Glenn R. Mueller, Ph.D.Professor
University of DenverFranklin L. Burns School of Real Estate
& Construction Management&
Real Estate Investment Strategist
Dividend Capital [email protected]
Source: Mueller, Real Estate Finance 1995
Market Cycle Quadrants
Phase 1 - Recovery
Phase 2 - Expansion
Phase 4 - Recession
Demand/Supply Equilibrium Point
Long Term Occupancy Average
Occ
upan
cy
Time
Phase 3 - Hypersupply
2
54
3
89
7
10
16
15
13
1
6
11
14
1
12
0.3%
2.7%
-3.0%
-1.5%
1.7%
4.0%
6.4%
11.0%
12.5%
10.5%
6.7%
-1.0%1.6%
3.3%
6.1%
10.0%
Historic National Office Rental Growth
30 Year Cycle - Periods 1968-1997
Long Term Average Occupancy
Occ
upan
cy
Time
700.00
800.00
900.00
1000.00
1100.00
1200.00
1300.00
1400.00
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Denver NON-AGR. EMPLOY. (000)
-0.1
-0.05
0
0.05
0.1
0.15
78.0
80.0
82.0
84.0
86.0
88.0
90.0
92.0
94.0
Denver Office Occupancy Denver Office Rent Growth
AlbuquerqueCincinnatiDetroitEast Bay Hartford+2Kansas CityNorfolkSan Antonio
Source: Mueller, 2014
11
1467
89
10 12
13
115
164321
3rd Quarter, 2015 Estimates
LT Average Occupancy
Office Market Cycle FORECAST
N. New JerseyStamford
ChicagoLong IslandLos Angeles
MilwaukeeSt. LouisWash DC Austin
HonoluluNashville+1
BaltimoreBostonDallas FWJacksonvilleMinneapolisNew Orleans
5 CharlotteColumbusMiamiOklahoma CityOrlandoPittsburghRiverside
Salt Lake
Palm BeachPhiladelphiaPhoenixRichmondSacramento San DiegoSan JoseSeattleTampaNATION
New YorkPortlandRaleigh-DurhamSan Francisco+1
AtlantaCleveland
DenverFt. Lauderdale+1
HoustonIndianapolis
Las Vegas+1Memphis
Orange County
Top 11 Markets = 50% of all 54 largest markets = 0.25% Emp & 0.86% Pop growthSecond Tier 17 Markets = 27% of 54 largest markets = 0.86% Emp & 1.23% Pop growth
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
0.2
87.0
89.0
91.0
93.0
95.0
97.0
99.0
Denver INDUSTRIAL Occupancy Denver INDUSTRIAL Rent Growth
Source: Mueller, 2014
11
14
89
10 12
13
115
16531
LT Average Occupancy
Industrial Market Cycle FORECAST
42
NorfolkOrange CountySacramentoStamford
RichmondLong Island
HartfordMilwaukee
New Orleans+1Oklahoma City
OrlandoPhiladelphia
PhoenixWash DC
AtlantaBostonBaltimoreChicagoCleveland DetroitEast BayJacksonvilleKansas CityLas Vegas Memphis+1NashvilleNew YorkRaleigh-DurhamSt. Louis+1Tampa
Charlotte+1Cincinnati
Columbus-1Ft. Lauderdale+1
MiamiMinneapolis
PittsburghNATION
HoustonIndianapolisN. New JerseySan AntonioSan Diego
76
AustinDallas FWHonoluluPortlandRiversideSeattle
3rd Quarter, 2015 Estimates
DenverLos Angeles+1Palm Beach+1Salt LakeSan Francisco+1San Jose
Top 12 Markets = 50% of all 54 largest marketsSecond Tier 17 Markets = 27% of all 54 largest markets
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08
0.1
86.0
88.0
90.0
92.0
94.0
96.0
98.0
Denver APT Occupancy Denver APT Rent Growth
-2000
2000
4000
6000
8000
10000
12000
14000
APARTMENT ABSORPTION (units) APARTMENT COMP. (units)
Source: Mueller, 2014
11
146
89
10 12
13
115
164321
LT Average Occupancy
Apartment Market Cycle FORECAST
Norfolk
5
AtlantaBoston
ChicagoColumbus-1Dallas FW
HartfordJacksonvilleLong IslandLos Angeles
Miami
Las Vegas
7
3rd Quarter, 2015 Estimates
Austin
DenverOrlandoRaleigh-DurhamSeattleWash DC
Honolulu
CharlotteCleveland
Ft. LauderdaleHouston
IndianapolisKansas City
MemphisMinneapolis
Nashville
BaltimoreCincinnati
East BayMilwaukeeNew York
Sacramento-1San Diego-1
Detroit
Oklahoma CityOrange CountyPalm BeachPhoenixSan Antonio San FranciscoStamfordSt. LouisTampa
New Orleans-1N. New JerseyPhiladelphiaPittsburghPortlandRichmondSalt LakeSan JoseNATION
Riverside+3
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
91.0
91.5
92.0
92.5
93.0
93.5
94.0
94.5
95.0
Denver Retail Occupancy Denver Retail Rent Growth
Source: Mueller, 2014
11
147
910 12
13
115
164321
LT Average
Retail Market Cycle FORECAST
6OccupancyCleveland
DetroitSt. Louis
ChicagoCincinnatiKansas CityMemphisNorfolkOklahoma CityOrange CountyRichmondRiverside
CharlotteFt. Lauderdale HartfordIndianapolisJacksonville San AntonioStamford
New Orleans+1Orlando
Palm BeachTampa+1NATION
DenverPortland
Baltimore Houston+1Long IslandLos Angeles
Raleigh-DurhamSeattle
AtlantaColumbus+1
Dallas FWLas Vegas
MilwaukeeNashville
N. New JerseyPhiladelphia
PhoenixSacramento
5
8
3rd Quarter, 2015 Estimates
AustinEast Bay+1
MinneapolisPittsburghSan Diego
San JoseWash DC
BostonHonoluluMiamiNew YorkSalt LakeSan Francisco
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
80.0%
Denver HOTEL Occupancy Denver HOTEL Rent Growth
CincinnatiHartfordRichmond LT Average Occupancy
Source: Mueller, 2014
11
1467
89
10 12
13
115
1654321
Hotel Market Cycle FORECAST
Kansas City+1 MemphisOklahoma CityPhoenixRaleigh-Durham
ColumbusJacksonvilleRiversideSacramentoSan AntonioStamford
BaltimoreClevelandDetroitIndianapolisMilwaukeeOrange County
Norfolk
Charlotte+1Las Vegas+1
NashvilleNew Orleans
Wash DCNATION
Dallas FWOaklandSt. LouisSalt Lake
N. New JerseyPhiladelphia
AustinBostonDenverEast Bay Ft. LauderdaleHonoluluOrlandoPittsburgh+3PortlandSan Diego+1San FranciscoSan JoseSeattle
3rd Quarter, 2015 Estimates
Atlanta+1ChicagoHouston
Los AngelesMinneapolis
Tampa+1
Long IslandMiamiNew YorkPalm Beach
Real Capital Analytics — Real Commercial Property Price Index (CPPI)
Property Price Cycle
Source: Real Capital Analytics, Inc., September 2014.
Current Price Recovery from 2007 Peak %
CBD Office— 108%
Apartment— 116%
Retail— 84%
Industrial— 90%
Suburban Office— 80%
http://www.rcanalytics.com
Major Market Pricing
RCA CPPI –Major Markets % of 07 Peak
80.00
100.00
120.00
140.00
160.00
180.00
200.00
220.00
240.00
260.00
San Francisco 139%
Los Angeles 124%
New York 122%
Wash DC103%
Texas 102%
Boston 100%
Chicago 89%
http://www.rcanalytics.com
Second Tier Market Pricing
RCA CPPI – 2nd Tier Markets % of 07 Peak
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
220.00
240.00
Denver 111%
Hartford 106%
Seattle 104%
Philly 100%
Miami 85%
Atlanta 75%
Tampa 75%
Orlando 73%
Jacksonville 67%
Las Vegas 61%