2012 commercial market forecast

www.CharlestonCommercialMarketForecast.com

October 11, 2012


Thank you to our 2012 Planning Committee

Markus Kastenholz, (co-chair), CB Richard Ellis/Carmody

David Grubbs (co-chair), NAI Avant CharlestonEddie Buxton, Palmetto Commercial Properties

Jon Chalfie, Avison YoungAlex DeSeta, Lee & Associates

Edie DuBose, Meyer Kapp & AssociatesRuth Marie Embler, NAI Avant CharlestonHank Futch, Hank Futch Real Estate, LLC

Pete Harper, Lee & AssociatesJim Rowe, Carolina One Real Estate


Charleston Gold Sponsor


October 11, 2012


Jim Newsome, President & CEO,

SC State Ports Authority


October 11, 2012


Lewis Gossett, President & CEO,

SC Manufacturers Alliance


October 11, 2012


Chris Starr, Ph.D.

Department Chair & Associate Professor, Computer Science

Department, College of Charleston

Silicon Harbor

The Future of the

Charleston Technology Sector

Tech Industry

Create new IP

design software

provide infrastructure

Learn continuously

1: pick an amazing city2: find a sick jobdefault: start a software company

Software developer algorithm of life

Charleston Attracts

Software EntrepreneurshipATD, Blackbaud, Benefitfocus, Bibliolabs, Blue Acorn, Blue Key, Blue Ion, BookSurge, Boomtown, CanteyTech, CreateSpace/Amazon, Cybersprockets, eGroup, Ethority, Good Done Great, Information Alchomy, Jack Russell, King & Partners, Mandex, Modus21, PeopleMatter, Sawgrass, Social123, SPARC, Visualive.tv, ... 100+

Software Sectorsbiomedical, healthcare, DOD, defense contractors, Dept of Commerce, transportation/logistics, aerospace, energy, software security, banking/finance, big data/analytics, saas, paas, iaas,... 1x103+

Recruiting Tech Companies

VCs know Charleston is a 2x location

programmer salaries

real estate cost

Young companies incubate

Fastcompany, June 2012

Paradigm ShiftsInformation economy

Cloud computing

Cheap compute cycles

Cheap memory

Information = new oil

Computational Thinking

Computational Thinking

...in the US

Richard FloridaCreative Class

creates new IP to grow info economy

Service Class

serve the growing high tech industries

Local AssetsGeography (beach, green space, proximity)

Arts (music, art, playhouses, SPOLETO)

Education (CS, Data Science, CITA)

Food (Chefs, beer, bars, coffee)

...but that's not all

Tech FabricEducational threads

CS @ CofC, Citadel, CSU, Clemson, USC

CodeCamp

CofC Center for Continuing Ed & PD

Tech FabricIncubation and Acceleration

Flagship – CHS Digital Corridor

The Lowcountry Innovation Center

SCRA MUSC Innovation Center

Mount Pleasant Incubator

Tech FabricSocial threads

Tech Meet ups

Maker labs

User groups

Events

Growing Tech Talent1980-2012: 600 CS graduates from

CofC

1987 100 CS undergraduate students

95% exited Charleston

2011 251+ CS undergrads

84% stayed in Charleston

2x Talent PipelineToday: 200 unfilled software developer jobs

30-40 CS grads/yr

Tomorrow: 500 undergrads by 2016

100 CS grads/yr by 2016

Digital Media Center 2013

Foster the Culturetalent, technology, tolerance

coffee shops, foodies, youth, nightlife in city

universities and research

live-work-play-work

bandwidth and network ubiquity

Foster the Cultureproximity of living space to work space

lateral job movement potential

direct flights to VCs and markets

bandwidth

Risks to CharlestonStaying parochial vs. competing nationally

Ignoring native assets vs. leveraging them

Local challengesTolerance

cycling, skate boards, kayaks, sailing

LGBT community

bohemians

internationals

Local challengesalternate Transportation

car sharing / electric plug stations

cycling

buses with GPS data

light rail

pedestrian centric

Local challengesSpace

more landing pads

airBnB for startups

new designs for live-work-play

new business models for commercial space

Local challengesState support for tech

Infrastructure

Incentives

Investors

Angel funds

Venture funds

Sense the Urgency

Agility

Adaptability

Timing

Silicon Harbor

Let's move there together


October 11, 2012


Chris Miller, Executive Director and Senior Civilian Official,

SPAWAR

Commercial Real Estate Market Forecast

The Daniel Island Club

Space and Naval Warfare Systems Center Atlantic

Statement A: Approved for Public Release. Distribution is unlimited (09 October 2012).

Mr. Christopher MillerSSC Atlantic

Executive Director

11 October 2012

42

We rapidly deliver and support solutions that enable information dominance for our Naval, Joint, National, and Coalition Warfighters.

We are a Department of the NavyInformation Technology (IT) Command


SSC Command HQ

3,910 Civil Service Personnel127 Military Personnel

9,200 Industry Partners

Strategically located to quickly respond to new threats and develop practical solutions

SSC Atlantic HQ

43

Joint Base Charleston Major Commands


Weapons Station Joint Base CHS

Air Force BaseJoint Base CHS

Former CHS Naval Shipyard

• Army Strategic Logistics Activity Charleston (ASLAC)• Pre-positioning ships • Single point of entry for returning

MRAPs / MATVs

• Naval Health Clinic• Serving 6,915 Navy, 6,000 VA

• Naval Nuclear Training Command (NNPTC) and

Naval Nuclear Power Training Unit (NNPTU)• 4,500 Nuclear Propulsion Students

• Navy Munitions Command / Naval Weapons Station• 269 Bunkers / 62 million # net weight

• 841st Transportation Battalion• 35% of all OIF / OEF material;

leading port for surge

• Naval Consolidated Brig• Level II Medium Security

• SSC Atlantic• C4ISR for the Warfighter and the Nation

JBCTotal Personnel: 21,800Real Estate: 23,777 AcresAssets: $12.2 BillionTenant Units: 53

Charleston AFB• 628th Air Base Wing

• Installation Command and Expeditionary Combat Forces

• 437th / 315th Airlift Wings• C-17 Direct Delivery anywhere

in the world

SSC Atlantic (Chs)Personnel: 2,590 Govt & Mil82 Buildings

1,409,000 Gross sq ft485,160 sq ft Lab space11 SCIFs

44

Command History and Workload


NESEA St. Inigoes SSC New Orleans

SSC CharlestonNISE East

NESEA Washington

NAVELEX Charleston

NAVELEX Portsmouth

SSC Atlantic

NCTC Washington

NCTC Pensacola

NCTC Norfolk

NCTC Jacksonville

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

BRAC1993

Part of CNSY

Part of FISC Charleston

Joint Base Charleston Standup

BRAC 2005

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

1

2

3

4

5

6

Total Obligation Authority $ Billions

1994-2011

$ B

illio

ns

SSC Atlantic( Navy Working Capital

and Mission Funds )

Total Contracting Effort*

$3.52 BTotal Contract Actions*

18,775

Available Ceiling

$8.3 BTotal Small Business *

$955 M

$5.3FY 2011

*Based upon FPDS-NG data as of 24 JAN 2012

NavMASSO joined SPAWAR as SSC Chesapeake SSC Norfolk

45

▼ Fiscally Similar to interwar period from 1919-1939 Difficult choices & opportunities

▼ Geopolitically New global competitors Decreasing natural resources

▼ Militarily Post 9/11 Evolving military strategy

▼ Technology Cyber evolving as warfare area Big Data Challenge Digital natives

Today’s Environment: Constrained Budgets and Uncertain Threats


2 China tech firms called

spy suppliers

Oil Surges as Middle East

Tensions Escalate

Rising tension between Syria and Turkey.

Cyber Attacks Nearing Statistical

Certainty

Panetta: We are strongly committed to strengthening our defense partnerships

http://www.google.com/hostednews/ap/slideshow/ALeqM5g36T0bbweoY9pqDwaACvJzTbfBnw?docId=0d32d0e28cbb410d8b14c2f398646bf1&index=0

http://securityaffairs.co/

46

Strategic Guidance


CNO’s Sailing Direction

National Defense StrategyIncreased focus on PACOM, Cyber, and Special Operations

Guidance on readiness, teamwork and winning from the Sea

SPAWAR GuidanceDelivering core Naval Information Dominance programs that enable information to become a main battery of our warfighting capability

CNO’s Navigation PlanDescribes the Navy’s budget submission for FY2013-2017

47

Products & ServicesMonitoring & Measuring Performance

Gov

ernm

ent

0

100

100

Effective, innovative and affordable solutions for the warfighter=Integrated government /

industry partner team

Workforce Composition %

A B C

–M

ater

iel S

olut

ion

Anal

ysis

–Te

chno

logy

Dev

elop

men

t

–En

g &

Man

ufac

turin

g De

v.

–Pr

oduc

tion

& De

ploy

men

t

–O

pera

tions

& S

uppo

rt Industry

Program Milestone

Government Technical Expertise,

Planning & Engineering

EnterpriseContract Strategy that maximizes competition

and agility

Core Reusable Components

100

0

Our Work Sourcing Approach

Leveraging Technology Speed to Capability


48

Facilities – Optimized for Requirements


2.5M sq ft, 125 Buildings Command-Wide

Air Traffic Control Building

Enterprise Engineering and Certification (E2C)

Common Submarine Radio Room

National Research Assets: RF Test Facility (Poseidon Park) Vehicle Integration Solutions Center USMC Digital Integration Facility (DIF) Service Oriented Architecture (SOA) Test

Laboratories Environmental Test Lab Anechoic Test Chamber Shock and Vibration Test Capability Platform Test & Integration Facility (SCN) Commercial and DoD Satellite

Communication (Complex D) RDT&E Network Air Traffic Control Test Lab C4I End-to-end Integration Lab Multidisciplinary Research Center

Vehicle Integration Solutions Center

SSC Atlantic Data Center

Testing and Integration Facility

49Statement A: Approved for Public Release. Distribution is unlimited (09 October 2012).

Workforce Development

Acquisition Workforce▼ Bringing down average age

Current Avg Age 44 (from 46 in 2003) 242 New Professionals 105 Student Interns

▼ 2,293 billets (up from 1,889 in FY11)▼ Primary career fields

IT Specialists, Electronics Engineers, Computer Scientists, Mgmt & Program Analysts, and Elec. Tech

▼ Emphasis on training $11M spent in workforce development

in FY12 $2M spent in labor for acquisition

credentials in FY12

Civil Service Personnel by Competency

2011 USD AT&L Workforce Development Silver Award0

500

1000

1500

2000

2500

3000Bachelors Masters Doctorate

# Em

ploy

ees

21 2326

19

20112007 2009 20102008

17

32

2012

Engineering

Logistics & Fleet Support

Corporate Operations

FinanceContracts Science & Technology

<1%

Program Management

We are the largest employer

of electrical engineers in SC

50

STEM Outreach: An Investment in our Nation’s Future


INSPIREthe next generation of scientists and engineers, as well as their parents and teachers.

ENGAGE students build their STEM confidence and skills through hands-on learning.

EDUCATEstudents to be well prepared for employment in STEM careers that support the Navy and Marine Corps.

EMPLOYretain and develop naval STEM professionals.

Cyber Security Syllabi Team

HB

CU P

ipel

ine

Proj

ect

Rob

otics

Com

petit

ion

IT

Sha

dow

Days

Dim

ensio

nU C

ompe

titio

n Science, Technology, Engineering and Mathematics (STEM) education to

Collegiate Cyber Defense Competition

Science Fair in New Orleans ROTC Engagement

SEAPEARCH Gulf Coast Regional Challenge

improve scientific and technology literacy and the competitiveness of our nation’s students.

Learn more visit https://suss.spawar.navy.mil/trqfqe

51

Economic benefits to S.C. and the Nation*


SSC Atlantic In South Carolina $2.6 Billion annual economic impact Accounts for 21,534 jobs in the

Charleston area− Responsible for 1 out of every 14 jobs

One of the fastest growing business operations− Grew 238% from 2000 through 2009

Largest employer of electronics engineers

One of the top three employers of Knowledge Economy workers

▼ Visitors to SSC Atlantic, Charleston Office Bring in $27 Million to

the Charleston area each year

Support 360 jobs in tourism* This info taken from economic impact study done by the Division of Research, Darla

Moore School of Business at the University of South Carolina DTD 10.04.2009

More than $9 Billion economic impact in the U.S.

52

Final Thought


We Make IT Count for the Warfighter and the Nation


Web: http://www.public.navy.mil/spawar/Atlantic Facebook: http://www.facebook.com/spaceandnavalwarfaresystemscommand Twitter: http://twitter.com/SPAWARHQ Employment opportunities: www.USAJOBS.gov

http://www.public.navy.mil/spawar/Atlantic

http://www.facebook.com/spaceandnavalwarfaresystemscommand

http://twitter.com/SPAWARHQ


October 11, 2012


Ray Owens, Senior Economist & Research

Advisor, Federal Reserve Bank of Richmond

Raymond Owens

October 11, 2012

-10-9-8-7-6-5-4-3-2-1012345678

-10-9-8-7-6-5-4-3-2-1012345678

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

57

Q2 1.3%

Real Gross Domestic Product

Source: Bureau of Economic Analysis/Haver Analytics

Percent change from previous quarter at annual rate

58

Real Gross Domestic Product


Q2 Q3 Q4 Q1 Q2

CHANGE FROM PREVIOUS QUARTER AT COMPOUND ANNUAL RATE [Percent]:

Gross Domestic Product 2.5 1.3 4.1 2.0 1.3

Personal Consumption Expenditures 1.0 1.7 2.0 2.4 1.5

Nonresidential Fixed Investment 14.5 19.0 9.5 7.5 3.6Structures 35.2 20.7 11.5 12.9 0.6Equipment & Software 7.8 18.3 8.8 5.4 4.8

Residential Fixed Investment 4.1 1.4 12.1 20.5 8.5

Exports of Goods & Services 4.1 6.1 1.4 4.4 5.3Imports of Goods & Services 0.1 4.7 4.9 3.1 2.8

Final Sales to Domestic Purchasers 1.8 2.2 2.1 2.2 1.4

LEVEL IN QUARTER AT SEASONALLY ADJUSTED ANNUAL RATE [Billions of Chained (2005) Dollars]:

Change in Private Inventories 27.5 -4.3 70.5 56.9 41.4

Net Exports of Goods & Services -399.6 -397.9 -418.0 -415.5 -407.4

-3

2011

Government Consumption Expenditures & Gross Investment

2012

-0.8 -2.9 -2.2 -0.7

59

128

129

130

131

132

133

134

135

136

137

138

139

128

129

130

131

132

133

134

135

136

137

138

139

2006 2007 2008 2009 2010 2011 2012 2013

Millions of Persons

September134 mil.

Nonfarm Payroll Employment

Source: Bureau of Labor Statistics/Haver Analytics

-800

-700

-600

-500

-400

-300

-200

-100

0

100

200

300

400

500

-800

-700

-600

-500

-400

-300

-200

-100

0

100

200

300

400

500

2006 2007 2008 2009 2010 2011 2012 2013

60

Quarterly average of monthly changes, thousands of persons

Q3 Avg.

Nonfarm Payroll Employment


Sep. 114Aug. 142Jul. 181Jun. 45May 87

Monthly Change

61

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Percent

September7.8%

Civilian Unemployment Rate

Source: Bureau of Labor Statistics, Board of Governors, Haver Analytics

Notes: FOMC forecast is the central tendency for the Q4 levels, from the September 12-13 meeting.

FOMC Forecast

-6

-4

-2

0

2

4

6

-6

-4

-2

0

2

4

6

2006 2007 2008 2009 2010 2011 2012 2013

62

Personal Income & Expenditures


12 Month % Change

Real Personal Consumption Expenditure

Real Personal Income

August

Jun. Jul. Aug.Income 0.2 0.1 -0.3Expenditures -0.1 0.4 0.1

Month over Month % Change

63

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

2006 2007 2008 2009 2010 2011 2012 2013

August4 .3 mil.

Existing Single-Family Home Sales

Source: National Association of Realtors/Haver Analytics

Millions of Homes

Average Annual Existing Home Sales: 1990 through 1999

64

Private Multi-Family Housing Starts & Permits

Source: Census Bureau/Haver Analytics

Millions of Starts & Permits

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2006 2007 2008 2009 2010 2011 2012 2013

Starts

Permits

1990 – 1999 Average Multi-Family Starts

August

65

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

2006 2007 2008 2009 2010 2011 2012 2013


Q24.8%

Real Investment in Equipment & Software


66

-45-40-35-30-25-20-15-10-50510152025303540

-45-40-35-30-25-20-15-10-505

10152025303540

2006 2007 2008 2009 2010 2011 2012 2013


Q20.6%

Real Investment in Nonresidential Structures


4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

6

7

8

9

10

11

12

13

14

15

16

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

United States

4

4.5

5

5.5

6

6.5

7

12

14

16

18

20

22

24

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Charleston, S.C.

Industrial Vacancies & Rents

Source: Torto Wheaton Research

Percent

Torto Wheaton Real Rent Index

(Right Axis)

Index


(Right Axis)

Percent Index

Vacancy Rate (Left Axis)Vacancy Rate

(Left Axis)

67

68

300

320

340

360

380

400

420

440

460

480

500

300

320

340

360

380

400

420

440

460

480

500

2006 2007 2008 2009 2010 2011 2012 2013

Current $, Billions

Twelve-Month Moving Average

August

Manufacturers’ New Orders

Source: Census Bureau/Haver Analytics

20

21

22

23

24

25

26

27

28

29

30

8

9

10

11

12

13

14

15

16

17

18

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

United States

17

18

19

20

21

22

23

4

6

8

10

12

14

16

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Charleston, S.C.

Office Vacancies & Rents

Source: Torto Wheaton Research

Percent


(Right Axis)

Office Vacancy Rate (Left Axis)

Index

Office Vacancy Rate (Left Axis)


(Right Axis)

Percent Index

69

Net Absorptions & Employment

Source: Torto Wheaton, Bureau of Labor Statistics, & Haver Analytics

Notes: Office employment is the sum of employment in information, financial activities, and professional and business services.

70

-50

-40

-30

-20

-10

0

10

20

30

40

50

-250

-200

-150

-100

-50

0

50

100

150

200

250

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

Thousands of Employees, Quarterly Averages Millions of Square Feet

Net Absorptions,Office Buildings

(Right Axis)

Changes in Employment(Left Axis)

-3

-2

-1

0

1

2

3

4

5

6

-3

-2

-1

0

1

2

3

4

5

6

2006 2007 2008 2009 2010 2011 2012 2013

71

All Items

Core CPI

August

Consumer Price Indexes12 Month % Change


Jul. Aug.CPI: All Items 1.4% 1.7%Core CPI 2.1% 1.9%

72

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2006 2007 2008 2009 2010 2011 2012 2013

October5th

5-Year

5-Year5 Years Ahead

TIPS Inflation Compensation

Source: Board of Governors/Haver Analytics

Percent

73

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Federal Funds Target Rate

October 5th

Primary Credit Rate

Discount Rate(discontinued)

Monetary Policy InstrumentsPercent


Federal Funds Rate Target Range

1000

1200

1400

1600

1800

2000

2200

2400

2600

2800

3000

9/12/2012 10/3/2012

74

Federal Reserve System Assets


$, Billions

Treasury Securities:$1,648

AgencyDebt: $83

Agency MBS: $835

Notes: Discount Window lending is less than $1 bln. as of 1/25. Foreign Currency Swaps were less than $1 bln. until 10/19/11.

AIG & Bear Stearns: $2

Term ABS LendingFacility (TALF): $1 Total: $2,847

Miscellaneous: $264

Treasury Securities:$1,652

AgencyDebt: $87

Agency MBS: $843

AIG & Bear Stearns: $4

TALF: $2Total: $2,867

Miscellaneous: $258

Foreign Currency Swaps:

$13Foreign

Currency Swaps: $20

75

0.5

1.5

2.5

3.5

4.5

5.5

6.5

7.5

8.5

9.5

10.5

0.5

1.5

2.5

3.5

4.5

5.5

6.5

7.5

8.5

9.5

10.5

2008 2009 2010 2011 2012 2013

October 5th

10-Yr. Treasury Bond Rate

Corporate BBB Bond Rate

30 Year Conventional Mortgage Rate

Corporate AAA Bond Rate

Capital Market RatesPercent

Source: BofA Merrill Lynch, Board of Governors, Haver Analytics


Questions?


A few words from our Host Sponsor…


Please join us for our Legislative + Networking Reception

Compliments of

Find today’s presentations on:

Slideshare.net/CharlestonRealtorsFacebook.com/CharlestonCID

Ready-to-use Web Content Download copies of the reports (and more commercial research resources!) at CharlestonRealtors.com/CID


October 11, 2012

2012 commercial market forecast

Documents

public release

play

09 october 2012

work

unlimited

foster

distribution

approved