lawrence yun - nar.realtor · 7/21/2020 · reit stock market returns by sectors...

Lawrence Yun

Chief EconomistNATIONAL ASSOCIATION OF REALTORS®

Economic Backdrop

2

Economy in 2020 Q1 down 5% … 2020 Q2 to be down much sharper

3

Total Payroll Jobs in the U.S.

4

115000

120000

125000

130000

135000

140000

145000

150000

1550002

00

0 -

Jan

20

00

- J

ul

20

01

- J

an

20

01

- J

ul

20

02

- J

an

20

02

- J

ul

20

03

- J

an

20

03

- J

ul

20

04

- J

an

20

04

- J

ul

20

05

- J

an

20

05

- J

ul

20

06

- J

an

20

06

- J

ul

20

07

- J

an

20

07

- J

ul

20

08

- J

an

20

08

- J

ul

20

09

- J

an

20

09

- J

ul

20

10

- J

an

20

10

- J

ul

20

11

- J

an

20

11

- J

ul

20

12

- J

an

20

12

- J

ul

20

13

- J

an

20

13

- J

ul

20

14

- J

an

20

14

- J

ul

20

15

- J

an

20

15

- J

ul

20

16

- J

an

20

16

- J

ul

20

17

- J

an

20

17

- J

ul

20

18

- J

an

20

18

- J

ul

20

19

- J

an

20

19

- J

ul

20

20

- J

an

In thousands

Payroll Jobs in Charleston, SC

5

200.0220.0240.0260.0280.0300.0320.0340.0360.0380.0400.0

20

00

- J

an

20

00

- J

ul

20

01

- J

an

20

01

- J

ul

20

02

- J

an

20

02

- J

ul

20

03

- J

an

20

03

- J

ul

20

04

- J

an

20

04

- J

ul

20

05

- J

an

20

05

- J

ul

20

06

- J

an

20

06

- J

ul

20

07

- J

an

20

07

- J

ul

20

08

- J

an

20

08

- J

ul

20

09

- J

an

20

09

- J

ul

20

10

- J

an

20

10

- J

ul

20

11

- J

an

20

11

- J

ul

20

12

- J

an

20

12

- J

ul

20

13

- J

an

20

13

- J

ul

20

14

- J

an

20

14

- J

ul

20

15

- J

an

20

15

- J

ul

20

16

- J

an

20

16

- J

ul

20

17

- J

an

20

17

- J

ul

20

18

- J

an

20

18

- J

ul

20

19

- J

an

20

19

- J

ul

20

20

- J

an

In thousands

Payroll Jobs in Detroit

6

New First-time Cases … Unemployment Check Filings… Cumulative 49 million

7

Total Ongoing Cases of Receiving Unemployment Checks … 18 million

8

Generous Unemployment Benefits due to $600 enhancement

9

Rent Strike? Weekly Census Survey of Households

10

9.9%

19.7% 19.4%17.6% 18.2% 18.8% 17.5% 18.9% 18.3%

16.6%

Percent of Renters Who Did Not Pay or Deferred Rent

Multifamily (Apartment) Construction Up or Down?

11

Federal Reserve … maximum Liquidity, including buying corporate bonds

12

Record Lows on 10-year Treasury and 30-year Mortgage Rates

13

Stock Market Price-to-Earnings Ratio

14

REIT Stock Market Returns by Sectors

15

-51

-40.1

-27.5

-26.4

-19

-13.6

-7.7

3.4

19.3

22.4

Lodging/Resorts

Retail

Health care

Office

Residential

All Equity REITS

Self-storage

Industrial

Infrastructure

Data Centers

Year-to date Returns on the FTSE Nareit U.S. Real Estate Index Series as of July 10 2020

Source: Nareit

Commercial Real Estate Property Price Index

16

Blowout Federal Budget Deficit

17

10% of Small Businesses Who Will Not Return

18

Remote Work will Outlast the VirusGartner Survey of Businesses

19

Follow the People … Location Change for Home Purchase

20

Forecast with Many Uncertainties

21

2019 2020Forecast

2021Forecast

GDP Growth 2.3% -4.5% +3%

Job Gains +2.2 million - 4 million + 2 million

10-Year Treasury 2.1% 0.9% 0.7%

Commercial Real Estate Price Index

7.4% -10% -3%

Thank You

22

Commercial Market Update:Multifamily and Office Markets

Gay Cororaton, Director of Housing & Commercial ResearchCommercial Real Estate WebinarJuly 21, 2020 | 11;30-12:30 pm EST

MULTIFAMILY

2

MULTIFAMILY SALES VOLUME: -81% Y/Y IN MAY 2020 (-79% ALL CRE SALES)

3

$75

$9.79

$23.0

$3.1$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0 '0

1Jan

'01A

ug

'02M

ar '0

2Oct

'03M

ay '0

3De

c '0

4Ju

l '0

5Fe

b '0

5Se

p '0

6A

pr

'06

No

v '0

7Ju

n '0

8Ja

n '0

8A

ug

'09

Mar

'09

Oct

'10

May

'10

De

c '1

1Ju

l '1

2Fe

b '1

2Se

p '1

3Ap

r '1

3No

v '1

4Ju

n '1

5Jan

'15A

ug

'16

Mar

'16

Oct

'17M

ay '1

7De

c '1

8Ju

l '1

9Fe

b '1

9S

ep

'20

Ap

r

Bill

ion

s

Volume of Acquisitions $2.5M+

Source: RCA

SALES VOLUME DECLINED IN PRIMARY CITIES, BUT INCREASED IN SECONDARY/TERTIARY CITIES

4 Source: RCA

Percent change in apartment sales volumeYTD May 2020 vs. YTD May 2019Columbus 120%Stamford 117%Indianapolis 116%Sacramento 93%East Bay 87%Nashville 76%St Louis 74%Memphis 48%Portland 45%Dallas 40%Orlando 40%Cleveland 32%Salt Lake City 31%Detroit 28%Kansas City 25%Raleigh/Durham 18%

Percent change in apartment sales volumeYTD May 2020 vs. YTD May 2019Hartford -75%Seattle -67%Chicago -63%Inland Empire -62%Palm Beach Co -58%San Diego -57%Orange Co -52%DC, MD, VA burbs -52%Philadelphia -51%Phoenix -48%Las Vegas -44%San Francisco -43%Boston -38%Los Angeles -20%Manhattan -7%

LEASING VOLUME (ABSORPTION) IN 2020 Q2: -81% Y/Y DECLINE

5Source: RealPage

134 132 138 141

188

34

2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020 Q2

Apartment Demand Slumped in 2020 Q2

LEASING DOWN IN GATEWAY CITIES, BUT UP IN SUN-BELT METROS

6

Source:RealPage

About three in 10 of the country’s 150 biggest markets suffered net move-outs from their apartment stocks in 2nd quarter.

RENT COLLECTION RISKS WEIGHING DOWN APARTMENT SECTOR

7 Source: NMHC ; https://www.nmhc.org/research-insight/nmhc-rent-payment-tracker/

https://www.nmhc.org/research-insight/nmhc-rent-payment-tracker/

CMBS 30-DAY DELINQUENCY RATE STILL TRENDING UP

8

Source: Trepp

10.32

3.292.66

0

2

4

6

8

10

12

Mar-20 Apr-20 May-20 Jun-20

CMBS 30-DAY DELINQUENCY RATE

CMBS 30-days delinquent Multifamily OFFICE

LOW VACANCY RATES WILL SUSTAIN RENT GROWTH

9

INCREASE IN MULTIFAMILY CONSTRUCTION IN MAY 2020 TO EASE RENT PRESSURE

10

Source: U.S. Census Bureau

$81.58

$77.34

$68.0

$70.0

$72.0

$74.0

$76.0

$78.0

$80.0

$82.0

$84.0

$86.0

Jan

/20

18

Mar

/20

18

May

/20

18

Jul/

2018

Se

p/2

018

No

v/20

18

Jan

/20

19

Mar

/20

19

May

/20

19

Jul/

2019

Se

p/2

019

No

v/20

19

Jan

/20

20

Mar

/20

20

May

/20

20

Value of Construction Put in Place,Multifamily, Seasonally Adjusted Annual Rate, in

Billion Dollars

628

355

0

100

200

300

400

500

600

700

Jan

/20

18

Mar

/20

18

May

/20

18

Jul/

2018

Se

p/2

018

No

v/20

18

Jan

/20

19

Mar

/20

19

May

/20

19

Jul/

2019

Se

p/2

019

No

v/20

19

Jan

/20

20

Mar

/20

20

May

/20

20

Housing Starts: Total Multifamily (SAAR, Thous.Units)

Source: US Census Bureau

OFFICE

11

OFFICE SALES VOLUME: -82% Y/Y IN MAY 2020 (-79% ALL CRE SALES)

12

$74.9

$9.79

$18.3

$2.3$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0 '0

1Jan

'01A

ug

'02M

ar '0

2Oct

'03M

ay '0

3De

c '0

4Ju

l '0

5Fe

b '0

5Se

p '0

6A

pr

'06

No

v '0

7Ju

n '0

8Ja

n '0

8A

ug

'09

Mar

'09

Oct

'10

May

'10

De

c '1

1Ju

l '1

2Fe

b '1

2Se

p '1

3Ap

r '1

3No

v '1

4Ju

n '1

5Jan

'15A

ug

'16

Mar

'16

Oct

'17M

ay '1

7De

c '1

8Ju

l '1

9Fe

b '1

9S

ep

'20

Ap

r

Bill

ion

s

Volume of Acquisitions $2.5M+

All commercial Office

13

OFFICE OCCUPANCY LOSS IN 2020 Q2: - 14M sf (~200 football fields); GROSS LEASING ACTIVITY: -53% IN 2020 Q2

14

NET DECREASE IN PRIMARY MARKETS IN 2020 Q2NET INCREASE IN LEASED SPACE IN SECONDARY/TERTIARY MARKETS

555,980.00

558,460.00

685,906.00

727,763.00

1,066,429

Salt Lake City

Seattle-Bellevue

Phoenix

Chicago

Atlanta

Top 5: Net increase in leased space (s.f.)

-710,634

-822,833

-1,317,937

-2,002,112

-5,206,475

Boston

Dallas

New Jersey

San Francisco

New York City

Top 5: Net decrease in leased space (s.f.)

Source: JLL

DECLINE IN DEMAND FOR CO-WORKING SPACES

15Source: JLL https://www.us.jll.com/en/trends-and-insights/research/office-market-statistics-trends

Largest increase in sublease space in markets that are highly exposed to tech, finance, and tourism jobs:

East Bay (+94.4%)Orlando (+90.3%)San Francisco (+71.4%)Charlotte (+62.7%)Denver (+53.1%)Raleigh (+44.9%) Pittsburgh (+41.0%)

https://www.us.jll.com/en/trends-and-insights/research/office-market-statistics-trends

16

ASKING RENTS FELL SLIGHTLY IN 2020 Q2

PRESSURES FOR RENT TO FALL DUE TO TENANT REQUESTS FOR:

- RENT ABATEMENT - TENANT IMPROVEMENT

ALLOWANCES

17

DECLINING SHARE OF OFFICE-CBD SALES SINCE 2012 IN PART DUE TO HIGH CBD PRICES

36%

0%

10%

20%

30%

40%

50%

60%

$0.0

$50.0

$100.0

$150.0

$200.0

$250.020

01

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Jan

-May

20

20

Bill

ion

sVolume of Office Acquisitions of $2.5M or over

CBD Suburban Share of CBD sales to total

Source: Real Capital Analytics

18

SUBURBAN OFFICE SPACE DEMAND FACTORS: LOWER PRICE + WORK FROM HOME

Price per square foot of office space CBD Suburb

San Francisco $978 $1,746Manhattan $703 $570Los Angeles $671 $419Nashville $642 $233Boston $617 $354Austin $587 $178San Jose $586 $487DC $494 $251East Bay $467 $212No NJ $400 $138San Diego $376 $293Sacramento $337 $185Denver $326 $213Chicago $277 $190Charlotte $259 $228Las Vegas $186 $239Raleigh/Durham $177 $248Cincinnati $97 $182Detroit $79 $172Total US $426 $240Source: Real Capital Analytics, Jan-May 2020 transactions

Note: Suburb office space associated with Manhattan is NYC Burroughs

Suburb office space associated with DC is DC-VA suburb

0.0500.0

1,000.01,500.0

2,000.02,500.03,000.03,500.04,000.04,500.05,000.0

CBD and Suburban Office Sales from Jan-May for $2.5M or more Properties

CBD Suburban

~500k NET NEW OFFICE-USING JOBS IN MAY-JUNE 2020

19

-27.5-14.4

-7.2-2

1.81.92.24.95.6710.711.514.516.418.1

42.251

117.7211.6

Computer Systems Design & Related Services Travel Arrangement & Reservation Services Management of Companies & Enterprises Waste Management & Remediation Services Office Administrative Services Advertising & Related Services Facilities Support Services Investigation & Security Services Specialized Design Services Scientific Research & Development Services Other Support Services Business Support Services Legal Services Architectural & Engineering Services Management & Technical Consulting Services Other Professional & Technical Services Accounting & Bookkeeping Services Services To Buildings & Dwellings Employment Services

466,000 Net Office-Using Payroll Job Gains in May and June 2020

Source: BLS Establishment Survey

Gay CororotonSenior Economist, Director of Housing and Commercial ResearchNATIONAL ASSOCIATION OF REALTORS®[email protected]

Brandon Hardin

Research Economist

NATIONAL ASSOCIATION OF REALTORS®

Retail Market

2

Retail Trade Employment Improves

3

15672

13287

13669

14399

12000

12500

13000

13500

14000

14500

15000

15500

16000

Retail Trade Employees, SA Thousands

Total Monthly Sales for Retail and Food Services Trends Upward

4

531,643527,273

483,476

412,766

487,708

524,306

0

100000

200000

300000

400000

500000

600000

January February March April May June

Mill

ion

s $

2020 Total Monthly Sales for Retail and Food Services

Total Monthly Sales for Non-Store Retail Slightly Decreases

5

83

79

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

Nonstore Retailers, SA Millions

Nonstore Retailers Elect. Shopping & M/O Houses

Total Monthly Sales for Food Services & Drinking Places Continue Upward Momentum

6

66,210

65,359

45,915

32,361

39,507

47,425

0

10000

20000

30000

40000

50000

60000

70000

January February March April May June

Mill

ion

s $

2020 Total Monthly Sales Food Services & Drinking Places

Food Delivery Monthly Sales Contract 10%

7

• Share of market:

45%

22%

8%

24%

24%

0

50

100

150

200

250

300

350

400

450

Ind

exed

Fo

od

Del

iver

y Sa

les*

* Sales are indexed to food delivery January 2018 (sales=100)Souce: Second Measure

Food Delivery Monthly Sales

DoorDash Grubhub Postmates Uber Eats

Retail Sales Transactions Fell 83%

8

$-

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May

'19 '19 '19 '19 '19 '19 '19 '19 '19 '19 '19 '19 '20 '20 '20 '20 '20

Bill

ion

s


Retail Sales Dollar Volume

Shops Centers All Retail

Retail Rent Payment Increases

9

91

54

5961

0

10

20

30

40

50

60

70

80

90

100

March April May *June

Source: Datex Property SolutionsNote: *as of mid-June

Percent of Retail Rent Paid March - June 2020

Industrial Market

10

Warehouse and Storage Employment Increases

11

1121

1134

1194

1060

1080

1100

1120

1140

1160

1180

1200

1220

1240

Jan/2020 Feb/2020 Mar/2020 Apr/2020 May/2020 June/2020

Warehousing and Storage Employees YTD, SA Thousands

Industrial Average Per Square Foot Increased By $2

12

$-

$20

$40

$60

$80

$100

$120

0

200

400

600

800

1000

1200

1400

1600


'19 '19 '19 '19 '19 '19 '19 '19 '19 '19 '19 '19 '20 '20 '20 '20 '20


Industrial Properties and Avg. Per Square Foot

# Props Avg. PSF

Industrial Sales Transactions Fell 70%

13

$-

$5

$10

$15

$20

$25

$30


'19 '19 '19 '19 '19 '19 '19 '19 '19 '19 '19 '19 '20 '20 '20 '20 '20

Bill

ion

s


Industrial Sales Dollar Volume

Flex Warehouse All Industrial

Industrial Only Sector to Decrease Delinquency Rates

14

0%

5%

10%

15%

20%

25%

30%

Industrial Retail Office Multifamily Lodging

Source: Trepp

CMBS Delinquency Rate by Property Type

Mar-20 Apr-20 May-20 Jun-20

lawrence yun - nar.realtor · 7/21/2020 · reit stock market returns by sectors...

Documents