National Association of Real Estate Investment Trusts® REITs: Building Dividends & Diversification® 1875 I St, NW Suite 600, Washington, DC 20006 • 202-739-9400 January 10 Outlook for the Economy and Commercial Real Estate 2014 Calvin Schnure Vice President, Research and Industry Information
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2014 01 Realtor University Speaker Series Calvin Schnure Reits 2014-09-11
This presentation is from Dr. Calvin Schnure's talk about the commercial market outlook for 2014 and the trends of 2013. He speaks about REITs (Real Estate Investment Trusts) and talks about what they are, how they work and perform, and why they're important to the commercial real estate industry.
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National Association of Real Estate Investment Trusts®
REITs: Building Dividends & Diversification®
1875 I St, NW Suite 600, Washington, DC 20006 • 202-739-9400
January 10
Outlook for the Economy and
Commercial Real Estate
2014 Calvin Schnure
Vice President, Research and Industry
Information
1
Macroeconomic Outlook
Positive Signs for the Year Ahead
• GDP growth accelerated in 2013:H2 – 4.1% growth in Q3 had large inventory contribution
– But final demand firmed in Q4
• Auto sales are strongest since 2007 – Aging vehicles on the road translate into pent-up demand
• Job market continues to gain strength – Trend growth now 200K/ month
• Housing market – In full recovery mode, finally!
2
-10
-8
-6
-4
-2
0
2
4
6
8
2000 2003 2006 2009 2012
GDP growth accelerated in 2013
3
Percent change, annual rate
Source: Bureau of Economic Analysis, Haver Analytics
0
5
10
15
20
25
2000 2002 2004 2006 2008 2010 20124
Robust auto sales reflect rising incomes, confidence… and pent-up demand
Million units, seasonally adjusted annual rate
-1000
-800
-600
-400
-200
0
200
400
600
2000 2002 2004 2006 2008 2010 2012
5
Job growth continues to gain momentum
Monthly change in nonfarm payrolls
(Red line is 6-month average)
Source: Bureau of Labor Statistics, Haver Analytics
6
Rising house prices help household net worth and consumer spending, confidence, real estate markets
Source: S&P/Case-Shiller, Haver Analytics
Index 2000 = 100
But how do we know this isn’t another false start?
• GDP growth and the job market have faltered several times in this recovery
– External events: European debt crisis, Japanese earthquake, debt ceiling and govt shutdown
Initial Investment Cumulative Dividends with Reinvestment Cumulative Capital Gains with Reinvestment
Standard & Poor’s 500 Index
FTSE NAREIT All Equity REIT Index
Price Return
Note: Based on monthly total returns and price appreciation returns, January 1990 –October 2013
Sources: NAREIT® analysis of data from IDP accessed through FactSet.
Dividends Drive Investment Performance One-half to two-thirds of REIT total returns
24
Competitive Long-Term Investment Performance Total returns in percent
Data as of September 30, 2013
Sources: NAREIT® analysis of data from IDC accessed through FactSet. 25
FTSE NAREIT U.S. Equity
REITs TR
FTSE EPRA/NAREIT Developed TR
S&P 500 TR MSCI EAFE TR Barclays Capital U.S. Aggregate
Bond1
Barclays Capital Global Aggregate
Bond1
1-Year 11.11 13.16 27.18 26.88 -1.08 -1.54
3-Year 12.65 10.02 16.56 8.38 3.02 1.99
5-Year 15.36 15.33 15.17 11.99 6.09 6.07
10-Year 9.94 10.04 7.46 7.71 4.78 5.08
15-Year 10.74 10.04 5.10 5.00 5.36 4.95
20-Year 10.25 8.78 8.93 5.45 5.77 5.71
25-Year 10.71 NA 10.04 5.11 6.82 NA
30-Year 11.39 NA 10.96 9.63 7.82 NA
35-Year 13.04 NA 11.92 9.15 8.07 NA
40-Year 12.45 NA 10.56 8.96 NA NA
Diversification U.S. equity REITs offer low to moderate correlation with stock and bond investments December 1992– December 2012
Source: Large-cap stocks – Standard & Poor’s 500®; Small-cap stocks – Russell 2000; International stocks – Morgan Stanley Capital International Europe, Australasia,
and Far East (EAFE®) Index; U.S. bonds - Barclays U.S. Aggregate Bond Index; Non-U.S. bonds – Citigroup Non-USD World GBI; U.S. REITs – FTSE NAREIT All Equity