Real Estate Industry Practice Group Joe Fobert, Real Estate Practice Leader 2013 Economic Outlook...

Real Estate Industry Practice GroupJoe Fobert, Real Estate Practice Leader

2013 Economic Outlook for the Real Estate Industry

Keynote Speaker:Ken McCarthyChief EconomistResearch

Real Estate Industry Practice Group - REAL Industry Expertise You Can Trust

Real Estate Industry Practice Group

Highlights

• Write all lines of business: Property, Casualty, Environmental, Excess, D&O and E&O

• Over 11,000 clients and 13,000 policies

• Largest writer of real estate business by GWP in the U.S.

• 2011 paid approx. $266 million in real estate claims

Real Estate Industry Practice GroupAn integrated service platform that provides seamless access to the industry’s foremost real estate insurance products and services. AIG has written insurance for the real estate industry for over 40 years, with substantial market penetration and long-term dedication to many classes.

• Multi-line, high-limit product offerings• Industry-focused claims expertise, loss control capabilities & risk management services

• Transactional insurance products & expertise• Synergies with the Construction Solutions industry practice - for the needs of large construction and development projects

• REITs, Asset, Investment and Fund Managers• Residential & Non-Residential Property Owners, Operators & Managers

• Land Developers & Sub-dividers• Office Buildings, Apartments, Retail Centers and Industrial Parks

• Multinational Coverage – operations in over 90 countries – CMP, Passport, Local policies & services

Real Estate Industry Practice Group

Industry Expertise!

• 2012 Conducted 3 CE Seminars, 3 Webinars, over 300 client meetings

• 2013 5 CE Seminars, 4 Industry White Papers

• Partnership with GlobeSt.com as Industry Thought Leader

• 2013 Economic Outlook for the Real Estate Industry

JANUARY 17, 2013

US AND MANHATTAN OFFICE MARKET

Economic & Market Overview

CUSHMAN & WAKEFIELD

7

Cushman & Wakefield Research

OVERVIEW

CUSHMAN & WAKEFIELD

8


US GDP GROWTH IN RECOVERIES AFTER 13 QUARTERS

Source: US Bureau of Economic Analysis

CUSHMAN & WAKEFIELD

9


US PRIVATE SECTOR EMPLOYMENT GROWTHMONTHLY AVERAGE PER QUARTER

CUSHMAN & WAKEFIELD

10


HOUSEHOLD DEBT BURDEN

10.0%

10.5%

11.0%

11.5%

12.0%

12.5%

13.0%

13.5%

14.0%

14.5%

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Perc

ent o

f Disp

osab

le In

com

e

Source: Board of Governors Federal Reserve

CUSHMAN & WAKEFIELD

11


9

11

13

15

17

19

21

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Mill

ions

of u

nits

US MOTOR VEHICLE SALES


CUSHMAN & WAKEFIELD

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US CORPORATE PROFITS

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Billi

ons o

f Dol

lars


CUSHMAN & WAKEFIELD

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250,000

300,000

350,000

400,000

450,000

500,000

550,000

600,000

650,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

National Recessions Unemployment Claims Healthy Labor Market

US WEEKLY UNEMPLOYMENT CLAIMS

CUSHMAN & WAKEFIELD

14

Cushman & Wakefield ResearchEMPLOYMENT CHANGE SINCE FEBRUARY

2010 BY INDUSTRY SECTOR

1,530 1,523

1,138

860

526 506

274116

-109

-546-575

-75

425

925

1,425

Tho

usan

ds o

f Per

sons

Total Increase: +4.8 mil.Private Sector: +5.3 mil.

December 2012

CUSHMAN & WAKEFIELD

15


178.

3%

145.

2%

139.

3%

117.

5%

107.

8%

91.4

%

82.3

%

74.7

%

72.4

%

71.1

%

63.0

%

52.7

%

50.6

%

50.1

%

47.5

%

46.7

%

45.2

%

44.7

%

43.4

%

37.9

%

36.6

%

33.0

%

26.5

%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

180.0%

200.0%

JOBS RECOVERED SINCE TROUGHAS A PERCENT OF JOBS LOST

CUSHMAN & WAKEFIELD

16


135.

6%

114.

8%

112.

5%

103.

8%

101.

3%

91.6

%

88.9

%

78.0

%

74.6

%

67.6

%

65.3

%

65.2

%

60.5

%

52.4

%

48.3

%

48.1

%

43.6

%

37.6

%

36.2

%

31.3

%

31.2

%

24.7

%

18.5

%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

OFFICE-USING JOBS RECOVERED SINCE TROUGHAS A PERCENT OF JOBS LOST

CUSHMAN & WAKEFIELD

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7.1% 8.

7%

8.8% 9.

9%

10.3

%

10.7

%

11.4

%

11.9

%

12.3

%

13.0

%

13.1

%

13.9

%

14.1

%

14.1

%

15.8

%

15.9

%

16.2

%

17.4

%

17.9

%

18.1

%

18.3

%

18.7

%

20.1

%

20.4

%

21.7

%

22.6

%

22.7

%

23.9

%

24.0

% 27.0

%

27.5

%

0%

5%

10%

15%

20%

25%

30%

VACANCY RATE BY MAJOR METRO

CUSHMAN & WAKEFIELD

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Cushman & Wakefield ResearchVACANCY RATE BY MAJOR METRO

Change From a Year Ago

2.3%1.9%1.8%1.7%

1.3%1.3%1.3%1.1%

0.7%0.6%0.4%0.4%

0.1%

-0.4%-0.5%-0.6%-0.7%-0.7%-0.7%-0.8%-1.0%-1.0%

-1.9%-2.1%-2.5%

-3.0%-3.0%

-3.6%-3.9%-4.0%

-5.6%-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

CUSHMAN & WAKEFIELD

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PAYROLL EMPLOYMENT US COMPARED WITH NYC

3,200

3,300

3,400

3,500

3,600

3,700

3,800

3,900

100,000

105,000

110,000

115,000

120,000

125,000

130,000

135,000

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Thou

sand

s of P

erso

ns

National Recessions US Employment NYC Employment

Source: US Bureau of Labor Statistics

NYC Job Change

4/08-11/09 -140,800

11/09-11/12 +195,100

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410

460

510

560

610

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Thou

sand

s of

Per

sons

National Recessions Professional Business Services Financial Services

Employment Change4/08-11/09 11/09-11/12

Business Services -46,100 +84,000Financial Services -44,100 +13,900

NYC EMPLOYMENT: BUSINESS SERVICES AND FINANCIAL SERVICES


CUSHMAN & WAKEFIELD

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HIGH TECH EMPLOYMENT: NEW YORK METRO AREA

170

180

190

200

210

220

230

240

250

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Tho

usan

ds o

f Per

sons

Source: Moody’s Analytics

CUSHMAN & WAKEFIELD

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VENTURE CAPITAL FUNDING CHANGE: 2007-2011

22

-52.5%

-50.2%

-42.5%

-31.0%

-20.5%

-7.6%

3.1%

4.7%

6.8%

24.8%

44.7%

-65.0% -45.0% -25.0% -5.0% 15.0% 35.0% 55.0%

Philadelphia

San Diego

Southeast

DC/Metroplex

New England

US

Silicon Valley

LA/Orange County

Midwest

Texas

NY Metro

Source: PricewaterhouseCoopers Money Tree Report

CUSHMAN & WAKEFIELD

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5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

1,100

1,120

1,140

1,160

1,180

1,200

1,220

1,240

1,260

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Tho

usan

ds o

f Per

sons

Office Using Employment Vacancy Rate

MANHATTAN OFFICE USING EMPLOYMENT VS. VACANCY


CUSHMAN & WAKEFIELD

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MANHATTAN NEW LEASING

5.0

6.5

4.2

3.4 3.1 3.3

5.0 5.0 5.7

7.1 6.6

7.5 7.6

10.1

6.4 6.0 5.8

5.4 5.7

6.4

0.0

2.0

4.0

6.0

8.0

10.0

Mill

ions

of S

quar

e Fe

et

10-Year Average 6.0 msf

CUSHMAN & WAKEFIELD

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MANHATTAN QUARTERLY NEW LEASING

4.02

0.89 1.12

3.50

1.021.29

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Mill

ions

of S

quar

e Fe

et

10-Year Average 2012 Average

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10.3%

8.8%

7.1%

3.0%

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Midtown Downtown Midtown South

MANHATTAN OFFICE MARKET: VACANCY RATE

All Classes

CUSHMAN & WAKEFIELD

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10.9%

8.2%

4.8%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Midtown Downtown Midtown South

MANHATTAN OFFICE MARKET: VACANCY RATE

Class A

CUSHMAN & WAKEFIELD

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Overall Rental Rates

MANHATTAN OFFICE MARKET

$67.36

$49.69

$40.75

$25.00

$35.00

$45.00

$55.00

$65.00

$75.00

$85.00

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Midtown Midtown South Downtown

$/s

f

CUSHMAN & WAKEFIELD

29


Class A Rental Rates

MANHATTAN OFFICE MARKET

$72.54

$63.59

$45.16

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Midtown Midtown South Downtown

$/s

f

CUSHMAN & WAKEFIELD

30


$88.

79

$80.

42

$78.

75

$63.

89

$63.

32

$50.

08

$49.

77

$51.

60

$46.

54

$50.

22

$47.

07

$50.

37 $57.

82

$51.

86

$52.

06

$56.

47

$57.

84

$57.

69

$55.

88

$86.

12

$92.

30

$92.

59

$86.

40

$79.

13

$71.

58

$67.

64

$65.

61

$65.

54

$65.

85

$66.

24

$67.

27

$67.

77

$68.

47

$69.

75

$71.

22

$72.

08

$71.

67

$71.

76

35

40

45

50

55

60

65

70

75

80

85

90

95

100

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12

$/SF

Net Effective Rent Asking Rent

Midtown Class A Rents

Net Effective Change

1Q08 - 1Q10 -47.6%

1Q10 - 3Q12 +20.1%

RENTAL RATES:Asking versus Net Effectives

CUSHMAN & WAKEFIELD

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MIDTOWN CLASS A RENTS

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

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

$/s

f

1996-2001 +98%

2004-2008 +83%

2010-2012 +9.4%

CUSHMAN & WAKEFIELD

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NYC MONTHLY EMPLOYMENT

3,100

3,200

3,300

3,400

3,500

3,600

3,700

3,800

3,900

4,000

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Th

ou

san

ds

CUSHMAN & WAKEFIELD

33


NYC OFFICE-USING EMPLOYMENT FORECAST

1,000

1,050

1,100

1,150

1,200

1,250

1,300

1,350

1,400

1,450

1,500

Tho

usan

ds o

f Per

sons

Source: US Bureau of Labor Statistics, Moody’s Analytics

Projected NYC Job Growth

2011 35.32012 40.72013 11.62014 42.22015 46.6

CUSHMAN & WAKEFIELD

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MANHATTAN INVENTORY OVER TIME

321

337

348

361 364 37

339

2 396 400

398

400

394

392

389

389 392

392

379 38

738

939

139

038

939

1 395

393

393

393

392 39

839

940

140

440

4 409

409

409

300

320

340

360

380

400

420

1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020

MSF

Expected Additions:2013: 55 West 46th (292,500 sf)330 Hudson Street (395,000 sf)51 Astor Place (307,839 sf)One World Trade Center (3.0 msf)Four World Trade Center (2.0msf)2014:250 West 55th (1.0 msf)7 Bryant Park (434,000 sf)2015: Hudson Yards (1.7 msf)2016:Three World Trade Center (2.5 msf)2018:Manhattan West (2.5 msf)

CUSHMAN & WAKEFIELD

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MIDTOWN CLASS A ASKING RENT AND VACANCY FORECAST

$72.54

$74.84

$83.07

$92.36

$99.75

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

Va

can

cy

psf

/ yr

Rent Vacancy

CUSHMAN & WAKEFIELD

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MIDTOWN CLASS A RENTAL RATES:Asking versus Net Effectives

$65.

61

$67.

27

$71.

22

$72.

54

$74.

84 $83.

07 $92.

36 $99.

75

$51.

60

$50.

37

$56.

47

$58.

16

$59.

62

$67.

84 $76.

53 $85.

21

3.0%

5.0%

7.0%

9.0%

11.0%

13.0%

$20

$30

$40

$50

$60

$70

$80

$90

$100

Vaca

ncy

psf /

yr

Asking Rents Net Effective Rents Vacancy Rate

2012-2016 ChangeVacancy: -6.5ppAsking Rents +36.5%Net effective Rents +46.5%

www.cushmanwakefield.com

1290 Avenue of the AmericasNew York, NY 10104(212)-841-7500

American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.

AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. Products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Not all products and services are available in every jurisdiction, and insurance coverage is governed by actual policy language. Certain products and services may be provided by independent third parties. Insurance products may be distributed through affiliated or unaffiliated entities. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.

The data contained in this presentation is for general informational purposes only. The advice of a professional insurance broker and counsel should always be obtained before purchasing any insurance product or service. The information contained herein has been compiled from sources believed to be reliable. No warranty, guarantee, or representation, either expressed or implied, is made as to the correctness or sufficiency of any representation contained herein.

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Real Estate Industry Practice Group Joe Fobert, Real Estate Practice Leader 2013 Economic Outlook...

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