CrowdFunding Is Emerging Trends in Real Estate 2015
CrowdFunding Is Emerging Trends in Real Estate 2015
CrowdFunding Is Emerging Trends in Real Estate 2015
Emerging Trends
in Real Estate
EmergTrends US 2015_C1_4.indd 3
10/6/14 9:42 AM
EmergTrends US 2015_C1_4.indd 4
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Emerging Trends
in Real Estate
2015
Contents
2 Chapter 1 Sustaining Momentum but Taking Nothing for Granted
4 The 18-Hour City Comes of Age
4 The Changing Age Game
6 Labor Markets Are Trending toward a Tipping Point
9 Real Estates Love/Hate Relationship with Technology Intensifies
9 Event Risk Is Here to Stay
11 A Darwinian Market Keeps the Squeeze on Companies
12 A New 900-Pound Gorilla Swings into View
13 Infrastructure: Time for the United States to Get Serious?
14 Housing Steps Off the Roller Coaster
15 Keeping an Eye on the BubbleEmerging Concerns
17 Expected Best Bets
20
21
24
30
31
31
33
34
35
36
36
38
47
60
60
64
65
67
70
73
76
77
80
84
87
90
96
96
97
99
Interviewees
Emerging Trends in Real Estate 2015
Authors
Hugh F. Kelly
Andrew Warren, PwC
Principal Researchers and Advisers
Stephen Blank, Urban Land Institute
Anita Kramer, Urban Land Institute
Senior Advisers
Christopher J. Potter, PwC, Canada
Miriam Gurza, PwC, Canada
Susan M. Smith, PwC
ULI Editorial and Production Staff
James A. Mulligan, Senior Editor
David James Rose, Managing Editor/Manuscript Editor
Betsy VanBuskirk, Creative Director
Anne Morgan, Cover Design
Deanna Pineda, Muse Advertising Design, Designer
Craig Chapman, Senior Director of Publishing Operations
Xiaoning Mao, Project Intern
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October 2014 by PwC and the Urban Land Institute.
Printed in the United States of America. All rights reserved. No part of
this book may be reproduced in any form or by any means, electronic
or mechanical, including photocopying and recording, or by any information storage and retrieval system, without written permission of the
publisher.
Recommended bibliographic listing:
PwC and the Urban Land Institute: Emerging Trends in Real Estate
2015. Washington, D.C.: PwC and the Urban Land Institute, 2014.
ISBN: 978-0-87420-355-7
ii
Adam Boutros*
Adam S. Feuerstein
Adriane Bookwalter
Aki Dellaportas
Allen Baker*
Allen Topaloglu*
Alysha Brady
Amanda Gruskos
Amy E. Olson
Amy Perron*
Andrew Alperstein
Andrew Popert*
Andrew Stansfield
Andrew Warren
Brad Wood
Brett Matzek
Bud Thomas
Carlo Bruno
Chris Dietrick
Chris Mill
Chris Vangou*
Christina Howton*
Christine Hill
Christine Lattanzio
Christopher J. Potter*
Cynthia Chandler
Daniel Cadoret*
Daniel DArchivio*
David Baldwin
David Baranick
David Glicksman*
David Khan*
David M. Voss
David Ross
David Seaman
David Yee*
Deborah Dumoulin*
Dennis Goginsky
Dillon Long
Dominique Fortier*
Doug Purdie*
Douglas B. Struckman
Emily Pillars
Eric Andrew*
Eric St-Amour*
Ernie Hudson*
Eugene Chan
Frank Magliocco*
Franklin Yanofsky
Fred Cassano*
Ian Gunn*
Ian T. Nelson
Jack Keating
Jackie Yau*
Jacqueline Kinneary
James Oswald
Jane Ma*
Jasen Kwong*
Jason Chessler
Jay Schwartz
Jay Weinberg
Jeff Kiley
Jeffrey Nasser
Jerry Kavanagh*
Jim DAmore
John Amman
Julia Powell
Ken Griffin*
Kent Goetjen
Kevin Nishioka
Kourosh HoorAzar
Kristen Anderson
Kristen Conner
Laura Daniels*
Lori-Ann Beausoleil*
Louis DeFalco
Matt Lopez
Mel Fowle
Mike Herman
Miriam Gurza*
Nadja Ibrahim*
Nicholas Mitchell
Philippe Thieren*
Rachel Klein
Rajveer Hundal*
Raymond J. Beier
Renee Sarria
Rich Fournier
Rick Barnay*
Rob Sciaudone
Ron Bidulka*
Ron Walsh*
Russell Sugar*
Ryan Dumais
Scott Tornberg
Scott Williamson
Sean Hiebert*
Sergio Lozano
Stacie Benes
Stephan Gianoplus
Stephen Cairns
Steve Baker
Steve Hollinger*
Steve Tyler
Steven Weisenburger
Susan Smith
Tim Conlon
Tori H. Lambert
Warren Marr
William Hux
William Keating
*Canada-based.
www.pwc.com/structure
Notice to Readers
Emerging Trends in Real Estate is a trends and forecast publication now in its 36th
edition, and is one of the most highly regarded and widely read forecast reports in the
real estate industry. Emerging Trends in Real Estate 2015, undertaken jointly by PwC
and the Urban Land Institute, provides an outlook on real estate investment and development trends, real estate finance and capital markets, property sectors, metropolitan
areas, and other real estate issues throughout the United States and Canada.
Emerging Trends in Real Estate 2015 reflects the views of more than 1,400 individuals who completed surveys or were interviewed as a part of the research process for
this report. The views expressed herein, including all comments appearing in quotes,
are obtained exclusively from these surveys and interviews and do not express the
opinions of either PwC or ULI. Interviewees and survey participants represent a wide
range of industry experts, including investors, fund managers, developers, property
companies, lenders, brokers, advisers, and consultants. ULI and PwC researchers
personally interviewed more than 391 individuals, and survey responses were received
from 1,055 individuals, whose company affiliations are broken down below.
Private property company investor, or developer
29.3%
20.8%
13.3%
9.2%
8.7%
6.1%
2.9%
7.0%
1.2%
Other 1.5%
Throughout the publication, the views of interviewees and/or survey respondents have
been presented as direct quotations from the participant without attribution to any particular participant. A list of the interview participants in this years study who chose to
be identified appears at the end of this report, but it should be noted that all interviewees are given the option to remain anonymous regarding their participation. In several
cases, quotes contained herein were obtained from interviewees who are not listed.
Readers are cautioned not to attempt to attribute any quote to a specific individual
or company.
PricewaterhouseCoopers has exercised reasonable care in the collecting, processing, and reporting of this information but has not independently verified, validated,
or audited the data to verify the accuracy or completeness of the information.
PricewaterhouseCoopers gives no express or implied warranties, including but not
limited to any warranties of merchantability or fitness for a particular purpose or use
and shall not be liable to any entity or person using this document, or have any liability
with respect to this document.
To all who helped, the Urban Land Institute and PwC extend sincere thanks for sharing
valuable time and expertise. Without the involvement of these many individuals, this
report would not have been possible.
Emerging Trends in Real Estate 2015
aware of how much runway you have left in the current cycle.
excellent
Sell
good
fair
Hold
Buy
poor
abysmal
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Emerging Trends in Real Estate surveys.
30%
NAREIT total
expected return
8.0
Index change
20%
10%
0%
1999
2001
2003
2005
2007
2009
2011
2014* 2015*
-10%
-20%
-30%
-40%
3%
1%
1997
5%
NCREIF total
expected return
8.0
-1%
GDP change
GDP
40%
-3%
-5%
Sources: NCREIF Fund Index Open-End Diversified Core Equity (NFI-ODCE); NAREIT Equity
REIT Index; Bureau of Economic Analysis/U.S. Department of Commerce; World Economic
Outlook, July 2014; Emerging Trends in Real Estate 2015 survey.
*GDP forecasts are from World Economic Outlook; NCREIF/NAREIT data for 2014 are as of
second-quarter 2014; 2015 forecasts are based on the Emerging Trends in Real Estate 2015
survey.
Percentage of respondents
70%
60%
Goodexcellent
50%
40%
30%
20%
Abysmalpoor
10%
0%
2010
2011
2012
2013
2014
2015
Financial factors also help define trends, this year and always.
The volume and form of our savings as a society count. The
flow of capital from around the world influences U.S. real estate
mightily. The appetite for risk and the pricing of risk help direct
that capital to the preferred geographic locations and property
types. Competition hones the pricing of real estate itself, and the
various services needed to get the most out of properties. The
wide variety of investment opportunitiesequity and debt, direct
and indirect investment vehicles, the legal structures that offer a
range of choices to property professionalsrequires us to discuss trends in a specified and nuanced way. Even with a limited
number of top trends, it is important to tell the stories carefully.
With these salient principles in mind, we herewith present our
selection of the top trends in real estate for 2015. Let the discussion and debate begin!
3.62
3.56
Homebuilders/residential
land developers 2.64
1.66
3.86
3.52
Private local
real estate owners 3.18
2.84
3.62
3.27
Architects/designers
2.49
2.09
3.76
3.46
Real estate
investment managers 3.18
3.02
3.59
3.33
Real estate consultants
2.87
2.67
3.72
3.68
Commercial developers
3.49
3.14
3.57
3.43
Commercial bank
real estate lenders 3.04
2.76
REITs
3.72
3.42
3.46
3.27
1
Abysmal
CMBS lenders/issuers
2
Poor
3
Fair
4
Good
2015
2014
2013
2012
3.63
3.51
Insurance company
real estate lenders 3.32
3.22
2015
2014
2013
2012
5
Excellent
3.45
3.29
2.74
2.44
1
Abysmal
2
Poor
3
Fair
4
Good
5
Excellent
have been much talked about, but for all their impact thus far,
there is much more to come. And the changes will accelerate
and become more complex over the next ten years.
A healthy amount of disagreement exists about what will happen. One camp is convinced that the millennials will revert to
the mean and want private offices and will move to the suburbs
to raise families. The other side feels like they will continue with
the same behavior they have exhibited. But the key is that we
are talking about a large generational cohort that will evolve and
segment over time. Painting them with too broad a brush will
lead to misplaced expectationsas it has with the baby boomers. One size will not fit all millennials.
Millions
4
3
2
1
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80
Gen Z
Millennials
Gen X
Boomers
Greatest generation
2.5%
Labor force growth
3,000,000
2,500,000
2.0%
Average projected growth,
20082025
1.5%
2,000,000
1,500,000
1.0%
1,000,000
0.5%
500,000
0.0%
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
-500,000
-0.5%
Sources: U.S. Bureau of Labor Statistics; Moodys Analytics (Economic & Consumer Credit Analytics) forecast.
10%
5%
0%
Madison
Honolulu
Raleigh/Durham
Minneapolis/St. Paul
Tucson
Charleston
Omaha
Boise
Oklahoma City
Portland, OR
Austin
Norfolk
Kansas City
Denver
Salt Lake City
Des Moines
Seattle
All-market average
Memphis
Atlanta
Birmingham
Cleveland
Richmond
Dallas/Fort Worth
Louisville
Chicago
Inland Empire
Las Vegas
Los Angeles
Tampa/St. Petersburg
Miami
Providence
Houston
Philadelphia
New York City
-5%
-10%
-15%
-20%
-25%
Notes: Skills gap is the difference between percentage of job openings projected to require some college and percentage of population with some college.
Estimates are for year-end 2012.
Source: Brookings Institution.
3
4
5
Moderate Considerable Great
importance importance importance
Economic/financial issues
Job growth 4.59
Income and wage growth 4.11
Social/political issues
Terrorism/war 3.53
Political gridlock 3.37
Federal government actions 3.35
Lack of qualified workers 3.31
Immigration 3.14
Rising cost of education 2.97
Social equity/inequality 2.75
Real estate/development issues
Construction costs
Land costs
Vacancy rates
Infrastructure funding/development
Refinancing
Transportation funding
Future home prices
CMBS market recovery
NIMBYism
Affordable/workforce housing
Deleveraging
Wellness/health features in buildings
Green buildings
Risks from extreme weather
4.05
3.90
3.76
3.72
3.55
3.47
3.24
3.20
3.15
3.13
3.02
2.74
2.67
2.51
1
What does this mean for real estate? Well, most industry
veterans would confirm that job growth is the key factor for
filling office buildings and new housing, as well as the driver
for improving sales at shopping centers and spending at
hotels and resorts. Can real estate prosper during times of low
unemployment? Of course! But constraining labor force growth
by restrictive immigration policy is counterproductive, notes the
Conference Board. The Real Estate Roundtable has joined in
with support of a reformed E-5 visa program, while arguing that
a cap of 15,000 on lower-wage W laborers hobbles the industrys construction recovery.
While those looking at the rearview mirror continue to belabor
the claim that the official unemployment rate understates slackness in the job market, the emerging trends are moving in the
opposite direction.
Asia-based investors
80%
Europe-based investors
70%
60%
50%
40%
30%
20%
10%
0%
North America
Europe
Asia
Global
Source: Prequin.
Fair 3
Private direct
real estate
investments
Publicly listed
property companies
or REITs
Publicly listed
homebuilders
Publicly listed
nonreal estate
securities
Commercial
mortgagebacked
securities
2015
2014
2013
2012
2011
2015
2014
2013
2012
2011
2015
2014
2013
2012
2011
2015
2014
2013
2012
2011
2015
2014
2013
2012
2011
2015
2014
2013
2012
Abysmal 1
2011
Poor 2
Investment-grade
corporate bonds
on. The largest investors seek more control. This reduces the
number of new managers you might have seen at this point
in the real estate cycle, according to an industry association
officer. A few niche managers are offering funds. Capital raising
is difficult for mid-tier managers.
One upshot: fees (again) are going to be squeezed as the
capital sources want more services for less money. After a long
period in which outsourcing was the fundamental approach
(staying lean and mean), there is some indication that bringing real estate talent in-house is not only an improvement in
accountability, but also more cost-effective. Though this is going
on in just a slice of the industry, consolidation could accelerate
as this trend gathers momentum.
Meanwhile, capital raising in Europe has gotten more difficult with the Alternative Investment Fund Managers Directive
(AIFMD). New regulations vastly increase reporting and
compliance requirements. Some managers will just not be
able to afford operating under AIFMD, reducing the number of
private equity firms and hedge funds sourcing capital from the
European Union, in the view of one such investor.
As more and more capital has become available, more and
more players naturally have been looking to tap the cash. That
leads to overpopulation in the field. Look for a winnowing-out
process as the next step. The brokerage industry, it might be
noted, is already well advanced in this process. Other business
lines will be moving down that path.
Emerging Trends in Real Estate 2015
11
Percentage allocated
30%
34.2%
32.2%
30.7%
25%
20%
15.3%
15.2%
15%
12.5%
11.7%
10%
6.9%
6.4%
5.6%
5%
0%
6.4% 5.5%
Target date
funds
Nontarget date
balanced funds
Bond funds
6.7%
3.1%
1.9%
Equity funds
5.5%
Money funds
Other funds
Note: Average asset allocation of 401(k) account balances, year-end 2012. Funds include mutual funds, bank collective trusts, life insurance separate accounts,
and any pooled investment product primarily invested in the security indicated. Percentages are dollar-weighted averages. Components do not add up to
100 percent because of rounding.
Source: Investment Company Institute.
account (IRA) funds. As one interviewee put it, We will be seeing retirees become their own chief investment officers.
Annuity reserves
US$ trillions
$20
Government plans
Private defined-benefit plans
$15
$10
IRAs
$5
$0
2007
2008
2010
2012
2013
2013
Q1
Source: Investment Company Institute, Research and Statistics Report, June 25, 2014.
12
300,000
250,000
200,000
150,000
100,000
1994
1996
1998
2010
2012
2014
roads, and the like (as important as they are). Since 2009,
spending on educational buildings and health care facilitiesby
both the public and private sectorsis down by one-third in
real-dollar terms. As a nation, the United States is not investing
in the physical facilities needed to compete into the future. The
trend here is not good, and it is going to be painful for real estate
if problems are left to worsen.
An investor with deep experience in logistics believes that congestion is not just a goods-movement problem. Infrastructure
constraints causing congestion hobble the improvements technology can provide. The millennial generation is intolerant of congestion and delayon highways and in transit. If the pursuit of
the millennials is central to your citys economic development
or your firms business strategy, thats alarming. A top New York
broker laments, Real estate depends upon ease of commutation. Businesses are paying close attention to commutation
patterns of employees, realizing that the people you most want
are also the most footloose as employees. Fundamentally, all
businesses need talent [and customers], and you solve back
to the real estate from that.
The chief investment officer of a public retirement fund wants to
invest in growth markets. But he expects less growth in areas
not investing in infrastructure. A private equity firm with holdings
concentrated in the BostonWashington corridor comments,
Infill is the key to opportunity in strong markets, but it is a challenge when transportation and utility infrastructure is old and
seriously underfunded.
Out Westbeyond the 100th meridian particularlythe future
depends desperately on water. The 14-year drought in the
Colorado River basin has brought Lake Mead to its lowest
Emerging Trends in Real Estate 2015
13
level since the Hoover Dam was constructed during the Great
Depression. The level of the lake has dropped 100 feet during
this drought, and 150 feet from its high water mark in 1983. This
has cities like Denver, Phoenix, Las Vegas, and Los Angeles
scrambling, and has the federal government initiating a pilot program to pay cash as an incentive to reduce water use. Needless
to say, if these cities were to face serious growth constraints on
population gains because of water deficiency, that would alter
Americas real estate map considerably. A valuation specialist
with a national practice had this to say: How do we get what
we need where we need it? Droughts have been coming more
frequently and are longer lasting. Can we figure out the transportation of water? Pipelines, easements, pricing?
Some light at the end of the tunnel may come from the increas
ing tendency of public agencies to turn to public/private partnerships (PPPs) as the vehicle for addressing the infrastructure
crisis. The daunting price tag of needed improvements, coupled
with the straitjackets constraining public budgets, has prompted
a wider degree of cooperation. The PPP approach is not a panacea, of course. The private sector needs to earn a return, and
public agencies face political pressure if the return is derived
from increased user fees (with tax increases not even on the
table in most places). It is a conundrum.
On this subject, we are behind the curve already. ASCE estimates that the needed repair programs for existing, identified
infrastructure needs will cost $2.2 trillion over the next five years.
Yet, a funding proposal for $50 billion to $75 billion and the
enabling legislation to create a national infrastructure bank are
mired in Washington politics. Unfortunately, the trend of infra-
3,500
3,000
Months supply
2,500
10
8
2,000
6
1,500
4
1,000
500
0
2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
14
12
Exhibit 1-15 Change in Disposable Income, Median Home Sales Price, and Affordability
250
14%
Affordability index
12%
Year-over-year change
8%
150
6%
4%
100
2%
0%
-2%
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
2013
Q1
2013
Q2
2013
Q3
2013
Q4
2014
Q1
2014
Q2
2014
Q3
Affordability index
200
10%
50
-4%
0
-6%
Sources: U.S. Bureau of Economic Analysis; S&P Dow Jones Indices; National Association of Realtors.
7.8%
35 years
36.6%
510 years
39.3%
10+ years
0%
16.3%
10%
20%
30%
40%
15
$500
Portfolio
$ billions
$400
Individual
$300
$200
$100
$0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
H1
Current 62 months
and counting
20
40
60
Months
80
100
120
3.51
Development
3.42
3.74
Opportunistic investments
3.40
3.68
Core-plus investments
3.31
Core investments
3.07
Distressed properties
Distressed debt
1
Abysmal
2.77
2.67
2
Poor
2015
3.81
2014
3.61
3.34
2.99
2.85
3
Fair
4
Good
5
Excellent
17
Increase substantially
70%
Increase moderately
60%
50%
40%
Fall moderately
30%
Fall substantially
20%
10%
0%
2015
2020
Inflation
2015
2020
Short-term rates
18
2015
2020
Long-term rates
2015
2020
Mortgage rates
The bad: anything garden variety. Over the short haul, anyway,
there is not much demand from either users or investors for
plain-vanilla highway-dependent office parks, or other real
estate that falls into the commodity bucket. They are cheap,
but you get what you pay for.
The ugly: anything that smacks of sprawl or of yesterdays hot
concept. If a property is dependent upon an inflated parking
ratio, take a pass. If a property is operationally tied to demand
that presumes the growth of tract housing at the perimeter of a
metro area, run the other way. If you find a property without a
cogent appeal to either millennials or baby boomers, time is not
on your side.
Some suburbs, in other words, can make the cut as a best bet,
but thats a very select set. Use some commonsense litmus
tests to figure out the good, bad, and ugly buckets.
19
barrel.
The tide has come back in. An oceanic flow of capital is surging through Americas real estate markets, tugged by gravity
and pushed by tailwinds. Rising tides, as the clich goes, are
thought to lift all boats. Yet memories of the last tsunami and the
detritus that can still be found littering the landscape from place
to place are keeping eyes glued to the weather glass, lest a
squall blow in at the high water mark.
The managing director of one institutional investor says, I
expect transaction volumes to be very strong in 2015. Bidding
wars are now going on. There is more capital looking to buy
than there are opportunities. A West Coast developer thinks
that managing director is correct: The trend of more institutional
capital will accelerate. A senior officer with an international
developer/owner firm sees this involving more than just the
institutions. There is more capital than there are uses for it,
he finds. Sovereign wealth funds are coming here that havent
been seen before.
So the issue for 2015 is not the volume of liquidity supporting
the industry, it is navigation. In every enterprise, a basic need to
chart the course exists. That is what virtually all Emerging Trends
interviewees stressed as their key to success into the future. The
prevailing sentiment is the need to maintain rationality, to avoid
getting caught up in the flood of capital, being pushed by the
tide rather than using it to best advantage. That requires considerable discipline.
One prominent retail property executive stressed that abundant
capital does not equal undisciplined capital for the year or two
ahead. He is encouraged that there is more skin in the game
throughout the capital stack, from lower LTVs [loan-to-values]
to greater lender reserve requirements. The chief executive
officer (CEO) of one untraded real estate investment trust (REIT)
acknowledged those conditions, with a caveat: The market is
20
very liquid and buoyant. I do not see that changing any time
soon. My only concern would be that people are still fairly
disciplined . . . at this moment. But the debt side may be on the
verge of becoming too aggressive. As Melvilles Ishmael prayed
in Moby Dick, Oh, Time, Strength, Cash, and Patience!
That CEOs concern is validated by a look at the risk premium
priced into the mortgage rates of the American Council of
Life Insurers (ACLI). The chart showing the mortgage rate risk
premium is simply the ACLI mortgage constant, across all loans,
less the risk-free Treasury note rate. The green horizontal line
shows the 65th percentile of such spreads since 1995, while the
red line represents the 35th percentile. The area between those
lines represents, in some rough fashion, the normal spread for
Exhibit 2-1 Risk Premium in Mortgage Rate
7%
Risk premium*
6%
65% percentile
5%
4%
3%
35% percentile
2%
1%
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Sources: The American Council of Life Insurers (ACLI), Federal Reserve, NPV Advisors.
*Risk premium is the ACLI mortgage constant, across all loans, less the seven-year
Treasury rate.
mortgage rates. It is clear how insurers kept their spreads disciplined within that normal range from 1995 to 2003, but became
excessively aggressive in the Niagara of capital years (i.e.,
20042007). And then, draining liquidity from the market in the
de-levering move prompted by the financial crisis, the lenders
pushed spreads up so that loan risk was richly priced until 2013.
Now it is obvious that risk on is the signal, as spreads in the
first half of 2014 bumped along toward the bottom of the normal
spread range, touching the red line.
Emerging Trends survey respondents, as a group, recognize
lenders increased readiness to accept risk as a condition for
putting their money to work. Relatively few believe that debt
standards will become more stringent in the coming year. While
most foresee lenders carrying over their 2014 underwriting standards in the short run, a substantial minority (about 40 percent)
expect less rigorous reviews as loan applications seek to tap an
ample pool of debt capital.
21
Total ($ billions)
350%
300%
$200
48%
30%
250%
38%
43%
26%
200%
Year-over-year
change
$150
150%
100%
$100
50%
Annual change
2014
14%
US$ billions
2015
0%
$50
-50%
-100%
$0
2015
30%
56%
1998
14%
2010
2012
2014
(partial)
-150%
2014
27%
52%
21%
2015
30%
51%
20%
2014
59%
30%
11%
Undersupplied
In balance
Oversupplied
2015 45.7%
44.7%
2014 43.3%
2013 19.6%
39.4%
41.5%
2012 31.9%
2011 29.8%
35.1%
29.2%
22
9.6%
17.4%
39.1%
33.0%
41.0%
So why the worries? A shopping center executive is concerned as he sees CMBS underwriting standards, terms and
conditions, and pricing all getting thinner. A veteran of many
cycles from the valuation perspective doesnt like the return of
so much interest-only paper. Others fret that CMBS is once
again pushing the envelope, taking deals that banks and life
companies wont accept, understanding that rating agencies
have pretty successfully resisted regulatory reform since 2008.
As one private equity investor put it, I really start to worry when
Wall Street takes over as a leading competitor in lending.
2.99
Private REITs
3.17
3.61
3.40
3.65
3.43
3.67
3.57
2
Decline
2014
3.50
3.34
Foreign investors
1
Large
decline
2015
3.38
3
Stay
the same
3.93
4
Increase
5
Large
increase
Lending source
Government-sponsored
enterprises
Mortgage REITs
2.53
2.93
3.08
2015
3.41
Insurance companies
3.35
3.58
Commercial banks
3.40
3.59
Mezzanine lenders
Nonbank financial
institutions
Securitized lenders/CMBS
1
Large
decline
3.33
3.60
3.31
3.65
3.47
2
Decline
3
Stay
the same
2014
3.74
4
Increase
5
Large
increase
If timing is everything, when should you pitch the life companies for a mortgage loan? A Chicago-based international real
estate consultant thinks that the time to get the insurers attention
is early in the year: Good for the first six months of each year,
but then they are out of allocations. Others are not so sure,
pointing to life company clients who still need to find deals in
August and beyond before the year-end clock runs down. Data
from the ACLI say unambiguously, Dont lose sleep over this.
In most years since 1990, it is the economic cyclenot the calendar itselfthat shapes the quarter-to-quarter loan volume put
out by the life companies. Its comforting, perhaps, to think that
some variable like seasonality is the reason why an investment
committee declines a mortgage bid. It is more likely the case
that basic underwriting is the cause.
23
24
lenders will find 15 percent or more of their loans delinquent during their originally prescribed maturities.
Mezzanine debt is one arena where such customized lenders
like to play. The present and likely future environment makes that
arena pretty limited. One private equity investor virtually writes
off this market segment for now: Mezz debt is the most overstated opportunity at present. There is too much money flowing
to achieve reasonable yields. This is a product better suited to
dislocated market conditions. Mezz is living in the 75 percent to
85 percent LTV tier, but only able to earn less than 10 percent,
with 1.10 DSC for deals priced at a 5 percent cap rate. Thats
way too much risk for that kind of pricing.
Last Word on Lending
Every lender is in every other lenders business, making this
environment as competitive as it has ever been.
Major markets
(all property)
200
National
(all property)
175
150
125
100
Nonmajor markets
(all property)
75
50
Jan
01
Jan
03
Jan
05
Jan
07
Jan
09
Jan
11
Jan
13
Jun
14
2015
12%
33%
55%
2014
19%
27%
54%
Undersupplied
In balance
Oversupplied
25
once in the other investments bucket, they first shifted to alternatives and now are considered a full-fledged asset class.
Risk management is not the same as risk avoidance. The movement of institutional capital into noncore property investment
does not necessarily betray a loss of discipline, as long as the
risk/reward equation is honestly computed.
A debate continues about REITs higher correlation with common stocks lessening their diversification benefit in mixed-asset
portfolios, when compared with direct investment. It is clear,
however, that large-scale investors are not waiting for the outcome of that debate when they have money to put to work now.
As long as the trusts performance remains strong, they will have
no trouble sourcing capital of all kinds, particularly from sources
that especially value liquidity and real-time pricing.
In this environment, pension funds are bound to be more handson, a trend already with the wind at its back. The larger the
investor, the more it wants a say in decision making at all points
of the investment process: at acquisition, during the operating
period, and in timing disposition. As a cross-border real estate
investment analyst said in his interview, we will see the give-meyour-capital-and-trust-me approach increasingly out of favor.
With the internalization of real estate asset management
at pension plans, investors will be consolidating assets with
fewer external managers so that there are fewer relationships
to oversee.
REITs
The real estate investment trust industry is incredibly dynamic
at mid-decade, its engines humming and its bow wave creating
energy in markets that all other investors must heed. REITs have
broad access to capital from both private and public sources,
and can choose when and where to use their entity-level power
to complement a strategy of rationalizing their individual property holdings.
It is no accident that REITs have been capital magnets. Thats
the power of performance. As one institutional money manager
said, REITs can anticipate 3 percent to 4 percent dividend
growth, and should be able to deliver 8 percent to 10 percent
yield to investors as a steady flow. Thats a real sweet spot right
now. That manager also observed, Theres been an evolution
in the way sophisticated investors see REITs. Where they were
2015 41.4%
47.5%
2014 30.7%
2013 19.6%
50.8%
50.7%
18.5%
29.7%
2012 22.8%
46.7%
30.5%
2011 26.6%
40.6%
32.8%
26
11.1%
Exhibit 2-9 U.S. Buyers and Sellers: Net Capital Flows, by Source and Property Sector, 2Q 2013 2Q 2014
$8
Cross-border
Institutional/equity fund
Listed REIT
Private
User/other
$6
$4
US$ billions
$2
$0
$-2
$-4
Office
Industrial
Retail
Apartment
Hotel
$-6
$-8
Source: Real Capital Analytics.
International Investors
It doesnt take more than basic attention to the news to sense
the ramping up of international investment in U.S. real estate.
From coast to coast, the Chinese, for instance, have been
grabbing headlines with deals like the $1 billion acquisition by
Greenland Holdings of the Metropolis project in Los Angeles
from CalSTRS and its 70 percent stake in Brooklyns 14-building
Atlantic Yards development, joining Forest City Ratner. China
Vanke, meanwhile, is working with Tishman Speyer in a 655-unit
apartment project in the South of Market (SoMa) neighborhood
in San Francisco.
Yet China is just one of many sources of inbound investment,
though perhaps the most visible because of the predilection for
eye-popping deals and its status as the new kid on the block.
Emerging Trends interviewees know firsthand the breadth of
the offshore equity capital rushing into the United States. A
New Yorkbased value-add owner/operator rattled off those
buying pieces of his deals in the past year: Israelis, Koreans,
Egyptians, Russians, Mexicans, and others have all come to us
for a piece of Manhattan.
Gateway cities are still the principal targets for offshore
investors, with the list now including Houston and Seattle in
addition to the big California markets, Miami, and the Boston
Washington corridor. But a boutique international investment
firm says, The heartland is now actively considered by Russian,
South American, Middle Eastern, [and] Asian investors. They
Emerging Trends in Real Estate 2015
27
12+88+Q
11+89+G
Past 12
months
Past 36
months
Dont expect the trend for international capital to gain an increasing share of U.S. transaction volume to moderate any time soon.
Asian capital, in particular, may prove the tonic that stimulates
the long-deferred rise in development in the coming years.
like the fundamentals but are really capital [yield] driven. The
integration of the world economy, on practically all imaginable
levels, is one of the profound hallmarks of our time.
Despite globalization, though, there are frictions in the international investor realm that domestic capital just doesnt
experience. The Foreign Investment in Real Property Tax
Act (FIRPTA) has long annoyed those seeking greater fluidity in accessing offshore capital. Now Europe has joined the
Crowdfunding
Maybe it shouldnt be a surprise to hear such a buzz about
crowdsourcing capital for real estate at a time when social media
is the hot item in advertising and communications. After all, what
12 months
$30
US$ billions
$25
Previous 12 months
as percentage of 3-year total
$20
$15
47%
$10
$5
$0
58%
Canada
China
63%
38%
Germany
23%
Japan Switzerland
28
44%
Israel
86%
36%
Singapore Norway
61%
Hong
Kong
27%
South
Korea
62%
100%
Australia Bermuda
$16
36 months
$14
$3
Previous 12 months
as percentage of 3-year total
$10
$8
US$ billions
US$ billions
$12
58%
$6
$4
$0
$2
12 months
Previous 12 months
as percentage of 3-year total
48%
$1
84%
$2
36 months
12 months
94%
100%
69%
45%
39%
23%
2%
$0
Canada
China
Germany
Norway
Canada
South Korea
Norway
UAE
Germany
South Korea
$6
$3
36 months
36 months
12 months
100%
$4
Previous 12 months
as percentage of 3-year total
$2
$3
$2
35%
$0
26%
Canada
87%
Israel
25%
Switzerland
97%
$1
100%
$1
12 months
Previous 12 months
as percentage of 3-year total
US$ billions
US$ billions
$5
30%
Bermuda
16%
Japan
$0
Japan
Canada
Singapore
18%
UAE
Malaysia
12 months
$5
US$ billions
$4
Previous 12 months
as percentage of 3-year total
$3
$2
$1
$0
70%
17%
Canada
43%
Australia
Netherlands
34%
Switzerland
52%
Germany
can you say when Snapchata site that allows the sharing of pictures that promptly disappear after viewingis reputedly valued
at $10 billion (about the same as Garmin) despite the absence of
revenue? Maybe there should be less fear about asset bubbles
and more about app bubbles! But we digress.
Crowdfunding is touted as a movement democratizing investment in real estate. Interviewees have seen it in action for small
projects at the local level, but find it untried at scale. They
expressed concern about outsourcing risk to a crowd illprepared to accept it and believe that more consumer protection and regulation lie ahead.
It does no good to just ignore the phenomenon. It is out there,
and the buzz will intensify.
29
Markets to Watch
Its no longer just about the current strength of the market or
submarket. We have to be sure that the location will be
viable
31
3.80
3.68
3.75
3.54
3.43
3.52
3.44
3.72
3.37
3.24
3.25
3.27
3.35
3.36
3.21
3.12
3.19
3.30
3.24
3.11
2.97
3.36
3.00
3.23
3.03
3.05
3.03
3.02
2.91
3.03
2.97
3.02
2.88
2.95
2.83
2.74
2.97
2.83
4.21
4.33
3.80
3.87
3.98
3.73
3.71
3.34
3.39
3.57
3.54
3.36
3.40
3.26
3.50
3.60
3.15
3.08
2.95
3.26
3.36
2.77
3.43
3.10
3.17
3.14
3.00
3.04
3.26
3.08
2.93
2.80
3.28
2.98
3.11
3.26
3.01
2.87
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
2.88
2.87
3.04
2.69
2.87
2.98
2.71
3.04
2.68
3.05
2.80
2.85
2.81
2.98
2.76
2.85
2.84
2.75
2.76
2.80
2.92
2.83
2.87
2.76
2.61
2.87
2.63
2.76
2.83
2.55
2.65
2.76
2.56
2.98
2.52
2.87
2.71
2.55
2.59
2.74
2.61
2.85
2.44
2.76
2.55
2.55
2.43
2.72
2.51
2.62
2.46
2.58
2.26
2.98
2.22
2.94
2.36
2.55
2.30
2.67
2.40
2.49
2.34
2.48
2.60
1.84
2.60
1.89
2.23
2.27
2.00
2.55
1.81
1.97
now stands alone rather than being part of San Francisco, and
Tacoma, Washington, has been separated from Seattle. To better represent each of the four regions, additional markets have
been added. The fast-growing South region now has seven
new markets: Birmingham, Alabama; Cape Coral/Fort Myers/
Naples, Florida; Charleston, South Carolina; Columbia, South
Carolina; Deltona/Daytona, Florida; Greenville, South Carolina;
Louisville, Kentucky; and Richmond, Virginia. To the Midwest
region the following have been added: Des Moines, Iowa;
Madison, Wisconsin; and Omaha, Nebraska. The Northeast
and West regions also have been expanded: Buffalo, New York;
Hartford, Connecticut; and Portland, Maine, are now part of the
Northeast, while Boise, Idaho, and Spokane, Washington, have
been added to the West.
32
73%
72%
Secondary
($140 billion)
71%
70%
69%
Major
($154 billion)
Tertiary
($80 billion)
68%
67%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
33
34
Something significant has been occurring during the recovery from the Great Recession. Cities and companies have
discovered that it is possible to re-create the efficiencies and
attractiveness of an urban core environment in different markets
and suburban locations. This is not to say that this is an easy
transformation, nor is it one that can be accomplished quickly,
but it may well be worth it if you look at the relationship between
urban growth and how investors are viewing 2015 market performance.
Exhibit 3-3 shows the relationship of population growth in the
urban center of the markets covered in the 2015 survey and
plots the growth rate against the individual market investment
score. When you are examining 75 markets there are bound to
be outliers, but the graphed relationship shows that the higher
the urban growth rate, the more likely the market will be rated
good to excellent by 2015 survey respondents.
The growth in the urban center population is clearly evident in a
number of markets that are experiencing an increase in investment interest over the past year. Three notable markets that
have seen significant urban growth are Austin (8.6 percent),
Denver (7.6 percent), Charlotte (7.3 percent), and Seattle (6.9
percent). These markets are seeing the benefits from population
growth in their urban centers and have steadily become more
attractive to investors over the past three years. Survey results
seem to indicate that this trend will continue in 2015.
The development of vibrant urban centers is almost a universal
trend among the 75 markets included in the 2015 survey. Only
five markets have seen negative growth in urban center population over the past three years. This improvement is not limited to
markets that have established urban centers. Dallas/Fort Worth
and Houston are two markets that historically have been identified by strong suburban growth. Interviewees made note of the
development of urbanization trends that are occurring in both
markets. They cited activity in the traditional downtown area
and also in suburban nodes. This activity is mirroring what is
normally associated with more traditional urban locations.
The next cities to benefit from increased urbanization were identified by both interviewees and survey respondents. Raleigh/
Durham and Nashville, with growth rates of 5.5 percent and 4.9
percent respectively, were markets that interviewees were quick
to mention as seeing good opportunity due to their increased
urban feel. New Orleans, with 8.8 percent growth in its urban
population, could be another city that may see improvement in
investment opportunities, although survey respondents currently
put the market in the fair category.
Exhibit 3-3 Three-Year Population Growth in Urban Center, by Overall Real Estate Prospects
Urban population growth, 20102013
10%
2
Poor
3
Fair
Market score
4
Good
8%
Population growth
6%
4%
2%
0%
-4%
Buffalo
Providence
Hartford
Virginia Beach/Norfolk
Milwaukee
Deltona/Daytona
Memphis
Portland, ME
Sacramento
Spokane
Tucson
Las Vegas
Richmond
Tacoma
Omaha
West Chester/Fairfield, NY/CT
Boise
Birmingham
Des Moines
Jacksonville
Cape Coral/Fort Myers/Naples
Cincinnati
Madison
Cleveland
Washington, DCMD suburbs
Louisville
New Orleans
Albuquerque
Inland Empire
Palm Beach
Fort Lauderdale
St. Louis
Honolulu
Pittsburgh
Oklahoma City
Orlando
Detroit
Columbus
Tampa/St. Petersburg
Salt Lake City
Columbia
Kansas City, MO
Northern New Jersey
Baltimore
Minneapolis/St. Paul
Greenville
Washington, DCNorthern VA
Philadelphia
Washington, DCDistrict
Phoenix
Indianapolis
San Antonio
San Diego
Charleston
Miami
Oakland/East Bay
Chicago
Portland, OR
San Jose
New YorkManhattan
Nashville
Orange County
Atlanta
Raleigh/Durham
Boston
Charlotte
Seattle
Los Angeles
Dallas/Fort Worth
Denver
San Francisco
Austin
Houston
-2%
Sources: Emerging Trends in Real Estate 2015 survey, U.S. Census Bureau.
35
Exhibit 3-4 Millennials and Baby Boomers as Percentage of Total U.S. Population*
800,000
23.0%
Baby boomers
Millennials
700,000
Population
500,000
22.0%
400,000
21.5%
300,000
200,000
Percentage
22.5%
600,000
21.0%
100,000
0
Ne
Sa
Yo n Fr
r k a n
c
M isco
an
ha
t ta
n
S
Po e a
r tl t tle
an
d
Pi , M E
t ts
b
M
inn New urg
e a Or h
p o le
lis an
W
as
/S s
hin
t. P
g to
a
n, St. ul
W
as
L
D
o
C
hin
uis
g to
Di
n,
s
D C B t r ic
a
l ti t
No mo
r th re
ern
Cl VA
ev
el
Lo a nd
uis
vil
l
De e
nv
H er
Po a r t f o
r tl rd
an
d
Ri , O R
ch
m
M ond
ilw
au
ke
Bo e
s to
Oa
n
W
k la B u
as
N
f
hin or nd fal
g to t h e / E a o
n, r n N s t B
DC e
a
wJ y
M er s
K a D su e y
ns b u
as
r
Ci bs
ty,
M
O
De
t ro
it
20.5%
These 33 markets created more than 1.6 million jobs in the last
two years, or 52 percent of the total created by all 75 markets.
The resurgence in the U.S. energy industry has resulted in more
growth occurring in more markets across the country. Top technology markets include San Jose; San Francisco; Washington,
D.C.; Raleigh/Durham; and Seattle. Energy industry exposure is
more evident in Houston, Oklahoma City, and Pittsburgh. With
each geographic region represented, investors have a wide
choice of markets that may offer opportunities in 2015. The
projections are that energy production will continue to expand
in the United States as more locations expand fracking operations. This continued expansion will drive future economic
growth. Interviewees and survey respondents are confident
that these industries will continue to spur growth in a number
of local economies.
Exhibit 3-5 Technology and Energy Employment Concentration, by Market: Q2 2012 to Q2 2014
200,000
30%
150,000
20%
Jobs created
100,000
15%
10%
50,000
25%
5%
0
as
hin
g
to n
Sa
nJ
Ho os e
S
, D a n no
C Fr lul
a u
M nc
W
Ra D s isco
as
l ei ub
hin
g h ur
g to
/ D bs
n
ur
W ,D
h
as C
hin S am
g to N o e a
n, r t h t t l e
DC e r
n VA
D
Ch istri
a rl c t
es
H o to n
u
s
Oa
k l a A to n
D a nd / us t
lla Ea in
s / st
Fo B a
Sa rt W y
l t L or
Or a k t h
an e C
g e it
Co y
Gr u n t
ee y
Sa nvill
nD e
i
M e go
Al adi
bu so
qu n
No
e rq
r th
e r n Po u e
r
N e tla
w nd
Je
rse
y
M
D
inn Ind en
e a ia n v e r
po a p
lis ol
/S is
Ph t. P
Ka ila au
ns d e l
as lph
Ci ia
W
es
ty,
tch
M
O
es
A
ter
tla
/ F B a nt
air lt a
fie im
ld , o r e
NY
/C
T
Bo
Ok Ch ise
l a h ic a
om go
Pi a Cit
t ts y
bu
rg
h
0%
45+21+34C
1,422,833
1,104,461
Two-year
job growth
95% to
105%
Under
95%
Over 105%
656,157
Sources: U.S. Bureau of Labor Statistics; Moodys Analytics, as of June 30, 2014.
37
5
4
excellent
good
4.01
fair
Houston
2
38
poor
05
07
09
11
13
15
excellent
excellent
good
good
3.85
fair
3
Austin
poor
05
07
09
11
13
15
fair
3.82
San Francisco
poor
05
07
09
11
13
15
excellent
good
fair
poor
05
07
09
11
13
15
Hold
Sell
Inland Empire
68.4
Orange County
67.7
23.7
Los Angeles
66.7
Minneapolis/St. Paul
66.7
27.8
5.6
65.6
28.1
6.3
Dallas/Fort Worth
61.3
Indianapolis
61.1
29.0
22.9
29.0
16.7
7.9
3.2
10.4
9.7
22.2
Seattle
57.6
Raleigh/Durham
56.0
30.3
12.1
Houston
55.9
32.4
Oakland/East Bay
53.6
39.3
7.1
San Francisco
52.6
36.8
10.5
Charlotte
52.4
40.0
4.0
11.8
35.7
11.9
Denver
51.2
32.6
16.3
Philadelphia
48.7
41.0
10.3
Phoenix
47.1
Baltimore
46.9
Atlanta
44.4
Austin
44.1
Chicago
40.7
0%
44.1
8.8
40.6
12.6
41.7
13.9
47.1
8.8
40.7
20%
40%
60%
18.6
80%
100%
39
excellent
excellent
good
good
3.65
3.56
Dallas/Fort Worth
fair
fair
Los Angeles
poor
05
07
09
11
13
15
poor
05
07
09
11
13
15
Hold
Sell
New YorkBrooklyn
91.7
71.0
2.8 5.6
New YorkManhattan
69.1
Los Angeles
64.1
Philadelphia
62.8
Oakland/East Bay
59.5
19.0
21.4
Portland
55.2
27.6
17.2
Houston
53.5
Miami
51.7
19.4
12.7
25.0
25.6
27.9
9.7
18.2
10.9
11.6
18.6
37.9
10.3
San Diego
51.4
29.7
Orange County
51.2
29.3
18.9
Nashville
50.0
San Jose
48.6
Denver
47.2
18.9
34.0
San Francisco
46.6
24.1
29.3
19.5
16.7
33.3
37.1
14.3
Chicago
42.9
32.7
24.5
Dallas/Fort Worth
41.9
34.9
23.3
Atlanta
37.0
27.2
35.9
Seattle
34.8
30.4
34.8
Austin
29.4
41.2
29.4
0%
20%
40%
60%
80%
100%
40
excellent
good
fair
Charlotte
poor
05
07
09
11
13
15
Columbia, SC
87.5
New YorkBrooklyn
67.9
Los Angeles
65.6
San Diego
63.0
Hold
Sell
12.5
32.1
24.6
9.8
33.3
3.7
Raleigh/Durham
62.5
Dallas/Fort Worth
60.0
28.6
11.4
Boston
59.5
27.0
13.5
Orange County
58.3
36.1
San Jose
57.6
36.4
New YorkManhattan
56.7
Seattle
54.8
26.2
19.0
31.1
15.6
Austin
53.3
Denver
52.8
Oakland/East Bay
52.6
San Francisco
49.2
Houston
48.8
Phoenix
46.3
Charlotte
44.0
Miami
44.0
Atlanta
37.0
0%
20.0
17.5
5.6
6.1
30.0
13.3
37.7
9.4
44.7
2.6
27.1
23.7
20.9
30.2
29.3
24.4
34.0
22.0
40.0
16.0
42.0
20%
40%
21.0
60%
80%
100%
excellent
good
3.70
fair
Seattle
poor
05
07
09
11
13
15
41
Edmonton
2
Saskatoon
8
Calgary
1
Vancouver
4
Winnipeg
7
Seattle
8
Tacoma
62
Spokane
67
Portland, OR
16
Minneapolis/
St. Paul
30
Boise
58
Sacramento
66
San Francisco
3
Oakland
San Jose
East Bay
15
17
Omaha
61
Los Angeles
6
Orange County
12
Inland Empire
46
San Diego
20
Albuquerque
47
Phoenix
26
Tucson
65
Honolulu/Hawaii
42
Kansas City
33
Denver
4
Las Vegas
64
Oklahoma City
40
Dallas/Fort Worth
5
Austin
2
San Antonio
23
42
Des Moines
57
Houston
1
Halifax
9
Montreal
6
Ottawa
5
Portland, ME
68
Boston
9
Providence
Buffalo
Hartford
74
Madison
75
73
53 Milwaukee
Westchester,
NY/Fairfield, CT
Detroit
71
60
38
Northern New Jersey
New Yorkother boroughs
32
New YorkBrooklyn 48
Cleveland
22
Pittsburgh
Chicago
49
43
18
New YorkManhattan
Indianapolis
14
Philadelphia
24
Columbus Washington, DC
Baltimore
27
MD suburbs
37
31
51
Washington, DCDistrict
St. Louis
Cincinnati
25
Richmond
41
54
Washington, DCNorthern VA
63
28
Louisville
50
Virginia Beach/Norfolk
72
Raleigh/Durham
Charlotte
10
7
Nashville
Greenville
Memphis
13
29
69
Columbia
34
Atlanta
Leading U.S./Canadian Cities
Charleston
11
21
Birmingham
59
Overall Real Estate Prospects
Toronto
3
Generally good
Jacksonville
55
New Orleans
49
Fair
Deltona/Daytona
70
Tampa/
St. Petersburg
35
Cape Coral/Fort Myers/Naples
56
Orlando
39
Generally poor
Note: Numbers represent metro-area overall
country rank.
Palm Beach
45
Fort Lauderdale
44
Miami
19
43
Market
United States
21.2%
10.6%
Business Costs
Employment Total
Location Quotient****
5-year
Per capita
GMP per
Education
2015 as % 2017 as % Bus &
disposable disposable
2015 GMP capita 5-year Cost of
Goods Office
income 20142015 of previous of previous professional & health
income
doing
per capita projected
services services Energy producing using
peak
peak
growth
%change
growth business** ratio***
ratio*
321.34
0.8%
1.00
7.3%
100%
Albuquerque
0.90
0.2%
0.19
21.0%
-4.1%
Atlanta
5.69
1.6%
16.40
20.5%
16.6%
Austin
2.00
2.5%
8.09
24.6%
18.1%
0.99
1.00
9.6%
2.7%
101.4%
107.6%
1.0
0.78
4.8%
88.0%
0.74
4.5%
0.1%
0.93
12.5%
90.0%
0.86
8.2%
2.7%
5.9%
101.0%
0.90
9.3%
4.1%
116.1%
1.0
1.0
1.0
1.0
92.6%
94.2%
101.4%
109.2%
0.9
1.0
0.4
0.8
0.9
1.2
0.8
1.1
0.9
128.9%
1.1
1.0
0.7
0.5
1.0
1.0
0.9
Baltimore
2.82
0.7%
3.20
21.3%
8.7%
1.12
8.0%
104.0%
1.09
6.5%
2.6%
104.2%
109.8%
1.0
1.2
0.7
0.8
Birmingham
1.15
0.6%
1.46
19.8%
9.7%
0.84
12.9%
94.0%
0.86
11.4%
1.8%
95.5%
102.0%
0.8
0.9
0.7
1.1
0.9
Boise
0.67
1.6%
1.59
19.7%
8.2%
0.75
6.3%
79.0%
0.75
5.7%
3.1%
101.8%
108.4%
0.8
1.0
0.3
1.3
0.8
Boston
4.79
0.9%
5.35
21.7%
10.9%
1.36
7.6%
120.0%
1.21
8.3%
2.1%
103.2%
107.8%
1.1
1.3
0.8
0.9
1.1
Buffalo
1.13
-0.2%
-0.65
20.3%
2.8%
1.15
11.5%
89.0%
0.84
8.7%
2.3%
100.3%
103.9%
0.8
1.1
1.7
1.1
0.8
1.06
2.6%
7.79
15.4%
17.3%
0.62
10.0%
95.0%
1.03
10.8%
3.8%
97.0%
106.8%
0.8
0.8
0.1
0.9
0.8
Charleston
0.73
1.3%
1.75
23.0%
12.8%
0.77
3.6%
95.0%
0.83
6.2%
2.6%
104.6%
110.6%
0.9
0.8
0.8
1.1
0.8
Charlotte
1.95
2.1%
8.88
20.5%
23.4%
0.98
3.8%
86.0%
0.87
5.1%
2.9%
104.1%
112.2%
1.1
0.6
1.4
1.1
1.1
Chicago
9.62
0.4%
-3.84
21.1%
7.2%
1.04
9.4%
99.0%
0.96
8.1%
1.8%
98.1%
102.1%
1.1
1.0
1.7
1.1
1.0
Cincinnati
2.18
0.6%
1.24
19.7%
8.6%
0.90
6.2%
95.0%
0.89
7.7%
2.7%
100.1%
105.4%
1.0
1.0
1.7
1.3
0.9
Cleveland
2.05
-0.3%
-2.15
18.2%
3.2%
1.01
7.8%
97.0%
0.94
8.9%
2.7%
96.8%
101.6%
0.9
1.2
2.1
1.4
0.8
Columbia
0.82
1.5%
2.85
22.2%
14.0%
0.81
2.2%
93.0%
0.77
6.5%
2.8%
100.4%
106.7%
0.8
0.8
1.8
1.0
0.9
Columbus
1.94
0.7%
1.02
22.2%
9.6%
1.00
2.6%
95.0%
0.88
7.4%
2.4%
105.6%
111.0%
1.0
0.9
1.1
0.9
1.0
Dallas/Fort Worth
7.08
2.0%
22.10
21.2%
16.0%
1.07
14.2%
94.0%
0.96
9.7%
3.8%
108.4%
118.9%
1.0
0.8
1.0
1.2
1.0
Deltona/Daytona
0.52
2.0%
3.43
16.8%
13.5%
0.56
9.6%
86.0%
0.72
10.9%
3.7%
94.1%
102.5%
0.7
1.3
0.4
0.9
0.7
Denver
2.81
1.7%
8.31
21.8%
15.9%
1.08
7.3%
94.0%
1.04
9.4%
3.2%
107.2%
115.5%
1.1
0.8
0.5
1.0
1.1
Des Moines
0.61
0.5%
-0.09
20.9%
6.8%
1.17
14.6%
83.0%
0.99
8.3%
3.1%
105.7%
112.0%
0.8
0.9
1.1
0.9
1.2
1.0
Detroit
4.28
-0.1%
-2.71
18.6%
4.8%
0.90
11.3%
95.8%
0.90
8.8%
2.8%
91.7%
96.5%
1.2
1.0
1.2
1.3
Fort Lauderdale
1.90
1.5%
6.87
19.5%
14.2%
0.79
3.4%
96.0%
0.91
10.5%
3.1%
98.8%
106.1%
1.1
0.8
0.3
0.7
1.1
Greenville
0.68
1.1%
1.67
20.5%
12.0%
0.79
8.7%
90.0%
0.78
7.1%
2.8%
102.2%
108.5%
1.2
0.7
4.9
1.4
1.0
Hartford
1.22
0.0%
-0.20
19.5%
6.9%
1.50
11.1%
102.0%
1.09
10.8%
2.2%
98.4%
102.8%
0.7
1.1
0.7
1.2
1.0
Honolulu
1.00
0.9%
0.75
23.7%
8.1%
1.05
4.8%
116.0%
1.03
5.8%
1.7%
100.8%
103.9%
0.9
0.9
0.2
0.7
0.8
Houston
6.61
1.7%
13.71
21.8%
13.7%
1.29
19.8%
99.0%
1.10
10.1%
3.8%
112.1%
122.6%
0.9
0.8
2.2
1.7
0.8
Indianapolis
1.87
1.2%
2.36
20.5%
13.2%
1.04
5.0%
87.0%
0.89
8.8%
2.2%
104.1%
109.5%
1.0
0.9
2.3
1.2
0.9
Inland Empire
4.49
1.2%
4.78
21.9%
11.1%
0.62
4.8%
92.0%
0.65
9.9%
2.6%
98.6%
103.8%
0.7
1.0
1.1
1.1
0.6
Jacksonville
1.43
1.3%
3.96
20.8%
11.7%
0.80
6.6%
91.0%
0.89
11.1%
2.9%
100.0%
107.0%
1.0
0.9
0.3
0.8
1.1
Kansas City, MO
2.12
0.8%
1.78
20.0%
9.5%
0.92
8.5%
89.0%
0.94
8.2%
2.7%
100.2%
105.7%
1.0
0.9
1.2
1.0
1.0
0.8
Las Vegas
2.12
2.2%
10.12
21.4%
20.3%
0.80
2.7%
85.0%
0.78
9.4%
3.1%
95.4%
103.4%
0.8
0.6
0.3
0.7
Los Angeles
10.16
0.6%
2.12
23.5%
9.3%
1.14
8.7%
103.0%
0.90
10.4%
2.6%
99.6%
105.3%
0.9
1.2
0.9
1.0
1.0
Louisville
1.33
0.6%
1.39
19.6%
10.1%
0.87
7.5%
85.0%
0.88
8.2%
2.7%
102.3%
107.6%
0.8
0.9
1.4
1.4
0.8
Madison
0.60
1.0%
0.76
24.3%
6.4%
1.19
9.9%
94.0%
1.05
11.0%
2.4%
104.1%
109.4%
0.7
0.7
1.8
1.1
0.9
Memphis
1.36
0.7%
1.04
20.8%
10.9%
0.85
5.3%
85.0%
0.87
6.9%
2.6%
96.4%
101.6%
0.9
0.9
1.3
1.0
0.8
Miami
2.66
0.9%
6.64
21.1%
12.1%
0.79
1.9%
107.0%
0.85
10.2%
2.9%
103.3%
110.1%
0.9
1.0
0.5
0.6
0.9
Milwaukee
1.57
0.2%
-0.61
20.2%
2.9%
0.98
8.5%
99.0%
0.98
11.3%
2.1%
97.5%
101.9%
0.9
1.2
1.3
1.5
0.9
Sources: Moodys Analytics, U.S. Census Bureau, Bureau of Economic Analysis, Bureau of Labor Statistics.
*Metro GMP per capita/National GMP per capita.
**Cost of doing business - national average = 100%.
***Market per capita disposable income/national per capita disposable income.
****Location quotient measures employment concentration by market - (metro industry employment as a % of metro total)/(national indsustry employment as a % of national total).
44
Market
United States
10.6%
Business Costs
Employment Total
Location Quotient****
5-year
Per capita
GMP per
Education
2015 as % 2017 as % Bus &
disposable disposable
2015 GMP capita 5-year Cost of
Goods Office
income 20142015 of previous of previous professional & health
income
doing
per capita projected
services services Energy producing using
peak
peak
growth
% change
growth business** ratio***
ratio*
321.34
0.8%
21.2%
1.00
7.3%
Minneapolis/St. Paul
3.47
0.9%
2.57
20.9%
7.4%
1.08
7.7%
Nashville
1.71
0.8%
1.16
21.9%
11.4%
0.97
3.3%
100%
1.00
9.6%
2.7%
101.4%
107.6%
1.0
99.0%
1.00
0.6%
90.0%
1.00
7.2%
1.0
1.0
1.0
1.0
2.0%
101.2%
105.8%
0.9
1.1
1.2
1.2
1.0
3.1%
109.7%
116.0%
1.0
1.0
0.8
1.2
1.0
New Orleans
1.23
0.4%
0.07
21.7%
4.8%
0.98
7.6%
86.0%
0.94
11.0%
3.0%
91.2%
96.8%
0.8
1.0
1.8
1.1
0.8
New YorkBrooklyn
2.64
0.7%
-2.37
26.0%
11.0%
1.27
7.3%
140.0%
0.91
19.6%
2.3%
110.5%
116.9%
0.5
2.3
0.2
0.3
0.8
New Yorkother
boroughs
7.11
0.3%
-4.03
21.0%
6.3%
1.27
7.3%
140.0%
1.49
15.8%
2.2%
105.2%
110.1%
0.7
1.5
0.9
0.7
0.8
New YorkManhattan
1.65
0.3%
-1.17
30.9%
6.2%
1.27
7.3%
160.0%
2.65
19.2%
1.8%
104.0%
108.7%
1.3
0.8
0.0
0.1
1.5
2.17
0.1%
-1.33
18.5%
7.5%
1.20
5.0%
102.0%
1.05
20.5%
2.7%
95.9%
100.9%
1.1
1.0
2.2
0.8
1.0
Oakland/East Bay
2.71
0.7%
1.98
21.1%
10.6%
1.00
4.1%
104.0%
1.21
11.0%
2.9%
100.4%
107.1%
1.0
1.1
1.2
1.1
0.9
Oklahoma City
1.36
1.3%
2.50
22.5%
11.3%
0.90
7.1%
83.0%
0.92
7.9%
2.5%
107.7%
113.3%
0.8
0.9
0.4
1.2
0.8
Omaha
0.92
1.4%
1.91
21.1%
12.3%
0.98
1.6%
89.0%
0.97
3.9%
3.0%
102.2%
109.0%
0.9
1.0
1.1
1.0
1.0
Orange County
3.18
0.9%
2.22
21.6%
9.9%
1.31
6.9%
102.0%
1.05
10.2%
2.9%
97.6%
103.6%
1.1
0.8
1.1
1.4
1.1
Orlando
2.39
2.4%
13.68
22.2%
18.9%
0.87
0.7%
94.0%
0.76
10.2%
3.1%
102.9%
111.5%
1.0
0.8
0.3
0.7
1.0
Palm Beach
1.43
2.3%
10.00
17.0%
17.6%
0.76
2.5%
96.0%
1.17
10.7%
3.5%
98.6%
107.6%
1.1
1.0
0.2
0.7
1.0
Philadelphia
6.07
0.3%
-0.26
20.6%
5.8%
1.01
6.8%
105.0%
1.06
8.5%
2.4%
99.0%
104.0%
1.0
1.3
1.5
0.9
1.0
Phoenix
4.60
2.3%
20.37
20.8%
17.7%
0.81
8.2%
93.0%
0.79
9.0%
3.1%
95.8%
103.5%
1.0
1.0
0.4
1.0
1.1
Pittsburgh
2.36
0.1%
1.84
18.9%
4.5%
1.03
5.1%
94.0%
1.00
9.7%
2.5%
101.9%
106.9%
0.9
1.3
1.0
1.1
0.9
Portland, ME
0.52
0.4%
2.70
17.4%
0.4%
0.88
7.1%
106.0%
0.95
5.3%
2.0%
99.8%
104.4%
0.8
1.2
1.0
1.1
0.8
Portland, OR
2.36
0.9%
0.44
21.0%
9.5%
1.25
9.3%
94.0%
0.92
12.5%
3.1%
103.4%
110.3%
0.9
1.0
0.7
1.4
0.9
Providence
1.61
0.2%
0.47
20.1%
7.3%
0.86
5.4%
100.0%
0.94
4.9%
2.0%
97.1%
100.8%
0.7
1.4
1.2
1.2
0.7
Raleigh/Durham
2.32
1.7%
7.97
20.7%
20.5%
0.97
8.1%
85.1%
0.87
6.5%
3.1%
104.7%
113.3%
1.1
1.0
1.5
1.0
1.0
Richmond
1.32
0.8%
1.61
20.7%
11.2%
0.99
7.5%
90.0%
0.91
7.8%
2.1%
101.7%
106.4%
1.0
0.9
1.2
0.9
1.0
0.8
Sacramento
2.27
1.0%
2.65
21.5%
9.8%
1.01
6.5%
96.0%
0.91
11.1%
3.2%
97.6%
104.4%
0.8
1.0
0.3
0.8
1.21
1.3%
1.04
23.5%
13.8%
1.15
8.8%
84.0%
0.88
7.9%
3.7%
107.1%
115.4%
1.0
0.7
1.1
1.2
1.0
San Antonio
2.38
1.9%
6.67
21.8%
13.1%
0.78
8.8%
84.0%
0.83
9.5%
3.6%
110.2%
120.1%
0.8
1.0
0.4
0.9
0.9
0.9
San Diego
3.30
1.2%
2.96
24.6%
10.0%
1.11
6.2%
111.0%
1.01
9.9%
2.6%
102.6%
108.2%
1.1
0.9
0.9
1.1
San Francisco
1.88
0.9%
2.37
23.0%
11.4%
1.71
6.8%
118.0%
1.57
10.6%
3.0%
109.2%
116.2%
1.4
0.9
1.0
0.6
1.4
San Jose
1.94
0.6%
-0.20
21.6%
10.6%
1.52
7.5%
116.0%
1.45
11.0%
3.0%
108.0%
114.8%
1.2
1.0
0.3
1.7
1.2
Seattle
2.88
1.3%
4.05
22.6%
12.0%
1.48
7.9%
101.0%
1.22
4.6%
2.6%
104.3%
110.2%
0.9
0.8
0.3
1.4
1.0
Spokane
0.49
0.9%
0.79
21.9%
9.0%
0.90
6.7%
82.0%
0.79
2.6%
2.5%
97.4%
102.5%
0.7
1.3
0.8
1.0
0.7
St. Louis
2.86
0.2%
-0.30
19.9%
5.8%
0.89
8.6%
91.0%
0.95
8.8%
2.5%
98.6%
103.5%
0.9
1.1
1.6
1.2
0.9
Tacoma
0.83
0.7%
0.50
22.3%
9.0%
0.73
14.0%
89.0%
0.87
3.7%
2.9%
99.7%
106.1%
0.5
1.2
1.0
1.1
0.6
Tampa/St. Petersburg
2.93
1.1%
9.28
18.6%
10.3%
0.81
9.7%
95.0%
0.87
11.0%
3.1%
98.6%
105.6%
1.1
1.0
0.5
0.8
1.1
Tucson
1.03
2.7%
6.83
20.8%
18.0%
0.74
9.3%
92.0%
0.77
8.6%
3.5%
95.4%
103.8%
0.8
1.1
0.2
0.9
0.8
Virginia Beach/Norfolk
1.73
0.6%
0.46
24.2%
8.7%
0.96
7.2%
91.0%
0.89
7.9%
2.0%
97.0%
101.1%
0.8
0.9
0.4
1.0
0.8
Washington, DC
District
0.67
1.4%
0.72
33.2%
17.7%
1.29
4.2%
117.0%
1.61
21.7%
1.9%
104.9%
109.3%
1.3
1.1
0.0
0.0
2.2
Washington, DC
MD suburbs
0.49
0.6%
0.17
18.2%
9.1%
0.73
5.5%
110.0%
1.09
20.3%
1.5%
100.2%
104.0%
0.8
0.9
0.6
0.3
0.9
Washington, DC
Northern VA
2.97
1.5%
3.55
21.4%
12.8%
1.08
5.1%
110.0%
1.37
18.8%
2.2%
103.9%
110.5%
1.7
0.7
0.2
0.1
1.6
Westchester/Fairfield,
NY/CT
1.92
0.2%
-0.96
17.4%
7.1%
1.22
9.4%
120%
1.74
20.7%
2.1%
98.6%
103.4%
1.0
1.2
0.7
0.5
1.1
45
Market
2015 total
(000s)
3-year
projected
growth
2015 price
United States
122,587
3.0%
$278,841
Albuquerque
350.99
0.5%
Atlanta
2,096.57
4.2%
Austin
758.08
6.0%
Baltimore
1,082.97
2.7%
Birmingham
461.02
Boise
249.20
Boston
1,854.54
20142015
% change
Space under
construction as
% of inventory
Affordability
index*
Permits
Starts
Completions
Sales
5.4%
96.1%
157.58
53.1%
47.0%
16.7%
15.5%
51
0.6
21.3%
3.6%
180.468
2.7%
90.9%
153.44
41.1%
33.3%
10.0%
10.8%
40
0.6
18.6%
3.8%
$161,733
6.1%
94.4%
213.92
-58.4%
-62.3%
-58.8%
20.6%
46
0.7
17.2%
2.4%
$242,285
3.3%
128.4%
154.24
43.6%
40.1%
11.5%
13.3%
35
0.5
18.0%
9.1%
$261,122
5.3%
91.7%
168.31
32.2%
24.2%
-6.0%
-0.8%
66
0.6
18.6%
4.8%
2.4%
$174,111
4.2%
105.5%
168.13
-0.8%
-0.9%
-1.8%
5.8%
33
0.6
18.8%
2.0%
4.1%
$177,250
5.6%
86.1%
169.12
46.7%
35.2%
-6.3%
25.3%
37
0.6
17.2%
1.3%
2.9%
$412,421
4.9%
101.0%
125.54
47.2%
42.2%
23.5%
12.5%
80
0.6
29.5%
4.7%
Walk Score
Rent/cost of
ownership**
Rent as % of
household
income
2015 as
% of peak
Buffalo
469.56
0.5%
$139,998
3.7%
126.0%
251.19
71.2%
63.8%
26.8%
13.7%
65
0.8
18.0%
2.0%
444.13
6.8%
$328,713
4.7%
84.4%
108.77
69.5%
58.6%
13.9%
16.1%
36
0.4
21.0%
1.0%
Charleston
284.79
4.1%
$240,811
9.6%
112.1%
123.49
9.2%
1.6%
-24.2%
18.7%
34
0.5
19.7%
6.8%
Charlotte
761.18
6.1%
$183,676
6.1%
117.7%
176.87
14.6%
7.2%
-14.4%
10.8%
24
0.6
17.6%
9.1%
Chicago
3,577.31
1.4%
$200,395
5.7%
73.3%
182.31
23.6%
20.2%
16.9%
12.2%
75
0.8
21.4%
1.9%
1.8%
Cincinnati
861.94
2.1%
$135,512
1.3%
93.3%
247.18
46.1%
45.2%
14.5%
16.9%
50
0.8
16.6%
Cleveland
838.67
0.3%
$120,226
3.7%
86.4%
263.99
80.0%
82.0%
33.8%
12.7%
57
0.9
18.1%
1.5%
Columbia
323.70
4.5%
$149,636
2.4%
102.3%
200.78
30.9%
26.1%
4.2%
12.1%
35
0.7
18.6%
4.3%
Columbus
762.13
2.5%
$151,746
8.1%
101.2%
220.34
20.5%
19.9%
-5.9%
13.8%
40
0.7
15.7%
3.8%
Dallas/Fort Worth
2,580.90
5.1%
$182,124
5.2%
122.1%
184.91
65.3%
59.5%
25.4%
13.7%
44
0.6
16.0%
3.8%
Deltona/Daytona
225.73
5.0%
$131,943
11.7%
64.2%
182.78
73.2%
55.7%
-2.9%
13.3%
13
0.9
23.2%
0.0%
Denver
1,124.02
4.3%
$298,464
7.2%
119.6%
127.70
46.3%
38.1%
14.0%
15.5%
56
0.4
17.6%
6.5%
Des Moines
235.92
1.7%
$170,758
1.3%
112.1%
207.88
43.6%
44.4%
14.1%
22.3%
42
0.7
15.9%
4.4%
Detroit
1,695.75
1.2%
$81,382
8.4%
50.4%
426.23
58.2%
47.5%
-8.2%
20.6%
52
1.5
18.9%
0.6%
Fort Lauderdale
720.09
4.0%
$268,804
13.3%
73.3%
112.86
121.0%
103.1%
11.4%
31.1%
54
0.6
26.9%
4.9%
Greenville
267.72
3.7%
$166,756
5.3%
107.8%
166.06
-54.9%
-62.4%
-73.0%
14.5%
41
0.6
17.2%
0.8%
Hartford
478.67
1.4%
$231,560
3.5%
88.2%
187.30
98.9%
91.1%
13.4%
28.1%
68
0.6
17.5%
4.0%
Honolulu
327.43
2.5%
$700,472
6.3%
109.5%
60.48
66.3%
61.0%
44.9%
23.4%
63
0.3
21.5%
0.0%
Houston
2,305.94
4.3%
$193,291
7.2%
127.1%
169.22
21.2%
18.1%
0.1%
9.6%
44
0.6
16.7%
4.2%
Indianapolis
732.24
3.0%
$145,930
7.8%
118.6%
229.83
62.6%
62.8%
26.8%
10.2%
29
0.7
15.6%
2.9%
Inland Empire
1,403.82
3.7%
$270,893
11.9%
67.5%
110.90
121.2%
105.5%
30.9%
15.3%
39
0.6
23.6%
1.3%
Jacksonville
559.03
4.0%
$171,398
4.9%
89.0%
179.78
33.3%
24.7%
-9.2%
13.5%
26
0.7
18.6%
2.2%
Kansas City, MO
845.10
2.5%
$157,767
3.4%
101.7%
221.91
42.5%
35.4%
-7.3%
8.9%
32
0.7
15.0%
4.4%
Las Vegas
790.11
5.5%
$194,555
12.1%
61.4%
147.79
35.4%
25.6%
-15.7%
17.2%
39
0.6
19.4%
1.1%
Los Angeles
3,392.94
2.2%
$436,424
9.9%
78.1%
72.08
39.9%
29.5%
8.1%
23.7%
50
0.5
31.2%
2.2%
Louisville
534.36
1.6%
$141,072
1.5%
102.8%
220.87
31.1%
19.6%
-25.0%
10.9%
31
0.7
16.5%
3.2%
Madison
249.24
3.0%
$225,659
4.3%
99.6%
170.10
74.6%
71.7%
31.6%
13.9%
47
0.6
17.1%
4.0%
Memphis
520.29
2.5%
$140,083
10.1%
98.6%
193.39
80.0%
80.9%
56.4%
15.0%
33
0.7
18.3%
2.5%
Miami
908.22
3.6%
$258,434
10.1%
68.4%
93.61
107.8%
102.0%
45.0%
67.5%
76
0.6
30.5%
7.4%
Milwaukee
636.07
1.4%
$204,636
3.3%
92.9%
166.01
74.0%
74.1%
22.7%
15.4%
59
0.6
19.1%
1.8%
Minneapolis/St. Paul
1,371.25
2.9%
$203,649
5.2%
87.6%
197.31
75.0%
77.1%
46.6%
18.2%
65
0.7
18.0%
3.3%
Sources: U.S. Census Bureau, Moodys Analytics, WalkScore, U.S. Federal Reserve, Reis, CoStar, and Bureau of Economic Analysis.
* Affordability is the percentage of the median price home that can be purchased with the median income for the market.
** Market apartment rent/median mortgage payment, taxes, insurance, and maintenance.
46
Multifamily Metrics
Market
2015 total
(000s)
3-year
projected
growth
United States
122,587
3.0%
Nashville
669.28
New Orleans
2015 price
20142015
% change
2015 as
% of peak
Affordability
index*
Permits
Starts
Completions
Sales
$278,841
5.4%
96.1%
157.58
53.1%
47.0%
16.7%
15.5%
2.5%
$175,378
3.4%
95.9%
186.63
48.3%
46.3%
37.7%
22.8%
472.13
1.9%
$168,142
2.5%
97.5%
166.87
49.5%
52.8%
58.4%
11.0%
Multifamily Metrics
Rent/cost of
ownership**
Rent as % of
household
income
Space under
construction as
% of inventory
51
0.6
21.3%
3.6%
26
0.7
17.5%
7.6%
56
0.8
22.2%
4.2%
Walk Score
New YorkBrooklyn
943.54
2.0%
$420,320
4.1%
92.0%
60.17
64.6%
54.7%
90.0%
14.1%
97
0.8
56.2%
2.2%
2,410.22
1.4%
$492,093
0.0%
105.0%
87.62
74.9%
70.0%
36.3%
14.2%
83
0.6
38.9%
1.0%
New YorkManhattan
781.18
1.0%
$464,019
5.6%
93.7%
30.99
63.8%
53.9%
90.1%
19.0%
100
1.0
50.6%
1.6%
778.38
1.0%
$414,949
6.8%
93.7%
116.74
55.3%
55.3%
59.1%
15.0%
78
0.6
25.1%
5.0%
Oakland/East Bay
966.15
2.0%
$755,231
6.2%
98.0%
64.60
67.1%
58.2%
26.1%
15.9%
69
0.3
22.8%
2.0%
Oklahoma City
528.66
3.5%
$162,353
3.5%
116.0%
194.05
12.4%
8.3%
-9.3%
14.3%
32
0.5
13.9%
2.8%
Omaha
357.33
3.9%
$157,073
5.1%
113.7%
220.62
50.5%
50.2%
15.4%
9.2%
41
0.7
15.9%
4.7%
Orange County
1,045.20
2.5%
$727,073
4.3%
102.7%
62.25
48.5%
40.8%
14.3%
15.1%
51
0.3
25.9%
3.3%
5.2%
Orlando
881.76
6.0%
$192,224
5.2%
71.5%
154.63
48.1%
39.3%
3.3%
10.1%
39
0.7
21.7%
Palm Beach
568.60
4.9%
$286,395
5.8%
73.0%
115.69
70.9%
61.3%
21.4%
12.0%
40
0.6
26.4%
3.6%
Philadelphia
2,313.43
1.6%
$239,327
7.3%
102.6%
173.31
81.3%
74.0%
19.8%
19.5%
77
0.7
20.8%
3.0%
3.5%
Phoenix
1,703.32
5.6%
$214,741
7.0%
80.4%
152.63
84.5%
81.2%
69.1%
19.9%
52
0.5
16.2%
Pittsburgh
1,020.94
1.3%
$145,591
5.5%
122.1%
241.10
57.8%
54.1%
13.2%
18.4%
60
0.9
20.5%
3.1%
Portland, ME
221.87
1.6%
$239,929
4.2%
98.2%
147.69
56.8%
51.1%
-7.3%
16.5%
57
0.7
23.1%
0.8%
Portland, OR
946.70
3.3%
$298,633
5.1%
101.4%
126.05
67.5%
62.0%
33.9%
17.6%
63
0.4
18.2%
4.1%
Providence
626.18
1.2%
$244,909
5.4%
83.8%
149.25
82.7%
81.0%
39.4%
15.4%
76
0.7
26.3%
1.6%
Raleigh/Durham
911.88
4.5%
$215,521
0.0%
116.0%
181.57
20.4%
14.5%
-8.6%
11.5%
29
0.5
16.2%
8.0%
Richmond
518.93
2.7%
$253,454
3.6%
108.8%
137.63
94.2%
89.3%
43.2%
16.7%
49
0.5
18.1%
3.8%
Sacramento
828.87
2.7%
$275,274
5.6%
73.5%
137.49
106.3%
95.3%
42.2%
14.9%
33
0.5
18.9%
3.2%
401.77
3.1%
$264,633
4.0%
114.2%
136.18
54.6%
50.6%
24.0%
10.2%
55
0.4
14.7%
4.1%
San Antonio
852.25
4.5%
$185,380
3.7%
121.2%
166.41
68.9%
65.3%
28.3%
12.2%
34
0.6
18.0%
4.7%
2.5%
San Diego
1,149.76
2.3%
$523,015
5.3%
86.8%
73.41
96.6%
88.6%
49.0%
15.0%
49
0.4
26.1%
San Francisco
743.59
2.7%
$1,084,748
2.8%
114.8%
49.68
54.8%
48.8%
28.7%
10.4%
84
0.3
30.8%
7.4%
San Jose
649.42
2.2%
$890,417
3.7%
106.5%
64.06
43.9%
42.6%
37.4%
12.7%
48
0.3
20.0%
6.5%
Seattle
1,139.35
3.5%
$411,774
4.4%
98.0%
110.62
28.6%
10.9%
-30.0%
8.5%
71
0.4
19.4%
5.3%
Spokane
198.37
3.0%
$189,920
6.0%
97.4%
170.44
34.9%
12.9%
-38.7%
8.8%
36
0.5
18.5%
0.6%
St. Louis
1,163.62
1.6%
$145,796
4.4%
99.1%
241.88
60.8%
59.0%
16.1%
13.0%
60
0.7
16.6%
0.7%
Tacoma
317.18
2.7%
$226,015
4.1%
84.1%
156.70
14.8%
-9.5%
-52.3%
12.6%
51
0.5
17.4%
1.9%
Tampa/St. Petersburg
1,200.19
3.1%
$165,987
8.2%
73.6%
182.61
58.6%
56.0%
39.6%
7.6%
46
0.8
22.6%
2.5%
Tucson
411.61
6.3%
$194,163
7.0%
79.3%
151.77
82.9%
82.8%
77.1%
13.0%
39
0.5
17.4%
0.6%
Virginia Beach/Norfolk
656.76
2.3%
$196,236
3.6%
80.5%
169.90
79.9%
77.4%
52.3%
16.3%
38
0.7
21.5%
5.4%
Washington, DCDistrict
289.60
2.8%
$383,158
3.0%
102.4%
110.97
-11.7%
-20.8%
-82.1%
8.4%
74
0.6
26.9%
6.1%
Washington, DCMD
suburbs
173.78
2.1%
$365,400
4.6%
91.8%
134.12
60.6%
55.2%
26.1%
16.1%
47
0.5
19.1%
5.8%
Washington, DCNorthern
VA
1,077.23
3.9%
$376,260
4.0%
91.3%
131.98
83.6%
81.3%
52.1%
20.6%
56
0.6
23.6%
6.1%
Westchester/Fairfield,
NY/CT
696.18
1.3%
$531,422
7.0%
89.8%
103.86
33.2%
28.2%
46.4%
17.9%
51
0.5
27.3%
9.5%
47
excellent
good
3.58
48
fair
Boston
poor
05
07
09
11
13
15
New YorkBrooklyn
92.0
Hold
Sell
8.0
Miami
75.0
New YorkManhattan
67.3
Houston
Washington, DC
Northern VA
San Francisco
60.7
32.1
7.1
58.1
38.7
3.2
Nashville
55.0
Boston
54.0
Orange County
51.9
20.8
18.4
57.1
Charlotte
48.8
48.3
4.2
14.3
33.3
9.5
40.0
33.3
5.0
12.7
33.3
14.8
34.9
16.3
44.8
6.9
Seattle
47.1
41.2
11.8
Los Angeles
47.1
39.2
13.7
Raleigh/Durham
46.4
42.9
10.7
Washington, DCDistrict
45.9
45.9
8.1
Denver
45.2
47.6
Chicago
45.1
Austin
38.2
Oakland/East Bay
33.3
Atlanta
31.6
0%
7.1
27.5
27.5
47.1
14.7
42.4
24.3
46.1
20%
40%
22.4
60%
80%
100%
about the Raleigh/Durham office market, and it is ranked number seven. The
appeal of the market to future residents is
being reflected in a single-family housing
ranking of number nine and a retail ranking of 13. The industrial sector in Raleigh/
Durham has historically been skewed
toward higher-finish product that has
been designed to serve the local technology industries. Survey respondents
feel relatively good about the industrial
market in Raleigh/Durham, and it is currently ranked number 15. The multifamily
ranking for the market is just outside the
top one-third of markets at number 29.
The lower ranking may reflect the relative
affordability of single-family housing. The
hotel sector is the lowest-ranked property
type in Raleigh/Durham for 2015.
5
4
excellent
good
5
4
excellent
good
5
4
excellent
good
3.50
3.40
3.42
Atlanta
fair
fair
fair
Raleigh/Durham
Orange County
poor
05
07
09
11
13
15
poor
05
07
09
11
13
15
poor
05
07
09
11
13
15
49
5
4
excellent
good
5
4
excellent
good
3.44
3.32
Nashville
fair
fair
New YorkManhattan
poor
05
07
09
11
13
15
poor
05
07
09
11
13
15
investors. Manhattan remains the financial center of the United States, but much
of the economic growth can be attributed
to a growing technology center further
enhancing the diversity of the economy.
Manhattan is expensive, but if you have
the capital, survey respondents feel there
may be good investment opportunities.
The survey results put retail at number
three, hotel at number nine, office at number ten, and multifamily at number 13 as
the best options for 2015. The industrial
and single-family housing sectors are
viewed somewhat less favorably and are
ranked in the bottom one-third, as both
are ranked number 53 for 2015.
Manhattan is clearly the most attractive destination for global and domestic
capital in the United States. This isnt
likely to change in 2015 as strength in
the local economy and investor demand
should keep the market active in 2015. A
unique strength of the Manhattan market
has been the cooperation between public
and private groups to make some of the
massive real estate projects undertaken
in the city a reality.
San Jose (15). San Jose becomes the
second Bay Area market in the top 20. It
is all about technology in San Jose, but
excellent
good
3.33
fair
San Jose
poor
05
07
09
11
13
15
Miami
69.6
Los Angeles
61.0
Hold
Sell
17.4
29.3
10.0
13.0
Portland
9.8
Nashville
60.0
New YorkBrooklyn
56.5
Boston
55.2
Oklahoma City
50.0
San Francisco
47.6
Houston
43.8
Seattle
43.3
Detroit
42.9
Indianapolis
37.5
Austin
36.1
36.1
27.8
New YorkManhattan
31.0
45.2
23.8
Charlotte
Denver
Washington, DC
District of Columbia
Dallas/Fort Worth
Chicago
28.9
30.0
39.1
3.24
4.3
29.3
15.5
fair
50.0
38.1
14.3
43.8
12.5
30.0
26.7
42.9
14.3
37.5
25.0
39.5
28.1
31.6
62.5
25.7
9.4
60.0
14.3
23.1
50.0
26.9
22.0
48.8
29.3
Atlanta
21.2
51.5
27.3
Baltimore
19.0
53.4
27.6
0%
excellent
good
20%
40%
60%
80%
100%
poor
05
07
09
11
13
15
51
5
4
excellent
good
excellent
excellent
good
good
Chicago
3.55
3.46
Oakland/East Bay*
fair
fair
fair
Miami
poor
05
07
09
11
13
15
poor
05
07
09
11
13
15
poor
05
07
09
11
13
15
excellent
Perspective on Regions
good
Midwest Region
The 13 markets that constitute the Midwest region have an
average survey rank of 44, with Chicago leading the way at
number 18. The next-highest-ranked markets in the region are
Indianapolis, Minneapolis/St. Paul, and Kansas City.
3.32
fair
San Diego
poor
05
07
09
11
13
15
The Midwest industrial market has experienced improvement due to the increase in demand for goods and services
from local economies and increased industrial production in
the region. Survey respondents have ranked the potential for
industrial as good in Chicago, Indianapolis, Minneapolis/St.
Paul, Kansas City, and Cincinnati. The expectations for Detroit,
Columbus, and Des Moines are also favorable.
Office
Retail
Industrial Multifamily
Hotel
Local
outlook
Housing score*
18
24
30
33
37
38
41
52
53
54
57
61
71
Chicago
Indianapolis
Minneapolis/St. Paul
Kansas City, MO
Columbus
Detroit
St. Louis
Cleveland
Madison
Cincinnati
Des Moines
Omaha
Milwaukee
2.96
2.99
2.79
2.71
2.93
2.54
2.87
2.55
2.83
2.18
2.41
2.55
2.49
3.24
2.83
2.75
2.68
2.98
2.77
2.63
2.36
2.76
2.19
2.44
2.97
2.79
3.76
3.51
3.37
3.29
3.13
3.19
2.98
2.88
2.55
3.25
3.08
2.34
2.76
3.87
3.49
3.30
3.08
3.08
3.34
3.05
3.06
2.98
3.26
2.98
2.55
2.98
3.07
3.16
3.02
2.72
2.69
3.19
2.69
2.81
2.98
2.62
3.00
2.55
2.34
3.08
3.10
3.08
3.28
3.01
2.87
2.98
2.76
2.55
2.76
2.55
2.55
1.84
3.70
3.97
4.06
3.74
3.88
3.51
3.23
3.36
3.85
3.49
3.53
3.75
3.32
44
Midwest average
2.68
2.72
3.08
3.15
2.83
2.80
3.65
53
and Columbus lead the outlook for the region. The expectations
for St. Louis, Cleveland, and Milwaukee are still good, but somewhat muted compared with those for the rest of the region.
Northeast Region
Indianapolis 3.97
Columbus 3.88
Madison 3.85
Omaha 3.75
Kansas City, MO 3.74
Chicago 3.70
Des Moines 3.53
Detroit 3.51
Cincinnati 3.49
Cleveland 3.36
Milwaukee 3.32
St. Louis 3.23
1
Weak
2
Declining
3
Average
4
Improving
5
Strong
The expectations for the multifamily sector are very good for
most of the markets in the Northeast region. The three markets
Exhibit 3-13 Local Outlook: Northeast Region
New YorkManhattan 4.41
New YorkBrooklyn 4.35
Boston 4.20
Pittsburgh 3.92
New Yorkother boroughs 3.87
Philadelphia 3.49
Northern New Jersey 3.49
Westchester/Fairfield, NY/CT 3.23
Baltimore 3.07
Hartford 2.93
Buffalo 2.68
Portland, ME 2.62
Providence 2.16
1
Weak
2
Declining
3
Average
4
Improving
5
Strong
Note: Average score of local market participants opinion on strength of local economy,
investor demand, capital availability, development and redevelopment opportunities, public/
private investments, and local development community.
New YorkManhattan
New YorkBrooklyn
Boston
Pittsburgh
New Yorkother boroughs
Philadelphia
Northern New Jersey
Westchester/Fairfield, NY/CT
Baltimore
Hartford
Buffalo
Portland, ME
Providence
Northeast average
Office
Retail
Industrial
Multifamily
Hotel
Housing
Local
outlook
score*
3.56
3.59
3.53
2.74
2.57
2.83
2.42
2.22
2.63
2.05
1.59
1.85
1.70
2.56
3.66
3.33
3.46
2.61
3.11
3.09
3.35
2.88
2.82
2.36
1.97
2.30
2.27
2.86
2.91
2.75
3.22
2.86
2.85
3.35
3.76
2.44
3.34
2.32
2.13
2.27
1.75
2.76
3.72
4.15
3.61
3.00
3.20
3.59
3.71
2.88
3.58
2.64
2.13
2.68
2.46
3.33
3.20
3.58
2.81
2.55
2.98
2.47
2.40
3.08
2.20
1.74
2.73
2.23
2.77
3.26
3.39
3.05
2.80
3.00
2.80
2.76
2.93
2.27
1.97
2.67
2.55
4.41
4.35
4.20
3.92
3.87
3.49
3.49
3.23
3.07
2.93
2.68
2.62
2.16
3.18
2.71
2.79
3.42
that make up the New York City area, along with northern New
Jersey, are all expected to offer good investment opportunities
in 2015. Boston, Philadelphia, and Baltimore also could offer
good investment choices.
The heavily urbanized markets are expected to offer the best
retail investment opportunities next year. The New York region
including northern New Jersey scored well in this years survey.
Philadelphia and Boston are not far behind and could provide
investors with good investment chances.
The single-family housing outlook for the region is similar in a
number of markets in the region, with Boston, Brooklyn, and
Pittsburgh being scored slightly higher by survey participants.
Providence, Hartford, and Buffalo are projected to trail the
regional average.
Survey views of the Northeast industrial market are mixed. The
outlook is good for northern New Jersey, Philadelphia, and
Baltimore. Boston, Pittsburgh, and Manhattan have each scored
above the regional average.
The results of the survey reflect some caution in regard to
the hotel sector in the Northeast, but Boston, Manhattan,
and Brooklyn are given scores well above the regional
average. Increasing business and leisure travel will likely
drive hotel demand and push up room rates in these
business center markets.
West Region
Eight of the 20 markets in the West region are in this years
top 20, so the region has an impressive average rank of 34.
Phoenix, at number 26, is the highest-ranked West region
market outside of the top 20. Salt Lake City, at number 36, is the
only other West region market in the top half of this years survey.
In general, survey respondents appear to be positive on all
property sectors in the West region. The average outlook is
good for the multifamily, industrial, and single-family housing
sectors. The outlook for the other property types is fair, with the
hotel property type trailing the other sectors.
The Bay Area and southern California markets lead the region
in terms of outlook for multifamily investments. Albuquerque,
Phoenix, Salt Lake City, and Honolulu also are ranked as offering good investment potential in 2015.
55
San Francisco
3.81
3.61
3.62
3.98
3.89
3.80
Local
outlook
score*
4.54
Seattle
3.75
3.52
3.92
3.76
3.62
3.34
4.48
15
San Jose
3.62
2.88
3.16
3.91
2.77
3.50
4.41
Denver
3.68
3.55
3.62
3.66
3.49
3.87
4.30
Los Angeles
3.43
3.27
3.71
3.84
3.67
3.73
4.11
12
Orange County
3.40
3.28
3.72
3.63
2.90
3.36
4.08
20
San Diego
3.27
2.89
3.05
3.76
2.84
3.36
3.98
Overall
Rank
Office
Retail
Industrial
Multifamily
Hotel
Housing
17
Oakland/East Bay
3.51
3.17
3.55
3.89
2.65
3.15
3.95
16
Portland
2.93
2.75
3.35
3.92
2.94
3.60
3.88
36
2.96
2.64
3.05
3.01
2.62
3.26
3.81
26
Phoenix
3.12
2.82
3.68
3.51
2.67
3.14
3.66
46
Inland Empire
2.45
2.39
3.87
3.23
2.35
2.85
3.64
42
Honolulu
2.48
2.67
2.92
3.04
2.95
3.04
3.63
64
Las Vegas
2.02
2.32
2.78
2.90
2.60
2.58
3.49
58
Boise
2.51
2.55
2.81
2.71
2.55
2.74
3.42
67
Spokane
2.02
2.23
2.81
2.73
2.41
2.55
3.27
62
Tacoma
2.21
2.05
3.23
2.98
2.02
2.72
3.26
66
Sacramento
2.00
2.12
2.49
2.52
2.13
2.94
3.24
65
Tucson
2.27
2.21
2.98
2.76
1.28
2.98
2.70
47
Albuquerque
2.70
2.81
2.88
3.52
2.63
2.75
2.66
34
West average
2.91
2.79
3.26
3.36
2.75
3.16
3.73
The Inland Empire and Phoenix are the top regional industrial
markets outside of the top 20. Salt Lake City and Tacoma also
have good outlooks for 2015. The higher-ranked markets in the
West region all have national or regional distribution characteristics. The remaining markets are dependent on the strength of
their local economies to drive industrial demand.
Survey respondents like the single-family housing market in the
West region. Salt Lake City and Phoenix have the highest scores
for markets that are not included in the overall top 20. No market
in the West region has an outlook score below fair for 2015.
The overall outlook for the office sector in the West region is
fair. The outlook is substantially stronger in the eight markets
that were included in the overall top 20, with Phoenix having the
highest score for a market not in that top group.
Survey respondents are less favorable toward the potential for
retail investments outside of the markets in the overall top 20.
56
South Region
Like the West region, the South region also has eight markets in
the top 20 of this years survey. The regional average rank of 35
is one below that achieved by the West. South region markets
just outside the top 20 include Charleston, San Antonio, and
Washington, D.C.
Survey respondents expect most property types to offer good
investment opportunities in 2015. The housing sector, both multifamily and single-family, is the top-scoring sector in the region.
4.54
Houston 4.70
4.48
4.41
Austin 4.30
4.30
Miami 4.22
4.11
Nashville 4.18
4.08
3.98
Raleigh/Durham 4.09
3.95
3.88
Charlotte 4.05
3.81
3.66
Charleston 3.94
3.64
Atlanta 3.79
3.63
Greenville 3.74
3.49
3.42
3.27
3.26
3.24
2.70
Louisville 3.63
2.66
1
Weak
3
Average
4
Improving
5
Strong
Orlando 3.54
Cape Coral/Fort Myers/Naples 3.45
Note: Average score of local market participants opinion on strength of local economy,
investor demand, capital availability, development and redevelopment opportunities, public/
private investments, and local development community.
Jacksonville 3.31
Richmond 3.27
Birmingham 3.20
Virginia Beach/Norfolk 3.17
Columbia 3.04
Memphis 2.80
Deltona/Daytona 2.76
1
Weak
2
Declining
3
Average
4
Improving
5
Strong
57
Overall
Rank
1
5
2
19
13
49
10
7
23
21
11
29
44
25
35
45
50
40
39
56
28
55
51
63
59
72
34
69
70
35
Houston
Dallas/Fort Worth
Austin
Miami
Nashville
New Orleans
Raleigh/Durham
Charlotte
San Antonio
Charleston
Atlanta
Greenville
Fort Lauderdale
Washington, DCDistrict
Tampa/St. Petersburg
Palm Beach
Louisville
Oklahoma City
Orlando
Cape Coral/Fort Myers/Naples
Washington, DCNorthern VA
Jacksonville
Washington, DCMD suburbs
Richmond
Birmingham
Virginia Beach/Norfolk
Columbia
Memphis
Deltona/Daytona
South average
Office
Retail
Industrial
Multifamily
Hotel
Housing
Local
outlook
score*
4.00
3.74
4.02
3.39
3.27
2.20
3.63
3.51
3.13
3.13
3.18
2.83
2.88
2.94
2.55
2.27
2.76
2.98
2.35
2.42
2.62
2.34
2.46
2.44
2.30
2.54
3.28
2.13
1.70
2.86
3.96
2.89
3.80
3.45
3.17
3.33
3.34
3.44
3.17
3.10
3.14
2.82
2.92
3.39
2.81
2.95
2.55
2.98
2.92
2.68
3.49
2.21
2.94
2.37
2.60
2.66
3.16
2.13
2.27
2.99
3.97
3.84
3.78
3.13
3.18
2.98
3.54
3.77
2.98
3.18
3.50
3.53
3.04
2.93
3.07
3.00
3.12
2.98
3.04
2.23
3.19
3.05
2.46
2.75
2.98
2.35
3.15
2.98
2.44
3.11
3.99
3.68
3.74
3.68
3.90
2.79
3.42
3.49
3.19
3.62
3.69
2.90
3.04
3.38
3.17
3.30
3.08
3.02
3.60
3.03
3.29
2.71
3.30
2.81
2.62
2.94
2.51
2.64
2.92
3.22
3.61
3.32
3.50
3.32
3.16
2.82
2.73
3.42
2.83
3.04
3.11
2.79
2.63
3.09
3.04
2.55
2.64
3.12
2.85
2.80
2.98
2.60
2.39
2.25
2.34
2.34
2.98
2.17
2.69
2.87
4.21
3.98
4.33
2.95
3.40
2.83
3.57
3.71
3.43
3.26
3.54
3.26
2.85
3.17
3.11
2.98
2.76
2.69
2.87
2.87
3.04
2.98
2.87
2.62
2.85
1.89
2.98
2.49
2.48
3.10
4.70
4.43
4.30
4.22
4.18
4.09
4.09
4.05
3.99
3.94
3.79
3.74
3.72
3.69
3.67
3.66
3.63
3.59
3.54
3.45
3.45
3.31
3.29
3.27
3.20
3.17
3.04
2.80
2.76
3.68
The office sector scores well in a number of the regional markets included in the top 20, but survey respondents were less
optimistic for the region as a whole. A number of office markets
in the region received comparatively low scores, but the survey
respondents are a little more positive about office opportunities
in San Antonio, Columbia, and Charleston.
58
Declining
Houston
Average
Improving
Strong
4.62
Phoenix
Dallas/Fort Worth
4.24
3.55
San Jose
4.20
Washington, DCDistrict
3.54
Seattle
4.19
Portland, OR
3.54
New Orleans
4.17
Tampa/St. Petersburg
3.52
New YorkBrooklyn
4.15
Inland Empire
3.51
Denver
4.14
Philadelphia
3.51
San Francisco
4.09
St. Louis
3.50
Nashville
4.06
Orlando
3.48
Minneapolis/St. Paul
4.05
Cincinnati
3.47
Los Angeles
4.00
3.43
Miami
4.00
Jacksonville
3.43
Pittsburgh
4.00
3.43
Oklahoma City
4.00
Tacoma
3.40
Louisville
4.00
Deltona/Daytona
3.33
Raleigh/Durham
3.98
Cleveland
3.30
Austin
3.94
Honolulu
3.25
Indianapolis
3.90
Sacramento
3.18
San Diego
3.85
Las Vegas
3.17
Charlotte
3.84
Milwaukee
3.17
Oakland/East Bay
3.84
Spokane
3.17
Boston
3.81
Birmingham
3.17
Charleston
3.81
Washington, DCNorthern VA
3.15
Columbus
3.80
Buffalo
3.14
Kansas City, MO
3.78
Richmond
3.10
Madison
3.75
Virginia Beach/Norfolk
3.09
New YorkManhattan
3.75
3.07
Chicago
3.74
Baltimore
3.03
Atlanta
3.72
Des Moines
3.00
Orange County
3.71
Westchester/Fairfield, NY/CT
3.00
Boise
3.70
Columbia
3.00
Omaha
3.67
Hartford
3.00
3.65
Memphis
2.92
San Antonio
3.65
Portland, ME
2.88
Palm Beach
3.64
Albuquerque
2.73
Greenville
3.63
Tucson
2.33
Fort Lauderdale
3.63
Providence
1.75
Detroit
3.62
3.57
59
overdone.
I dont think people need to talk to their coworkers all day long.
Industrial
One of the basic principles of market analysis is that of equilibrium. Like so many things in life, the business of real estate is
a balancing act. The principle of equilibrium says that market
60
3.61
3.58
Apartment
3.48
3.41
Hotels
3.37
3.46
Office
3.17
3.20
Retail
3.01
3.18
2015
2014
Development prospects
Industrial/distribution
3.65
3.74
Apartment
3.48
3.06
Hotels
3.32
2.95
Office
2.86
2.55
Retail
2.73
2.57
1
Abysmal
2
Poor
3
Fair
4
Good
5
Excellent
operations will lead toward the price point where supply and
demand match up. This fundamental rule supports everything
from the theory of cycles to the concept of reversion to the
mean. It lurks in the background of every discussion of excess
Development Prospects
Apartment 3.35
high income
Medical office 3.35
Apartment 3.50
moderate income
Medical office 3.47
Full-service hotels 3.28
Neighborhood/community 3.27
shopping centers
Central city office 3.27
Apartment 3.28
high income
Student housing 3.15
Apartment 3.25
moderate income
Student housing 3.16
Neighborhood/community 2.60
shopping centers
Institutional for rent 2.53
single family
Regional malls 2.43
1
Abysmal
2
Poor
3
Fair
4
Good
5
Excellent
1
Abysmal
2
Poor
3
Fair
4
Good
5
Excellent
Exhibit 4-3 Prospects for Niche and Multiuse Property Types, 2015
Development Prospects
Investment Prospects
Urban mixed-use properties 3.78
Infrastructure 3.42
Infrastructure 3.53
Land 3.52
Land 3.34
1
Abysmal
Source: Emerging Trends in Real Estate 2015 survey.
Note: Based on U.S. respondents only.
3
Fair
5
Excellent
1
Abysmal
3
Fair
5
Excellent
61
225
Office
Retail
200
175
150
125
Officesuburban
100
Industrial
75
50
Jan
2009
Jan
2007
Jan
2005
Jan
2003
Jan
2001
Jan
2011
Jan
2013
Jun
2014
20-year average
occupancy
2%
Demand
92%
90%
1%
88%
0%
1995
1997
1999
2001
2003
2005
2007
-1%
-2%
Source: CBRE Econometric Advisors.
*Forecasts.
62
94%
Supply
2009
2011
86%
84%
82%
Occupancy
Percentage of inventory
3%
60%
excellent
NAREIT
40%
0%
good
NCREIF
20%
R&D industrial
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
YTD
fair
-20%
-40%
Warehouse industrial
poor
-60%
-80%
Sources: NCREIF Fund Index Open-End Diversified Core (ODCE) NAREIT Equity REIT Index.
2005
2007
2011
2013
2015
2015
Investment prospects
Development prospects
2009
Prospects
Rating
Ranking
3.72
3.74
Good
Good
1
1
Hold
29.9%
Buy
57.6%
Sell
12.5%
6.2%
Prospects
Rating
Ranking
3.10
3.06
Fair
Fair
9
9
Hold
48.0%
Sell
26.0%
7.0%
63
Hotels
The prospects for liquidity in the hospitality sector shape up
as excellent for 2015. Our survey respondents would be quite
happy to hold hotel assets, and there is good balance on the
buy/sell recommendations for full-service hotels. Limitedservice hotels have upside in pricing, if the spread of 31.6
percent of buy advocates over 23.9 percent sell proponents
is a proxy for bid/ask pressure. Remarkably, and in distinct
comparison with most other property types, the survey shows
no expectation of any alteration in cap rates for hotelsnot
even a basis point. How often does that happen? The expected
cap rates for December 2015 are anticipated to stand at 7.1
percent for limited-service hotels and 6.6 percent for fullservice lodging facilities.
Hotels have been in high favor, and have seen exceptional
demand. Transaction volume tracked by Real Capital Analytics
was up 24.1 percent through July 2014, compared with the
same year-to-date figure for 2013. A few major transactions
pushed the full-service sector up 28.8 percent while the limitedservice segment was up 14.3 percent in total dollar volume. In
all, $18.4 billion in hotel deals was concluded over the first seven
months of 2014. This is a volatile sector, though, and closely correlated with gross domestic product (GDP). While the economic
consensus is favorable for the next couple of years, this is a
difficult sector to timeespecially in an era when geopolitical
events can stifle travel with just a few headlines.
64
NAREIT
NCREIF
40%
20%
0%
1994
1996
1998
-20%
2000
2002
2004
2006
2008
2010
2012
2014
YTD
-40%
-60%
-80%
Sources: NCREIF Fund Index Open-End Diversified Core (ODCE); NAREIT Equity REIT Index.
*Returns as of June 30, 2014.
excellent
good
Full-service hotels
fair
Limited-service
hotels
poor
2005
2007
2009
2011
2013
2015
Prospects
Rating
Ranking
3.52
3.52
Good
Good
3
2
Hold
44.4%
Buy
31.6%
Sell
23.9%
7.1%
Prospects
Rating
Ranking
3.28
3.04
Fair
Fair
6
10
Hold
38.7%
Sell
31.1%
6.6%
Apartments
Multifamily was unquestionably real estates trendsetter in the
first years of recovery. Now that apartments have reached a
more mature phase of their cycle, we get to a more interesting period. More interesting, in the first place, because the
investment/development questions become more complex
and nuanced. And more interesting because it is probable that
issues and strategies that will be tested in 2015 in the multifamily sector will help shape the template for 20162018 in other
property types. Keep your eye on apartments this year.
If you go by just the numbers, the opinions of the Emerging
Trends survey respondents seem sharply divided. For high-end
Exhibit 4-10 U.S. Multifamily: Change in Supply and Demand
Demand
Occupancy
3.5%
98%
97%
3.0%
20-year average
occupancy
96%
95%
2.0%
Occupancy
Percentage of inventory
Supply
94%
93%
1.0%
92%
91%
0.0%
1995
1997
-0.5%
1999
2001
2003
2005
2007
2009
2011
90%
89%
65
50%
excellent
NAREIT
40%
NCREIF
good
Apartment rental:
moderate income
30%
20%
fair
10%
0%
Apartment rental:
high income
1994
1996
1998
2000
2002
2004
-10%
2006
2008
2010
2012
2014
YTD
-20%
-30%
Sources: NCREIF Fund Index Open-End Diversified Core (ODCE); NAREIT Equity REIT Index.
*Returns as of June 30, 2014.
poor
2005
2007
2009
2011
2013
2015
Prospects
Rating
Ranking
3.28
3.35
Fair
Fair
7
3
Investment prospects
Development prospects
Buy
21.4%
Hold
30.4%
Sell
48.2%
5.2%
Prospects
Rating
Ranking
3.50
3.25
Good
Fair
4
7
Buy
35.2%
Hold
37.1%
Sell
27.7%
6.0%
What might account for this? Developers preferences for upperend apartments notwithstanding, the depth of demand for
luxury rental units goes only so far. Wealthy households prefer
to own their homesand most already do. The bulk of pent-up
and emerging demand comes from the battered middle-income
and lower-middle-income sector, predominantly renters. As the
forecasted gains in employment take hold, millennial sharers,
boomerang children, domestic migrants, and international
immigrants represent the bulk of new residential renter demand.
Developers may actually be able to make up in volume what
they cant achieve in price.
The overarching context is that next year and beyond, the
demand fundamentals for moderate apartments continue to
Yes, supply is still on the rise. But that, too, is tiered, and a
disproportionate share of new construction is at the high
end. This makes sense when urban high-rise property in the
gateway markets is priced at 20 to 30 percent more than the
cost to construct. Of course, this spurs the developers on!
Interestingly, though, the urban housing surge is now extending into the Nashvilles, Greenvilles, and Raleighscities where
even until recently the central business district (CBD) emptied
out in the evening as commuters returned to the suburbs in
their cars. Now, while the cities themselves are still labeled car
dependent by Walkscore.com, their downtowns have good to
excellent walkability scoresand builders have caught on. One
hallmark of these Southeast markets is their cost-competitiveness in comparison with the large coastal cities. Locally low cost
of living, in turn, argues for moderate-rent apartments as the
better investment opportunity.
Some earlier favorites are already victims of their own success.
A local investment manager looks at Bostons lively apartment
development scene and says, Whoa! Too much! And a veteran institutional investor looks at Washington, D.C., multifamily
and sees one of the nations biggest real estate risks for 2015.
Sure enough, the Emerging Trends survey has Boston down
in 20th place for multifamily investment prospects and 21st for
development, and D.C. ranks 30th in investment prospects and
32nd for development. Several interviewees singled out Boston
and Washington as multifamily markets that have gotten ahead
of themselves.
Interestingly, though, survey respondents still felt that both
Boston and Washington represented buy opportunities, by 49
percent and 41 percent of the respondents, respectivelywhich
must mean they are looking beyond 2015 to longer-term market
strength. Otherwise, it is many of the usual suspects that
are in the top 20 rankings, as well as many newcomers such
as Nashville, Austin, San Jose, Orange County, Portland, and
Retail
Investment and development strength in the retail sector ranks
the lowest of all the major property types in the 2015 Emerging
Trends survey. Just as the slow recovery in jobs has hindered
95%
Occupancy
94%
20-year average
occupancy
2.0%
Supply
Demand
93%
92%
1.0%
91%
90%
0.0%
1999
2001
2003
2005
2007
2009
2011
2013
2015*
2017*
Occupancy
Percentage of inventory
89%
88%
-1.0%
87%
Source: REIS.
*Forecasts.
67
50%
excellent
NAREIT
40%
good
NCREIF
30%
Neighborhood/
community
shopping centers
20%
10%
0%
fair
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014*
Power
centers
Regional malls
-10%
-20%
poor
-30%
2007
2009
2011
2013
-50%
Sources: NCREIF Fund Index Open-End Diversified Core (ODCE); NAREIT Equity REIT Index.
*Returns as of June 30, 2014.
68
2005
-40%
2015
2015
Prospects
Rating
Ranking
2.60
3.27
Fair
Fair
11
5
Investment prospects
Development prospects
Hold
35.4%
Buy
47.3%
Sell
17.3%
6.6%
Prospects
Rating
Ranking
2.36
2.38
Poor
Poor
14
11
Investment prospects
Development prospects
Hold
39.5%
Buy
14.6%
Sell
45.9%
6.7%
Prospects
Rating
Ranking
2.43
1.74
Poor
Poor
13
14
Hold
38.3%
Sell
52.6%
6.5%
with sentiment shifts that are likely to alter the direction of retail
property trends.
Like every other property type, retail has its cyclical ups and
downs. But one REIT CEO urges keeping an eye on the big
picture. America averages an increase of 3 millionplus in
population annually. Well be up by 100 million come 2050.
What does this mean for retail real estate? More groceries, more
drugstores, more outlets for goods of all kinds. An investment
manager thinks that as job growth becomes more self-sustaining in 2015, retail will benefit from pent-up demand, saying,
Theres a lot of alpha in shopping centers. An East Coast
pension fund executive is convinced that retail is in recovery,
and is placing money alongside retail specialists in properties it
considers undercapitalized but poised for a turnaround.
69
70
Occupancy
4%
20-year average
occupancy
3%
92%
Supply
90%
Demand
2%
1%
0%
-1%
88%
86%
1995
1997
1999
2001
2003
2005
2007
2009
2011
84%
-2%
82%
-3%
80%
-4%
78%
Occupancy
5%
Percentage of inventory
Offices
OfficesCBD offices in particular, and CBD offices in the leading 24-hour cities especiallyfollowed apartments in the lineup
of property types cycling upward after the financial crisis. This
would be no surprise to Emerging Trends readers, interviewees, and survey respondents, since it was this publication that
brought the concept of 24-hour real estate markets to public
attention 20 years ago. It is gratifying, however, to see that
the academic literature is finally catching up to the industrys
intuition and experience. Papers in such respected publications
as the Journal of Real Estate Portfolio Management have been
testing and validating the claim, published here in our 1995
edition, that 24-hour cities would provide superior investment
performance. The live/work/play theme is not just hype; it is
statistically significant.
In fact, that might very well be one of the more powerful trends
for offices, and not just in the gateway cities. The resurgence in
downtown living is bolstering secondary office markets around
the country. It turns out that workers like the urban feel and
lunchtime amenities better than employee cafeterias. Moreover,
as transit-oriented developments become more common,
more-complex urban centers with a variety of uses provide
externalities that enhance quality of work life while buttressing office building values.
Austin, ranked tops for both office investment and development
in this years survey, has garnered national and international recognition as a live/work/play downtown. Houston, ranked number
two, has effected an incredible downtown transformation and
is one of Americas most diverse and globally connected cities. One cross-border investor characterized Houston as the
60%
excellent
NAREIT
good
NCREIF
40%
20%
fair
0%
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
YTD
-20%
Suburban office
poor
2005
-40%
2007
2009
2011
2013
2015
-60%
Sources: NCREIF Fund Index Open-End Diversified Core (ODCE); NAREIT Equity REIT Index.
*Returns as of June 30, 2014.
perfect storm for commercial real estate. Denvers LoDo neighborhood has helped concentrate that citys economic energy.
A finance professional thinks that Denvers discipline is better
than a number of other growth markets, and thus more capable
of sustaining its upward trend.
Dallas, long the epitome of the edge-city configuration, is now
seeking to fully capitalize on the potential to be a 24-hour, 21stcentury urban neighborhood in its plan, Downtown Dallas 360.
It is enlightening to see how similar the rankings for top cities
are across property types, showing how a variety of land uses
interact to create value. What a difference from the separation
of uses zoning that influenced most cities in the last century.
More and more, cities around the country are looking to stick
with the mixed-use downtown winnersa reasonable basis for
seeing this as a trend with decades to run.
Office activity has been strong in the first half of 2014, with
Atlanta, Boston, Dallas, Denver, Houston, Los Angeles, and
Manhattan all reporting good absorption levels. Rent growth
is positive across the United States. With more than 77 million
square feet under construction, the office inventory is expanding by 2 percent. A number of markets with especially high rent
growth are also seeing rapid supply additions. Leading the list
of office construction volume relative to existing inventory are
Houston, San Jose, Austin, San Francisco, Seattle, Dallas/Fort
Worth, and Nashville. The ratings of the Emerging Trends survey
about office development markets match nicely with the observable data.
Prospects
Rating
Ranking
3.57
3.27
Good
Fair
2
6
Investment prospects
Development prospects
Hold
34.0%
Buy
37.3%
Sell
28.7%
5.8%
Prospects
Rating
Ranking
2.76
2.24
Fair
Poor
10
13
Hold
32.7%
Sell
42.2%
7.5%
71
Exhibit 4-19 Office Space under Construction as a Percentage of Total Inventory, 2Q 2014
10%
Total inventory
8%
400
300
6%
200
4%
100
2%
Tampa
Sacramento
Jacksonville
Fort Lauderdale
Orlando
Kansas City, MO
Baltimore
Indianapolis
St. Louis
Louisville
Miami
Orange County
Los Angeles
Atlanta
Las Vegas
Norfolk
Chicago
Memphis
Charlotte
Philadelphia
Washington, DC
Denver
Richmond
San Diego
New YorkManhattan
Tucson
Pittsburgh
Oklahoma City
Boston
Columbus
Raleigh
Phoenix
Nashville
Cincinnati
Seattle
Dallas/Fort Worth
Austin
San Francisco
Houston
San Jose
0%
500
12%
That sell the suburbs call says a lot about the expectations for
future trends.
Our interviewees season these numbers with their experience.
A Midwest institutional investment officer explains, Suburban
office is not doing well for us. No one wants to buy it right now.
The reemergence of suburban office is not likely soon, as the
office sector is becoming more infill/urban, dense suburban,
and less auto-dependent. No one wants to pull into a big
parking lot with no place to eat. The commodity-like character
of many office parks is discounting their value, and impeding
the ability of owners to drive rents upward. A Chicago-based
interviewee describes the business parks around his city as
desolate. The millennial preference for downtowns contributes
to the bleak outlook that some express for suburban office,
and even recent trends toward office space compression have
created problemsnamely, parking allocationsfor those
suburban offices enjoying decent occupancy.
But we should have learned long ago to question assertions
made with too broad a sweep. There is an articulate minority
of the Emerging Trends interviewees who see suburban office
battling back, taking the position that the death of suburban
office has been greatly exaggerated, and seeing a contrarian opportunity for those investors willing to buck the majority
72
with only 23.1 percent advising sell. For one thing, medical
office cap rates are expected to hold firm in 2015 at 6.6 percent,
before experiencing the upward drift of cap rates that is an
across-the-board expectation by 2018.
One private equity interviewee said this: Medical office looks
good on all metrics. We see a two-pronged trend where hospital
campuses provide concentration for doctors, but diffusion [into
communities, into malls] provides convenience for consumers.
Health care is going to be 20 percent of GDP, so the real estate
opportunity is great.
Housing
A minority opinion out there says, The back to the city trend is
oversubscribed; not so many people care about walkability to
a coffee shop; the majority of the U.S. is not on board with this.
Dont discount housing affordability as a factor for families, and
this disadvantages gateway cities. No doubt theres a kernel
of truth there, and one size does not fit all. But keep in mind
Damon Runyons streetwise advice: The battle is not always
to the strong, nor the race to the swiftbut thats the way to
bet! Housing is well on the way back, say the Emerging Trends
survey respondents, and they rank urban/infill as the top opportunity for 2015.
Despite talk of lingering overindebtedness and the lack of
savings on the part of potential homebuyers, the consensus
reads this way: both for investment and for development, upperincome housing and moderate-income housing score equally
well. Multifamily condominiums are just behind, and roughly in
the same ballpark as affordable housing. An interviewee sees
significant infill condo opportunities in 2015. A private equity
investor thinks a serious look should be given to condos where
the markets havent take off yet. Remember that millennials will
become homeowners at some point, but wherecity or suburb? The answer is probably both/and, not either/or.
Condominium prices rose a modest 3.7 percent year over year
during the second quarter of 2014, according to data from the
National Association of Realtors. The inventory of condos for
sale is very limitedjust a 4.8 months supply. Such a tight
market, coupled with continued low interest rates (as expected),
suggests a resumption of price escalation in the near future.
Watch for that in 2015.
What is lagging? Exactly the sort of product that resort and
retirement community developers were counting on as the
baby boomers reached retirement age: golf course communities, second-home and leisure development, and the like.
Who would have thought that the over-65 cohort would elect to
Emerging Trends in Real Estate 2015
73
Development Prospects
Infill and urban housing 4.10
Senior/elderly housing 3.88
Single family: high income 3.63
Single family: moderate Income 3.57
Multifamily condominiums 3.29
Affordable housing 3.23
Second and leisure homes 2.70
Manufactured-home communities 2.36
Golf course communities 1.87
1
Abysmal
3
Fair
5
Excellent
return downtown from their suburban homes, instead of migrating to Florida and Arizona en masse? Further, both for financial
reasons and because of an unwillingness to detach from work,
boomers are staying in the workforce longer and in greater
numbers than forecasted. That also has altered the housing
picture for this cohort.
Developers are catching on. Outside the CBDs, urban village
concepts are repositioning tired malls with ground-floor retail
under small offices or residential units, complementing the mix
with denser mid- to high-rise office, apartment, and hotel. Such
mixed-use development approaches have been meeting with
marked success.
74
CO2 emissions
Energy consumption
energy
carbon
-2.1%
Emission Reduction
Equivalents*
-2.2%
107,512
Cost
Electricity
9,733
cost of energy
4.0%
2012: 337 million USD
2013: 350 million USD
Properties: 657
electricity
-2.9%
Water use
Density
water
occupancy
2012: 94.3%
2013: 94.3%
Properties: 795
3.7%
4,218
1,185,385
trees planted
0.0%
22,524
Source (for Performance Snapshot): ULI Greenprint Center. The mission of the ULI Greenprint Center for Building Performance is to lead the global real estate community toward valueenhancing carbon-reduction strategies.
*U.S. Environmental Protection Agency, Greenhouse Gas Equivalencies Calculator. www.epa.gov/cleanenergy/energy-resources/calculator.html.
75
3
Fair
4
Good
5
Excellent
Total
employment
growth (%)
Unemployment
rate (%)
Halifax
3.4%
2.2%
5.7%
Vancouver
3.3%
2.6%
Calgary
3.1%
1.9%
Personal income
per capita
growth (%)
Population
growth (%)
Total housing
starts
Retail sales
growth (%)
3.7%
0.9%
2,017
4.9%
6.0%
3.5%
1.7%
18,040
4.9%
4.7%
2.8%
2.1%
13,547
5.3%
Edmonton
3.0%
1.9%
4.8%
2.9%
1.9%
12,559
5.1%
Saskatoon
2.9%
0.7%
4.3%
1.1%
2.6%
3,210
4.5%
Toronto
2.9%
2.4%
7.2%
3.1%
1.9%
34,576
4.2%
Winnipeg
2.8%
1.9%
5.4%
3.1%
1.4%
4,266
3.5%
Montreal
2.5%
1.7%
7.6%
3.4%
0.9%
14,855
4.2%
Ottawa
1.9%
1.6%
5.9%
3.3%
0.8%
6,478
3.5%
good
Hold
Economy
fair
Buy
Sell
poor
2008
2009
2010
2011
2012
2013
2014
2015
Looking ahead, what are the likely best bets in Canadian real
estate? Western Canada will remain the place to be, buoyed by
strong performance in Calgary and Edmonton. Commercial and
office space on the edges of the urban core looks promisingas
long as its the right price. Speculative industrial appears strong
in Alberta and the western part of Greater Toronto. Those focused
on Toronto opportunities would do well to explore retail opportunities as well as multiresidential opportunities along transit corridors.
And in a country with an aging population, seniors housingwell
managed and in good locationsoffers attractive potential.
The Canadian economy remains stable overall, achieving modest growth and creating a low-risk business environment for
developers and investors. The technology industry continues
to contribute to growth in British Columbias Greater Vancouver
region, while oil and gas continue to be Albertas economic
engine. The financial sector and government spending are
responsible for a significant portion of economic activity in both
Ontario and Quebec; and in Atlantic Canada, shipbuilding and
new oil and gas drilling are expected to provide a boost to the
regions economy.
The broad manufacturing sector continues to shrink, as manufacturers move more production to lower-cost labor markets in
the United States and elsewhere. This ongoing economic shift
has had a profound impact on central Canada, particularly
Ontario. Once the nations economic engine, Ontarios economy
now supports and benefits from the new growth powerhouses in
western Canada.
Global economies also will likely have an impact in Canada.
Canada as a whole and Ontario in particular are likely to get a
boost from a stronger U.S. economy, which appears to be finally
reaching a point of sustainable economic growth. On the other
hand, there may be headwinds with Europes continuing economic struggles and concerns around Chinas economy.
77
Table 5-2 Employment, Job Vacancy, and Average Weekly Earnings Growth, Year over Year
Total employment growth
Canada
0.5%
6.6%
2.4%
Alberta
3.2%
4.7%
3.3%
Saskatchewan
2.1%
4.0%
2.7%
Ontario
0.6%
17.2%
1.7%
British Columbia
0.4%
17.2%
2.5%
Manitoba
-0.4%
4.0%
4.1%
New Brunswick
-0.5%
2.3%
2.8%
Quebec
-0.6%
-9.7%
1.6%
-1.3%
33.3%
0.5%
Nova Scotia
-1.9%
15.2%
3.5%
Newfoundland/Labrador
-3.8%
8.3%
5.5%
International
Interprovincial
Toronto
Montreal
Vancouver
Winnipeg
Ottawa/Gatineau
Halifax
Saskatoon
Calgary
Edmonton
-200,000
-100,000
78
100,000
200,000
300,000
400,000
500,000
600,000
Younger workers in particularthough not exclusivelycontinue to flock to the urban core, preferring to work where they live
rather than take on long commutes. This continuing urbanization
trend has fueled the condo boom in Toronto and other cities,
but some question what will happen as the lifestyles of todays
young urban singles and couples change. Will they move out of
the city core in search of larger homes, schools, and services,
or will theylike their counterparts in other parts of the world
simply adapt to smaller living spaces?
Demographics
Australia
2015
2014
Winnipeg
United States
Calgary
Canada
Denmark
Edmonton
Greece
Ottawa
France
Germany
Saskatoon
Spain
Montreal
Japan
Halifax
Sweden
Canada
United Kingdom
Italy
China
Toronto
Russia
Vancouver
0%
Hong Kong
10%
20%
30%
40%
50%
60%
500
1,000
1,500
2,000
2,500
Square feet
Sources: CommSec, Reserve Bank of Australia, United Nations, U.S. Census Bureau.
79
Looking ahead, we can expect to see more and more retail and
services along the streets of Canadas city cores and along
major transit arteries, especially where new developments
predominate. Major brands are likely to move into these new
spaces, toothough with new formats and smaller footprints.
If done correctly, the addition of retail, services, and perhaps
office space will create a positive synergy where each use provides customers or tenants for the other.
Office Tenants Demand New Space
Proposed development
(sq ft)
Percent preleased
Toronto
5,000,000
56%
5.7%
5,700,000
Calgary
4,900,000
75%
2.5%
3,300,000
Vancouver
2,100,000
60%
5.9%
3,000,000
Montreal
1,100,000
58%
9.4%
4,800,000
Source: The Canadian Quartet: Look Forward, Summer 2014, Jones Lang LaSalle.
80
Market vacancy
rate
paying more per foot for the new space, but the impact on real
estate costs is not a one-for-one exchange.
The real impact of this new supply on the office market involves
the space left behind as tenants move into their new space.
Some older buildings will likely be upgraded to better compete
with the newer spaces, while others will instead choose to
compete on price, positioning older buildings as a lower-cost
alternative for tenants who want a desirable location but who
dont need all of the amenities offered by the new space. An
interviewee put it well with the following quote: Tout le monde
veut aller au ciel, mais personne ne veut mourir. Translated,
everyone wants to go to heaven, but nobody wants to die. A
number of office tenants want new office space, but may not be
willing to pay the higher rents required. The result is that there is
going to be a period of adjustment in these markets, when more
space competes for changing composition of tenants.
While the interest in leasing the new space indicates that the
market will welcome the new office space, there is no getting
around the fact that it will cause some uncertainty in the affected
office markets. Vacancy rates may increase and market rent
is likely to become dynamic in a number of areas. One of our
interviewees, a top real estate service provider, offered up his
opinion on market rents: There are really about four different
market rents today. It all depends on the situation and the current status of the space. Different lease rates are being quoted
for first-generation space, turnkey sublet space, vacant sublet
space, and renewal rates.
The Rise of the Superprime Asset Class
So-called superprime assets continue to attract capital looking
for safe returns. Superprime assets are defined as those whose
location is considered irreplaceable. The use in these locations
may change with market demand, but the actual physical and
perhaps historical position of the property is unique. Since this
type of asset is in short supply, the competition to purchase it
can be intense. The level of competition leads to very aggressive pricing. An increasing number of investors are sitting on
increasing levels of capital and are eager to put it to work in the
perceived safety of these premium properties.
In Canada, the flight to quality has compelled investors to trade
these irreplaceable assets at the lowest cap rates. The search for
Competition for high-quality Canadian assets is poised to intensify over the next few years.
81
Before 1960
19601979
19801999
Quebec
779,011
316,317
290,457
119,931
52,306
Ontario
664,776
135,094
431,670
71,962
26,050
British Columbia
176,635
24,690
112,745
28,096
11,104
Alberta
131,185
7,766
85,027
25,484
12,908
61,891
12,860
35,072
7,720
6,239
Manitoba
2000 or later
Nova Scotia
52,499
7,577
20,067
13,633
11,222
Saskatchewan
34,392
4,303
20,519
7,381
2,189
New Brunswick
32,029
8,036
11,309
6,080
6,604
6,400
1,447
1,025
2,298
1,630
Newfoundland/Labrador
5,680
1,223
2,721
1,206
530
1,946,443
519,336
1,011,298
284,556
131,253
Canada total
Source: CMHC Rental Market Survey.
The continuing flood of new capital into the Canadian real estate
market, whether debt or equity, has also brought with it new and,
in some cases, inexperienced lenders. There is a lot of competition to place capital, and this is being reflected in narrowing
spreads and more favorable terms being reported by some of
our interviewees. On the positive side, builders who are having
trouble getting financed by traditional lenders may very well have
alternative sources to consider. However, this may well put some
of these new lenders in situations where they may find themselves involved with inexperienced developers. One interviewee
remarked, If a builder cant get bank financing, there is still capital available, but it does make you wonder about the potential
viability of the project when you have two inexperienced parties
involved. The resulting new product may not in fact be good for
the local market, particularly in the condo sector.
The ongoing battle for talent between the real estate construction sector and Canadas booming natural resources industry
continues to drive up labor costs. At the same time, continued
Asian demand for construction materials is boosting real estate
input costs. Many industry watchers fear this could slow down
the pace of developmentor even stop projects from getting
off the ground. Yet others see rising costs as a means to avoid
overbuilding.
82
Increase
moderately
2013
Remain stable
at current levels
Inflation
2015
2015
14.0%
59.1%
26.9%
2014
17.9%
31.6%
50.5%
24.4%
38.5%
37.2%
28.6%
32.6%
38.8%
28.6%
22.6%
48.8%
Undersupplied
In balance
Oversupplied
2014
22.4%
55.3%
22.4%
36.7%
42.9%
20.4%
36.9%
35.7%
27.4%
Undersupplied
In balance
Oversupplied
2013
2013
2012
2012
2015
Municipal Issues
16.1%
57.0%
26.9%
18.4%
61.8%
19.7%
2014
2013
40.8%
42.9%
16.3%
28.9%
50.6%
20.5%
Undersupplied
In balance
Oversupplied
2012
53.8%
16.1%
2014
40.0%
45.3%
14.7%
Undersupplied
In balance
Oversupplied
83
Capital Markets
The consensus view among real estate players is that interest rates will rise at some point, but any move is unlikely to
occur until the second half of 2015 at the earliest. Interviewees
expressed confidence that increased capacity worldwide is
limiting any upward pressure on interest rates. The improvement
in the U.S. economy indicates that higher rates could be coming, but the economic stability in Canada and the United States
will continue to attract foreign capital. In addition, retiring baby
boomers are likely to flood the market with private capital as they
United States
Other
United Kingdom
Germany
Israel
Hong Kong
Saudi Arabia
Kuwait
Sweden
China
$264.1
$271.1
5-year total
$6,158.2
$310.0
$837.9
$50.1
$93.3
$96.7
$123.2
$2,102.5
$144.9
Spain
$160.4
$138.3
$2,860.4
$408.3
Toronto
Montreal
Vancouver
Edmonton
Calgary
Winnipeg
Ottawa
Other
$437.0
$591.0
$1,384.1
$146.6
$171.7
$214.0
5-year total
$241.1
$638.2
$697.5
Source: Real Capital Analytics.
84
$127.3
$485.2
2015 24.5%
55.3%
2015 25.8%
57.0%
17.2%
2014 11.5%
44.8%
43.7%
2014 9.5%
40.5%
50.0%
2013 6.7%
51.1%
42.2%
2013 5.9%
45.1%
49.0%
37.2%
2012 6.6%
2012 7.8%
54.9%
34.1%
59.3%
industry executive remarked, There are a number of organizations, both public and private, that are identifying their targets,
theyre doing their homework, and theyre preparing should the
REIT market continue to weaken. There have also been a large
number of new entrants over the last two years, and there will be
pressure for them to grow their portfolios or take some actions
to grow unit-holder value. One REIT executive feels that some
new REITs may need to merge to get to critical mass, but being
externally managed they are not really incentivized to do so.
The market may see increased investor/unit-holder activism to
force consolidation.
85
Banks
Investment prospects
Warehouse industrial
Institutional for-rent
single family
Full-service hotels
Neighborhood/community
shopping centers
Limited-service hotels
3.53
3.36
Warehouse industrial
Institutional for-rent
single family
Full-service hotels
Neighborhood/community
shopping centers
Limited-service hotels
3.30
3.16
Student housing
Apartment rental
high income
R&D industrial
Apartment rental
moderate income
Medical office
3.15
3.06
2.95
Student housing
Apartment rental
high income
R&D industrial
Apartment rental
moderate income
Medical office
Power centers
2.77
Power centers
2.83
Suburban office
2.69
Suburban office
2.40
Regional malls
2.60
Regional malls
2.00
3.47
3.43
3.39
3.11
3.10
3.06
1
Abysmal
Source: Emerging Trends in Real Estate 2015 survey.
Note: Based on Canadian investors only.
86
3
Fair
4
Good
5
Excellent
3.60
3.47
3.40
3.35
3.29
3.06
3.00
2.95
2.90
1
Abysmal
3
Fair
4
Good
5
Excellent
Neighborhood/community centers
Investment prospects
Industrial
3.47
3.22
Hotel
3.43
2.46
2015
2014
2.96
3.17
Retail
2.87
3.37
3.40
3.18
Apartment
3.28
3.02
Hotel
3.00
2.36
Office
2.80
2.93
Retail
2.60
3.13
1
Abysmal
Investment
Development
Prospects
Rating
Ranking
3.39
3.35
Fair
Fair
4
4
Hold
37.5%
Sell
21.9%
6.4%
Power centers
2015
Investment
Development
Development prospects
Industrial
2015
Buy
40.6%
3.28
Apartment
3.31
Office
2015
2014
Buy
18.8%
Prospects
Rating
Ranking
2.77
2.40
Fair
Poor
12
13
Hold
25.0%
Sell
56.3%
6.4%
Regional malls
2015
Investment
Development
2
Poor
3
Fair
4
5
Good Excellent
Buy
25.0%
Prospects
Rating
Ranking
2.60
2.00
Fair
Poor
14
14
Hold
28.1%
Sell
46.9%
6.0%
87
markets are losing pricing power and cant dictate the number
and location of storefronts as they did in the past.
With few good locations for new retail, developers are instead
focusing on existing assets. Some are adding more space for
retail and services in residential or commercial properties, while
others are considering adding a residential or office component
to retail properties. Urban retail is set to see strong growth, as
the influx of residents to city cores drives up demand for amenities. Mixed-use properties will become increasingly common.
Power centers have been especially hard hit by competition
from online retailers, and this market is flat or declining across
the countrythough centers anchored by grocery stores or
pharmacies are still proving viable for the moment. Demand
remains strong for fashion-focused centers, however.
Retail outlet developments appear to be here to stayand
grow. Off-price is the in thing, remarked one interviewee.
Its scary to see how much stuff is sold, and how much people
like outlets. Outlet centers continue to lure busloads of shoppers each dayand these shoppers come determined to buy
something to justify the trip.
Purpose-Built Multiresidential Rental Properties
With home prices rising and people keen to be close to the
urban core, some developers are discovering opportunities in
purpose-built multiresidential development or redevelopment.
Increasing location density, or adding a retail component to the
mix, could prove key to making the economics work.
Investors also are taking interest in multiresidential properties,
seeing them as a way to lock in income and potentially realize significant upside at the end of the term. Patience will be
key: rent controls and other factors may put some limits on the
returns that investors can expect, and making the numbers
work is still project-specific. Rental projects may also require
significant amounts of ongoing investment to keep the product
quality at a level where it can compete with rental stock represented by newer condos.
Single-Family Homes
Canadas housing market remains largely buoyant and housing
prices remain high. Land prices, development charges, and
labor costs are contributing factors, as are a number of other
trends. Buyers are using existing home equity to move up into
pricier homes. Parents are helping their children get into the
property market. Family members abroad are helping Canadian
relatives by shifting money into the country. Immigration continues to have an impact on the Canadian economy. Immigration
88
Apartmentshigh income
2015
Investment
Development
Buy
30.0%
Prospects
Rating
Ranking
3.11
3.47
Fair
Fair
8
2
Hold
35.0%
Sell
35.0%
5.2%
Apartmentsmoderate income
2015
Investment
Development
Prospects
Rating
Ranking
3.06
3.06
Fair
Fair
10
8
Buy
40.0%
Hold
32.5%
Sell
27.5%
5.9%
Warehouse industrial
2015
Investment
Development
Prospects
Rating
Ranking
3.53
3.60
Good
Good
1
1
Hold
35.5%
Buy
64.5%
Investment
Development
Buy
24.1%
Investment
Development
Prospects
Rating
Ranking
3.30
2.95
Fair
Fair
6
10
Hold
27.3%
Buy
50.0%
5.8%
Sell
22.7%
5.9%
Suburban office
R&D industrial
2015
2015
Prospects
Rating
Ranking
3.10
3.06
Fair
Fair
9
7
Hold
44.8%
Sell
31.0%
6.8%
Seniors Housing
Canadas aging population means that seniors housing offers
some attractive opportunities in the years ahead, and serves
as an alternative multiresidential investment. Vacancy rates are
low and returns can be quite strong in some instances. Some
investors may choose to partner with firms specializing in facility
management, rather than take on operational matters themselves.
And companies should take into account the important differences between independent-living facilities and long-term care or
convalescence properties, as the returns can be quite different.
Industrial
The industrial market is performing well, fueled by a rise in
single-tenant big-box developments designed for distribution.
An industrial investor summarized the trend in the market thusly:
Industrial is transformational. The days of the small-bay, multitenant building are waning. We are now seeing new 200,000- to
500,000-square-foot buildings with larger bays. Despite this
transformation, the outlook for older, smaller industrial space is
being helped as companies look to augment their local distribution capabilities at lower costs. Redevelopment opportunities will
emerge in the industrial market as developers look to upgrade
sites for industrial companies or retool for other uses. With
land scarce and expensive, we may eventually see the rise of
multilevel industrial properties.
2015
Investment
Development
Buy
22.7%
Prospects
Rating
Ranking
2.69
2.83
Fair
Fair
13
12
Hold
15.9%
Sell
61.4%
5.2%
Medical office
2015
Investment
Development
Buy
17.1%
Prospects
Rating
Ranking
2.95
2.90
Fair
Fair
11
11
Hold
63.4%
Sell
19.5%
6.5%
Office Space
The outlook for office space depends very much on location. In
the urban core, tenants desire to use space efficiently, be close
to their workers, and deliver the amenities those workers want is
driving the demand for new and upgraded space. These new
spaces are leasing quickly as tenants move from their older
offices; however, it is unclear who will move into the space they
have vacated.
The rise in the use of technology to facilitate how work gets
done is a key component of new office demand. The new space
being delivered is capable of providing ongoing flexibility and
further implementation of new technology. Owners of older
office space will find it necessary to decide whether to invest
the capital in their properties to provide these same amenities or
find another way to compete for tenants.
The overall view among this years interviewees is that suburban
office space will continue to be challenged in 2015. With most
Emerging Trends in Real Estate 2015
89
Medical Offices
In medical office space, the clear trend is away from the old
sole-practitioner model to multifunctional, multiphysician clinics offering longer hours and a wider range of services. At the
same time, small facilitieslaboratories, for examplewill
likely look to consolidate in order to control costs and achieve
economies of scale. Hospitals also will look to move some services such as rehabilitation out of their main facilities into other,
less expensive locations.
Property owners and developers may find themselves facing the
need to move tenants out of existing assets in order to secure
the space needed for these new clinicsor they may look for
opportunities to develop or redevelop other properties to suit.
good
3.42
3.40
3.53
3 Toronto (5/2/2)
3.29
7 Winnipeg (7/7/6)
3.10
3.09
3.15
9 Halifax (9/9/8)
2.83
1
Abysmal
3.13
3.13
2.50
3.00
3
Fair
4
Good
poor
08 09 10 11 12 13 14 15
Calgary
3.75
2.83
3.56
3.39
90
Calgary
3.64
3.83
2.93
fair
4.00
3.33
6 Montreal (8/8/3)
Housing
3.41
5 Ottawa (2/4/6)
3.42
5
Excellent
good
3.37
fair
Edmonton
poor
08 09 10 11 12 13 14 15
Edmonton
Robust growth in residential construction, retail sales and personal services sectors is expected to assume a more prominent
role in Edmontons expansion of the next 12 to 24 months.
These strong fundamental drivers will help insulate Edmontons
economy from external shocks.
The Edmonton economy is strong. Roughly 31,000 jobs were
added over the past year, with unemployment edging up to a
mere 5.5 percent. The economic table indicates a 2015 forecast
of 4.8% in 2015. Albertas job market is operating in a different realm from the rest of the country, said an interviewee. The
combination of big resource projects and the provinces solid
economic fundamentals is creating a perfect storm for job
creation now and in the foreseeable future.
Over the next five years, economic growth in Edmonton is
expected to average 3.6 percent annually; in the Edmonton
Census Metropolitan Area (CMA), 3.9 percent annually. The
combination of relatively low interest rates and modest inflation over the next 12 to 24 months will sustain a very favorable
environment for the city of Edmonton to undertake major capital
investments. Low interest rates will help contain financing costs,
while modest inflation will make estimates of final costs for multiyear projects much more reliable.
91
good
3.29
fair
Toronto
poor
08 09 10 11 12 13 14 15
Toronto
92
good
3.34
fair
Vancouver
poor
08 09 10 11 12 13 14 15
Vancouver
good
3.37
fair
Ottawa
poor
08 09 10 11 12 13 14 15
Ottawa
93
good
fair
poor
2.98
Montreal
08 09 10 11 12 13 14 15
Montreal
good
fair
3.10
Winnipeg
poor
09
10
11
12
13
14
15
Winnipeg
Softening demand due to lower employment and net immigration should keep housing starts below 2013 levels moving
forward, said a senior market analyst for a Winnipeg real estate
company. The market is currently dealing with a building up of
unsold homes from 2013 and slower homebuying and building
activity due to an unusually cold winter. New home construction
had declined for the fourth straight month by March 2014, down
6.1 percent from the previous year.
Some feel the slowdown is necessary: Recently, the Manitoba
Building and Construction Trades Council, which represents
13 construction and trade unions, called for a ten-year moratoriumif not longeron major housing developments such as
large-scale suburbs. The group believes that new developments
are putting a serious financial strain on the citys budget and
contributing to Winnipegs growing infrastructure deficit. Others,
including some in the city government, disagree, believing that
new suburbs are essential to handling population growth and
preventing people from leaving Winnipeg for surrounding bedroom communities.
Winnipeg shoppers are looking forward to the opening of the
citys first pure outlet center. The Outlet Collection of Winnipeg
will feature 90 premium retailers on a 40-acre site, and is anticipated to open in spring 2017. The project is expected to provide
a strong boost to the local construction sector.
4
good
fair
3.15
good
fair
Saskatoon
poor
09
10
11
12
13
14
15
Saskatoon
2.83
poor
08 09 10 11 12 13 14 15
Halifax
Halifax
Housing sales hit a 19-year low amid oversupply, a downsizing trend, stubborn prices, and mortgage rule changes.
Head/regional offices and new industry concentrations
boosting office construction.
Industrial market wavers as shipbuilding fails to deliver anticipated jobs.
95
Investor
demand
Capital
availability
Development/
redevelopment
opportunities
Public/private
investment
Local
development
community
Calgary
4.87
4.93
4.71
4.46
4.33
4.08
Edmonton
4.64
4.62
4.54
4.25
4.58
4.08
Vancouver
3.77
4.50
4.43
3.69
3.38
3.85
Saskatoon
3.67
3.67
3.67
4.00
4.00
3.67
Toronto
3.61
4.17
4.18
3.64
3.82
4.23
Halifax
3.50
3.00
3.25
3.00
3.00
3.67
Ottawa
3.17
3.00
3.83
3.40
3.20
3.60
Winnipeg
3.17
3.33
3.17
3.00
3.17
3.00
Montreal
3.00
3.50
3.50
3.33
2.89
3.44
Industrial development in and around Halifax has been relatively quiet, with some small developments underway but little
more. Part of the reason is that newly announced shipbuilding
contracts have thus far failed to deliver the anticipated boost to
local job growth.
Average
Fair
Good
Excellent
Strength of
local economy
Investor
demand
Capital
availability
Development/
redevelopment
opportunities
Public/private
investment
Local
development
community
Calgary
4.57
4.87
4.93
4.71
4.46
4.33
4.08
Edmonton
4.45
4.64
4.62
4.54
4.25
4.58
4.08
Toronto
3.94
3.61
4.17
4.18
3.64
3.82
4.23
Vancouver
3.94
3.77
4.50
4.43
3.69
3.38
3.85
Saskatoon
3.78
3.67
3.67
3.67
4.00
4.00
3.67
Ottawa
3.37
3.17
3.00
3.83
3.40
3.20
3.60
Montreal
3.28
3.00
3.50
3.50
3.33
2.89
3.44
Halifax
3.24
3.50
3.00
3.25
3.00
3.00
3.67
Winnipeg
3.14
3.17
3.33
3.17
3.00
3.17
3.00
97
98
Interviewees
Ackman-Ziff Real Estate Group LLC
Gerald S. Cohen
Jason Kane
Russell Schildkraut
Simon Ziff
Avalon Bay
Kevin OShea
Fred H. Henritze
Robert Turner
Axiometrics
Ronald Johnsey
Barclays Capital
P. Sheridan Schechner
Ross Smotrich
Bedford Lodging
Jeff Browning
Bentall Kennedy (Canada) LP
Remco Daal
Gary Whitelaw
Paul Zemla
Bentall Kennedy (US) LLP
Douglas Poutasse
BlackRock
Jack R. Chandler
Steve Cornet
Simon Treacy
Carmel Partners
Dennis Markus
Ron Zeff
ARA Finance
Tom MacManus
Arel Capital
Gabriel Bousbib
Teddy Schiff
Boston Properties
Michael LaBelle
Owen D. Thomas
Cassidy Turley
Garrick Brown
CBRE
William C. Yowell
CBRE Commercial Tri-State Region
Mary Ann Tighe
CBRE Econometric Advisors
Jon Southard
CBRE Group Inc.
Tom Frye
Raymond Wong
CB Richard Ellis Ltd.
Ross Moore
John OBryan
Roelof van Dijk
Centerpoint Properties
James Clewlow
Charles River Realty Investors
Brian H. Kavoogian
Emerging Trends in Real Estate 2015
99
100
Donahue Schriber
Lawrence P. Casey
Douglas Elliman
Faith Hope Consolo
Fisher Brothers
Winston Fisher
DRA Advisors
Paul McEvoy Jr.
Eastern Bank
David B. MacManus
Geolo Capital
Anne Raymond
Eastport Consulting
Susan Swindell Carter
Gerding Edlen
Molly Bodonaro
Kelly Saito
Emigrant Bank
Pat Goldstein
Empire Communities Group
Paul Golini Jr.
Andrew Guizzetti
Daniel Guizzetti
Ginkgo Residential
Philip Payne
Glenborough LLC
Alan Shapiro
Goff Capital
John Goff
ICSC
Michael P. Kercheval
IDI Gazeley
Linda Booker
Lachman Associates
Leanne Lachman
Intracorp Group
Don Forsgren
GTIS Partners
Steven Gorey
Guggenheim Partners
Kieran P. Quinn
iStar Financial
Nina Matis
Lubert-Adler
Dean S. Adler
Madison Homes
Miguel Singer
Hawkeye Partners LP
Bret Wilkerson
JLA LLC
Steve Utley
J.P. Morgan Asset Management
Nancy Brown
Anne Cole
Wayne Comer
Michael Hudgins
Mike Kelly
Brian Nottage
Hilary Spann
John Hancock
Joseph Shaw
KeyBanc Real Estate Capital
Angela Mago
Highwoods Properties
Edward J. Fritsch
Hilton Worldwide
Kevin Jacobs
Chris Nassetta
Hines
Kurt Hartman
Ken Hubbard
Hopewell Development Corp.
Don Larke
Manulife Financial
Joseph Shaw
Manulife Real Estate Funds
Catherine Barbaro
Tim Blair
David Shaw
Ted Willcocks
Martek
Charlie Oliver
The Mathews Co.
Bert Mathews
Mattamy Homes Ltd.
Brian Johnston
MDF Capital
Michael D. Fascitelli
Melcor REIT
Darin Rayburn
Menkes Development Group
Peter Menkes
Mesa Development
Richard A. Hanson
MetLife Real Estate Investors
Chuck Davis
Mark H. Wilsmann
Emerging Trends in Real Estate 2015
101
Metrolinx
Michael Sutherland
The Metrontario Group
Lawrie Lubin
Metrus Properties
Robert De Gasperis
Metzler North America
Donald Wise
Moodys Investors Service
Merrie S. Frankel
Morgan Stanley & Co.
Jim Collins
John Klopp
Grant Murray
Candice Todd
Murray Hill Properties
Norman Sturner
National Association of Real Estate
Investment Trusts
Steven Wechsler
New Tower Trust Co.
Brent A. Palmer
Newcastle Ltd.
Kent Swanson
Newport Capital Partners
Derrick McGavic
Next Realty LLC
Andy Hochberg
Alex Katz
Parkway
Jason Bates
PM Realty Group
John S. Dailey
Northwestern Mutual
David Clark
Northwood Investors
John Kukral
PREA
Greg MacKinnon
NPV Advisors
David Walden
John Wrzensinksi
Prologis
Chris Caton
Hamid Moghadam
Prudential Global Real Estate
Securities Fund
Marc Halle
Orlando Corp.
Nick Fuda
Bill ORourke
102
Otra Capital
Alfonso Graceffa
Edmondo Marandola
QIC
Matthew Strotton
Quadrant
Thomas Mattinson
RBC Capital Markets
Carolyn Blair
Dan Giaquinto
David Tweedie
Real Estate Capital Partners
Paul Doocy
Sylvia Gross
Jeremy Katz
Karen Shewer
The Real Estate Roundtable
Jeffrey DeBoer
Real Property Association of Canada
Michael Brooks
RealNet Canada Inc.
George Carras
Redbourne Group
Michel Bouchard
REIS Inc.
Ryan Severino
RioCan Real Estate Investment Trust
Rags Davloor
Ed Sonshine
Fred Waks
RLJ Lodging Trust
Ross H. Bierken
Rohit Group of Companies
Russell Dauk
Rosen Consulting Group
Kenneth Rosen
Rudin Management
Bill Rudin
Tideline Partners
Lev Gershahn
Trepp LLC
Matt Anderson
Unaffiliated
Jeff Blackman
UBS Global Asset Management
(Americas) Inc.
Lee S. Saltzman
University of California
Gloria Gil
Urban America
Thomas Kennedy
Urban Properties
John Breitinger
Yardi
Brad Setser
Robert Teel
Westfield Group
Peter Lowy
Mark Stefanek
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Sponsoring Organizations
Bringing together leaders from across the fields of real estate and
land use policy to exchange best practices and serve community
needs;
Fostering collaboration within and beyond ULIs membership through
mentoring, dialogue, and problem solving;
Established in 1936, the Institute today has more than 32,000 members
worldwide, representing the entire spectrum of the land use and development disciplines. Professionals represented include developers,
builders, property owners, investors, architects, public officials, planners, real estate brokers, appraisers, attorneys, engineers, financiers,
academics, students, and librarians.
ULI relies heavily on the experience of its members. It is through member involvement and information resources that ULI has been able to
set standards of excellence in development practice. The Institute has
long been recognized as one of the worlds most respected and widely
quoted sources of objective information on urban planning, growth, and
development.
Patrick L. Phillips
Global Chief Executive Officer, Urban Land Institute
K.K. So
Asia Pacific Real Estate Tax Leader
Hong Kong, China
Kathleen B. Carey
Chief Content Officer
Craig Hughes
U.K. and Global SWF Real Estate Leader
London, U.K.
Frank Magliocco
National Real Estate Leader
Toronto, Ontario, Canada
www.pwc.com
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PwC real estate practice assists real estate investment advisers, real
estate investment trusts, public and private real estate investors, corporations, and real estate management funds in developing real estate
strategies; evaluating acquisitions and dispositions; and appraising and
valuing real estate. Its global network of dedicated real estate professionals enables it to assemble for its clients the most qualified and
appropriate team of specialists in the areas of capital markets, systems
analysis and implementation, research, accounting, and tax.
On the front cover: The Mill District City Apartments project stands in
one of the most compelling locations in Minneapolis, near the citys
original settlement at St. Anthony Falls amid the historic flour mills and
the modern downtown.
This five-story wood-framed project consists of 175 market-rate rental
units, plus 3,400 square feet of ground-level retail space, and two levels
of underground parking, filling a unique market niche for high-end
market-rate housing.
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Highlights
What are the best bets for investment and development in 2015? Based on personal interviews
with and surveys from more than 1,000 of the
most influential leaders in the real estate industry,
this forecast will give you a heads-up on where to
invest, which sectors and markets offer the best
prospects, and trends in the capital markets that
will affect real estate. A joint undertaking of PwC
and the Urban Land Institute, this 36th edition of
Emerging Trends is the forecast you can count on
for no-nonsense, expert insight.
are changing.
ISBN: 978-0-87420-355-4
I S B N 978-0-87420-355-4
54995
780874 203554
www.uli.org
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www.pwc.com
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