Emerging Trends in Real Estate 2016
Jan 05, 2016
Emerging Trends in Real
Estate 2016
• PwC – ULI
• 12 Month Outlook on Trends
• 37th Edition
• 1,800+ Real Estate leaders surveyed
• 75 Cities
Please characterize the expected profitability of the real estate related portion of your business in 2016:
A. Abysmal B. Poor C. Fair D. Good E. Excellent
Source: Emerging Trends in Real Estate 2015
Profitability outlook
21.6%
60.6%
17.7%
2010
Abysmal to Poor
Fair
Good to Excellent
Source: Emerging Trends in Real Estate 2016
1.1%
24.9%
74.0%
2015
Abysmal–poor
Fair
Good–excellent
Profitability outlook
Expectations are high
Source: Emerging Trends in Real Estate 2016
1.1%
14.9%
84.0%
2016
Abysmal–poor
Fair
Good–excellent
Profitability outlook still improving
Look what we found Expectations are high
1.1%
14.9%
84.0%
2016
Abysmal–poor
Modestly poor–modestly good
Good–excellent
1.6%
14.4%
84.0%
????
Abysmal–poor
Modestly poor–modestly good
Good–excellent
Source: Emerging Trends in Real Estate 2016
Deja Vu all over again? Expectations are high
1.1%
14.9%
84.0%
2016
Abysmal–poor
Modestly poor–modestly good
Good–excellent
1.6%
14.4%
84.0%
2006
Abysmal–poor
Modestly poor–modestly good
Good–excellent
Source: Emerging Trends in Real Estate 2016
What do you think the impact of instability in financial markets will be on your business?
A. Positive B. Neutral C. Short Term Negative D. Long Term Negative
Emerging Trends Barometer: Buy? Hold? Sell?
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
2010 2011 2012 2013 2014 2015 2016Buy Sell Hold
Peak Buy
Peak Hold Peak Sell
Source: Emerging Trends in Real Estate 2016
11
2016 Emerging Trends Office: A Barometer
of Change
18-Hour cities 2.0
Next stop: The suburbs … what is a suburb?
A housing option for everyone
Parking for change
12
Infrastructure: Network it! Brand it!
Food is getting bigger and closer
Consolidation breeds specialization
The return of the human touch
We raised the capital, now what do we do with it?
2016 Emerging Trends
18-Hour Cities 2.0
Source: Emerging Trends in Real Estate 2016
-30
-20
-10
0
10
20
30
Emerging Trends outlook ranking change 2010 - 2016
Survey respondents favor growth and competitive business and living costs
Markets moving up
Markets moving down
2013
San Francisco
New York City
San Jose
Austin
Houston
Boston
Washington D.C.
Dallas/Fort Worth
Orange County
Source: Emerging Trends in Real Estate 2016
2016 Dallas/Fort Worth
Austin Charlotte
Seattle Atlanta Denver
Nashville San Francisco
Portland Los Angeles
Out of the top 10
Washington D.C. (24) New York City (15) Orange County (14)
Miami (19) Houston (30) Boston (13)
Raleigh/Durham (11)
Source: Emerging Trends in Real Estate 2016
Source: Moody’s Analytics, Real Capital Analytics
18-Hour cities 2.0
Cost of Doing
Business
2010 112%
2016 99%
Cost of Living
2010 119%
2016 112%
-200%
-100%
0%
100%
200%
300%
400%
500%
600%
2002 - 2007 2008 - 2009 2010 - 2011 2012 - 2015
Ch
an
ge
fro
m P
rev
iou
s C
ycl
e
Dollar Transaction Volume
2010 top 10 Markets 2016 to 10 Markets
Recession
Recovery
Expansion
Expansion
Next stop: The suburbs…
what is a suburb?
Generations are on the move, with millennials the most footloose
Over the Next 5 Years, Where will first time homebuyers be likely to purchase a home?
A. Urban Core B. Neighborhoods closer to urban core
(20 Minute commute) C. Suburban neighborhoods offering
more urban amenities D. Traditional suburban neighborhoods
62% 67%
71%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Millenials (18 to 35) Generation X (36 to 49) Baby Boomers (50 to 69)
Where Do People Currently Live?
City Suburb
Source: U.S. Census Bureau
Next stop: The suburbs…. what is a suburb?
Who is likely to move?
Somewhat or Very Likely to
move in 5 years
All Adults 48%
Millennials 73%
Gen Xers 42%
Baby Boomers
37%
War/Silent 25%
Homeowners 34%
Renters 73%
TOTAL, 3 GENERATIONS:
6.33 MILLION PEOPLE
TOTAL: 6.28 MILLION
PEOPLE
TOTAL: 2.27 MILLION
PEOPLE TOTAL: 1.51 MILLION
PEOPLE
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
BetweenSuburbs
Within City City to Suburb Suburb to City
Mil
lio
ns
of p
eo
ple
Metropolitan Mobility, 2013 to 2014
Gen
. X
Bo
om
ers
Mil
len
nia
ls
Source: U.S. Census Bureau
Next stop: The suburbs…. what is a suburb?
It’s all about the kids!
Source: City Observatory, National Vital Health Statistics, U.S. Census Bureau
25%
27%
29%
31%
33%
35%
37%
39%
41%
43%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Age
National probability of Living in city center by age of child
23.5
24
24.5
25
25.5
26
26.5
27
27.5
28
28.5
-
5.00
10.00
15.00
20.00
25.00
30.00
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
Female Millenials (Ages 25 - 35)
Average Age of First Birth
(millions) (average age)
Next stop: The suburbs…. what is a suburb?
Offices: A Barometer of Change
2000 2010 2020 ?
Number of workers per 1,000 sf
Source: Corenet Global, PwC
253 sf per worker 225 sf per worker 138 sf per worker
00’s
10’s
(894,136)
410,616
(483,520)
(1,000,000)
(800,000)
(600,000)
(400,000)
(200,000)
-
200,000
400,000
600,000
Leaving Joining Shortage
Persons
10-year labor force poses the question…
44.3%
30.6%
13.8%
11.3%
Millennials Gen X
Boomers Gen Z
% of total labor market
…Who is in charge?
Source: U.S. Census Bureau, Bureau of Labor Statistics, PwC
2016 - 2026 2026
Source: Bureau of Labor Statistics, PwC
46.5%
37.8%
6.0% 9.8%
Small Business, Big Impact
1 to 49
50 to 499
500 to 999
1,000 +
% of total employment change by company size since 2013
A Housing Option
for Everyone
Can you rent the American dream?
Source: U.S. Census Bureau
69.2
43.6
70.1
77.4 82.4 81.8
63.4
34.6
58
69.9
75.4 77.2
25
35
45
55
65
75
85
95
U.S. - Total Under 35 -Millennials
35 to 44 - Gen X 45 to 54 - Gen X andBoomers
55 to 64 - Boomers 65 and Over -Boomers and Older
Decline in Home Ownership % by Generation
Source: U.S. Census Bureau, Core Logic
20% 30% 40% 50% 60% 70%
New York-Brooklyn
Los Angeles
New York -other boroughs
Miami
Oakland/East Bay
New York-Manhattan
Fort Lauderdale
San Diego
San Francisco
Orange County
Palm Beach
San Jose
Boston
Inland Empire
Portland, ME
Honolulu
CapeCoral/Fort…
Providence
Dallas/Fort Worth
Average Rent as % of Median Income
30% 65% 100% 135% 170%
New York-Manhattan
San Francisco
Oakland/East Bay
San Jose
Honolulu
Orange County
New York-Brooklyn
San Diego
Los Angeles
New York -other boroughs
CapeCoral/Fort Myers/Naples
Miami
Westchester/Fairfield, NY/CT
Seattle
Palm Beach
Fort Lauderdale
Inland Empire
Boston
Washington DC-District
Northern New Jersey
Denver
Sacramento
Portland, OR
Portland, ME
Providence
Charleston
Dallas/Fort Worth
Own as % of Median Income
Parking for Change
Parking was once a must-have….
….building owners will now have options
00’s
10’s
Source: U.S. Census Bureau, U.S. Department of Commerce, Department of Transportation
64.0%
77.7%
84.1%
86.5% 87.9%
86.7% 86.3% 85.8%
60.0%
65.0%
70.0%
75.0%
80.0%
85.0%
90.0%
1960 1970 1980 1990 2000 2006 2010 2013
Percent of Drivers Commuting by Automobile
-25.0%
0.0%
25.0%
50.0%
75.0%
100.0%
Parking- free commuting (change
2000 to 2013)
Parking for Change
Delaying Licensure
Only 44% obtained a driver’s license with in 12 months of the minimum age
Only 72% obtained a license before turning 18
1. Not having a car
2. Ability to get around without driving 3. The cost of gasoline
4. Driving was too expensive
5. “just didn’t get around to it”
Top Reasons for not getting a drivers license:
We raised the capital,
now what do we do with it?
Source: Prequin, Quarterly real estate update, Q2 2015, Federal Reserve Flow of Funds
We raised the capital, now what do we do with it?
$0
$50
$100
$150
$200
$250
$300
2010 2011 2012 2013 2014 2015
$ m
illi
on
s
Institutional dry powder and REIT Cash
Prospects for Commercial/Multifamily Subsectors in 2016
Fulfillment Center
Warehouse industrial
Medical office
Apartment rental—moderate
Apartment rental—high
Limited-service hotels
Neighborhood/comm. shopping centers
Central city office
R&D Industrial
Student housing
Full-service hotels
Apartment rental—affordable
Suburban office
Institutional rentals of SF houses
Power centers
Regional malls
Warehouse industrial Fulfillment Center Medical office Apartment-high income Limited-service hotels Apartment rental—moderate Student housing Central city office R&D Industrial Neighborhood/community shopping centers Apartment rental—affordable Full-service hotels Institutional rentals--SF houses Suburban office Power centers Regional malls
How much longer is the current cycle going to last?
A. 6 Months B. 1 year C. 2 years D. Longer than 2 years
2016 Local Outlook: Dallas/Ft. Worth
+7%
-
1.00
2.00
3.00
4.00
5.00
2016 Sector Outlook: Dallas/Ft. Worth
Rank: #9 #5
#2 #2 #5
#1
0.00
1.00
2.00
3.00
4.00
5.00
Office Retail Industrial Multifamily Hotel Housing
Dallas/Ft. Worth National Average
2016 Comparison among markets in the South: Local Development Community
-
1.00
2.00
3.00
4.00
5.00
Dallas/Ft. Worth Investment Ratings Emerging Trends 2004-2016
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