NCREIF Geography 16q4 · PDF file– CoStar Business District methodology – RCA...

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NCREIF Subcommittee• Melissa Reagen (MetLife)

• James Bohnaker (CBRE-EA)

• Pago Lumban-Tobing (RCA)

• Jim Costello (RCA)

• Van Karen Hamme (Principal)

• Walter Page (CoStar)

• Kevin Scherer (NCREIF)

• Jay Denton (Axiometrics) 3.22.17

• Julia Georgules (JLL)

• Richard Kleinman (LaSalle)

4/8/2017 2

CBD, URBAN, SUBURBAN…CBD, URBAN, SUBURBAN…

Goals– Get a better definition for Office CBD/Suburban

– CBD defined in 80s by Torto Wheaton Research

Approach– Utilize modern GIS mapping technology to define boundaries

– Data driven selection of locations

– Met weekly from August to March

Issues– How many categories of office?

• CBD, Urban, Suburban & Suburban Business District

– What is the proper building block?

• Used Zip Code as easiest for NCREIF

– What is a CBD?

– Where to draw the distinction?

– Should all MSAs have a CBD?

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Current CBD Definition

4/8/2017 3

PROCESSPROCESS

Data contributions

– NCREIF – CoStar - RCA

Pago Lumban-Tobing (RCA) developed a Google maps based application

Several models were developed

– CBRE-EA Urban City score methodology

– CoStar Business District methodology

– RCA Suburban Node Cluster methodology

– NCREIF collection of best of breeds

NCREIF model, RCA application & CoStar Data were used

– Outliers were manually tagged

– Top 50 CBSAs were individually examined and experts from CoStar and/or JLL were brought in to assist.

– Results processed by NCREIF Analytics and CoStar Property

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CoStar Office SqFt Density

Boston Draft Definition

4/8/2017 4

CBD DEFINITIONCBD DEFINITION

CBDWhat defines a CBD? “Census Bureau”

– “I know it when I see it” “Tall Buildings”

– “Office Using” “Central Core”

– “Transportation Node” “Density”

Looked at– Original TWR Definition (felt too big)

– Average Building Heights (too many exceptions)

– Office Sq Ft % of Total Sq Ft

– Office Density

– Each city has a unique setting which “felt” best

Selected– Simple is better approach

– Office density greater than 2 to 8 MSF / Mile

– Office share of total SF > 20-35%

Current CBD Definition

Draft CBD Definition

4/8/2017 5

DEFINITIONSDEFINITIONS

Central Business District orUrban Business District“The commercial and business center, typified by a concentration of retail and office. Often synonymous with the ‘financial district’. “

Geographically, it often coincides with the "city center or downtown, but the two concepts are separate and our committee proposes while keeping the CBD tag, feels that “Central” is not critical.

Office density from 2 to 8 MSF / Mile

Office share of total SF > 20-35%

UrbanAn area with high population and/or commercial density, but not reaching the office concentration of a CBD.

Total commercial and residential density from 6 to 11 MSF / Mile

Boston Draft Definition

Suburban Business DistrictA business center in a suburban location.

Office density greater than 0.5 MSF / Mile

Office share of total SF > 20-35%

Suburban & OtherA lower density residential and/or mixed use area. Everything Else

4/8/2017 6

BOSTONBOSTON

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Downtown Default

Downtown After Edits

Should all of Cambridge be included in CBD?

Should Northend be left out?

Art & Real Estate, Not science

• Manual edits were made on inspecting

using old definition, arial maps and data.

4/8/2017 77

NEW YORKNEW YORK

The results from the model for NY felt right (Or Do they?)

4/8/2017 8

NCREIF OFFICE EXPOSURESNCREIF OFFICE EXPOSURES

Market Value Pct Exposure by Market Value

Pct Exposure by Property CountProperty Counts

0

50

100

150

200

250

1990 1995 2000 2005 2010 2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1995 2000 2005 2010 2015

62%

19%

8%

11%

CBD

Urban

SBD

Suburban

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1990 1995 2000 2005 2010 2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1995 2000 2005 2010 2015

32%

14%

24%

30%

CBD

Urban

SBD

Suburban

4/8/2017 9

RESULTS: OFFICE PERFORMANCERESULTS: OFFICE PERFORMANCE

4/8/2017 10

METRO OFFICE EXPOSURESMETRO OFFICE EXPOSURES

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METRO OFFICE EXPOSURESMETRO OFFICE EXPOSURES

Rank Metro Total Total

1 New York 45% 16% 2% 36% 1,218 81% 9% 2% 9% 54

2 Washington 21% 31% 16% 32% 515 44% 32% 12% 12% 50

3 Los Angeles 14% 46% 8% 32% 588 27% 44% 13% 16% 40

4 San Francisco 56% 20% 14% 10% 171 64% 8% 18% 10% 34

5 Boston 27% 24% 9% 39% 357 70% 13% 8% 9% 32

6 Chicago 37% 11% 17% 35% 480 79% 4% 8% 9% 27

7 Houston 16% 37% 8% 39% 329 39% 43% 8% 10% 21

8 Seattle 31% 12% 15% 42% 201 67% 4% 17% 13% 17

9 Dallas 12% 21% 11% 56% 369 31% 48% 3% 17% 17

10 Atlanta 20% 19% 16% 44% 317 27% 25% 23% 25% 14

11 San Jose 6% 64% 8% 23% 120 10% 69% 0% 22% 13

12 Denver 23% 22% 19% 36% 169 44% 25% 27% 3% 12

13 Miami 10% 33% 6% 51% 243 39% 38% 0% 23% 12

14 San Diego 13% 16% 40% 31% 117 31% 10% 52% 7% 10

15 Phoenix 8% 15% 14% 63% 180 13% 17% 39% 31% 8

16 Minneapolis 27% 13% 6% 54% 201 57% 3% 27% 12% 7

17 Austin 16% 10% 15% 59% 103 16% 2% 17% 66% 6

18 Charlotte 22% 6% 0% 72% 106 28% 6% 0% 66% 4

19 Philadelphia 19% 14% 17% 49% 309 31% 0% 24% 44% 4

20 Nashville 9% 20% 0% 71% 86 26% 11% 0% 63% 3

Sum Mkts 24% 22% 10% 44% 6,998 50% 22% 12% 16% 398

CoStar Market Exposures (Mil Sq Ft) NPI Market Exposures (Mil Sq Ft)

CBD Urban

Suburban

Business

District Suburban CBD Urban

Suburban

Business

District Suburban

4/8/2017 12

MARKET INDICATORSMARKET INDICATORS

NCREIF Vacancy Rates CoStar Vacancy Rates

4%

6%

8%

10%

12%

14%

16%

18%

2003 2005 2007 2009 2011 2013 2015

CBD Urban SBD Suburban

4%

6%

8%

10%

12%

14%

16%

18%

2003 2005 2007 2009 2011 2013 2015


4/8/2017 13


NCREIF Cap Rates CoStar Cap Rates

4%

5%

6%

7%

8%

9%

10%

11%

00 02 04 06 08 10 12 14 16


3%

4%

5%

6%

7%

8%

9%

10%

00 02 04 06 08 10 12 14 16


4/8/2017 14


NCREIF Rental Income ($/SF) CoStar Rent / SF

$10

$15

$20

$25

$30

$35

2003 2005 2007 2009 2011 2013 2015


$10

$15

$20

$25

$30

$35

2003 2005 2007 2009 2011 2013 2015


4/8/2017 15


NCREIF Rental Income Growth CoStar Rent Growth

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2003 2005 2007 2009 2011 2013 2015


-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2003 2005 2007 2009 2011 2013 2015


4/8/2017 16


NOI Growth

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2003 2005 2007 2009 2011 2013 2015


Expense Ratio

0.35

0.37

0.39

0.41

0.43

0.45

0.47

0.49

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


To Be Continued……

4/8/2017 17

COMMENTS / QUESTIONSCOMMENTS / QUESTIONS

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NCREIF Geography 16q4 · PDF file– CoStar Business District methodology – RCA...

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