Understanding Market Trends

Presented to:AI Connect

Hilton Austin, Austin, Texas

Presented by:Del H. Kendall, MAI, CRE, FRICS

RERC Managing Director

Retail Trends

• E-Commerce– Strong Growth

• Store Formats– Survival of the Fittest– Coping with E-Commerce

• Changing Consumers• Millennial’s Driving Change• Ethnic Diversity

E-Commerce

• Total retail sales increase 2.6% from Jan. 2013 to Jan. 2014-Total Volume $427.8 Billion

• Biggest growth rate of 6.5% for non-store retailers, includes e-commerce.

• Only 1% of over 1,000 surveyed never had shopped online; 72% at least once per month.

E-Commerce Growth

Source : U.S. Census Bureau

201220112010200920082007200620052004200320022001200019990

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

E-Commerce and Mail Order Retail sales (millions)Other merchandise2

Toys, hobby goods, and games

Sporting Goods

Office equipment and supplies

Music and videos

Furniture and home furnishings

Food, beer, and wine

Electronics and appliances

Drugs, health aids, and beauty aids

Computer software

Computer hardware

Clothing and clothing accessories (includes footwear)

Books and magazines

Retail TrendsE-Commerce Vs. Brick & Mortar

Jan-1992Apr-1994 Jul-1996 Oct-1998 Jan-2001Apr-2003 Jul-2005 Oct-2007 Jan-2010Apr-2012

50,000

100,000

150,000

200,000

Total Retail Less Internet/MailInternet and Mail Order Retail Sales

E-Commerce Trends

Source: U.S. Census Bureau

Changing Store Landscape

• Collateral Damage of E-Commerce– Circuit City, Linens and Things failed, Radio Shack closing

stores and restructuring

• Expansion of Winners and New Entries

• Decline of the Mall, Rise of the Lifestyle Center

Retail-The Growth Story

Evolution of Retail Concepts

Millennials Influence on Buying

• Omni-Channel Integration– 55% of consumers search brands on Facebook

• Rent v. Buying– Doubling in 2014 of Luxury & Sporting Goods,

Tools

• 70% would try clothing made from a 3D Printer

• Cashless Society– 62% of consumers had less than $20 on hand

INDUSTRIAL DEMAND

Industrial Trends

• Warehouses Moving Closer to Consumer– Same/next day shipping– Amazon

• agreed to collect sales tax• Building 50 warehouses of one million square feet each

• Amazon: Seattle, New York and the UK have automated lockers in drug stores and convenience stores to place deliveries

Changing Rental Patterns

• Millennials– Marrying later and less often (median age of marriage has

gone from 24.7 to 29 and 22 to 26.6 for men and women respectively over since 1980)

– High amounts of debt and poor job prospects out of college (Secured debt of people under 35 has gone from $59,019 to $76,500 from 2000 to 2011)

– Prefer downtown urban environment closer to work– Technology, apartments have latest technology installed– Living at home (age 25 to 34 living at home-10.2% in 2003

to 13.92% in 2013)

Single Vs. Married Homeowners

19821984

19861988

19901992

19941996

19982000

20022004

20062008

20102012

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Percentage of single homeownersPercentage of married homeowners

Homeownership Declining

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201363.0

64.0

65.0

66.0

67.0

68.0

69.0

70.0Homeownership Rates

Homeownership Rates

Demographic Trends• More ethnically diverse

– Lower incomes support higher renter population– Many immigrant families are larger, demanding larger units

• Less mobile residents– Number of movers 17.3% in 1991 to 11.7% in 2012

• Smaller household sizes– persons per household at 2.54 people per household

Development Trends• Apartment Rents/sf exceeding Office Rents (especially in urban

downtowns)• Adaptive Re-use to Apartments

– Office vacancies high, leaving hundreds of millions of square feet vacant

– Places like NYC, Cincinnati, Baltimore, Richmond, all have record number of conversions under way

• Both Buffalo, NY, and Providence, RI are discussing turning their tallest building in town into apartments

AI Connect

Understanding Market Trends

Presented by:Del H. Kendall, MAI, CRE, FRICS

RERC Managing Director