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NCREIF Subcommittee• Melissa Reagen (MetLife)
• James Bohnaker (CBRE-EA)
• Pago Lumban-Tobing (RCA)
• Jim Costello (RCA)
• Van Karen Hamme (Principal)
• Walter Page (CoStar)
• Kevin Scherer (NCREIF)
• Jay Denton (Axiometrics) 3.22.17
• Julia Georgules (JLL)
• Richard Kleinman (LaSalle)
4/8/2017 2
CBD, URBAN, SUBURBAN…CBD, URBAN, SUBURBAN…
Goals– Get a better definition for Office CBD/Suburban
– CBD defined in 80s by Torto Wheaton Research
Approach– Utilize modern GIS mapping technology to define boundaries
– Data driven selection of locations
– Met weekly from August to March
Issues– How many categories of office?
• CBD, Urban, Suburban & Suburban Business District
– What is the proper building block?
• Used Zip Code as easiest for NCREIF
– What is a CBD?
– Where to draw the distinction?
– Should all MSAs have a CBD?
2
Current CBD Definition
4/8/2017 3
PROCESSPROCESS
Data contributions
– NCREIF – CoStar - RCA
Pago Lumban-Tobing (RCA) developed a Google maps based application
Several models were developed
– CBRE-EA Urban City score methodology
– CoStar Business District methodology
– RCA Suburban Node Cluster methodology
– NCREIF collection of best of breeds
NCREIF model, RCA application & CoStar Data were used
– Outliers were manually tagged
– Top 50 CBSAs were individually examined and experts from CoStar and/or JLL were brought in to assist.
– Results processed by NCREIF Analytics and CoStar Property
3
CoStar Office SqFt Density
Boston Draft Definition
4/8/2017 4
CBD DEFINITIONCBD DEFINITION
CBDWhat defines a CBD? “Census Bureau”
– “I know it when I see it” “Tall Buildings”
– “Office Using” “Central Core”
– “Transportation Node” “Density”
Looked at– Original TWR Definition (felt too big)
– Average Building Heights (too many exceptions)
– Office Sq Ft % of Total Sq Ft
– Office Density
– Each city has a unique setting which “felt” best
Selected– Simple is better approach
– Office density greater than 2 to 8 MSF / Mile
– Office share of total SF > 20-35%
Current CBD Definition
Draft CBD Definition
4/8/2017 5
DEFINITIONSDEFINITIONS
Central Business District orUrban Business District“The commercial and business center, typified by a concentration of retail and office. Often synonymous with the ‘financial district’. “
Geographically, it often coincides with the "city center or downtown, but the two concepts are separate and our committee proposes while keeping the CBD tag, feels that “Central” is not critical.
Office density from 2 to 8 MSF / Mile
Office share of total SF > 20-35%
UrbanAn area with high population and/or commercial density, but not reaching the office concentration of a CBD.
Total commercial and residential density from 6 to 11 MSF / Mile
Boston Draft Definition
Suburban Business DistrictA business center in a suburban location.
Office density greater than 0.5 MSF / Mile
Office share of total SF > 20-35%
Suburban & OtherA lower density residential and/or mixed use area. Everything Else
4/8/2017 6
BOSTONBOSTON
6
Downtown Default
Downtown After Edits
Should all of Cambridge be included in CBD?
Should Northend be left out?
Art & Real Estate, Not science
• Manual edits were made on inspecting
using old definition, arial maps and data.
4/8/2017 8
NCREIF OFFICE EXPOSURESNCREIF OFFICE EXPOSURES
Market Value Pct Exposure by Market Value
Pct Exposure by Property CountProperty Counts
0
50
100
150
200
250
1990 1995 2000 2005 2010 2015
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1990 1995 2000 2005 2010 2015
62%
19%
8%
11%
CBD
Urban
SBD
Suburban
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1990 1995 2000 2005 2010 2015
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1990 1995 2000 2005 2010 2015
32%
14%
24%
30%
CBD
Urban
SBD
Suburban
4/8/2017 11
METRO OFFICE EXPOSURESMETRO OFFICE EXPOSURES
Rank Metro Total Total
1 New York 45% 16% 2% 36% 1,218 81% 9% 2% 9% 54
2 Washington 21% 31% 16% 32% 515 44% 32% 12% 12% 50
3 Los Angeles 14% 46% 8% 32% 588 27% 44% 13% 16% 40
4 San Francisco 56% 20% 14% 10% 171 64% 8% 18% 10% 34
5 Boston 27% 24% 9% 39% 357 70% 13% 8% 9% 32
6 Chicago 37% 11% 17% 35% 480 79% 4% 8% 9% 27
7 Houston 16% 37% 8% 39% 329 39% 43% 8% 10% 21
8 Seattle 31% 12% 15% 42% 201 67% 4% 17% 13% 17
9 Dallas 12% 21% 11% 56% 369 31% 48% 3% 17% 17
10 Atlanta 20% 19% 16% 44% 317 27% 25% 23% 25% 14
11 San Jose 6% 64% 8% 23% 120 10% 69% 0% 22% 13
12 Denver 23% 22% 19% 36% 169 44% 25% 27% 3% 12
13 Miami 10% 33% 6% 51% 243 39% 38% 0% 23% 12
14 San Diego 13% 16% 40% 31% 117 31% 10% 52% 7% 10
15 Phoenix 8% 15% 14% 63% 180 13% 17% 39% 31% 8
16 Minneapolis 27% 13% 6% 54% 201 57% 3% 27% 12% 7
17 Austin 16% 10% 15% 59% 103 16% 2% 17% 66% 6
18 Charlotte 22% 6% 0% 72% 106 28% 6% 0% 66% 4
19 Philadelphia 19% 14% 17% 49% 309 31% 0% 24% 44% 4
20 Nashville 9% 20% 0% 71% 86 26% 11% 0% 63% 3
Sum Mkts 24% 22% 10% 44% 6,998 50% 22% 12% 16% 398
CoStar Market Exposures (Mil Sq Ft) NPI Market Exposures (Mil Sq Ft)
CBD Urban
Suburban
Business
District Suburban CBD Urban
Suburban
Business
District Suburban
4/8/2017 12
MARKET INDICATORSMARKET INDICATORS
NCREIF Vacancy Rates CoStar Vacancy Rates
4%
6%
8%
10%
12%
14%
16%
18%
2003 2005 2007 2009 2011 2013 2015
CBD Urban SBD Suburban
4%
6%
8%
10%
12%
14%
16%
18%
2003 2005 2007 2009 2011 2013 2015
CBD Urban SBD Suburban
4/8/2017 13
MARKET INDICATORSMARKET INDICATORS
NCREIF Cap Rates CoStar Cap Rates
4%
5%
6%
7%
8%
9%
10%
11%
00 02 04 06 08 10 12 14 16
CBD Urban SBD Suburban
3%
4%
5%
6%
7%
8%
9%
10%
00 02 04 06 08 10 12 14 16
CBD Urban SBD Suburban
4/8/2017 14
MARKET INDICATORSMARKET INDICATORS
NCREIF Rental Income ($/SF) CoStar Rent / SF
$10
$15
$20
$25
$30
$35
2003 2005 2007 2009 2011 2013 2015
CBD Urban SBD Suburban
$10
$15
$20
$25
$30
$35
2003 2005 2007 2009 2011 2013 2015
CBD Urban SBD Suburban
4/8/2017 15
MARKET INDICATORSMARKET INDICATORS
NCREIF Rental Income Growth CoStar Rent Growth
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
2003 2005 2007 2009 2011 2013 2015
CBD Urban SBD Suburban
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
2003 2005 2007 2009 2011 2013 2015
CBD Urban SBD Suburban
4/8/2017 16
MARKET INDICATORSMARKET INDICATORS
NOI Growth
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
2003 2005 2007 2009 2011 2013 2015
CBD Urban SBD Suburban
Expense Ratio
0.35
0.37
0.39
0.41
0.43
0.45
0.47
0.49
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
CBD Urban SBD Suburban
To Be Continued……
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