2012 Outlook Cre Investor Final


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2012 Outlook Cre Investor Final

  1. 1. Commercial Real EstateOutlook - 2012Presented by Americas Research- Ben Breslau- John Sikaitis- Aaron AhlburnJanuary 30, 2012
  2. 2. AgendaEconomy:Ben Breslau, Director of Americas ResearchOffice:John Sikaitis, Director of Office ResearchIndustrial:Aaron Ahlburn, Director of Industrial & Retail ResearchRetail:Aaron Ahlburn, Director of Industrial & Retail ResearchCapital markets:Ben Breslau, Director of Americas ResearchQ&A
  3. 3. Macro outlook still full of risk• Europe likely to fall into recession, and will remain the biggest risk• Developed world economies broadly stalled• Emerging markets lead growth, but slower than 2011• Financial market volatility will remain high• Interest rates and inflation remain low• Credit availability will range widely• Political uncertainty will continue to weigh on confidenceSource: Jones Lang LaSalle Economy
  4. 4. Despite global headlines, most U.S. economic indicatorsare improving – domestic recession unlikely GDP Business spending Employment Small business C&I lending Corporate profits Confidence Retail sales Unemployment Industrial production Incomes Leading indicators Housing marketSource: Jones Lang LaSalle Economy
  5. 5. 2011 Q4 : United State property clockMost property types recovering led by apartments Peaking market Falling market Rising market Bottoming market Multifamily Hotel Retail Industrial OfficeSource: Jones Lang LaSalle Property fundamentals
  6. 6. U.S. office predictions for 2012 1. Recovery will continue to remain highly segmented across geographies, product types and asset classes Tech-heavy and energy-rich markets will outpace the national 2. recovery, joined finally by a portion of the Sunbelt The nation’s four largest office markets, some of which have 3. already experienced aspects of the recovery, and some which have not, will lag in 2012Source: Jones Lang LaSalle Office
  7. 7. Office sector remains at bottom, but segmented Peaking market Falling market Rising market Bottoming market Detroit San Francisco Cincinnati, Cleveland, Sacramento, West Palm Beach, Westchester County Fort Lauderdale, Hampton Roads, Jacksonville New York, Pittsburgh, New Jersey, Orlando, Phoenix Silicon Valley Austin, Houston Charlotte, Fairfield County, Los Angeles, Miami, San Diego, St. Louis, Tampa Boston, Washington, DC Chicago, Orange County, Raleigh-DurhamBaltimore, Dallas, Denver, San Francisco Peninsula Atlanta, Indianapolis, Minneapolis, Oakland-East Bay, Philadelphia, Richmond, San Antonio, Seattle, United StatesSource: Jones Lang LaSalle Office
  8. 8. Tech and energy will continue to boom and diversifySource: Jones Lang LaSalle Office
  9. 9. Beaten down housing markets making a comeback Office
  10. 10. Gateway markets continue to lag New York 0.5% Chicago 0.3% LA DC0.0% 0.2% United States 0.9% Source: Jones Lang LaSalle Office
  11. 11. Overall slow and steady growth… competition for space in the “Big Box” distribution sectorSource: Jones Lang LaSalle Industrial
  12. 12. Warehousing demand study – four dominant industries Dispersion by industry Distribution of requirements by size Greater than 1MSF 6.6% 750K-1MSF 3.1% 500-750K 8.6% 100-200K 400-500K 41.8% 6.5% 300-400K 10.4% 200-300K 23.0% By count By square footage• Top four industries exhibiting continuing • The same industries comprise large requirements growth as % of the total •Tight ratio of large blocks of available space to tenants currently in the market for spaceSource: Jones Lang LaSalle 12
  13. 13. U.S. Industrial predictions for 2012 Scarcity growing for ‘big box’ bulk logistics & distribution space 1. • Class A rent growth will accelerate • Speculative development ramps up in 2012 Overall, a steady but measured recovery will continue 2. • Demand will be very uneven, especially from small & mid-sized businesses • Limited total rent growth expected in 2012 Evolution of the supply chain remains a critical driver 3. • Lean inventories mean a push for efficiency • Oil & transportation costs will lead to more optimization effortsSource: Jones Lang LaSalle Industrial
  14. 14. Consumers squeezing out the middle-of-the-road retailer Y-Y % Change December 2011 8% ) MIDDLE ( 7%Source: Jones Lang LaSalle Retail
  15. 15. U.S. Retail predictions for 2012 Emphasis on redevelopment 1. • Smaller spaces and store-within-store formats • Drive-thru lanes and pick-up zones • Refreshing/redesign to ‘experience shopping’ Increased move toward outlet centers 2. • Development of outlet centers • Outlet centers closer to traditional retail • More retailers expanding outlet store offerings Cross-channel focus 3. • Infrastructure changes: order online, pick up in-store will increase • ▲Technology investment: wireless displays, kiosks and in-store gadgetry • Showrooming a threat to big boxesSource: Jones Lang LaSalle Retail
  16. 16. U.S. investment growth will continue, but pace will slow U.S. total transaction volume – office, industrial, retail, multifamily projected $450 $400Total Transaction Volume ($ Billions) $350 $300 $250 15-20% $200 44% $150 117% $100 $50 $0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* 2012* Source: Jones Lang LaSalle, Real Capital Analytics Capital Markets
  17. 17. U.S. Capital markets predictions for 2012 Macro risks and financial market volatility will drive sentiment swings 1. • Expect periods of “risk on” and “risk off” behavior Increased investment volumes and core cap rate pressure 2. • Relative yield attractiveness • Relative safe haven status of US core real estate Debt capital availability will remain bifurcated 3. • Life Cos and US banks active • CMBS slowdown short-lived • Financing challenges continue for high risk real estateSource: Jones Lang LaSalle Capital Markets
  18. 18. Questions & Answers
  19. 19. Thank YouFor more information, please contact:Ben BreslauDirector of Americas Research+1 617 531 4233benjamin.breslau@am.jll.comJohn SikaitisDirector of Office Research+1 202 719 5839john.sikaitis@am.jll.comAaron AhlburnDirector of Industrial & Retail Research+1 424 294 3437aaron.ahlburn@am.jll.com www.us.joneslanglasalle.com©2012 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representationor warranty is made to the accuracy thereof.