CHINA OVERSEAS REAL ESTATE SUMMIT · exist: negative net absorption, flat or increasing vacancy rate, sluggish leasing activity, flat or declining rents, rent concessions or an imbalance

CHINA OVERSEAS REAL ESTATE SUMMIT U.S. Commercial Real Estate Overview

July 2, 2014

2 CBRE | CHINA OVERSEAS REAL ESTATE SUMMIT

U.S. INVESTMENT SALES BENCHMARKS

Source: CBRE Econometric Advisors, Q1 2014

APARTMENT HOTEL INDUSTRIAL OFFICE RETAIL TOTAL %CHANGE

2003 $31.9 $1.7 $15.1 $49.8 $32.6 $131.2 n/a

2004 $52.5 $14.6 $22.3 $77.6 $48.1 $215.1 64.0%

2005 $94.2 $30.1 $42.1 $107.6 $57.7 $331.6 54.2%

2006 $95.2 $34.9 $46.9 $131.9 $55.3 $364.2 9.8%

2007 $83.2 $36.8 $54.6 $163.4 $60.8 $398.9 9.5%

2008 $41.6 $13.1 $26.0 $58.3 $25.6 $164.7 -58.7%

2009 $17.7 $4.0 $9.9 $18.7 $16.3 $66.7 -59.5%

2010 $39.5 $11.4 $19.6 $52.8 $24.8 $148.0 121.8%

2011 $59.8 $22.6 $27.4 $79.6 $40.8 $230.1 55.4%

2012 $80.2 $19.5 $37.7 $85.9 $62.2 $285.4 24.0%

2013 $101.2 $28.1 $40.3 $111.7 $64.0 $345.3 21.0%

2014 $15.3 $5.1 $7.1 $20.7 $13.2 $61.5 -82.2%


INVESTMENT VOLUME REMAINS HEALTHY

-

4

8

12

16

20

24

28

32

36

40

Q1

20

08

Q3

20

08

Q1 2

009

Q3

20

09

Q1

20

10

Q3

20

10

Q1

20

11

Q3

20

11

Q1

20

12

Q3

20

12

Q1

20

13

Q3

20

13

Q1

20

14

Suburban Volume (L) CBD Volume (L)

Sum of Markets Volume in $ Billions

Year-on-Year Volume Still Up

Sources: Real Capital Analytics, Federal Reserve, CBRE Econometric Advisors.


Office CBD – Key Ratios

CAP RATE SURVEY: SECOND HALF 2013

© Copyright 2014 CBRE Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or

representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved

and cannot be reproduced without prior written permission of the CBRE Global Chief Economist.


Office Suburban – Key Ratios

CAP RATE SURVEY: SECOND HALF 2013

© Copyright 2014 CBRE Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or

representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved

and cannot be reproduced without prior written permission of the CBRE Global Chief Economist.


Improving U.S. Economy Will Pace Demand Improvements

U.S. OFFICE MARKET POISED FOR CONTINUED IMPROVEMENTS

Source: CBRE EA, Office Outlook, Q1 2014.

0

4

8

12

16

20

-100

-50

0

50

100

150

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Va

ca

ncy,

%

Co

mp

letio

ns a

nd

Ne

t A

bso

rptio

n, M

SF

Completions (L) Net Absorption (L) Vacancy Rate (R)

Forecast


Downward Trend in Vacancies Continues

IMPROVEMENTS SLOW IN Q1, BUT OFFICE MARKETS MOVING IN THE RIGHT DIRECTION

Basis Points Change in Vacancy for 20 Largest Markets

-250

-200

-150

-100

-50

0

50

100

Ba

ltim

ore

De

nve

r

Ph

oen

ix

Ch

ica

go

Pitts

bu

rgh

Ne

w Y

ork

De

tro

it

Se

attle

Atlanta

Ho

usto

n

Lo

s A

ng

ele

s

Sa

n F

ran

cis

co

Da

llas

Min

neapolis

Sa

n D

ieg

o

Bo

sto

n

Wa

sh

ing

ton

, D

C

Oa

kla

nd

Ora

nge C

ounty

Ph

ilad

elp

hia

Q-o-Q Y-o-Y

Source: CBRE EA Office Outlook, Q1 2014.


Office Demand Following Jobs

OFFICE EMPLOYMENT GROWTH HEALTHY

Office-Using Employment and Net Absorption, 2-Year Average Annual Historical % Change

0 1 2 3 4 5 6 7

Louisville

Tampa

Las Vegas

Orange County

Oakland

Denver

Miami

Sacramento

San Antonio

Phoenix

West Palm Beach

Salt Lake City

San Francisco

Nashville

Raleigh

San Jose

Austin

Office Employment Net Absorption

Source: CBRE Econometric Advisors, Bureau of Labor Statistics, Q1 2014.


HIGH-TECH AND BUSINESS SERVICES PACE U.S. OFFICE LEASING

Leasing Activity Trend by Industry, Q1 2014 vs. 2013, As a % of Total Square Footage Leased

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Energy

Government

Insurance

Legal

CreativeIndustries

Health Care/LifeSciences

Financial Services

Business Services

High-Tech

Q1 2014 2013

Source: CBRE Econometric Advisors, Bureau of Labor Statistics, Q1 2014.


INDUSTRIES DRIVING DEMAND FOR LARGE DEALS, Q1 2014

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Philadelphia

Dallas/Fort Worth

Los Angeles

Chicago

Northern Virginia

Houston

Manhattan, Midtown

Atlanta

Seattle

Boston

Phoenix

Manhattan, Midtown…

Washington, D.C.

Denver

San Francisco High-Tech

High-Tech

High-Tech

High-Tech

High-Tech

High-Tech

Government

Business Services

Bus. Ser.

Creative Industries

Energy

Aerospace/Def.

Legal

Healthcare

Insurance

Note: Includes 25 largest transactions by square footage for each of the 57 markets with available data.

Source: CBRE Research, Q1 2014.


JOBS

Source: CBRE, CoStar Group, M/PF YeildStar, CBRE Econometric Advisors


OFFICE COMPLETIONS RATE IS LOW IN THE U.S.

0.0

1.0

2.0

3.0

4.0

5.0

6.0

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Forecast

1989-2013 Average

Source: CBRE Econometric Advisors.

Changes in Office Stock, % per annum


Top 10 Markets Account for 70% of Scheduled Office Deliveries

COMPLETIONS REMAIN SUBDUED RELATIVE TO HISTORIC NORMS


Scheduled Deliveries of Office Space, 2014-2017, MSF

0

1

2

3

4

5

6

7

Ho

usto

n

Ne

w Y

ork

Wa

sh

ing

ton

,D

C San

Fra

ncis

co

Da

llas

Bo

sto

n

Sa

n J

ose

Se

attle

Au

stin

Chic

ago

Multi-tenant

Single-tenant


Steady Growth or Accelerating

RENTS IN SWEET SPOT

2 Year Average Annual Growth in TW Rent Index (%), 20 Largest Markets

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Sa

n F

ran

cis

co

Oa

kla

nd

Ho

usto

n

De

nve

r

Bo

sto

n

Da

llas

Ne

w Y

ork

Se

attle

Ph

oen

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Lo

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De

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n D

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e C

ou

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Ch

ica

go

Wa

sh

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C

Pitts

bu

rgh

Ba

ltim

ore

Min

ne

apo

lis

Atla

nta

Ph

ilad

elp

hia

Historical Forecast



Non-Gateway Markets Lead The Way

FOCUSING ON FUNDAMENTALS, STILL SOME ATTRACTIVE MARKETS OUT THERE

3%

4%

5%

6%

7%

8%

9%

2%

3%

4%

5%

6%

7%

8%

Phoenix

Ora

nge C

ounty

Da

llas

Oa

kla

nd

Atla

nta

Min

ne

apo

lis

Ch

ica

go

Se

attle

Ph

ilad

elp

hia

Su

m o

f M

ark

ets

Sa

n D

ieg

o

Ch

arlo

tte

Ne

w Y

ork

Bo

sto

n

Lo

s A

ng

ele

s

Ho

usto

n

Sa

n F

ran

cis

co

Wa

sh

ing

ton

, D

C

Revenue Forecast (L) 12 Month Rolling Avg Cap Rate (R )

5 Year Average Annual Revenue Growth (%) Current RCA Cap Rate(%)

Sources: CBRE EA Office Outlook, Q1 2014, Real Capital Analytics.


U.S. OFFICE MARKET CONDITIONS METER

Cambridge (U)

Dallas/Ft. Worth (U)

Denver (U)

San Francisco (U)

Owner Favorable Market conditions where one or more of the

following exist: positive net absorption, stable or

declining vacancy rate, strong leasing activity,

increasing rents, a lack of rent concessions or

limited new supply.

Occupier Favorable Market conditions where one or more of the following

exist: negative net absorption, flat or increasing

vacancy rate, sluggish leasing activity, flat or

declining rents, rent concessions or an imbalance

created by a large increase in new supply.

Houston (U) Atlanta (U)

Boston (U)

Chicago (U) Seattle (U)

Denver (U)

Manhattan, Downtown (U)

Manhattan, Midtown (U)

Atlanta (U)

Boston (U)

Manhattan,

Midtown South (S)

Seattle (U)

Dallas/Ft. Worth (S)

Philadelphia (U)

Washington, D.C. (D)

Los Angeles (S)

Chicago (U)

DO

WN

TO

WN

MA

RK

ET

S

Houston (S)

San Francisco (U)

SU

BU

RB

AN

MA

RK

ET

S

Los Angeles (U)

Maryland Suburban (S)

Philadelphia (U)

Virginia Northern (S)

12-Month Rent Outlook:

(U) = Up

(S) = Stable

(D) = Down


CBRE GLOBAL INVESTORS CLIENT CONFERENCE | 17

Class A trophy office tower constructed in 2000

and totaling 388,370 SF with LEED Gold & Energy

Star certification.

Hit the market in October 2013 with initial bids due

early November 2013. Best and Final bids were taken

in late November 2013.

Strong interest from Insurance/Pension Fund Advisors

and Core Equity Funds, as well as foreign capital, with

114 confidentiality agreements signed and

approximately 40 tours held.

11 first round offers received representing nearly $3B

in capital, with the majority of bids ranging between

$265M - $270M; subsequent bidding rounds saw

pricing climb over $30M.

Invesco went non-refundable with $50M (17% of

purchase price) upon execution of the Purchase and

Sale Agreement.

101 Second Street, San Francisco, CA

CASE STUDY – U.S.

For more information regarding this presentation please contact: RUSSELL L. INGRUM Vice Chairman | Managing Director T +1 415 772 0103

F +1 415 772 0459

[email protected]

Documents

CHINA OVERSEAS REAL ESTATE SUMMIT · exist: negative net absorption, flat or increasing vacancy rate, sluggish leasing activity, flat or declining rents, rent concessions or an imbalance