why office now?€¦ · why office now? today’s commercial office environment is unique from...
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Why Office Now? Today’s commercial office environment is unique from prior cycles and will continue to afford opportunities
to deliver outsized returns, even as the recovery time since the last recession is lengthening. Prime
submarkets within fast‐growing Secondary Markets have recently overtaken1 and are projected to
outperform Gateway Markets2, making larger contributions to the overall performance within the office
sector. Alpha‐generating opportunities are further extended through pro‐active leasing, property
management, and asset management to drive NOI (Net Operating Income) growth. In this research piece,
we will discuss how the current and forecasted office environment combined with well‐targeted locations,
an expertise in selective office value‐add assets, and strategic improvements at the asset level present
unparalleled opportunities for alpha‐generating office real estate investing.
1 Source: CoStar Analytics2 “Gateway Markets” include New York, Washington DC, San Francisco, Los Angeles, and Chicago
Executive Summary
The market for commercial office space is increasingly positioned to reward a value‐add strategy in fast‐
growing Secondary Markets. Bridge believes this sector presents an under‐appreciated opportunity to
“create alpha” at the asset level and generate above‐market returns due to:
Limited New Construction: In many U.S. office
markets, rents are 30‐40% below
“replacement rents,” presenting a substantial
barrier to new construction despite the
expansionary real estate cycle environment.
Constraints to construction—e.g., regulation,
rising construction and land costs, and lending
issues—are expected to keep supply tight in
the medium to longer term, rewarding well‐
positioned existing assets with higher rents
and net absorption.
Rising Demand: Demand for office space is
growing rapidly in Southern and Western
Secondary Markets. These markets
disproportionately import demand from other
metros, support existing company expansion,
and foster startup ecosystems, leading to high
tenant leasing activity and absorption.
Employment levels are expected to increase
3.3%+ per year in a number of Secondary
Markets versus 1.7% in Gateway Markets.
Attractive Price Points for Investments: Despite
strong demand, office assets in fast‐growing
Secondary Markets and their submarkets
remain at an attractive price point, in many
cases less than 50% of new asset replacement
cost. This has been due in part to a lagging
recovery from the global financial crisis and
delays by many larger investors in recognizing
the opportunity for outsized returns that
these markets present. The suburban office
market share of demand and transaction
volume has been rising and is expected to
remain stable or increase as the overall
market grows. Bridge Target Markets3 present
the benefit of higher entry cap rates combined
3 “Bridge Target Markets” include 25 Secondary Markets within the U.S. The list of these markets is provided in the appendix.
with stronger forecasted NOI growth. There
also exists the prospect of compressing cap
rates in these markets from higher demand as
more investors realize the opportunity and
start pursuing these markets for greater
investment yields.
Limited Risk Environment: Investment Risks
are mitigated by macroeconomic and
demographic trends. A slow recovery and
tighter lending standards over the last decade
suggest that this expansionary cycle may last
longer than previous cycles. Full employment
risk is similarly constrained by a rising labor
participation rate, meaning that office
demand can rise even in a sub‐5%
unemployment environment.
Value‐Add Opportunities: Although trends in
office space usage have driven a more dense
utilization of space and a reduction of 50‐
100sf per employee, these shifts present an
opportunity to value‐add investors who can
renovate buildings to fit modern tenant
preferences and capture the insights of the
WeWork office model in repurposing obsolete
spaces for common area amenities. By
repositioning assets and leveraging a robust
in‐house leasing and operating platform,
Bridge targets to maximize occupancy and
command higher rents from satisfied tenants,
driving NOI and higher returns for investors.
Supply Story: New Construction is Being Held in Check by Market Forces
Headlines about rising office construction are really focused on five markets that represent 50% of the
current new supply. These stories can be misleading if taken as a broad brush to paint the entire U.S. office
market. Although office completions have steadily increased from their historically low numbers in 2011‐
2013, this cycle’s peak year for completions (2017) will be significantly lower than even historical average
deliveries over the past 35 years, let alone peak deliveries from other cycles, which have been as much as
triple the 2017 peak delivery. Furthermore, new completions are slated to come down again from 2018‐
2021.
Source: CoStar Analytics, Q1 2017
Why such low new construction during a time when absorption has outpaced completions every quarter
for the last 27 quarters, rents have increased, and vacancies have fallen? There is one main reason:
Builders Cannot Make Money Building New Commercial Office in Many Markets around the U.S.
Construction costs have escalated at a pace much faster than inflation and rents since the turn of
the century. RSMeans (a leading construction cost estimator in the industry) shows that
construction costs have increased 75% since 2000. With higher costs, fewer deals pencil (deals that
would have made economic sense in prior cycles). This escalation in costs is due to new regulations
in construction methods, higher labor costs (many construction professionals permanently left the
industry during the Great Financial Crisis), higher materials costs (in part due to global demand for
building materials in other property types), significantly higher municipal fee structures, and most
recently, lending regulations that make construction financing costlier and less desirable to banks
who have provided the majority of the leverage. All of these hard and soft costs, combined with
the high cost of land, have resulted in very little new speculative office construction in many
markets around the country.
0
50
100
150
200
250
300
Square Feet (in m
illions)
NEW COMMERCIAL OFFICE COMPLETIONS (U.S.)
New Office Completions Historical Average
3
This lack of new construction in most metro areas benefits owners of existing commercial office space in markets with growing demand.
Manhattan, 13%
San Jose, 12%
San Francisco, 9%
Washington, DC, 9%
Dallas/Fort Worth, 7%
Remaining Metros, 50%
U.S. SHARE OF OFFICE UNDER CONSTRUCTION
Source: RS Means, CoStar Analytics
Office rents, although steadily increasing since their trough in 2010, are nowhere near
“replacement rents” in many markets around the country. In other words, office developers need
to achieve certain rents for deals to make economic sense. Many U.S. markets (including both CBD
and suburban areas of these markets) show current asking rents for commercial office space well
below (often 30‐40% below) the rents necessary to justify new construction. This is a unique
circumstance this far into an expansionary real estate cycle. The results are historically low new
office construction during an expansionary portion of a cycle, with half of that construction in only
five markets nationally where “replacement rents” are high enough to justify new construction.
Source: CBRE Research, Q1 2017
80
100
120
140
160
180
OFFICE CONSTRUCTION COSTS VS. RENTS
Avg Office Construction Hard Cost Growth Avg Office Asking Rents
4
Demand Story: Office‐Using Employment is Expected to Continue its Strength
A slow and methodical economic recovery has led to steady employment growth and, more specifically,
office‐using employment growth since the second quarter of 2010. The slow pace of economic growth,
coupled with more restrictive lending standards relative to prior cycles, has allowed for a lengthening
expansion with major forecasters prognosticating continued growth for the next several years.
Source: Moody’s Analytics
Owners of office space are poised to benefit greatly from this expansion. Office‐using employment
increased by 129,000 jobs in Q1 2017, which exceeded the quarterly average of 120,000 jobs since 20114.
Of particular note is that the financial services sector added 41,000 jobs in Q1, the highest quarterly gain
since 2005. A resurgent financial services sector, along with a growing high‐tech sector, healthcare/life
sciences, business services, and creative industries in many Secondary Markets throughout the country,
are a boon for owners of commercial office space for both the near and medium term.
Source: BLS, Moody’s Analytics
4 Source: CBRE
(2)
0
2
4
6
8
2000‐2009 2010‐2019
(MILLIONS)
CHANGE IN OFFICE‐USING EMPLOYMENT
5,000,000
5,500,000
6,000,000
6,500,000
7,000,000
7,500,000
8,000,000
8,500,000
9,000,000
1980Q1
1981Q1
1982Q1
1983Q1
1984Q1
1985Q1
1986Q1
1987Q1
1988Q1
1989Q1
1990Q1
1991Q1
1992Q1
1993Q1
1994Q1
1995Q1
1996Q1
1997Q1
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
2011Q1
2012Q1
2013Q1
2014Q1
2015Q1
2016Q1
2017Q1
U.S. FINANCIAL SERVICES EMPLOYMENT
Financial Services Employment Indicative Straight‐Line Employment
2017‐2019(f)
2010‐2016 Decade Average of
Negative Growth
5
Not all markets are created equal with regards to office‐using employment. An office investment strategy
is not confined to national‐average absorption, employment growth, and ultimately returns. Bridge
believes that an investment strategy taking advantage of the supply‐demand dynamics in the U.S. office
sector should be focused on geographies in which there is above‐average new demand that is: a) imported
from other metro areas; b) supported by existing tenant expansion; and c) created by newly‐formed startup
companies. Almost without exception, this type of activity is happening throughout the South and West
regions of the U.S., sometimes at the expense of markets in the Midwest and much of the Northeast.
Bridge is focused on these Southern and Western markets, where
office‐using employment growth is forecasted to grow at more than
2x the rate of growth in Gateway Markets.
For example, markets such as Orlando, Raleigh, Phoenix, Portland, and others are forecasted to average
over 3% annual growth in office‐using employment during the next three years (and with limited new
development). Bridge continues to source office assets at well below replacement cost in these markets,
particularly in sub‐markets within these markets that are desirable for the live‐work‐play environments that
tenants seek.
Source: Moody’s Analytics
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2016 2017 2018 2019
STRONG OFFICE‐USING EMPL. GROWTH IN SOUTH AND WEST
Orlando Raleigh Phoenix Portland Gateway Cities Average
6
Fast‐Growing Secondary Markets Should Outperform
Bridge believes that Secondary Markets should outperform Gateway Markets during the next several years,
particularly Secondary Markets throughout the South and West regions of the U.S. We view Secondary
Market asset pricing, which is significantly below replacement cost, as a comparative bargain to Gateway
Markets and as an opportunity to secure yield. Assets that meet return thresholds are now simply less
available in Gateway Markets – a trend that should continue in coming years. In response, investors should
cast a wider net for stable yet growth‐oriented acquisitions. Bridge also believes that these markets are
currently off the radar of many domestic and international investors, but, as was the case with the
multifamily industry, these markets will gain favor as investors see their relative outperformance and begin
looking for better returns than they can achieve in the Gateway Markets.
Jobs follow workers, with many Secondary Markets experiencing significant population and employment
growth. A lower cost of doing business and the higher quality of life are driving businesses and people to
choose Secondary Markets that offer cultural attractions, walkable urban and suburban cores, premium
retail and restaurants, and good public transportation options (particularly transit‐oriented development
[TOD] sites next to light rail nodes). These areas within Secondary Markets can be found either in CBDs
(central business districts – think downtown Portland, Atlanta, or Sacramento) or in prime suburbs (think
Scottsdale AZ, Lake Mary in Orlando, or Cumberland/Galleria in Atlanta). Bridge targets submarkets with
these characteristics.
The relatively low supply expected in Bridge Target Markets, coupled with strong demand fundamentals,
makes these markets very attractive for office investors.
Source: REIS, CoStar, Moody’s
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
Office‐Using Employment Growth Absoprtion as % of Inventory Completion as % of Inventory
DEMAND AND SUPPLY IN BRIDGE TARGET MARKETS VS. GATEWAY MARKETS, 2017‐2019 FORECAST
Bridge Target Markets Gateway Cities
DEMAND 33% HIGHER
SUPPLY 17.6% LOWER
7
Prime submarkets within Bridge Target Markets are projected to materially outperform “Gateway CBDs” in
NOI growth, averaging 3.3% per year vs Gateway CBD’s 1.7% (see below chart); furthermore, assets can be
acquired at higher cap rates, which generates significantly higher cash yields and total returns. Normally,
investors accept a lower cap rate on investments due to the perceived security of the investment and
stronger expected growth. Stronger growth in Gateway Markets was certainly the case in the first few years
coming out of the recession. Yet Secondary Markets caught up to Gateway Markets in 2015 and are
expected to materially outperform going forward.
Office investors in Secondary Markets are being rewarded with not only much higher initial yields, but also
stronger expected growth. With limited new development in these Secondary Markets and fast‐growing
investor interest, Secondary Market office is a more secure and growing asset class than is currently being
appreciated by the marketplace. Bridge Office seeks to capitalize on the opportunity this market
underappreciation presents and believes it can generate significant current cash flow yields, NOI growth
and capital appreciation through our “We Work‐ Lite” alpha creation at the asset level, “boots‐on‐the‐
ground” local knowledge and our in‐house operating and leasing platforms.
Source: CBRE Cap Rate Survey, CoStar Analytics, Q1 2017
Pricing and Demand Now More Favorable in Secondary Markets and Suburbs
Despite the headline‐grabbing moves of large tenants away from the suburbs to CBDs, digging deeper into
the numbers shows that office demand has actually remained remarkably steady in recent years between
suburbs and CBDs. In fact, the percentage share of demand for CBDs has declined by 90 basis points since
2007, while Prime Suburban submarkets gained 80 basis points of market share over the same period5.
Furthermore, CoStar’s data shows that the office market’s share of demand is split nearly evenly between
urban districts (49.1%) and suburban districts (50.9%). Additionally, CoStar does not forecast that demand
share will change in a meaningful way over the next five years, meaning that Prime Suburban submarkets
should remain in high demand.
5 Source: CoStar Analytics
5.4%7.5%
1.7%
3.3%
0%
2%
4%
6%
8%
10%
12%
Gateway CBD Bridge Target Markets
CAP RATE + MARKET NOI GROWTH ‐GATEWAY CBD VS. BRIDGE TARGET
MARKETS
Cap Rate ‐ Class A & B Office NOI Growth Forecast
8
The below chart illustrates that since the Great Financial Crisis, cap rates for CBD office dropped
significantly more than non‐CBD (or suburban) office as institutional investors sought safety. This has
created a situation in which the spread between CBD and non‐CBD office this decade has been two to three
times higher than in previous decades (even while absorption in non‐CBD office has grown relative to CBD
office). Furthermore, the current spread of non‐CBD office to the 10‐year Treasury rate is still 70 bps wider
than the historical average, even including the recent increase in interest rates throughout Q1 2017. This
contrasts with the spread of CBD Office cap rates to Treasuries, which is at historical averages, given that
cap rates in CBDs have continued to fall in the face of rising rates. Bridge believes that this flight to safety
is ready for a correction – to the benefit of owners of suburban office.
Source: RERC, Real Capital Analytics (RCA), Federal Reserve Economic Data (FRED)
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
OFFICE CAP RATES CBD VS SUBURBAN AND 10 YEAR TREASURY YIELD 1990 ‐ 2017 Q1
Office‐CBD Office‐Non‐CBD 10 Year Treasury Yield
Historical Spread to Treasuries (2000‐2007) Office‐CBD: 3.2% Office‐Non‐CBD: 3.8%
Current Spread to Treasuries (2017 Q1) Office‐CBD: 3.1% Office‐Non‐CBD: 4.5%
9
Risks and Mitigating Factors
Recession Risk
Commercial office investment is susceptible to movements of the business cycle. However, expansionary
cycles do not simply die of old age. While Bridge does not purport to know the timing of the next recession,
we see strong evidence that the current expansionary cycle may last longer than previous cycles.
The slow speed of recovery in employment is a marked difference between the current cycle and previous
cycles. In fact, it took over 6 years from the 2007 pre‐recession peak for employment to recover in this
cycle – by far the longest it has taken for job growth recovery since the Great Depression.
Source: Moody’s Analytics, National Bureau of Economic Research
Furthermore, lending practices during this cycle have
been much tighter than during expansionary periods of
prior cycles. G‐7 countries reduced government deficits
from 7% of GDP in 2010 to 3% in 2016. U.S. households
and financial institutions deleveraged also, likely due to
trauma from the crisis. The personal savings rate during
this recovery is 6.4% higher than the historical mean.
Perhaps more importantly, there has been a 56%
decrease in U.S. financial sector leverage relative to
previous recoveries. 6
6 Source: Goldman Sachs Investment Strategy Group 2017 Outlook
All in all, given the above, there is reason to believe that this cycle could outlast previous cycles.
‐10%
‐5%
0%
5%
10%
15%
20%
25%
CUMULATIVE JOB GROWTH FROM PRE‐RECESSION PEAK
1981‐1982 Recession 1990‐1991 Recession
2001 Recession 2007‐2009 Recession
2017 Q1
0%2%4%6%8%10%12%14%16%
0%1%2%3%4%5%6%7%8%
1949‐1953
1954‐1957
1958‐1960
1961‐1969
1970‐1973
1975‐1980
1980‐1981
1982‐1990
1991‐2001
2001‐2007
2009‐Present
MAX Y‐O
‐Y GDP GROWTH
%
REA
L GDP GROWTH
%
H ISTORICAL EXPANSIONARY CYCLE GDP GROWTH
Real GDP CAGR Trough to Peak (L)
Max Y‐o‐Y GDP Growth (R)
10
A strategy centered on robust in‐house leasing and operating platforms can serve as a significant risk
mitigant in times of crisis. During the global financial crisis, Bridge’s performance history was one of strong
relative outperformance, due to our deep relationships with tenants and ability to meet their needs with
relevant office space.
In addition to prioritizing a strong leasing platform, market selection also plays a large role in creating a
recession‐defensive portfolio. Historically, office cycles have been much more impacted by supply changes
than changes in demand. In Atlanta, for example, the amount of leased square footage from 2007 to 2009
dropped only 2%, but the market delivered approximately 4%‐6% of additional supply, taking an 87% leased
market to approximately 80% leased in a very short period of time7.
In today’s market conditions, most markets that Bridge invests in have very limited new supply: Bridge
Target Markets have an anticipated less than 1% annual supply growth forecast with some of our markets
forecasted at 0% supply growth. If we encounter another event of Great Financial Crisis proportions where
the demand dipped 2%, and if there is only 1% being delivered, then our markets could drop from 88%
leased to 85% leased. (This is using the Great Financial Crisis as an example, and most market participants
do not estimate that level of event due to seemingly less imbalances in today’s economy.) If one assumes
a flat market from a mild recession, we would anticipate demand growth to stall and markets to stay
relatively flat; because development is constrained, market occupancy might drift in the 87‐88% range. In
this mild recession scenario, an operator who can continue to add value at the asset level is a true
differentiator – in other words, a flat market is still an environment where a true value‐add operator can
thrive.
Bottoming Out of Unemployment
The unemployment rate reached 4.4% in April 20178, which would be considered “full employment” in
traditional economics parlance. This would lead some to conclude that employment growth may stall in
the near future.
Evidence suggests that there remains significant slack in the labor market. As indicated in the below chart,
the labor force participation rate appears to have bottomed in 2016 and is projected to rise in coming
years. Good scholarly work has been done on the reasons for the fall in the participation rate, with the
aging U.S. population playing a key role. However, a meaningful part of the fall can be attributed to
discouraged workers, and with rising wages finally becoming a reality, it is likely that workers who are out
of the workforce or underemployed will be able to find more diverse types of work and re‐enter the labor
force.
7 Source: CoStar Analytics 8 Source: BLS
11
Source: BLS, Moody’s Analytics
Changing Office Habits of Employees
Throughout most office markets in the U.S., a shift towards creative office space with less “me” space and
more “we” space has become prevalent. Many companies have chosen to downsize their office space due
to employees working from home, non‐dedicated space models, conference room sharing, and
productivity‐based management. This shift in office‐using behavior has not only been prevalent in the
technology industry, but has also crept into other industries looking to attract young professionals who
might prefer an open office environment or contain costs. There is debate about the open office
environment’s effect on productivity, but the trend is likely here to stay, with fewer square feet per
employee (150‐200sf per employee) being the norm as opposed to 250sf+ per employee in the past. This
more efficient use of office space during the current economic expansion has likely been the primary reason
for the solid‐yet‐unspectacular absorption of office space, even as millions of new office‐using employees
have been added to the workforce.
But these new trends will not spell the end of the commercial office market; the need for face‐to‐face
collaboration in a work setting, albeit in a more efficient work setting, will allow for continued office net
absorption as the U.S. economy grows and absorption continues to outpace new supply.
This trend has created opportunities for capable commercial office
operators to reposition well‐located, high‐quality older assets by
converting less desirable spaces in these buildings into functional
common areas and break‐out areas for tenants.
62.0%
63.0%
64.0%
65.0%
66.0%
67.0%
68.0%
LABOR PARTICIPATION RATE
12
“Bridge”ing WeWork
The WeWork phenomenon has changed the way people think about flexible‐term executive suites, virtual
offices, and creative/collaborative work environments. In digging into the business of WeWork and their
competitors, these companies create a membership model with a variety of paid services that boast
flexible, fun environments for individuals and companies in which to work.
These paid services include access to open, collaborative spaces that are tailored to their
tenants’/members’ individual working preferences, such as couches, community tables, coffee bars, cafés,
conference facilities and often short‐term offices. These spaces are coupled with areas of “escape” for
games, ping pong, shuffleboard, and other ways to unplug and interact with others. There are also web‐
based programs and mobile apps for scheduling conference time, special events notification, and
interactive communication within a social membership community.
Bridge provides similar creative environments which offer these same
services and amenities as a part of our
Capital Improvement Program on acquisition.
The Bridge collaborative environments contain free Wi‐Fi, wired flexible work areas, concierge services,
web‐based communication programs and scheduling, conference facilities, cafés, coffee shops, etc., that
are available to tenants at no cost. Our centers and building amenity packages are both an incentive for
prospective tenants to lease space and an ongoing amenity, which improves tenant productivity, attracts
labor, promotes employee retention, provides flexible work environments, and generates a sense of
building community, making the property stand out from its competitors. Bridge believes that the modern
tenant needs working environments that promote collaboration, productivity, and flexibility, amenities
which are largely lacking in most of the existing supply in Bridge Target Markets and which the Bridge
operating platform is particularly capable of delivering.
13
Bridge “Creates Alpha” at the Asset Level
The Bridge investment approach combines a disciplined asset selection process with a focus on
operationally oriented, value‐added improvements that increase tenant satisfaction and solve vacancy
issues. The extensive Bridge “boots‐on‐the‐ground” operating and leasing network and our closeness to
the assets allows us to address local tenant needs on a comprehensive basis and transform ordinary office
properties into state‐of‐the‐art, modern, appealing workspaces that command premium market rents
and high occupancies.
Bridge thrives in its ability to execute a hands‐on business plan of renovating and repositioning poorly
managed properties in a “WeWork‐Lite” model. Bridge has proven through its investment in 49 office
buildings, since 2009, that it can, on average, turn each dollar of NOI into $1.74 in just 2.5 years of ownership
through asset stabilization. In other words, Bridge – by modernizing and repositioning stale office space ‐
increased NOI by 74% in just 2.5 years, while the corresponding markets in which it operated experienced
only 7% NOI growth.
Sample Bridge Value‐Add Investment
ASSET REPOSITIONING AND REHABILITATION
New Landscaping
Enhanced Entry
Upgraded Lighting
New Systems / HVAC
Create “Ready to Lease” Spaces
Upgrade Amenities / Common Areas
REBRANDING WITH BRIDGE LEASING, MARKETING,
AND PUBLIC RELATIONS
REBRANDING, LEASING, MARKETING, AND PR
Execute Aggressive Marketing Plan
Tightly Target Advertising and PR
Community Involvement – Improvement Districts
New Logo and Brand Identity
Create Presentation Environment
Broker Awareness Program
$1.00
$1.74
$0.00
$0.50
$1.00
$1.50
$2.00
At Acquisition At Stabilization/Disposition
NOI AT BRIDGE ASSETS
Capital expenditures in the attributes most valued by local market tenants combined with Bridge's
proprietary leasing platform can result in significant increases in occupancy and NOI, historically in as little
in 24 months in a number of Bridge properties.
14
CONCLUSION
The fundamentals of supply and demand strengthen the commercial office asset class and particularly
reward value‐add strategies in Secondary Markets. Growing labor force participation and economic
recovery bring hundreds of thousands of workers every year into the market, and new construction is
unable to respond in turn due to high costs and structural problems in the replacement rate. Secondary
Markets offer both higher entry cap rates and stronger NOI growth than Gateway Markets. Underpriced
assets in Secondary Markets further reward investment in properties with sound fundamentals and limit
the downside risk of recession. These circumstances provide an opportunity for value‐add investors who
can offer responsive renovations and proactive “boots‐on‐the‐ground” asset management. Whether
economic trends continue or falter, we believe this targeted market will outperform the rest of the sector,
rewarding investors who capture these market trends. By making substantial capital investments in the
attributes most valued by local tenants and accounting for new and changing office preferences, Bridge
can produce assets where people actually want to work, right in the cities where the most growth is
projected to occur.
15
APPENDIX
Bridge Target Markets are listed in the below chart showing office‐using employment growth forecasts from Moody’s Analytics.
0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%
Gateway Markets AverageMinneapolis
Denver
Ventura County
SacramentoSan Diego
San Bernardino/Riverside
Oakland‐East BayMemphis
Charlotte
Atlanta
San AntonioFort Lauderdale
Greenville
Palm Beach
JacksonvillePortland
Salt Lake City
Las VegasRaleigh‐Durham
Tampa‐St. Petersburg
Dallas
OrlandoAustin
Seattle
Phoenix
2017 FORECASTED OFFICE‐USING EMPLOYMENT GROWTH ‐BRIDGE TARGET MARKETS
16
About Bridge Office:
Bridge Office Manager’s senior management team averages 25 years of experience in the office sector and has been
instrumental in the financing, acquisition, leasing and management of 274 properties in the US, completing
~$3 billion of office transactions in prior ventures. The investment team has substantial access to off‐market deal
flow and in three predecessor funds, on the heels of the Great Financial Crisis, acquired assets at a 53% average
discount to replacement cost. The majority of these transactions were sourced through Bridge’s longstanding industry
relationships with asset owners and the brokerage community.
About Bridge Investment Group:
Bridge Investment Group is a privately held real estate investment management firm with $7.4 billion in assets under
management. Bridge combines its 1,000‐person, nationwide operating platform with specialized teams of investment
professionals focused on select U.S. real estate verticals, which Bridge believes offer above‐market opportunity:
Multifamily, Office, Seniors Housing, Affordable Housing and Debt Strategies.
Bridge principals are owners and operators who are deeply rooted in their assets. In‐depth knowledge of local
markets, as well as extensive real asset and capital markets expertise, enable Bridge to develop prolific deal flow and
to deploy active asset management and monitoring across its business lines. Bridge’s asset management strategy is
specialized and focused in a way that emphasizes current income and capital appreciation while mitigating risk. By
making improvements that build lasting communities, increase renter satisfaction, and ultimately bring value to
investors, Bridge seeks to “create alpha” at the asset level.
The principals of Bridge have been investing in and improving communities around the U.S. since 1991 and manage
private equity funds, separately managed vehicles, co‐investments, and joint ventures. Woven and intertwined with
its buildings, people, and communities, Bridge transforms assets in a manner that maximizes their potential.
17
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