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Connecticut Multi Family Market Trends 2010 Connecticut Commercial Real Estate Conference Presented by: Steve Witten
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Presented In February:
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Monthly Employment Note: Technical recession defined as two consecutive quarters of GDP contraction. Sources: Marcus & Millichap Research Services, BLS, Economy.com Gross Domestic Product Jobs in Thousands Economy Gaining Traction; Risk Levels Remain Elevated Annualized Growth Jan-06Jan-07 2005: 3.1% 2006: 2.7% 2007: 2.1% 2008: 0.4% 2009: -2.4% * GDP through 2Q 2010, Employment through September Jan-08 Jan-10 2010*: 2.7% Jan-09
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Corporate Investment Stalled Despite Healthy Balance Sheets, Unemployment Rising * Through September Sources: Marcus & Millichap Research Services, BLS, Federal Reserve Rate
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Total Nonfarm Employment Change New Haven-Fairfield County vs. United States Sources: Marcus & Millichap Research Services, Economy.com * Forecast Year-over-Year Change NH-FC: 4,600 U.S.:1,000,000 2010* Job Growth
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Monthly Change (thousands) *Through August Sources: Marcus & Millichap Research Services, BLS, Economy.com Total Employment New Haven-Fairfield County
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New Haven-Fairfield County Sector Employment Year-over-Year Absolute Growth Sources: Marcus & Millichap Research Services, BLS, Economy.com Thousands
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Unemployment Rate New Haven-Fairfield County vs. United States * Forecast Sources: Marcus & Millichap Research Services, BLS, Economy.com Unemployment Rate
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Job Growth is Critical to Renter Household Formation and Apartment Occupancies Apartment Vacancy Rate * Preliminary Estimate Sources: Marcus & Millichap Research Services, BLS, Reis Unemployment Rate
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Shadow Market a Significant Factor in Rising Vacancies – More in Select Metros Total Vacant Units (in 000s) 1-Unit Structure as % of Total Sources: Marcus & Millichap Research Services, U.S. Census Bureau
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CAPITAL MARKETS OVERVIEW and OUTLOOK
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Commercial Mortgage Delinquency Rates by Lender Type Delinquency Rates Delinquency rates at the end of each period Sources: Marcus & Millichap Research Services, Mortgage Bankers Association CMBS Banks
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Total Multifamily Mortgage Debt Outstanding: $911.7 billion Sources: Marcus & Millichap Research Services, MBA By Lender Types ($Bil): GSEs and Ginnie Mae $359.6 Commercial Banks $216.8 CMBS, CDO, and Other ABS $110.3 State & Local Governments $66.1 Savings Institutions $64.0 Life Insurance Companies $50.4 Other $44.4
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Total CMBS Outstanding: $751.7 billion Sources: Marcus & Millichap Research Services, MBA By Property Types ($Bil.): Office $233.8 Retail $224.0 Multifamily $114.3 Hotel $70.7 Industrial $38.3 Self-Storage $13.5 Healthcare $4.5 Other $52.6
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Estimated Multifamily Debt Maturities by Lender Type Billions $ Sources: Marcus & Millichap Research Services, Foresight Analytics
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Total Multifamily Debt Maturities by Vintage Maturing Balance (Billions $) Sources: Marcus & Millichap Research Services, Foresight Analytics
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* Forecast Sources: Marcus & Millichap Research Services, U.S. Census Bureau Change in Population Renter Demographics New Haven-Fairfield County
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New Housing Permits New Haven-Fairfield County New Housing Permits * Forecast Sources: Marcus & Millichap Research Services, Economy.com
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Supply and Demand Apartment United StatesNew Haven-Fairfield County * Forecast Sources: Marcus & Millichap Research Services, Reis Units (000s) Vacancy Rate Units (000s) Vacancy Rate
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Apartment Metro Vacancy Ranking 2Q 2010 Top 15 Markets 2Q 2010 Vacancy Y-O-Y Bps Change Denver6.1% (290) Austin9.6% (90) San Jose4.2% (80) Tucson11.8% (80) Jacksonville13.2% (60) Fort Lauderdale7.6% (50) New Haven-Fairfield County4.3% (50) Portland5.8% (40) Boston6.2% (30) Louisville6.7% (20) New York3.0% (20) Oakland-East Bay5.5% (20) Phoenix11.5% (20) Sacramento7.1% (10) Washington, D.C.6.3% (10) U.S. Average7.8%10 Bottom 15 Markets 2Q 2010 Vacancy Y-O-Y Bps Change Detroit7.9% 30 Minneapolis5.1% 40 Charlotte10.5% 40 Cincinnati7.7% 40 Palm Beach8.6% 40 Tampa-St. Petersburg9.8% 40 Dallas-Ft. Worth8.9% 50 Orlando11.0% 50 Oklahoma City10.2% 60 Kansas City9.4% 80 Houston12.4% 90 Las Vegas11.1% 100 Indianapolis9.6% 110 Salt Lake City7.1% 120 Columbus9.7% 170 U.S. Average7.8%10 Sources: Marcus & Millichap Research Services, Reis
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Apartment Vacancy by Class New Haven-Fairfield County Average Vacancy Rate * Through 2Q Sources: Marcus & Millichap Research Services, Reis
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Apartment Vacancy Ranking by Submarket New Haven-Fairfield County Submarkets 2Q 2009 2Q 2010 Bps Change New Haven Harborside3.2%3.1%-10 Naugatuck/Waterbury3.8%3.6%-20 West Fairfield County5.0%4.5%-50 East Fairfield County6.6%5.8%-80 North Haven/Wallingford/Meriden3.3%2.4%-90 Metro Average6.1%6.0%-10 Sources: Marcus & Millichap Research Services, Reis
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Apartment Asking Rent Trends New Haven-Fairfield County * Forecast Sources: Marcus & Millichap Research Services, Reis Asking Rent Annual Change $1,544 $1,036 2% to 3% annual growth
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Apartment Metro Effective Rent Growth Ranking 2Q 2010 Top 15 Markets 2Q 2010 Eff. Rent Y-O-Y % Change San Diego $1,2561.3% San Antonio $6480.8% New Haven-FF County $1,4650.3% Fort Lauderdale $9950.1% Seattle-Tacoma $9090.0% Tucson $596-0.2% Washington, D.C. $1,272-0.2% Salt Lake City $682-0.3% Oklahoma City $514-0.4% St. Louis $662-0.5% Chicago $964-0.5% Atlanta $736-0.5% Cleveland $685-0.6% Austin $765-0.6% Philadelphia $957-0.8% U.S. Average$946-1.4% Bottom 15 Markets 2Q 2010 Eff. Rent Y-O-Y % Change Palm Beach $993-2.2% Dallas-Ft. Worth $690-2.3% Phoenix $678-2.3% Milwaukee $772-2.4% Los Angeles $1,311-2.5% San Francisco $1,673-2.5% Indianapolis $613-2.5% Houston $688-2.7% Oakland-East Bay $1,190-3.0% Sacramento $828-3.0% Orange County $1,401-3.3% Tampa-St. Petersburg $751-3.5% San Jose $1,317-3.8% Orlando $767-4.1% Las Vegas $755-4.4% U.S. Average$946-1.4% Sources: Marcus & Millichap Research Services, Reis
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Investment Trends Apartment United StatesNew Haven-Fairfield County Median Price per Unit (000s) Average Cap Rate Median Price per Unit (000s) Average Cap Rate * Through 1H 2010 Sales $500,000 and greater Sources: Marcus & Millichap Research Services, Reis
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Total Transactions (000s) Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics Total Dollar Volume (Bil.) Total Dollar VolumeTotal Transactions Apartment Sales Trends New Haven-Fairfield County
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U.S. Apartment Buyer Composition Sales $5 Million and greater Sources: Marcus & Millichap Research Services, Real Capital Analytics * YTD through September Percent of Sales Volume
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* Estimate Includes sales $1Million and Greater Sources: Marcus & Millichap Research Services, Costar Group, Inc. National Apartment Price and Cap Rates Average Price per Unit (000s) Average Cap Rate
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24 – Month Cap Rate Adjustment Matrix * Primary Secondary Tertiary Class AClass BClass C 1.001.251.75 1.25 1.752.25 2.75 2.00 * Change in cap rates last 24 months
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24 – Month Pricing Adjustment Matrix Primary Secondary Tertiary Class AClass BClass C -20% -23%-32% -24% -30%-36% -33% -35%-41% * Change in property value last 24 months
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Why the Long-Term Outlook for U.S. Apartments is Extremely Favorable U.S. will experience a fundamental change in housing dynamics favoring the density, efficiency, flexibility and affordability of apartment living: 1.Population growth 2.Changing demographics 3.Environmental concerns 4.Budget / expense factors 5.Sharp decrease in new supply 6.Affordability 7.Rent vs. own
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Population Dynamics U.S. population is expected to increase 33% by 2030 to 376 million. To accommodate this growth, the nation needs 60 million new housing units. Millions 94 Million
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Demographic Dynamics Married couples with children are projected to decline to under 1 in 5 households by 2025 Singles and un-related individuals living together will comprise 1 in 3 households by 2020 78 million echo boomers are getting ready to enter their prime renting years 10 million legal immigrants will enter the country in next ten years
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7.4 Million Net New Households 3.2 Million New Renter Households 4.1 Million New Owner Households * Forecast Sources: Marcus & Millichap Research Services, Economy.com, Harvard University U.S. Household Growth Projection 2010 - 2015*
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Budget / Fiscal Dynamics Urban / suburban sprawl is expensive Compact development reduces infrastructure costs and saves money The U.S. can save over $100 billion in infrastructure costs over 25 years by growing compactly
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State of Connecticut Apartment Sales 2000 - 2010 2010 (as of 10/1): 1,131 units traded for $94,399,000 2009: 2,251 units traded for $188,532,880 2008: 5,532 units traded for $758,785,000 2007: 6,247 units traded for $891,958,998
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2010 Connecticut Commercial Real Estate Conference Steve Witten, Senior Director 265 Church Street, Suite 210 New Haven, CT 06510 203.672.3320 Steve.witten@marcusmillichap.com
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