2017 Real Estate Outlook: Waves of...

© JR DeLisle, Ph.D.

2017 Real Estate Outlook: Waves of Change

presented to:AI Kansas City Chapter

byJames R. DeLisle, Ph.D.

September 21, 2016


Preview

Respondent Profiles

National Economy: Changing Waves

National Real Estate Market

Kansas City: Overall and Real Estate Waves

RESPONDENT PROFILES


Survey Respondent Profile


Respondent Careers

Career Plans

ECONOMIC OUTLOOK: INSIGHTS FROM KC AND BEYOND


Economic OutlookNo Recession

Emp. AccelerateInflation not Risk

DisagreeAgree Disagree

GDP Will Surge

Disagree

DisagreeAgreeAgree

Disagree

Agree

Retail Rebound


Economic OutlookGradual EconRecovery

Mtg Mkt willbe like 2008

Interest Rates Low

Disagree

Agree

Disagree

Corp Profits Up

Disagree

Agree Agree

DisagreeAgree

Stocks Willbe Strong

Agree


WSJ 60 Economist Survey: Recession & Risks

Downside

Downside


WSJ 60 Econ On Rates


Employment

Source: The Conference Board, WSJ.com

Labor Force Participation

Monthly Job Growth

Unemployment by Duration

Unemployment by Education


Housing Market

Housing Starts

HomeownershipRates


Consumer Confidence & Retail Sales


The Global Scene: Falling Tides?

Source: OECD


Importance toEconomic Recovery

Washington Politics

Inc. Bus Accessto Credit

Maintain Low Rates

Strong Job Growth

Trade Deficit

Important

Unimportant

Important

Important

Important

Important


Importance toRecovery Pt2

Consumer Conf

ImproveGlobal Econ

Inflation in Check

Stop Offshore JobsAttract Offshore

Capital

Important

Unimportant

Important

Important

Important

Important


Presidential Election

Hillary Clinton

Donald Trump

Other

Want to Win

Think Will Win

Hillary Clinton

Donald Trump

Other

THE NATIONAL REAL ESTATE MARKET


Cap Rates: National

44% < 5% 30% - 6%17% - 9%Current

12 Months

3 Years

32% - 6% 23% - 7%18% - 9%

26% - 6.5% 21% - 7.5% 23% - 10%


National Transaction Cap RatesTransaction Cap Rates: 2007-2016

Source: Real Capital Analytics

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Apartment Industrial Retail Office Hotel

NCREIF Cap Rates

RCA Cap Rates

Source: NCREIF


Real Estate: A New(?) Sector

Source: REIT.com


NAREIT Returns

Source: REIT.com


NCREIF Property Index: Returns & Vacancy

NPI Vacancy Rates

Source: NCREIF


Transaction Volume

RCA Volume

NCREIF Volume

Source: NCREIF


NCREIF & Implicit Cap Rates: Tide is Out?NCREIF Property Index Snapshot: 2Q 2016

Total * Share Component 2Q 2016 1Q 2016 1 YearOffice 1,398 $186.67 36.9% Income 1.15% 1.12% 4.63%

Appreciation 0.59% 0.59% 4.52%Total Return 1.74% 1.72% 9.31%

Retail 1,126 $117.17 23.2% Income 1.19% 1.21% 5.00%Appreciation 0.98% 1.75% 6.96%Total Return 2.17% 2.96% 12.22%

Industrial 3,089 $71.86 14.2% Income 1.31% 1.30% 5.39%Appreciation 1.58% 1.65% 7.64%Total Return 2.90% 2.96% 13.33%

Apartment 1,626 $124.06 24.5% Income 1.15% 1.14% 4.68%Appreciation 0.73% 0.73% 4.89%Total Return 1.88% 1.87% 9.74%

Hotel 114 $5.58 1.1% Income 2.26% 1.34% 8.02%Appreciation -0.81% -0.18% 1.36%Total Return 1.46% 1.16% 9.46%

Total Index NPI 7,353 $505.33 25.7% Income 1.19% 1.17% 4.88%Appreciation 0.84% 1.04% 5.56%Total Return 2.03% 2.21% 10.64%

* Value in billions

Property Type Number of Assets

Market Value Returns (%)

Source: NCREIF

KANSAS CITY: CHANGING WAVES?


Cap Rates: Kansas City

29% - 6% 34% - 6% 21% - 10%Current

12 Months

3 Years

26% - 7%% 22% - 7.25%26% - 10%

26% - 7% 22% - 7.25% 26% - 10%


Kansas CityHousing Market

Source: CoreLogic, FHFA


Kansas City: NCREIF Investments 1Q13 vs 2Q16

1Q13 - $723m

2Q16 - $1,197m

Source: NCREIF


Commercial Transaction Volume: Kansas City


1st Half 2016 - $1,559.7 m

Trailing 12 mo - $2,822.6 m


Commercial Sales by Property Type: Kansas City *

Office

Vol ($m) # Props $/SF Avg Cap Vol ($m) # Props $/SF Avg Cap Vol ($m) # Props $/SF Avg Cap 39.8 6 63 466.0 33 125 8.8% 505.8 39 111 8.8%

Retail

Vol ($m) # Props $/SF Avg Cap Vol ($m) # Props $/SF Avg Cap Vol ($m) # Props $/SF Avg Cap 845.8 22 281 7.0% 214.4 25 144 6.8% 1,060.2 47 200 6.8%Industrial

Vol ($m) # Props $/SF Avg Cap Vol ($m) # Props $/SF Avg Cap Vol ($m) # Props $/SF Avg Cap 82.0 5 157 92.1 21 45 174.1 26 73

Apartment

Vol ($m) # Props $/unit Avg Cap Vol ($m) # Props $/unit Avg Cap Vol ($m) # Props $/unit Avg Cap 831.1 52 80,338 6.1% 111.5 6 76,120 942.5 58 79,920 6.1%Hotel

Vol ($m) # Props $/unit Avg Cap Vol ($m) # Props $/unit Avg Cap Vol ($m) # Props $/unit Avg Cap 63.2 6 36,606 46.6 10 109.9 16 41,176 9.0%

Full-Service Limited Service All Hotel

Flex Warehouse All Industrial

Garden Mid/Highrise All Apartment

Mall & Other Strip All Retail

Office - CBD Office - Sub All Office


* 12 months through April 2016


Significance of Risks to Kansas City Economy in 2017

Overbuild Shortage Crime Failed Decline Apartment Class A Off Rising Housing Outside $

Incentive Lack of Airport Failed US AcceleratedPullback Afford Hsg Unsettled Recovery Border Wars


Outlook for Kansas City: Agree - Disagree

Outside $ Core Prices Office Vac Comm’l Transactions $ Pour in Up Declining Mtg Easy Accelerate

New Wave Multi-Const Local Emp Housing KC MoreOff Const. Down > US Avg Rebound Entrepreneurial


Greatest Opportunities in Kansas City


Greatest Risks to Kansas City Real Estate


Industry Changes


Advice to Young


Review

Respondent Profiles

National Economy: Changing Waves

National Real Estate Market

Kansas City: Overall and Real Estate Waves

2017 Real Estate Outlook: Waves of...

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