jones lang la salle nycmg 4q10 market report

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  • 1. DRAFT 10-13-2010 NEW YORK CAPITAL MARKETS GROUP Market Overview Fourth Quarter 2010

2. MANHATTAN CAPITAL MARKETS Executive Summary Economic Overview Global Capital Markets U.S. Economic Snapshot U.S. Capital MarketsInvestment Market U.S. Capital MarketsDebt Market Manhattan Capital Markets Manhattan Leasing Market New York City Residential Market Addendum NEW YORK CAPITAL MARKETS GROUPRichard BaxterJonathan Caplan Yoron CohenScott LathamVice Chairman Vice Chairman Vice ChairmanVice Chairman+1 212 812 6443 +1 212 812 6440 +1 212 812 6442+1 212 812 6441richard.baxter@am.jll.com jon.caplan@am.jll.com yoron.cohen@am.jll.com scott.latham@am.jll.comNEW YORK CAPITAL MARKETS GROUP 2 3. ECONOMIC OVERVIEW GLOBAL CAPITAL MARKETS Snapshot Global Capital Markets Overview 2010 global investment sales increased nearly 50% (vs. 2009) to $317 billion, approximately 59% below peak volume in 2007 of $759 billion Cap rates compressed considerably from mid-2009, and, varying by market, have stabilized at lower levels or are moving downward more slowly 2011 global investment sales volumes are projected to increase by an additional 20% - 25% with the Americas anticipated to show the largest increase U.S. Economic Overview Lack of employment growth and an anemic housing market pose potential drag on growth entering 2011 However, heightened jobless recovery and double dip recession anxiety has lessened during the past quarter, as GDP growth and consumer spending have improved Q42010 retail sales reflect an approximate 7% increase year-over-year, in non-auto, non-gasoline sales 4-week, moving average jobless claims dropped from 490,000 in August to 410,000 at the end of 2010 Record corporate profits anticipated to accelerate hiring as the new year progresses * Additional data can be found in the addenda (Slides 56-75)NEW YORK CAPITAL MARKETS GROUP3 4. ECONOMIC OVERVIEW GLOBAL CAPITAL MARKETS Snapshot (contd)U.S. Capital Markets Investment Market Overview Transactions from all product types, led by office and multifamily, surged 122% (versus 2009) to $120 billion; still down 76% from2007 peak Market remains highly differentiated with core Class A office and multifamily product in primary markets heavily favored by investors Cap rates are down as much as 200 basis points over past year for top tier product in strongest markets 2011 sales volume anticipated to increase significantly, with broadening market (geography and asset quality), as economy recovers Demand will continue to outpace supplyU.S. Capital Markets Debt Market Overview De-leveraging continues to be a slow process. The extend and pretend strategy chosen by many lenders in 2009 and early 2010looks like a good decision in retrospect 157 FDIC-insured banks failed in 2010, following 140 such failures in 2009. Closings will remain highly elevated for some time, withmore than 900 problem institutions accounting for over $400 billion in total assets at the beginning of 2011 Large national banks, insurance companies and international banks increased production levels as rebounding core property values,stabilizing market fundamentals and an improving economy, combined with accommodative monetary policy, sparked renewedlender interest in commercial real estate The CMBS market is showing new signs of life, with 2011 volume of $11.6 billion. A more recent series of larger bond issuances areunderway, anticipated to be sold in early 2011NEW YORK CAPITAL MARKETS GROUP 4 5. ECONOMIC OVERVIEW GLOBAL CAPITAL MARKETS Global Commercial Real Estate Investment2003-3Q10800 $759bn$700bnGlobal Annual Total700 US$ billions600 $357$301 $495bn US$ billions500 $393bn $378bn$168400 $354bn$118300$89 $159$209bn$200bn200 $399 $402$327$79 $70 $266 $275100$219 $130$130 0 2003 200420052006 2007200820093Q2010DomesticCross-border2009 down 72%, 2010 YTD annualized down 65% from 2007 peak.Domestic: Refers to any investor that originates from within the country in which the relevant transactions occur. Transactions involving bothdomestic purchaser and seller are referred to as domestic activity. Cross-border: Refers to any purchaser, vendor or both that originates fromoutside the country in which the relevant transaction occurs. Categorized into Inter-regional and Intra-regional transactions.NEW YORK CAPITAL MARKETS GROUP Source: Jones Lang LaSalle New York Capital Markets Group 5 6. ECONOMIC OVERVIEW GLOBAL CAPITAL MARKETS Global Commercial Real Estate Investment1Q07 4Q10$759 Billion100 $206Global Quarterly Total *$205 90 US$ billions$188 80$160 $379 Billion 70 US$ billions $137 60$317 Billion$111 50$103 $209 Billion 40 $90$70$64 $65 $68$73 30$49 20$40 $35 100Q107 Q207 Q307 Q407Q108Q208Q308Q408 Q109 Q209 Q309 Q409 Q110 Q210Q310 Q410AmericasEMEAAsia PacificThe Americas sales volume experienced the most dramatic decline from 2007 to 2009.* Totals do not include multi-family salesSource: Jones Lang LaSalle New York Capital Markets GroupNEW YORK CAPITAL MARKETS GROUP 6 7. ECONOMIC OVERVIEW GLOBAL CAPITAL MARKETSTop Investment MarketsTransaction Volume In U.S. $ Billions (Properties $10 Million And Greater) 200720082009 2010*NYC Metro$50 Tokyo$17 London Metro$13 London Metro $16London Metro $42 NYC Metro$15 Tokyo$9 Tokyo $15Paris$24London Metro$15 Paris $7Hong Kong $10SF Metro$22Paris$10Seoul $5 NYC Metro $9LA Metro $18Stockholm $6 Shanghai $4 Paris $8 DC Metro $17 Madrid$5Hong Kong$3DC Metro$8 Tokyo$16Seoul$5Moscow$3SF Metro$5Seattle $11DC Metro $4NYC Metro $3LA Metro$5 Chicago$11Singapore $4DC Metro $2 Singapore$5 Boston $10 LA Metro$4Beijing $2 Shanghai$4* Represents transactions greater than $10 closed thru 3Q2010Source: Real Capital Analytics, Jones Lang LaSalle New York Capital Markets GroupNEW YORK CAPITAL MARKETS GROUP 7 8. ECONOMIC OVERVIEW GLOBAL CAPITAL MARKETS Major Global Markets Office Supply Pipeline (2011-2012) MumbaiShanghaiDubai Singapore Tokyo MoscowSydneyHong Kong2011ParisAmsterdam 2012London Madrid BrusselsFrankfurtWashingtonToronto Los AngelesSan Francisco New YorkCompletions as % of existing stock Chicago010 2030 40 50 60Major U.S. gateway cities have almost no supply pipeline. Source: Jones Lang LaSalle New York Capital Markets GroupNEW YORK CAPITAL MARKETS GROUP8 9. ECONOMIC OVERVIEW GLOBAL CAPITAL MARKETS Prime Office Yields - Global Cities 8% 7% 6% Cap Rate 5% 4% 3% New York ParisFrankfurt London Tokyo 2%Q2 2000 Q2 2001 Q2 2002 Q2 2003 Q2 2004 Q2 2005 Q2 2006 Q2 2007 Q2 2008 Q2 2009 Q4 2009 Q2 2010 Q3 2010 Q4 2010 Due to differences in reporting metrics across the globe, data is not strictly comparable. Source: Jones Lang LaSalle Capital Markets GroupNEW YORK CAPITAL MARKETS GROUP9 10. ECONOMIC OVERVIEW GLOBAL CAPITAL MARKETS The Hierarchy of Economic Performance, 2011-2012 Projected economic growth led by China, India and Brazil China IndiaBrazilTurkeyPolandRussiaMexicoSouth KoreaAustraliaSweden Canada United States Germany Asia Pacific United KingdomEMEAFrance America JapanItaly % GDP Change Spain0% 2% 4%6% 8%10 % Source: Global Insight, October 2010NEW YORK CAPITAL MARKETS GROUP10 11. ECONOMIC OVERVIEW U.S. ECONOMIC SNAPSHOT Historical U.S. and NYC Unemployment Rates 12.1% 12%10.8%10.5% 10.4%10.2%10.2% 10%9.0%9.4%9.1% Unemployment Rate 7.8%8% 7.9% 6.3%6% 5.6% 5.0%4%4.2%4.4% 4.4%3.9%2% 76 78 80 82 84 86 889092949698 00 02 04 06 08 1019191919191919 19 19 19 19 19202020202020 Recessions NYC Unemployment Rate U.S. Unemployment Rate As of December 2010, New York City unemployment rate at 9.1% vs. U.S. unemployment rate at 9.4%.Source: NYS Department of Labor, U.S. Department of LaborNEW YORK CAPITAL MARKETS GROUP 11 12. ECONOMIC OVERVIEW U.S. ECONOMIC SNAPSHOT Current Recessions Job Decline vs. Notable Recessions Past 40 yearsRecessions:197419811990200120071(Percent)0(1)(2)(3)(4)(5)(6)(7)05101520 2530354045 Number of Months After Peak EmploymentU.S. job market has formidable ground to regain; job creation has been sluggish.Source: Bureau of Labor Statistics, Moodys Economy.com, Jones Lang LaSalleNEW YORK CAPITAL MARKETS GROUP 12 13. ECONOMIC OVERVIEW U.S. ECONOMIC SNAPSHOT Labor Market Overview Jan 06 Dec 10(Net Change in Employment) 600,000 11(Percent) 400,000 10 200,000 908 (200,000) 7 (400,000) 6 (600,000) 5 (800,000) 4 Feb-06Apr-06 Jun-06 Aug-06Oct-06 Dec-06Feb-07 Apr-07Jun-07 Aug-07Oct-07 Dec-07Feb-08 Apr-08Jun-08Aug-08 Oct-08Dec-08 Feb-09Apr-09 Jun-09Aug-09 Oct-09Dec-09 Feb-10Apr-10 Jun-10Aug-10 Oct-10Dec-10Net Jobs Added Unemployment Rate Employment growth slowly returning in near-term.* As of November 2010Source: Bureau of Labor Statistics, Moodys Economy.com, Jones Lang LaSalleNEW YORK CAPITAL MARKETS GROUP13 14. ECONOMIC OVERVIEW U.S. ECONOMIC SNAPSHOT Consumer Confidence Levels Jan 80 Dec 10145 (1985 = 100) Consumer Confidence30-Year Average125105 85 65 45 25Jan-80 Jan-81Feb-82 Mar-83 Apr-84May-85 May-86Jun-87 Jul-88 Aug-89Sep-90 Sep-91Oct-92 Nov-93Dec-94 Jan-96Jan-97 Feb-98Mar-99 Apr-00May-01 Jun-02Jun-03 Jul-04Aug-05 Sep-06Oct-07 Oct-08Nov-09 Dec-10Source: Bloomberg, Jones Lang LaSalleNEW YORK CAPITAL MARKETS GROUP14 15. ECONOMIC OVERVIEW U.S. ECONOMIC SNAPSHOT U.S. Personal Consumption Year-Over-Year Retail Sales Growth9(Percent)US Personal Consumption Expenditures876543210(1)(2)(3)Jul-94 Feb-95Sep-95 Apr-96 Nov-96Jun-97 Jan-98Aug-98 Mar-99Oct-99 May-00Dec-00 Jul-01Feb-02 Sep-02Apr-03 Nov-03Jun-04 Jan-05Aug-05 Mar-06Oct-06 May-07Dec-07 Jul-08Feb-09 Sep-09Apr-10 Nov-10Strong fourth quarter rebound in consumer spending.* As of November 2010 Source: Bloomberg, Jones Lang LaSalleNEW YORK CAPITAL MARKETS GROUP15 16. ECONOMIC OVERVIEW U.S. ECONOMIC SNAPSHOT Labor Productivity and Corporate Profits 03Q1 10Q3($, billions)1,40010 (Percent) 91,300 8 71,200 61,1005 41,000 3 900 2 1 800 0 (1) 700 (2) 600 (3)2003Q2 2003Q32003Q42004Q1 2004Q22004Q3 2004Q42005Q1 2005Q22005Q3 2005Q4 2006Q12006Q2 2006Q32006Q4 2007Q12007Q2 2007Q3 2007Q42008Q1 2008Q22008Q3 2008Q42009Q1 2009Q22009Q3 2009Q42010Q1 2010Q22010Q3Corporate Profi