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RESILIENT RISING&
Portland State of the Market2016
Portland – why all the hype?
#1 #1
#1
#1 #1
#1 #1
#3Overall real estate prospects – ULI
Emerging Trends in Real Estate 2017#1
Healthiest EconomyBloomberg - Economic Evaluation of States 2016
Top Moving DestinationUnited Van LinesNational Movers Study 2013-2015
Most Craft BreweriesCurrently 105 microbreweriesin the PDX Metro, the most of any American city
Hottest Housing MarketStandard & Poor's/Case Shiller home-price index October 2015-September 2016
Highest GDP GrowthOregon has the fastest real GDP
growth in the nation at 3.9%in Q1 2016
Highest Job GrowthOregon has the highest
employment growth in the nation at 3.5% for September 2016
Best Food City in America
Washington Post - 2016
Best AirportTravel + Leisure – America’s Best Airports
2013-2016
Source: JLL Research
4
Acknowledging the elephant in the room…
Source: JLL Research
= ?2
-17.7%
-7.1%
Volume declines
26.9%
41.4%
Secondary volumes (%)
106 bps
111 bps
Pricing gap (Primary-Secondary)
25 / 16
18 / 13
VIX(Max / Avg)
Q2
Q3
Moderating volatility spurring reemergence of cautious optimism
Source: JLL Research, Bloomberg, NCREIF, Real Capital Analytics (Transactions larger than $5.0m)
2
1Secondary markets are the new norm
A new hierarchy emerging for CRE investment
7
Source: JLL Research
High-growth secondary markets—notably, Portland and Charlotte—emerging as ‘transitional’ markets between old and new guard
90
110
130
150
170
190
210
230
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
JLL O
ffice M
arke
t Mom
entum
Inde
x (10
0 = 20
03)
San Francisco, New York,Boston, Seattle
Charlotte, Atlanta, DenverRaleigh, Dallas
Minneapolis
United States
Portland
These factors in aggregate are supporting strong total—and appreciation—returns
8
Source: JLL Research, NCREIF
Total returns (3-year avg.) Appreciation returns (3-year avg.)
0.0% 10.0% 20.0% 30.0%
MinneapolisRaleighSeattle
New YorkChicagoBostonDenverAtlantaDallas
Los AngelesPortland
CharlotteSan Francisco
Current peak Prior peak
-5.0% 0.0% 5.0% 10.0% 15.0%
MinneapolisRaleighSeattle
ChicagoDenver
New YorkAtlantaDallas
BostonCharlottePortland
Los AngelesSan Francisco
Current peak Prior peak
The other key word – Stability
9
Source: JLL Research
Volatility indices across total returns, rent growth and absorption (sorted by highest to lowest)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Los A
ngele
s
New
York
Chica
go
Bosto
n
Atlan
ta
Denv
er
Seatt
le
Char
lotte
Dalla
s
San F
ranc
isco
Ralei
gh
Portla
nd
Minn
eapo
lis
Total return volatility Rent growth volatility Absorption volatility
2A rising tide does not lift all boats
Divergent office pricing dynamics emerging across secondary markets
11
Source: JLL Research, NCREIF
Volatility indices across total returns, rent growth and absorption (sorted by highest to lowest)
-80 -60 -40 -20 0 20 40 60
HoustonRaleigh-DurhamOrange County
DallasFort Lauderdale
MiamiAtlantaDenver
MinneapolisPhoenix
CharlotteAustin
San DiegoPortland
NashvillePhiladelphia
OrlandoSalt Lake City
12-month cap rate change (basis points)
Compressing Stable
Softening
Sustained cap rate compression in Portland
3The herd will come
With this, office ownership composition has shifted dramatically
13
Source: JLL Research
Ownership landscape, Class A & B CBD office buildings greater than 50,000 square feet
38.3% 49.2% 57.5%
0
2
4
6
8
10
12
14
16
18
20
2005 2010 Today
CBD
office
inve
ntory
(milli
ons o
f squ
are f
eet)
Non-Institutional Institutional
+50%
Structural shift in tenant profiles supporting resilient fundamentals
14
Source: JLL Research, Moody’s
6,766
9,902
8,081
13,08
7
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
2009 2010 2011 2012 2013 2014 2015
Avg Size Tenant (s.f.) Avg Size CBD Tenant (s.f.)
+46%
+62% DenverPhoenix
PortlandOakland
San FranciscoLos Angeles
Seattle
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Office tenants are getting bigger… … and the economy is diverse
Has the window closed in Portland? 2017 presents opportunities for new and existing investors
15
Source: JLL Research; Includes office investment sales over $10.0m
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,00020
02
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
P
2017
F
2018
F
2019
F
2020
F
2021
F
Inves
tmen
t sale
volum
es (m
illion
s of $
US)
Sales will come from the following• Stabilized new
construction• Repositioned creative• Core suburban
Forecast
4Redefining the core
Redefining the core in Portland
17
Source: JLL Research, Includes sales greater than $10.0m
Portland’s expanding core
Redefining the core in Portland
18
Portland’s expanding core
Source: JLL Research, Includes sales greater than $10.0m
Redefining the core in Portland
19
Portland’s expanding core
Source: JLL Research, Includes sales greater than $10.0m
5… and then there were kids
Rent growth opportunity in desirable suburban locations
21
Source: JLL Research
$40.11
$33.13
$28.43$29.30
$14
$18
$22
$26
$30
$34
$38
$42
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Net e
ffecti
ve re
nts (p
.s.f.)
Trophy Class A, CBD Class B, CBD Class A, Kruse Way
+1%
+14%
-1%
+17%
+24%
+21%
+1%+4%
Prior-to-Current Peak
YoYChange
Closing thoughts
