Our Professionals   Jeremy           Chris        Jon       Johnny    Willits      Fraser, CCIM   Chalfie     Bevon    Tod...
Our StaffCharlene         Taylor   CourtneyAydelotte        Massey     Ray
Robert BachSenior Vice PresidentChief EconomistGrubb&Ellis
2012 Commercial RE ForecastRobert BachSVP, Chief Economist
Gross Domestic Product, Historic & ForecastAnnualized Percent Change   4%   2%                                            ...
Consumer Price Index, Historic & ForecastAnnual Percent Change   6%   4%                                                  ...
10 Year Treasury Yield, Historic & ForecastEnd of Quarter   5%   4%                                                       ...
Payroll Job ChangeAnnual             3  Millions             2             1             0                                ...
Job Losses Since Recession Began 12/2007U.S. vs. Selected South Carolina Metros     2%     0%     -2%     -4%             ...
Office Vacancy & Class A Rent*National Forecast   % Vacant                                                                ...
Industrial Demand Drivers        ISM Manufacturing Index                                DOT Freight Index             Valu...
Industrial Vacancy & Warehouse Rent*National Forecast   % Vacant                                                          ...
Retail Demand Drivers             Monthly Retail Sales                           Personal Saving Rate             % Change...
Retail Vacancy & Rent*National Forecast   % Vacant                                                                      Re...
Apartment Demand Drivers            20-34 Year-Old Cohort                          Homeownership Rate                Chang...
Apartment Vacancy & Rent*National Forecast   % Vacant                                                                     ...
Investment Market Outlook       CRE Investment by Quarter                                                     Moodys/REAL ...
Average Cap RatesBy Property Type     9%                                       8.4%     8%                                ...
Distressed Assets       Total Outstanding Distress                              Monthly Additions &Billions               ...
Avg. Cap Rate vs. 10-year Treasury YieldQuarterly      Cap Rate & 10-year Yield   10%                                     ...
2012 Commercial RE ForecastRobert BachSVP, Chief Economist
Mary GrahamSenior Vice PresidentCharleston Metro Chamber of Commerce
The Charleston Region:          2012 and Beyond         Grubb&Ellis|WRS         February 15, 2012char l est on m r o cham ...
Top Three Globally• Building wide-body  commercial aircraft• R&D wind turbines• Tourism Destination
Charleston Has Biggest     Brain Gain in U.S.
Charleston’s Recognition & Rankings                                           Best Cities for Job Growth                  ...
Significant Developments                                  Boeing’s 2nd 787                       Dreamliner assembly line ...
Population Trends800,000700,000600,000500,000400,000300,000200,000100,000      0          1950   1960   1970   1980   1990...
Employment Growth                             2000 - 2011350,000300,000250,000200,000                                     ...
Employment By Sector                                     Natural Resources, Mining, &                                     ...
Target Industries
Target Tactics Advanced                                 WindSecurity & IT Aerospace    Biomedical    Energy               ...
AerospaceBoeing 787 Assembly Operation  – 5,900 employees  – $ 4.6 billion annual economic impact  – One of three places i...
The Port of Charleston$44.8 billion economic impact ($7 billion in the Charleston region)260,800 jobs (50,000+ in the Char...
Panama Canal Game Changer                                                         33.5m                                   ...
MSC Northern Justice          8,440 TEU / 1090’ LOACharleston Harbor / May 12, 2010
Medical Industry• 10 major medical centers• 2,000 physicians• Medical centers locally employ 20,000 +• 26,000 total worker...
Joint Base Charleston• $4.7 billion annual economic impact• 29,000 active, civilian and contract  personnel• Airlift, Seal...
Joint Base Charleston• Navy Nuclear Training Command /  Training School  - 3,200 students per year• Federal Law Enforcemen...
Key Challenges• Workforce Skills/Education• Infrastructure• International Business  Location• Managing Growth
Mary Graham, CCR, IOM, CCE Sr. Vice President Business Advocacy              843.805.3043  mgraham@charlestonchamber.orgch...
Chris Fraser, CCIMPresidentGrubb&Ellis|WRS
How are we doing?
Residential Inventory
Employment
Industrial Market
Industrial Vacancy30%25%20%15%10% 5%   2008           2009          2010      2011          General Industrial   R&D/Flex ...
Avg. Asking Rental Rates $10 $8 $6 $4 $2  2008        2009        2010      2011         General Industrial      R&D/Flex ...
DOD to Ask for Two NewBRAC Rounds, Sources SayJanuary 25, 2012The Pentagon is planning to requestCongress authorize two ne...
Panama Canal???
Norfolk Southern Intermodal Terminal atCharlotte Douglas Airport planned…volume up!2006 – 58% of N&S freight moved from We...
Four extra feet of depth is equal to 8600 extratons of wheat!
Industrial Occupancy & TEU
Charleston             Source – Integra Realty Resources
Industrial 2012 Vacancy Forecast    30%    25%    20%    15%    10%     5%       2008      2009              2010       20...
Office Market
Office Vacancy30%25%20%15%10%5%0%  2007     2008    2009      2010     2011         CBD      Suburban          Combined
Avg. Asking Rental Rates  $28  $26  $24  $22  $20  $18    2007    2008     2009    2010   2011           Class A     Class B
22 Relevant Office Properties          Changed Hands in 20113 (14% of total sales) Bank owned buildings     • average of $...
Healthcare / Medical Sector
Institutional Movement• Hospitals purchasing medical practices to control referral sources & income stream• Doctors sellin...
Mt. Pleasant since 4/2010 • MUSC – Specialty Care 84,000 SF      Dr.’s will relocate in the 2nd and 3rd quarter of 2012  ...
Carnes Crossroads / Moncks Corner   Carnes Crossroads Plans                        Moncks Corner Plans    146,000 SF     ...
Biomedical Research
Horizon ProjectMUSC, SCRA and City of Charleston
Business Incubators Thrive!•Over 61,000 SF•Assisted over 100 Companies•Notable    •PeopleMatter    •Avista Solutions
Charleston
Charleston
Office 2012 Vacancy Forecast    30%    25%    20%    15%    10%     5%     0%       2007     2008   2009       2010     20...
Retail Market
Retail Vacancy10%8%6%4%  2009            2010               2011         CBD   Suburban   Combined
Avg. Asking Rental Rates $18 $16 $14 $12   2009      2010          2011
Value Based Trend
Charleston
Retail 2012 Vacancy Forecast    10%    8%    6%    4%      2009         2010        2011         2012-F             CBD   ...
Investment Market
What is the Outlook for 2012?
Thank you!
2012 Investor Breakfast
2012 Investor Breakfast
2012 Investor Breakfast
2012 Investor Breakfast
2012 Investor Breakfast
2012 Investor Breakfast
2012 Investor Breakfast
2012 Investor Breakfast
2012 Investor Breakfast
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2012 Investor Breakfast

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Annual Forecast for Charleston commercial Real Estate Market

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2012 Investor Breakfast

  1. 1. Our Professionals Jeremy Chris Jon Johnny Willits Fraser, CCIM Chalfie Bevon Todd Mike Gregg BillGarrett, CCIM Ferrer, CCIM Legerton Goodwin
  2. 2. Our StaffCharlene Taylor CourtneyAydelotte Massey Ray
  3. 3. Robert BachSenior Vice PresidentChief EconomistGrubb&Ellis
  4. 4. 2012 Commercial RE ForecastRobert BachSVP, Chief Economist
  5. 5. Gross Domestic Product, Historic & ForecastAnnualized Percent Change 4% 2% Historic Wells Fargo 0% PNC Goldman -2% -4% 03 04 05 06 07 08 09 10 11 12- 13- F F Source: BEA, Goldman Sachs, PNC, Wells Fargo 8
  6. 6. Consumer Price Index, Historic & ForecastAnnual Percent Change 6% 4% Historic Wells Fargo 2% PNC Goldman 0% -2% 03 04 05 06 07 08 09 10 11 12- 13- F F Source: BLS, Goldman Sachs, PNC, Wells Fargo 9
  7. 7. 10 Year Treasury Yield, Historic & ForecastEnd of Quarter 5% 4% Historic Wells Fargo 3% PNC Goldman 2% 1% 2008 2009 2010 2011 2012 Source: Federal Reserve, Goldman Sachs, PNC, Wells Fargo 10
  8. 8. Payroll Job ChangeAnnual 3 Millions 2 1 0 Historic -1 Wells Fargo -2 PNC -3 Grubb & Ellis -4 -5 -6 03 04 05 06 07 08 09 10 11 12- 13- F F Source: BLS, PNC, Wells Fargo, Grubb & Ellis 11
  9. 9. Job Losses Since Recession Began 12/2007U.S. vs. Selected South Carolina Metros 2% 0% -2% -4% U.S. -6% Gville Columbia -8% Charleston -10% Myrtle Bch -12% Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Source: BLS, Grubb & Ellis 12
  10. 10. Office Vacancy & Class A Rent*National Forecast % Vacant Rent* 19% $38 18% $36 17% $34 16% $32 15% $30 % Vacant 14% $28 $ Rent* 13% $26 12% $24 11% $22 10% 02 03 04 05 06 07 08 09 10 11 12-F $20 % Vacant 17.4% 17.7% 16.8% 14.6% 13.6% 13.0% 14.8% 17.4% 17.7% 17.3% 16.0% * Weighted average $ Rent* 28.72 30.09 30.32 33.91 35.95 36.69 35.74 32.50 32.93 33.49 34.16 asking rent $/SF/year gross Source: Grubb & Ellis 13
  11. 11. Industrial Demand Drivers ISM Manufacturing Index DOT Freight Index Values > 50 = Expansion 2000 = 100 65 115 60 110 55 50 105 45 100 40 95 35 30 90 00 02 04 06 08 10 00 02 04 06 08 10 Source: ISM, DOT, Grubb & Ellis 14
  12. 12. Industrial Vacancy & Warehouse Rent*National Forecast % Vacant Rent* 11% $5.00 10% $4.75 9% % Vacant 8% $4.50 $ Rent* 7% $4.25 6% 5% 02 03 04 05 06 07 08 09 10 11 12-F $4.00 * Weighted average % Vacant 9.5% 9.8% 9.4% 8.1% 7.7% 7.7% 8.8% 10.7% 10.4% 9.7% 8.7% asking rent $/SF/year $ Rent* 4.33 4.21 4.38 4.54 4.67 4.79 4.68 4.36 4.33 4.26 4.47 NNN Source: Grubb & Ellis 15
  13. 13. Retail Demand Drivers Monthly Retail Sales Personal Saving Rate % Change Year Over Year, SA SAAR15% 14%10% 12% 10% 5% 8% 0% 6% -5% 4%-10% 2%-15% 0% 07 08 09 10 11 80 85 90 95 00 05 10 Total Core Source: Census, CoStar, Grubb & Ellis 16
  14. 14. Retail Vacancy & Rent*National Forecast % Vacant Rent* 12% $20 11% $19 10% 9% $18 % Vacant 8% $ Rent* $17 7% $16 6% 5% 02 03 04 05 06 07 08 09 10 11-F 12-F $15 * Neighborhood & % Vacant 7.3% 7.2% 7.0% 6.8% 7.1% 7.5% 8.9% 10.6% 11.0% 11.1% 11.0% community centers, $ Rent* 16.68 17.14 17.62 18.22 18.92 19.46 19.52 19.13 18.99 18.96 19.10 asking rent $/SF/year NNN Source: Reis, Grubb & Ellis 17
  15. 15. Apartment Demand Drivers 20-34 Year-Old Cohort Homeownership Rate Change by Decade By Quarter, Seasonally Adjusted Millions Percent 6 70% 4 4.7 68% 3.9 4.3 2 66% 0 64% -2 62% -3.5 -4 60% 1980s 1990s 2000s 2010s 80 90 00 10 Source: Census, Grubb & Ellis 18
  16. 16. Apartment Vacancy & Rent*National Forecast % Vacant Rent* 9% $1,200 8% $1,100 7% % Vacant $1,000 $ Rent* 6% $900 5% 4% 02 03 04 05 06 07 08 09 10-F 11-F 12-F $800 * Projects w/ at least % Vacant 6.3% 6.9% 6.7% 5.7% 5.8% 5.7% 6.7% 8.0% 6.6% 5.3% 4.9% 50 units, asking rent $ Rent* 889.0 902.0 921.0 944.0 982.0 1,025 1,050 1,026 1,043 1,066 1,096 Source: Reis, Grubb & Ellis 19
  17. 17. Investment Market Outlook CRE Investment by Quarter Moodys/REAL CPPI +75% in 2011, + 25% in 2012 2000-Q4 = 1.0Billions$600 2.0 1.9$500 1.8 514 1.7 1.6$400 1.5 363 1.4$300 312 1.3 250 1.2$200 232 1.1 200 1.0 146$100 127 126 0.9 104 0.8 55 $0 0.7 02 04 06 08 10 12-F 00 02 04 06 08 10 All 6-city Trophy Distress Source: Real Capital Analytics, Grubb & Ellis
  18. 18. Average Cap RatesBy Property Type 9% 8.4% 8% 7.8% 7.8% 7.6% 7.5% 2010 7.4% 7.3% 7% 2011 6.6% 6.4% 6.3% 6% 5% Apartment Hotel Industrial Office Retail Source: Real Capital Analytics, Grubb & Ellis
  19. 19. Distressed Assets Total Outstanding Distress Monthly Additions &Billions Billions Reductions to Distress$400 $25,000 $20,000$300 $15,000 $10,000$200 $5,000 $0$100 -$5,000 -$10,000 $0 -$15,000 2008 2009 2010 2011 2008 2009 2010 2011 Troubled REO Restructured Resolved Additions Workouts Source: Real Capital Analytics, Grubb & Ellis
  20. 20. Avg. Cap Rate vs. 10-year Treasury YieldQuarterly Cap Rate & 10-year Yield 10% 500 8% 400 Spread (basis points) 6% 300 4% 200 2% 100 0% 0 01 03 05 07 09 11 10-yr. Yield Cap Rate Spread Source: Real Capital Analytics 23
  21. 21. 2012 Commercial RE ForecastRobert BachSVP, Chief Economist
  22. 22. Mary GrahamSenior Vice PresidentCharleston Metro Chamber of Commerce
  23. 23. The Charleston Region: 2012 and Beyond Grubb&Ellis|WRS February 15, 2012char l est on m r o cham et ber of com er ce m
  24. 24. Top Three Globally• Building wide-body commercial aircraft• R&D wind turbines• Tourism Destination
  25. 25. Charleston Has Biggest Brain Gain in U.S.
  26. 26. Charleston’s Recognition & Rankings Best Cities for Job Growth Charleston region ranked 8th, up 17 spots from last year.2010 Best Performing Cities New Geography May 2011Charleston ranked among nation’s top20 “large cities” Americas Favorite CitiesMilken Institute Charleston ranks #1October 2010 Travel + Leisure Magazine November 2010Best Towns of 2011Charleston ranked 5th Worlds Best CityOutside Magazine Charleston ranked #3 inSeptember 2011 the world CNNGo October 2011Best Places for Business& Careers #1 in North AmericaCharleston MSA ranked in #3 in the worldtop 50 Tourist DestinationForbes July 2011 Conde’ Nast Traveler October 2011
  27. 27. Significant Developments Boeing’s 2nd 787 Dreamliner assembly line • Est: 15,000 jobs (direct & indirect) $5.9 billion statewide impactWind Turbine Drive Train Testing Facility• $98 million DOE-backed facility – one of only three and largest in the world • Est: 20,000 jobs (direct & indirect) statewide• Opportunity to attract global manufacturing & R&D investments Southwest Airlines • Began service March 13, 2011
  28. 28. Population Trends800,000700,000600,000500,000400,000300,000200,000100,000 0 1950 1960 1970 1980 1990 2000 2010 2020 est.
  29. 29. Employment Growth 2000 - 2011350,000300,000250,000200,000 Labor Force150,000 Employment100,000 50,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
  30. 30. Employment By Sector Natural Resources, Mining, & Construction Manufacturing 5% 20% 8% Wholesale Trade 3% Retail Trade Transportation and Utilities 3% Information 13% Financial Activities12% Professional and Business Services 4% Education and Health Services 2% Leisure and Hospitality 4% 12% Other Services 14% Government
  31. 31. Target Industries
  32. 32. Target Tactics Advanced WindSecurity & IT Aerospace Biomedical Energy Recruit Recruit Recruit Recruit Retain/ Expand Retain/ Retain/ Expand Expand Retain/ Expand Startup Startup Startup Startup Immediate Immediate Mid- to Mid- to To Mid-Term Long-Term Long-Term
  33. 33. AerospaceBoeing 787 Assembly Operation – 5,900 employees – $ 4.6 billion annual economic impact – One of three places in world – First delivery 2nd Qtr 2012
  34. 34. The Port of Charleston$44.8 billion economic impact ($7 billion in the Charleston region)260,800 jobs (50,000+ in the Charleston region)Cargo Diversification Strategy – 1.4 million TEUs – BMW – RO/RO – Breakbulk CargoNew $500 million terminal
  35. 35. Panama Canal Game Changer 33.5m (110’) Current Locks Vessel Max: 4,800 TEUs Draft 12.04 m (39.5’) 12.8m (42’) Draft 15.2 m (50’) 55m (180’) New Locks 18.3m (60’) Vessel Max : 12,600 TEUs*Courtesy of Panama Canal Authority
  36. 36. MSC Northern Justice 8,440 TEU / 1090’ LOACharleston Harbor / May 12, 2010
  37. 37. Medical Industry• 10 major medical centers• 2,000 physicians• Medical centers locally employ 20,000 +• 26,000 total workers in healthcare services industry• $243 million R&D at MUSC for fiscal year 2011, marking the 15th consecutive year of continuous growth
  38. 38. Joint Base Charleston• $4.7 billion annual economic impact• 29,000 active, civilian and contract personnel• Airlift, Sealift and Prepositioning - One of top ranked military strategic ports - One of 12 Joint Base initiatives• SPAWAR Atlantic - 2,600 employees - 8,000 contract workers / 80+ defense contractors - 6,000 visitors per year
  39. 39. Joint Base Charleston• Navy Nuclear Training Command / Training School - 3,200 students per year• Federal Law Enforcement Training Center - Maritime Law Enforcement Training - 12,500 annual graduates• State Department - 800 employees - Global Financial Services, Passport Office
  40. 40. Key Challenges• Workforce Skills/Education• Infrastructure• International Business Location• Managing Growth
  41. 41. Mary Graham, CCR, IOM, CCE Sr. Vice President Business Advocacy 843.805.3043 mgraham@charlestonchamber.orgchar l est on m r o cham et ber of com er ce m
  42. 42. Chris Fraser, CCIMPresidentGrubb&Ellis|WRS
  43. 43. How are we doing?
  44. 44. Residential Inventory
  45. 45. Employment
  46. 46. Industrial Market
  47. 47. Industrial Vacancy30%25%20%15%10% 5% 2008 2009 2010 2011 General Industrial R&D/Flex WH/Dist Combined
  48. 48. Avg. Asking Rental Rates $10 $8 $6 $4 $2 2008 2009 2010 2011 General Industrial R&D/Flex WH/Dist Combined
  49. 49. DOD to Ask for Two NewBRAC Rounds, Sources SayJanuary 25, 2012The Pentagon is planning to requestCongress authorize two new baseclosure rounds to help the departmentcut almost a half a trillion dollars inspending over the next decade, AirForce Times reported Wednesday.Officials would request one BRAC round in 2013 andthe next in 2015, one source told the publication. Thedepartment’s intention to conduct one or more BRACrounds is not unexpected given the current budgetenvironment. Many officials already believed the 2005round failed to eliminate all of the department’sexcess capacity. Also, the spending cuts imposed onthe military are expected to result in the eliminationof tens of thousands of troops and cuts in aircraftorders, further reducing the need for militaryinfrastructure.Closures likely woulddisproportionately fall on Army andAir Force installations due to thespecific cuts planned, the Timesreported.
  50. 50. Panama Canal???
  51. 51. Norfolk Southern Intermodal Terminal atCharlotte Douglas Airport planned…volume up!2006 – 58% of N&S freight moved from West Coast2011 – 61% of N&S freight moved from East Coast
  52. 52. Four extra feet of depth is equal to 8600 extratons of wheat!
  53. 53. Industrial Occupancy & TEU
  54. 54. Charleston Source – Integra Realty Resources
  55. 55. Industrial 2012 Vacancy Forecast 30% 25% 20% 15% 10% 5% 2008 2009 2010 2011 2012-F General Industrial R&D/Flex WH/Dist Combined
  56. 56. Office Market
  57. 57. Office Vacancy30%25%20%15%10%5%0% 2007 2008 2009 2010 2011 CBD Suburban Combined
  58. 58. Avg. Asking Rental Rates $28 $26 $24 $22 $20 $18 2007 2008 2009 2010 2011 Class A Class B
  59. 59. 22 Relevant Office Properties Changed Hands in 20113 (14% of total sales) Bank owned buildings • average of $96/sf in partial shell condition9 (41% of total sales) Bank owned condos • average of $129/sf in completed condition7 (32% of total sales) Market type buildings arms length transactions • average of $182/sf3 (14% of total sales) Market type condo transactions • averaging $130/sf
  60. 60. Healthcare / Medical Sector
  61. 61. Institutional Movement• Hospitals purchasing medical practices to control referral sources & income stream• Doctors selling for fixed income/security during uncertain times especially regarding possible future cuts in reimbursements
  62. 62. Mt. Pleasant since 4/2010 • MUSC – Specialty Care 84,000 SF  Dr.’s will relocate in the 2nd and 3rd quarter of 2012  Vacancy will rise throughout Mt. Pleasant • East Cooper Hospital  250,000 SF  130 Beds • Roper Hospital  200,000 SF  85 Beds
  63. 63. Carnes Crossroads / Moncks Corner Carnes Crossroads Plans Moncks Corner Plans  146,000 SF 145,000 SF  50 Beds  50 Beds * Appeals from both parties need to be worked out in the courts before final approval.
  64. 64. Biomedical Research
  65. 65. Horizon ProjectMUSC, SCRA and City of Charleston
  66. 66. Business Incubators Thrive!•Over 61,000 SF•Assisted over 100 Companies•Notable •PeopleMatter •Avista Solutions
  67. 67. Charleston
  68. 68. Charleston
  69. 69. Office 2012 Vacancy Forecast 30% 25% 20% 15% 10% 5% 0% 2007 2008 2009 2010 2011 2012-F CBD Suburban Combined
  70. 70. Retail Market
  71. 71. Retail Vacancy10%8%6%4% 2009 2010 2011 CBD Suburban Combined
  72. 72. Avg. Asking Rental Rates $18 $16 $14 $12 2009 2010 2011
  73. 73. Value Based Trend
  74. 74. Charleston
  75. 75. Retail 2012 Vacancy Forecast 10% 8% 6% 4% 2009 2010 2011 2012-F CBD Suburban Combined
  76. 76. Investment Market
  77. 77. What is the Outlook for 2012?
  78. 78. Thank you!

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