CRE Markets 2 Mortgage Bankers Association 1 11/9/2017 Mortgage - PDF document

11/9/2017 Mortgage Bankers Association Commercial Real Estate Outlook November 2017 1 CRE Markets 2 Mortgage Bankers Association 1

11/9/2017 Mortgage Bankers Association Snapshot of Today’s Market Indicator Level Trend Apartment Vacancy Rate 9.0% Up from recent levels that were lowest since 1984 Office Vacancy Rate 16.0% Trending (slightly) down, still above pre-recession levels Office Property Cap Rate 6.6% Near all-time lows Multifamily Property Cap Rate 5.6% At all-time lows Multifamily Units Under Construction 600,000 Recent levels are highest since 1974 Life Company Mortgage Rate 3.9% Up slightly but still near all-time lows Mortgage Bankers Originations $491 billion Down from 2015, but 3rd highest in history Total Multifamily Mortgage Originations ~$260 billion At all-time high UW CMBS LTV 60% Second lowest (to 2010) Moody's Stressed CMBS LTV 113% Second highest (to 2016) Multifamily non-current rate is lowest on record (to Bank 90+ Day Mortgage Delinquency Rate 0.54% 1993) Mortgage Debt Outstanding $3.1 trillion Record high Sources: Census, REIS, Real Capital Analytics, ACLI, MBA, JPMorgan, Moody’s FDIC, MBA 3 Different Property Types, Different Drivers APARTMENTS: Supply vs. Demand OFFICE: Employment Growth & The Efficiency Trend RETAIL: E-commerce, Haves and Have Nots, Fewer Haves INDUSTRIAL: E-commerce, Economy, Last Mile 4 Mortgage Bankers Association 2

11/9/2017 Mortgage Bankers Association Commercial/Multifamily Property Fundamentals Vacancy Rates (Percent) Year-over-year Asking Rent Growth 20 12% Office 18 10% 16 Retail 8% 14 Apartment 6% 12 4% 10 2% 8 0% 6 Office 4 Retail -2% 2 Apartment -4% 0 -6% 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1 Year-over-year NOI Growth Among NCREIF Properties Property Prices (Index: 2007Q3 = 100) Apartment 15% 180 Office - CBD 160 Retail 10% Industrial 140 Office - Suburban 5% 120 0% 100 80 -5% Apartment 60 Retail -10% 40 Office Industrial -15% 20 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: REIS, NCREIF, Moody’s/Real Capital Analytics 5 Contributions to Commercial Property Price Changes Source: NCREIF 6 Mortgage Bankers Association 3

11/9/2017 Mortgage Bankers Association Commercial/Multifamily Capitalization Rates 10-year Treasury Apartment 10% Office - CBD 9% Retail Industrial 8% 7% 6% 5% 1.3% Apartment spread 4% 4.6% 3.3% 3% 2% 1% 0% 01Q1 01Q4 02Q3 03Q2 04Q1 04Q4 05Q3 06Q2 07Q1 07Q4 08Q3 09Q2 10Q1 10Q4 11Q3 12Q2 13Q1 13Q4 14Q3 15Q2 16Q1 16Q4 Source: Real Capital Analytics and Federal Reserve Board 7 Capitalization Rates in Selected Markets, H2 2017 Class A CBD Office (blue) and Class A Multifamily Infill (red) Source: CBRE 8 Mortgage Bankers Association 4

11/9/2017 Mortgage Bankers Association Value of Construction Put in Place SAAR, $millions Source: Census Bureau 9 CRE Finance 10 Mortgage Bankers Association 5

11/9/2017 Mortgage Bankers Association Commercial/Multifamily Property Sales, Mortgage Bankers Originations and Non-bank Maturities ($millions) $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 n.a. n.a. n.a. n.a. $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017 Trend Non-bank Mortgage Maturities Property Sales Mortgage Bankers Originations Source: MBA CREF Database and Real Capital Analytics 11 NOTE: Maturities not available prior to 2009 Commercial/Multifamily Mortgage Bankers Originations $billions $600 Commercial/Multifamily $500 Multifamily $400 $300 $200 $100 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: MBA CREF Database 12 Mortgage Bankers Association 6

11/9/2017 Mortgage Bankers Association Mortgage Bankers Originations, by Property Type ($billions) $250 $200 Multifamily Office $150 Retail Other Hotel $100 Industrial Health $50 $- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: MBA 13 Mortgage Bankers Originations, by Capital Source ($billions) $250 $200 Banks GSEs $150 Life Cos CMBS $100 FHA Other $50 $- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: MBA 14 Mortgage Bankers Association 7

11/9/2017 Mortgage Bankers Association Different Capital Sources, Different Drivers Banks – CRE Fundamentals, Regulatory Guidance, HVCRE Life Companies – Alternative Investment Options GSEs – Lending Caps, Housing Goals, Duty to Serve CMBS – Bond Markets, Risk Retention, Fundamental Review of the Trading Book FHA – Rates, Construction, MAP Guide, MIP for Affordable 15 Commercial and Multifamily Mortgage Bankers Originations, by Quarter ($billions) $600 $500 $400 $300 $200 $100 $0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 Q2 Q3 Q4 Source: MBA 16 Mortgage Bankers Association 8