U.S. Economic, Capital Markets. and Self-Storage Market Overview

Transcription

1 U.S. Economic, Capital Markets and Self-Storage Market Overview

2 2011 Economic Tug-of-War Positives Retail Sales excl. auto and gas well above pre-recession levels U.S. GDP higher than 2006 levels The Private Sector added 1.7 million jobs in the past 12 months Worker Productivity at all-time high and up 7.6% from pre-recession levels Corporate Profits above previous peak from 3Q06 ISM Manufacturing Index is up 25% from pre-recession levels ISM Non-Manufacturing Index is up 10% from pre-recession levels Capital Markets improving 10-Year Treasury at 3.4% Core Inflation near 1% compared to 2.4% in 2007 Headwinds Unemployment Rate at 8.8% compared to 5% in 2007 Underemployment Rate at 15.7% Consumer Confidence remains 30% below pre-recession levels Single-Family Home Sales 33% below the 2005 peak Single-Family Home Prices down 28% from the 2005 peak Household Debt remains elevated at 90% of GDP Public Debt, at 94% of GDP, is the highest level since World War II Turmoil in the Middle East poses risk of contagion Uncertainty/Macro Risks persist (geopolitical, commodity prices) Sources: Marcus & Millichap Research Services, BLS, BEA, ISM, U.S. Census Bureau

3 10-Year Treasury Movement Reflects the Power of Market Sentiment, Expectations and Uncertainty 10-Year Treasury Rates Cash for Clunkers Ends 150K+ Monthly Private Employment Growth Healthcare Reform Bill Signed into Law BP Oil Spill Euro Debt Crisis 1Q10 U.S. GDP Revised Down To 2.7% 2Q10 China GDP Slows To 10.3% Disappointing Private Employment Growth Retail Sales Exceed Expectations QE2 Announced Protests in Libya Protests in Egypt Earthquake In Japan Bush-Era Tax Cuts Extended 2.25 Jul-09 Sep-09 Oct-09 Nov-09 Jan-10 Feb-10 Mar-10 May-10 Jun-10 Aug-10 Lower Jobless Claims Sep-10 Oct-10 Dec-10 Jan-11 Mar-11 Through March 29 Sources: Marcus & Millichap Research Services, Federal Reserve

4 U.S. Retail Sales Have Recovered From Dramatic Drop Further Growth Hindered 20% Long-Term Total Retail Sales $280 Monthly Retail Sales Excl. Auto and Gas Y-o-Y Change 15% 10% 5% 0% -5% Retail Sales (Bil.) $260 $240 $ % -15% Recessions * $200 $ * * Through February Sources: Marcus & Millichap Research Services, U.S. Census Bureau

5 Capital Spending by Corporate America Key to Sustainable Recovery Profit Trend Positive Indicator 30% Corporate Profits Fixed Investment in Equipment and Software $2,000 YOY Change in Investment 15% 0% -15% -30% $1,500 $1,000 $500 $0 Corporate Profits (Billions) 2000Q4 2001Q4 2002Q4 2003Q4 2004Q4 2005Q4 2006Q4 2007Q4 2008Q4 2009Q4 2010Q4 Sources: Marcus & Millichap Research Services, BEA

6 Companies Still Hesitant to Add Permanent Jobs Temporary Employment (Y-o-Y Change) 30% 15% 0% -15% -30% Temporary Employment * Through March Sources: Marcus & Millichap Research Services, BLS Non-farm Employment Temporary Non-Farm : -652, M 2010: +310, M Ann.2011*: +201, M * 6% 3% 0% -3% -6% Non-farm Employment (Y-o-Y Change)

7 U.S. Employment by Sector YOY Change Through March 2011 U.S. Employment Sectors Absolute Change % Change Prof. & Business Services 529, % Education & Health Services 420, % Trade, Transport & Utilities 238, % Manufacturing 196, % Leisure & Hospitality 193, % Other Services 108, % Natural Resources & Mining 78, % Total Gain 1,762,000 Financial Activities (33,000) -0.4% Construction (36,000) -0.6% Information (37,000) -1.4% Government (356,000) -1.6% Total Loss (462,000) Sources: Marcus & Millichap Research Services, BLS

8 Crude Oil Prices vs. 10-Year Treasury Rate Crude Oil (WTI) 10-Year Treasury Rate $150 15% Crude Oil (price per barrel) $120 $90 $60 $30 Recessions % 9% 6% 3% 10-Year Treasury Rate * $0 0% * Through March 28 Sources: Marcus & Millichap Research Services, Federal Reserve, U.S. Department of Energy

9 Single-Family Housing and Condo Market Yet To Enter Sustainable Recovery Median Home Prices Existing Home Sales $250 Single-Family Condo 80% Single-Family Condo Median Price (000s) $225 $200 $175 $ Y-O-Y Change 2011* -4% -11% 60% 40% 20% -20% -40% * Through February 2011 Sources: Marcus & Millichap Research Services, National Association of REALTORS Year-Over-Year Change 0% * Y-O-Y Change -3% -3%

10 Employment Growth Is Expected to Gain Momentum in 2011 and 2012 Even If Just Catching up to Long-Term Average 6% Total Job Losses Annual Emp Growth-1st Year Following Annual Emp Growth-2nd Year Following Annual Emp Growth-3rd Year Following Historical Avg. Emp Growth Change 3% 0% 2.7M 2.0M 0.9M -3% -6% Current* * Next year = 2010 job growth, Following 2 years = job growth Employment growth based on employment for the 12 months after the contraction period Sources: Marcus & Millichap Research Services, BLS

11 U.S. Household Formation Y-o-Y Change in Number Households 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% * * Forecast Sources: Marcus & Millichap Research Services, Bureau of Census

12 Employment Absolute Change by Metro Forecast 2011 Top 15 Markets Abs Chg* % Chg* Washington, DC 85, % New York City 84, % Dallas-Fort Worth 77, % Houston 65, % Los Angeles 56, % Chicago 52, % Boston 49, % Atlanta 37, % Orange County 36, % Phoenix 36, % Seattle-Tacoma 36, % Austin 28, % Philadelphia 28, % Minneapolis 25, % Denver 24, % U.S. Total 2,000, % Bottom 15 Markets Abs Chg* % Chg* Milwaukee 14, % Las Vegas 14, % Oakland 13, % Cincinnati 13, % Kansas City 13, % Salt Lake City 12, % West Palm Beach 12, % Cleveland 11, % Oklahoma City 10, % Fort Lauderdale 9, % Sacramento 9, % Jacksonville 9, % Detroit 8, % Tucson 7, % Louisville 7, % U.S. Total 2,000, % * Forecast through 2011 Sources: Marcus & Millichap Research Services, BLS

13 Shoring Up the Recovery Dominating Current Fed Agenda, Tightening Unlikely Until 2012 Unemployment Rate Core CPI Capacity Utilization 15% 90% Unemployment Rate and Core CPI 12% 9% 6% 3% 85% 80% 75% 70% Capacity Utilization 0% 65% * * Unemployment rate through March, Core CPI and Capacity Utilization through February Sources: Marcus & Millichap Research Services, U.S. Census Bureau, BLS, Federal Reserve Board

14 Core Inflation vs. 10-Year Treasury 20% Core Inflation Avg. Core Inflation 10-Year Treasury Avg. 10-Year Treasury 15% Rate 10% 7.21% 5% 4.41% 0% * *Through February 2011 Sources: Marcus & Millichap Research Services, Economy.com, Federal Reserve

15 Total Commercial Mortgage Debt Outstanding: $2.3 trillion* By Lender Types ($Bil): Commercial Banks $1,197.6 CMBS, CDO & Other ABS $522.2 Life Insurance Companies $251.4 Savings Institutions $122.2 Federal Government $64.1 Others $155.1 CMBS, CDO and other ABS issues 23% Others 7% Federal Government Savings 3% Institutions 5% Life Insurance Companies 11% Commercial Banks 51% * As of 4Q10 Sources: Marcus & Millichap Research Services, Mortgage Bankers Association

16 Commercial Mortgage Delinquency Rates by Lender Type CMBS (30+ days and REO) Life Companies (60+ days) 4Q1997 4Q1998 4Q1999 4Q2000 4Q2001 4Q2002 4Q2003 4Q2004 4Q2005 4Q2006 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 4Q2009 1Q2010 2Q2010 3Q2010 4Q % 8% 6% 4% 2% 0% Banks & Thrifts (90+ days) Delinquency Rates Delinquency rates at the end of each period Sources: Marcus & Millichap Research Services, Mortgage Bankers Association

17 Estimated Maturities by Vintage Commercial/Multifamily Mortgages Pre $320 Maturing Balance (Billions $) $240 $160 $80 $ Sources: Marcus & Millichap Research Services, Foresight Analytics

18 Sources of Acquisition Financing by Dollar Volume Percent 100% 75% 50% 25% 0% 14% 25% 29% 33% 31% 16% 30% 20% 1% 6% 16% 12% 16% 13% 34% 11% 7% 1% 5% 7% 5% 9% 6% 7% 8% 12% 6% 10% 4% 2% 3% Bank -nat'l, int'l, inv bnk Assumed Debt Regional/Local Bank Government Agency CMBS Insurance Financial Seller Financed Sources: Marcus & Millichap Research Services, Real Capital Analytics

19 * U.S. Commercial Mortgage Backed Securities (CMBS) Issuance $250 $200 $150 $100 $50 CMBS Issuance (billions) $ * forecast Sources: Marcus & Millichap Research Services, Commercial Mortgage Alert

20 Commercial Real Estate Vacancies Stabilizing Apartments, Self-Storage Leading the Recovery 20% * Average Vacancy Rate 15% 10% 5% 0% Self Storage Apartment Retail Office Industrial * Forecast Source: Marcus & Millichap Research Services, REIS, CoStar Group, Inc., Self Storage Data Services, Inc.

21 National Self-Storage Completions 320 Square Feet Completed (Mil.) Sources: Marcus & Millichap Research Services, MiniCo, Inc.

22 National Self-Storage Asking Rent vs. Occupancy Rate Asking Rent Occupancy Rate $ % Asking Rent per Square Foot $0.96 $0.94 $ % 86% 83% Occupancy Rate $ * 80% * Forecast Sources: Marcus & Millichap Research Services, Self Storage Data Services, Inc.

23 2010 National Self-Storage Vacancy Rank by Metro Top 15 Metros 2010 Vacancy Seattle-Tacoma 12.0% Washington DC 12.1% Philadelphia 12.4% Detroit 13.0% Baltimore 13.1% Boston 14.3% Portland 14.7% Columbus 15.0% Denver 15.0% Indianapolis 15.0% San Francisco-Oakland 15.0% Phoenix 15.7% San Jose 17.0% Miami-Ft. Lauderdale 17.8% Dallas-Fort Worth 18.0% U.S. Average 18.3% Bottom 15 Metros 2010 Vacancy Jacksonville 20.0% Las Vegas 20.0% Los Angeles-Santa Ana 20.0% Milwaukee 20.0% Oklahoma City 20.0% Salt Lake City 20.0% San Antonio 20.0% San Diego 20.0% St. Louis 20.0% Tampa 20.0% Atlanta 21.0% Houston 21.0% Sacramento 22.7% Inland Empire 25.3% Orlando 28.0% U.S. Average 18.3% Sources: Marcus & Millichap Research Services, Self Storage Data Services, Inc.

24 National Self-Storage Sales Trends Self-Storage Transactions Self-Storage Dollar Volume 125 $ $0.6 $0.4 $0.2 Total Transactions Total Dollar Volume ($ Bil.) 0 $0.0 2Q03 1Q04 4Q04 3Q05 2Q06 1Q07 4Q07 3Q08 2Q09 1Q10 4Q10 2Q03 1Q04 4Q04 3Q05 2Q06 1Q07 4Q07 3Q08 2Q09 1Q10 4Q10 Includes sales $1M+ Sources: Marcus & Millichap Research Services, CoStar Group, Inc.

25 U.S. Self-Storage Property Price / Cap Rate Trends $100 Average Price Cap Rates 11% Average Price per Square Foot $75 $50 $25 $0 10% 9% 8% 7% 6% Average Cap Rate Includes sales $1Million and Greater Sources: Marcus & Millichap Research Services, Costar Group, Inc.

26 Flight to Quality, Re-Pricing of Risk Reflected in Commercial Cap Rate Trends by Market Type 1Q 04 2Q 04 3Q 04 4Q 04 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10* 10% 9% 8% 7% 6% Primary Secondary Tertiary Average Cap Rate * Preliminary Estimate Sales of apartment, retail, office, industrial, Self-Storage properties $1 and greater Sources: Marcus & Millichap Research Services, Real Capital Analytics

27 Self-Storage Cap Rate Trends Average Cap Rates vs. 10-Year Treasury Self-Storage Cap Rate 10-Year Treasury Rate 12% Cap Rate Long- Term Avg. Average Rate 9% 6% 3% 0% 490 bps 480 bps 10-Yr Treasury Long-Term Avg bps 550 bps Sales $1,000,000 and above Sources: Marcus & Millichap Research Services, CoStar Group, Inc bps 560 bps 2010

28 U.S. Public REIT Valuation Indices vs. S&P 500 * Through February Index: December 1993 = 100 Sources: Marcus & Millichap Research Services, NAREIT, Standard & Poor s S&P 500 All REITs Self Storage REITs Peak-Trough Trough-Current S&P 500: -51% +88% All REITs: -68% +162% SS REITs: -52% +129% Index (Dec = 100) 1, *

29 2010 Household Growth Rank by Metro Top 15 Metros 2010 HH % Chg. Austin 3.0% Charlotte 2.5% San Antonio 2.3% Houston 2.2% Dallas-Fort Worth 2.2% Phoenix 2.0% Portland 2.0% Salt Lake City 1.8% Denver 1.6% Seattle-Tacoma 1.5% Indianapolis 1.5% Sacramento 1.4% Atlanta 1.4% Washington D.C. 1.3% Las Vegas 1.2% U.S. Average 0.9% Bottom 15 Metros 2010 HH % Chg. Chicago 0.7% San Diego 0.7% New York 0.7% Jacksonville 0.7% Cincinnati 0.7% Tampa-St. Petersburg 0.7% St. Louis 0.6% Louisville 0.5% Milwaukee 0.5% Philadelphia 0.5% Detroit 0.0% West Palm Beach -0.1% Cleveland -0.3% Miami -0.6% Fort Lauderdale -1.0% U.S. Average 0.9% Sources: Marcus & Millichap Research Services, Reis

30 Total Nonfarm Employment Change 6% California United States Absolute Job Growth Year-over-Year Change 3% 0% -3% * California: -1,100, ,000 United States: -8,700,000 +5,200,000-6% * *Forecast California includes: San Francisco, San Jose, Oakland, Sacramento, Los Angeles, Orange County, Inland Empire and San Diego Sources: Marcus & Millichap Research Services, Economy.com, BLS

31 Unemployment Rate 15% California United States 12% Unemployment Rate 9% 6% 3% 0% * * Forecast Sources: Marcus & Millichap Research Services, Economy.com, BLS

32 Change in Median Existing Single-Family Home Prices California United States 30% Year-over-Year Change 15% 0% -15% -30% % Change by Decade 1990s 2000s California: 70% 60% United States: 51% 23% California includes: San Francisco, San Jose, Oakland, Sacramento, Los Angeles, Orange County, Inland Empire and San Diego Sources: Marcus & Millichap Research Services, Economy.com, CAR, NAR

33 U.S. Economic, Capital Markets and Self-Storage Market Overview