We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you!
Presentation is loading. Please wait.
Published byEnrique Callis
Modified over 2 years ago
© JR DeLisle, Ph. D. Economic, Capital and Real Estate Outlook 2010 presented to: IREM 2010 Forecast by: Jim DeLisle, Ph.D. December 4, 2009
© JR DeLisle, Ph. D. Presentation Overview I: Outlook 2010 Prelude II: Economic and Capital Markets III: Real Estate Capital Markets IV: Commercial Real Estate Market Update V: Implications for Seattle Real Estate Market
© JR DeLisle, Ph. D. Who Responded to the Survey? Experience of Respondents What Specializations? JRD Prediction Number with Same Company will decline….. Real Estate Professional Other Same Company Sources: JRDeLisle, IREM Survey Respondents
© JR DeLisle, Ph. D. What Issues Concern You the Most? Real Estate Cycle –When will this all be over? –What challenges/risks do we face? –How act with government wildcard? Mortgages/Debt –What is the solution to the financing/debt problem? –Why won't lenders loosen up? –What's up with lenders? Seattle Real Estate Market –Will meltdown hit Seattle? –Will we see distressed asset sales? –What's the outlook for leasing/sales? –How can we avoid rent decline? Seattle/Regional Destiny –How can we be more business friendly? –How can we lure tenants downtown? –How can we strengthen local economy? –Where will next wave of tenants come from and how get them here? Sources: JRDeLisle, IREM Survey Respondents
© JR DeLisle, Ph. D. Part 1 Prelude: Three Major Attributes of Real Estate Three major attributes of real estate... – L, – L. L L L ulnerable, ulnerable. The 2009 regime of real estate... – D istressed, istressed. Three major attributes of real estate... – L, – L. The regime of real estate... Liability, Litigation, Liquidity (NOT!) L, L, L Butt, what the L?
© JR DeLisle, Ph. D. Commercial Real Estate: How we Got Here Tax Recovery: ACRS Deregulate Fin Inst. Foreign $s Pension $s Tax Reform Record Const. RE Collapse Thrifts Collapse RTC UPREITs CMBS Defensive Capital $s 9/11 Recession ERISA Tax Reform NCREIF Total Return Value Change
© JR DeLisle, Ph. D. What Happened: Commoditization of Pricing Market Risk/Return Long-Term Recent: Risk/Return 5 yrs
© JR DeLisle, Ph. D. The Three Cs of our Disconnect Credit Crisis –Easy Credit –Cheap Credit –Plentiful Credit Crisis of Confidence –Consumer Confidence –Corporate Confidence Crisis of Collateral –Value attributable to delinking spatial market/capital market –Values correction as marked to market –Re-pricing of Risk
© JR DeLisle, Ph. D. How Were Doing: Institutional Real Estate Sources: JRDeLisle, NCREIF, NAREIT The Good News…. Its not as bad as it was REITs Bouncing? Private Equity Public Equity
© JR DeLisle, Ph. D. Part II: A Growing Consensus on Economy Sources: JRDeLisle, IREM Survey Respondents
© JR DeLisle, Ph. D. When National & Seattle Markets Bottom Out? National Seattle Sources: JRDeLisle, IREM Survey Respondents
© JR DeLisle, Ph. D. Breaking News on Real Estate & the Economy
© JR DeLisle, Ph. D. The Good News: Employment Losses Slowing Source: economy.com Net Employment losses Unemployment Jobless Claims Slowing? 10%
© JR DeLisle, Ph. D. Critical Elements to Sustainable Recovery The Future Remains Uncertain Sources: JRDeLisle, IREM Survey Respondents
© JR DeLisle, Ph. D. Business Confidence Source: economy.com U.S. Business Confidence Some improvement…. But, deficit…. 9/12/08 9/12/09
© JR DeLisle, Ph. D. Small business report tighter credit Reactions –Cutting payrolls –Reducing inventory –Reducing capital spending Outlook –No near-term improvement Focus on Small Business Source: economy.com Credit Remains Tight for Business
© JR DeLisle, Ph. D. Housing Activity and Delinquency Rates Construction Housing Index Delinquency & Default Residential Foreclosures
© JR DeLisle, Ph. D. Consumer Confidence, Spending & Credit Consumers Contracting Source: economy.com Consumers are over 70% of GDP…. As of October 2009, recent uptick in retail sales on Year over Year; partly weak 2008… Butt…
© JR DeLisle, Ph. D. Part II Summary: The Economy Macro-economic Environment Economy showing some signs of turning Businesses struggling, credit tight Consumers bearish
© JR DeLisle, Ph. D. Part III: Real Estate & Capital Markets Investment Preferences –Core assets at distressed prices –Major markets, strong assets Timing –Still waiting for bottom –Indecisive; slower to act Transaction Volume Decreased capital flows –Investors still frozen –Debt limited sources & tighter –Access & yield for equity Capital Market Challenges –Refinancing: volume & status –Surge in distressed assets –Mark-to-market risks –Growing pressure to act.. Sources: JRDeLisle, RCAnalytics
© JR DeLisle, Ph. D. Commercial Leverage: Problems & Implications Tightened Credit –Higher DCRs and LVs –Hard valuations, less financial engineering –Recourse debt –Real equity positions Outlook for Commercial Debt –Limited supply; flight to quality –Tighter; increased equity and recourse Refinancing Crisis –No obvious sources of debt –Banks struggling with carry-over problems –No CMBS resurgence Sources: JRDeLisle, RCAnalytics
© JR DeLisle, Ph. D. Current and Future National-Level Cap Rates Sources: JRDeLisle, IREM Survey Respondents
© JR DeLisle, Ph. D. Seattle Cap Rates Sources: JRDeLisle, IREM Survey Respondents
© JR DeLisle, Ph. D. Emergence of Two-Tiered Pricing System Apartments/Unit Suburban Office/SF Core Value-add Core Value-add
© JR DeLisle, Ph. D. Whats Happening on the Distressed RE Front? Source: Real Capital Analytics Status and Location Growth & Build-up
© JR DeLisle, Ph. D. Distressed Asset Spillover: Why it Matters Terminus 200: Cousins Phipps Tower: Crescent/Manulife 3630 Peachtree: Duke/Pope & Land Two Alliance Center: Tishman Bank of America Lead Regions Lead Wells Fargo Lead, Regions Follows Sources: RCA, WSJ 4/21/2009
© JR DeLisle, Ph. D. REITs –Have reversed downward spiral –Significant new capital raised through Sept 2009 –Low Dividends suggest accretive opportunities Global Investors –Western European –Middle East –Asia/Australia Domestic Funds –Significant growth inUS –New Opportunity Funds –New Value-Plus Funds Players in Distressed Asset Market
© JR DeLisle, Ph. D. REITs: Back to the Future? Changing Game? –Through June, raised $12 billion in stock –Who? Office: Boston Properties, Vornado Realty Trust Retail: Regency Centers, Simon Property Group Challenges –Existing Leverage –Eroding Fundamentals –Falling Property Values Accretive? Buy at 8-10, payout 4-6
© JR DeLisle, Ph. D. REIT Stock Prices: Retail and Office
© JR DeLisle, Ph. D. Apartment, Hotel and Diversified REITs
© JR DeLisle, Ph. D. Part III Summary: Real Estate Capital Markets Real Estate Capital Market Still shut down; some activity increasing Rising Cap rates, tighter credit, picky sources Major challenge in de-levering Macro-economic Environment Economy showing some signs of turning Businesses struggling, credit tight Consumers bearish
© JR DeLisle, Ph. D. Commercial Market Fundamentals Downtown Office Suburban Office Industrial Apartments Source: Torto Wheaton Research, REIS, 2009 Emerging Trends Retail Vacancy Rates Office Industrial Retail Apartments Development (msf)
© JR DeLisle, Ph. D. Rising Rents Values Spatial & Capital De-connect and Re-connect Warranted Construction: Expanding Demand Capital Market Bubble Market Inefficiency Spatial Market Capital Market Cap Rate Rise Interest Rates/Debt Rise Vacancy Up Rents Down BV (Bubble Value) Debt -20%+/- Bubble Cap R -20%+/- Bubble Market %+/- Softening %
© JR DeLisle, Ph. D. NCREIF Property Type Returns 200 bp Gap Total Return 38% Loss Income Return (Cap Rate) Cap Rate: Long Term
© JR DeLisle, Ph. D. Part IV Summary: The Spatial Markets Spatial Market Fundamentals continue to erode lagging economy Vacancy rates rising, rents falling Stagnant demand, leasing sluggish Real Estate Capital Market Still shut down; some activity increasing Rising Cap rates, tighter credit, picky sources Major challenge in de-levering Macro-economic Environment Economy showing some signs of turning Businesses struggling, credit tight Consumers bearish
© JR DeLisle, Ph. D. Part V: Bringing it Home to Seattle Seattle vs. National Total Returns Seattle Returns by Property Type Distressed in Seattle Distressed P-Type Share vs. US
© JR DeLisle, Ph. D. Seattle Transactions and Cap Rates vs. National? Not as different as we thought Seattle Transaction Volume: 2009 Seattle Cap vs. National by Property Type
© JR DeLisle, Ph. D. Current and Future Seattle-Area Cap Rates Sources: JRDeLisle, IREM Survey Respondents
© JR DeLisle, Ph. D. Additional Insights on Seattle Market Sources: JRDeLisle, IREM Survey Respondents
© JR DeLisle, Ph. D. Seattle Market Risks: Significant/Not Sources: JRDeLisle, IREM Survey Respondents
© JR DeLisle, Ph. D. Part V. Real Opportunities in Seattle RE Sources: JRDeLisle, IREM Survey Respondents
© JR DeLisle, Ph. D. Players –Emergence of new players will create further problems –Many naïve buyers will clog up the system –Intermediaries will raise capital but struggle to deploy –Infrastructure not in place to deal with sheer volume of deals New Funds –Expect a spate of new funds, some with experience others not –Closed-end fund structures will be popular –Off-shore investors will be a major target for money managers Products –A spate of new products will be introduced to lay off risk –New Partnership arrangements will match expertise with capital Other Challenges: Players and Products
© JR DeLisle, Ph. D. So, To Walk, To Talk, To Walk the Talk???That is the question…. –There is no one answer…. –Critical thinking and survival instincts will rule… –If not, theres always school…. Back to the Future….. Conclusion: What to do? Back to School?
© JR DeLisle, Ph. D. Real Estate Outlook 2010: No Bottom, No Net presented to: Seattle Chapter of the Appraisal Institute Fall Conference by: Jim DeLisle,
© JR DeLisle, Ph. D. Lecture 4 (a): Reflecting on the Future for Real Estate: Leaner, Meaner, Cleaner and Greener by James R. DeLisle, Ph.D.
Capital Markets Update Rob Stiles EVP & Principal Head of Western Region Cushman & Wakefield Sonnenblick Goldman.
36 Offices in 17 Countries Beyond the Media Stories: What’s Happening in the USA? John Thomas Global Real Estate Practice Group Leader.
June 1, 2010 Commercial Real Estate Fundamentals.
Saudi Arabia Business Optimism Index – Q Presented by Dun & Bradstreet National Commercial Bank.
1 Overview of the US Commercial Real Estate Investment Market January 20, 2009.
Devon W. Olson, CRE, MAI Director – Real Estate Utah Retirement Systems.
1 DOMESTIC ECONOMIC CONDITIONS Jeff Fuhrer Director of Research Federal Reserve Bank of Boston Equipment Leasing and Finance Association Credit and Collections.
The Economy 2010 and How We Got Here Steven L. Cobb, Ph.D. UNT Center for Economic Education.
An overview of prepared for A D V I S O R Y G R O U P World Services Group, Inc. May, 2004 U.S. Economy & Commercial Real Estate Investment Market.
Economic and Real Estate Outlook By Lawrence Yun, Ph.D. Chief Economist National Association of REALTORS®
1 Colgate Real Estate Workshop Matt Lougee ‘07 Director of Finance Developers Diversified Realty September 25-26, 2009.
Mercer Limited is authorised and regulated by the Financial Services Authority Registered in England No Registered Office: 1 Tower Place West,
Update on Real Estate Capital Markets-- Where is the Equity Investment Market Today? CREW Network: Investing in Your Professional Development Presenter.
© 2008 Northern Trust Corporation northerntrust.com The Northern Trust Experience A C C E S S. E X P E R T I S E. S E R V I C E. Paul L. Kasriel Director.
$2 000 billion: the total value of the real estate assets that should be disposed of by 58 European banks within 2 years, according to the IMF. EMBA.
1 CHAPTER 7 LECTURE BACKGROUND... © 2014 OnCourse Learning. All Rights Reserved.
MODULE 9 INTRODUCTION TO REAL ESTATE FINANCE Fundamentals of Real Estate Finance w Financing Decisions Balancing Risks and Rewards w Risk Analysis Inflation.
Economic Outlook in Uncertain Times Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS® Presentation to IREM Chapter 77 In Reston, VA.
The Global Financial Crisis, in Brief.. The root cause was runaway borrowing and debt based on the inflated value of “assets” Plus the lending of.
Global economic forecast November 1st The housing market has stabilised recently but a sustained recovery is unlikely until 2011 Factors putting.
Veritas Financial Group Introduction to the Financial Universe Week 6 – Real Estate.
The Real Estate Roundtable Washington, DC How FIRPTA Reform Can Fill Commercial Real Estate’s Equity Gap and Help Stabilize the Market.
Financial Crisis Student Name Student ID Fong Kwok Ki Cheng Tsz Hong
Real Estate Development Industry Senior Analyst: Chris Woo Junior Analysts: Nakul Pandav, Joseph Padellaro, Steve Xiarhos, Eric Des Lauriers.
The Economic Outlook: Recession and Opportunities By Dean Baker Co-Director of the Center for Economic and Policy Research (CEPR)
The role of the land market to provide financial stability in the EU markets Professor Elias Dinenis Neapolis University Pafos.
2 February What is a REIT What is a REIT REIT Industry REIT Industry HRPT Properties Trust HRPT Properties Trust Economic Environment Economic Environment.
Brokerage Challenges…Regional Expertise Sixth Annual Palestine Capital Markets Forum Palestine – December 11, 2012 Waleed Al-Nassan.
Artis Real Estate Investment Trust AX.UN By the Real Estate and Health Analyst Team.
1 The Credit Crisis in Commercial Real Estate. 2 Commercial real estate accounts for a meaningful 6% of GDP Commercial real estate entered the recession.
The Economy and External Environment 10th Annual Georgia Idea Institute August 19, 2015 Bill Hampel, Chief Policy Officer Credit Union National Association.
Uncertainty and Volatility in Global and Domestic Markets Robert B. Engel President & Chief Executive Officer December 6, 2010.
Economic Outlook William Strauss Senior Economist and Economic Advisor Federal Reserve Bank of Chicago Multi-Chamber Economic Outlook Luncheon Downers.
Economic and Commercial Real Estate Outlook By Lawrence Yun, Ph.D. Chief Economist National Association of REALTORS ® May 14, 2015 Washington, D.C.
The Great Recession Causes & Prospects. What is the “Great Recession?” Decline of speculative markets in 2007 Bursting of the real estate bubble Decline.
Copyright © 2007 Global Insight, Inc. The U.S. Economic Outlook: How Much Fallout from The Housing Meltdown? Nariman Behravesh Chief Economist NAHB April.
Economic & Investment Update GK Wealth Management Limited Jim Power Chief Economist, Friends First April 30th 2008.
Business Optimism Index Kuwait Q Presented by Dun & Bradstreet South Asia Middle East Ltd (D&B) Muthanna Investment Company (MIC)
1 Update on the Hong Kong Economy for The Task Force on Economic Challenges Government Economist 8 December 2008.
Economic Background: Short Term and Long Term Issues January 29, 2009 Russell Fehr City Treasurer.
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Economic outlook 2011–2013 Euro & talous (Bank of Finland Bulletin) 5/2011 Governor Erkki Liikanen
The Polish economy in 2002 Frigyes Ferdinand Heinz Research Office (London) Bank of Tokyo-Mitsubishi Ltd.
U.S. Property Market Update Mary Ludgin, PhD, Heitman Research September, 2007 There is a difference.
Local Capital Markets Emerging Market Investment Opportunities Executive Summary Local Capital Markets Emerging Market Investment Opportunities Executive.
1 Regional Economic Outlook Middle East, North Africa, Afghanistan, and Pakistan Masood Ahmed Director, Middle East and Central Asia Department International.
The New Economic Landscape William Strauss Senior Economist and Economic Advisor Federal Reserve Bank of Chicago The Progressive Manufacturing Summit 2009.
The Global Economy and Real Estate Markets Asieh Mansour, PhD Head of Americas Research January 2013.
© 2017 SlidePlayer.com Inc. All rights reserved.