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Global Research and Consulting Econometric Advisors CBRE Econometric Advisors Client Conference 2012 October 2, 2012 Session 1 | U.S. Property Market Outlook.

Published byOsborn Knight Modified over 9 years ago

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Presentation on theme: "Global Research and Consulting Econometric Advisors CBRE Econometric Advisors Client Conference 2012 October 2, 2012 Session 1 | U.S. Property Market Outlook."— Presentation transcript:

1 Global Research and Consulting Econometric Advisors CBRE Econometric Advisors Client Conference 2012 October 2, 2012 Session 1 | U.S. Property Market Outlook Presented by: Jon Southard, Managing Director and Director of Forecasting

2 CBRE | Page 2 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Two Groups for Vacancy vs. Historical Average Source: CBRE Econometric Advisors. Ratio – Vacancy to Historical Average

3 CBRE | Page 3 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Same Two Groups for Current Rent Growth Source: CBRE Econometric Advisors. Year-over-Year, % Rent Change

4 CBRE | Page 4 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 …Creates Leaders and Laggards in NCREIF Forecasts Source: CBRE Econometric Advisors

5 CBRE | Page 5 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Cap Rate Declines Ended, but Reversal At End of Five Year Window Source: CBRE Econometric Advisors

6 CBRE | Page 6 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 …And The Treasury Rate is Why Source: CBRE Econometric Advisors

7 CBRE | Page 7 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 But Wait, Using A Different Return Approach… Source: CBRE Econometric Advisors. Ignores Benefits of Property Management and Trading

8 CBRE | Page 8 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 But Wait, Using A Different Return Approach… Source: CBRE Econometric Advisors. Ignores Benefits of Property Management and Trading

9 CBRE | Page 9 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 For Unmanaged Office, NOI and Cap Rate Increase Mis-timed Index, 100 = 2012Q2 Source: CBRE Econometric Advisors.

10 CBRE | Page 10 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Simple Rent to NOI Relationship Index, 100 = 2012Q2 Source: CBRE Econometric Advisors.

11 CBRE | Page 11 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 …Whereas Multifamily Takes One Punch Index, 100 = 2012Q2 Sources: CBRE Econometric Advisors.

12 Global Research and Consulting Econometric Advisors CBRE Econometric Advisors Client Conference 2012 October 2, 2012 Market Strategies

13 CBRE | Page 13 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Office Markets that “Give You” Returns Source: CBRE Econometric Advisors. 5 Year IRR (%) NCREIF-based Cap Rate (%)

14 CBRE | Page 14 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 IRR Looks at Income Return, Rent Growth, and Rent Roll-down Source: CBRE Econometric Advisors. Office Markets IRRCap RateRent Growth % Avg Annual % St. Louis11.117.946.27 Salt Lake City10.706.514.82 Houston9.395.983.07 Pittsburgh9.347.996.75 San Francisco8.125.086.55 Sum of Markets1.895.524.26 Rent Growth Opportunity, But It’s Not Assured Office Markets IRRCap RateRent Growth % Avg Annual % Dallas6.475.917.62 Austin5.485.007.60 San Jose0.635.596.75 Minneapolis3.366.766.10 Boston2.885.175.99 Tucson2.035.945.88

15 CBRE | Page 15 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Can The Tortoise Match The Hare? Office Rent Growth, % Source: CBRE Econometric Advisors.

16 CBRE | Page 16 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 More Multi-housing Markets that “Give You” Returns Source: CBRE Econometric Advisors. 5 Year IRR (%) NCREIF-based Cap Rate (%)

17 CBRE | Page 17 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Multifamily Has No Roll-down Source: CBRE Econometric Advisors. Multi-housing Markets IRRCap RateRent Growth % Avg Annual % Detroit12.138.233.46 Austin10.635.475.37 San Francisco10.624.784.71 San Antonio10.216.604.08 Boston8.364.564.04 Salt Lake City8.236.094.15 Kansas City8.206.383.40 Orlando8.085.914.03 Sum of Markets5.804.793.27 Capital Costs or Low Capitalizations Can Keep Off List Multifamily Markets IRRCap RateRent Growth % Avg Annual % Phoenix6.545.165.48 Atlanta7.065.625.03 Las Vegas5.686.14.30 Tucson7.035.544.01 Dallas7.265.753.95 Oakland3.293.373.93

18 CBRE | Page 18 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Industrial Markets that “Give You” Returns Source: CBRE Econometric Advisors. 5 Year IRR (%) NCREIF-based Cap Rate (%)

19 CBRE | Page 19 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 IRR Looks at Income Return, Rent Growth, and Rent Roll-down Source: CBRE Econometric Advisors. Industrial Markets IRRCap RateRent Growth % Avg Annual % Wilmington11.627.635.48 Columbus11.219.765.86 Denver9.047.064.51 Kansas City8.858.081.32 Austin8.826.029.46 Houston8.376.434.47 Charlotte8.327.036.80 Sum of Markets3.246.27 5.24 Rent Growth Opportunity, But It’s Not Assured Industrial Markets IRRCap RateRent Growth % Avg Annual % San Jose2.875.828.22 Jacksonville2.676.337.81 Newark-0.845.687.56 Orange County3.025.657.55 Riverside-0.565.287.54 New York5.466.436.95

20 CBRE | Page 20 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 IRR Looks at Income Return, Rent Growth, and Rent Roll-down Source: CBRE Econometric Advisors. Rent Growth Is Only Retail Opportunity Retail Markets IRRCap RateRent Growth % Avg Annual % Denver3.016.138.36 Oklahoma City3.086.456.59 Austin4.786.515.51 Oakland0.166.15.47 Tucson1.456.045.39 Las Vegas-2.297.255.30 Retail Markets IRRCap RateRent Growth % Avg Annual % Sum of Markets1.056.154.26

21 CBRE | Page 21 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Employment Growth Isn’t Everything Source: CBRE Econometric Advisors. Annualized, % Change

22 CBRE | Page 22 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Tech and Energy Are Common Themes Source: Bureau of Labor Statistics, CBRE Econometric Advisors. Location Quotient = % of Total Emp / US % of Total Emp

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