Shifting Demographics: Real Estate Investment Implications

Transcription

1 Shifting Demographics: Real Estate Investment Implications Presentation by: Mary Ludgin, PhD Managing Director and Director of Investment Research Heitman Portland State University 7 th Annual Real Estate Conference May 30, 2012

2 The U.S. in a Global Context

3 3 U.S. Population Aging But Relatively Youthful

4 4 While U.S. Population Growth Will Slow

5 5 U.S The Exception on Fertility

6 Birth Rates by Race and Ethnicity U.S Ethnic/Racial Diversity a Factor in Growth Rate Hispanic Origin 23.0 Asian or Pacific Islander 16.4 Black 16.3 White 13.7 All Races Source: National Center for Health Statistics; Heitman Research

7 7 U.S. Well Positioned on Gender Balance

8 The 30,000-Foot View of the U.S. Population

9 Population by Age and Gender U.S years and over 80 to 84 years 75 to 79 years 70 to 74 years 65 to 69 years 60 to 64 years 55 to 59 years 50 to 54 years 45 to 49 years 40 to 44 years 35 to 39 years 30 to 34 years 25 to 29 years 20 to 24 years 15 to 19 years 10 to 14 years 5 to 9 years Under 5 years The Population Pyramid is So Source: U.S. Bureau of the Census; Heitman Research 9

10 Population By Age and Gender U.S years and over 80 to 84 years 75 to 79 years 70 to 74 years 65 to 69 years 60 to 64 years 55 to 59 years 50 to 54 years 45 to 49 years 40 to 44 years 35 to 39 years 30 to 34 years 25 to 29 years 20 to 24 years 15 to 19 years 10 to 14 years Under 5 years 10 5 to 9 years By 2010, Immigration Had Filled in Some Gaps Source: U.S. Bureau of the Census; Heitman Research

11 Population by Age and Gender U.S years and over to 84 years 75 to 79 years 70 to 74 years 65 to 69 years 60 to 64 years 55 to 59 years 50 to 54 years 45 to 49 years 40 to 44 years 35 to 39 years 30 to 34 years 25 to 29 years 20 to 24 years 15 to 19 years 10 to 14 years 5 to 9 years Under 5 years Source: U.S. Bureau of the Census; Heitman Research The Road Ahead: Older and More Female

12 12 U.S. Life Expectancy Still Rising

13 Life Expectancy at Age 75 Australia, Japan, U.K. and U.S. Demand for Senior Housing Stimulated by More Seniors Living Longer Additional Years Someone Age 75 is Expected to Live Women Men Australia Japan U.K U.S Source: Australian Bureau of Statistics; Japanese National Institute of Population and Social Security Research; U.K. Dept. of Health; U.S. Centers for Disease Control; Heitman Research As life expectancy increases, so does the risk of dementia, increasing the need for specialized care in senior housing facilities 13

14 Medical Office Demand Also Stimulated by an Aging Population 14

15 The U.S. Demographic Landscape: Boom/Bust Giving Way to More Stability Births by Generation U.S Baby Boomers flooded the higher-education system in the 1960s and 70s The Echo Boom created another surge in college enrollment Rising enrollment rates and a stillelevated birth rate support continued growth 000s of Births 4,500 4,000 The baby bust led to declining enrollment Births were low during the Great Depression and WW2 3,500 3, Million 32.4Million 76.2 Million 57.4 Million 81.4 Million WW II Generation 83+Years Swing Generation 65 to 82 Years Baby Boom 46 to 64 Years Baby Bust 32 to 45 Years Echo Boom 13 to 31 Years 54.2 Million Millenium 12 & Under 2,500 2, Source: National Center for Health Statistics, US Census Bureau; Heitman Research 15

16 Household Size Trending Down Outside Recessionary Periods Persons Per Household U.S Source: US Census Bureau; Heitman Research 16

17 One in Ten People Now Living Alone 35,000 30,000 25,000 20,000 15,000 10,000 5, Single-Person Households U.S Millions of households Source: U.S. Census Bureau; Heitman Research 17

18 Investment Strategies

19 Build Strategy Around Demographic Best Bets Year-Over-Year Net Change in Job Growth by Educational Attainment U.S SA 000s College Degree Less than High School High School Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Source: U.S. Bureau of Labor Statistics; Heitman Research 19

20 Population Growth U.S. Top 50 Metropolitan Areas Like Fastest-Growing Areas 20

21 And Places with Educated Populations Unemployment by Educational Attainment for People 25 Years and Older U.S (Q1) 20.0% % unemployed (quarterly) 18.0% 16.0% Less than High School 14.0% 12.0% 10.0% High School Diploma 8.0% 6.0% Associates Degree or Some College 4.0% 2.0% Bachelor's Degree or Higher 0.0% Source: U.S. Bureau of Labor Statistics, Heitman Research 21

22 These Most-Educated Places Include Oregon 20 Most-Educated States U.S Population Population 25+ with 25+ with Rank State BA's BA's 1 District of Columbia 39.1% 11 Minnesota 27.4% 2 Massachusetss 33.2% 12 New York 27.4% 3 Colorado 32.7% 13 California 26.6% 4 Maryland 31.5% 14 Hawaii 26.2% 5 Connecticut 31.4% 15 Utah 26.1% 6 New Jersey 29.8% 16 Illinois 26.1% 7 Virginia 29.5% 17 Kansas 25.8% 8 Vermont 28.7% 18 Rhode Island 25.6% 9 New Hampshire 27.7% 19 Oregon 25.1% 10 Washington 27.4% 20 Delaware 25.1% Source: U.S. Census Bureau; Heitman Research 22

23 23 Demographic Landscape Favors Apartments

24 And Student Housing College Enrollment Rates and Employment Growth U.S. Universities Full-Time Students 18 to 24 Years Old 30.0% Enrollment Rate (In blue/red) Employment Growth (In gold) 6.0% 5.0% 25.0% Recessions in Red 4.0% 20.0% 3.0% 2.0% 15.0% 1.0% 10.0% 0.0% -1.0 % 5.0% -2.0 % 0.0% -3.0 % Source: National Center for Education Statistics, U.S. Census Bureau, Economy.com; Heitman 24

25 Younger Metros a Target for Apartment Buys Metros with Highest Share of People Age U.S. Top 100 Metros 2010 Total Population Total Population Population # % Population # % 1 Provo 529,970 90, % 14 San Francisco 4,345, , % 2 Austin 1,728, , % 15 Dallas-Ft. Worth 6,402, , % 3 Salt Lake City 1,128, , % 16 Charleston 667,741 99, % 4 Ogden 551,173 86, % 17 Des Moines 570,358 84, % 5 Madison 569,923 87, % 18 Oklahoma City 1,257, , % 6 Washington D. 5,610, , % 19 Nashville 1,593, , % 7 Denver 2,560, , % 20 Columbus 1,840, , % 8 Seattle 3,449, , % 21 Los Angeles 12,849,383 1,888, % 9 San Diego 3,105, , % 22 Minneapolis 3,286, , % 10 Houston 5,977, , % 23 Raleigh 1,137, , % 11 Las Vegas 1,954, , % 24 Bakersfield 842, , % 12 Portland 2,232, , % 25 Atlanta 5,288, , % 13 San Jose 1,843, , % Source: U.S. Census Bureau; Heitman Research 25

26 The Recession Drove People Home: Unbundling to Come % of Population Age 25 to 34 Living at Home with Parents U.S % 12.5% +1 Std. Dev. Average -1 Std. Dev. 10.0% 7.5% 26 Sources: US Census Bureau, JBREC; Heitman Research

27 Beyond Demographics: Supply Hasn t Kept Up with Demand Recently Growth in Households vs. Growth in Housing Stock U.S Thousands (000s) Projection Annual Growth in Households Annual Growth in Housing Stock Source: U.S. Census; National Association of Realtors; Moody' s Analytics; Heitman Research 27

28 Particularly for Apartments Growth in Renter Households vs. Growth in Rental Housing Stock U.S ,600 Thousands (000s) 1,400 1,200 Annual Growth in Households Annual Growth in Housing Stock 1, (200) (400) (600) Source: U.S. Census; National Association of Realtors; Moody' s Analytics; Heitman Research 28

29 Homeownership Rate U.S % 69.0% Apartments Helped by Fall in Home Ownership 69.2% 68.0% 67.0% 66.0% 65.0% 65.4% 64.0% 63.0% 62.0% Source: U.S. Census; Heitman Research 29

30 When People Bought Got Skewed During Boom Homeownership Rate for Households 35 or Younger U.S % 43.0% % of households headed by someone 35 or younger that own homes 43.1% 42.0% 41.2% 41.0% 40.0% 39.0% 37.7% 38.0% 37.3% 37.0% 36.0% 35.0% 34.0% Source: U..S Census Bureau; Heitman Research 30

31 Change in Homeownership Rate U.S. and Selected Markets Peak-2011 Portland More Restrained Than Many But Rate Has Fallen Farther Than U.S. Average 75.0% Peak 72.4% 72.5% 72.9% Now 70.0% 68.4% 68.8% 68.5% 68.3% 68.3% 69.0% 65.8% 66.1% 65.0% 63.4% 63.3% 63.7% 60.0% 59.2% 55.0% 52.9% 50.0% 45.0% Atlanta, GA Las Vegas, NV Orlando, FL Phoenix, AZ Riverside, CA Tampa, FL Portland United States Source: U.S. Census Bureau; Heitman Research 31

32 U.S. Not Done with Housing Crisis But Mortgages in Delinquency or Foreclosure U.S % % of Loans Serviced 10.0% 10.1% 8.0% 7.6% 6.0% 4.0% Pre-2008 Avg % Delinquent Mortgages 4.6% 4.4% 2.0% Pre-2008 Avg. -1.0% In Foreclosure 0.0% Source: Mortgage Bankers Association; Heitman Research 32

33 We re Close to the Bottom Renter-Occupied vs. Owner-Occupied Households U.S ,000 Thousands 000s Homeownership Rate 70.0% 140,000 Homeowners Foreclosures Projection 69.0% Renters 68.0% Homeownership Rate 120, % 66.0% 100, % 80, % 63.0% 60, % 40, % Source: U.S. Census; Mortgage Bankers Association; Moody' s Analytics; Heitman Research 33

34 Demographics and The Office

35 Office Downtown Office Markets in Better Shape Than Suburban Office Vacancy: Downtown vs. Suburbs U.S Suburban % Downtown % Source: CBRE Econometric Advisors; Heitman Research 35

36 Demographics and Retail

37 Retail Demographics Drive Asset Quality and Asset Quality Drives Retail Performance % Change in NOI Mall REITs by Quality Level (Q3) 4.0% 3.0% 3.2% 2.9% 2.0% 1.5% 1.0% 0.9% 0.0% -1.0% -2.0% (Q3) -3.0% -4.0% -5.0% -6.0% -4.3% -5.4% Low Quality Middle Quality High Quality Source: Company Reports; Heitman Research 37

38 Retail E-Commerce Market Share Gains Running at 30 bps Year-Over-Year 0.45% 0.40% 0.35% 0.30% 0.25% 0.20% 0.15% 0.10% 0.05% 0.00% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q E-Commerce Annual Market Share Gains (Q4) Year-over-year growth, on a rolling four-quarter basis Source: U.S Census Bureau; HeitmanResearch 38

39 39 Themes for Next 20 Years U.S. population boom/bust pattern should give way to consistent growth U.S. population will age but that s not only meaningful dynamic U.S. economic position helped by immigration and fertility While major economic powers will see population stagnation or decline, U.S. will continue to grow Diversity today and into future Educational attainment rising but not as fast as others we need to speed that up Migration patterns will reflect age structure, generational preferences DEMOGRAPHICS ARE DESTINY