The Global Economy and Real Estate Markets Asieh Mansour, PhD Head of Americas Research January 2013.

The Global Economy and Real Estate Markets

Asieh Mansour, PhDHead of Americas Research

January 2013

The Global Economy

CBRE | Page 3

Four Forces Shaping Global Economy

Austerity

Deleveraging

Monetary Reflation

US Labor Market Weakness

CBRE | Page 4

(Real GDP, Quarter-on-Quarter % Change, Annual Rate)

Global Outlook: Still Growing Despite Europe

4

Source: IHS Global Insight, December 2012.

2005

Q3 20

0520

06

Q3 20

0620

07

Q3 20

0720

08

Q3 20

0820

09

Q3 20

0920

10

Q3 20

1020

11

Q3 20

1120

12

Q3 20

1220

13

Q3 20

1320

14

Q3 20

14-8%

-6%

-4%

-2%

0%

2%

4%

6%

CBRE | Page 5

2013: Diminished Growth Expectations

A synchronized deceleration in growth

European debt crisis

Slowdown in Emerging Markets, no decoupling

Debt-ceiling and spending cliff concerns in the U.S.

.

CBRE | Page 6

2014: A Multi-Speed Global Recovery

Source: IHS Global Insight, December 2012.

(Real GDP, Annual % Change)

Asia-Pacific Latin America World United States EMEA0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

4.4%

3.4%

2.6%

1.9%

1.0%

5.4%

4.4%

3.4%

2.7%

1.6%

2013 2014

The U.S. Economy

CBRE | Page 8

(Annual % Change)

US Economic Outlook: Consumers More Upbeat than Business

8

Source: Global Insight, December 2012.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

Real Private Consumption Real GDP Growth

CBRE | Page 9

Lackluster Employment Trends

9

Source: IHS Global Insight, December 2012.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-6

-5

-4

-3

-2

-1

0

1

2

3

4

0%

2%

4%

6%

8%

10%

12%

Net Jobs (Millions), Left-Hand Side

CBRE | Page 10

Net Job Gains (1000s)

Where will the jobs come from?

10

Source: Moody’s Economy.com, January 2013.

Federal Government

Natural Resources & Mining

Utilities

Real Estate

Manufacturing

Information

Construction

Transportation & Warehousing

Educational Services

Wholesale Trade

Finance & Insurance

Other Services

Retail Trade

Leisure & Hospitality

Professional & Business Services

Health Care & Social Assistance

-100 0 100 200 300 400 500

2.7%

2.3%

2.3%

1%

1.4%

1.2%

1.1%

1.3%

1%

0.5%

0.9%

0.2%

1%

0.6%

-0.7%-0.6%

CBRE | Page 11

Net Job Creation in 2013 (1000s), Top 25 Markets

Where are the jobs?

11

Source: Moody’s DataBuffet.com, November 2012

St. LouisSan Jose

TampaPortland, OR

ChicagoMiami

Riverside, CA Detroit

Washington D.C.Philadelphia

DenverOrlando

San DiegoSan Antonio

AustinSeattle

MinneapolisBoston

PhoenixSan Francisco

AtlantaLos Angeles

HoustonDallas

New York

0 20 40 60 80 100 120 140

The Capital Markets

CBRE | Page 13

Real Estate Comparative Returns (Annualized Returns)

REITs Equities Real Property Government Bonds

CPI T-Bills

-5%

0%

5%

10%

15%

20%

25%

30%

35% 33.8%

30.2%

11.0%

2.9% 2.0%0.1%

11.5%

8.0% 8.4%

4.7%2.5% 1.7%

1 Year(1) NAREIT Equity REIT Index(2) Standard & Poors 500 Index(3) NCREIF Property Index (4) Barclays Capital Govt Bond(5) Consumer Price Index(6) 90-day T-Bills

Source: NCREIF, Q3 2012.Note: Data through September 30, 2012.

CBRE | Page 14

Global Research and Consulting

1 Year Total Returns by Country

Note: Annual results based on local currency composite; selected countries shown where data are available. Frequency of country-level and regional indices differ.

Source: IPD, CBRE Research as of Q3 2012.

CBRE | Page 15

National Investment Sales

Source: Real Capital Analytics, Q3 2012

(Sales Volume, in Billions)

$0

$20

$40

$60

$80

$100

$120

$140

$160

Hotel Apartment Retail Industrial Office

CBRE | Page 16

Cap Rate Forecast by Property Type

Source: Real Capital Analytics, Q3 2012

2005 Q3

2006 Q3

2007 Q3

2008 Q3

2009 Q3

2010 Q3

2011 Q3

2012 Q3

5%

6%

7%

8%

9%

10%

Office Industrial Retail Apartment Hotel

US Market Fundamentals

CBRE | Page 18

Property Sector Trajectory

2011.4

    2012Q4Past Cyclic

High“Natural Rate”

Year Back to "Natural Rate"

Office Vacancy Rate 15.4% 16.9 / 2010 13 to 15 2013

Industrial Availability Rate 12.8% 14.5 / 2010 9 to 10 2015

Retail Availability Rate 12.8% 13.2 / 2011 9 to 10 2016

Multifamily Vacancy Rate 5.0% 7.44 / 2009 5 to 6 2010

Full Service Hotels Vacancy Rate 33.7%* 43 / 2009 34 to 38 2010

*Q3 2012 data.Source: CBRE Econometric Advisors, Q4 2012

CBRE | Page 19

Property Fundamentals: Uneven Recovery

Apartment market is back in equilibrium

Office, industrial, retail sectors affected by overhang of vacant space

Over-building has not been an issue for all property sectors this cycle

Some speculative construction is coming back for apartments and industrial

Job growth will ultimately determine real estate market performance

CBRE | Page 20

2013 US Office Supply & Demand Outlook Remains Tepid

20

Source: CBRE EA, Q3 2012.

(SF x Million) (Vacancy Rate, %)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-60

-40

-20

0

20

40

60

80

100

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Completions (SF x Million) Net Absorption (SF x Million) Vacancy Rate (%)

CBRE | Page 21

US Multifamily Housing Supply & Demand Outlook

21

Source: CBRE EA, Q3 2012.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-200

-100

0

100

200

300

400

0%

1%

2%

3%

4%

5%

6%

7%

8%

Rentable Completions (Units x 1000) Net Absorption (Units x 1000)

(Units x 1000) (Vacancy Rate, %)

CBRE | Page 22

Global Research and Consulting

Rental Decline Accelerating Rental Decline Slowing Rental Growth Accelerating Rental Growth Slowing

Americas Office Market Rent Cycle, Q3 2012

V Vancouver

Philadelphia

Seattle

Buenos Aires

Santiago

New York

Washington D.C.

Dallas

San Francisco

Houston

Calgary

Montreal

Orange CountyChicago

Northern New Jersey

Los Angeles

Miami

Panama City

Austin

Atlanta

San Diego

Boston

Denver

Lima

Toronto

Mexico City

Source: CBRE Research, Q3 2012.

DO

Phoenix

Sao Paulo

R Rio de Janeiro

B

S

S

S

S

H

T

M

M

M

W

C

C

L

L

N

NP

P

P

A

A

D

B

S

CBRE | Page 23

Implication for Investors and Occupiers

Highest probability is for the North American economy to continue modest growth.

Debt markets remain open

Interest rates remain low for now.

Global equity markets remain highly volatile.

Demand for “core” assets is strong. Investors searching for yield are beginning to fan out to secondary markets and non-core assets.

Investors have begun to focus on development and build-to-core strategies as well.

Occupiers should lock in long-term leases while investors want to shorten duration. Rents have begun to rise across certain markets.

Los Angeles: Market Fundamentals

CBRE | Page 25

2005 2006 2007 2008 2009 2010 2011 201275%

80%

85%

90%

95%

100%

Office Industrial Retail Apartment

Occupancy Levels by Property Type

Source: CBRE Research, Q4 2012.Note: Apartment data from CBRE EA, Q3 2012.

CBRE | Page 26

2005 2006 2007 2008 2009 2010 2011 2012-30%

-20%

-10%

0%

10%

20%

30%

Office Industrial Retail Apartment

YOY Rent Growth by Property Type

Source: CBRE Research, Q4 2012.Note: Apartment data from CBRE EA, Q3 2012.