2011 commercial market forecast presentation (full)
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www.CharlestonCommercialMarketForecast.com
2011 Charleston Multifamily Forecast
Supply is on the way!
National Multifamily Overview
Vacancy Rates Steadily DECREASING
• 8.3% in 2008• 6.7% in 2011• 5.7% by 2015
Real Effective Rent Growth
• 8-10% in several submarkets
SIGNIFICANT DEMAND - Units Supply Demand2008 – 145,700 -11,424 2009 – 120,526 -41,7082010 – 56,259 180,0702011 – 31,794 112,826
DEMOGRAPHIC SHIFT(between the age of 20-34)
Baby Boomers - 1986 – 63 million
Echo Boomers - 2015 – 67 million
Charleston Multifamily Development Pipeline
MT. PLEASANT – 1,600 UNITSDANIEL ISLAND – 300 UNITS
DOWNTOWN– 272 UNITS
NORTH CHAS – 620 UNITS
SUMMERVILLE – 300 UNITS
WEST ASHLEY– 300 UNITS
Woolfe St.
N
Reid St.
Mary St.
Ann St.
John St.
Hutson St.
Calhoun St.
Map Restaurants
Midtown Bar & Grill
Chai’s Lounge and Tapas
Basil
Closed for Business
Fish
Halls Chophouse
O-Ku
39 Rue De Jean
Coast Bar & Grill
1
2
3
4
5
6
7
8
Map Retail
Piggly Wiggly (grocery)
U-Haul Moving & Storage
52.5 Record Store
B-ZAR & Charleston Power Yoga
Morris Sokol Furniture
Hughe’s Lumber & Supply
Cupcake
Gelato Store & French Bakery
Dwelling (interior design)9
1
2
3
4
5
6
7
8
9
Map Lodging
Hotel Site (full service planned)
Holiday Inn Site (planned)
Embassy Suites (full service)
Hampton Inn (limited service)
Library (full service planned)
Francis Marion (full service)
Holiday Inn (Marriot u/c)
Federal Bldg. (full service conv.)
Courtyards at 411 Meeting (apt)
1
2
3
4
5
6
7
8
9
Map Other
Charleston School of Law
Public Parking Garage
Marion Square (park)
Charleston Children’s Museum
CARTA (central bus station)
Charleston Visitor’s Center
Charleston Historic Museum
American Theater
Music Farm
1
2
3
4
5
6
7
8
9
1
4
7
6
1
1
1
1
3
5 2
1
2
9
14
5
6
5 3
4
1
8
7
3
89
6
7 8
5
4
2
2
62
37
8
9
King St.
Meeting St.
Spring St.
DASH Station (free shuttle)
Legend
50,000 sf High-Tech Office
Proposed Hotel Renovation
72 Units – Student Housing
260-300 room Hotel, Retail, Restaurant(s)
Holiday Inn – 115 rooms
Midtown Mixed Use – 200 apartment units 7,000 sf retail
New Development on Upper King Street – Downtown Charleston
New Downtown Multifamily Development – 200 Units
New Development Downtown - Spring Elevation
2011 Charleston Multifamily Forecast
• Economics for both existing assets and new development projects that are the first to start will be strong
• Occupancy will stay in the mid 90’s throughout the next cycle due to strong job growth and people wanting to live in or around Charleston
• Capital markets will determine how many deals actually get built in certain submarkets (ie. Mt. Pleasant)
• Overall, deals in select submarkets will perform well
Retail ForecastTim Metzler, Retail
Properties
PORTFOLIO OPTIMIZATION...
INTEGRATE INTERNET SALES...
DOWNSIZE STORE PROTOTYPE...
INVEST IN EXISTING STORES...
SUSTAINABILITY IS GOOD BUSINESS...
OCCUPY FAILED LOCATIONS WITH NEW FOOTPRINT…
SIGNIFICANT RENT REDUCTIONS…
REVITALIZE DOWNTOWN MARKETPLACE…
NEW PLAYERS SEEKING KEY LOCATIONS…
APPAREL
SPORTING GOODS & BOATING
RESTAURANTS
ELECTRONICS, OFFICE SUPPLY & HOME
GROCER
RENT COMPRESSION FOR ANCHOR TENANTS…
REDUCTION IN NUMBER OF STORES AND PROJECTS…
FLIGHT TO QUALITY…
DOWNSIZING CREATES OPPORTUNITY...
SIX NEW DEVELOPMENTS...
CHANGE IS CONSTANT...
JOB CREATION IS BRINGING MORE CONSUMERS...
DEMOGRAPHIC MIGRATION FROM NORTH TO SOUTH...
QUALITY OF LIFE BRINGS DIVERSE OPPORTUNITIES...
WE CONTINUE TO ATTRACT HIGHER PAYING JOBS...
RETAIL DEVELOPMENT FOLLOWING RESIDENTIAL GROWTH...
RETAILERS WILL ENTER: REI & CRATE AND BARREL...
Industrial ForecastMike White, CB Richard
Ellis/Carmody
U.S. COMPANIES RACK UP BIG PROFITS DESPITE SLOWING ECONOMY...
RECOVERY REMAINS FRAGILE...
UNCERTAINTY ABOUNDS STIFLING EMPLOYMENT...
MANUFACTURING RELOCATIONS CONTINUE TO FAVOR SOUTHERN STATES...
AEROSPACE AND AUTOMOTIVE EXPANSIONS EXPECTED TO CONTINUE TO
CHOOSE RIGHT-TO-WORK, LOW-TAXATION CONDITIONS
BOEING TAKES OFF WITH 787 DREAMLINER FINAL ASSEMBLY...
CHARLESTON PORT TRAFFIC CONTINUES TO GROW...
VACANCY TIGHTENS... SPEC BUILDING REACHES A TIPPING POINT
INDUSTRIAL LEASING CONTINUES ABSORBING 1 BUILDING PER MONTH
CLASS A SPACE IS VIRTUALLY GONE...
INDUSTRIAL LAND SALES PRICE REACHES A NEW RECORD $ PER ACRE.
MAJOR BOEING SUPPLIERS WILL ANNOUNCE NEW FACTORIES...
SPEC INDUSTRIAL BUILDING WILL BEGIN ANEW...
PANAMA CANAL EXPANSION WILL ATTRACT NEW USERS AND DEVELOPERS
MORE RECORD-SETTING LAND SALES WILL CLOSE...
JEDBURG AREA WILL LAND A NEW, MAJOR PROJECT
PROXIMITY TO BOEING...
EXPANDING GLOBAL TRADE ATTRACTS NEW SHIPS AND MORE CONTAINERS...
PRO-BUSINESS GOVERNMENT CONTINUES TO FIND ECONOMIC DEVELOPMENT...
OUR QUALITY-OF-LIFE GROWS IN REPUTATION
THE NLRB WILL BE DEFEATED AND DISBANDED...
BOEING WILL ANNOUNCE A SECOND AIRPLACE FOR CHARLESTON
SHIPPING COMPANIES WILL PUBLICALLY ENDORSE PORT OF CHARLESTON
THE WIND TURBINE INDUSTRY WILL EMBRACE OUR REGION
OUR DEFENSE SECTOR WILL CONTINUE TO GROW
The Big Picture
(Looking For Perspective in a Changing World)Ted Abernathy
How is the Economy?
U.S. Chamber Small Business Survey
84%
8%8%
54%
27%19%
61%
25%
14%
Headed in Right DirectionOff on Wrong DirectionNot Sure
The U.S. Economy
The Local Economy
Your Business
Source: U.S. Chamber Small Business Survey, July 2011
The Last Decade Was….Not Good
27%
22%20%
-1%-5%
0%
5%
10%
15%
20%
25%
30%
1970-1980 1980-1990 1990-2000 2000-2010
Employment Growth
Source: Peter Linneman, NAI Global
The Last Decade Was….Not Good
34%
40% 40%
17%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1970-1980 1980-1990 1990-2000 2000-2010
Real GDP Growth
Source: Peter Linneman, NAI Global
The Last Decade Was….Not Good
27%
47%
61%
-3%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
1970-1980 1980-1990 1990-2000 2000-2010
Real Household Wealth
Source: Peter Linneman, NAI Global
And then The Recession Made Things Worse
Recession & Weak Recovery Impacts
Soaring poverty rates (15.1% most since 1993) Black poverty rate 27% Male workers, median income falls to 1973 level 6% decline in births between 2008-2010 Most educated metros widened gap Government budget cuts reshaping
competitiveness Corporate profits largest share of GDP since 1950
With Full Credit to TIP StrategiesA Picture is Worth a Thousand words
8 Ounces
6 Ounces
4 Ounces
2 Ounces
0 Ounces
Today Is the Economic Glass ½ Full or ½ Empty ?
“Get your facts first then you can distort them as much as you
like.”
Mark Twain
“4 Ounces”
Globally
Unemployment Rates
9.1%
4.3%
6.1%
7.3%
10.0%
5.3%
10.8%
6.0% 6.1%
0%
2%
4%
6%
8%
10%
12%
US Japan China Canada Euro Area Austrialia India Brazil Russia
Source: Economist Oct 8, 2011
Projected GDP Growth 2011
1.6%
-0.4%
9.0%
2.2% 1.6% 2.1%
7.9%
3.6%4.3%
-5%
-3%
-1%
1%
3%
5%
7%
9%
US Japan China Canada Euro Area Austrialia India Brazil Russia
Source: Economist Oct 8, 2011
Trade balance as % of GDP
-3.3%
2.3%
4.0%
-2.7%
-0.5%
-2.3%-3.2%
-2.5%
4.9%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
US Japan China Canada Euro Area Austrialia India Brazil Russia
Source: Economist Oct 2011
U.S. Exports & Imports (Goods)
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2009 2010
Exports Imports
In $Millions
Source: Census, World Almanac 2009 & U.S. BEA 2010
U.S. Exports 2009-2011
$-$20,000$40,000$60,000$80,000
$100,000$120,000$140,000$160,000$180,000
2009-Jan
2009-May
2009-Sept
2010-Jan
2010-May
2010-Sept
2011-Jan
2011-May
Exports
42% Increase
Source: BLS Sept 2011
Less than 1% of U.S. firms export and of those that
do more than ½ export to only one country
Exports Per Capita(2009)
$2,623$1,823
$2,531$2,428
$4,082
$7,764
$2,137$1,588
$2,323
$1,197
$3,621$3,250
$6,579
$1,909
$2,650$3,443
0
1000
2000
3000
4000
5000
6000
7000
8000
2011 Competitiveness Redbook
Nationally
Employment Monthly Net Change 2000- Sept 2011
-800
-600
-400
-200
0
200
400
600
2000 2008
Jobs
Source: BLS Oct 2011
125,000 Jobs/Mo. To keep pace with growthIn thousands
The best year in the last decade averaged 208,000 additional jobs per month…12 years
How Many New Jobs in the Last Year?
September 2010 to August 2011
1,288,000 or 1% job growth in private sector
Sectors gaining jobs; Manufacturing(+2%),
Prof/Bus Services(+3%), Education & Health(+2%)
-312,000 government jobs (-1.5% of Government jobs)
Source: BLS September 2011
Job Growth- Last 12 Months 44 of 50 states had job growth Biggest growth- Texas +269,000, California
+189,600, New York +106,600, Ohio +74,100
6 States that lost jobs Indiana, Georgia, Alabama, Kansas, Delaware, Nevada
Personal Savingas a % of Disposable Personal Income
5.2% 5.2% 5.0% 4.9%5.1% 5.2% 5.5%
5.0%
0%
1%
2%
3%
4%
5%
6%
Dec-10 Jan Feb March April May June July
Source: BLS Personal Income and Outlays, August 2011
Estimates of Monthly Retail and Food Services
$-
$100,000
$200,000
$300,000
$400,000
$500,000In million $$
Source: Economics and Statistics Administration Sept 2011
US Firms in Forbes Global 2000
751
536
0
100
200
300
400
500
600
700
800
2004 2011
Source: Forbes May 9, 2011
US Firms in Forbes Global 2000Growth in 2010
69%
12%18%
2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Profits Sales Value Employees
Source: Forbes May 9, 2011
Overall, last year was one of the most profitable years for U.S. businesses in history
Stock Markets …?
Regionally
Brookings Metro Monitor
2nd Quarter 2011
Recession and Recovery
Employment Changes in the SouthJuly 2010- July 2011
-4.7
8.328.1
-24.9
27.9 26.33.6 5.5 1.6 4.4
34.017.3 12.8
269.5
8.3 1.5
-50
0
50
100
150
200
250
300
AL AR FL GA KY LA MD MO MS NC OK SC TN TX VA WV
Source: bizjournals.com Aug 2011
In thousands
% Employment Changes in the South July 2010- July 2011
-0.3%
0.7%0.4%
-0.6%
1.6%1.4%
0.1% 0.2% 0.1%0.1%
2.2%
1.0%
0.5%
2.6%
0.2% 0.2%
-1%
0%
1%
2%
3%
AL AR FL GA KY LA MD MO MS NC OK SC TN TX VA WV
Source: bizjournals.com Aug 2011
Regional Manufacturing Employment
Change Aug 2010-Aug 2011
3.9%
2.4%
8.6%
1.1%0.4%
1.1%
2.9%
1.0%
-0.7%
-1.7%
0.8%
-3.6%
2.6%
0.4%
-5.0%
-3.0%
-1.0%
1.0%
3.0%
5.0%
7.0%
9.0%
Source: The Business Journals, Scott Thomas, September 29, 2011
Regional Retail Employment
Change Aug 2010-Aug 2011
2.6%
4.3%
-6.3%
-0.9%-0.3%
-1.8%-1.8%
1.2%
-2.5%
2.5%
-4.5%-5.7%
3.7%
0.9%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Source: The Business Journals, Scott Thomas, September 29, 2011
% GDP Changes in the South 2009-2010
2.0%2.3%
1.4%1.4%
3.2%
2.6%2.9%
1.4%1.1%
3.4%
1.0%
2.6%
3.5%
2.8%2.6%
4.0%
0%
1%
2%
3%
4%
5%
AL AR FL GA KY LA MD MO MS NC OK SC TN TX VA WV
Source: BEA Economic Recovery Widespread Across States in 2010, June 7, 2011
Regional GDP Change 2010
3.2%
3.9%
1.3%
2.6%
3.9%
5.2%
1.6%
4.6%4.4% 4.2%
0.4%
1.6%
0.8%
2.1%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Source: BEA September 13, 2011
Regional GDP Change 2007-2010
1.5%
-1.2%-0.6%
-1.1%-1.7%
5.0%
-4.3%
1.3%
-3.8%
1.5%
-0.2%
0.8%
-2.8%
-4.4%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Source: BEA September 13, 2011
Regional Income ChangeChange July 2010-July 2011
Non-farm private hourly earning inflation adjusted
-0.1%
1.1%0.8%
-0.4%
-8.4%
-4.9%
-1.7%
-4.1%
-1.8%
-5.9%-5.6%
-3.2%-3.4%-3.1%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
Source: Garner Economics, Tom Tveidt, September 2011
(NATIONAL)
Change In Housing Value Last Year
-5.9% -6.4% -6.6%
-13.6%
-5.0%
-14.9%
-8.8%-8.1%
-13.4%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
United States
South Carolina
North Carolina
GeorgiaVirginia
ArizonaCalifornia
FloridaNevada
Source: FHFA Price Index, period ending 03/2011
Change In Housing Value Last 5 Years
-18.8%
-9.6% -6.9%
-24.5%
-14.6%
-49.5%-46.0%-45.5%
-58.1%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
Source: FHFA Price Index, period ending 03/2011
Regional Housing Price Index ChangeOne Year
-5.9% -5.4%
-1.4%
-5.0% -4.9%
-3.1%-3.1%
-9.0%
-2.7%-3.6%
-2.5%
-5.8% -6.0%
-4.7%
-9.2%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
Source: Federal Finance Agency, 2nd Quarter 2011
Regional Housing Price Index ChangeFive Years
-18.8%
-14.4%
6.1%
-0.4%-2.6%
-1.3%
2.1%
-18.4%
0.2%
-1.8%
0.9%
-11.9%-11.5%
-5.5%
-30.8%-35.0%-30.0%-25.0%-20.0%-15.0%-10.0%-5.0%0.0%5.0%
10.0%
Source: Federal Finance Agency, 2nd Quarter 2011
The United States Is In a Rapidly Changing Economy and the
Impacts Are Real What Is the New Normal?
“The future is not some place we are going to, but one we are creating.”
John Schaar
A Few Things To Think About
The Future of U.S.
Manufacturing
1
US Industry Shifts Over the Past 50 Years (Manufacturing)
0
5,000
10,000
15,000
20,000
25,000
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
Manufcturing
Source: BLS April, 2011
In thousands
% Manufacturing Job Losses1990-2000
-9%-3%
-13%
-6%
8%
-4%
-16% -17%
-10%-12%
5%
-12%
-6%
-15%-13%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
AL AR FL GA KY LA MD MO MS NC OK SC TN VA WV
Source: VEDP Data Base Aug 2011
% Manufacturing Job Losses2000-2010
-33% -33% -33% -35% -33%
-22%
-34% -33%
-39%-43%
-31%
-38% -39%-37% -35%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
AL AR FL GA KY LA MD MO MS NC OK SC TN VA WV
Source: VEDP Data Base Aug 2011
Manufacturing Workforce of the Future
The Churn in the Economy
2
Business Employment Net Private Job Gains and Losses By Quarter
-3,000
-2,500
-2,000
-1,500
-1,000
-500
0
500
1,000
Source: BLS Business Employment Dynamics, August 2011
Business Employment Dynamics (Churn)
Net Private Job Gains and Losses
-10,000-8,000-6,000-4,000-2,000
02,0004,0006,0008,000
10,000
2000-1
2000-3
2001-1
2001-3
2002-1
2002-3
2003-1
2003-3
2004-1
2004-3
2005-1
2005-3
2006-1
2006-3
2007-1
2007-3
2008-1
2008-3
2009-1
2009-3
2010-1
2010-3
Source: BLS Business Employment Dynamics, August 2011
In millions
Businesses Opening and Closing
644,122
-604,201
670,058
-619,695
668,395
-620,732
626,400
-707,446
552,600
-721,737-1,000,000
-800,000-600,000-400,000-200,000
0200,000400,000600,000800,000
1,000,000
2005 2006 2007 2008 2009
Births Closures/Bankruptcies
Source: US Small Business Administration Aug 2011
The Bar To Be Prosperous Is Rising
If We Don’t Start Expecting More We Need To Start Expecting Less
3
Middle-Skills Require more than a high school degree
but less than a BA degree 52% of employers said in 2011 manpower
survey that they were struggling to fill positions, an all-time high
Southern Jobs By Skill Level 2009
Middle Skill51%
High Skill29%
Low Skill20%
High Skill Low Skill Middle Skill
Source: Middle skill jobs in the American South’s Economy, National Skills Coalition, August 2011
Southern Skills Mismatch
32%
43%
25%
29%
51%
20%
0% 10% 20% 30% 40% 50% 60%
High Skills
Middle Skills
Low-Skill
JobsWorkers
Source: Middle skill jobs in the American South’s Economy, National Skills Coalition, August 2011
The World Has Changed…Has the U.S. Role?
4
America’s Self-Image & Global Image Is Changing
Tallest building…Dubai Richest Man…Mexico Largest Publicly Traded Company…China Producer of the Most Movies….India Biggest Gambling Town…Macao Largest Ferris Wheel…Singapore Only 1 of 10 Largest Shopping Malls
The Rise of the RestWho and How We Compete
So What Next? Total Economy- Today the reality economy Minus increased savings Minus increased debt Minus bubbles in housing wealth and stock
market wealth With slowing growth in new income and new
people Equals slow growth and new realities
So What Next? Global slowdown will push a weak recover to the edge In a national political year businesses usually hold their
cards Housing is close to bottom but “underwater” losses will
drag it for several more years…probably slightly increasing sales but values will continue to slide
Job growth will be slow…for a while Real estate will face changing business models Very Uneven- Regions that succeed will focus on
strengths, be globally aware and engaged, and will understand the role of talent
Despite Our Current Gloom, the United States Will Be One of the Major Global Powers for a Long
Time
“Whether you believe you can do a thing or not, you are right.”
Henry Ford
Southern Growth Policies Board
Since 1971,Bringing Together Governors, State Legislative Leaders Business Leaders, Higher Education Leaders, and Citizens
Help communities understand the changing context of competitiveness
Follow us on Twitter or LinkedIn or join as an associate member
www.southern.orgPublic policy is about making choices, Southern Growth informs choice
Thank You
Questions?
Ted Abernathy
Southern Growth Policies Board
tabernathy@southern.org
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