20172017Extended Growth Cycle, Extreme Weather,

Political Chaos, Fed “Normalization” –Now What?

Resilient Economy Faces Headwinds

Headwinds (and forecasting challenges) include…... 

• 2‐2.5 Million  Annual Job Creation

2017 – Economic Perspective

• 4.2%  Unemployment Rate

• 1.4%  Inflation Rate (PCE)

• 2.4% 10‐Yr. Treasury Yield

• 9.7 Million  More Households Than 2007

• 8.2 Million  More Jobs Than 2007

• 6.1 Million  Current Job Openings

• $4.5 Trillion  GDP Growth Since 2007 

Employment Growth Durable and Remarkably Stable

-2.7

-1.8

-0.9

0.0

0.9

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

*

Qua

rter

ly J

ob G

row

th (M

illio

ns)

+8.3 Million

+16.9 Million*

-8.7 Million

2016 Total:                     2,240,0002017 Forecast:              2,000,000

* Through 3QSources: Marcus & Millichap Research Services, BLS

80

85

90

95

100

105

110

115

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

*

10

30

50

70

90

110

130Small Business Optimism Index Consumer Confidence

Smal

l Bus

ines

s O

ptim

ism

Inde

xSmall Business Optimism Index vs 

Consumer Confidence Index

* Through SeptemberSources: Marcus & Millichap Research Services, National Federation of Independent Business, The Conference Board

Consum

er Confidence Index

Fed to Begin Balance Sheet Normalization

$0.0

$1.5

$3.0

$4.5

$6.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*

TIPS/TIPS Inflation Compensation/Agencies/BillsMBSNotes & Bonds

Fed

Hol

ding

s (T

rillio

ns)

* Through October 18Sources: Marcus & Millichap Research Services, Federal Reserve

QE 1

QE 2

QE 3

10‐Year Treasury Rates by Country

Country 10‐Year Treasury Rate

Switzerland ‐0.01%

Japan 0.1%

Germany 0.5%

France 0.9%

United Kingdom 1.4%

Canada 2.0%

United States 2.4%

Australia 2.8%

China 3.8%

Russia 7.6%

Brazil 9.7%

As of October 25, 2017Sources: Marcus & Millichap Research Services, Trading Economics

eCommerce and the “Retail Apocalypse” Myth

The Headlines Capture Investor Attention…

0

15

30

45

60

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Retail Stores Closed Retail Stores Opened

Balancing Headlines With Data - Retail Store Closings Trend Lower

Retail Stores Ope

ning

/Closing

 (000

s)

Sources: Marcus & Millichap Research Services, International Council of Shopping Centers

Off-Price Departmen

t StoreDiscount

Stores Fitness Warehouse Club

Quick-Serve

Restaurant

Home Improvement

Health and

Beauty

Grocery Fast Fashion

Wellness

Numerous eCommerce Resistant Retail Concepts

U.S. Commercial Real Estate Market Overview and Outlook

U.S. Construction Trends

0

100

200

300

400

Apartment

Com

plet

ions

(000

s of

Uni

ts)

Com

plet

ions

(Mil.

of S

q. F

t.)

0

75

150

225

300

Retail Office Industrial

2000-2014 2015 2016 2017*

* ForecastSources: Marcus & Millichap Research Services, MPF Research, CoStar Group, Inc.

Long‐TermAverage

0%

5%

10%

15%

20%

Apartment Retail Office Industrial

2000-2014 2015 2016 2017*

U.S. Vacancy Rate TrendsVa

canc

y R

ate

4.5%4.9%

14.0%

5.1%

* ForecastSources: Marcus & Millichap Research Services, MPF Research, CoStar Group, Inc.

-8%

-4%

0%

4%

8%

Apartment Retail Office Industrial

2008-2014 2015 2016 2017*

U.S. Rent Growth TrendsY-

O-Y

Per

cent

Cha

nge 3.8%

2.4%3.5%

7.3%

* ForecastEffective rent growth for apartment; asking rent growth for retail, office, and industrialSources: Marcus & Millichap Research Services, MPF Research, CoStar Group, Inc.

U.S. Average Price Trends

* Preliminary estimate through 3QIncludes sales $1 million and greaterSources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics

$0

$40

$80

$120

$160

Apartment

Avg.

Pric

e pe

r Uni

t (00

0s)

$0

$75

$150

$225

$300

Retail Office Industrial

2004-2014 2015 2016 2017*

Avg.

Pric

e pe

r Sq.

Ft.

+40%

+9%

+2%

+14%

U.S. Cap Rate Trends

0%

3%

6%

9%

12%

Apartment Retail Office Industrial

2004-2014 2015 2016 2017*

Aver

age

Cap

Rat

e

5.2%

6.3%6.9% 7.1%

* Preliminary estimate through 3QIncludes sales $1 million and greaterSources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics

Commercial Real Estate Cap Rate Trends by Market Type

5%

6%

7%

8%

9%

10%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

*

Primary Secondary Tertiary

Aver

age

Cap

Rat

e

* Preliminary estimate through 3QIncludes apartment, retail, office, and industrial sales $1 million and greaterSources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics

60 bps

220 bps

130 bps

Commercial Real Estate Avg. Yield vs.10‐Yr. Treasury – Spread Remains “Balanced”

Aver

age

Rat

e

0%

3%

6%

9%

12%

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

*

Commercial Real Estate Cap Rate 10-Year Treasury Rate

* Through October 24Includes apartment, retail, office, and industrial sales $1 million and greaterSources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics

430

bps

440

bps

480

bps

480

bps

200 bps

580

bps

390

bps

Cap Rate Long-Term Avg.

10-Yr Treasury Long-Term Avg.

U.S. Commercial Real Estate Investor Sentiment

Investor Sentiment Settling Near Long‐Term Average

0

50

100

150

200

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

*In

vest

or S

entim

ent

* Through 3QSources: Marcus & Millichap Research Services, M&M/NREI Investor Survey

Long-Term Average: 144 150

Investor Transactional Outlook Favors Industrial

0%

25%

50%

75%

100%

Apartment Industrial Office Retail

Buy Hold Sell

Perc

enta

ge o

f Inv

esto

rs

As of 3Q 2017Base: respondents invested in each property type; (n varies for 3Q17)Sources: Marcus & Millichap Research Services, U.S. Census Bureau, M&M/NREI Investor Survey

27%

63%

27%

27%

46%

47%

24%

17%

43%

40%

46%

35%

46%

27% 18

%

30%

Majority of Apartment and Industrial Investors Expect Values to Rise

0%

25%

50%

75%

100%

Apartment Industrial Office Retail

Increase Remain the same Decrease

Perc

enta

ge o

f Inv

esto

rs

As of 3Q 2017Base: respondents invested in each property type; (n varies for 3Q17)Sources: Marcus & Millichap Research Services, U.S. Census Bureau, M&M/NREI Investor Survey

Retail

Office

Industrial

Apartment

Average percentage change expected:

31%

58%

31%

11%

64%

32%

41%

45%

14%

30%

44%

25% 3.8%

5.1%

1.6%

0.3%

National Apartment Market Overviewand Outlook

Housing Construction Has Fallen Short of Demand

0.0

0.5

1.0

1.5

2.0

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

*

Single-Family Completions Multifamily Completions Household Growth

2000‐2007 Oversupply: 2.6M2008‐2017* Undersupply: 1.8M

Com

plet

ions

/ H

ouse

hold

Gro

wth

(Mil.

)

* ForecastTrailing 24-month average for household growthSources: Marcus & Millichap Research Services, U.S. Census Bureau

National Apartment Vacancy vs. Construction

0

100

200

300

400

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17*

2%

4%

6%

8%

10%Completions Vacancy Rate

Completions (0

00s of Units)

Vacancy Rate

* ForecastSources: Marcus & Millichap Research Services, MPF Research

Apartment Development Following The Jobs

Top 10Metros

2017 Completions*

Completions as % Inv.

Dallas‐Fort Worth 31,800  4.4%

New York 29,700  1.6%

Houston 22,000  3.4%

Atlanta 17,300  3.7%

Washington, D.C. 16,400  2.8%

Seattle‐Tacoma 14,300  3.5%

Austin 12,800  5.7%

Denver 12,500  4.5%

Los Angeles 11,900  1.1%

Nashville 9,700  7.3%

U.S. Total 365,000  2.3%

Top 10Metros

Absolute Change**

Percent Change**

Dallas‐Fort Worth 99,800  2.8%

Atlanta 62,200  2.3%

Washington, D.C. 53,600  1.7%

Boston 52,500  1.9%

Los Angeles 49,600  1.1%

New York 49,100  1.1%

Philadelphia 48,300  1.7%

Seattle‐Tacoma 47,100  2.4%

Inland Empire 38,700  2.7%

Minneapolis 38,500  2.0%

U.S. Total 1,777,000  1.2%

* Forecast** Trailing 12-months through SeptemberSources: Marcus & Millichap Research Services, MPF Research, CoStar Group, Inc., BLS

Apartment Construction Employment Growth

0%

8%

16%

24%

32%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

*

Shar

e of

Uni

ts C

ompl

eted

Share of U.S. Apartment Completions in Downtown

* Trailing 12‐months through 3QIncludes downtown and suburban submarkets for 46 major metrosSources: Marcus & Millichap Research Services, MPF Research

28.2%

Long‐Term Average: 15.0%

Recent Apartment Construction as a Percent of Existing Class A Stock

0%

15%

30%

45%

60%

Denve

rHou

ston

Seattle

DFW

Atlanta

Wash., D

.C.

South FL

Bay Area

New York

Los A

ngele

s

U.S.

Perc

ent o

f Inv

ento

ry

Recent construction: 2015 to 2017 forecastSouth Florida includes Miami, Fort Lauderdale and West Palm Beach; Bay Area includes San Francisco, San Jose and OaklandSources: Marcus & Millichap Research Services, MPF Research

2%

4%

6%

8%

10%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

*Class A Class B Class C

Vaca

ncy

Rat

eU.S. Apartment Vacancy Trends by Class

* Through 3QTrailing 12‐month averageSources: Marcus & Millichap Research Services, MPF Research

-8%

-4%

0%

4%

8%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

*Class A Class B Class C

Y-O

-Y P

erce

nt C

hang

eU.S. Apartment Rent Growth Trends by Class

* Through 3QSources: Marcus & Millichap Research Services, MPF Research

Class Change Since 2009

Class A +38.8%

Class B +34.5%

Class C +24.2%

+2.3%

+3.8%+5.2%

0

4

8

12

16

01 03 05 07 09 11 13 15 17*

$1M-$10M $10M-$20M $20M+

* Preliminary estimate for trailing 12-months through 3QIncludes sales $1 million and greaterSources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics

Tota

l Tra

nsac

tions

(000

s)U.S. Apartment Investment Trends by Price Tranche

+6.9% ‐5.5%

$0

$45

$90

$135

$180

01 03 05 07 09 11 13 15 17*

$1M-$10M $10M-$20M $20M+

Dol

lar V

olum

e (B

il.)

+36%‐12%

Transaction Activity Dollar Volume

U.S. Apartment Price and Cap Rate Trends

$50

$75

$100

$125

$150

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

*

5%

6%

7%

8%

9%Average Price Cap Rates

+40%

Aver

age

Pric

e pe

r Uni

t (00

0s)

Average Cap R

ate

* Preliminary estimate through 3QIncludes sales $1 million and greaterSources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics

U.S. Apartment Cap Rates by Class

4%

5%

6%

7%

8%

9%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17*

Class A Preferred MarketsClass AClass B/C

Aver

age

Cap

Rat

e

* Preliminary estimate through 3QIncludes sales $1 million and greaterAssumes properties less than 10 years old at time of sales to be Class A, properties older than 10 years assumed to be Class B/CPreferred Markets Include: NY, DC, BOS, SD, LA, OC, SJ, SF, SEASources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics

140 bps220 bps70 bps

120 bps

170 bps

U.S. Apartment Cap Rate Trends Average Cap Rates vs. 10‐Year Treasury

0%

2%

4%

6%

8%

10%

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

*

Apartment Cap Rate 10-Year Treasury Rate

Aver

age

Rat

e

10-Yr Treasury Long-Term Avg.

Cap Rate Long-Term Avg.

380

bps

430

bps

390

bps

100 bps

280

bps

390

bps

450

bps

* Through October 24Includes sales $1 million and greaterSources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics, Federal Reserve

National Apartment Market Overviewand Outlook