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Page 1: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook
Page 2: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Emerging Trends in Real Estate 2014

• Emerging Trends is the industry’s most predictive forecast

• 35th annual outlook

• Based on over 1,000 interviews and surveys of industry leaders

• Sponsored by PwC and the Urban Land Institute

Page 3: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Emerging Trends Scorecard: How did we do?

2013 Trend Yes No ?

Highlighted slow recovery

Warned of continued political uncertainty

Warned of fiscal cliff

Noted beginning of move to secondary markets

Warned on multifamily overbuilding in 2015

Highlighted mezzanine and preferred equity investments

Change in tenant demand and use of office space

Highlighted reurbanization of suburbs

Page 4: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Emerging Trends Scorecard: How did we do?

2013 Trend Yes No ?

Noted commercial developer headwinds

Highlighted chasing yield strategy

Noted increase in transaction volume

Consider single family housing funds

Focus on infill locations

Develop “new wave” office in 24-hour cities

Develop industrial in distribution hubs

Slow multifamily development in low barrier to entry markets

Page 5: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Fundamentals continue to improve…slowly… across all property groups and property markets

2014 expected to continue trends in employment (modest growth) and increasing demand for space

2014 likely to be last year industry benefits from 6 years of little increase in supply

Interviewees see industry reaching an inflection point where “valuations will no longer be driven by capital markets,” leverage, and financial engineering

Interest rates universally anticipated to increase; it’s the magnitude of the increase that is uncertain

Gaining Momentum

Page 6: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Investment Prospects by Asset Class

4.62

4.96

5.49

5.57

5.78

6.43

1 2 3 4 5 6 7 8 9

Investment-grade bonds

Commercial mortgage backed securities

Publicly listed equities

Publicly listed property companies or REITS

Publicly listed homebuilders

Private direct real estate investments

2014 2013 2012 2011

Source: Emerging Trends in Real Estate surveys

Abysmal Fair Excellent

Page 7: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

5.0 5.4 5.4 5.3

4.7 4.3

4.6

5.3 5.6 5.8

0

1

2

3

4

5

6

7

8

9

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Average Market Score

Investment Prospects

Excellent

Fair

Poor

Source: Emerging Trends in Real Estate surveys

Page 8: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Average Property Score

Source: Emerging Trends in Real Estate 2014 survey

Note: Based on US respondents only

Abysmal Fair Excellent

0 1 2 3 4 5 6 7 8 9

Retail

Office

Apartment Residential (Rental)

Hotels

Industrial/Distribution

Investment Development

Page 9: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Issues of importance for real estate Economic/Financial Issues

none moderate great

Source: Emerging Trends in Real Estate 2014 survey

Note: Based on US respondents only

3.50

3.60

3.61

3.68

4.11

4.46

4.63

0 1 2 3 4 5

Federal fiscal deficits/imbalances

Global economic growth

Tax policies

Inflation

Income and wage growth

Interest rates

Job growth

Page 10: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Issues of importance for real estate Real Estate/Development Issues

none moderate great

Source: Emerging Trends in Real Estate 2014 survey

Note: Based on US respondents only

3.58

3.58

3.59

3.85

3.99

4.03

0 1 2 3 4 5

Infrastructure funding/development

Future home prices

Refinancing

Land costs

Vacancy Rates

Construction costs

Page 11: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

“With the economy in a position where the tailwinds are now stronger than the prevailing headwinds, 2014 should be a year when we see real estate fundamentals improve in sectors beyond the very healthy rental growth multifamily sector—and in a number of markets—to a point where we could see above-inflation-rate rental growth”

Page 12: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

A “stubbornly high’ unemployment rate

Uncertainty over government regulation and fiscal policy

Likely increase in the cost of both equity and debt capital

Economic uncertainty in the Euro-zone

China’s moderating economic growth

Headwinds Facing the Real Estate Industry

Page 13: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

“Good if not great” job growth in industries with high real estate utilization including: energy, technology, health care, and medical research Even education and financial services sectors are projected to support increased space needs in 2014 Increasing corporate profits Continuing recovery in the single-family housing industry

Tailwinds Benefiting the Real Estate Industry

Page 14: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Industry profitability expected to continue to improve

Interest rates anticipated to increase

Dependence on cap rate compression to drive increase in value to be replaced by emphasis on asset management

Markets are expected to be “well supplied” with both equity and debt capital

Emerging Trends: Key Drivers for 2014

Page 15: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Opportunities to develop property finally appear in sectors other than multifamily

Industry begins to notice and understand needs of both Gen Y and the baby boomers

Needs of end users of commercial space continue to evolve

The single family housing market continues to make a positive contribution to the overall economy

Emerging Trends: Key Drivers for 2014

Page 16: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Prospects for profitability by percentage of respondents

0%

10%

20%

30%

40%

50%

60%

70%

80%

2010 2011 2012 2013 2014

Abysmal to Poor

Modestly Poor toModestly Good

Good to Excellent

Source: Emerging Trends in Real Estate surveys

Note: Based on US respondents only

Page 17: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

The beginning of the “middle innings” of the “recovery from the recovery”

Use of financial structuring and leverage as means to create value will be replaced by property operating skills

Focus will continue to shift from “solely core in gateway 24-hour” markets to overlooked markets and property sectors as well as value-added strategies including repositioning, re-leasing, re-tenanting, renovation, and the like

2014 Condensed

Page 18: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Capital markets

Page 19: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Prospects by Investment Category/Strategy

4.80

4.99

5.53

5.95

6.13

6.15

6.32

0 1 2 3 4 5 6 7 8 9

Distressed Debt

Distressed Properties

Core Investments

Core-plus Investments

Opportunistic Investments

Development

Value-added Investments

Abysmal Fair Excellent

Source: Emerging Trends in Real Estate 2014 survey

Note: Based on US respondents only

Page 20: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Change in Availability of Capital for Real Estate in 2014

5.38

5.70

6.00

6.12

6.18

6.43

0 1 2 3 4 5 6 7 8 9

Public Equity REITs

Private REITs

Private Local Investors

Private Equity/Opportunity/Hedge Funds

Institutional Investors/Pension Funds

Foreign Investors

Very large decline Stay the Same Very large increase

Equity source

Source: Emerging Trends in Real Estate 2014 survey

Note: Based on US respondents only

Page 21: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Change in Availability of Capital for Real Estate in 2014

4.55

5.54

5.95

6.00

6.03

6.12

6.24

0 1 2 3 4 5 6 7 8 9

Government Sponsored Enterprises

Mortgage REITs

Non-Bank Financial Institutions

Mezzanine Lenders

Insurance Companies

Commercial Banks

Securitized Lenders/CMBS

Very large decline Stay the Same Very large increase

Lending source

Source: Emerging Trends in Real Estate 2014 survey

Note: Based on US respondents only

Page 22: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Index Returns: Real Estate vs. Stocks/Bonds

-50.00%

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

FTSE NAREIT

NCREIF

S&P 500 Barclays Capital

Government Bond Index

Source: NCREIF, NAREIT, S&P, Barclays Group

Note: 2013 data annualized from second-quarter 2013

Page 23: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

NCREIF Cap Rates vs. U.S. Ten-Year Treasury Yields

Source: NCREIF, Moody’s Analytics, Federal Reserve Board

*Ten-year Treasury yields based on average of the quarter, 2013Q2 average is as of July 2013

Note: Cap rate based on four-quarter moving average of current-value cap rate

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

19

90Q

1

19

90Q

3

19

91Q

1

19

91Q

3

19

92Q

1

19

92Q

3

19

93Q

1

19

93Q

3

19

94Q

1

19

94Q

3

19

95Q

1

19

95Q

3

19

96Q

1

19

96Q

3

19

97Q

1

19

97Q

3

19

98Q

1

19

98Q

3

19

99Q

1

19

99Q

3

20

00Q

1

20

00Q

3

20

01Q

1

20

01Q

3

20

02Q

1

20

02Q

3

20

03Q

1

20

03Q

3

20

04Q

1

20

04Q

3

20

05Q

1

20

05Q

3

20

06Q

1

20

06Q

3

20

07Q

1

20

07Q

3

20

08Q

1

20

08Q

3

20

09Q

1

20

09Q

3

20

10Q

1

20

10Q

3

20

11Q

1

20

11Q

3

20

12Q

1

20

12Q

3

20

13Q

1

Cap Rate

10-Year Treasury*

Spread

Page 24: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Capital flows outlook Real estate capital market balance forecast for 2014

4.4%

26.0%

43.4%

23.5%

2.7%

1.8%

17.1%

26.9%

40.5%

13.7%

Substantially undersupplied

Moderately undersupplied

In balance

Modestly oversupplied

Substantially oversupplied

Equity capital for investing Debt capital for acquisitions

Source: Emerging Trends in Real Estate 2014 survey

Note: Based on US respondents only

Page 25: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Debt capital for specific uses

3.1%

24.1%

52.2%

17.2%

3.4%

15.9%

42.9%

30.2%

10.4%

0.7%

Substantially undersupplied

Moderately undersupplied

In balance

Modestly oversupplied

Substantially oversupplied

Debt capital for development Debt capital for refinancing

Source: Emerging Trends in Real Estate 2014 survey

Note: Based on US respondents only

Page 26: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Equity Underwriting Standards Forecast

26.6%

30.5%

29.7%

18.5%

40.6%

46.7%

50.7%

50.8%

32.8%

22.8%

19.6%

30.7%

2011

2012

2013

2014

More rigorous Remain the same Less rigorous

Source: Emerging Trends in Real Estate 2014 survey

Note: Based on US respondents only

Page 27: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Debt Underwriting Standards Forecast

29.8%

33.0%

39.1%

17.4%

29.2%

35.1%

41.5%

39.4%

41.0%

31.9%

19.4%

43.3%

2011

2012

2013

2014

More rigorous Remain the same Less rigorous

Source: Emerging Trends in Real Estate 2014 survey

Note: Based on US respondents only

Page 28: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Top Real Estate Capital Markets Trends

Page 29: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Emerging trends barometer 2014

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Buy

Sell Hold

Source: Emerging Trends in Real Estate surveys

Note: Based on US respondents only

Excellent

Poor

Fair

Abysmal

Good

Page 30: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Real Estate Capital Flows

Survey participants anticipate an increase in both equity and debt capital

Equity investors will continue to expand search for yield, turning focus from solely core in 24-hour markets to a wider geography and range of asset classes

Lender’s return to corporate profitability “allows them to get back in the game”

For both investors and lenders, real estate provides an increasingly attractive investment alternative

Page 31: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Increase in Availability of Debt Capital

Respondents expect an increase in availability of debt capital from five sources

CMBS (securitized) market

Commercial banks

Life insurance companies

Mezzanine lenders

Non-bank financial institutions

Page 32: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

CMBS Revival Continues

Survey participants ranked CMBS first in terms of change in availability of capital for real estate in 2014

2013 transaction volume expected to exceed $80 billion; 2014 originations anticipated to exceed $100 billion

CMBS lenders continue to fill the gaps left by conventional lenders in terms of deal size (under $25 million) and property location (secondary versus solely primary locations)

Page 33: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Commercial Banks

Expected increases in interest rates (and profitability) will make real estate lending increasingly attractive

Regional and local banks are expected to become increasingly active as real estate lending returns to become a major part of their business model

National banks, searching for opportunities, will increasingly compete on a regional and local basis

Development and construction loans will become increasingly available for borrowers with strong credentials and track records, and properties with substantial pre-leasing

Page 34: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2,013

Construction and development loans noncurrent rate

Multifamily mortgages noncurrent rate

Commercial mortgages noncurrent rate

Bank Real Estate Loan Delinquency Rates

Source: Federal Deposit Insurance Corp.

Note: Delinquent loans defined her as those that are noncurrent, either 90 days or more past due or in noncurrent status

*as of second quarter 2013

Page 35: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Dealing with problem loans

12.9%

25.9%

56.7%

4.5%

14.9%

23.6%

54.7%

6.9%

14.8%

25.4%

53.5%

6.3%

Foreclose and dispose

Sell to a third party

Extend with mortgage modification

Extend without mortgage modification

Preferred strategy for lenders

2012

2013

2014

Source: Emerging Trends in Real Estate 2014 survey

Note: Based on US respondents only

Page 36: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

0

1

2

3

4

5

6

7

8

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Delinquency

Life insurers mortgage delinquency and in-foreclosure rates

Source: Moody’s Analytics, American Council of Life Insurers

In-foreclosure

%

Page 37: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Mezzanine Financing

Interviewees and survey participants seem of two minds regarding the roll of mezzanine financing in 2014

“The biggest question on mezzanine is where the returns are going to be. If mezzanine rates don’t increase enough and we don’t feel we’re getting paid enough, we’ll stop. At a 200 [basis point] difference, we don’t think we’re getting paid for the risk.”

Other interviewees predict an “increase in B-piece, mezzanine, and debt funds to fill gaps in transaction structure” and “an increase in the use of mezzanine financing combined with higher-cost senior debt.”

Page 38: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Shadow Banking

Shadow banking is commercial lending outside of the regulated universe of insured depository institutions and life insurance companies

While not the “lender of last resort”, borrowers in the shadow banking market will find themselves dealing with a “hodge-podge “ of well capitalized private funds, wealthy individuals, family offices, refugees from other lending markets and the like who are in this market solely because the spreads are attractive

Page 39: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Equity Sources

Foreign investors

Private equity funds

Pension funds

Equity REITs

Page 40: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Markets to watch

More markets begin to look attractive

Page 41: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

The lack of new supply has allowed the steady nature of the economic recovery to drive improvement in real estate

41%

16%

6%

57%

39%

28%

65%

47%

59%

0%

10%

20%

30%

40%

50%

60%

70%

Investment Prospects Development Prospects Homebuilding Prospects

Percent of markets ranked moderately good or better

2012

2013

2014

Source: Emerging Trends in Real Estate 2014 survey Note: Based on US respondents only

Page 42: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Changing positions Best and worst

-15

-10

-5

0

5

10

15

20 La

s V

eg

as

Sa

cr

am

en

to

Atla

nta

Inla

nd

Em

pir

e

Ph

oe

nix

St. L

ou

is

Ind

ian

ap

olis

Ta

mp

a/S

t. Pe

ter

sb

ur

g

Na

sh

ville

Sa

n A

nto

nio

Alb

uq

ue

rq

ue

Milw

au

ke

e

Ba

ltimo

re

Ra

leig

h/D

ur

ha

m

Ho

no

lulu

/Ha

wa

ii

Vir

gin

ia B

ea

ch

/No

rfo

lk

We

stc

he

ste

r/F

air

field

Ok

lah

om

a C

ity

No

rth

er

n N

ew

Je

rs

ey

Wa

sh

ing

ton

, DC

Rank Change from 2013

Position change

Source: Emerging Trends in Real Estate surveys Note: Based on US respondents only

Page 43: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Outlook improves for more markets

Markets with Investment Prospects of Good or Better

2011 2012 2013 2014

New York City Austin Austin Austin

Washington D.C. Boston Boston Boston

New York City Houston Dallas/Ft. Worth

San Francisco New York City Houston

San Jose San Francisco Miami

Seattle San Jose New York City

Washington D.C. Seattle Orange County

Portland

San Francisco

San Jose

Seattle

Page 44: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

7.0

7.0

6.8

6.8

6.8

6.8

6.7

6.6

6.6

6.6

6.9

6.6

6.7

6.6

6.4

6.4

6.3

6.4

6.4

6.2

7.7

7.5

7.4

7.2

7.4

7.2

7.3

7.1

6.9

6.9

1. San Francisco

2. Houston

3. San Jose

4. New York

5. Dallas/Ft. Worth

6. Seattle

7. Austin

8. Miami

9. Boston

10. Orange County, CA

Top 10 total rank 2014

Investment Development Homebuilding

Source: Emerging Trends in Real Estate 2014 survey Note: Based on US respondents only

Page 45: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

6.5

6.5

6.5

6.3

6.5

6.4

6.3

6.4

6.5

6.3

6.1

6.2

6.2

6.1

5.9

5.9

5.9

6.0

5.9

6.3

6.8

6.8

6.7

6.8

6.7

6.8

6.8

6.5

6.3

5.9

11. Denver

12. Nashville

13. Los Angeles

14. San Antonio

15. San Diego

16. Charlotte

17. Raleigh/Durham

18. Salt Lake City

19. Portland, OR

20. Minneapolis/St. Paul

Next 10 markets 2014

Investment Development Homebuilding

Source: Emerging Trends in Real Estate 2014 survey Note: Based on US respondents only

Page 46: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

The impact of uncertainty Impact on the outlook for Washington, DC

0

5

10

15

20

25

30

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Rank Score

The outlook for Washington, DC succumbs to fed fatigue

Market Rank Investment Score

Excellent

Fair

Poor

Source: Emerging Trends in Real Estate surveys

Note: Based on US respondents only

Page 47: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Top 10 investment markets

2014 2013 Rank

Change

1. Houston 7.00 6.84 +4

2. San Francisco 6.98 7.21 -1

3. New York 6.84 7.14 -1

4. Seattle 6.83 6.72 +2

5. San Jose 6.78 6.89 -2

6. Dallas/ Fort Worth 6.76 6.47 +4

7. Austin 6.69 6.71 -

8. Boston 6.64 6.85 -4

9. Orange County, CA 6.60 6.48 -

10. Miami 6.57 6.47 +1

Page 48: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Top 10 development markets

2014 2013 Rank

Change

1. San Francisco 6.88 6.87 -

2. San Jose 6.75 6.58 +1

3. Houston 6.64 6.36 +2

4. New York 6.58 6.76 -2

5. Miami 6.38 5.89 +6

6. Dallas/Fort Worth 6.37 6.20 +1

7. Seattle 6.36 6.13 -1

8. Boston 6.35 6.31 -2

9. Minneapolis/St. Paul 6.27 5.06 +16

10. Austin 6.25 6.40 -6

Source: Emerging Trends in Real Estate 2014 survey Note: Based on US respondents only

Page 49: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Top 10 homebuilding markets

2014 2013 Rank

Change

1. San Francisco 7.74 6.80 -

2. Houston 7.48 6.15 +4

3. San Jose 7.40 6.58 -1

4. Dallas/Fort Worth 7.36 5.86 +6

5. Austin 7.34 6.26 -

6. New York 7.19 6.42 -3

7. Seattle 7.19 6.14 -

8. Miami 7.06 5.44 +8

9. Boston 6.87 6.05 -1

10. Orange County, CA 6.85 5.91 -1

Source: Emerging Trends in Real Estate 2014 survey Note: Based on US respondents only

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Markets: 2014 emerging trends Markets: 2

Page 51: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

East coast

Boston 6.6

Washington DC 5.9

New York 6.8

Providence 4.3

Pittsburgh 5.5

Philadelphia 5.6

Northern NJ 5.9

Westchester/ Fairfield, CT 5.5

Baltimore 5.1

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West coast

Seattle 6.8

San Francisco 7.0

Los Angeles 6.5

Portland 6.5

San Jose 6.8

Sacramento 5.0

Inland Empire 5.9

Orange County 6.6

San Diego 6.5

Honolulu 5.7

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Southwest

Las Vegas 5.5

Phoenix 6.1

Tucson 5.1

Albuquerque 4.6

Oklahoma City 4.8

Denver 6.5

Dallas 6.8

Houston 7.0

Austin 6.7

San Antonia 6.3

Salt Lake City 6.4

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Southeast

Atlanta 6.1

New Orleans 4.5

Charlotte 6.4

Raleigh/Durham 6.3

Nashville 6.5

Memphis 4.5

Virginia Beach/Norfolk 5.2

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Florida

Miami 6.6

Jacksonville 5.0

Tampa 6.0

Orlando 5.9

Page 56: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Midwest

Minneapolis 6.3

Kansas City 5.3

St. Louis 5.2

Chicago 6.1

Indianapolis 5.3

Cincinnati 5.0

Columbus 4.9

Cleveland 4.2

Milwaukee 4.8 Detroit 3.1

Page 57: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Property type outlook

Industrial leads the pack

Page 58: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Industrial takes the top spot

5.72

5.76

6.14

6.23

6.45

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00

Retail

Office

Apartment Residential (Rental)

Hotels

Industrial/Distribution

Prospects for major commercial property types in 2014

Source: Emerging Trends in Real Estate 2014 survey Note: Based on US respondents only

Abysmal Fair Excellent

Page 59: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Subsector outlook shows diversity of recovery

4.93

4.95

5.29

5.72

5.92

6.00

6.08

6.11

6.17

6.30

6.56

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00

Suburban Office

Power Centers

Regional Malls

R&D Industrial

Apartment Rental--high-income

Neigh./Community Shopping Ctrs.

Central City Office

Full-Service Hotels

Limited-Service Hotels

Apartment Rental--moderate-income

Warehouse Industrial

Prospects for commercial subsectors in 2014

Source: Emerging Trends in Real Estate 2014 survey Note: Based on US respondents only

Abysmal Fair Excellent

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Subsectors with the most promise

Good

Fair

Poor

Source: Emerging Trends in Real Estate surveys Note: Based on US respondents only

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Central City Office Full-Service Hotels Limited-Service Hotels Warehouse Industrial

Excellent

Abysmal

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Middle of the pack subsectors

Good

Fair

Poor

Source: Emerging Trends in Real Estate surveys Note: Based on US respondents only

Excellent

Abysmal 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

R&D Industrial Apartment, High Income

Apartment,Moderate Income Neigh./Community Shopping Ctrs.

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Trailing subsectors

Good

Fair

Poor

Source: Emerging Trends in Real Estate surveys Note: Based on US respondents only

Excellent

Abysmal 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Suburban Office Power Centers Regional Malls

Page 63: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Commercial development begins to look up

4.58

4.63

5.31

5.52

6.74

0 1 2 3 4 5 6 7 8 9

Office

Retail

Hotels

Apartment Residential (Rental)

Industrial/Distribution

Prospects for major commercial property types in 2014

Source: Emerging Trends in Real Estate 2014 survey Note: Based on US respondents only

Abysmal Fair Excellent

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Development prospects reflect where market is strongest

3.43

3.55

3.92

4.96

5.11

5.14

5.23

5.52

6.00

6.25

6.44

0 1 2 3 4 5 6 7 8 9

Regional Malls

Suburban Office

Power Centers

Full-Service Hotels

R&D Industrial

Central City Office

Neigh./Community Shopping Ctrs.

Limited-Service Hotels

Apartment Rental--moderate-income

Apartment Rental--high-income

Warehouse Industrial

Prospects for commercial subsectors in 2014

Source: Emerging Trends in Real Estate 2014 survey Note: Based on US respondents only

Abysmal Fair Excellent

Page 65: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Some changes in what investors want to buy Investment recommendation of survey respondents

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

Power Centers

Regional Malls

Apartment Rental--high-income

Suburban Office

R&D Industrial

Apartment Rental--moderate-income

Full-Service Hotels

Central City Office

Neigh./Community Shopping Ctrs.

Limited-Service Hotels

Warehouse Industrial

Sell

Hold

Buy

Source: Emerging Trends in Real Estate 2014 survey Note: Based on US respondents only

Page 66: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Wrap up

Page 67: Emerging Trends in Real Estate® 2011 · 2020-07-09 · Emerging Trends in Real Estate 2014 •Emerging Trends is the industry’s most predictive forecast •35th annual outlook

Emerging Trends Scorecard: How will we do?

2014 Trend Yes No ?

Industry profitability continues to improve

Interest rates rise

More emphasis on property management and less on financial engineering

More capital expected to be available

Development opportunities outside of multifamily increase

Industry changes to meet generational needs

Needs of end users of space continue to change

Single family home market continues to improve