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2010. Connecticut Commercial Real Estate Conference. • Connecticut Multi Family Market Trends •. Presented by : Steve Witten. Presented In February:. Economy Gaining Traction; Risk Levels Remain Elevated. Gross Domestic Product. Monthly Employment. 2005: 3.1%. 2007: 2.1%. 2009: -2.4%.
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2010 Connecticut Commercial Real Estate Conference • Connecticut Multi Family Market Trends • Presented by: Steve Witten
Economy Gaining Traction; Risk Levels Remain Elevated Gross Domestic Product Monthly Employment 2005: 3.1% 2007: 2.1% 2009: -2.4% 2006: 2.7% 2008: 0.4% 2010*: 2.7% Jan-09 Jan-10 Jobs in Thousands Annualized Growth Jan-06 Jan-07 Jan-08 * GDP through 2Q 2010, Employment through September Note: Technical recession defined as two consecutive quarters of GDP contraction. Sources: Marcus & Millichap Research Services, BLS, Economy.com
Corporate Investment Stalled Despite Healthy Balance Sheets, Unemployment Rising Rate * Through September Sources: Marcus & Millichap Research Services, BLS, Federal Reserve
2010* Job Growth NH-FC: 4,600 U.S.: 1,000,000 Total Nonfarm Employment ChangeNew Haven-Fairfield County vs. United States Year-over-Year Change * Forecast Sources: Marcus & Millichap Research Services, Economy.com
Total EmploymentNew Haven-Fairfield County Monthly Change (thousands) *Through August Sources: Marcus & Millichap Research Services, BLS, Economy.com
New Haven-Fairfield County Sector EmploymentYear-over-Year Absolute Growth Thousands Sources: Marcus & Millichap Research Services, BLS, Economy.com
Unemployment RateNew Haven-Fairfield County vs. United States Unemployment Rate * Forecast Sources: Marcus & Millichap Research Services, BLS, Economy.com
Job Growth is Critical to Renter Household Formation and Apartment Occupancies Apartment Vacancy Rate Unemployment Rate * Preliminary Estimate Sources: Marcus & Millichap Research Services, BLS, Reis
“Shadow” Market a Significant Factor in Rising Vacancies – More in Select Metros Total Vacant Units (in 000s) 1-Unit Structure as % of Total Sources: Marcus & Millichap Research Services, U.S. Census Bureau
CAPITAL MARKETS OVERVIEW and OUTLOOK
Commercial Mortgage Delinquency Rates by Lender Type CMBS Banks Delinquency Rates Delinquency rates at the end of each period Sources: Marcus & Millichap Research Services, Mortgage Bankers Association
Total Multifamily Mortgage Debt Outstanding: $911.7 billion By Lender Types ($Bil): GSEs and Ginnie Mae $359.6 Commercial Banks $216.8 CMBS, CDO, and Other ABS $110.3 State & Local Governments $66.1 Savings Institutions $64.0 Life Insurance Companies $50.4 Other $44.4 Sources: Marcus & Millichap Research Services, MBA
Total CMBS Outstanding: $751.7 billion By Property Types ($Bil.): Office $233.8 Retail $224.0 Multifamily $114.3 Hotel $70.7 Industrial $38.3 Self-Storage $13.5 Healthcare $4.5 Other $52.6 Sources: Marcus & Millichap Research Services, MBA
Estimated Multifamily Debt Maturities by Lender Type Billions $ Sources: Marcus & Millichap Research Services, Foresight Analytics
Total Multifamily Debt Maturities by Vintage Maturing Balance (Billions $) Sources: Marcus & Millichap Research Services, Foresight Analytics
Renter Demographics New Haven-Fairfield County Change in Population * Forecast Sources: Marcus & Millichap Research Services, U.S. Census Bureau
New Housing PermitsNew Haven-Fairfield County New Housing Permits * Forecast Sources: Marcus & Millichap Research Services, Economy.com
Supply and DemandApartment New Haven-Fairfield County United States Vacancy Rate Units (000s) Vacancy Rate Units (000s) * Forecast Sources: Marcus & Millichap Research Services, Reis
Apartment Metro Vacancy Ranking2Q 2010 Sources: Marcus & Millichap Research Services, Reis
Apartment Vacancy by ClassNew Haven-Fairfield County Average Vacancy Rate * Through 2Q Sources: Marcus & Millichap Research Services, Reis
Apartment Vacancy Ranking by SubmarketNew Haven-Fairfield County Sources: Marcus & Millichap Research Services, Reis
Apartment Asking Rent TrendsNew Haven-Fairfield County $1,544 $1,036 Asking Rent Annual Change 2% to 3% annual growth * Forecast Sources: Marcus & Millichap Research Services, Reis
Apartment Metro Effective Rent Growth Ranking2Q 2010 Sources: Marcus & Millichap Research Services, Reis
Investment TrendsApartment New Haven-Fairfield County United States Average Cap Rate Average Cap Rate Median Price per Unit (000s) Median Price per Unit (000s) * Through 1H 2010 Sales $500,000 and greater Sources: Marcus & Millichap Research Services, Reis
Apartment Sales Trends New Haven-Fairfield County Total Transactions Total Dollar Volume Total Transactions (000s) Total Dollar Volume (Bil.) Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics
U.S. Apartment Buyer Composition Percent of Sales Volume * YTD through September Sales $5 Million and greater Sources: Marcus & Millichap Research Services, Real Capital Analytics
National Apartment Price and Cap Rates Average Cap Rate Average Price per Unit (000s) * Estimate Includes sales $1Million and Greater Sources: Marcus & Millichap Research Services, Costar Group, Inc.
24 – Month Cap Rate Adjustment Matrix * Class “A” Class “B” Class “C” 1.00 1.25 1.75 Primary Secondary 1.25 1.75 2.25 2.75 2.00 2.25 Tertiary * Change in cap rates last 24 months
24 – Month Pricing Adjustment Matrix Class “A” Class “B” Class “C” -20% -23% -32% Primary Secondary -24% -30% -36% -33% -35% -41% Tertiary * Change in property value last 24 months
Why the Long-Term Outlook for U.S. Apartments is Extremely Favorable U.S. will experience a fundamental change in housing dynamics favoring the density, efficiency, flexibility and affordability of apartment living: Population growth Changing demographics Environmental concerns Budget / expense factors Sharp decrease in new supply Affordability Rent vs. own
Population Dynamics U.S. population is expected to increase 33% by 2030 to 376 million. To accommodate this growth, the nation needs 60 million new housing units. 94 Million Millions
Demographic Dynamics Married couples with children are projected to decline to under 1 in 5 households by 2025 Singles and un-related individuals living together will comprise 1 in 3 households by 2020 78 million echo boomers are getting ready to enter their prime renting years 10 million legal immigrants will enter the country in next ten years
U.S. Household Growth Projection2010 - 2015* 4.1 MillionNew Owner Households 3.2 MillionNew Renter Households 7.4 Million Net New Households * Forecast Sources: Marcus & Millichap Research Services, Economy.com, Harvard University
Budget / Fiscal Dynamics Urban / suburban sprawl is expensive Compact development reduces infrastructure costs and saves money The U.S. can save over $100 billion in infrastructure costs over 25 years by growing compactly
State of Connecticut Apartment Sales 2000 - 2010 2010 (as of 10/1): 1,131 units traded for $94,399,000 2009: 2,251 units traded for $188,532,880 2008: 5,532 units traded for $758,785,000 2007: 6,247 units traded for $891,958,998
2010 Connecticut Commercial Real Estate Conference Steve Witten, Senior Director 265 Church Street, Suite 210 New Haven, CT 06510 203.672.3320 Steve.witten@marcusmillichap.com