Wealth Management Research Americas Commercial Real Estate & Economic Overview

Transcription

1 CIO Wealth Management Research Wealth Management Research Americas Commercial Real Estate & Economic Overview Jonathan Woloshin, CFA Executive Director & Co-Head of Fundamental Research This report has been prepared by UBS Financial Services, Inc. Required disclosures appear at the end of this presentation February 2016

2 Jobs, Wages & The Economy Partly Sunny, Partly Cloudy 1

3 Growth in Full Time vs. Part Time Employment for Employees 25 Years & Older Source: BLS 2

4 Number of Unemployed & Looking Persons Per Job Opening Source: BLS 3

5 Employment to Population Ratio Ages Source: BLS 4

6 Do Not Underestimate the Impact of Falling Oil Prices & The Velocity of Money WTI Prices Each 1 cent decline in gasoline prices = $1.4BN in incremental discretionary income Source: FactSet 5

7 Falling Home Heating Prices Could Spur Additional Consumer Spending NYMEX Natural Gas $/MMBTU Source: FactSet 6

8 A Deeper Dive on the Unemployment Rate Source: BLS 7

9 Labor Force & Participation Rate Changes by Age Range Source: BLS 8

10 Unemployment Rate by Age Range Source: BLS 9

11 Hourly Earnings & Average Hours Worked Frustratingly Slow Growth Source: BLS 10

12 Average Annual Earnings by Age (Nominal Earnings) Source: BLS 11

13 Household Income by Quintile (Real Earnings in 2014 Dollars) Source: BLS 12

14 The Importance of Job Growth to Home Prices Source: NAR 13

15 Capital Remains Widely Abundant 14

16 Public REIT Capital Offerings ($MM) Since 2009 REITs have raised $380bn in Unsecured debt and preferred & common equity Source: SNL Financial 15

17 Private Equity & Commercial Real Estate A Significant Source of Global Capital ($BN) PE Firms have more than $220bn in uncalled capital available for CRE Investment Source: Preqin 16

18 CMBS Issuance Continues to Recover BUT. Source: Commercial Mortgage Alert 17

19 Revisions To FIRPTA & The Extension of EB-5 Are Extremely Important And Should Not Be Underestimated 18

20 Foreign Investors a Growing Force in CRE Transactions ($BN) Source: Real Capital Analytics, 19

21 Top Foreign Investors in U.S. CRE by Transaction Volume Past 24 Months Source: Real Capital Analytics, 20

22 Top U.S. Cities Invested in by Foreign Investors by Transaction Volume Past 24 Months Source: Real Capital Analytics, 21

23 Don't Fear The Interest Rate Reaper 22

24 CRE Transactional Cap Rates by Property Type Source: Real Capital Analytics 23

25 Multifamily Cap Rates Primary Markets Also Continue to Command a Significant Premium Source: Real Capital Analytics, UBS Estimates 24

26 Office Cap Rates Primary Markets Benefitting From CBD Strength Source: Real Capital Analytics, UBS Estimates 25

27 Retail Cap Rates Location, Location, Location Source: Real Capital Analytics, UBS Estimates 26

28 Industrial Cap Rates Primary Markets Continue Their Outperformance Source: Real Capital Analytics, UBS Estimates 27

29 Understanding Demographic Forces is Essential in Analyzing Real Estate (and Many Other Sectors) 28

30 Current U.S. Population by Age Bracket (000) US Census 29

31 Homeownership Rate Trends 35 Years Old & Below US Census 30

32 Living With Mom & Dad Trends for Year Olds Source: U.S. Census 31

33 Household Formations Change in Owner Occupied vs Renter Occupied Housing Units (in 000) Net Change in Owned HH: - 674K Net Change in Renter HHs: +8.4MM Source: U.S. Census 32

34 Shared Households as a % of Total Households Source: U.S. Census 33

35 Trend in Homeownership Rate by Age Bracket Source: U.S. Census 34

36 Indexed Rental Households by Age Bracket Source: U.S. Census 35

37 Is The Growth of Single Family Rentals Cyclical or Longer- Term in Nature? Source: U.S. Census 36

38 Change in Share of U.S. Population That is Married Source: U.S. Census 37

39 Birth Rates per 1,000 by Age Range (Indexed to 1970) Source: CDC National Vital Statistics Report 38

40 Student Debt Outstanding Has Grown 357% Since 2003 To More Than $1.2 Trillion Source: FRBNY 39

41 Share of 25 Year Olds With Student Debt Source: FRBNY 40

42 College Cost Inflation Far Outpacing Growth in Incomes & Home Prices Source: The College Board 41

43 Number of Households Under 40 Years Old by Monthly Student Loan Payment Source: John Burns Consulting 42

44 Potential CRE Related Tax Changes on the Horizon? Carried Interest 1031 Exchanges Depreciation & Capital Gains Rules 43

45 Our Preferred Sectors Multifamily Self Storage Industrial Class A Malls Strip Retail (in good housing markets) Premium Outlets 44

46 Contact Information Jonathan Woloshin, CFA Executive Director and Co-Head of Fundamental Research Wealth Management Research Americas UBS Financial Services Inc UBS Financial Services Inc. inc 2016 UBS Financial Services Inc. All Rights Reserved. Member SIPC. UBS Financial Services Inc. is a subsidiary of UBS AG. 45

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