1. Global Research and Consulting Econometric Advisors CBRE Econometric Advisors Client Conference 2012 October 2, 2012 Global Research and Consulting Econometric Advisors Session II | Aging, Labor Force and Immigration Presented by: Gleb Nechayev, Senior Economist Arthur Jones, Senior Economist Abigail Rosenbaum, Senior Economist Luciana Suran, Senior Economist

2. CBRE | Page 2 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Some Effects of an Aging Population Slower population, employment, and household growth Rising dependency ratio, costs of healthcare and social security Rising share of consumer demand with lower median income and higher income inequality Rising share of households with higher propensity to own (historically) but also demand for more affordable housing Changing retail consumption patterns

3. CBRE | Page 3 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Key Drivers of Real Estate Demand Sources: Bureau of the Census, BLS, CBRE Econometric Advisors. Average annual change, %

4. CBRE | Page 4 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Why is Population Growth Slowing? Source: “The Changing Demographic Profile of the United States”, CRS Report to the U.S. Congress. Per 1,000 population

5. CBRE | Page 5 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Population by Age: Levels Sources: Bureau of the Census, BLS, CBRE Econometric Advisors. Population, millions

6. CBRE | Page 6 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Population by Age: Growth Sources: Bureau of the Census, BLS, CBRE Econometric Advisors. Population, millions

7. CBRE | Page 7 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Aging Population Has an Impact on Job Market Sources: Bureau of Labor Statistics, Census Bureau.

8. CBRE | Page 8 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 More People Generally Means More Jobs Source: CBRE Econometric Advisors, Bureau of Labor Statistics, Census Bureau.

9. CBRE | Page 9 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Labor Force Contracted Cyclically for First Time… Source: Bureau of Labor Statistics. For the first time the labor force has actually declined

10. CBRE | Page 10 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Older People Staying More Attached to Labor Force Source: Bureau of Labor Statistics.

11. CBRE | Page 11 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 But Aging Population Will Present a Problem Source: Bureau of Labor Statistics, Census Bureau.

12. CBRE | Page 12 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Developed Economies Face Similar Issues Source: World Bank

13. CBRE | Page 13 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 U.S. Outlook Could Be Worse Source: European Commission.

14. CBRE | Page 14 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 No Return to Renting Among the Seniors Homeownership rate, % Age Sources: Bureau of the Census, CBRE Econometric Advisors.

15. CBRE | Page 15 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Don’t Just Bet on the Young to Provide Tenants! Sources: Bureau of the Census, CBRE Econometric Advisors. Scenario A assumes age-specific homeownership rates remain at current levels Scenario B assumes age-specific homeownership rates revert to long-term averages 2012-2016 growth in renter households, ths.

16. CBRE | Page 16 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Pent-Up Demand to Rent Among the Elderly? The reverse mortgage market is overpriced because of adverse selection, so elders rarely find it a good deal (only 1.3% of owners age 65+ have it). In theory, this means that there is pent-up demand to rent as a means of freeing up equity for covering living expenses. The elderly are on fixed income and very risk averse and rents are volatile. The cost of living in a fully owned home is constant, as is remaining in a fixed-rate mortgage market. One potential incentive/solution: longer leases for the elderly. Japan’s experience shows that long-term leases can be viable for the elderly, with rents fixed at higher levels than in typical short-term leases.

17. CBRE | Page 17 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Where is Pent-Up Rental Demand Among the Elderly? Factors explaining variation in propensities to rent among seniors across markets: ratio of median home price to median income of households age 65+ share of single-person households among total households age 65+ share of low-income and high-income households among total households age 65+ (renters by necessity and renters by choice)

18. CBRE | Page 18 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Who’s Spending the Most? Source: U.S. Census Bureau, Bureau of Labor Statistics.

19. CBRE | Page 19 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 What are the Elderly Spending Their Money On? Source: BLS.

20. CBRE | Page 20 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Retail Sales in Cities with 20% Fewer Workers Per Capita; (like the US as a whole in 2030) Source: Census Bureau, CBRE Econometric Advisors.

21. CBRE | Page 21 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 The Elderly Do Not Like to Drive (Average yearly vehicle miles traveled: 2009 NHTS) AgeTotal VMTNon-Work VMT 25-6418,20012,100 65-7511,0008,500 75-856,9006,100 85+4,4004,200 Source: NHTS.

22. CBRE | Page 22 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Age Profile of Native - Versus Foreign-Born in U.S. Source: Migration Policy Institute tabulations of the US Census Bureau's 2010 American Community Survey.

23. CBRE | Page 23 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Population Growth: Internal or External? Population growth between 2000 and 2010 and its components Source: OECD Population and Vital Statistics Database.

24. CBRE | Page 24 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Contribution of international migration to growth in the labor force, 2000-10 Source: OECD (International Migration Outlook 2012). Immigration and the Labor Force

25. CBRE | Page 25 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Immigration in the USA: Overview  40 million foreign-born people lived in the US in 2010 …making up 13% of the population  Per-country ceilings: Immigrants from a single country can’t exceed 7% of total immigrants annually  Annual worldwide limit of 675,000 legal immigrants Family reunification: up to 480k Diversity: 55k Employment-based: min. of 140k  Sharp contrast to systems in Canada, UK, and Australia

26. CBRE | Page 26 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Immigration in the US: 1975 to 2050 Source: National Research Council. (2012). Aging and the Macroeconomy. Long-Term Implications of an Older Population. Committee on the Long-Run Macroeconomic Effects of the Aging U.S. Population. Board on Mathematical Sciences and their Applications, Division on Engineering and Physical Sciences, and Committee on Population, Division of Behavioral and Social Sciences and Education. Washington, D.C.: National Academy Press.

27. CBRE | Page 27 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Who Migrates Where…and Why?

28. CBRE | Page 28 Global Research and Consulting ● Econometric Advisors CBRE Econometric Advisors Client Conference 2012 Immigration: Two Key Questions Q: Will immigration reduce the elderly dependency ratio? A: Most likely. Q: Will immigration ease the fiscal burden caused by rising pension costs and government spending? A: Not necessarily.