Welcome Columbus Investor Forum May 12, 2016
Columbus Investor Forum Market of Focus: Columbus, Ohio Presented by: Doug Wilson SVN, Managing Director, Columbus Tim Treasure SVN, Managing Broker “Maximum Competition = Maximum Value”
Columbus Investor Forum Sponsors: Anne Treasure, JD/CPA Tim Norris, Sr. Vice President Jennifer Alvarez, CEO “Maximum Competition = Maximum Value”
What to expect… • Commercial Real Estate Market Overview • What is the “SVN Difference” • Expansion of Columbus SVN • Presentation of Forum Sponsors: – Tim Norris, Columbus First Bank – Ann Treasure, Whalen and Co. CPA’s – Jim Havens, Cardinal Title
US Commercial Real Estate Capital Markets Update April 5, 2016 Robert M. White Jr., CRE, FRICS
US 2015 – ANOTHER STRONG YEAR US Quarterly Volume & Pricing Individual Portfolio Entity CRE Prices* $180 225 Billions $160 200 $140 175 $120 150 $100 125 $80 100 $60 75 $40 50 $20 25 $0 0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 *Moody’s/RCA CPPI, national aggregate, December 2000 = 100
RECENT TRENDS SLOWING Year-Over-Year Change Commercial Property Prices in Monthly Volume (Moody’s/RCA CPPI National Aggregate) (excluding portfolios) 100% 220 210 80% 200 60% 190 40% 180 20% 170 0% 160 -20% 150 -40% 140 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 '14 '15 '16 '14 '15 '16
MORTGAGE RATES RISING
CRE CAPITAL MOUNTING Dry Powder in Real Estate Funds $252 $199 $186 $180 $171 $167 $167 $156 $148 Dec '07 Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Dec '15 Source: Preqin
BROAD BASE OF EQUITY CAPITAL
RECORD CROSS-BORDER INFLOWS TO US US Direct Acquisitions by Foreign Buyers Canada Europe Middle East Asia Australia Latin America billions $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
SHIFTING SOURCES OF DEBT CAPITAL
DEBT AND EQUITY TRENDS STILL FAVOR MAJOR METROS
HEADWIND: MORE CAPITAL FLOWING TO DEVELOPMENT HOWEVER NEW FED SCRUTINY AND REGS ON CONSTRUCTION LOANS SHOULD KEEP BANKS DISCIPLINED… Dollars Invested in Construction
HEADWIND: RISING INTEREST RATES? OFFICE, INDUSTRIAL, RETAIL PROPERTIES 10yr UST* Mortgage Rate Cap Rate 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
WHAT’S NEXT: FROM GREAT TO GOOD Moody’s Analytics PREA CONCENSUS
MACRO: GDP, Jobs & Money • US GDP IS 70% CONSUMER DEMAND • 2015 GDP growth @ 2 - 3% • 2016 GDP Growth, likely in same range as 2015. • Political uncertainties = repeat of 2015: budget extensions, high deficits • Jobs @ 200K/month • Consumer debt is declining • Consumers still spending • Corporate profits: softening • Investment markets still flooded with capital • Expect little inflation + only modest interest rate change
Real Estate National Outlook • $200 billion, annualized in transactions in 2015 – (up 15% over 2014), no decline anticipated – 2016, slight decline in the 1 st quarter • Job growth slowly impacting office absorption • Apartments: “the new” demographic – Substantial room for additional construction • Retail property sales will ease into single digits cap rates and construction still slow. • Real estate remain asset class of choice for at least next decade • Increased institutional investment in secondary & tertiary markets • Cap rate compression makes asset & property management critical • Low interest rates the new normal in the near future
APARTMENT OVERVIEW: • Strong Demand vs. Bubble Market? • Growth of Households still outpacing new construction • Fundamentals Still Strengthening: – Vacancy 4%, Rent Growth 3.5% – Population Growth: 22,000/yr in the Columbus MSA – Millennial Population exceeds Baby Boomer Population – New Construction mostly single bedroom – Only entry level housing boom slows apartments • Large quantities of affordable capital driving investment market • Columbus Pricing is VERY attractive compared to US average. • Columbus apartments are on the radar of National Investors
Columbus Apartments – Number of Sales Transactions 70 60 50 40 30 20 Source: Xceligent 10 0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2012 2013 2014 2015 2016
Columbus Apartments – Sales Volume $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 Source: Xceligent $100,000,000 $0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2012 2013 2014 2015 2016
Columbus Apartments – Average Price Per Unit $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 Source: Xceligent $0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2012 2013 2014 2015 2016
Columbus Apartments Cap Rates Apartments - Secondary Apartments - Teritary 12.00% 10.00% 8.00% 6.00% 4.00% Source: Xceligent 2.00% 0.00% 2012 2013 2014 2015 2016
Completed Projects Under Construction Planned/Proposed Columbus Submarkets 1 University/Downtown 2 Bexley 3 Sharon/Worthington 4 Dublin/Powell 5 Hilliard 6 Grove City 7 Whitehall/Gahanna/Reynoldsburg 8 Northeast/Minerva Park 9 Westerville 10 Southeast 11 Groveport/Canal Winchester 12 Upper Arlington/North Columbus
RETAIL OVERVIEW: • Construction Levels Slowly Improving – Still Strong By Local Standards • Selective Big Box and Existing Renovations Show most Strength. • Vacancy Improving, in all Sub Markets • Cap Rates Falling: Dearth of New Construction combined with Job Growth • Local Market is Strong Fundamentally.
Columbus Retail Number of Sales Transactions 120 100 80 60 40 Source: Xceligent 20 0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2012 2013 2014 2015 2016
Columbus Retail Sales Volume $180,000,000 $160,000,000 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 Source: Xceligent $20,000,000 $0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2012 2013 2014 2015 2016
Columbus Retail Cap Rates 10.00% 9.50% 9.00% 8.50% 8.00% Source: Xceligent 7.50% 7.00% 2012 2013 2014 2015 2016
OFFICE OVERVIEW: • Fundamentals Improving, Finally • Vacancy Beginning to Wane, especially CBD • Transactions Increasing, Especially CBD: – Mixed Use, 250 S. High St. • Cap Rates and Prices Locally Very Intriguing • Institutional Buyers Active in Columbus “hyper markets” Now – Grandview Yard – Easton – Polaris
Columbus Office Number of Sales Transactions 80 70 60 50 40 30 20 Source: Xceligent 10 0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2012 2013 2014 2015 2016
Columbus Office Sales Volume $200,000,000 $180,000,000 $160,000,000 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 Source: Xceligent $20,000,000 $0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2012 2013 2014 2015 2016
Columbus Office Cap Rates 11.00% 10.50% 10.00% 9.50% 9.00% Source: Xceligent 8.50% 8.00% 2012 2013 2014 2015 2016
INDUSTRIAL OVERVIEW: • Locally Diminished Speculative Development Aiding Absorption • Developers Have Looked at Improvements as an Opportunity to Expand • Growth Sluggish and Expansion in Manufacturing, Nationally • Columbus Warehouse Space Leading Improvement • Vacancy Improving Locally • CAP Rate reflects compression pricing from low vacancy and slow construction
Columbus Industrial Number of Sales Transactions 80 70 60 50 40 30 20 Source: Xceligent 10 0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2012 2013 2014 2015 2016
Columbus Industrial Sales Volume $400,000,000 $350,000,000 $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 Source: Xceligent $50,000,000 $0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2012 2013 2014 2015 2016
Columbus Industrial Cap Rates 12.00% 10.00% 8.00% 6.00% 4.00% Source: Xceligent 2.00% 0.00% 2012 2013 2014 2015 2016
So What?. . . 2016 and you… • Cap Rate Compression: − Less with Multifamily, but more compression otherwise − But with high BPS spreads vs. T- Bills… • Affordable capital still available… • Record number of investors… • Low capital gain rate unchanged for <$450k Income, 15% • Vacancy % moving in right direction… • Supply and demand always in play… • Lack of alternative asset investments…
The bottom line… • Buy product you understand • Buy in a market you understand • Tolerate RISK on your terms • Don’t buy and sell the same way • Sell to outside “capital” • Do not try to “finitely” time the market • Diversify
2016 Business Trends How we usespace. How we build space. How we re-use space. How we move products between spaces.
Employee experience Offices designedfor: Concentration Collaboration Socialization Education Less about the desk.
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