The MarketMillennials Move

how

PDX state of the market 2015

3.3%3.0%

2.6% 2.5%2.3%

2.0% 1.9%

1.4%

0%

1%

2%

3%

4%

San

Jose

Portl

and

Seat

tle

San

Die

go

Los A

ngel

es

Bost

on

San

Fran

cisc

o

New

Yor

k

projected to be leading among tech hubs

PDX employment growth

2.2%nationalaverage

Source: Moody’s Analytics, US Census Bureau, ULI’s Emerging Trends

Tech Hub Cities

Forecast Employment

Growth % 2015-2016

3.2%3.0% 3.0% 2.9%

2.6% 2.6% 2.5% 2.5% 2.5% 2.5%2.3% 2.3%

0%

1%

2%

3%

4%

Atla

nta

Nas

hville

Port

land

Rale

igh/

Dur

ham

Gre

envil

le

San

Anto

nio

Aust

in

Char

lotte

Salt

Lake

City

San

Die

go

Char

lest

on

Den

ver

projected to be among top for 18-hour cities

PDX employment growth

Source: Moody’s Analytics, US Census Bureau, ULI’s Emerging Trends

18-hour Cities

Forecast Employment

Growth % 2015-2016

2.2%nationalaverage

-5

0

5

10

15

2010

2011

2012

2013

2014

2015

2016

by sector

Portland YOY office employment growth3.0%

overall growth

Source: Moody’s Analytics, JLL Research

Financial Activities

Professional and Business Services

Information

Government

-10

-5

0

5

10

15

2010

2011

2012

2013

2014

2015

2016

Portland YOY industrial employment growth

Source: Moody’s Analytics, JLL Research

Mining and Logging

Construction

Trade, Utilities, and Transportation

Manufacturing

Other Services

by sector 3.0%overall growth

MarketOfficepdx

NOW MEANS

PORTLAND CBD PORTLAND urban MARKETSCBDUrban

PORTLAND CBD

CBD

CBD

OLD TOWN

NORTH WATERFRONT

CONVENTION AREA/LLOYD DISTRICT

CLOSE IN EASTSIDE

SOUTH

CLOSE IN EASTSIDE

NORTH

SOUTH WATERFRONT

NORTH END

ALPHABET DISTRICT

WEST END

SOUTH END

PSU

PEARL DISTRICT

GOOSE HOLLOW

BROADWAY RETAIL CORE

NW INDUSTRIAL

0%

2%

4%

6%

8%

10%

12%

14%

-500

-300

-100

100

300

500

700

900

1,100

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 E 2016 F

SF in

tho

usan

ds

Supply Demand Vacancy

Urban office markets are among the tightest in the US

8.9%PROJECTEDVACANCY

2016

Source: JLL Research

An increasing development pipeline

will deliver 1.1 MSF in 2016 and bump

vacancy up slightly

6%

8%

10%

12%

14%

16%

18%

20%

22%

24%

-1,200

-700

-200

300

800

1,300

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 E 2016 F

SF in

tho

usan

ds

Supply Demand Vacancy

Suburban office markets have recovered dramatically

9.6%PROJECTEDVACANCY

2016

Source: JLL Research

Five years of demand far outpacing

supply has led to dropping vacancy

and rent growth

$15

$17

$19

$21

$23

$25

$27

$29

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Urban Rent Suburban Rent

Rent growth has been strong in urban markets

suburban markets have seen their rents surpass their pre-recession peak

Source: JLL Research

$28.56

$21.32

urban

suburban

But rent growth has been most robust in urban markets

Suburbs have joined the recovery

10.8%

6.5%

7.4%

14.6%Source: JLL Research

urban vacancy

yoy rent growth

suburban vacancy

yoy rent growth

Source: JLL Research

rise of the creative class... urban leasing driven by creatives... who will pay the price

Impact of Millennialson Portland s office market

$20

$22

$24

$26

$28

$30

$32

$34

$36

2012 2013 2014 2015

Class A/B Creative Class A/Non Creative

$33.37

$24.50

35.6% GAP

Betweeneffectiverents

creative

effectiverents

creativenon

AND

creative

non-creative

Source: JLL Research

Creative leasing has comprised an

increasingly larger portion of activity

in the market

Creative leasingdominates urban leasing

0

200

400

600

800

1,000

1,200

1,400

2012

35.1% 36.3% 78.7%

78.2%

2013 2014 YTD 2015

SF in

Tho

usan

ds

Traditional Class A/B Creative

35.1%in 2012

78.2%in 2015

Creative TI s maintain their value significantly

Source: JLL Research

vs

TI’s for second generation Creative space vs. traditional Class A space for 5-year deals

creative non-creative

$11.45/sf $45.30/sf

[ ]

MarketIndustrial

pdx

SF in

tho

usan

ds

Supply Demand Vacancy 0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 E 2016 F

Portland s industrial marketin year six of the recovery

4.3%PROJECTEDVACANCY

2016

Source: JLL Research

Five years of demand outpacing supply has

led to low vacancy and a filling pipeline

of construction

$0.53

$0.52

$0.53

$0.48

$0.49

$0.44

$0.48 $0.49

$0.53

$0.57

$0.40

$0.45

$0.50

$0.55

$0.60

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Industrial net effective rentshave jumped, driven by construction

7.5%rent jump from 2014

to 2015

Source: JLL Research

Net effective rents for industrial leases

have surpassed their previous peak, up

7.5% in 2015

Source: JLL Research

Food and Beverage as well as

ecommerce logistics are

driving demand in Portland

market

Demand in industrial marketdriven by millennial shifts

21.0%

16.3%

14.5%

Food and Beverage

Logistics and Distribution

Computing/Tech/Media

Construction Materials and Building Fixtures

Industrial Supplies and Machinery

Paper and Packaging

Bio/Healthcare

Manufacturing

Storage and Warehousing

Consumer Products

Retailer

Auto, Auto Parts, and Tires

Professional & Business Services

Food and Beverage

Logistics and Distribution

Computing/Tech/Media

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2013 2014 2015

Squa

re fe

et

Average size industrial lease

Source: JLL Research

Number of tenants looking

for spaces in excess of

100,000 SF is also increasing

Size of industrial tenants growing up 53% in 2 years

2013

21,249 sf

2014

23,855 sf

2015

32,540 sf

53%increasein 2 years

MarketMultifamily

pdx

0

2,000

4,000

6,000

8,000

10,000

Single Family Multifamily

12,000

14,000

16,000

18,000

20,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Housing starts ramping up with multifamily making up an increasing share

Source: us census bureau, JLL Research

13,03520 year

average

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2009 2010 2011 2012 2013 2014

# of housing units permitted Change in population

Population changeand change in housing stock

Source: us census bureau, JLL Research

13,03520 year

average

33,500Population growth has been outpacing housing stock while

the number of permitted housing

units remains below the 20-year

average

$856 $906

$968 $974 $983 $997 $1,007 $1,042 $1,146 $1,185

$1,278

$1,575

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Atla

nta

Nas

hville

Port

land

Rale

igh/

Dur

ham

Gre

envil

leSa

n An

toni

o

Aust

in

Char

lotte

Salt

Lake

City

San

Die

go

Char

lest

on

Den

ver

but not among 18-hour cities

Cost of housing has been a strong advantage

Source: PPR, JLL Research

Average monthly apartment rent

Outlookpdx

Portland property clockstill room to run

MARKET

PEA

KING FALLIN

G

RISING BOTTOM

ING

MULTIFAMILY

CBD OFFICE

INDUSTRIAL

HOTEL

RETAIL

SUBURBAN OFFICE

Top take aways 1. Economic advantages of creative space2. CBD now means Urban3. Opportunity in the suburbs4. Bullish on industrial5. Multifamily affordability advantage at risk6. Sticky investors / sticky tenants7. Buyer pool deepens8. Information is key – can’t look in rearview