Land Forecast Lunch

Scott Davis

CASE Commercial Real Estate Partners

May 29, 2013

Total Land Sales Volume Remains Steady in Q1

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

$700,000,000

$800,000,000

Source: CoStar, CASE Commercial

4Q12 – Most Acres Sold Since Peak

2005

- Q1

2005

- Q3

2006

- Q1

2006

- Q3

2007

- Q1

2007

- Q3

2008

- Q1

2008

- Q3

2009

- Q1

2009

- Q3

2010

- Q1

2010

- Q3

2011

- Q1

2011

- Q3

2012

- Q1

2012

- Q3

2013

- Q1

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Source: CoStar, CASE Commercial

Almost 85% of acreage sold outside Beltway

2009

- Q1

2009

- Q2

2009

- Q3

2009

- Q4

2010

- Q1

2010

- Q2

2010

- Q3

2010

- Q4

2011

- Q1

2011

- Q2

2011

- Q3

2011

- Q4

2012

- Q1

2012

- Q2

2012

- Q3

2012

- Q4

2013

- Q1

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Total Outside 610 Outside BeltwayInside Beltway Inside 610

Source: CoStar, CASE Commercial

Still Huge Interest in Inner Loop Properties

2009

- Q1

2009

- Q2

2009

- Q3

2009

- Q4

2010

- Q1

2010

- Q2

2010

- Q3

2010

- Q4

2011

- Q1

2011

- Q2

2011

- Q3

2011

- Q4

2012

- Q1

2012

- Q2

2012

- Q3

2012

- Q4

2013

- Q1

0

20

40

60

80

100

120

140

160

180

Source: CoStar, CASE Commercial

Sales to List Spread Narrows to 2010-2011 Levels

Source: CoStar, CASE Commercial

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

8.2%

-49.2%

-22.9%

Median Days on Market Decreased in Q1/13

Source: CoStar, CASE Commercial

2005

- Q1

2005

- Q3

2006

- Q1

2006

- Q3

2007

- Q1

2007

- Q3

2008

- Q1

2008

- Q3

2009

- Q1

2009

- Q3

2010

- Q1

2010

- Q3

2011

- Q1

2011

- Q3

2012

- Q1

2012

- Q3

2013

- Q1

-

100

200

300

400

500

600

700

800

What Does the Future Hold?

1970 1980 1990 2000 2010 2020 2030 2040

2.2 3.1

3.7 4.7

5.9

7.0

8.1

9.2

0.9 1.6 1.8

2.3 2.6 3.2

3.74.1

People

Region will grow by 3.3 Million

Source: HGAC Demographic Model

In Millions

Gen Y: Millions of 22YO By Year

2000

2001

2002

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

3,400,000

3,500,000

3,600,000

3,700,000

3,800,000

3,900,000

4,000,000

4,100,000

4,200,000

Age 22 Age 25

Peak Rental Demand Peak Owner Demand

Source: US Centers for Disease Control and Prevention

Houston #2 Destination For Millennials

Rank Metro AreaWage Change for

Gen YMedian Pay for

Gen Y

Commute Time for Gen Y % Gen Y

Gen Y Metro Score

1 Seattle 4.4% $ 44,000 24.3 0.22 1.61

2 Houston 4.3% $ 44,000 24.8 0.22 1.52

3 Minneapolis 3.3% $ 42,800 20.4 0.23 1.46

4 Washington, DC 3.2% $ 49,500 30 0.26 1.25

5 Boston 3.3% $ 46,200 29.9 0.25 1.16

6 Dallas 2.9% $ 41,200 20.6 0.21 1.11

7 New York 2.9% $ 46,900 30.6 0.26 1.04

8 Tampa 2.7% $ 36,600 20.7 0.19 0.83

9 - Tie Philadelphia 2.6% $ 42,000 28.7 0.23 0.81

9 - Tie San Francisco 2.2% $ 51,300 29.3 0.22 0.81

Source: Best Cities for Gen Y, www.payscale.com, 2012

Where People Want to Live, by Generation

60+ (Silent + GI)

50-59 (Boomer)

40-49 (Boomer & Gen X)

30-39 (Gen X & Gen Y)

18-29 (Gen Y)0%

20%

40%

60%

80%

100%

14% 15% 14% 18%31%

39% 38% 38%

47%

42%

46% 47% 47%34%

25%

City Suburban Small Town

Source: 2011 National Community Preference Survey, NAR, March 2011

Where Do They Actually Live?

Core Municipalities Suburbs Outside Major Metropolitan Areas0%

10%

20%

30%

40%

50%

2000% of Age 20-29 2010% of Age 20-29

Source: Wendell Cox, www.newgeography.com

Gen Y Still Want Single Family

Fall 2007 “Home Type

Likely to Choose”

Summer 2010 “Anticipated Housing in

2015”

March 2011

“Home Type

Preference”

Apartment/Condo 12% 25% 15%

Rowhouse/Townhouse

12% 6% 6%

Single-Family 70% 64% 74%

Other 5% 5% n/a

Source: RCLCO Survey, 207, ULI/Lachman Survey 2010, NAR ConsumerPreference Study 2011

Gen X & Gen Y Favor Lifestyle Factors – Close to Work, Shopping

Small Lot, Walk to Work

Small Lot, Walk to Shop

Less than Ideal Home, Close to

Shop

Less than Ideal Home, Close to

Work

Urban Setting0%

20%

40%

60%

80%71%

55%52%

42%

51%

62%

46%43%

49% 47%

Gen Y Gen X

15

Source: Robert Charles Lesser Co.

16Job Growth in Suburban Centers

Market 2013 2020 Growth

Inside Loop

Bellaire 34,438 38,320 11.3%

Greenway 63,143 68,148 7.9%

CBD 148,117 153,970 4.0%

TMC 107,344 116,272 8.3%

Galleria 134,162 136,999 2.1%

Inside Beltway

Greenspoint 91,343 100,042 9.5%

Brookhollow 25,526 26,271 2.9%

Northwest Crossing 53,149 56,065 5.5%

Sharpstown 39,327 40,360 2.6%

Westchase 96,223 100,183 4.1%

Outside Beltway

Clear lake 48,897 50,628 3.5%

Katy 18,707 21,591 15.4%

The Woodlands 48,805 55,398 13.5%

West Houston 102,795 108,760 5.8%

Sugar Land 86,934 101,129 16.3%

Total Market 2,959,033 3,275,509 10.7%

Source: HGAC, 2035 Regional Transportation Plan

Houston #1 in Self-Employment Growth

Rank RegionGrowth in Self-employed, 2008-

2011

1 Houston-Sugar Land-Baytown, TX 12.20%

2 Riverside-San Bernardino-Ontario, CA 11.80%

3 Phoenix-Mesa-Glendale, AZ 11.50%

4 Seattle-Tacoma-Bellevue, WA 10.00%

5 Baltimore-Towson, MD 8.60%

6 San Antonio-New Braunfels, TX 8.10%

7 Tampa-St. Petersburg-Clearwater, FL 6.50%

8 Dallas-Fort Worth-Arlington, TX 6.30%

9 Boston-Cambridge-Quincy, MA-NH 5.60%

10 Miami-Fort Lauderdale-Pompano Beach, FL 4.90%

Land Growth Trends

• Houston will grow dramatically over the next two decades

• Gen Y will drive some inner-city interest but still has overwhelming suburban preference

• Real preference by Gen X and Gen Y is for a shorter commute and close to shopping

• Most job growth will be in the suburbs