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Connecticut Multi Family Market Trends 2010 Connecticut Commercial Real Estate Conference Presented by: Steve Witten.

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Presentation on theme: "Connecticut Multi Family Market Trends 2010 Connecticut Commercial Real Estate Conference Presented by: Steve Witten."— Presentation transcript:

1 Connecticut Multi Family Market Trends 2010 Connecticut Commercial Real Estate Conference Presented by: Steve Witten

2 Presented In February:

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4 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 : 3.1% 2006: 2.7% 2007: 2.1% 2008: 0.4% 2009: -2.4% * GDP through 2Q 2010, Employment through September Jan-08 Jan *: 2.7% Jan-09

5 Corporate Investment Stalled Despite Healthy Balance Sheets, Unemployment Rising * Through September Sources: Marcus & Millichap Research Services, BLS, Federal Reserve Rate

6 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, * Job Growth

7 Monthly Change (thousands) *Through August Sources: Marcus & Millichap Research Services, BLS, Economy.com Total Employment New Haven-Fairfield County

8 New Haven-Fairfield County Sector Employment Year-over-Year Absolute Growth Sources: Marcus & Millichap Research Services, BLS, Economy.com Thousands

9 Unemployment Rate New Haven-Fairfield County vs. United States * Forecast Sources: Marcus & Millichap Research Services, BLS, Economy.com Unemployment Rate

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14 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

15 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

16 CAPITAL MARKETS OVERVIEW and OUTLOOK

17 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

18 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

19 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

20 Estimated Multifamily Debt Maturities by Lender Type Billions $ Sources: Marcus & Millichap Research Services, Foresight Analytics

21 Total Multifamily Debt Maturities by Vintage Maturing Balance (Billions $) Sources: Marcus & Millichap Research Services, Foresight Analytics

22 * Forecast Sources: Marcus & Millichap Research Services, U.S. Census Bureau Change in Population Renter Demographics New Haven-Fairfield County

23 New Housing Permits New Haven-Fairfield County New Housing Permits * Forecast Sources: Marcus & Millichap Research Services, Economy.com

24 Supply and Demand Apartment United StatesNew Haven-Fairfield County * Forecast Sources: Marcus & Millichap Research Services, Reis Units (000s) Vacancy Rate Units (000s) Vacancy Rate

25 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

26 Apartment Vacancy by Class New Haven-Fairfield County Average Vacancy Rate * Through 2Q Sources: Marcus & Millichap Research Services, Reis

27 Apartment Vacancy Ranking by Submarket New Haven-Fairfield County Submarkets 2Q Q 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

28 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

29 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 $ % Washington, D.C. $1, % Salt Lake City $ % Oklahoma City $ % St. Louis $ % Chicago $ % Atlanta $ % Cleveland $ % Austin $ % Philadelphia $ % U.S. Average$ % Bottom 15 Markets 2Q 2010 Eff. Rent Y-O-Y % Change Palm Beach $ % Dallas-Ft. Worth $ % Phoenix $ % Milwaukee $ % Los Angeles $1, % San Francisco $1, % Indianapolis $ % Houston $ % Oakland-East Bay $1, % Sacramento $ % Orange County $1, % Tampa-St. Petersburg $ % San Jose $1, % Orlando $ % Las Vegas $ % U.S. Average$ % Sources: Marcus & Millichap Research Services, Reis

30 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

31 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

32 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

33 * 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

34 24 – Month Cap Rate Adjustment Matrix * Primary Secondary Tertiary Class AClass BClass C * Change in cap rates last 24 months

35 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

36 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

37 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

38 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 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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42 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 *

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47 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

48 State of Connecticut Apartment Sales (as of 10/1): 1,131 units traded for $94,399, : 2,251 units traded for $188,532, : 5,532 units traded for $758,785, : 6,247 units traded for $891,958,998

49 2010 Connecticut Commercial Real Estate Conference Steve Witten, Senior Director 265 Church Street, Suite 210 New Haven, CT


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