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February 2010
Foreword
We are pleased to provide you this thirteenth annual edition of TrendLines®: challenging time in our industry. What are the signposts to look for in the
Trends in Washington Commercial Real Estate. This is a collaborative period ahead, indicators that can shape our approach to the future? We
publication of Transwestern and its research affiliate, Delta Associates. Our address this topic in Section One of this report. With regard to overall
purposes are to distill the trends of 2009 and to shed light on pivotal forces market performance, our expectations for 2010 include:
and issues that we believe will affect the region’s economy and commercial
National and Regional Economy: A stabilizing job market, with
real estate in 2010 and beyond.
consistent growth beginning in 2010.
2009 was a challenging year. Capital was in short supply as many loans Office Market: Rising vacancy through mid-2011, followed by a need
came due. Owners cut rental rates to maintain occupancy and as a for spec development by 2013 as demand returns. Many tenant-driven
consequence values declined in all commercial product types. Only Class opportunities before then thanks to BRAC, GSA, and corporate moves.
A apartment assets did not see a decline in occupancy during the year. And Retail and Flex/Industrial Markets: Stabilization in 2010; spec
yet condominiums performed as we projected last year: an improvement development warranted by 2012.
in performance over 2008. Rental Apartment Market: Rising vacancy and declining rents
through 2010, but improvement in 2011 as supply and demand return
Despite the hardships, the Washington real estate market survived 2009
to balance. Rent spikes in some submarkets by 2013 as product
better than any other major metro market. The Federal government
shortages emerge.
ramped up hiring, and is scheduled to continue that trend in 2010.
Condominium Market: Price increases in some submarkets this year,
Investors domestic and foreign have come to Washington and bid down
with some conversions due to product shortages.
cap rates at the end of the year. And many owners have used the downturn
Capital Markets: Gradually rising volumes as credit and product
to position assets with improvements to compete better and operate more
begin to reappear. Values likely will decline further in 2010 as property
efficiently.
performance remains a challenge in many areas.
We believe 2010 is a unique opportunity to: Overall: More opportunities in our industry in 2010 than we found in
2009. The volatility will continue to require patience, cash, vision and
Buy assets at below replacement cost with low-cost debt or with an appetite for risk.
readily available equity.
Reposition existing under-performing assets, whether yours or others, Thank you for your interest in our research and other services, including
to draft-up in the coming recovery. brokerage, property management, investment sales, and development.
Position now for development in the next cycle – for delivery in 2010 We look forward to helping you interpret everything you see in the market,
through 2013, depending on the product type. and to being your service partner in the period ahead. Best wishes for a
successful 2010.
The difficulties of 2009 give this annual publication, TrendLines, even
greater importance. It can shed light on the path forward during a
As a leader in our business community for more than 30 years, Beers + Cutler is once again proud to support
TrendLines. But this year, you may notice something a bit different about our presence at TrendLines.
Since we convened last February, Beers + Cutler has merged with Baker Tilly. While the name has changed,
our level of commitment and dedication to our clients’ business needs remains the same. The team of
talented professionals that has built trusted partnerships with our clients over the years will continue to
work with them in the future.
All of us are excited about this new opportunity and new chapter in the history of our firm. Jim Beers and
John Cutler started something very special back in 1976 when they came together to create their own firm.
Over the years, we have all taken pride in ensuring the Beers + Cutler name stood for the highest levels of
service and quality in the delivery of tax, assurance and consulting services. As the marketplace evolves,
we believe becoming part of a national firm with a greater breadth and depth of resources will serve our
real estate clients well and position us for continued success.
While our region has fared better than many areas around the country, the past 18 months have been
like no other period in recent memory, and there is no doubt that the turbulent economy has significantly
impacted the local real estate market. However, the Washington region continues to be well-positioned
to thrive long term.
As the unpredictable market continues, we will be right here with you, advising on ways to navigate
through this difficult environment and gain a competitive edge. Serving as business and tax advisors to
the real estate industry since the mid-1970’s, we draw upon our experiences with many of the region’s top
companies to assist in creating tax-efficient ownership structures and developing planning alternatives.
We also identify opportunities by being experts in the industries we serve and in the areas of Federal and
state tax laws that impact our clients.
We look forward to continuing our work with the entrepreneurs who are the foundation of the Metro
Washington real estate industry, as well as investors – foreign and domestic – who recognize our area as
one of the most desirable markets in the United States.
To learn more about how we can help you manage your business in today’s changing marketplace, please
contact us.
Very truly yours,
Kelly P. Toole
Partner
703.923.8215
kelly.toole@bakertilly.com
Dear TrendLines Participant:
PNC is once again proud to sponsor the 2010 TrendLines® report, the premier resource for our region’s
commercial real estate professionals.
In today’s rapidly evolving real estate environment, having access to timely market knowledge is critical
to running your business. For years, the TrendLines report has been such a source, delivering a valuable
overview of the Washington, D.C. real estate market.
Equally critical is having confidence in your lender, an institution that has experienced varied economic
cycles and has always been available to its customers. PNC is one of those lenders.
PNC has been part of the Washington, D.C. real estate community for decades, delivering one of the
industry’s broadest platforms of products and services – including construction, interim, and permanent
financing, along with access to the capital markets, treasury management services and the comprehensive
capabilities of PNC Real Estate, from multifamily debt and equity expertise to best-in-class third party loan
servicing, asset management and technology solutions for the commercial real estate industry provided
by Midland Loan Services, Inc.
With our acquisition of National City Corporation, PNC is now one of the nation’s top five banks by deposits
and branches. Our strength lies not only in our size, but in the innovative way in which we deliver products
and solutions to help you achieve your goals.
To learn how we can bring ideas, advice and solutions to you, call us or visit www.pnc.com/realestate.
Sincerely,
2 0 1 0
Identifying
Opportunities During
the Recovery
9
Identifying Opportunities
During the Recovery
The purpose of TrendLines® is to distill the trends of 2009 and shed light on pivotal issues that shape
our commercial real estate opportunities in the Washington marketplace in 2010 and beyond. With many
describing 2009 as annus horribilis, perhaps just surviving the year was enough. But we view events of 2009
as having set up 2010 as a year with remarkable opportunities.
While it is always instructive to review the year past – and we do in this TrendLines – we prefer to use this
opportunity to look ahead. Specifically, how can we in the real estate industry identify profitable opportunities
during the recovery, and position ourselves now for intermediate and long-term success?
In this chapter, we identify three opportunities and four signposts The 44th president was sworn into office at the beginning of 2009
to watch, so as to know if we are on track. The balance of this report on the slogan “Yes We Can,” replacing a leadership with one of the
drills down to each property type to get more specific about trends and worst approval ratings in history.
opportunities for each.
The American Recovery and Reinvestment Act (ARRA), a $787 billion
economic stimulus plan, was signed into law in February – making a
First, let’s take a macro view of trends of the past year and decade as a
promise to create or save 3.5 million jobs over the next two years.
background to our overall identification of opportunities and signposts.
To aid the ailing automobile industry, in July the government enacted
2009: Began as a Year of Hope; Concluded with a car allowance rebate, “Cash for Clunkers,” which provided $3 billion
in incentives for vehicle trade-ins.
“Let’s Hope This Year Just Ends”
The hope of the early part of the year was consumed by some difficult
The nation entered 2009 with a financial hangover from the year prior.
realities:
However, a handful of positive indicators gave hope to the nation that
2009 would be a year of positive change:
Only $257 billion of the $787 billion in stimulus money had been
allocated by year-end, according to Recovery.gov.
10 Section One
American Recovery and Reinvestment Act Bernie Madoff stole $65 billion from
Overview of Funding investors in an elaborate Ponzi scheme.
Bankruptcy filings increased to 1.4 million
in 2009, a 32% rise from 2008.
Unemployment continued to rise, from
7.4% at December 2008 to 10.0% at
December 2009.
Foreclosures increased 21% in 2009, to 2.8
million properties receiving at least one
foreclosure filing, according to RealyTrac.
Total retail sales declined 6.2% in 2009.
12 Section One
That is a brief review of what went wrong – and, to a lesser extent, what went right – during the past What Is “Recovery”?
decade. What is ahead during the recovery, and how can smart investors capitalize? To understand
opportunities in a recovery, first, what is a “recovery”? We often hear talk of economic “recovery,” but
we rarely hear the word defined. What do those
making predictions mean when they say “the
Payroll Job Change economy will recover by [a frequently shifting,
January 2000 to November 2009 speculative date of one’s choice]”? Let’s examine
a few possible definitions of “recovery.” After
all, if we are giving advice on opportunities in
recovery, we should have a notion of the time
period involved. And do we mean “recovery”
or “recovered”? After all, a recovery is a time
period with a beginning and an end.
But for commercial real estate, employment growth is a crucial element of recovery, because jobs fill
office space and apartments, and they create consumer confidence to get shoppers back into retail
space. So 2010 is a pivotal point in our industry.
14 Section One
It would be a meaningful decline from a current that most observers expect the next few years When Will We See Opportunities?
level of 10% – a level that is likely to rise further to be a “slow-growth” period, it is likely to
before beginning its cyclical decline by mid- take until 2013 or beyond before all of those Following the logic above, we believe that
2010. We see a 300-400 basis-point decline in persons are put back to work. During the four- the most meaningful opportunities of a cycle
unemployment, which would translate into 4-5 year period from 2004-07, the U.S. created 7.9 are found at the confluence of:
million new jobs nationally, as “meaningful” million jobs – and this was considered a rather
progress. It is the kind of progress that would robust part of the economic cycle. The bottom of the real estate cycle
reflect a major boost in confidence by hiring
managers that a robust part of the cycle has Of course, it is not all of the actual jobs that were and
returned. It is likely to be late 2012 or early 2013 lost that will come back – in many cases, the The beginning of the economic
before we achieve this kind of decline in the positions lost in 2008 and 2009 will never return, recovery
unemployment rate. such as many manufacturing jobs. Instead, other
positions will be created to replace them, often That would be 2010, in our opinion.
If that bar seems too high, and we define requiring new or different skills, and making the
“meaningful” simply as a consistent decline in rehiring of laid off workers less likely. Those
employment, even at a slow pace, then we put seeking work not only need to find employment What About Recovery for Washington
recovery at 2011, as shown in the graph on the opportunities, they need a skills match with the Commercial Real Estate?
previous page. We expect the unemployment positions for which they are applying.
rate to peak in the first half of 2010, and gain Our take is that the local industry’s recovery
traction next year as consumer confidence But 2013 will be a key year for the commercial began in 2009 for some product types and
rises, pumping more money into the economy real estate industry, as the re-hiring of the 7.2 that all product types will be in recovery in
and leading to job growth. In 2010, any million workers will herald more normalized 2010 to one degree or another. 2009 did not
improvement in unemployment is likely to be times for: feel much like recovery, but by July or August
modest, since as conditions improve, many of there were early signs of it:
those who gave up searching for work will return The office market, as supply/demand
to the labor market, increasing competition for conditions will approach equilibrium It starts with the sobering realization that
available jobs. But by 2011, the hiring trend Retail and industrial/distribution markets, there is no place for construction starts
will be obvious. Slow, but clear. So 2011 will which will get a boost from consumers who for spec product – and there were virtually
be an important milepost in the commercial go back to their old ways of spending none in 2009.
real estate industry, as unemployment declines
Personal wealth accumulation, which will Equity began to re-enter the market, and
enough to:
be on track to encourage consumers to investment sales perked up in the second
buy homes/condominiums and travel half of the year. In fact, by year-end our
Induce added apartment occupancy by
more freely broker clients were reporting a shortage of
encouraging un-doubling
listings.
Add to retail spending via an increase in
To which definition of “recovery” do we Cap rates seemed to have peaked during
consumer confidence
subscribe? the summer months, at least for all but
Increase office absorption due to job office buildings.
growth We are not sure it matters: By all of these The rate of distressed assets hitting the
definitions it appears that between 2010 and market slowed.
Does “economic recovery” mean all of the 2013 the national economy will move through
Even the office market, which struggled
jobs lost during the recession have been recovery at which time we can declare it
with dis-absorption throughout the year,
regained? recovered by 2013.
pulled into the positive by year-end. The
Washington metro area was the only major
This definition of recovery sets a very high bar, metro area to finish in the positive in 2009.
particularly given the number of jobs lost during
the recent downturn: 7.2 million. Considering
16 Section One
Cyclical Fluctuation in Value #3: Position now for development into the
U.S. Commercial Real Estate – 1988 Through 2014 next cycle.
1. Job growth
2. GDP growth
3. Real estate values
Source: Delta Associates; January 2010. 4. Mortgage interest rates
18 Section One
Duration of Recent Recessions Consumer spending is 70% of the GDP. The
University of Michigan’s monthly index of
Duration Peak in Initial End of consumer sentiment is a valuable measure, as
of Recession Unemployment Claims Recession it provides a look into the consumer mindset –
indicating if consumers are confident enough to
16 Months February 1975 March 1975
part with their money. The index rose to 72.5 in
6 Months June 1980 July 1980 December 2009 – rising unevenly since the low
16 Months October 1982 November 1982 of 56.3 in February 2009.
8 Months March 1991 March 1991
The index remains below the long-term average
8 Months October 2001 November 2001
of 88.2 and low enough to hamper robust
Source: Smart Money via MSN.com, NBER, BLS, St. Louis Fed, Delta Associates; January 2010.
spending. However, we believe spending will
rise slowly in 2010, as the nation has a pent-up
demand for goods, which will help keep GDP
growth in positive territory.
#2: GDP growth: It reflects greater economic We believe the GDP experienced the last of its
activity, creating jobs and a sense of consumer cyclical decline during the 2nd quarter of 2009.
confidence that drives the retail and housing The GDP likely rose during the 4th quarter to
markets. a similar level as experienced during the 3rd
quarter, once the numbers are finalized, as the
After four straight quarters of decline, the GDP Federal stimulus and capital injections work
increased 2.2% (at an annualized rate) during their way further into the economy.
the 3rd quarter of 2009.
20 Section One
further in early 2010, we may hit bottom by the end of the year. A total decline of 40% would We believe values will begin to stabilize by late
approximate the decline from the early 1990s – but that decline occurred over a six-year period. 2010, given the improvement in overall economic
This time around, the market was faster down, and should be faster to recover. Values should conditions. But importantly, those who wait until
begin rebounding by 2011, meaning that now is the time to beat competitors into the market. it is apparent that values are stabilizing will be
entering the market too late to achieve maximum
The MIT Transactions-Based Index for commercial property values indicates that values are back value. Based on a combination of factors, we
to 2004 levels as shown in the accompanying graph. believe now is the ideal time to buy commercial real
estate product in the Washington area:
Investment Alternatives NOI will be at its low point in late 2010 or early
Commercial Real Estate vs. Stocks vs. Bonds | 12 Months Ending September 2009 2011.
The cost of financing is not likely to get any
lower – for more on mortgage rates, see the
following section.
The availability of financing should improve
during 2010 as lenders become more
convinced of an economic recovery.
Cap rates are already leveling off locally, based
on our proprietary Market Maker Survey (see
Section Nine of this report).
We hope the information in this report assists you in making informed decisions to meet your
particular business objectives in 2009 and beyond. Best wishes for success in the period ahead.
22 Section One
Identifying Opportunities During the Recovery 23
2 The
National Economy
25
The
National Economy
Downturn Has Ended; Slow Recovery Underway Implications for commercial real estate?
Last year in the TrendLines report we said that the recession would end in mid-2009. Given the Office and industrial space, filled by
downward-spiral of the economy at the time, many readers found this a wildly optimistic view. The employees, will be slow to materialize. We
good news is: That prognostication appears on target. The bad news is: Other than the fear factor, it believe it will be until 2011-2012 before
appears to have made little difference in the quality of the economic climate. a meaningful reduction is seen in the
unemployment rate. It will be after 2012
So this is recovery! before we rehire the 7.2 million workers
who lost their jobs in this recession.
The national economy experienced a turbulent year, as 4.2 million jobs were eliminated during The retail sector will take a few years to
the 12 months ending December 2009 and unemployment climbed to 10.0%. Despite the distress recover, as consumer confidence is low,
experienced during 2009, we believe the recession ended about mid-year, although official word has indicating fear in parting with disposable
not come as of this writing. Although we expect further decline in the labor market, as unemployment income.
lags, we believe a handful of indicators show the recession has ended:
Apartments, on the other hand, are
in demand, as demographics support
Job losses have moderated with a loss of only 85,000 jobs during December 2009 – compared
household formations and we witness a
to the peak of job cuts at 741,000 during January 2009.
structural shift from homeownership to
Temporary help – an indicator of recovery – has been steadily rising since July 2009. rental.
GDP increased 2.2% during the 3rd quarter of 2009 – rising for the first time in four quarters.
The leading economic indicators index has increased 7.2% since its low in March 2009. Components of a Recovery
Claims for unemployment insurance peaked in April 2009 and are declining.
Worker productivity (output per hour) jumped
8.1% during the 12 months ending September
Although the national recession has ended, warning signs suggest a slow growth recovery: 2009, as companies experienced a rise in profits
stemming from reduced employee costs. This
Increased worker productivity which in turn is leading to reduced job growth. is the highest increase experienced since the
Reduced consumer sentiment that is depressing consumer spending. 9.7% rise during the 12 months ending 3rd
A high personal savings rate that is also contributing to dampened consumer activity. quarter of 2003 and compares to the long-term
26 Section Two
average of 2.0%. Productivity typically spikes at the U.S. Productivity
end of a recession due to companies significantly Employee Output per Hour
reducing costs – by eliminating workers and reducing
or capping salaries and overhead costs.
28 Section Two
U.S. Economic Trends and Forecast American Recovery and Reinvestment Act
1981 – 2014 Overview of Funding
Source: Bureau of Labor Statistics, Bureau of Economic Analysis, Delta Associates; January 2010.
Gross Domestic Product (GDP) We expect GDP to rise by a similar level during the 4th quarter, once the
numbers are finalized, as Federal stimulus and capital injections work their
After four straight quarters of decline, the GDP increased 2.2% (annualized way further into the economy. However, for the year, we expect the GDP to
rate) during the 3rd quarter of 2009, compared to declining a revised 0.7% decline 2.7%. The GDP should rebound with 2.5% growth in 2010, 90% of
during the 2nd quarter. the long-term average.
Note: Index has been re-benchmarked, with 2004 as the base year.
Source: The Conference Board; January 2010.
Source: Bureau of Labor Statistics; January 2010.
Payroll Jobs
Approximately 7.2 million jobs have been eliminated since the start of the
recession in December 2007 – a 5.2% decline.
30 Section Two
An indicator of market health, the Purchasing Managers’ Index (PMI) was Purchasing Managers’ Index
at 55.9 in December 2009, compared to 32.9 one year earlier. The PMI has
risen above 50 (an indication of expansion) for the past five months, the first
time since January 2008. We expect the demand for goods and services
will remain slow during 2010, as consumers gradually regain confidence.
Unemployment Rate
Note: Seasonally adjusted. Note: Through December 2009; seasonally adjusted; shaded bars represent recessions.
Source: U.S. Census; January 2010. Source: Bureau of Labor Statistics; January 2010.
We anticipate the unemployment rate will continue to edge up during the recession is over by the single best barometer. In each of the past five
1st quarter – before declining slowly during the balance of 2010. Of note, recessions, dating back to 1975, the recession’s end has coincided with the
although economic recovery is underway, unemployment is a lagging peak in the four-week moving average in initial unemployment claims.
indicator.
This observation, made by Robert J. Gordon (a member of the Business
Unemployment Claims Cycle Dating Committee of the National Bureau of Economic Research,
the agency that determines when recessions began and ended), is
Initial unemployment claims peaked in April 2009 – indicating the startling in its simplicity.
Energy Prices
Note: Data is seasonally adjusted. Oil prices are starting to rise again, after sinking
Source: Bureau of Labor Statistics, Federal Reserve Bank of St. Louis, Delta Associates; January 2010.
to a cyclical low of $39 per barrel in February
2009. Since this bottom, prices have increased
U.S. Inflation 90% to $75 a barrel in December 2009 and even
higher at this writing.
32 Section Two
Oil Prices Gas prices have increased to $2.61 per gallon
at this writing, a 62% rise during the past year.
Although gas prices have increased, the price
of gas remains lower than the recent peak of
over $4.00 a gallon during the summer of 2008.
We expect oil prices to average $70 to $80 per
barrel in 2010.
Stock Market
Mortgage Rates
U.S. Existing Home Sales vs. Sales Price Annual Change in Existing Home Sale Prices
Existing Home Sales According to the National Association of Realtors (NAR), price changes
during the 12 months ending September 2009 ranged from a low of -34.5%
Now we are talking progress! Existing homes sold at an annualized rate (Las Vegas) to a high of +0.2% (Houston).
of 6.1 million units during October 2009, up 24% from one year ago. The
current inventory is at a 7.0 months supply, down from 10.2 months one We believe housing sales will continue to rise through 2010, given low
year ago. interest rates and the home buyer tax credit – now extended through
Spring 2010. With the inventory declining, prices should start to stabilize
Sales prices on existing homes declined to an average of $218,100 per during the first part of next year and gain traction soon after. Many local
unit, down 5.0% from one year ago. However, prices have risen 5.5% from markets, like Washington, are already seeing the early stages of a housing
the cyclical low of $206,700 during January 2009. market recovery.
34 Section Two
Federal Budget Deficit Federal Budget Deficit
We believe the national economy reached The U.S. economy shed 4.2 million payroll jobs over the 12 months ending December 2009. This
the bottom during the middle of 2009 represents a decline of 3.1%. The pace of job change has been rapid, as 7.2 million jobs have been
– concluding this economic downturn. cut since the start of the recession. However, job losses have moderated, as the recession has ended
Although recovery is underway, we are not out and a slow recovery is underway.
of the woods yet, as we predict unemployment,
a lagging indicator, will continue to edge up into
2010. In addition, we expect more bankruptcies
and foreclosures, as the financial markets remain U.S. Payroll Job Growth
unsettled.
Job Change %Change
The stimulus spending is starting to have an
2009* -4,164,000 -3.1%
impact. Greater gains will be felt during 2010, as
more stimulus money is disbursed. We believe 2008 -558,000 -0.4%
the 4th quarter GDP will grow at the same level 2007 1,527,000 1.1%
achieved during the 3rd quarter. However, for
2006 2,397,000 1.8%
the year, we expect the GDP to decline 2.5%.
The GDP should rebound with 2.5% growth in 2005 2,276,000 1.7%
2010, about 90% of the long-term average. 2004 1,423,000 1.1%
2003 -344,000 -0.3%
High worker productivity, coupled with
low consumer confidence and restrained 2002 -1,489,000 -1.1%
spending, means few new jobs will be 2001 36,000 0.0%
created in the recovery period that will last
through 2012. *Change for 12 months ending in December 2009; others are comparisons of annual averages. Note that BLS has rebenchmarked figures since
their initial publication; the figures presented above are the most recent estimates.
36 Section Two
12-Month Payroll Employment Change Through November 2009
39
The
Washington Area Economy
Slow Regional Recovery Underway Since 1st Half 2009, as Federal Although conditions remain sluggish, the worst condi-
Initiatives Stimulate the National Economy; Area Holding Up tions appear to be behind us, and a slow recovery is
underway, as suggested by the following indicators,
Better than the Nation
among others:
Two years ago in TrendLines we declared the region to be resilient, yet we observed that
Retail sales, for nondurable goods, bottomed out
the local economy had peaked for this cycle in 2004. Last year we described the Washington
during the 1st quarter. Although still sluggish,
metro area as recession-resistant, as the nation tumbled into recession. This year we observe
sales increased during the 2nd and 3rd quarters.
that in 2009 the region suffered its first recession since 1990, losing jobs. Yet, we believe the
Washington metro area economy experienced a shallow and short-lived recession in 2009 The metro area unemployment rate peaked in
and was in recovery by the Spring of the year. June 2009 at 6.5% and has declined to 6.1% in
November 2009 (the most recent statistic available
at this writing).
Payroll Job Growth
Consumer confidence in the South Atlantic
Washington Area | 1981 Through November 2009
bottomed out in the 1st quarter of 2009 at 20.8 and
has risen to 23.9 during the 3rd quarter. This pattern
is paralleled by the Greater Washington Board of
Trade’s Consumer Confidence Index that shows
the regional index bottomed out in December
2008.
The Washington Metro area Index of Lead-ing
Economic Indicators bottomed out in the 1st
quarter of 2009 and is up since.
40 Section Three
Although sluggish conditions remain as a slow recovery is underway, Washington maintains one Despite a net job loss of 15,300 payroll positions in
of the strongest economic bases in the nation. the metro area, four of the twelve sectors grew jobs
over the past 12 months. The region continues
Payroll Employment: 3.0 million at November 2009. to grow high-end jobs even as it sheds low-end
Job Growth: negative 15,300 during the 12 months ending November 2009. jobs. The top three sectors leading job growth are
Government, Education/Health, and Professional/
Unemployment Rate: 6.1% at November 2009, up from 4.3% one year ago. Business Services – with a total of 27,000 new jobs
Coincident Index: 104.0 at September 2009 – up from the bottom at 103.8 in February added to the economy in these three sectors.
2009.
Leading Index: 107.0 at September 2009, the same level as one year ago. The Government sector gained 17,300 jobs during
the last 12 months, with 76% of these jobs created in
Inflation: prices decreased 0.8% during the 12 months ending September 2009. the Federal government.
Housing Prices: increased 2.2% during 2009.
Source: BLS, GMU-CRA, MRIS; January 2010.
The Education and Health sector gained 5,200
jobs in the previous 12 months, with most of these
positions in the health field.
Jobs
The Professional and Business Services sector
With 3.0 million payroll jobs, the Washington metro area ranks the fourth largest job base among gained 4,500 jobs during the last 12 months.
metro areas, behind New York, the LA Basin and Chicago.
The greatest number of jobs lost during the past 12
Payroll employment declined 15,300 in the Washington metro area over the 12 months ending months occurred during the month of January 2009
November 2009. This represents a decline of 0.5%, compared to the national decline of 3.5% with 59,900 jobs cut during the month. We believe
during this period. this was a deep loss because (1) the National Bureau
of Economic Research (NBER) declared in December
2008 the country was in a recession, spooking
employers who then eliminated workers, and (2) the
Payroll Job Change
retail sector eliminated holiday staff.
Washington Metro Area | 12 Months Ending November 2009
However, the Washington metro area has grown
jobs since January 31, 2009 – adding 50,700
new jobs. The Government and Professional/
Business Services added 32,600 and 12,400 new jobs,
respectively, since January 2009.
Source: Bureau of Labor Statistics; January 2010. Source: Bureau of Labor Statistics; January 2010.
42 Section Three
Coincident and Leading Indices Index of Coincident Economic Indicators
Washington MSA
The Washington Metro Area Coincident
Index, which represents the current state of the
area economy, was 104.0 in September 2009,
below the 20-year average of 107.9. However,
the index remains above the low of 103.8
experienced in February.
Housing Prices
Washington metro home prices increased an average of 9.5% per year The Washington housing market has entered the recovery phase of
from 2000 to 2006, outpacing the average annual income growth of 2.5% the cycle in 2009. We expect that a combination of continued Federal
during the same period. Prices started to decline in 2007 due to the Credit impact on the Washington housing market and a recovering labor market
Crunch and fell further at the onset of the national recession, as the credit will continue to bring gains to the Washington housing market in 2010,
markets froze and job losses increased foreclosures. particularly in the Core (the District, Arlington and Alexandria). The pace
of the recovery may be uneven, but in early 2010, we expect that renewed
Housing became more affordable as the metro area nearly matched that of demand will yield yearly price gains, particularly in the Core, where
the national average for affordability among major metros. The New York inventory is more limited and demand is strongest, but extending to the
metro area is the least affordable with a ratio of 6.6. Outer suburbs by late 2010/early 2011.
44 Section Three
Ratio of Median Home Price to Median Household Income Gross Regional Product (GRP)
Washington Metro Area Select Metro Area | 2008
The Washington metro area ranked 9th in population, yet was the nation’s
4th largest economy among major metros during 2008. Only New York,
Los Angeles and Chicago outsized the Washington metro area economy.
Note: Figures are estimates. Procurement figures do not include US Postal Service and FAA purchases. 3/01 - 11/01 2.5%
Source: Dr. Stephen Fuller, Delta Associates; January 2010.
7/90 - 3/91 0.2%
7/81 - 11/82 3.1%
1/80 - 7/80 2.3%
We expect GRP in the metro area edged down 0.5% during 2009, once Federal Procurement Spending
the numbers are finalized. This compares favorably to our projection of the Washington Metro Area
national gross domestic product change of negative 2.5% in 2009.
The most important element of Federal spending in the metro area economy
is procurement — the Federal government’s purchase of goods and services
from the private sector. Spending increased notably during 2008 by 10% to
$66.5 billion – above the 15-year annual average of 7.5%. The rise in spending
was due, in part, to an increase in funds flowing from the Department of
Homeland Security. Procurement funding increased 37% in this agency,
compared to the average increase of 20% per annum.
*Estimate.
Source: Dr. Stephen Fuller, Delta Associates; January 2010.
46 Section Three
Procurement spending is projected to rise 13.2% Consumer Confidence Index
in 2009, once the numbers are finalized, to $75.3 Greater Washington Area
billion in current year dollars, accounting for
53% of all Federal funds flowing into the area
economy. This level of procurement spending
supports about 550,000 private sector jobs.
Regional Consumer
Source: Greater Washington Board of Trade, Delta Associates; January 2010.
Confidence Index
According to the Greater Washington Board of Trade, younger generations are more confident about
the economy compared to older generations, as the younger consumer has time to recoup money
lost during the recession. This is no doubt a boon to the area, as the Washington metro has a larger
share of young and affluent residents living here. We expect those closer to retirement to remain
more cautious about spending in the next two years.
With consumers stashing cash during the recession, a rebound in spending is anticipated during 2010
– riding upon the economic recovery and pent-up demand for goods.
Retail spending is projected to rise 5.5% in the Washington metro area during 2010, according to
Woods & Poole. This is above the 25-year annual average of 3.5%. The 2010 sales total is expected to
mirror what spending totaled back in 2004. This will help boost the GRP in the metro area.
48 Section Three
Consumer Confidence Index Total Jobs Created or Saved Through the American Recovery and
Greater Washington Area Reinvestment Act
Washington Metro Area
Source: Greater Washington Board of Trade, Delta Associates; January 2010. *Delta Associates’ estimate based on state-wide job creation and regional population share.
Source: Recovery.gov, Delta Associates; January 2010.
Payroll Job Growth We believe GRP may have declined 0.5% during 2009, once the numbers
Washington Metro Area | 2000 Through 2012 are finalized. This decline is less severe compared to the national decline
of 2.5%. The decline locally is due to retail spending and construction –
the two hardest hit industries in the metro area, which are taking longer to
recover. Conditions should stabilize in 2010 with a GRP rise of 2.7%. This
compares to the national GDP rise of a projected 2.5%.
Job growth will resume in 2010, with 24,900 new jobs and gain
steam in 2011 with 34,900 new jobs. It is not until 2012 or 2013 that
we are likely to return to job growth numbers that parallel historic levels
Note: Data restated since 2000 consistent with redefinition of metro area in March 2005.
Source: Dr. Stephen Fuller, Delta Associates; January 2010. – 52,000 annual average. This level of performance is likely to be among
the strongest in the nation among metro areas. And it provides plenty of
job and population growth to support a recovering and eventually robust
housing and commercial real estate market in the period ahead. Just
where are these opportunities? Read on . . .
51
The Washington Area
Office Market
52 Section Four
National Context Washington metro has the fourth-lowest overall
vacancy rate among large metro areas in the
The Washington metro area is the 3rd largest office market in the nation, behind New York and Los United States. The New York metro area holds
Angeles/Orange County. the lowest overall vacancy rate in the nation, at
10.7% – at least for now.
Net Absorption: 630,000 SF Net Absorption of Office Space And Change in Sublease Space
2008 vs. 2009 (000s of SF)
Net absorption of office space in the Washington metro area totaled
630,000 SF, compared to 3.4 million SF in 2008 and the long-term average Direct Space Net Sublease Space Absorbed
of 7.5 million SF.
Absorption or (Returned)
Market 2008 2009 2008 2009
Northern Virginia and the District experienced positive net absorption NOVA 2,333 360 (386) (348)
during 2009, as government, health care, and government contractors
Sub MD 524 (649) (21) (113)
signed notable deals in these sub-state areas. Suburban Maryland
experienced negative net absorption, as demand could not keep pace District 546 919 0 (706)
with tenants vacating large blocks of space. For instance: Total 3,403 630 (407) (1,167)
Lockheed Martin vacated 180,000 SF at 6560 Rock Spring Drive in the Source: Delta Associates; January 2010.
The most notable non-renewal deal of the year was during the 2nd quarter,
Net absorption of Class A space totaled 2.8 million SF in the Washington
with the Raytheon Company’s lease of 600,000 SF in AOL’s former space at
metro area during 2009, compared to 4.3 million SF during 2008.
22110-22270 Pacific Boulevard in Loudoun County.
54 Section Four
Gross Leasing Activity Despite the national recession, gross leasing activity in the Washington
Washington Metro Area | 2000 Through 2009 metro area increased 12.3% in 2008 compared to 2007, due in part to
numerous renewal deals by the Government as tenants wait to relocate to
bases under the Base Realignment and Closure (BRAC) decision. However,
the tech/telecom sector experienced a notable rise in leasing due in part
to procurement spending, which increased 10.0% during the year.
The share of gross leasing activity has increased in the past year by
government and legal/finance/business services. This is consistent with
the growth in jobs in these categories.
*Estimate.
Source: CoStar, Delta Associates; January 2010. Vacancy Rate: Up to 13.0%
Construction starts of office space in the Washington metro area Source: CoStar, Delta Associates; January 2010.
have slowed down to a trickle – totaled 2.1 million SF during 2009,
compared to 7.8 million SF in 2008.
Given the credit crisis, developers are finding it difficult to either Projects Agency (DARPA) to fully lease the new office project, the Shooshan
start construction or continue construction that has broken ground. Companies intends to develop a 353,000 SF office building at 675 N. Randolph
Only all-cash projects or projects with notable pre-leasing in place Street in the RCB Corridor of Arlington, Virginia.
appear to be breaking ground at this time.
Approximately 11.7 million SF of office space, including renovations, delivered in
One project of note likely will start construction early in 2010. the Washington metro area during 2009 at 23% leased. During 2008, 10.7 million SF
Armed with the recent deal with the Defense Advanced Research delivered at 36% leased upon delivery.
56 Section Four
Projected Supply vs. Demand: Vacancy to Decline by Office Space Deliveries
December 2011 Washington Metro Area | 1980 Through 2009
We project the overall vacancy rate will decrease over the next two years,
from 13.0% today to approximately 12.6% by December 2011.
Office Space Demand and Deliveries Office Space Demand and Deliveries
Washington Metro Area | 24 Months Ending December 2011 Washington Metro Area | 24 Months Ending December 2011
Source: Delta Associates; January 2010. Source: Delta Associates; January 2010.
Rents: Declined in 2009; Cyclical as vacancy remains high. Rents declined 6.0% We project rents will decline 5.0% to 7.0%
inside the Beltway during the same period. during 2010, as vacancy remains elevated.
Increases Expected by 2012
However, better buildings in better submarkets
Concessions to tenants increased during 2009, will outperform these averages.
The average effective office rent declined 6.9%
as competition to sign tenants intensified.
during 2009, compared to ticking up 0.1%
The average TI cost for space increased to By 2012 we expect rents to begin their cyclical
during 2008. Rents declined at a faster pace
approximately $45.00/SF, for all classes of increase.
outside the Beltway, by 7.8% during the year,
space. The average free rent offering rose to 4.0
months at December 2009.
1
NCREIF compiles return based on its members’ $87.7 billion office portfolios. The index includes both
*Trailing 12 months current income and capital appreciation returns.
Source: Real Capital Analytics, graphic by Delta Associates; January 2010. Source: Delta Associates, based on data in NCREIF’s 3rd Quarter 2009 Real Estate Performance Report.
58 Section Four
Office Market Outlook: Identifying Opportunities Overall Office Vacancy
During the Recovery Outside the Beltway
The Washington metro area market should remain one of the best
performing office markets in the nation. We believe the recession
bottomed out locally during the first half of 2009 and a recovery is
underway. Recovery will be slow during 2010, as the Federal government’s
oversight activities begin to ramp up hiring and office leasing. However,
meaningful growth will not be felt until 2011. And “normalized” office
market conditions will not be felt until 2013.
We believe vacancy outside the Beltway to have peaked at year-end Source: Delta Associates; January 2010.
2009 at 15.9%, as most projects have already delivered. We expect
vacancy to decline slowly during 2010 and 2011. However, we do not
expect vacancy to reach the rent equilibrium zone until 2015 or so, as
we believe demand will be softer outside the Beltway compared to
inside the Beltway.
We project rents will decline by 5.0% to 7.0% in 2010 – with concession
offerings limiting effective rents. We expect available space to remain
elevated in 2010, keeping rents down. By 2012 rents should gain
traction, and return to the long-term average increase of 3.8% by 2013.
The District could attract a few suburban tenants, as the emerging submarkets of NoMa, Southwest,
and Capitol Riverfront deliver spec construction at lowered rents. Tenants looking to trade up could
choose these submarkets.
We anticipate limited investment sales into 2010 – with the exception of all-cash transactions, as
lending remains modest. With stressed and distressed assets arriving to the market, sales volume
should increase in the near-term as potential buyers take advantage of reduced prices.
Overall, the long-term outlook for the metro area remains positive, driven by the continued
activity of the Federal government. We expect the Washington metro office market to remain
among the best performers in the nation.
1. Selectively accumulate assets at below replacement cost while prices and interest rates are low.
2. Invest in repositioning older, under-performing assets at superior locations for delivery in 2013
or sooner if tenancy is not a risk until 2013 or beyond.
3. Develop and deliver new projects before 2013 only on a tenant-driven (pre-leased) basis or
sooner in the few submarkets where supply/demand fundamentals warrant.
4. Position now for development throughout the metro area in 2013 and beyond as more
“normalized” conditions return to the market.
60 Section Four
The Washington Area Office Market 61
The Washington/Baltimore
Flex/Industrial Market
63
The Washington/Baltimore
Flex/Industrial Market
Regional Market Contracted in 2009; Stabilization Largest U.S. Flex/Industrial Markets 2009
Expected In 2010 2009
64 Section Five
2009 Market Highlights Flex/Industrial Vacancy Rate
Select Metro Areas | Year-End 2009
Net absorption: Negative 2.3 million SF, compared to positive 4.4
million SF in 2008.
Sublease space: Increased by 217,000 SF. Available sublease space
represents 0.9% of standing inventory.
Overall vacancy rate: 11.4%, up from 10.1% one year ago.
Under construction: 1.1 million SF, down from 3.5 million SF one year
ago.
41% of the space under construction is pre-leased, up from
30% a year ago.
Rents: Down 4.3%, compared to rising 0.3% in 2008.
Investment sales: $136.9 million. Average sales price: $58/SF.
Net absorption during 2009 fell into the negative, as demand could not
keep pace with tenants vacating space. Although there were some gains Source: CoStar, Delta Associates; January 2010.
in leasing of bulk warehouse space, it was offset by tenants vacating flex/
warehouse and flex/R&D space.
Leasing of bulk warehouse space was fairly healthy, as: Flex/Industrial Net Absorption
Washington/Baltimore Region | 1997 Through 2009
Sun Products Corporation leased 503,000 SF at 1900 Clark Road in
Harford County.
IDX Corporation leased 434,000 SF at 8901 Snowden River Parkway in
the Columbia submarket.
Hhgregg leased 393,000 SF at 14301 Mattawoman Drive in Prince
George’s County.
Parcorini Metals leased 135,000 SF at 7700 Rolling Mill Road in the
Baltimore County East submarket.
Location of Flex/Industrial Inventory & Absorption Buildings with Contiguous Blocks of Available Space
Washington/Baltimore Region | 2009 Washington/Baltimore Region | December 2009
Net absorption of newer space (built after 1987) totaled negative 1.1
million SF during 2009, compared to 5.2 million during 2008. For newer
space, the Washington metro area absorbed negative 836,000 SF and
Note: Includes buildings under construction or renovation.
the Baltimore metro area absorbed negative 240,000 SF. Source: CoStar, Delta Associates; January 2010.
We estimate gross leasing activity in the Washington/Baltimore region The most notable lease deal in the region during 2009 was Sun
totaled 17.1 million SF during 2009, below the 10-year average of 20.9 Products Corporation’s lease of 503,000 SF at 1900 Clark Road in the
million SF. Harford County submarket of the Baltimore metro area. The most
notable deal in the Washington metro area was Hhgregg’s lease of
66 Section Five
393,000 SF of bulk warehouse space at 14301 Mattawoman Drive in Flex/Industrial Vacancy Rate
Prince George’s County. Washington/Baltimore Region | 1998 Through 2009
There are 1,114 buildings with contiguous blocks of available space over
10,000 SF in the Washington/Baltimore region. This compares to 963
buildings one year ago. The largest block of space is 1.1 million SF at 2800
Eastern Boulevard in the Baltimore metro area.
Vacancy Rate Up
The region’s overall vacancy rate for newer product (built since 1987)
increased to 13.1% at year-end, from 10.7% one year ago. The region’s
Direct Flex/Industrial Vacancy Rates
direct vacancy rate for newer product is 11.9%, up from 9.5% a year ago.
Washington/Baltimore Region | All Space
The regional flex/industrial vacancy rate likely will tick down to 11.0%
by year-end 2010, from 11.4% today. The overall vacancy rate will edge
down 40 basis points, as we project demand to outpace new supply by
approximately 1.0 million SF.
We expect more progress in 2011, with the vacancy rate declining towards
the equilibrium zone (10.3% to 10.5%), heralding the resumption of region-
wide rent growth.
Rent growth for each product type experienced decline during 2009. Rents
declined most notably for flex/R&D space, as overall vacancy increased
Flex/Industrial Space
Deliveries and Pre-Leasing | Washington/Baltimore Region | 2009
the most, at 260 basis points over the past year, for this product type.
The Washington metro area experienced stronger rent declines of 4.9% Millions of SF
during 2009, as overall vacancy climbed 190 basis points since year-end Market Delivered % Pre-leased
2008. Rent decline in the Baltimore metro area was lower at 3.5%, as overall Washington 1.5 20%
vacancy ticked up 70 basis points. 0.3 46%
Baltimore
We expect flex/industrial rents to edge down during 2010, as the region Regional Total 1.8 25%
slowly recovers from the national recession. We anticipate rents will Source: CoStar, Delta Associates; January 2010.
tick down by 2.0% to 3.0% in 2010, as the economy gradually recovers.
However, during 2011 we expect rents to gain slight traction as the region-
wide vacancy rate continues to decline.
68 Section Five
Investment Sales
Projected Year-End 2010 Vacancy Rates
Washington/Baltimore Region | Flex/Industrial Market | (Millions of SF) Flex/industrial investment sales volume totaled $137 million in the
Washington/Baltimore region during 2009, compared to $564 million in
Wash. Balt. Regional 2008.
Metro Metro Total
Inventory Sales prices averaged $58/SF for the 15 transactions that closed during the
year. This compares to $102/SF for 45 transactions in 2008.
Inventory at 12/09 177.1 178.7 356.4
Pipeline Thru 12/101 1.1 0.5 1.5 We expect limited investment sales activity, though possibly some
Inventory at 12/10 178.7 179.2 357.9 distressed sales, during 2010. With low prices, few deals on the market,
and tight credit markets, we expect a low volume of transactions again
Supply2 vs. Demand
in 2010. Regardless, investors will remain interested in the Washington/
Vacant Space at 12/09 21.9 18.6 40.5 Baltimore flex/industrial market, given its long-term, stable nature.
New Supply Thru 12/10 1.1 0.5 1.5
Avail. Space at 12/10 22.9 19.1 42.0 The Flex/Industrial Market Outlook:
Demand Thru 12/10 1.7 0.8 2.5 Identifying Opportunities During the Recovery
Vacant Space at 12/10 21.2 18.3 39.5
Flex/industrial market conditions in the Washington/Baltimore area should
Vacancy Rate2 stabilize during 2010 Demand should remain steady in the Baltimore
Vacancy at 12/09 12.3% 10.4% 11.4% metro area, as tenants start to lease space due to BRAC relocation.
Vacancy at 12/10 11.9% 10.2% 11.0%
1
Conditions in the Washington metro area should remain sluggish, as
Pipeline equals buildings under construction and those planned that may deliver by year-end 2010.
2
Includes sublet space. tenants are hesitant to lease space until improving business conditions
Source: CoStar, Delta Associates; January 2010.
are felt.
71
The Washington Area
Apartment Market
However, we are in the midst of a more competitive apartment market due to deliveries Net effective rental rates for all classes of apartments
outpacing demand for the past 18 months. While several quarters of weaker performance are in the Washington metro area declined 2.0% during
ahead for the Washington metro, the groundwork is being laid for stronger market conditions 2009. On the other hand, rents declined 3.7%
in 2011 and 2012, and an emerging product shortage by 2012 in select submarkets and nationally. Class A rents in the Washington metro
widespread shortages in 2013. area declined 1.7% in 2009.
The pipeline of supply continues to decline from its peak in the fourth quarter of 2007.
Annualized Class A absorption exceeds 7,900 – the highest of any metro market in the
nation.
72 Section Six
2009 Washington Metro Apartment Apartment Vacancy Rates
Market Highlights: Major Apartment Marktes | 2009
shortages by 2012.
Vacancy
Concessions for All Class A Properties Washington metro area vacancy rate for all
Washington Metro Area
classes of apartments was flat, remaining at 4.3%
at year-end 2009. The vacancy rate for Class A
Year-End 2006 Year-End 2007 Year-End 2008 Year-End 2009 apartments declined – moving down to 3.6%,
No. VA 2.7% 5.8% 5.3% 6.8% from 4.4% a year ago. This rate remains elevated
for the Washington metro area but it continues
Sub. MD 2.1% 3.4% 6.0% 7.3%
to be among the lowest in the nation.
District 2.7% 3.3% 6.3% 8.7%
Metro-Wide 2.4% 4.8% 5.7% 7.2% The stabilized vacancy rate remains elevated –
flat since year-end 2008 at 4.3%. However, only
in the first quarter of 2009 did rents for Class A
product begin to decline – for the first time since
Concessions for Class A Properties Currently Filling 2003.
Washington Metro Area
Concessions
Year-End 2006 Year-End 2007 Year-End 2008 Year-End 2009
No. VA 6.0% 9.5% 12.8% 14.9% Concessions rose for all Class A projects, from
5.7% at year-end 2008 to 7.2% at year-end 2009.
Sub. MD 6.0% 8.4% 12.0% 15.0%
Concessions for all Class A properties (that
District 5.4% 7.9% 7.8% 17.8% is, those filling up as well as those replacing
Metro-Wide 5.9% 9.0% 11.5% 15.7% turnover) are the highest they have been since
2003. See the accompanying table for details at
the substate level.
Source (For Both): Delta Associates; January 2010.
74 Section Six
Concessions for projects currently filling up,
and not yet stabilized, are the highest we have A Word About Our Definition of Vacancy Rate
ever recorded. See the accompanying table for
details at the substate level. We sometimes hear from apartment developers and managers that their portfolio vacancy rate
is 200 to 400 basis points higher than the numbers we report, which places them under unfair
Concession rates are up due to the large investor scrutiny. As a result, we thought it appropriate to describe here our term “vacancy.”
number of projects in lease up, currently 37.
However, this number is a decline from a peak When we conduct our quarterly surveys, we obtain information on “units available to lease”
of 54 projects in lease-up in the first quarter of – that is, physical vacancy. Obtaining the information this way, of course, may produce several
2009. Approximately 54% of the 10,322 units important differences from “vacancy” as reported in your financial statements. Simply stated,
in projects leasing up have been absorbed, the difference can be characterized as:
compared to 49% of 14,640 units in lease-up at
year-end 2008. Delta’s Definition: Available units to lease
Operating Statement Vacancy: Economic vacancy
Pipeline
Our definition (available units) may therefore be understated compared to yours (economically
The pipeline is shrinking: During 2007, the vacant) by our exclusion of units occupied by non-paying tenants (which we cannot know), and
pipeline grew significantly in response to of units not available for lease, such as employee units and model apartments. We estimate that
the robust performance of the apartment this adds about 100 to 150 basis points to your definition of vacancy, as compared to ours. Our
market, available development financing, and vacancy rate may also be understated, compared to yours, by our exclusion of what at present
reprogrammed condominium projects. The are economically vacant, on-notice units for which a lease to occupy in the future has been
metro-wide pipeline peaked in the fourth signed (hence, they are not currently available to lease). We estimate that this potentially adds
quarter of 2007, with declines registered across another 150 to 200 basis points to your definition of vacancy, as compared to ours.
the region throughout 2008 and 2009.
76 Section Six
Annual Net Apartment Absorption These factors have led to the absorption of
Class A and B Units | Washington Metro Area 7,955 Class A units in the past twelve months.
Concurrently, jobs losses in economic sectors
which consist of Class B renters, coupled with
move-ups to Class A properties due to rent
compression, have resulted in the dis-absorption
of over 1,800 Class B units during 2009. So while
Class A absorption remains near record highs,
total unit absorption totaled 6,061 units over
the past twelve months – closer to the historical
norm of 4,700 units per annum.
Source: Delta Associates; January 2010. Source: Delta Associates; January 2010.
Supply compared to demand? The tightening credit markets have Projected Deliveries
impacted development throughout the region, bringing construction Projects Currently Under Construction
starts to a near standstill for most of 2009. The “materialization rate” for Washington Metro Area | 2010 Through 2011
units that were to have begun construction over the preceding year is just
6%, with only 1,073 units starting construction in 2009.
Apartment unit deliveries will continue their cyclical decline from 6,417 in
2009 to an estimated 4,635 units in 2010 – a 28% decrease.
78 Section Six
Summary of Washington Apartment Indicators Demand and Supply Projections, Class A Apartment Market
Washington Metro Area | December 2009 Through December 2012
NoVa SubMD District Metro-Wide
Net Absorption Class A & B:
2009 2,541 1,611 1,909 6,061
2008 3,404 2,384 505 6,293
2007 1,001 380 606 1,987
Deliveries:
2009 3,510 1,737 1,170 6,417
2010 2,568 1,245 822 4,635
2011 513 677 738 1,928
2012 2,182 1,232 1,232 4,646
Starts
4Q 2009 46 0 289 335
2009 477 307 289 1,073
1
Probable supply after projected attrition.
36-month Pipeline: 1/ 2
Includes unleased units at projects in lease-up.
Source: Delta Associates; January 2010.
At 12/31/09 7,830 5,093 3,683 16,606
At 12/31/08 11,884 9,411 5,902 27,197
At 12/31/07 17,120 12,706 7,126 36,952
1/
Class A Apartment Vacancy Rate
Includes vacant units in projects leasing up, units under construction, and units expected to begin con-
struction and deliver in the next 36 months. Washington Metro Area | 2002 Through 2012
Rent Projections
We believe that supply will come into equilibrium with demand at the metro
level in late 2011 or early 2012. Given the projected delivery schedule of
projects currently under construction, we expect the region-wide vacancy
rate for stabilized Class A apartment properties to edge up to the mid-4%
range in 2010 before declining to 1.1% by year-end 2012. The 36-month
projection now extends beyond the peak vacancy of this cycle when the
pipeline’s low materialization rate and the subsequent improvement of
supply/demand balance begins to impact the market.
80 Section Six
Apartment Market Outlook: Identifying Opportunities During the Recovery
In this phase of the real estate cycle, the successful investor/developer will:
1. Selectively accumulate assets at below replacement cost while prices and interest rates are
low.
2. Invest in repositioning existing under-performing assets.
3. Develop new projects before 2012 only with superior design features at premier sites within
submarkets that will outperform the overall market.
4. Position now for development in 2012 as the metro area develops a supply shortage.
Superior design features: As the mixed-use moniker becomes more prevalent at projects across
the region, what was once seen as a niche is increasingly common. Merely adding first floor retail to
an otherwise common project will yield diminishing differentiation in this market. We feel creative
approaches to place-making, partnered with bold design, and designing for niches is essential
– niches such as student housing, seniors housing, mid-market housing in some locations and up-
market housing at others.
Superior locations: Not just transit access, but those submarkets with superior supply/demand
fundamentals are keys to success in the period ahead. And by our analysis there are many submarkets
with good supply/demand fundamentals that warrant attention and development before the metro
“sweet spot” of 2012.
Timing: Except for a half-dozen submarkets that will be ready sooner, most successful developments
will deliver in 2012 and beyond. With entitlements especially difficult in the region, it is not too soon
to be positioning for the next round of development – in 2012 in most areas and even before then in
select submarkets.
83
The Washington Area
Condominium Market
Sales Volume Up; Pipeline Down, With New Product 2009 Condominium Market Overview
Shortages Expected in 2010 in Select Submarkets
Sales volume: Over the past few quarters,
Given the free-fall of 2008, many in the TrendLines audience snickered last year when we condominium sales volume in the Washington metro
stated that prices would gain traction in 2009 in select submarkets and that sales volume would area has accelerated. For 2009 it totaled 2,350 units
improve in 2009 over 2008. And we said this with the headwind of job losses in the metro area. – a level not seen since 2007. Several factors have
Nevertheless: played a role in the increase in sales activity:
Prices increased 0.9% in Arlington and Alexandria. Interest rates remained near historic lows at
year-end and were below 6% throughout 2009.
Metro-wide volume increased 34%, to 2,350 units in 2009.
Near the end of the year, FHA rules were
relaxed to allow the new condominium pre-sale
Let’s hope our tarot cards are working two years in a row:
requirement to drop from 70% to 30%.
Price traction will likely spread to a few more submarkets in 2010, including the District. Since January 31, the metro area has been
growing jobs, mostly in sectors that support
Volume should increase in 2010 over that of 2009 – perhaps to 2,400 to 2,700 units.
condominium ownership.
Select submarkets are anticipated to experience product shortages in 2010, triggering
The first-time home buyer credit helped bring
condominium conversions in the next six to 18 months, and new product construction as
more buyers to the market. The tax credit was
soon as prices rise to support new development and a lender can be found.
extended until April 2010 and expanded to
include the move-up market, which should fuel
National Context more demand in the first half of 2010.
Contract kick-outs are returning to more
The Washington metro area is the fifth largest condominium market in the nation, with normalized levels, since building deliveries
approximately 220,300 units. Only the nation’s three largest cities (New York, Los Angeles, dropped off in 2009. A typical kick-out rate is
and Chicago), plus the popular second-home location of Miami, have a larger inventory of 15%-20%, whereas when the market was severely
condominiums than the Washington area. oversupplied, cancellation rates were sometimes
higher than 50%.
84 Section Seven
Prices continue to decline metro-wide, but in some submarkets, Net New1 Unit Sales By Jurisdiction
the declines are moderating. Buyers sense that the market may be 2009
recovering and are taking advantage of lower prices before they start
to increase. Submarket # of Units Sold2
Sales pace: Projects that have sold out in the past two years have averaged
about three sales per month.
In 2009, there were a total of 2,350 sales, which is an increase of 34% from
2008. A disproportionate share of this increase came in the District and
Northern Virginia. Lower sales figures in Suburban Maryland are perhaps
explained by a lack of job growth in that substate area compared to the
District or Northern Virginia. The most sales during 2009 occurred in
Loudoun/Prince William (attributable to first-time buyers) and the District
(thanks to government job growth).
Source: Delta Associates; January 2010.
Two firms accounted for 44% of all new unit sales in 2009 – McWilliams|Ballard
and The Mayhood Company.
However, prices increased in Arlington and Alexandria – Source: Delta Associates; January 2010.
The region’s highest effective prices per square foot are New Condominium Prices Per SF*
found in the District and Arlington/Alexandria, whereas Washington Metro Area | Year-End 2009
the lowest are found in Loudoun/Prince William and Anne
Arundel/Howard.
86 Section Seven
36-Month Condominium Market Pipeline 36-Month Pipeline Stabilizes; Years
Washington Metro Area | 2008 Through 2009 of Supply Dwindles; Pace on the Rise
The trend of removing condominium units from the pipeline has slowed dramatically, as market
conditions are firming.
Projects that sold out during the past two years have averaged three units of sales per month. Actively
marketing projects are averaging about the same.
The Washington metro area currently has an inventory of 6,071 new condominium units to sell –
perhaps a 2.6-year inventory at current rates of net sales velocity. While prices declined 5.8% for new
units in 2009, we believe prices will trend higher in select submarkets in 2010.
Even as there is an increase in mortgage interest rates and the end of the home buyer tax credit
occurs in April 2010, there are other circumstances in play that will allow a net sales pace of 2,400 to
2,700 units per annum over the next two years.
With this, select jurisdictions will find equilibrium arriving quickly – it appears that equilibrium has
arrived in Arlington/Alexandria and will reach the District soon. As a result, it is entirely possible that
within the next 6 to 18 months, we may see a trend of apartment projects converting to condominiums
in select submarkets due to a tightened condominium pipeline and increased demand. Given enough
time for prices to rise, new development may commence in 2011, at least in select submarkets. This,
of course, presumes one can find a lender willing to lend on a condominium deal.
88 Section Seven
The Washington Area Condominium Market 89
8
The Washington Area
Retail Market
91
The Washington Area
Retail Market
92 Section Eight
Although vacancy has risen in the metro area Average Household Income
due to the economic slowdown, shopping
2000 2008 2013
center retail maintains a relatively low vacancy
rate. A low vacancy rate is maintained by steady Jurisdiction (Actual) (Est.) (Proj.)
population growth, high incomes, and the fact Washington Metro Area $80,600 $102,800 $118,400
that the metro area has lost the fewest jobs of U.S. $56,600 $67,900 $75,800
all major metro areas.
Source: Claritas Inc; January 2010.
Retail Inventory
Given the demand for groceries at all points We survey these centers each year to tabulate The inner and outer ring submarkets
of the economic cycle, grocery-anchored vacancy and rent data. The charts following experienced the steepest rise in vacancy during
shopping centers maintain the greatest stability summarize trends from 1999-2009. the year, at 180 and 190 basis points, respectively.
compared to other retail property types. As a The core submarkets experienced only a slight
result, the bulk of investor interest and therefore The metro-wide vacancy rate for grocery- rise in vacancy – at 10 basis points.
our analysis in this section is focused on grocery- anchored shopping centers increased over
anchored shopping centers. the past year to 5.3% at year-end 2009, from Rental rates at grocery-anchored centers
3.7% one year ago. The Suburban Maryland decreased 5.8% in 2009, after rising by 1.7%
Of the total retail inventory in the Washington vacancy rate at year-end 2009 was 5.4%, a rise in 2008. Metro-wide average in-line tenant rents
metro area, 55.9 million SF is located in 319 of 160 basis points over the past year. The were $31.77/SF at year-end 2009. Suburban
grocery-anchored shopping centers, which is Northern Virginia vacancy rate was 5.3%, a rise Maryland rents were $32.25/SF, a 4.8% decline
almost half of the total retail inventory in the of 170 basis points since year-end 2008. from one year ago. Northern Virginia rents were
metro area. $31.29/SF, down 6.6% from year-end 2008.
The core submarkets experienced the least decline in asking rates during
2009, as there continues to be demand within the core and this area has
limited availability.
The inner and outer rings experienced steeper rent declines at 5.4% and
Note: Estimate.
7.4%, respectively, as these submarkets have less demand and a greater
Source: CoStar, Delta Associates; January 2010. amount of available inventory.
There are additional stores in the planning stages that are not included in
the adjacent table, some of which may deliver as late as 2013.
We expect few projects to move forward in the near-term, with the exception
of projects with notable pre-leasing and financing in place. However, given
the long-term demand for goods in the metro area, we believe developers
will look to deliver new product by mid-2012, as the market transitions back
to landlord conditions.
94 Section Eight
Grocery-Anchored Shopping Center Asking Rents Asking Rents Under Renovation
Washington Metro Area | 1999 Through 2009 Grocery-Anchored Shopping Centers | Washington Metro Area
Source: Delta Associates; January 2010. The per store average sales volume for all grocers in the Washington metro
area was $24.4 million during 2009, a 4.3% increase from $23.4 million one
year ago. Wegmans surpassed all other food retailers, with $62.2 million
per store. However, this is a 24% decline from $81.4 million during 2008
Notable Grocery-Anchored Shopping Centers Under Construction
for Wegmans.
or Under Renovation
Washington Metro Area | Year-End 2009
Walmart scored top sales growth, as food sales increased by 11.2% in
2009, after a 1.4% rise in 2008. Giant Food experienced a healthy 4.2% rise
Shopping Center RBA Anchor during 2009.
Dulles Landing 700,000 Super Wal-Mart
685,000 Wegmans During 2008, traditional grocers outpaced organic/ specialty stores
Woodmore Towne Center
in average per store sales volume growth by 60 basis points, as these
Potomac Town Center 550,000 Wegmans1
companies reinvented themselves in order to compete with the organic/
Village at Leesburg 464,000 Wegmans1 specialty market.
North Bethesda Market 230,000 Whole Foods2
Given current economic conditions, consumers have shifted spending
Moorefield Village 150,000 Harris Teeter
towards super center/club stores in order to save money, however. During
Urbana Village Center 94,000 TBA 2009, super center/club stores outpaced organic/specialty and traditional
Goose Creek Village 73,000 Harris Teeter3 stores in average per store sales growth by 130 and 150 basis points,
respectively.
Adams Square Shopping Center 60,000 Giant1
Total 3,006,000 Walmart, although not a strong player in the Washington metro area,
1/
operates just over 3,500 stores nationwide, with 75% of these stores as
Building/renovating, using existing grocery store as an anchor.
2/
Relocating from existing store at Congressional Plaza. supercenters, which includes a full-service grocery store. The company
3/
Phase 1 only.
Source: CoStar, Washington Business Journal; Delta Associates, January 2010.
expanded supercenters by 7% nationwide during 2009, compared
to shuttering 8% of the traditional format stores. Given supercenters
experience better returns, the company has expanded this format by 34%
since 2005, compared to shuttering the same amount of the traditional
format stores. During 2010, the company plans to add 125-140 super-
center stores.
96 Section Eight
Change in Total Retail Sales most recent Washington Region Confidence Index by the
Washington Metro Area | 2001 Through 2012 Greater Washington Board of Trade.
Percent Increase
During 2010, we expect shopping centers anchored
Industry 2010 vs. 2009 by a grocer or drug chain to be successful. We also
Motor Vehicle 12.5% expect centers located in healthy micro-markets, such
Building Supplies 10.3% as Pentagon City and Potomac Yards, to remain stable.
Shopping centers with notable vacancies will have a hard
Home Furnishing 9.1%
time attracting new tenants, unless the center is located
Gas Stations 6.5% in a top performing submarket. If these centers fail to
Electronics 4.1% attract tenants over the next year or two, redevelopment
into a different use could occur.
Clothing 3.5%
Health/Personal Care 3.5% Look for the younger consumer to help pull up retail sales
Food/Beverage 2.1% over the next couple of years. According to the Greater
Washington Board of Trade, younger generations are
Total Retail 5.5%
more confident about the economy compared to older
generations. This is expected, as the younger consumer
Source: Woods & Poole, Delta Associates; January 2010.
has time to recoup money lost during the recession. We
expect those closer to retirement to remain timid about
spending in the next two years.
Sources: Greater Washington Board of Trade, Delta Associates; January 2010. Sources: Greater Washington Board of Trade, Delta Associates; January 2010.
98 Section Eight
Investment Worthiness Index developers and financial experts, here in the Washington
Grocery Anchored Shopping Centers | Washington Metro Area region. In 2009, our respondents scored grocery-
anchored shopping centers in the metro area at 6.2 for
investment worthiness, up from 4.3 in 2008. This product
type increased two spots to fifth place for investment
worthiness out of ten alternatives.
With this product type so sensitive to consumer sentiment, the Metro Area 12-Month Total Return at 3rd Quarter 20091
successful investor/developer will: Washington -12.72%
Chicago -13.88%
1. Selectively accumulate assets at below replacement cost
while prices and interest rates are low. Los Angeles -14.73%
3. Develop new projects before 2011 in select locations with Dallas -17.60%
good supply/demand fundamentals like the District of Phoenix -26.96%
Columbia.
1
4. Develop more broadly throughout the metro area after NCREIF compiles return based on its members’ $54.1 billion retail portfolios.
The index includes both current income and capital appreciation returns.
2011. Source: NCREIF, Delta Associates; January 2010.
103
Capital Markets and
Investment Trends
Volume Off Sharply But Uptick Seen at Year-End; Last year at this time we expected that sales would pick up toward the
end of 2009 due to the entry of distressed assets into the market. Our
Cap Rate Rise May Have Peaked
expectations were unfulfilled for the most part. But sales volume did turn
up a bit, as buyers recognized that prices for the most part are well below
It was just two years ago that national investment sales set a record – for
replacement cost and low enough to attract capital in a risk re-priced
example, $211 billion in office building sales in 2007. Re-pricing of risk, a
world.
profound lack of credit, and a buy-sell price gap have put an end to all of
that.
2009 transactions are characterized as all-cash, or assets with little market
risk, or foreign or REIT buyers, or impaired properties with high cap rates
or extraordinary discounts.
National Investment Sales of Office Buildings
2001 Through 2009 But several things became evident by the end of the year:
There is a bifurcated cap rate market: A lower rate for low-risk assets
and a higher rate for deals with hair.
There are more buyers than sellers. After all, at these prices, owners
are either underwater and can’t sell or are choosing to hold – in a
sense choosing to buy their own asset at these prices. As a result, the
rise in cap rates has paused. Stopped? We are not sure.
With today’s low mortgage interest rates (even with tough terms),
and with rates likely to rise over the next several years, there is an
increasing urgency to buy.
Capital has been attracted to those few markets with the best
fundamentals – with Washington at the head of that list.
*Estimate.
Source: Real Capital Analytics, graphic by Delta Associates; January 2010.
So, who has been buying commercial real estate during this downturn? At
the national level, private equity was the greatest source of capital for 2009
office sales, with 33.2% of the total. Institutional and foreign buyers – who
tend to use little if any leverage – also were significant players in 2009, with
a combined 28.6% of office purchases.
Source: NCREIF, Delta Associates; January 2010.
The yield on Washington area office assets for the 12-month reporting
period ending September 2009 was second in the U.S., behind only
Houston’s. Returns are, of course, negative due to asset value declines.
Over the long term, returns are more predictable in Washington than in
most other metro areas. This led to a flood of capital entering the market
from 2004-07. Because of the run-up in values for Washington assets
during that period – and the downturn in market conditions brought about
by the recession – returns have trended negative recently. However, total
returns remain ahead of the national average for all four major product
types, as shown in the accompanying graph.
Note: Excludes portfolio sales and properties under contract; through November 2009.
Source: Real Capital Analytics, graphic by Delta Associates; January 2010.
Source: Annual survey by Delta Associates, conducted October 2009, of the region’s leading
commercial real estate players.
Source: Surveys by Delta Associates, conducted June 2009 and October 2009, of the
region’s leading commercial real estate players.
Investment Sales
Washington Metro Area | 1999 Through 2009
A lower cap rate and higher prices for assets with lower
risk and coupon-like quality (credit tenants, long-term
leases, little vacancy, high quality location and finishes,
etc.).
A higher cap rate and lower prices for assets with risk and
Source: Real Capital Analytics, CoStar COMPS, graphic by Delta Associates; January 2010. value-add features (vacancy issues, short-term lease roll-
overs, lower-quality location and finishes, etc.).
For example, since the peak of the market in 2007, Class A apartment
prices are down 41% for gardens and 34% for high-rise. This seems to
parallel the sum of cap rate decline and performance decline.
More to the point, values today are below replacement cost and this has
led to investors awakening at year-end 2009 to the fact it is time to buy
again. Hence, volume turned up significantly in the second half of the year.
For example, here are the facts for a Class A high-rise:
Average price per unit in 2009: $266,000 *Trailing 12 months; through November 2009.
Source: Real Capital Analytics, graphic by Delta Associates; January 2010.
Replacement cost in 2009 1/ $367,000
1/
$297,000 development cost plus $70,000 land cost
Source: Annual survey by Delta Associates, conducted October 2009, of the region’s leading
commercial real estate players.
Class A Garden and High-Rise Apartment
Average Sales Price | Washington Metro Area | 2007 Through 2009
Investment Sales Outlook
Cap Rates: In 2010, we expect cap rates to edge up nationally, but most
of the increase is likely behind us. Locally, we believe cap rates for most
product types peaked in 2009. Lower quality product and deals with hair
will see elevated cap rates continue into 2010 and beyond. For high-quality
deals we may see cap rates edge down.
Note: Buyer’s cap rate, based on prior 12 months NOI, before reserves.
Source: Annual survey by Delta Associates, conducted October 2009, of the region’s leading commercial real estate players.
111
2010 TrendSetter
Award Recipients
10
Each year, Transwestern and its research affiliate, Delta Associates, honor an individual, or individuals, who
have made a noteworthy contribution to the commercial real estate industry as a whole, and to the Washington
metropolitan area in particular.
This year our Private Sector honoree is Thomas S. Bozzuto, Chief Executive Officer of The Bozzuto Group.
We are also pleased to honor James E. Bennett, President and CEO of the Metropolitan Washington Airports
Authority, as our Public Sector TrendSetter of the Year.
Since the formation of The Bozzuto Group in 1988, Tom Bozzuto has led the company’s
development, construction and management of almost a billion dollars of income producing
and for-sale housing. During his more than thirty-year career, he has overseen and been
responsible for the creation of more than 46,000 residential units with a conservatively
estimated value of nearly $7 billion. Partners, employees and residents are uniform in their
praise of The Bozzuto Group’s standards, integrity and commitment to providing quality
housing for all, from luxury homes and apartments to affordable housing residences.
The firm’s ongoing success in a difficult real estate environment is a testament to their
unique ability to combine design appeal, quality construction, property management
excellence, and award-winning service with unswerving dedication to the communities they
serve. The Bozzuto Group’s many civic, charitable and philanthropic activities underscore
their desire to improve the lives of the region’s citizens and families as they revitalize
homes and neighborhoods. For his principled and steadfast leadership, particularly in
a time of market turmoil, we’re very pleased to honor Tom Bozzuto as our 2010 Private
Sector TrendSetter of the Year.
James E. Bennett
President and CEO
Metropolitan Washington Airports Authority
Growing traffic congestion and the need to augment the region’s transportation
infrastructure have long been cited as among the chief obstacles to the Washington
area’s long term economic vitality. In 2009, after years of effort, final Federal approval was
secured to fund the first phase of the Metrorail extension to Dulles Airport and Loudoun
County. This critical project will expand access for residents, employers and employees
to the entire metro region; provide a viable, dependable alternative to automobile travel;
and encourage high-density, transit-oriented development around Metrorail stations.
As President and CEO of the Metropolitan Washington Airports Authority, the entity
charged with managing the Metrorail extension, James E. Bennett has been instrumental
in moving this project from dream to reality. Construction activity has begun in earnest,
financial planning for the funding of Phase II is proceeding on schedule, and smart growth
and responsible land use plans are being designed that will be essential to safeguarding
Washington’s future. For his tireless advocacy and resolute commitment to making this
project a reality, we’re very pleased to honor James E. Bennett as our 2010 Public Sector
TrendSetter of the Year.
W. Christopher Smith, Jr. Donald Wood Oliver T. Carr, III Benjamin Jacobs Michael Glosserman Andrew Florance
2009 Private Sector 2009 Public Sector 2008 TrendSetter of the Year 2007 Private Company 2007 Private Company 2007 Public Company
TrendSetter of the Year TrendSetter of the Year President & CEO TrendSetter of the Year TrendSetter of the Year TrendSetter of the Year
CEO President & CEO Carr Properties Managing Partner Managing Partner Founder, Director,
William C. Smith & Co. Federal Realty Investment Trust The JBG Companies The JBG Companies President & CEO
CoStar Group, Inc.
Milton Peterson F. Joseph Moravec John E. (Chip) Akridge Congressman Tom Davis Bryant F. Foulger Clayton F. Foulger
2006 TrendSetter of the Year 2005 Public Sector 2005 Private Sector 2004 Public Sector 2004 Private Sector 2004 Private Sector
Chairman TrendSetter of the Year TrendSetter of the Year TrendSetter of the Year TrendSetter of the Year TrendSetter of the Year
The Peterson Companies Commissioner Chairman 11th District of Virginia Principal and Vice President Principal and Vice President
GSA Public Buildings Service Akridge Real Estate Services U.S. House of Representatives Foulger-Pratt Companies Foulger-Pratt Companies
Douglas M. Duncan R. William Hard Anthony A. Williams Robert Gladstone Thomas M. Garbutt Michael J. Darby
2003 Public Sector 2003 Private Sector 2002 Public Sector 2002 Private Sector 2001 Institutional 2001 Entrepreneurial
TrendSetter of the Year TrendSetter of the Year TrendSetter of the Year TrendSetter of the Year TrendSetter of the Year TrendSetter of the Year
County Executive Executive Vice President and Mayor Chairman Managing Director Principal
Montgomery County Principal-In-Charge, LCOR District of Columbia Quadrangle Development TIAA-CREF Monument Realty, LLC
Jeff rey T. Neal Ray D’Ardenne Daniel T. McCaffery Robert E. Burke Raymond A. Ritchey
2001 Entrepreneurial 2000 TrendSetter of the Year 1999 TrendSetter of the Year 1998 TrendSetter of the Year 1998 TrendSetter of the Year
TrendSetter of the Year Chief Operating Officer President Executive Vice President, Executive Vice President,
Principal Lend Lease Real CCR McCaffery Operations Head of the Washington, D.C.
Monument Realty, LLC Estate Investments Developments Boston Properties Office & National Director of
Acquisitions and Development
Boston Properties
Delta Associates thanks all of its 2009 Market Maker Survey participants, among whom are the following:
In today’s challenging market it’s more important than ever to make sure you work
with a team that can deliver the results you need. With one of the broadest sets
of capabilities in the industry, we provide financial solutions and expertise to help
you plan and achieve your goals. To discover how we can help you, call Bill Lynch
at 202-835-4513 or visit pnc.com/realestate.
PNC is a registered service mark of The PNC Financial Services Group, Inc. (“PNC”). Lending products and services require credit approval and are provided by PNC Bank, National Association.
©2010 The PNC Financial Services Group, Inc. All rights reserved. CIB PDF 0110-024
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of the Washington region’s leading accounting and consulting
firms. We have now joined forces with Baker Tilly. And while our
name is changing, our level of commitment and dedication
to our real estate clients remains the same.
Keynote Address
Bruce Baschuk Rich Brown Michael Darby Steve Fuller Jair Lynch Bob Murphy
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Notes
119
Partners in Excellence
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Headquarters Headquarters
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120