CBRE CAPITAL MARKETS

CBRE 2017 MULTIFAMILY CONFERENCEB E Y O N D T H E C Y C L E

J E F F A D L E RVice Pres iden t , Yard i Mat r i x

J E A N E T T E R I C EAmer i cas Head o f Mu l t i f am i l y Research , CBRE

G R E G W I L L E T TChie f Economis t , Rea lPage

INVESTING IN GOOD GROWTH: FINDING DEMAND IN ALL THE RIGHT PLACES

MAJOR U.S. MULTIFAMILY MARKETS – OUR “CURATED” GROUP

• Driven heavily by growing tech, financial services, health care, universities, consumer marketing – Intellectual Capital

• Mostly in “Smile” States, with exception of a few Midwestern Markets

Austin

San Francisco

Orlando

Dallas

Nashville

Denver

Las Vegas

Seattle

Charlotte

Atlanta

PhoenixHouston Portland

San Diego

Miami

New York

Los Angeles

BostonMinneapolisChicago

Washington DC

San Jose

Raleigh

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

21.0% 26.0% 31.0% 36.0% 41.0%

Annu

al J

ob G

row

th R

ate,

201

1-20

16:

Prof

essi

onal

and

Hea

lth S

ervi

ces

Sect

ors

Professional + Health Services Jobs as a % of Total Employment

Professional and Health Services Jobs are Driving Employment Growth (bubble size reflects # of jobs in professional and health services)

EMPLOYMENT GROWTH RATE, 2011-2016

Source: Bureau of Labor Statistics; Moody’s Analytics

U.S. Average= 29.6%

U.S. Average= 2.6%

AustinSan Francisco

Orlando

Dallas

Nashville

DenverLas Vegas Seattle

Charlotte

Atlanta

PhoenixHouston

PortlandSan Diego

Miami

New York

Los Angeles

Boston

Minneapolis

Chicago

Washington DC

San JoseRaleigh

-

50

100

150

200

250

300

350

400

450

500

21.0% 26.0% 31.0% 36.0% 41.0%

Thou

sand

s of

Job

s Ad

ded,

201

1-20

16:

Prof

essi

onal

+ H

ealth

Ser

vice

s Se

ctor

s

Professional + Health Services Jobs as a % of Total Employment

Professional and Health Services Jobs are Driving Employment Growth (bubble size reflects # of jobs in professional and health services)

U.S. Average= 29.6%

EMPLOYMENT GROWTH IN THOUSANDS OF JOBS ADDED, 2011-2016

Source: Bureau of Labor Statistics; Moody’s Analytics

JOB GROWTH IN PROFESSIONAL AND HEALTH SERVICES, 2011-2016

Metro Annual % Job Growth Rate:Professional & Health Services

Thousands of Professional and Health Jobs Added

Professional and Health Jobs as a % of Total Employment 1 Std. Dev. Of % Chg. in Job Growth

Austin 5.7% 70 27% 8%San Jose 5.4 90 37 8Orlando 4.3 68 29 7Raleigh 3.7 50 32 5Charlotte 3.8 54 26 6Phoenix 3.9 111 30 6Denver 4.0 79 29 6Dallas 3.9 181 29 6Las Vegas 5.5 54 23 8San Francisco 3.8 139 33 5Seattle 3.0 75 28 4Nashville 5.2 69 32 8Atlanta 4.2 155 30 6Los Angeles 2.7 232 29 4Portland 3.3 52 28 5Miami 3.6 131 28 5Houston 3.2 126 27 5San Diego 2.8 57 29 4Boston 2.7 130 42 4Washington DC 1.8 103 37 3New York 2.9 452 36 4Chicago 2.2 156 33 3Minneapolis 2.3 71 35 3

Source: Bureau of Labor Statistics (BLS); Moody’s Analytics

RANKING OF EMPLOYMENT GROWTH, 2011-2016Metro Rank: Total % Employment

GrowthThousands of Professional and

Health Jobs AddedGrowth Rank: Professional

& Business ServicesGrowth Rank: Health & Education Services

Austin 1 70 2 3San Jose 2 90 3 4Orlando 3 68 7 7Raleigh 4 50 13 10Charlotte 5 54 5 21Phoenix 6 111 10 9Denver 7 79 15 2Dallas 8 181 6 12Las Vegas 9 54 4 1San Francisco 10 139 8 14Seattle 11 75 14 22Nashville 12 69 1 11Atlanta 13 155 11 5Los Angeles 14 232 19 17Portland 15 52 12 19Miami 16 131 9 18Houston 17 126 17 6San Diego 18 57 21 8Boston 19 130 16 20Washington DC 20 103 23 15New York 21 452 18 13Chicago 22 156 20 23Minneapolis 23 71 22 16

Source: Bureau of Labor Statistics (BLS); Moody’s Analytics

HOMEOWNERSHIP RATES DECLINING

Source: US Census Bureau, Housing Vacancy Surveys

Notes: Beginning in 2000, renter household data are the revised, consistent-vintage counts. 2000-09 counts are 2010 vintage, 2010-15 are 2014 vintage.

>35

35-44

45-54

55-65

65+

0

10

20

30

40

50

60

70

80

90

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Percent U.S. Homeownership Rate by Age Cohort, 1994-2015

Overall >35 35-44 45-54 55-65 65+

60%

62%

64%

66%

68%

70%

72%

74%

30

32

34

36

38

40

42

44

Renter Households

Homeownership Rate

Renter Households (Millions) Homeownership Rate

FORECASTED JOB FORMATION VS. RENTER HH FORMATION

Source: Bureau of Labor Statistics; Moody’s Analytics

Orlando

RaleighAustin

Charlotte Las Vegas

Phoenix

Dallas

Atlanta

Miami

Houston

Nashville

SeattlePortland

Denver

Minneapolis

San Diego

Washington DC

San Francisco

San Jose

Los Angeles

Boston

New York

Chicago

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

0 5,000 10,000 15,000 20,000 25,000 30,000

Aver

age

Annu

al J

ob F

orm

atio

n (2

016-

2026

)Pr

ofes

sion

al +

Hea

lth S

ervi

ces

Sect

ors

Average Annual Renter Household Formations (2016-2026)

SIGNIFICANT VARIATION BY CITY, BUT THE U.S. WON’T EVER LOOK LIKE LA/SF

Metro Homeownership Rate 2006

Homeownership Rate 2016 % Point Drop

Orlando 70.5% 58.4% 12.1%

Miami 69.2% 58.6% 10.6%

Phoenix 71.2% 61.0% 10.2%

Portland 68.3% 58.9% 9.4%

Las Vegas 61.4% 52.1% 9.3%

Denver 70.7% 61.6% 9.1%

San Diego 60.5% 51.8% 8.7%

San Jose 59.2% 50.7% 8.5%

Inland Empire 68.5% 61.1% 7.4%Tampa - St Petersburg 71.7% 64.9% 6.8%

Philadelphia 73.5% 67.0% 6.5%

Metro Homeownership Rate 2006

Homeownership Rate 2016 % Point Drop

Austin 63.9% 57.5% 6.4%

Chicago 70.0% 64.3% 5.7%

Los Angeles 54.6% 49.1% 5.5%

Jacksonville 67.9% 62.5% 5.4%

Baltimore 70.6% 65.3% 5.3%

Seattle 64.5% 59.5% 5.0%

Boston 63.0% 59.3% 3.7%

Sacramento 64.1% 60.8% 3.3%

San Francisco 57.8% 56.3% 1.5%

San Antonio 66.0% 66.0% 0.0%

Bottom is probably ~62%, rising slowing back to ~63%

PROJECTIONS OF NEW HOUSEHOLD FORMATIONS (2016-2026)

Source: CBRE; Moody’s Analytics

Metro Total Renter Households (000s) New Renter Households (000s) Percentage Change Renter Rates2016 2026 Total Avg. Annual Total Increase Avg. Annual 2016

Orlando 381 539 158 15 41% 3.5% 41.5%Raleigh 245 336 91 9.1 37% 3.2% 34.1%Austin 343 458 115 11.5 34% 2.9% 43.5%Charlotte 320 417 97 9.7 30% 2.7% 33.8%Las Vegas 392 509 117 11.7 30% 2.6% 48.7%Phoenix 646 823 177 17.7 27% 2.5% 37.4%Dallas 1,055 1,316 261 26.1 25% 2.2% 40.3%Atlanta 819 1,013 194 19.4 24% 2.1% 38.5%Miami 974 1,204 230 23.0 24% 2.1% 37.4%Houston 983 1,215 232 23.2 24% 2.1% 41.0%Nashville 255 305 50 5.0 20% 1.8% 35.0%Seattle 634 756 122 12.2 19% 1.8% 42.3%Portland 364 434 70 7.0 19% 1.8% 38.2%Denver 430 505 75 7.5 17% 1.6% 38.4%Minneapolis 431 496 65 6.5 15% 1.4% 30.9%San Diego 552 632 80 8.0 14% 1.4% 46.7%Washington 845 958 113 11.3 13% 1.3% 36.9%San Francisco 779 881 102 10.2 13% 1.2% 44.2%San Jose 335 375 40 4.0 12% 1.1% 50.1%Los Angeles 2,389 2,673 284 28.4 12% 1.1% 52.9%Boston 769 847 78 7.8 10% 1.0% 41.1%New York 3,724 4,002 278 27.8 7% 0.7% 49.6%Chicago 1,281 1,366 85 8.5 7% 0.6% 35.5%

PROJECTED MARKET PLACEMENT WITHIN GROWTH CYCLE

SOME MARKETS‘ GROWTH ARE DIMINISHING AS COST/SUPPLY CONSIDERATIONS PUSH GROWTH TO LOWER COST CITIES; SOME LATE STAGE CITIES ARE ACCELERATING, WHILE CERTAIN MARKETS ARE ON A STEADIER GROWTH PATH.

Growth Diminishing Growth Accelerating Growth Steady Larger Markets, Slower % Growth

San Francisco Orlando Dallas New York

Bay Area Raleigh Atlanta Los Angeles

Denver Austin Miami Boston

Charlotte San Diego Chicago

Las Vegas Minneapolis Washington D.C.

Phoenix Houston

Nashville

Seattle

Portland

BOOMER AND MILLENNIAL NET MIGRATION

Source: U.S. Census Bureau (BOC); Internal Revenue Service

Arizona

California

Colorado

Florida

Georgia

Illinois

Maryland

Massachusetts(40% w/ bachelor’s)

Minnesota

Nevada(23% w/ bachelor’s)New Jersey

New York

North Carolina

Oregon

Tennessee

TexasVirginiaWashington

29.0%

29.5%

30.0%

30.5%

31.0%

31.5%

32.0%

32.5%

33.0%

33.5%

34.0%

-2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%

Mille

nnia

l + B

aby

Boom

er %

of T

otal

Po

pula

tion

Annual Net Migration % of Millennial + Baby Boomer Population from 2011-2015

Millennials (age cohort 26-35) & Baby Boomers (ages 56-65) are Driving Net Migration(bubble size reflects % of population with bachelor's degree)

U.S. Average = 32.4%

CLEAR WINNERS/LOSERS FOR KEY IN-MIGRATION GROUPS AMONG STATESSOME MARKETS‘ GROWTH ARE DIMINISHING AS COST/SUPPLY CONSIDERATIONS PUSH GROWTH TO LOWER COST CITIES; SOME LATE STAGE CITIES ARE ACCELERATING, WHILE CERTAIN MARKETS ARE ON A STEADIER GROWTH PATH.

Winners Losers

North Carolina Massachusetts

Georgia New York

Tennessee New Jersey

Florida Maryland

Texas Virginia

Colorado Illinois

Arizona Minnesota

Nevada California

Washington

Oregon

MILLENNIAL GENERATION NET MIGRATION BY STATE

Source: U.S. Census Bureau (BOC); Internal Revenue Service

$-

$10

$20

$30

$40

$50

$60

$70

-1.5%-1.0%-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%

Millennial Population Growth from Net Migration and HH Income by State

Age Cohort 26-35: Avg Annual Pop. Growth, 2011-2015 Avg HH Income in Thsds for Net Migrating HH in Age Cohort

Millennials favor Western states, less so pricey California

Sunbelt states are secondarymigration markets

Millennials are leaving New York, Chicago, and

Boston

BOOMER GENERATION NET MIGRATION BY STATE

Source: U.S. Census Bureau (BOC); Internal Revenue Service

$-

$50

$100

$150

$200

$250

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Baby Boomer Population Growth from Net Migration and HH Income by State

Age Cohort 56-65: Avg Annual Pop. Growth, 2011-2015 Avg HH Income in Thsds for Net Migrating HH in Age Cohort

Migrating Boomers favor Florida and Desert

Secondary retirement destinations in Mid-South and

Pacific Northwest

Substantial migration of affluent Boomers out of Northeast, Midwest, and California

WEALTH ALSO MIGRATING TOWARDS SECONDARY MARKETS

Source: IRS, Tax Foundation

Business friendliness and relative affordability common among growing markets

Retiring Boomers and mobile Millennials highlight population and income shifts

IMMIGRATION IS THE KEY TO GATEWAY CITY GROWTH

Source: U.S. Census Bureau (BOC); Moody’s Analytics

Population Growth, 2011-2016

-5%

0%

5%

10%

15%

Atla

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Aus

tin

Bos

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Cha

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Chi

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Mia

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Yor

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Orla

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Pho

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Por

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Ral

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San

Die

go

San

Fra

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co

San

Jos

e

Sea

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Was

hing

ton

DC

Natural Population Growth Domestic Migration Immigration Total Population Growth

2012-2016 MIGRATION: IMMIGRANTS CHOOSE GATEWAY, DOMESTIC MIGRANTS, SECONDARY

Source: U.S. Census Bureau (BOC); Moody’s Analytics; Yardi Matrix

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%10.0%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Aus

tin

Ral

eigh

Cha

rlotte

Orla

ndo

Nas

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Den

ver

Pho

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Las

Vega

s

Hou

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Dal

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Por

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Atla

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San

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Los

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Yor

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Annual Domestic Migration per Capita Annual International Migration per Capita Annual Rent Growth

Secondary Markets:High Migration, Low Immigration

Gateway Markets:High Immigration, Low/Negative Migration

INTERNATIONAL GATEWAY CITIES ARE MOST EXPOSED TO IMMIGRATION POLICYINTERNATIONAL CITIES’ NET MIGRATION DEFICIT IS ONLY MADE UP BY IMMIGRATION. WITHIN THAT, CERTAIN INDUSTRIES AND CITIES ARE IMPACTED BY SPECIFIC PROGRAMS:H1-B/EB-5• San Francisco• Boston• New York• Washington, D.C.

INDUSTRIES AFFECTED• Tech, Finance• Tech, Healthcare• Finance, Tech• Healthcare, Defense

CERTAIN CITIES, WHILE NOT INTERNATIONAL GATEWAYS, ARE EXPOSED TO A LESSER DEGREE:H1-B/EB-5• Seattle

RESTRICTIVE BORDERS• Miami• Orlando• Los Angeles

INDUSTRIES AFFECTED• Tech

• Hospitality• Hospitality, Construction• Construction

WHAT MIGHT A REVAMPED IMMIGRATION SYSTEM LOOK LIKE?

MERIT BASED IMMIGRATION SIMILAR TO CANADA:

• Foreign nationals may apply for green cards on the basis of educational,

intellectual, personal skills

• Limits “chain migration” of residents bringing family members to U.S.

• Would benefit intellectual capital based markets, and limit unskilled

immigration

BEST POSITIONED MARKETS

• Net domestic in-migration in low tax states with strong Tech/Healthcare/Services sectors

seem best positioned as offensive and defensive plays. Examples:

– Seattle, Austin, Dallas, Atlanta, Raleigh, Nashville, Portland

– Possibility of near term (2-3 year) correction from unrelenting expansion since 2010

• International gateway cities are a bet on NO real change in immigration policy

• Within the markets above, suburban areas with an urban feel, seem best positioned to

take advantage of demographic shifts

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THANK YOU!

CBRE CAPITAL MARKETS

CBRE 2017 MULTIFAMILY CONFERENCEB E Y O N D T H E C Y C L E