U.S. GDP (2012 Q3 2014 Q2)
U. S. Employment
Employment Recovery Following the Last Two Downturns
Rail Traffic: Containers
Rail Traffic: Commodities
Select Rail Traffic
Residential Mortgages
Pipeline of Multifamily Projects Lease Up 225,090 Under Construction 294,718 In Planning 878,516 Source: AXIOMetrics
Number of Units Multifamily Supply and Demand 700,000 600,000 500,000 400,000 300,000 200,000 100,000-1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 (100,000) (200,000) (300,000) 4 Quarter Sum New Supply Demand The market is generally in equilibrium as supply and demand are converging. New construction is ramping up. There are roughly 300,000 units under construction (not all will deliver within the next year). The rate and amount of new deliveries are beginning to have a modest impact on occupancy during the non-peak leasing season. Source: AXIOMetrics
Apartment Rent Gap 1Q14 Gap Between Class C and Other Asset Classes Atlanta, GA Austin, TX Baltimore, MD Boston, MA Chicago, IL Dallas, TX Denver, CO Fort Lauderdale, FL Houston, TX Los Angeles, CA Miami, FL New York, NY Oakland, CA Philadelphia, PA Phoenix, AZ San Diego, CA San Francisco, CA San Jose, CA Seattle, WA Washington, DC 0% 50% 100% 150% 200% 250% 300% A(New Build) A B Source: AXIOMetrics
Change in Last Year (BPS) 1=100bps Metro Office Vacancy Rates 4 3 Tucson 2 Ft. Worth 1 New York Memphis 0-1 -2-3 Albany Newark Washington DC Chicago LA HOU Minn Seattle Honolulu Bos US 14.8%, -80bps Cinncinati Phil Tampa SF STL Clev Atlanta Phoenix Austin Detroit Nashville SLC Charlotte Dallas Miami KC JAX Riverside LV Richmond FTL 0 5 10 15 20 25 Vacancy Rate (%) Office vacancy rates have improved in the last year The rate of improvement has slightly accelerated; however, it is modest when compared to past recoveries Source: CBRE-EA
Change in Last Year (BPS) 1=100bps Metro Warehouse Vacancy Rates 0.5 SLC 0.0 LA Cleveland Phoenix -0.5-1.0 US 11.3%; -140bps Seattle HOU NYC STL Phil Memphis Ann Arbor -1.5 KC CHI Atlanta -2.0 Minn, Orange Co. SF Miami Cincinnati Denver San Diego JAX BOS -2.5-3.0 Riverside Dallas Nashville Trenton Vallejo -3.5-4.0 FTW -4.5 0 5 10 15 20 25 Ecommerce and trade growth is driving declines in the Warehouse Vacancy Rate. Source: CBRE-EA Vacancy Rate (%)
Change in Last Year (BPS) 1=100bps Metro Retail Vacancy Rates 1.0 0.5 Tampa 0.0 Miami NYC Albuquerque -0.5-1.0 SF LA Orange Co. SLC CHI BOS SEA Denver US 12%, -70bps Phil Nashville STL SAC KC ATL JAX LV Cleveland -1.5 Oakland Pittsburgh Minn Hou Orlando Dallas Phoenix Memphis -2.0 Newark Trenton -2.5 FTW -3.0 0 2 4 6 8 10 12 14 16 18 Consumer Sentiment has been modestly improving; however, improvement in retail remains fair due to changing spending trends Source: CBRE-EA Vacancy Rate (%)
Cap Rates by Property Type 10% 8% 6% 4% 2% 0% 01Q1 02Q1 03Q1 04Q1 05Q1 06Q1 07Q1 08Q1 09Q1 10Q1 11Q1 12Q1 13Q1 Apartment Industrial Retail CBD Office Suburban Office Limited Service NMM Cap Rates began to ebb upward slightly in 2013; however, in the short term upward pressure appears to have subsided Source: RCA Analytics, FRBA
2000 = 100 Commercial Real Estate Values By Property Type 250 200 150 100 50 0 01Q1 02Q1 03Q1 04Q1 05Q1 06Q1 07Q1 08Q1 09Q1 10Q1 11Q1 12Q1 13Q1 Apartment Industrial Retail CBD Office Suburban Office Hotel Apartment and CBD Office values have surpassed 2007 peaks Suburban Office and Industrial are improving, but have a significant way to go to return to they 2007 peaks Source: Moody s/rca Analytics, FRBA
CRE Loan Standards A negative number translates into the loosening of standards, and generally greater availability of loans Banks appear to be slowing the pace of relaxing their standards on C&D and Multifamily loans Source: Federal Reserve Senior Loan Officer Survey
Summary After the economy contracted during 1Q2014, the National Economic Picture is expected to improve during the remainder of 2014. Seriously Delinquent Mortgages continue to decline, however hard hit areas (New York, New Jersey, Florida & Nevada) remain at heightened levels. Vacancy rates continue to improve; however, changing use preferences are having a substantial impact on the rate of improvement. Multifamily conditions appear robust; however, supply and demand appear to be in balance. Rent premiums on newly built projects appear to be at unsustainable levels. CRE values have increased significantly since 2001. When compared to heights of 2007, Retail, Suburban Office, Industrial and Hotel property values remain well below the 2007 peak values.