GEDA State of the States Presentation - cdn.ymaws.com€¦ · Source: CBRE Millennials: Myths and...

MAY 25, 2017

STATE OF THE STATES:ECONOMIES AND CRE

Presented by:Darin MellottDirector, Research and AnalysisCBRE | Southwest Region

2 STATE OF THE STATES: ECONOMIES AND CRECBRE

WHAT IMPACTS CRE MARKETS?

• How are businesses deciding where to go?

• Structural vs. cyclical

• State of the market

• Economic update and outlook

WHAT ARE THEY THINKING?


WHAT ARE THE SIGNIFICANT CHALLENGES FACING YOUR CORPORATION?

AMERICAS OCCUPIER SURVEYKEY FINDINGS

Source: CBRE Americas Occupier Survey, 2017.


WHAT ARE CORPORATE REAL ESTATE EXECUTIVES FOCUSED ON?

AMERICAS OCCUPIER SURVEYKEY FINDINGS



CUTTING COSTSTHE STRATEGIC IMPACT OF LABOR

Source: CBRE Labor Analytics Group, 2017.

SMALL CHANGE = HIGH IMPACT (Based on 500 employees at 125 sq. ft.)

per hour

$1per hour

LABOR COSTS

per sq.ft.

$16.64REAL ESTATE COSTS

TWO WAYS TO SAVE $1 MILLION


THE EMPLOYER’S PERSPECTIVEMARKET SELECTION


Labor Cost & Availability

Real Estate Cost & Availability

83%

79%

43%Access toNew Market& Customers

WHAT DRIVES YOUR MARKET SELECTION?


THE EMPLOYER’S PERSPECTIVEWORKPLACE STRATEGY


WHAT ARE THE MAIN DRIVERS OF YOUR ORGANIZATION’S APPROACH TO WORKPLACE STRATEGY?

WO

RK

PLA

CE S

TR

ATEG

Y D

RIV

ER

S

$

employees that differentiates you

from the competition.

The workplace can act as a

catalyst for drawing people back

The workplace can achieve real

estate savings to be reinvested

into enhanced technology &

offerings.

55%

53%

40%

Talent Attraction

& Retention

Promote

Collaboration

Operating

Expense

Savings


THE EMPLOYER’S PERSPECTIVELABOR FORCE


WHAT IS MOST IMPORTANT TO YOUR LABOR FORCE?

FLEX

WORKING

45% 9%SUSTAINABILITYINDOOR

ENVIRONMENT

QUALITY

37%AMENITIES

64%PUBLIC

TRANSPORTATION

41%CONNECTIVITY

25%FLEX

WORKSPACE

47%

WHAT ARE THOSE PEOPLE THINKING?


THE GLOBAL REPORTMILLENNIALS: MYTHS AND REALITIES

Source: CBRE Millennials: Myths and Realities, 2017.


MILLENNIALS: MYTHS AND REALITIESTHE SURVEY

• 13,000 responses from millennials aged between 22 and 29

• 1,000 respondents in each of the 12 countries representing the three major global regions

• Additional 6,893 internal responses from a range of ages to the same survey

• Series of internal discussion groups to extract more detailed findings



MILLENNIALS: MYTHS AND REALITIESHOW MILLENNIALS LIVE



MILLENNIALS: MYTHS AND REALITIESHOW MILLENNIALS WORK



MILLENNIALS: MYTHS AND REALITIESHOW MILLENNIALS PLAY


BEWARE THE PREVAILING NARRATIVE


CBRE VIEWPOINTMILLENNIAL MYTH BUSTER

Source: CBRE Research.


MILLENNIALS: MYTHS AND REALITIESAPPEAL OF DIFFERENT WORK LOCATIONS


CITIES AREN’T THE ONLY APPEALING LOCATION FOR MILLENNIALS

0%

10%

20%

30%

40%

50%

60%

70%

City or large town in the center Suburbs / on the outskirts of a city/large town

Medium/small town Out-of-town location Rural location

% ra

ting l

ocati

on ‘fa

irly’ o

r ‘very

’ app

ealin

g


MILLENNIALS: MYTHS AND REALITIESCOMMUTE TIME


IN GENERAL, MILLENNIALS PREFER A RELATIVELY SHORT COMMUTE

0%

5%

10%

15%

20%

25%

30%

35%

Up to 10 mins Up to 20 mins Up to 30 mins Up to 45 mins Up to 60 mins Up to 75 mins Up to 90 mins Over 90 mins

Millennials’ longest tolerable commute


THE CURRENT SITUATIONFINDING TALENT

MILLENNIALS ARE WILLING TO RELOCATE FOR THE RIGHT REASONS



MILLENNIALS: MYTHS AND REALITIESTRADE-OFFS FOR A BETTER ENVIRONMENT


0% 5% 10% 15% 20% 25%

Take a modest pay cut

Give up some progression and promotion prospects

Move to a less attractive location for work

Travel farther to work

Move to a smaller, less well-known company

MOST MILLENNIALS WILL MAKE TRADE-OFFS TO IMPROVE ENVIRONMENT


MILLENNIALS: MYTHS AND REALITIESLEISURE TIME


EXPERIENCE IS VALUED AS PART OF LEISURE

0

1

2

3

4

5

Eat out Visit a shopping center to shop

Visit a high street to shop Visit shopping center for a reason other than shopping

Go to the cinema Go to a live event

Numb

er of

days

a mon

th tha

t mille

nnial

s …


MILLENNIALS: MYTHS AND REALITIESCONCLUSION

Source: Wikipedia.

PLACEMAKING DEFINED

Placemaking is a multi-faceted approach to the planning, design and management of public spaces. Placemaking capitalizes on a local community's assets, inspiration, and potential, with the intention of creating public spaces that promote people's health, happiness, and well being.


MILLENNIALS: MYTHS AND REALITIESCONCLUSION


Flexible offices but managed transition

Convenience in location and property management

Long-term renting

Delivery straight to the consumer

Shopping as a leisure activity

Facilities to support leisure and wellness at work Element of privacy in the workplace

Accessible location


WHAT ARE THEY THINKING?A SUMMARY

• Businesses are most concerned about talent

• Focus on what talent wants and needs

• Better outcomes

• We see it in real estate submarkets across the country

WHAT DO WE SEE AND ADVISE?


THE CURRENT SITUATIONFINDING TALENT

OPPORTUNITY

COMPANY PERSPECTIVEEstablished cities good for

talent, but expensive

WORKER PERSPECTIVEEstablished cities good for

work, not always great for life


COMMON CRITERIA FOR EVALUATING SITES:

LOCATION STRATEGYCOMMON CRITERIA

Access to talent & key skill sets

Talent growth & pipeline

Industry depth & growth

Quality & intensity of competition

Quality of life

Transportation & accessibility

Labor & business costs

Facilities costs

Financial incentives

Source: CBRE Labor Analytics Group, 2017.


BUSINESS CONSIDERATIONSGETTING LOCATION STRATEGY RIGHT

BALANCE OF FAVORABLE CHARARACTERISTICS

SIZE COST QUALITY OF LIFE

GOOD TALENT


BUSINESS CONSIDERATIONSSOME OTHER IMPORTANT POINTS

• Public-Private Partnerships

• Type of presence matters (engaged with the community)

CYCLICAL VS. STRUCTURAL


FIRST SOME THOUGHTSMEGATRENDS

• Evolution of retail

• Supply chain evolution

• War for talent

• All driven by changes in tech, demographics and economic realities


STRUCTURAL FACTORSE-COMMERCE

• Everyone knows about e-commerce

• Not everyone understands the overall impact

• Reverse logistics

• Last mile


STRUCTURAL FACTORSREVERSE LOGISTICS

• Holiday returns = 8% traditionally vs. 15% to 30% e-commerce

• Huge cost to retailers (4.4% of revenue annually)

• Additional warehouses and distribution centers needed to support reverse flow of merchandise

Source: CBRE Research. Holiday Stress: E-commerce and the Rapidly Rising Rate of Return, December 2016.


STRUCTURAL FACTORSLAST MILE

• Driven by consumer preference/demand

• Supply chain arms race

• Companies use industrial CRE as a strategic differentiator

Source: CBRE Research. Last Mile/City Logistics, January 2017.

STATE OF THE MARKET


STATE OF THE MARKETBEST METROS FOR INVESTMENT

WHICH METRO IN THE AMERICAS DO YOU BELIEVE TO BE THE MOST ATTRACTIVE FOR PROPERTY INVESTMENT PURCHASE?

2017 Rank Metro 2016 Rank1 Los Angeles 12 Dallas/Ft. Worth 33 New York 24 Washington, D.C. 85t Atlanta 65t San Francisco 46 Seattle 77 Houston *8t Toronto 58t Boston 108t Denver 99 Chicago 1110 Miami/South Florida 1411 Austin 1212 São Paulo 1313 Nashville *14 Phoenix 1615 Tampa *

CanadaTop-Ranked Metros:1. Toronto2. Vancouver3. Montréal

Latin AmericaTop-Ranked Metros:1. São Paulo2. Mexico City

2017 Rank Metro 2016 Rank1 Los Angeles 12 Dallas/Fort Worth 33 New York 24 Washington, D.C. 85t Atlanta 65t San Francisco 46 Seattle 77 Houston *8t Toronto 58t Boston 108t Denver 99 Chicago 11

10 Miami/South Florida 1411 Austin 1212 Sao Paulo 1313 Nashville *14 Phoenix 1615 Tampa *

Source: CBRE Research. CBRE Americas Investor Intentions Survey, 2017. *Not top-ranked Metro in 2016


U.S. INDUSTRIALCOMPLETIONS VS. NET ABSORPTION

Source: CBRE EA. *Forecasted


U.S. INDUSTRIALAVAILABILITY RATE



U.S. RETAILCOMPLETIONS VS. NET ABSORPTION



U.S. RETAILAVAILABILITY RATE



U.S. RETAILRENT GROWTH



U.S. RETAILRENT GROWTH

Source: CBRE EA.

Rank Metro Rent Growth (YoY, %)

1 San Jose 6.9%

2 Honolulu 6.7%

3 Oakland 6.3%

4 West Palm Beach 6.3%

5 Oklahoma City 6.0%

6 Portland 5.8%

7 Fresno 5.7%

8 Houston 5.6%

9 Austin 5.6%

10 Fort Worth 5.4%


U.S. OFFICECOMPLETIONS VS. NET ABSORPTION



U.S. OFFICEVACANCY RATES



U.S. OFFICERENT GROWTH



U.S. OFFICERENT GROWTH

Source: CBRE EA.


1 Austin 8.5%

2 Oakland 8.3%

3 San Jose 7.3%

4 Boston 7.3%

5 Atlanta 6.1%

6 Orange County 5.6%

7 Portland 5.6%

8 Phoenix 5.3%

9 Nashville 5.2%

10 Riverside 4.6%


APARTMENTCOMPLETIONS VS. NET ABSORPTION



APARTMENTVACANCY RATES



APARTMENTRENT GROWTH



APARTMENTRENT GROWTH

Source: CBRE EA.


1 Sacramento 8.6%

2 Salt Lake City 4.8%

3 Honolulu 4.8%

4 Fort Worth 4.5%

5 Orlando 4.4%

6 Long Island 4.3%

7 Seattle 4.2%

8 Raleigh 4.1%

9 Phoenix 3.9%

10 Atlanta 3.9%


WHAT ABOUT….SUPPLY

• Yes, it’s important

• But secondary

• How do the policies in your community interact with the market?


OUTLOOK


OUTLOOKGEOPOLITICS MATTER, BUT NOT LIKE YOU THINK

Source: U.S. Bureau of Labor Statistics, Q4 2016.

-6%

-4%

-2%

0%

2%

4%

6%Y-o-Y % Change Recession Nonfarm Emp.

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2017

2016

REAGAN SHOT

FALKLANDS WAR

US EMBASSY IN BEIRUT BOMBED

CHERNOBYL DISASTER

GLASTNOSTIN USSR

BERLIN WALL FALLS IRAQ INVADES

KUWAIT

GULF WAR STARTS FALL OF THE

SOVIET UNION

EUROPEAN UNION BEGINS

BOSNIAN WAR ENDS

EUROZONE CREATED

9/11US INVASION

OF IRAQ

RUSSO-GEORGIAN WAR

OBAMA ELECTED

SYRIAN WAR

JAPANESE TSUNAMI

ISIS EMERGES

CRIMEA ANNEXED

PARIS ATTACKS

BREXIT VOTE

NAFTASIGNED

HURRICANE KATRINA

BUSH I ELECTED

CLINTON ELECTED

BUSH II ELECTED

TRUMP ELECTEDPC INTRO


OUTLOOKEMPLOYMENT AND INTEREST RATES

Source: CBRE Research, Moody’s Analytics.

-6

-4

-2

0

2

4

6Fed Funds Rate (%)

2.0%

1.6%

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2017

2016

Federal Funds Rate Deviation From Trend

2.8% 3.3%

Recession


HISTORICAL UNEMPLOYMENTGEORGIA VS. UNITED STATES

Source: Bureau of Labor Statistics

CONCLUSION


CONCLUSIONLAST THOUGHTS

• Outlook is positive on global and national level

• U.S. set for a good year

• Cycle has some life left in it

• Watch FX and interest rates

• Keep in mind people and place making


THANK YOU!

Darin MellottDirector, Research and AnalysisCBRE | Southwest Region

GEDA State of the States Presentation - cdn.ymaws.com€¦ · Source: CBRE Millennials: Myths and...

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Transcript of GEDA State of the States Presentation - cdn.ymaws.com€¦ · Source: CBRE Millennials: Myths and...