2011 Commercial Market Forecast Presentation (full)

www.CharlestonCommercialMarketForecast.com

2011 Charleston Multifamily Forecast

Supply is on the way!

National Multifamily Overview

Vacancy Rates Steadily DECREASING

• 8.3% in 2008• 6.7% in 2011• 5.7% by 2015

Real Effective Rent Growth

• 8-10% in several submarkets

SIGNIFICANT DEMAND - Units Supply Demand2008 – 145,700 -11,424 2009 – 120,526 -41,7082010 – 56,259 180,0702011 – 31,794 112,826

DEMOGRAPHIC SHIFT(between the age of 20-34)

Baby Boomers - 1986 – 63 million

Echo Boomers - 2015 – 67 million

Charleston Multifamily Development Pipeline

MT. PLEASANT – 1,600 UNITSDANIEL ISLAND – 300 UNITS

DOWNTOWN– 272 UNITS

NORTH CHAS – 620 UNITS

SUMMERVILLE – 300 UNITS

WEST ASHLEY– 300 UNITS

Woolfe St.

N

Reid St.

Mary St.

Ann St.

John St.

Hutson St.

Calhoun St.

Map Restaurants

Midtown Bar & Grill

Chai’s Lounge and Tapas

Basil

Closed for Business

Fish

Halls Chophouse

O-Ku

39 Rue De Jean

Coast Bar & Grill

1

2

3

4

5

6

7

8

Map Retail

Piggly Wiggly (grocery)

U-Haul Moving & Storage

52.5 Record Store

B-ZAR & Charleston Power Yoga

Morris Sokol Furniture

Hughe’s Lumber & Supply

Cupcake

Gelato Store & French Bakery

Dwelling (interior design)9

1

2

3

4

5

6

7

8

9

Map Lodging

Hotel Site (full service planned)

Holiday Inn Site (planned)

Embassy Suites (full service)

Hampton Inn (limited service)

Library (full service planned)

Francis Marion (full service)

Holiday Inn (Marriot u/c)

Federal Bldg. (full service conv.)

Courtyards at 411 Meeting (apt)

1

2

3

4

5

6

7

8

9

Map Other

Charleston School of Law

Public Parking Garage

Marion Square (park)

Charleston Children’s Museum

CARTA (central bus station)

Charleston Visitor’s Center

Charleston Historic Museum

American Theater

Music Farm

1

2

3

4

5

6

7

8

9

1

4

7

6

1

1

1

1

3

5 2

1

2

9

14

5

6

5 3

4

1

8

7

3

89

6

7 8

5

4

2

2

62

37

8

9

King St.

Meeting St.

Spring St.

DASH Station (free shuttle)

Legend

50,000 sf High-Tech Office

Proposed Hotel Renovation

72 Units – Student Housing

260-300 room Hotel, Retail, Restaurant(s)

Holiday Inn – 115 rooms

Midtown Mixed Use – 200 apartment units 7,000 sf retail

New Development on Upper King Street – Downtown Charleston

New Downtown Multifamily Development – 200 Units

New Development Downtown - Spring Elevation

2011 Charleston Multifamily Forecast

• Economics for both existing assets and new development projects that are the first to start will be strong

• Occupancy will stay in the mid 90’s throughout the next cycle due to strong job growth and people wanting to live in or around Charleston

• Capital markets will determine how many deals actually get built in certain submarkets (ie. Mt. Pleasant)

• Overall, deals in select submarkets will perform well

Retail ForecastTim Metzler, Retail

Properties

PORTFOLIO OPTIMIZATION...

INTEGRATE INTERNET SALES...

DOWNSIZE STORE PROTOTYPE...

INVEST IN EXISTING STORES...

SUSTAINABILITY IS GOOD BUSINESS...

OCCUPY FAILED LOCATIONS WITH NEW FOOTPRINT…

SIGNIFICANT RENT REDUCTIONS…

REVITALIZE DOWNTOWN MARKETPLACE…

NEW PLAYERS SEEKING KEY LOCATIONS…

APPAREL

SPORTING GOODS & BOATING

RESTAURANTS

ELECTRONICS, OFFICE SUPPLY & HOME

GROCER

RENT COMPRESSION FOR ANCHOR TENANTS…

REDUCTION IN NUMBER OF STORES AND PROJECTS…

FLIGHT TO QUALITY…

DOWNSIZING CREATES OPPORTUNITY...

SIX NEW DEVELOPMENTS...

CHANGE IS CONSTANT...

JOB CREATION IS BRINGING MORE CONSUMERS...

DEMOGRAPHIC MIGRATION FROM NORTH TO SOUTH...

QUALITY OF LIFE BRINGS DIVERSE OPPORTUNITIES...

WE CONTINUE TO ATTRACT HIGHER PAYING JOBS...

RETAIL DEVELOPMENT FOLLOWING RESIDENTIAL GROWTH...

RETAILERS WILL ENTER: REI & CRATE AND BARREL...

Industrial ForecastMike White, CB Richard

Ellis/Carmody

U.S. COMPANIES RACK UP BIG PROFITS DESPITE SLOWING ECONOMY...

RECOVERY REMAINS FRAGILE...

UNCERTAINTY ABOUNDS STIFLING EMPLOYMENT...

MANUFACTURING RELOCATIONS CONTINUE TO FAVOR SOUTHERN STATES...

AEROSPACE AND AUTOMOTIVE EXPANSIONS EXPECTED TO CONTINUE TO

CHOOSE RIGHT-TO-WORK, LOW-TAXATION CONDITIONS

BOEING TAKES OFF WITH 787 DREAMLINER FINAL ASSEMBLY...

CHARLESTON PORT TRAFFIC CONTINUES TO GROW...

VACANCY TIGHTENS... SPEC BUILDING REACHES A TIPPING POINT

INDUSTRIAL LEASING CONTINUES ABSORBING 1 BUILDING PER MONTH

CLASS A SPACE IS VIRTUALLY GONE...

INDUSTRIAL LAND SALES PRICE REACHES A NEW RECORD $ PER ACRE.

MAJOR BOEING SUPPLIERS WILL ANNOUNCE NEW FACTORIES...

SPEC INDUSTRIAL BUILDING WILL BEGIN ANEW...

PANAMA CANAL EXPANSION WILL ATTRACT NEW USERS AND DEVELOPERS

MORE RECORD-SETTING LAND SALES WILL CLOSE...

JEDBURG AREA WILL LAND A NEW, MAJOR PROJECT

PROXIMITY TO BOEING...

EXPANDING GLOBAL TRADE ATTRACTS NEW SHIPS AND MORE CONTAINERS...

PRO-BUSINESS GOVERNMENT CONTINUES TO FIND ECONOMIC DEVELOPMENT...

OUR QUALITY-OF-LIFE GROWS IN REPUTATION

THE NLRB WILL BE DEFEATED AND DISBANDED...

BOEING WILL ANNOUNCE A SECOND AIRPLACE FOR CHARLESTON

SHIPPING COMPANIES WILL PUBLICALLY ENDORSE PORT OF CHARLESTON

THE WIND TURBINE INDUSTRY WILL EMBRACE OUR REGION

OUR DEFENSE SECTOR WILL CONTINUE TO GROW

The Big Picture

(Looking For Perspective in a Changing World)Ted Abernathy

How is the Economy?

U.S. Chamber Small Business Survey

84%

8%8%

54%

27%19%

61%

25%

14%

Headed in Right DirectionOff on Wrong DirectionNot Sure

The U.S. Economy

The Local Economy

Your Business

Source: U.S. Chamber Small Business Survey, July 2011

The Last Decade Was….Not Good

27%

22%20%

-1%-5%

0%

5%

10%

15%

20%

25%

30%

1970-1980 1980-1990 1990-2000 2000-2010

Employment Growth

Source: Peter Linneman, NAI Global


34%

40% 40%

17%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1970-1980 1980-1990 1990-2000 2000-2010

Real GDP Growth



27%

47%

61%

-3%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

1970-1980 1980-1990 1990-2000 2000-2010

Real Household Wealth


And then The Recession Made Things Worse

Recession & Weak Recovery Impacts

Soaring poverty rates (15.1% most since 1993) Black poverty rate 27% Male workers, median income falls to 1973 level 6% decline in births between 2008-2010 Most educated metros widened gap Government budget cuts reshaping

competitiveness Corporate profits largest share of GDP since 1950

With Full Credit to TIP StrategiesA Picture is Worth a Thousand words

8 Ounces

6 Ounces

4 Ounces

2 Ounces

0 Ounces

Today Is the Economic Glass ½ Full or ½ Empty ?

“Get your facts first then you can distort them as much as you

like.”

Mark Twain

“4 Ounces”

Globally

Unemployment Rates

9.1%

4.3%

6.1%

7.3%

10.0%

5.3%

10.8%

6.0% 6.1%

0%

2%

4%

6%

8%

10%

12%

US Japan China Canada Euro Area Austrialia India Brazil Russia

Source: Economist Oct 8, 2011

Projected GDP Growth 2011

1.6%

-0.4%

9.0%

2.2% 1.6% 2.1%

7.9%

3.6%4.3%

-5%

-3%

-1%

1%

3%

5%

7%

9%


Source: Economist Oct 8, 2011

Trade balance as % of GDP

-3.3%

2.3%

4.0%

-2.7%

-0.5%

-2.3%-3.2%

-2.5%

4.9%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%


Source: Economist Oct 2011

U.S. Exports & Imports (Goods)

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

$4,500,000

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2009 2010

Exports Imports

In $Millions

Source: Census, World Almanac 2009 & U.S. BEA 2010

U.S. Exports 2009-2011

$-$20,000$40,000$60,000$80,000

$100,000$120,000$140,000$160,000$180,000

2009-Jan

2009-May

2009-Sept

2010-Jan

2010-May

2010-Sept

2011-Jan

2011-May

Exports

42% Increase

Source: BLS Sept 2011

Less than 1% of U.S. firms export and of those that

do more than ½ export to only one country

Exports Per Capita(2009)

$2,623$1,823

$2,531$2,428

$4,082

$7,764

$2,137$1,588

$2,323

$1,197

$3,621$3,250

$6,579

$1,909

$2,650$3,443

0

1000

2000

3000

4000

5000

6000

7000

8000

2011 Competitiveness Redbook

Nationally

Employment Monthly Net Change 2000- Sept 2011

-800

-600

-400

-200

0

200

400

600

2000 2008

Jobs

Source: BLS Oct 2011

125,000 Jobs/Mo. To keep pace with growthIn thousands

The best year in the last decade averaged 208,000 additional jobs per month…12 years

How Many New Jobs in the Last Year?

September 2010 to August 2011

1,288,000 or 1% job growth in private sector

Sectors gaining jobs; Manufacturing(+2%),

Prof/Bus Services(+3%), Education & Health(+2%)

-312,000 government jobs (-1.5% of Government jobs)

Source: BLS September 2011

Job Growth- Last 12 Months 44 of 50 states had job growth Biggest growth- Texas +269,000, California

+189,600, New York +106,600, Ohio +74,100

6 States that lost jobs Indiana, Georgia, Alabama, Kansas, Delaware, Nevada

Personal Savingas a % of Disposable Personal Income

5.2% 5.2% 5.0% 4.9%5.1% 5.2% 5.5%

5.0%

0%

1%

2%

3%

4%

5%

6%

Dec-10 Jan Feb March April May June July

Source: BLS Personal Income and Outlays, August 2011

Estimates of Monthly Retail and Food Services

$-

$100,000

$200,000

$300,000

$400,000

$500,000In million $$

Source: Economics and Statistics Administration Sept 2011

US Firms in Forbes Global 2000

751

536

0

100

200

300

400

500

600

700

800

2004 2011

Source: Forbes May 9, 2011

US Firms in Forbes Global 2000Growth in 2010

69%

12%18%

2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Profits Sales Value Employees

Source: Forbes May 9, 2011

Overall, last year was one of the most profitable years for U.S. businesses in history

Stock Markets …?

Regionally

Brookings Metro Monitor

2nd Quarter 2011

Recession and Recovery

Employment Changes in the SouthJuly 2010- July 2011

-4.7

8.328.1

-24.9

27.9 26.33.6 5.5 1.6 4.4

34.017.3 12.8

269.5

8.3 1.5

-50

0

50

100

150

200

250

300

AL AR FL GA KY LA MD MO MS NC OK SC TN TX VA WV

Source: bizjournals.com Aug 2011

In thousands

% Employment Changes in the South July 2010- July 2011

-0.3%

0.7%0.4%

-0.6%

1.6%1.4%

0.1% 0.2% 0.1%0.1%

2.2%

1.0%

0.5%

2.6%

0.2% 0.2%

-1%

0%

1%

2%

3%


Source: bizjournals.com Aug 2011

Regional Manufacturing Employment

Change Aug 2010-Aug 2011

3.9%

2.4%

8.6%

1.1%0.4%

1.1%

2.9%

1.0%

-0.7%

-1.7%

0.8%

-3.6%

2.6%

0.4%

-5.0%

-3.0%

-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

Source: The Business Journals, Scott Thomas, September 29, 2011

Regional Retail Employment

Change Aug 2010-Aug 2011

2.6%

4.3%

-6.3%

-0.9%-0.3%

-1.8%-1.8%

1.2%

-2.5%

2.5%

-4.5%-5.7%

3.7%

0.9%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Source: The Business Journals, Scott Thomas, September 29, 2011

% GDP Changes in the South 2009-2010

2.0%2.3%

1.4%1.4%

3.2%

2.6%2.9%

1.4%1.1%

3.4%

1.0%

2.6%

3.5%

2.8%2.6%

4.0%

0%

1%

2%

3%

4%

5%


Source: BEA Economic Recovery Widespread Across States in 2010, June 7, 2011

Regional GDP Change 2010

3.2%

3.9%

1.3%

2.6%

3.9%

5.2%

1.6%

4.6%4.4% 4.2%

0.4%

1.6%

0.8%

2.1%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Source: BEA September 13, 2011

Regional GDP Change 2007-2010

1.5%

-1.2%-0.6%

-1.1%-1.7%

5.0%

-4.3%

1.3%

-3.8%

1.5%

-0.2%

0.8%

-2.8%

-4.4%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Source: BEA September 13, 2011

Regional Income ChangeChange July 2010-July 2011

Non-farm private hourly earning inflation adjusted

-0.1%

1.1%0.8%

-0.4%

-8.4%

-4.9%

-1.7%

-4.1%

-1.8%

-5.9%-5.6%

-3.2%-3.4%-3.1%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

Source: Garner Economics, Tom Tveidt, September 2011

(NATIONAL)

Change In Housing Value Last Year

-5.9% -6.4% -6.6%

-13.6%

-5.0%

-14.9%

-8.8%-8.1%

-13.4%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

United States

South Carolina

North Carolina

GeorgiaVirginia

ArizonaCalifornia

FloridaNevada

Source: FHFA Price Index, period ending 03/2011

Change In Housing Value Last 5 Years

-18.8%

-9.6% -6.9%

-24.5%

-14.6%

-49.5%-46.0%-45.5%

-58.1%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

Source: FHFA Price Index, period ending 03/2011

Regional Housing Price Index ChangeOne Year

-5.9% -5.4%

-1.4%

-5.0% -4.9%

-3.1%-3.1%

-9.0%

-2.7%-3.6%

-2.5%

-5.8% -6.0%

-4.7%

-9.2%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

Source: Federal Finance Agency, 2nd Quarter 2011

Regional Housing Price Index ChangeFive Years

-18.8%

-14.4%

6.1%

-0.4%-2.6%

-1.3%

2.1%

-18.4%

0.2%

-1.8%

0.9%

-11.9%-11.5%

-5.5%

-30.8%-35.0%-30.0%-25.0%-20.0%-15.0%-10.0%-5.0%0.0%5.0%

10.0%

Source: Federal Finance Agency, 2nd Quarter 2011

The United States Is In a Rapidly Changing Economy and the

Impacts Are Real What Is the New Normal?

“The future is not some place we are going to, but one we are creating.”

John Schaar

A Few Things To Think About

The Future of U.S.

Manufacturing

1

US Industry Shifts Over the Past 50 Years (Manufacturing)

0

5,000

10,000

15,000

20,000

25,000

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

Manufcturing

Source: BLS April, 2011

In thousands

% Manufacturing Job Losses1990-2000

-9%-3%

-13%

-6%

8%

-4%

-16% -17%

-10%-12%

5%

-12%

-6%

-15%-13%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

AL AR FL GA KY LA MD MO MS NC OK SC TN VA WV

Source: VEDP Data Base Aug 2011

% Manufacturing Job Losses2000-2010

-33% -33% -33% -35% -33%

-22%

-34% -33%

-39%-43%

-31%

-38% -39%-37% -35%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

AL AR FL GA KY LA MD MO MS NC OK SC TN VA WV

Source: VEDP Data Base Aug 2011

Manufacturing Workforce of the Future

The Churn in the Economy

2

Business Employment Net Private Job Gains and Losses By Quarter

-3,000

-2,500

-2,000

-1,500

-1,000

-500

0

500

1,000

Source: BLS Business Employment Dynamics, August 2011

Business Employment Dynamics (Churn)

Net Private Job Gains and Losses

-10,000-8,000-6,000-4,000-2,000

02,0004,0006,0008,000

10,000

2000-1

2000-3

2001-1

2001-3

2002-1

2002-3

2003-1

2003-3

2004-1

2004-3

2005-1

2005-3

2006-1

2006-3

2007-1

2007-3

2008-1

2008-3

2009-1

2009-3

2010-1

2010-3

Source: BLS Business Employment Dynamics, August 2011

In millions

Businesses Opening and Closing

644,122

-604,201

670,058

-619,695

668,395

-620,732

626,400

-707,446

552,600

-721,737-1,000,000

-800,000-600,000-400,000-200,000

0200,000400,000600,000800,000

1,000,000

2005 2006 2007 2008 2009

Births Closures/Bankruptcies

Source: US Small Business Administration Aug 2011

The Bar To Be Prosperous Is Rising

If We Don’t Start Expecting More We Need To Start Expecting Less

3

Middle-Skills Require more than a high school degree

but less than a BA degree 52% of employers said in 2011 manpower

survey that they were struggling to fill positions, an all-time high

Southern Jobs By Skill Level 2009

Middle Skill51%

High Skill29%

Low Skill20%

High Skill Low Skill Middle Skill

Source: Middle skill jobs in the American South’s Economy, National Skills Coalition, August 2011

Southern Skills Mismatch

32%

43%

25%

29%

51%

20%

0% 10% 20% 30% 40% 50% 60%

High Skills

Middle Skills

Low-Skill

JobsWorkers

Source: Middle skill jobs in the American South’s Economy, National Skills Coalition, August 2011

The World Has Changed…Has the U.S. Role?

4

America’s Self-Image & Global Image Is Changing

Tallest building…Dubai Richest Man…Mexico Largest Publicly Traded Company…China Producer of the Most Movies….India Biggest Gambling Town…Macao Largest Ferris Wheel…Singapore Only 1 of 10 Largest Shopping Malls

The Rise of the RestWho and How We Compete

So What Next? Total Economy- Today the reality economy Minus increased savings Minus increased debt Minus bubbles in housing wealth and stock

market wealth With slowing growth in new income and new

people Equals slow growth and new realities

So What Next? Global slowdown will push a weak recover to the edge In a national political year businesses usually hold their

cards Housing is close to bottom but “underwater” losses will

drag it for several more years…probably slightly increasing sales but values will continue to slide

Job growth will be slow…for a while Real estate will face changing business models Very Uneven- Regions that succeed will focus on

strengths, be globally aware and engaged, and will understand the role of talent

Despite Our Current Gloom, the United States Will Be One of the Major Global Powers for a Long

Time

“Whether you believe you can do a thing or not, you are right.”

Henry Ford

Southern Growth Policies Board

Since 1971,Bringing Together Governors, State Legislative Leaders Business Leaders, Higher Education Leaders, and Citizens

Help communities understand the changing context of competitiveness

Follow us on Twitter or LinkedIn or join as an associate member

www.southern.orgPublic policy is about making choices, Southern Growth informs choice

Thank You

Questions?

Ted Abernathy

Southern Growth Policies Board

[email protected]

Real Estate

2011 Commercial Market Forecast Presentation (full)