco Bay Area Tampa/St Petersburg Chicago Dallas/Ft Worth Washington 0.3% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.2% 0.2% Source: CoStar Group 0.4% 0.3% 0.2% 0.1% 0.0% 0.1% 0.2% 0.3%

33 Quarterly Change in Quoted Retail Rents 1.5% 1.0% 0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% q q q 2010 Source: CoStar Group

34 U.S. Retail Vacancy Forecast Absorption Deliveries Vacancy Rate Forecast 8.0% 7.5% 7.0% Millions of Square Feet % 6.0% 5.5% Vacancy Rate 0 5.0% (10) 4.5% (20) Source: CoStar Group 4.0%

35 Capital Markets

36 Change in CRE Debt Outstanding by Holder 350 Life Insurers and Pension Funds Depository Institutions CMBS (50) (100) (150) Q1 YTD Source: CoStar Group

37 Quarterly CMBS Issuances $80 $70 Billions of Dollars in CMBS Issuances $60 $50 $40 $30 $20 $10 Source: CMSA $

38 REIT Capital Offerings $60 IPOs Secondary Equity Unsecured Debt Secured Debt $50 Capital Raised in Billions $40 $30 $20 $10 $ YTD Source: NAREIT

39 % of Assets Held By 20 Largest Banks 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Securities Derivatives CRE & Construction Loans Residential RE Loans C&I Loans Consumer Loans

40 Property Sales Market

41 U.S. Retail Days on Market vs. Selling Price as a Percent of Asking Price 350 Days on Market Percent of Ask 94% 92% % Days on Market % 86% 84% 82% Percent of Asking Price % q q q q 2010 Source: CoStar Group

42 Number of Retail Sales Withdrawn From Market 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Source: CoStar Group

43 Quarterly Sales Volume $12 $10 $8 Billions $6 $4 $2 $0 Source: CoStar Group q q q q q 2010

44 Year-Over-Year Change in Sales Volume 20 Largest Markets Houston Tampa/St Petersburg South Florida Long Island (New York) Boston Detroit Los Angeles Philadelphia Denver Phoenix Inland Empire (California) San Francisco Bay Area Washington Dallas/Ft Worth Westchester/So Connecticut Chicago Minneapolis Atlanta Seattle/Puget Sound Northern New Jersey 3% 8% 15% 19% 20% 32% 61% 80% 72% 58% 40% 32% 21% 19% 6% 3% 2% 164% 161% 405% 100% 0% 100% 200% 300% 400% 500% Source: CoStar Group

45 Retail Distressed Sales Non Distressed Sales Transactions Distressed as a Percentage of Total Transactions Distressed Sales Transactions 5, % 4,500 4, % 3,500 3, % 2,500 2, % 1,500 1, % % Source: CoStar Group

46 Distress by Property Type 50% Office Industrial Retail Multifamily Hospitality 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% q q q q 2010 Source: CoStar Group

47 Distressed Retail Sales as a % of Stock Source: CoStar Group Source: CoStar Group Net Absorption Retail Distressed Sales

48 Retail Cap Rates 12 (%) Source: CoStar Group

49 Cap Rate Spread High But Leveling Off 600 Basis Points Mean + One Std Dev Mean + Two Std Dev q q q q q q q q q q q q q q q Source: NCREIF

50 CoStar Repeat Sale Indices 325 Retail Office Industrial Multifamily Source: CoStar Group 1998 = 100

51 Dispersion in Sales Prices: Shopping Centers 0.1 Standard Deviations: Note: Mean and standard deviations are weighted by square footage. Includes Community Center, Neighborhood Center, Strip Center, Power Center, Super Regional Mall, Theme/Festival Center, Regional Mall, Outlet Center, Lifestyle Center, Airport Retail Price/SF /98 Source: CoStar Group 4/99 7/00 10/01 1/03 4/04 7/05 10/06 2/08 5/09 8/ = 100

52 2010 Average Sales Prices/SF 20 Largest Markets Long Island (New York) Los Angeles San Francisco Bay Area South Florida Washington Chicago Westchester/So Connecticut Seattle/Puget Sound $163 $158 $156 $190 $206 $229 $227 $272 Minneapolis Tampa/St Petersburg Dallas/Ft Worth Northern New Jersey Denver Phoenix Boston Philadelphia $154 $144 $138 $131 $130 $125 $121 $117 Inland Empire (California) Atlanta Houston Detroit $67 $116 $112 $105 Source: CoStar Group $0 $50 $100 $150 $200 $250 $300

53 Net Purchases of Investment Grade Shopping Centers $2,000 Net Purchases Bought Sold $1,460 $1,348 $1,500 $906 $1,000 Millions of Dollars $500 $0 ($500) ($461) ($461) ($14) $68 $13 ($54) $177 $101 ($76) $359 ($1,000) ($1,500) ($989) ($2,000) ($1,368) Institutional ($1,473) Private Private Equity User REIT/Public Source: CoStar Group

54 Retail REIT Buying in 2010 (Price/SF Paid) Cole Real Estate Investments $227 $991 Inland Real Estate Acquisitions, Inc. $141 $811 Simon Property Group, Inc. $571 $303 Retail Opportunity Investments Corp. $123 $250 Equity One Inc $264 $188 Kimco Realty Corporation $117 $138 One Liberty Properties Inc. $156 $124 Source: CoStar Group Millions $0 $200 $400 $600 $800 $1,000 $1,200

55 Top Retail Sales in Second Quarter Properties in CA, FL Date: 4/21/2010 Seller: Kimco Buyer: Canada Pension Plan Inv Board Price: $370,000,000 Price/SF: $179 The Galleria (Houston) Date: 6/14/2010 Seller: Walton Street Capital Buyer: Simon Property Group Price: $260,000,000 Price/SF: $ Properties in 4 States Date: 6/11/2010 Seller: Buyer: Entertainment Properties Trust Price: $124,000, movie screens Source: CoStar Group 21 Properties in 6 States Date: 5/25/2010 Seller: Kerasotes Showplace Theatres Buyer: AMC Entertainment Price: $275,000,000 Price/SF: $380

56 Questions?

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