connecticut multi family market trends 2010 connecticut commercial real estate conference presented...
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• Connecticut Multi Family Market Trends •
2010
Connecticut Commercial Real Estate Conference
Presented by: Steve Witten
Presented In February:
-800
-400
0
400
800
-8%
-4%
0%
4%
8%
06 07 08 09 10*
Monthly Employment
Note: Technical recession defined as two consecutive quarters of GDP contraction.Sources: Marcus & Millichap Research Services, BLS, Economy.com
Gross Domestic Product
Job
s in
Th
ou
san
ds
Economy Gaining Traction; Risk Levels Remain Elevated
An
nu
aliz
ed G
row
th
Jan-06 Jan-07
2005: 3.1%2006: 2.7%
2007: 2.1%2008: 0.4%
2009: -2.4%
* GDP through 2Q 2010, Employment through September
Jan-08
Jan-10
2010*: 2.7%
Jan-09
Corporate Investment Stalled Despite Healthy Balance Sheets, Unemployment Rising
0%
1%
2%
3%
4%
5%
6%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
*
10-Yr Treasury Core Inflation Fed Funds Rate
* Through SeptemberSources: Marcus & Millichap Research Services, BLS, Federal Reserve
Rat
e
-6%
-3%
0%
3%
6%
92 94 96 98 00 02 04 06 08 10*
Metro United States
Total Nonfarm Employment ChangeNew Haven-Fairfield County vs. United States
Sources: Marcus & Millichap Research Services, Economy.com* Forecast
Yea
r-o
ver-
Yea
r C
han
ge
NH-FC: 4,600U.S.: 1,000,000
2010* Job Growth
-8
-4
0
4
8
01 02 03 04 05 06 07 08 09 10*
Mo
nth
ly C
han
ge
(th
ou
san
ds)
*Through AugustSources: Marcus & Millichap Research Services, BLS, Economy.com
Total EmploymentNew Haven-Fairfield County
New Haven-Fairfield County Sector EmploymentYear-over-Year Absolute Growth
-20 -15 -10 -5 0 5 10
Construction
Manufacturing
Financial Activities
Information
Government
Professional & Business Services
Natural Resources & Mining
Trade; Transportation; & Utilities
Other Services
Leisure & Hospitality
Education & Health Services
3Q08-3Q09 3Q09-3Q10
Sources: Marcus & Millichap Research Services, BLS, Economy.com
Thousands
0%
3%
6%
9%
12%
92 94 96 98 00 02 04 06 08 10*
Metro United States
Unemployment RateNew Haven-Fairfield County vs. United States
* Forecast
Sources: Marcus & Millichap Research Services, BLS, Economy.com
Un
emp
loym
ent
Rat
e
Job Growth is Critical to Renter Household Formation and Apartment Occupancies
2%
4%
6%
8%
10%
12%
2%
4%
6%
8%
10%
12%
Apartment Vacancy Rate Unemployment Rate 20-34 yrsOverall Unemployment Rate
Ap
artm
ent
Vac
ancy
Rat
e
* Preliminary EstimateSources: Marcus & Millichap Research Services, BLS, Reis
Un
emp
loym
ent R
ate
“Shadow” Market a Significant Factor in Rising Vacancies – More in Select Metros
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
30%
35%
40%
45%
50%
55%
2+ Unit Structure 1-Unit Structure
1-Unit as % of Total
Tota
l Vac
ant
Un
its
(in
000
s) 1-U
nit S
tructu
re as % o
f Total
Sources: Marcus & Millichap Research Services, U.S. Census Bureau
CAPITAL MARKETS
OVERVIEW and OUTLOOK
Commercial Mortgage Delinquency Rates by Lender Type
0%
1%
2%
3%
4%
CMBS (30+ days and REO) Life Companies (60+ days)Fannie Mae (60+ days) Freddie Mac (60+ days)Banks & Thrifts (90+ days)
Del
inq
uen
cy R
ates
Delinquency rates at the end of each periodSources: Marcus & Millichap Research Services, Mortgage Bankers Association
CMBS
Banks
Total Multifamily Mortgage Debt Outstanding: $911.7 billion
Sources: Marcus & Millichap Research Services, MBA
CMBS, CDO, and Other ABS
12%
GSEs and Ginnie Mae
39%
Savings Institutions
7%
Commercial Banks24%
State & Local Gov'ts
8%
Life Insurance
Co.s6%
Other5%By Lender Types ($Bil):
GSEs and Ginnie Mae $359.6
Commercial Banks $216.8
CMBS, CDO, and Other ABS $110.3
State & Local Governments $66.1
Savings Institutions $64.0
Life Insurance Companies $50.4
Other $44.4
Total CMBS Outstanding: $751.7 billion
Sources: Marcus & Millichap Research Services, MBA
Office31.1%
Industrial5.1%
Multi-Family15.2%
Retail29.8%
Hotel9.4%
Self-Storage
1.8%
Healthcare0.6% Other
7.0%By Property Types ($Bil.):Office $233.8 Retail $224.0Multifamily $114.3Hotel $70.7Industrial $38.3 Self-Storage $13.5 Healthcare $4.5Other $52.6
Estimated Multifamily Debt Maturities by Lender Type
$0
$25
$50
$75
$100
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
CMBS Banks GSE/Other Life Companies
Bill
ion
s $
Sources: Marcus & Millichap Research Services, Foresight Analytics
Total Multifamily Debt Maturities by Vintage
$0
$25
$50
$75
$100
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Pre-2001 2001-2004 2005-2007 2008
Mat
uri
ng
Bal
ance
(B
illio
ns
$)
Sources: Marcus & Millichap Research Services, Foresight Analytics
-11%
-6%
-1%
5%
10%
2000-2004 2005-2009 2010-2014*
Ages 20-24 Ages 25-29 Ages 30-34
* ForecastSources: Marcus & Millichap Research Services, U.S. Census Bureau
Ch
ang
e in
Po
pu
lati
on
Renter Demographics New Haven-Fairfield County
New Housing PermitsNew Haven-Fairfield County
0
500
1,000
1,500
2,000
2,500
3,000
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10*
Single-Family Multifamily
New
Ho
usi
ng
Per
mit
s
* ForecastSources: Marcus & Millichap Research Services, Economy.com
Supply and DemandApartment
0
250
500
750
1,000
02 04 06 08 10*
3%
4%
5%
6%
Completions Vacancy
0
40
80
120
160
02 04 06 08 10*
2%
4%
6%
8%
10%
Completions Vacancy
United StatesNew Haven-Fairfield County
* ForecastSources: Marcus & Millichap Research Services, Reis
Un
its
(000
s)
Vacan
cy Rate U
nit
s (0
00s)
Vacan
cy Rate
Apartment Metro Vacancy Ranking2Q 2010
Top 15Markets
2Q 2010 Vacancy
Y-O-Y Bps Change
Denver 6.1% (290)
Austin 9.6% (90)
San Jose 4.2% (80)
Tucson 11.8% (80)
Jacksonville 13.2% (60)
Fort Lauderdale 7.6% (50)
New Haven-Fairfield County 4.3% (50)
Portland 5.8% (40)
Boston 6.2% (30)
Louisville 6.7% (20)
New York 3.0% (20)
Oakland-East Bay 5.5% (20)
Phoenix 11.5% (20)
Sacramento 7.1% (10)
Washington, D.C. 6.3% (10)
U.S. Average 7.8% 10
Bottom 15Markets
2Q 2010 Vacancy
Y-O-Y Bps Change
Detroit 7.9% 30
Minneapolis 5.1% 40
Charlotte 10.5% 40
Cincinnati 7.7% 40
Palm Beach 8.6% 40
Tampa-St. Petersburg 9.8% 40
Dallas-Ft. Worth 8.9% 50
Orlando 11.0% 50
Oklahoma City 10.2% 60
Kansas City 9.4% 80
Houston 12.4% 90
Las Vegas 11.1% 100
Indianapolis 9.6% 110
Salt Lake City 7.1% 120
Columbus 9.7% 170
U.S. Average 7.8% 10
Sources: Marcus & Millichap Research Services, Reis
Apartment Vacancy by ClassNew Haven-Fairfield County
0%
2%
4%
6%
8%
00 01 02 03 04 05 06 07 08 09 10*
Class A Class B/C
Ave
rag
e V
acan
cy R
ate
* Through 2QSources: Marcus & Millichap Research Services, Reis
Apartment Vacancy Ranking by Submarket
New Haven-Fairfield County
Submarkets2Q
20092Q
2010Bps
Change
New Haven Harborside 3.2% 3.1% -10
Naugatuck/Waterbury 3.8% 3.6% -20
West Fairfield County 5.0% 4.5% -50
East Fairfield County 6.6% 5.8% -80
North Haven/Wallingford/Meriden 3.3% 2.4% -90
Metro Average 6.1% 6.0% -10
Sources: Marcus & Millichap Research Services, Reis
Apartment Asking Rent Trends New Haven-Fairfield County
-8%
-4%
0%
4%
8%
Metro United States
2002-2009 2010*
* ForecastSources: Marcus & Millichap Research Services, Reis
Ask
ing
Ren
t A
nn
ual
Ch
ang
e
$1,544$1,036
2% to 3% annual growth
Apartment Metro Effective Rent Growth Ranking2Q 2010
Top 15Markets
2Q 2010Eff. Rent
Y-O-Y % Change
San Diego $1,256 1.3%
San Antonio $648 0.8%
New Haven-FF County $1,465 0.3%
Fort Lauderdale $995 0.1%
Seattle-Tacoma $909 0.0%
Tucson $596 -0.2%
Washington, D.C. $1,272 -0.2%
Salt Lake City $682 -0.3%
Oklahoma City $514 -0.4%
St. Louis $662 -0.5%
Chicago $964 -0.5%
Atlanta $736 -0.5%
Cleveland $685 -0.6%
Austin $765 -0.6%
Philadelphia $957 -0.8%
U.S. Average $946 -1.4%
Bottom 15Markets
2Q 2010Eff. Rent
Y-O-Y % Change
Palm Beach $993 -2.2%
Dallas-Ft. Worth $690 -2.3%
Phoenix $678 -2.3%
Milwaukee $772 -2.4%
Los Angeles $1,311 -2.5%
San Francisco $1,673 -2.5%
Indianapolis $613 -2.5%
Houston $688 -2.7%
Oakland-East Bay $1,190 -3.0%
Sacramento $828 -3.0%
Orange County $1,401 -3.3%
Tampa-St. Petersburg $751 -3.5%
San Jose $1,317 -3.8%
Orlando $767 -4.1%
Las Vegas $755 -4.4%
U.S. Average $946 -1.4%
Sources: Marcus & Millichap Research Services, Reis
Investment TrendsApartment
$0
$25
$50
$75
$100
02 04 06 08 10*
4%
6%
8%
10%
12%
Median Price Cap Rate
$0
$25
$50
$75
$100
02 04 06 08 10*
5%
6%
7%
8%
9%
Median Price Cap Rate
United StatesNew Haven-Fairfield County
Med
ian
Pri
ce p
er U
nit
(00
0s)
Averag
e Cap
Rate
Med
ian
Pri
ce p
er U
nit
(00
0s)
Averag
e Cap
Rate
* Through 1H 2010Sales $500,000 and greaterSources: Marcus & Millichap Research Services, Reis
0
75
150
225
300
375
02 03 04 05 06 07 08 09 1H09
1H10
$1M-$9.99M $10M-$19.99M $20M+
Tota
l Tra
nsa
ctio
ns
(000
s)
Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics
$0
$1
$2
$3
$4
02 03 04 05 06 07 08 09 1H09
1H10
$1M-$9.99M $10M-$19.99M $20M+
Tota
l Do
llar
Vo
lum
e (B
il.)
Total Dollar VolumeTotal Transactions
Apartment Sales TrendsNew Haven-Fairfield County
U.S. Apartment Buyer Composition
13%5%
2%
1%3%
10%
4%
9%
3%
2%
65%
84%
0%
25%
50%
75%
100%
2008 2009*
Private
User/Other
Equity Fund
Public
Foreign
Institutional
Sales $5 Million and greaterSources: Marcus & Millichap Research Services, Real Capital Analytics
* YTD through September
Per
cen
t o
f S
ales
Vo
lum
e
$0
$25
$50
$75
$100
$125
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
5%
6%
7%
8%
9%
10%
Average Price Cap Rates
* EstimateIncludes sales $1Million and GreaterSources: Marcus & Millichap Research Services, Costar Group, Inc.
National Apartment Price and Cap Rates
Ave
rag
e P
rice
per
Un
it (
000s
)A
verage C
ap R
ate
24 – Month Cap Rate Adjustment Matrix *
Primary
Secondary
Tertiary
Class “A” Class “B” Class “C”
1.00 1.25 1.75
1.25 1.75 2.25
2.25 2.752.00
* Change in cap rates last 24 months
24 – Month Pricing Adjustment Matrix
Primary
Secondary
Tertiary
Class “A” Class “B” Class “C”
-20% -23% -32%
-24% -30% -36%
-33% -35% -41%
* Change in property value last 24 months
Why the Long-Term Outlook for U.S. Apartments is Extremely Favorable
U.S. will experience a fundamental change in housing dynamics favoring the density, efficiency, flexibility and affordability of apartment living:
1. Population growth2. Changing demographics3. Environmental concerns4. Budget / expense factors5. Sharp decrease in new supply6. Affordability7. Rent vs. own
Population Dynamics
250
270
290
310
330
350
370
390
2000 2030
U.S. population is expected to increase 33% by 2030 to 376 million.
To accommodate this growth, the nation needs 60 million new housing units.
Mill
ions
94 Million
Demographic Dynamics
Married couples with children are projected to decline to under 1 in 5 households by 2025
Singles and un-related individuals living together will comprise 1 in 3 households by 2020
78 million echo boomers are getting ready to enter their prime renting years
10 million legal immigrants will enter the country in next ten years
7.4 Million Net New Households
3.2 MillionNew Renter Households
4.1 MillionNew Owner Households
* ForecastSources: Marcus & Millichap Research Services, Economy.com, Harvard University
U.S. Household Growth Projection2010 - 2015*
56%
44%
Own Rent
Budget / Fiscal Dynamics
Urban / suburban sprawl is expensive Compact development reduces infrastructure
costs and saves money The U.S. can save over $100 billion in
infrastructure costs over 25 years by growing compactly
State of Connecticut Apartment Sales 2000 - 2010
2010 (as of 10/1): 1,131 units traded for $94,399,0002009: 2,251 units traded for $188,532,8802008: 5,532 units traded for $758,785,0002007: 6,247 units traded for $891,958,998
2010
Connecticut Commercial Real Estate Conference
Steve Witten, Senior Director265 Church Street, Suite 210
New Haven, CT 06510203.672.3320