THE NATIONAL ECONOMY THE NATIONAL ECONOMY Source: National - PowerPoint PPT Presentation

THE NATIONAL ECONOMY

THE NATIONAL ECONOMY Source: National Association of Realtors, Delta Associates; October 2015.

THE REGIONAL ECONOMY

PAYROLL JOB GROWTH Selected Large Metro Areas | 12 Months Ending July 2015 250 T H O U S A N D S O F N E W 200 PAY R O L L J O B S 150 100 72.3 50 0 LA NY SF Bay DFW Atl Was S Fla Chi Phx Hou Bos Den Basin Source: Bureau of Labor Statistics, Delta Associates; October 2015.

UNEMPLOYMENT RATE Selected Large Metro Areas | July 2014 vs. July 2015 9% July 2014 July 2015 U N E M P L O Y M E N T R AT E * 8% 7% National Rate* 6.5% 6% 5.6% 5% 4% 3% 2% 1% 0% Den DFW SF Bay Bos Was Hou NY Phx S Fla Chi Atl LA Basin YoY Basis -100 -130 -120 -100 -70 -70 -120 -60 -90 -140 -150 -140 Point Change *Not seasonally adjusted . Source: Bureau of Labor Statistics, Delta Associates; October 2015.

PROJECTED JOB GROWTH Washington Metro Area 140 120 5-Year Projected Average = 47,300/Year T H O U S A N D S O F N E W 100 20-Year Annual Average = 41,700/Year PAY R O L L J O B S 80 60 40 20 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 -20 -40 -60 District of Columbia Suburban Maryland Northern Virginia Source: Bureau of Labor Statistics, Dr. Stephen Fuller, Delta Associates; October 2015.

PROJECTED JOB GROWTH Washington Metro Area 140 More office jobs, Lower wages, 120 higher wages more renters T H O U S A N D S O F N E W 100 PAY R O L L J O B S 80 60 40 20 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 -20 -40 -60 District of Columbia Suburban Maryland Northern Virginia Source: Bureau of Labor Statistics, Dr. Stephen Fuller, Delta Associates; October 2015.

PAYROLL JOB CHANGE BY WAGE Washington Metro Area Higher-Wage Mid-Wage 2008-2009 2010-2013 Lower-Wage (60) (40) (20) 0 20 40 60 80 Thousands J O B C H A N G E I N T H O U S A N D S Source: Dr. Stephen Fuller, Delta Associates; October 2015

PAYROLL JOB GROWTH Washington Metro Area | 12 Months Ending July 2015 Education/Health Professional/Business Services State and Local Government Leisure/Hospitality Retail Trade 76,700 Other Services Transportation/Utilities Construction/Mining Federal Government Information Wholesale Trade -2,900 Manufacturing Financial Activities -5,000 1,000 7,000 13,000 19,000 25,000 J O B C H A N G E Source: Bureau of Labor Statistics, Delta Associates; October 2015.

JOBS THAT SUPPORT CLASS A APARTMENTS AND CONDOMINIUMS Washington Metro Area | 12 Months Ending July 2015 Education/Health Professional/Business Services State and Local Government Leisure/Hospitality Retail Trade Other Services Transportation/Utilities Construction/Mining Federal Government Information Wholesale Trade Manufacturing Financial Activities -5,000 1,000 7,000 13,000 19,000 25,000 J O B C H A N G E Source: Bureau of Labor Statistics, Delta Associates; October 2015.

JOBS THAT SUPPORT CLASS B APARTMENTS Washington Metro Area | 12 Months Ending July 2015 Education/Health Professional/Business Services State and Local Government Leisure/Hospitality Retail Trade Other Services Transportation/Utilities Construction/Mining Federal Government Information Wholesale Trade Manufacturing Financial Activities -5,000 1,000 7,000 13,000 19,000 25,000 J O B C H A N G E Source: Bureau of Labor Statistics, Delta Associates; October 2015.

DEMOGRAPHIC SHIFTS AND TENANT & BUYER PROFILE

RENTER PREFERENCE Renter Households | Washington Metro vs. United States 37% P E R C E N TA G E O F T O TA L 36% U.S. 35% R E N T E R S A S A H O U S E H O L D S 34% 33% WASHINGTON METRO 32% 31% 30% 29% 28% 2006 2007 2008 2009 2010 2011 2012 2013 2014 Y E A R Source: U.S. Census Bureau, Delta Associates; October 2015.

OWN vs. RENT RESIDENCE United States Own Rent P E R C E N T O F G E N E R AT I O N 100% 90% 80% 70% 60% 50% 40% 30% 54% 20% 10% 20% 0% Millennials Baby Boomer Source: 2013 ULI/BRS National Survey, Delta Associates; October 2015.

SHARE OF POPULATION BETWEEN 25 – 34 YEARS OLD Largest Metro Areas Arlington County: 28% 16% 15.7% P E R C E N T O F P O P U L AT I O N City of Alexandria: 24% The District: 23% 15% 2 5 - 3 4 Y E A R S O L D 14% 13% 12% 11% Source: U.S. Census Bureau, Delta Associates; October 2015.

CLASS A TENANT PROFILE Washington Metro Area Source: The Bozzuto Group, Delta Associates; October 2015.

NEW TENANT PROFILE District of Columbia Source: The Bozzuto Group, Delta Associates; October 2015.

CHANGING DEMAND PATTERNS Residents Without Cars in Apartments 60% 51% S H A R E O F R E S I D E N T S W I T H O U T C A R S 40% 36% 27% 26% 20% 10% 0% District RB Corridor Bethesda Pentagon City Reston Source: Kettler, The Bozzuto Group, Delta Associates; October 2015.

AVERAGE UNIT SIZE Newly Delivered Class A High-Rise Apartments – Selected Submarkets RB Corridor District 900 AV E R A G E U N I T S I Z E 880 ( S Q U A R E F E E T ) 860 840 820 800 780 760 740 720 700 2000 2014-2015 Source: Delta Associates; October 2015.

APARTMENTS Changing Nature of Space

CLASS B TENANT PROFILE Washington Metro Area Source: ROSS Companies, Delta Associates; October 2015.

CONDO BUYER PROFILE National Source: National Association of Realtors, Delta Associates; October 2015.

THE WASHINGTON METRO AREA APARTMENT MARKET

LONG TERM ANNUAL APARTMENT ABSORPTION National Market Leaders 10,000 Past 12 Months: 14,775 9,000 L O N G T E R M A N N U A L A B S O R P T I O N O F A L L Class A Only Past C L A S S E S O F U N I T S 8,000 12 Months: 14,137 7,000 Class B Only Past 12 Months: 638 5,907 6,000 5,000 4,000 3,000 2,000 1,000 0 DFW Hou Was Atl LA Phx Balt Phil Chi Pgh Source: REIS, Delta Associates; October 2015 . Note: Excludes NY metro to conserve scale .

CLASS B APARTMENT ABSORPTION Washington Metro Area 6,000 C L A S S B A PA R M E N T U N I T S 4,000 2,000 0 -2,000 -4,000 -6,000 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Source: Delta Associates; October 2015. Note: Each quarter shows absorption over the past 12 months.

CLASS A APARTMENT ABSORPTION Washington Metro Area Annual Average Average Since 2008 = 7,920 ~ 10,300 Long-Term Average = 6,595 C L A S S A A PA R M E N T U N I T S 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 05 06 07 08 09 10 11 12 13 14 15* 16 17 18 Source: Delta Associates; October 2015. *12 months ending September 2015.

ABSORPTION PACE PER PROJECT PER MONTH Class A Projects in Initial Lease-Up | Washington Metro Area P R O J E C T S I N C E M A R K E T I N G B E G A N 20 85 M O N T H LY A B S O R P T I O N PA C E P E R 18 N U M B E R O F P R O J E C T S 75 I N A C T I V E L E A S E U P 16 65 14 12 55 10 45 8 6 35 4 25 2 0 15 9/09 9/10 9/11 9/12 9/13 9/14 9/15 Source: Delta Associates; October 2015.

STABILIZED APARTMENT VACANCY RATES Major Apartment Markets at Third Quarter 2015 7.0% 6.0% Class B Only: 2.8% National Rate 4.2% VA C A N C Y R AT E ( A L L 5.0% Class A Only: 3.6% C L A S S E S ) 4.0% 3.3% 3.0% 2.0% 1.0% 0.0% NY Wash LA Phi Chi Balt Phx DFW Hou Atl Source: REIS, Delta Associates; October 2015 .

ANNUAL EFFECTIVE RENT GROWTH Class A Apartments | Washington Metro Area 10% E F F E C T I V E R E N T G R O W T H Long Term Average Rent Growth = 4.2% 8% Combined Class A & B Rent 6% Growth = 1.0% 3.6% 4% 2% 0.5% 0% -2% -4% 2008 2009 2010 2011 2012 2013 2014 2015* Q2 2015 WA S H I N G T O N M E T R O U . S . Source: Delta Associates; October 2015. *12 months ending September 2015.

EFFECTIVE RENT AND VACANCY RATE Class B Apartments | Washington Metro Area 5.5% $1,700 Average Effective Base Rent 5.0% AV E R A G E E F F E C T I V E B A S E Vacancy $1,600 4.5% $1,500 VA C A N C Y R AT E 4.0% $1,400 R E N T 3.5% $1,300 3.0% $1,200 2.5% $1,100 2.0% 1.5% $1,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Source: Delta Associates; October 2015. * As of Third Quarter.

CLASS A APARTMENT UNIT STARTS Washington Metro Area | 2013 - 2015 7,000 District Sub MD No VA 6,000 N U M B E R O F C L A S S A Class A Projected M A R K E T R AT E U N I T S Quarterly Absorption ~ 2,600 5,000 4,000 3,000 2,000 1,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2015 Source: Delta Associates; October 2015.

PROJECTS CURRENTLY UNDER CONSTRUCTION District of Columbia Projects Under Construction In Lease-up Not Yet Leasing Source: Delta Associates; October 2015.

PROJECTED DELIVERIES 36-Month Development Pipeline | Washington Metro Area | 2015 - 2018 District Sub MD No VA 4,500 Class A Projected 4,000 N U M B E R O F C L A S S A Quarterly Absorption M A R K E T R AT E U N I T S ~ 2,600 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 Source: Delta Associates; October 2015.