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Whats imPORTant in 2013?

Reading of the Crystal Ball

TRENDS 2013
K.C. Conway, MAI, CRE Exec. Managing Dir. R.E. Analytics Colliers International KC.Conway@Colliers.com

January 29, 2013

Lets Start with a Review of 2012


Report Card on KCs 2012 Predictions ... 4 out of 5 or 80%.

U.S. GDP would Grow by 1.5% - 2%

Home Prices to bottom-out in 2012 Warehouse to be a Star Performer Overall CMBS DQT to surpass 10% Cap Rate Compression would end.
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For 2013, read the letters in KCs Eco. Alphabet Soup.


Look for direction outside Governmental data in places like NAHB, ONEI
MSA-level Job Gr.
TX MSAs = 20% of Top 20 (Houston #2)

NAHB Improved Mkt Index


Housing Recovery is real. TX has most MSAs on NAHB IMI with 18 (FL is #2)

ONEI On Numbers Eco Index


by Am Biz Journals. Quantify Recovering MSAs TX key 4 MSAs ranked in top 20 & Houston is #3

Rail Time Indicators


by Association of Am. Rail Roads

Company 10(q)s

Earnings reports are a treasure trove of info. Dodge Pipeline Journal of Commerce Why FED doesnt use in Beige New Construction An easy/cheap way to keep up Book is a mystery to me. (Familiarize yourself with with Indl, Ports, etc. new supply to jobs ratios) MF is 8-9 jobs : 1 new MF TX ratio in 2012 = 9.2:1
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TX and Houston by the Numbers / Rankings


#1 is such a lonely number, so Houston is 1,2,3,8 Still room for improvement #1 State on NAHB IMI, and Foreign Tr. Zone Imports & Exports.

#2 in 2012 MSA-level job growth

#3 ranking in latest On Numbers Economic Index & #5 by AFIRE. #8 in TEU container cargo in N.Am., but Most Irreplaceable port by Colliers.

Those kind of numbers explain why Houston is AFIRE!


Note: 4 of the 5 U.S. cities are all key port markets; & Indl R.E. #2 prfd property

MSA-level Job Growth


TX MSAs hold 4 of the Top-20 Rankings

NAHBs Improved Housing Markets


The Recovery is Broad-Based note the Gulf & East coast port MSAs
A post 2007 peak of 201 MSAs make the Dec 12 list

Housing Recovery will stimulate sub-office, retail & warehouse demand


NAHB/First American Improving Markets Index (IMI)
Permits Trough Date
01/31/09 03/31/10 02/28/09 04/30/11 03/31/09 11/30/05 01/31/09 12/31/05 03/31/09 10/31/10 01/31/11 03/31/09 04/30/09 01/31/09 09/30/11 01/31/09 04/30/09 02/28/09 12/31/10 04/30/11 08/31/11 09/30/10 04/30/09

Yr-End NAHB IMI


Growth From Trough
1.5% 6.5% 15.4% 3.3% 3.2% 1.9% 4.3% 2.0% 3.4% 3.0% 6.3% 5.9% 8.5% 4.7% 3.9% 5.7% 20.6% 23.2% 8.7% 5.1% 6.7% 4.8% 2.8%

MSA
Baton Rouge, LA* Houma, LA Lafayette, LA Lake Charles, LA Monroe, LA New Orleans, LA Shreveport, LA Beaumont, TX Brownsville, TX* College Station, TX* Corpus Christi, TX Dallas, TX Houston, TX Killeen, TX* Lubbock, TX McAllen, TX Midland, TX Odessa, TX San Angelo, TX San Antonio, TX Texarkana, TX* Victoria, TX Waco, TX

Growth From Trough


1.4% 4.2% 2.3% 2.2% 2.4% 0.5% 1.3% 0.7% 1.1% 2.5% 3.3% 2.1% 1.8% 1.9% 7.4% 0.2% 2.4% 29.3% 1.1% 2.6% 5.3% 6.2% 1.5%

Prices Trough Date


01/31/12 06/30/11 10/31/11 11/30/11 06/30/10 12/31/11 12/31/11 12/31/11 05/31/11 09/30/10 12/31/11 02/28/11 08/31/11 01/31/12 09/30/11 11/30/10 01/31/10 10/31/10 04/30/11 12/31/10 01/31/10 02/28/11 11/30/10

Growth Employment From Trough Trough Date


2.4% 3.1% 2.3% 1.7% 4.6% 4.4% 5.1% 2.4% 3.3% 6.1% 9.2% 5.7% 9.7% 4.3% 2.8% 6.5% 21.1% 13.7% 9.5% 7.0% 2.4% 9.9% 2.9% 02/28/10 06/30/11 01/31/10 11/30/10 09/30/09 02/28/10 08/31/10 12/31/09 03/31/09 01/31/08 11/30/09 12/31/09 12/31/09 12/31/07 09/30/10 12/31/07 08/31/09 08/31/09 06/30/09 09/30/09 10/31/09 11/30/09 01/31/12

TX has most MSAs with 18. Houston has most growth from trough of large TX MSAs.

FL ranks #2 among all states with 15


CA ranks #3 (14) Recovery in housing will drive renewed demand for all commercial R.E. types in the suburbs (nhood retail, professional services & small-bay, multi-tenant indistrial by contractors, 8 suppliers).

Recovering Markets ONEI November Rankings


Houston ranks #3 TX has 4 of Top-20, and 6 in Top 65 (State with most in Top-10,25,50
ON NUMBERS ECONOMIC INDEX - January 2013 (Top 102 U.S. MSAs ranked by Am. Business Journal)
Rank (Jan '13)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 Austin Houston Columbus Tulsa Provo, Utah Honolulu Omaha Pittsburgh Des Moines, Iowa Denver Dallas-Fort Worth Boston Nashville Salt Lake City Baton Rouge, La. Little Rock, Ark. Ogden, Utah San Antonio Louisville San Jose Lancaster, Pa. Cincinnati Washington Durham, N.C. Phoenix Scranton-Wilkes-Barre, Pa. Portland, Maine Chattanooga, Tenn. St. Louis Akron, Ohio Seattle Minneapolis-St. Paul Knoxville, Tenn.

MSA
Oklahoma City

Overall Scorre
90.473 89.755 82.627 78.765 77.922 76.908 74.037 72.577 72.304 71.561 70.052 69.805 69.606 69.507 69.409 69.061 68.541 68.195 67.775 67.156 66.785 63.096 62.75 62.428 60.992 59.308 59.185 58.516 58.046 57.452 57.452 57.131 56.735 56.042

Prior Rank
2 1 3 4 6 10 17 5 9 8 11 14 12 18 22 32 7 16 21 13 15 27 23 19 24 36 20 25 49 34 30 33 40 37

Rank (Jan '13)


35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68

MSA
New Orleans Charleston, S.C. San Francisco-Oakland Madison, Wis. Raleigh Albany, N.Y. San Diego El Paso, Texas Cleveland Wichita, Kans. Grand Rapids, Mich. Greenville, S.C. Harrisburg, Pa. Birmingham Boise, Idaho Buffalo Poughkeepsie, N.Y. Indianapolis Charlotte Milwaukee Portland, Ore. Rochester, N.Y. Jackson, Miss. Syracuse, N.Y. Richmond Columbia, S.C. Toledo, Ohio McAllen-Edinburg, Texas Youngstown, Ohio Tucson Baltimore Fresno, Calif. Kansas City Modesto, Calif.

Overall Scorre
55.497 55.225 55.126 54.432 54.285 54.086 54.086 53.963 53.714 53.021 52.997 52.65 51.932 51.312 50.893 50.175 49.309 49.11 49.086 49.085 47.799 47.725 46.807 45.892 45.546 45.496 44.976 44.334 43.294 42.797 42.477 42.204 41.833 41.634

Prior Rank
53 28 35 45 39 38 42 50 41 47 26 29 48 59 44 31 63 46 55 57 51 54 58 64 65 43 56 70 79 75 62 71 60 68

Rank (Jan '13)


69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102

MSA
New York City Orlando Dayton, Ohio Memphis Philadelphia Sacramento Atlanta Los Angeles Stockton, Calif. Worcester, Mass. Bakersfield, Calif. Springfield, Mass. Miami-Fort Lauderdale Augusta, Ga. Detroit Albuquerque Virginia Beach-Norfolk

Overall Scorre
41.413 41.14 40.867 40.57 40.422 40.397 37.898 37.65 37.551 37.501 37.18 37.08 33.54 32.748 32.724 32.574 32.55

Prior Rank
61 72 52 74 81 76 67 80 82 83 73 69 66 78 97 85 77 88 86 95 89 84 90 87 92 94 93 98 100 91 99 102 101 96

Allentown-Bethlehem, Pa.41.042

Bridgeport-Stamford, Conn. 38.244

Oxnard-Thousand Oaks, Calif. 34.357

Bradenton-Sarasota, Fla. 31.956 Cape Coral-Fort Myers, Fla. 31.213 Greensboro, N.C. Lakeland, Fla. Tampa-St. Petersburg Hartford Chicago Las Vegas Jacksonville New Haven, Conn. Colorado Springs Providence 30.843 30.842 30.076 29.061 28.887 27.253 26.907 25.15 21.213 20.694

Palm Bay-Melbourne, Fla. 30.322

Riverside-San Bernardino, Calif. 22.105

Rail Time Indicators Manufacturing & Trade


Forget ISM, Empire State Mfg Index & FED Mfg Surveys go to the source!

Q. Why did rail cars in storage rise at YE? A. Impending ILA E-Coast port strike.

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Dodge Pipeline New Supply is Distr-Ctrs & Logistics


Project Title City State Phase Construction Cost ($ m) Sq. Ft. (000's) Target Dates Completion

Indl U/C 2013 32.1 msf (not a lot) 8 states=45% of all constr. GA #1 TN #2 IN #3 75% Build-tosuit or large new D-Ctr & Logistics Ctr No Spec risk in Indl

Estrella Logistics Warehouse Distribution Center Phoenix AZ Coldwater Depot Logistics Office/ Warehouse Phase I Avondale AZ Total Sq Ft Under Construction at Yr-End 2012: FedEx Warehouse Distribution Facility Pacoima CA Chino Logistics Center Chino CA Whole Foods Market Distribution Center Richmond CA Total Sq Ft Under Construction at Yr-End 2012: United Natural Foods Refrigerated Warehouse (Design/Build) Aurora CO FedEx Ground Distribution Center South Windsor CT Dollar Tree Distribution Center Windsor CT Publix Warehouse & Distribution Center @ LeeVista Orlando Center FL Total Sq Ft Under Construction at Yr-End 2012: Tractor Supply Distribution Center (Design/Build)Macon GA Lowe's Flatbed Distribution Center Rome GA PPG Pittsburgh Paints Warehouse Bldg at Southpark Fairburn GA Home Depot Online Distribution Center Mcdonough GA Total Sq Ft Under Construction at Yr-End 2012: Toro Distribution Center (Design/Build) Ankeny IA FedEx Distribution Center Grimes IA FedEx Distribution Center Romeoville IL Total Sq Ft Under Construction at Yr-End 2012: Manufacturing/Distribution Building (PGP International) Evansville IN IDI World Connect Building 1 At Ameriplex Indianapolis IN Total Sq Ft Under Construction at Yr-End 2012: Coca Cola Distribution Facility (Pre-Engineered)(Design/Bld) MO Joplin Rubbermaid Warehouse & Distribution Center Brimfield Township OH Volkswagen Passat Parts Warehouse Kingston TN Amazon Distribution Center Lebanon TN Whirlpool Manufacturing and Distribution Facility Cleveland TN Total Sq Ft Under Construction at Yr-End 2012: Refrigerated Distribution Warehouse (Design/Build) Denton TX Total Sq Ft Under Construction at Yr-End 2012: Family Dollar Distribution Center Saint George UT

Underway Underway 1,493 Underway Underway Underway 1,547 Underway Underway Underway Underway 1,337 Underway Underway Underway Underway 3,437 Underway Underway Underway 1,270 Underway Underway 1,841 Underway Underway Underway Underway Underway 1847 Underway 749 Underway US total

18.0 20.0 20.0 12.0 12.7 25.0 25.0 57.0 100.0 30.0 80.0 30.0 91.1 43.0 19.0 15.0 6.0 25.0 5.5 22.9 40.0 33.0 84.0 20.0

593 509 236 300 136 542 222 1,001 970 686 1,451 300 1,000 450 186 239 70 795 56 811 400 1,016 400 450

July-13 March-13 June-13 February-13 February-13 July-13 October-13 May-13 October-14 May-13 April-13 April-13 April-13 December-13 March-13 September-13 March-13 December-12 March-13 April-13 March-13 February-13 January-13 March-13 June-13

80.0 820 2,132 32,112 ($ millions) SqFt 000s

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What is the Crystal Ball indicating for 2013?


Beware of Q1, but be prepared for a robust 2H2013.
Industrial: Ports will remain an imPORTant story! Port Labor Strife not done Feb 6, 2013. Leasing activity remains robust Dearth of new constr & assets for sale. Office: ICEE office MSAs still hot. Recovery in housing will add to suburban absorption. the 71.5msf of new office construction is Med Office MF: Overbuilding Risk is exaggerated Too much in just a few MSAs (DC) TX is OK: 1 unit : 9.2 jobs in 2012 Housing: The recovery is real! NAHB IMI > 200 markets. US Census Housing Occupancy (50 MSAs 90% to 96%) GDP: Pulls back to 1% or less in 1H2013, but Rebounds >2% in 2H2013 (No Cash for Clunkers or housing tax credit artificial stimulants). Employment: Focus on Labor Participation rate (63.6%), U-6 (14.4%), & expect another year of 153k/mo. job growth U-3 could drop to 7% just on workers losing Unempl. benefits.

Interest Rates: Get eer done in 2013! 2nd U.S. Debt downgrade >50% FED balance sheet @ 20% US GDP Monitor commodity prices.
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Colliers 2013 Industrial Warehouse Perspective

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Colliers Yr-End 2012 Industrial Warehouse Perspective

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www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012 www.colliers.com/us/insights CRE.org/Publications/rei_absdetail.cfm?lid=1897&lparent_id=1892

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How well do you know the U.S. Ports?


Colliers recognizes 10 ports 2X a year for distinction beyond size

www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012 www.colliers.com/us/insights

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Intermodal, Intermodal, Intermodal it means


Industrial Now Turns Especially to Rail to Move Ocean Distribution Across Land

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Office Space Trends

Note:
The old ratio (growth in office employment means X square feet of office absorption) is out the window. The open space architecture is moving the space per employee ratio from 1:300 to 1:250 to 1:200. That means a 20% growth in office employment = no net new absorption.

Source: Colliers Atlanta

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Colliers Yr-End 2012 Office Perspective

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Office Space Trends: FIRE Vs ICEE markets

Jan 23, 2013 Chicago fire: Building turns to ICE after fire.
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The Multi-Family Perspective


Construction Activity & Costs Vs Vacancy & Cap Rates. Is new construction overheating?
New Supply under construction or in lease-up approximates 2007 activity.

Are higher costs being rationalized by Cap Rate compression and


unrealistic rent growth? The cost per unit of new construction has increased 40%.

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The Multi-Family Perspective


A recent record MF sale in Denver is a warning sign for hot MF MSAs.

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Opportunities:
Housing Monitor NAHB IMI. A surprise stimulant to small-space warehouse users, like building contractors & suppliers. Job Gr in secondary MSAs fueled by ICEE sectors. Industrial especially port & inland distribution MSAs where retailers are remaking their supply-chains.

Risks:
Congress/political dysfunction leads to 2nd Debt Downgrade

ILA Port Strike Impacts East & Gulf coasts ports February 6, 2013; NW Grain ports in Spring & West coast ports at Yr-End
End of Bernanke Fed in 2013 - Impact on interest rates & QE

Thank You
K.C. Conway, MAI, CRE Exec. Managing Director, R.E. Analytics Colliers International KC.Conway@Colliers.com