WESTCHESTER COUNTY MARKET OVERVIEW AND DEVELOPMENT TRENDS

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WESTCHESTER COUNTY MARKET OVERVIEW AND DEVELOPMENT TRENDS PACE LAND USE LAW CENTER ANNUAL CONFERENCE PRESENTED BY: WILLIAM V. CUDDY, JR. December, 2017 PAGE 0 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

AGENDA 1. COMMERCIAL MARKET OVERVIEW: OFFICE RETAIL INDUSTRIAL/FLEX MEDICAL RESEARCH & DEVELOPMENT 2. TRANSITION OF INVENTORY 3. MULTI-FAMILY MARKET OVERVIEW 4. WHY IS RESIDENTIAL HOT? 5. WESTCHESTER MULTI-FAMILY Source: Bureau of Labor Statistics PAGE 1 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

COMMERCIAL MARKET OVERVIEW: OFFICE # of Buildings 208 Market Size (SF) 27,911,304 SF Available SF 6,258,440 % Availability Rate 22.40% Asking Rent $28.54 *Class A & B over 20,000 SF Source: CBRE Research 2017 PAGE 2 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

COMMERCIAL MARKET OVERVIEW: OFFICE TRENDS LESS SPACE PER WORKER, MORE SHARED SPACE THE FACTS Worker Preferences Like freedom of choice Satisfying collaboration Transparency Space per worker Space per office worker dropped to 150 square feet from 225 square feet More than 80 percent of businesses moving toward a more collaborative office environment Millennials in the workplace Millennials will comprise 45% of the workforce by 2025 Source: CBRE Americas Occupier Survey, 2015/16 PAGE 3 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

COMMERCIAL MARKET OVERVIEW: RETAIL # of Buildings 1,036 Market Size (SF) 36,850,326 SF Available SF 3,015,306 % Availability Rate 8.10% Asking Rent $25.65 *Buildings over 10,000 SF Source: CoStar PAGE 4 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

COMMERCIAL MARKET OVERVIEW: RETAIL TRENDS 01 02 03 04 Source: CBRE Research Beyond The Headlines: Part Two, 2017 PAGE 5 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

COMMERCIAL MARKET OVERVIEW: INDUSTRIAL/FLEX # of Buildings 114 Market Size (SF) 10,414,048 SF Available SF 495,627 % Availability Rate 9.40% Asking Rent $14.53 *Buildings over 40,000 SF with 16 FT ceiling heights Source: CoStar PAGE 6 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

COMMERCIAL MARKET OVERVIEW: INDUSTRIAL/FLEX TRENDS With demand exceeding supply for the 28th time in the past 30 quarters, the industrial market s availability rate fell to 7.7% the lowest level since Q1 2001 U.S AVERAGE NEW WAREHOUSE BUILDING SIZE Tight supply pushed net asking rents up by 6.3% year-over-year to $6.88 per sq. ft. the highest mark since CBRE began tracking this metric in 1989 Rapidly growing e-commerce sales are the primary driving factory for Warehouse Sizes increasing. Source: CBRE Research 2017 PAGE 7 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

COMMERCIAL MARKET OVERVIEW: MEDICAL # of Buildings 83 Market Size (SF) 6,755,602 SF Available SF 464,579 % Availability Rate 10.20% Asking Rent $24.91 *Buildings over 20,000 SF Source: CoStar PAGE 8 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

COMMERCIAL MARKET OVERVIEW: MEDICAL TRENDS Demographic trends signal strong demand for medical office space through the long term. The 65+ population, which accounts for the highest per-capita health care spending by far, is expected to nearly double between 2015 and 2055. Absorption of medical office space has outpaced completions of new supply for the past seven years, driving steady decreases in the national vacancy rate, which was 8.0% as of Q1 2017. Rising investor confidence in the medical office building (MOB) segment has driven increased transaction volume ($9.9 billion for the year ending Q1 2017) and pushed cap rates to record lows (6.8% as of Q1 2017) Source: CBRE RESEARCH 2017 U.S. MEDICAL OFFICE AND HEALTHCARE REPORT PAGE 9 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

COMMERCIAL MARKET OVERVIEW: RESEARCH & DEVELOPMENT # of Buildings 16 Market Size (SF) 2,865,515 SF Available SF 156,411 % Availability Rate 11% Asking Rent $34.00 *Buildings over 20,000 SF Source: CoStar PAGE 10 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

COMMERCIAL MARKET OVERVIEW: RESEARCH & DEVELOPMENT TRENDS Rents for laboratory space in premier life sciences markets have soared more than 50% in three years. Other markets are showing renewed growth near research universities. Life sciences companies are converging on markets with concentrations of scientific talent. NEW YORK CITY RISING New York City benefits from its adjacency to its world-renowned universities and hospitals. By mid-2018, 120,000 sq. ft. of new incubator space will be delivered to meet growing demand. In addition, New York is making an aggressive push to attract more life sciences companies through a variety of funding initiatives and tax credits. Source: CBRE Research PAGE 11 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

# OF BUILDINGS TRANSITION OF INVENTORY: OFFICE INVENTORY MIGRATION 34 33,202,550 SF - 16% -74 Buildings 33 5,291,246 SF 32 31 30 29 28 282 27,911,304 SF 27 26 208 25 2001 2017 # of Buildings *Class A and B office buildings Source: CBRE Research PAGE 12 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

TRANSITION OF INVENTORY: REPURPOSING 2001-2017 2,500,000 2,000,000 2,113,952 SF 1,500,000 1,000,000 776,556 SF 500,000 356,399 SF 475,088 SF 117,798 SF 243,000 SF 261,339 - Educational Hospitality Medical R&D Recreational Residential Retail Source: CBRE Research PAGE 13 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

TRANSITION OF INVENTORY INDUSTRIAL WATERFRONT TO MIXED-USE FORMER GENERAL MOTORS PLANT IN TARRYTOWN Transition from industrial waterfront to mixed use residential APPROVED MIXED USE DEVELOPMENT COMPONENTS Office: 30,000 SF Apartments: 1,177 units Hotel: 140 Key Retail: 135,000 SF PAGE 14 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

TRANSITION OF INVENTORY FORMER COMMUNITY HOSPITAL TO MIXED USE FORMER UNITED HOSPITAL IN PORTCHESTER Community hospital to transition from healthcare to mixed-used development Star Point Crossing MIXED USE DEVELOPMENT COMPONENTS Apartments: 500 Senior Living Units: 230 Key Hotel: 130 SF Retail: 90,000 SF Office/Medical: 217,000 SF PAGE 15 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

MARKET OVERVIEW: MULTI-FAMILY TOP & BOTTOM 10 U.S. MARKETS: TRENDS 2012-2017 Salt Lake City Sacramento Denver CA Oakland Los Angeles San Diego Riverside Tucson UT CO AZ NM Albuquerque Austin San Antonio TX Dallas TN Providence Detroit Cleveland MI OH NC SC RI Raleigh Charlotte Greenville Nashville Orlando TOP 10 AVERAGES Population Growth 2.0% Income Growth 4.3% GDP Growth 5.6% Employment Growth 3.2% BOTTOM 10 AVERAGES Population Growth 0.6% Income Growth 2.9% GDP Growth 3.7% Employment Growth 1.9% Source: CBRE Research Bureau of Economic Analysis *The markets are ranked based on annual average inventories delivery % change of the period 2012-2017. *In average, The top 10 markets are performing better than the bottom 10 markets in all four aspects. PAGE 16 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

WHY IS RESIDENTIAL HOT? POSITIVE ECONOMIC IMPACTS: MARKET METRICS 2012-2017 INCOME GROWTH 33% greater in top 10 GDP GROWTH 34% greater in top 10 EMPLOYMENT GROWTH 41% greater in top 10 Source: CBRE Research Bureau of Economic Analysis PAGE 17 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

WHY IS RESIDENTIAL HOT? NATIONAL TRENDS ON HOME OWNERSHIP (%) 70 HOMEOWNERSHIP RATE 69 68 67 66 65 64 63 62 61 60 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (Year) Q3 Homeownership Rate Source: United States Census Bureau Housing: Occupancy Characteristic Owner/Renter (Tenure in Occupied Units) Tenure by age of Householder PAGE 18 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

WHY IS RESIDENTIAL HOT? NATIONAL TRENDS ON HOME OWNERSHIP 2005-2016 100% RENTING HAS INCREASED SHARPLY ACROSS ALL AGE GROUPS 90% 86% 80% 70% 70% 60% 53% 50% 40% 39% 30% 20% 15% 15% 23% 19% 10% 0% 25-34 yrs 35-44 yrs 45-54 yrs 55-59 yrs 60-64 yrs 65-74 yrs 75-84 yrs 85 yrs + Renter occupied Total 3% Source: United States Census Bureau Housing: Occupancy Characteristic Owner/Renter (Tenure in Occupied Units) Tenure by age of Householder PAGE 19 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

WESTCHESTER MULTI-FAMILY: MARKET OVERVIEW Existing Units 90,599 Vacant Units 4,520 % Asking Rents $2,318 Vacant Rate 5.0% *Westchester Multifamily Over 10 units Source: CBRE Econometric Advisors PAGE 20 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

WESTCHESTER MULTI-FAMILY: STATUS OF DEVELOPMENT 20,000 18,000 UNDER CONSTRUCTION 3,690 16,000 14,000 BIDDING 0 12,000 10,000 8,000 6,000 4,000 FINAL PLANNING 493 PLANNING 13,577 2,000 0 Q103 Q104 Q105 Q106 Q107 Q108 Q109 Q110 Q111 Q112 Q113 Q114 Q115 Q116 Q117 PRE-PLANNING 0 Under Construction Bidding Final Planning Planning Pre-Planning Source: Axiometrics PAGE 21 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

WESTCHESTER MULTI-FAMILY: HOW MUCH INVENTORY CAN THE MARKET SUSTAIN? ($) 3,100 2,900 $2,449 100% 98% 2,700 96% 2,500 94% 2,300 92% 2,100 90% 1,900 88% 1,700 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19 4Q20 Effective Rent Effective Rent (Forecast) Occupancy Occupancy (Forecasted) 86% Source: Axiometrics PAGE 22 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

WESTCHESTER MULTI-FAMILY: RENTAL INVENTORY Completions Source: CBRE-EA PAGE 23 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

WESTCHESTER MULTI-FAMILY: AFFORDABLE HOUSING STATISTICS AND DEFINITIONS PROGRAM PROPERTIES UNITS DEFINITION SECTION 8 70 7,274 Provides rental assistance to low-income families unable to afford market rents. LOW-INCOME HOUSING TAX CREDIT (LIHTC): 88 7,495 A tax incentive intended to provide an income tax credit to owners of newly constructed or substantially rehabilitated low-income rental housing projects. SECTION 202 7 382 SECTION 811 30 2,990 PUBLIC HOUSING 24 4,632 Provides capital advances to finance the construction, rehabilitation or acquisition of structures that will serve as supportive housing for very-low-income elderly persons to help make them affordable and provides rent subsidies for the projects to help make them affordable. Provides capital advances to finance the construction, rehabilitation or acquisition of structures that will serve as supportive housing for very-low-income individuals with disabilities and provides rent subsidies for the projects to help make them affordable. Housing assisted under the provisions of the U.S. Housing Act of 1937 or under a state or local program having the same general purposes as the federal program. Distinguished from privately financed housing. TOTAL 219 22,773 Source: National Housing Preservation Database (NHPD) PAGE 24 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

DEVELOPMENT PHASE Horizontal Vertical Site Selection Feasibility analysis Site acquisition: contingent vs. noncontingent Entitlements: zoning, site plan and permits Construction documents Site preparation Construction and delivery Lease-up and management PAGE 25 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

CAPITAL STACK Equity Debt Private Equity/Family Office Venture Capital/Funds Institutional Corporate Construction documents Bridge/Mezzanine Loans Banks (Regional, Commercial, Money Center) Agency Debt (Fannie and Freddie) Insurance Companies Federal and State Programs (Tax credits) PAGE 26 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

THANK YOU WILLIAM V. CUDDY, JR. EXECUTIVE VICE PRESIDENT CBRE T +1 203 325 5380 WILLIAM.CUDDY@CBRE.COM

APPENDIX

TRANSITION OF INVENTORY WESTCHESTER REPURPOSED OFFICE BUILDINGS Source: CBRE Research PAGE 29 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

DEEP DIVE ON MULTI-FAMILY WESTCHESTER COUNTY MULTI FAMILY CURRENT PIPELINE PAGE 30 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

DEEP DIVE ON MULTI-FAMILY COST OF LABOR (MAY 16) Souce: US Bureau of Labor Stats PAGE 31 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

DEEP DIVE ON MULTI-FAMILY INCOME TAX (2017) SINGLE FILTER MARRIED FILING JOINTLY State Rates > Brackets Rates > Brackets N.J. 1.40% > $0 1.40% > $0 1.75% > $20,000 1.75% > $20,000 3.50% > $35,000 2.45% > $50,000 5.525% > $40,000 3.50% > $70,000 6.37% > $75,000 5.525% > $80,000 8.97% > $500,000 6.37% > $150,000 8.97% > $50,000 SINGLE FILTER MARRIED FILING JOINTLY State Rates > Brackets Rates > Brackets N.Y. 4.00% > $0 4.00% > $0 (bb) 4.50% > $8,500 4.50% > $17,150 5.25% > $11,700 5.25% > $23,600 5.9% > $13,900 5.9% > $27,900 6.45% > $21,400 6.45% > $43,000 6.65% > $80,650 6.65% > $161,550 6.85% > 215,400 6.85% > $323,200 8.82% > 1,077,550 8.82% > $2,155,350 SINGLE FILTER MARRIED FILING JOINTLY State Rates > Brackets Rates > Brackets Conn. 3.00% > $0 3.00% > $0 (t, u) 5.00% > $8,500 5.00% > $20,000 5.50% > $11,700 5.50% > $100,000 6.00% > $13,900 6.00% > $200,000 6.50% > $21,400 6.50% > $400,000 6.90% > $80,650 6.90% > $500,000 6.99% > 215,400 6.99% > $1,000,000 Source: Bloomberg BNA; state tax statutes and forms. PAGE 32 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017

DEEP DIVE ON MULTI-FAMILY COST OF ENERGY (2016) AVERAGE RETAIL PRICE OF ELECTRICITY (CENTS PER KILOWATTHOUR) Source: US Energy Information Administration PAGE 33 MULTIFAMILY RESIDENTIAL AND ECONOMIC DEVELOPMENT 2017