Q2-2010 national economics and colorado retail trends
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  • TOMTalk Slow and Explain SimplyThat was a bit of the Retail Teams whatever it takes mentalityWhat: National Economic Factors and local Retail Trends- Increase information flow, focus on retail specific factors.Point 1: First couple of slides dig into the national housing market - Loss of liquidity - Bursting of the Housing bubble - Reduction in Consumer Spending
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain Simply - What’s happening with Demand for New Homes?What: This tracks new home sales nationally back to 2002.Point 1: High average leading up to the peak, removal of cheap and easy money, the decline starts.Point 2: YTD we are 75% off the highs in 2005
  • TOMTalk Slow and Explain SimplyThat was a bit of the Retail Teams whatever it takes mentalityWhat: National Economic Factors and local Retail Trends- Increase information flow, focus on retail specific factors.Point 1: First couple of slides dig into the national housing market - Loss of liquidity - Bursting of the Housing bubble - Reduction in Consumer Spending
  • ROBWhat: Median price per sqft heading back to years past Point 1: Expect to see this as cap rates depressPoint 2:
  • TOMTalk Slow and Explain SimplyWhat: Transactions in Denver MetroPoint 1: 33 Actual, Annualize that and we get the box in RED 132Point 2: Continuing the slow down from past years
  • TOMTalk Slow and Explain SimplyWhat: Tracking Rental Rate growth for the past 5 yearsPoint 1: From start to the end point surprising we only see a 15% increasePoint 2: Much lower than the national average
  • ROBWhat: Median price per sqft heading back to years past Point 1: Expect to see this as cap rates depressPoint 2:
  • TOMTalk Slow and Explain SimplyThat was a bit of the Retail Teams whatever it takes mentalityWhat: National Economic Factors and local Retail Trends- Increase information flow, focus on retail specific factors.Point 1: First couple of slides dig into the national housing market - Loss of liquidity - Bursting of the Housing bubble - Reduction in Consumer Spending
  • TOMTalk Slow and Explain SimplyWhat: Transactions in Denver MetroPoint 1: 33 Actual, Annualize that and we get the box in RED 132Point 2: Continuing the slow down from past years
  • ROBWhat: Tracking dollar volume in Denver metroPoint 1: Removal of liquidity has curbed institutional investorsPoint 2: YTD Sales Volume Q1 2009 – 32.9 Million, 131.6 million projected
  • ROBWhat: Tracking dollar volume in Denver metroPoint 1: Removal of liquidity has curbed institutional investorsPoint 2: YTD Sales Volume Q1 2009 – 32.9 Million, 131.6 million projected

Q2-2010 national economics and colorado retail trends Presentation Transcript

  • 1. Pinnacle Real Estate Advisors
    Colorado Retail Update
    Q2 - 2010 National Economics and Colorado Trends
    Presented by: Tom Ethington
    (303) 962-9538
    August 2, 2010
    Colorado Trends
    • With absorption positive again, how are lease rates trending?
    • 2. Which Denver sub-markets have below average vacancy?
    • 3. Are Colorado cap rates in line with national averages?
    National Trends
    • Which cities are expected to have strong job growth?
    • 4. How is the Retail Repeat Sales Index trending?
    • 5. Statistics tell us NOW is the time to buy stabilized assets.
  • Pinnacle Real Estate Advisors
    2
    - Our Mission: Maximize our Clients’ wealth by utilizing our innovative process – the Pinnacle Experience.
    Pinnacle Investment Group:
    Our main focus is to advise each client during the sale or acquisition of their real estate investment. We draw from our diverse backgrounds and many successes to offer the best of our experiences to each client.
    We understand it is imperative to provide exceptional value.
  • 6. Pinnacle Real Estate Advisors
    2010 Mid Year National Economic Trends
  • 7. Pinnacle Real Estate Advisors
    4
    - National Economy: Where will Job Growth Occur (‘11 – ’14)?
    Rising incomes and profitable businesses will drive spending. Retail occupancy and NOI should follow!
    Energy and Technology driven economies
  • 8. Pinnacle Real Estate Advisors
    5
    - National Economy: A Move to Deleverage
    When consumers feel confident about the future, they are willing to purchase on credit. Today’s uncertain times has the consumer saving more and buying less on credit. We are deleveraging.
    However, if debt is forgiven by lenders, this could have a healthy outcome for consumer spending long term.
  • 9. Pinnacle Real Estate Advisors
    6
    - National Housing: New Starts
    We remain at an all time low for new housing starts. Until the national home builders return, this will remain soft.
    New home sales drive many other retail economies
    - contractors, home furnishings, movers, etc.
  • 10. Pinnacle Real Estate Advisors
    7
    - National Leasing: Market to Market
    Positive absorption has returned to much of the U.S. Despite Denver being demographically smaller than most of the markets listed, we are still toward the top of the absorption list.
    Is South Florida making its come back?
  • 11. Pinnacle Real Estate Advisors
    8
    - National Leasing: Absorption by Market Size
    This shows absorption as a function of inventory. Again, highlighting Denver’s strength compared to other markets.
  • 12. Pinnacle Real Estate Advisors
    9
    - National Leasing: Service Providers are Soaking Up Space
    Only new leases shown, not renewals
    Who are tomorrow’s retail tenants? Landlords should be looking to service industries to fill vacant space.
    Cellular stores (red arrows) could also be considered a service and are aggressively expanding.
  • 13. Pinnacle Real Estate Advisors
    10
    - National Leasing: New Product
    The 0.2% is made up mostly of strong credit big box tenants taking advantage of recession pricing.
  • 14. Pinnacle Real Estate Advisors
    11
    - National Leasing: Supply and Demand
    Oversupply is leading to competition for tenants in Denver. This is one of the factors causing lease rate compression.
    Barriers to entry keep supply down.
  • 15. Pinnacle Real Estate Advisors
    12
    - Capital Markets: CMBS Will Return
    We have seen a 99% drop in CMBS lending. Expect CMBS to return to commercial real estate but not at past levels.
    REITs and “opportunityequity” will control the market for the next couple of years.
  • 16. Pinnacle Real Estate Advisors
    13
    - National Sales Market: Sales Volume
    This compares the first half of 2009 to the first half of 2010.
    YoY demand is showing signs of improvement.
    Florida’s towards the top of the list once again.
  • 17. Pinnacle Real Estate Advisors
    14
    - National Sales Market: Distressed Sales
    1 and 5 retail properties traded today are considered distressed.
    Who is tomorrow’s seller?
  • 18. Pinnacle Real Estate Advisors
    15
    - National Sales Market: Cap Rate Deviation
    Cap rate spreads are trending above the national average within one standard deviation. This would suggest NOW is a good time to buy stable assets.
  • 19. Pinnacle Real Estate Advisors
    16
    - National Sales Market: Retail Repeat Sales
    2.75x
    From the base in 1998 to 2007 retail property values have increased 2.75x.
    According to the Case Shiller index (housing) we saw a 2.3x from 2000 to 2007.
    This graph is calculated by analyzing retail properties that have sold more than once.
  • 20. Pinnacle Real Estate Advisors
    17
    - National Sales Market: Today’s Buyer
    Who is buying in today’s market?
    $260MM was the Galleria purchase in Houston.
  • 21. Pinnacle Real Estate Advisors
    Mid Year 2010 Denver Retail Leasing Activity and Trends
    Market Summary:
    • Market absorption was positive for Q2, vacancy fell from 8.4% to 8.2%
    • 22. 10 new retail buildings were delivered in Q2 totaling 335,711 sqft
    • 23. Rental rates decreased 5.2% from the previous quarter: $15.86 to $15.03
  • Pinnacle Real Estate Advisors
    19
    - Denver Leasing: Total Retail Market Statistics – Ending Q2 - 2010
    Most of Denver’s retail markets continue to have slow growth and rental rate compression. However, some individual markets are starting to see below market vacancy, which should create new demand.
  • 24. Pinnacle Real Estate Advisors
    20
    - Denver Leasing: Some Positive Rental Demand
    The recession has created strong demand for local Outlet Centers, driving rental rates well above trending averages.
    Specialty Centers are defined as combining Airport Retail, Outlet Centers and Theme/Festival Centers.
  • 25. Pinnacle Real Estate Advisors
    21
    - Denver Leasing: Top Under Construction Properties
  • 26. Pinnacle Real Estate Advisors
    22
    - Denver Leasing: Top 20 Mid Year Lease Deals
  • 27. Pinnacle Real Estate Advisors
    Q2 - 2010 Colorado Retail Investment Sales Activity and Trends
    Data Set Parameters:
    • Product: Retail Cap Rate Sales
    • 28. Location: Colorado
    • 29. Comps Analyzed: 213 Cap Rate Deals from 07.01.07 to 06.30.10; 500k to 10M
  • Pinnacle Real Estate Advisors
    24
    - Colorado Sales: Transactions to Trailing Average - ($500k – 10M)
    While total sale volume is down, transaction volume has returned to historic averages. Have we found our new base line?
    17
    17
    17.75 avg.
    9
  • 30. Pinnacle Real Estate Advisors
    - Colorado Sales: Q2 Cap Rate Sales - ($500k to 10M)
    25
    How are Colorado cap rates to the national averages?
    11 of the 17 investment transaction were traded with above average cap rates.
  • 31. Pinnacle Real Estate Advisors
    - Colorado Sales: 17 Investment Sale Locations - ($500k to 10M)
    26
  • 32. Pinnacle Real Estate Advisors
    27
    - A Testimonial to Retail Investments
    "After meeting Tom in person, I was extremely impressed with his professionalism and market knowledge and decided to list the property [Macaroni Grill - Denver, CO] for sale with him.
    The fact that I have decided to list other properties with Tom is a clear endorsement of how he operates his business and works with his clients, and I would not hesitate to recommend him to anyone looking to buy or sell a commercial property.”
    Kurt Steves, Vice President Cardinal Capital
  • 33. Thanks for Reviewing the Q2 - ‘10 Retail Leasing & Investment UpdateQuestions about the information? In need of your current property’s value? Looking for a different market segment?Call Tom Ethington @ (303) 962-9538