GLOBAL RETAIL TRENDS IMPLICATIONS FOR COMMERCIAL REAL ESTATE Q2 2013
GLOBAL ECONOMY
2013: Steady Relative to 2012 1.7% CANADA 1.6% U.S. 2.9% MEXICO 1.1% UK -0.5% FRANCE -1.8% SPAIN 0.5% GERMANY -2.0% ITALY 2.8% RUSSIA 7.5% CHINA 5.1% INDIA 1.7% JAPAN 1.6% SOUTH KOREA 4.8% 2.4% BRAZIL CHILE 2.0% ARGENTINA 2.5% AUSTRALIA Source: IHS Global Insight, July 2013. CBRE Page 3 3
Mature Economies Expected to Drive Growth (Real GDP, Quarter-on-Quarter % Change, Annual Rate) Source: IHS Global Insight, July 2013. CBRE Page 4
A Multi-Speed Global Recovery (Real GDP, Annual % Change) Source: IHS Global Insight, July 2013. CBRE Page 5
2013 Retail Sales Outlook (Real Retail Sales Growth, 2013) 0.4% CANADA 2.7% U.S. 1.7% MEXICO -0.6% UK -1.0% FRANCE -4.4% SPAIN -3.6% ITALY 1.6% GERMANY 4.0% RUSSIA 10.2% CHINA 1.6% JAPAN 2.9% SOUTH KOREA 7.4% CHILE 3.3% BRAZIL 9.6% ARGENTINA 3.1% AUSTRALIA Source: IHS Global Insight, July 2013. CBRE Page 6
CBRE Global Retail Rent Index Source: CBRE Research, 2013. CBRE Page 7
U.S. CONSUMERS
U.S. Economy Strongly Tied to Consumption Source: IHS Global Insight, July 2013. CBRE Page 9
Households Deleveraging Debt Service as % of Disposable Income Source: Moody s Analytics, 2013. CBRE Page 10 10
Consumer Confidence Heading in the Right Direction (Index 1985=100) Source: The Conference Board; Moody's Analytics (ECCA) Forecast, 2013. CBRE Page 11 11
US Household Wealth Recovering Source: Federal Reserve Flow of Funds B.100 CBRE Page 12
U.S. Retail Sales Volatile Over Past Year Source: Moody s Analytics, August 2013. CBRE Page 13
U.S. RETAIL PROPERTIES
U.S. Market Fundamentals: Modest Improvement CBRE Page 15
Property Sector Trajectory 2011.4 2013Q2 Past Cyclic High Natural Rate Year Back to "Natural Rate" Office Vacancy Rate 15.2% 16.9 / 2010 13 to 15 2013 Industrial Availability Rate 12.0% 14.5 / 2010 9 to 10 2015 Retail Availability Rate 12.3% 13.2 / 2011 9 to 10 2016 Multifamily Vacancy Rate 4.6% 7.44 / 2009 5 to 6 2010 Full Service Hotels Vacancy Rate 34.4%* 43 / 2009 34 to 38 2010 *As of Q1 2013. Source: CBRE Econometric Advisors, Q2 2013. CBRE Page 16
U.S. Retail Property Capital Markets Trends Source: Real Capital Analytics, Q2 2013. CBRE Page 17 17
Flight-to-Quality Driving Prime Rent Growth Market District Retail Subtype Prime Retail Net Rents, Q2 2013 ($USD/sq. ft./annum) Broker Prime Retail Rents 6 Month Outlook New York Fifth Avenue (49th to 59th Streets) High Street $ 3,050 Los Angeles Rodeo Drive High Street $ 580 San Francisco Union Square High Street $ 575 Chicago Michigan Avenue High Street $ 480 Honolulu Kalakaua Avenue High Street $ 420 Miami 600/700 Block of Lincoln Road High Street $ 300 Washington, D.C. M Street, Georgetown High Street $ 225 Dallas Highland Park Village Shopping Center $ 170 Boston Newbury Street High Street $ 150 Philadelphia Walnut Street High Street $ 135 Seattle 6th & Pine High Street $ 85 Denver Cherry Creek Shopping Center $ 60 Source: CBRE Research, Q2 2013. CBRE Page 18 18
US Retail Construction Remains at Historical Lows Source: CBRE EA, Q2 2013. CBRE Page 19 19
Miami Supply & Demand Outlook Neighborhood & Community Centers Source: CBRE Econometric Advisors, Q2 2013. CBRE Page 20 20
West Palm Beach Supply & Demand Outlook Neighborhood & Community Centers Source: CBRE Econometric Advisors, Q2 2013. CBRE Page 21 21
Neighborhood & Community Centers Fort Lauderdale Supply & Demand Outlook Source: CBRE Econometric Advisors, Q2 2013. CBRE Page 22 22
Orlando Supply & Demand Outlook Neighborhood & Community Centers Source: CBRE Econometric Advisors, Q2 2013. CBRE Page 23 23
Tampa Supply & Demand Outlook Neighborhood & Community Centers Source: CBRE Econometric Advisors, Q2 2013. CBRE Page 24 24
Jacksonville Supply & Demand Outlook Neighborhood & Community Centers Source: CBRE Econometric Advisors, Q2 2013. CBRE Page 25 25
CHANGING FACE OF RETAIL
Megatrends Impacting U.S. Retail Properties Global Urbanization E-commerce Changing Demographic Age Cohorts Med-tail? CBRE Page 27
Megacities in 2007 LOS ANGELES NEW YORK CITY LONDON PARIS ISTANBUL MOSCOW BEIJING SEOUL TOKYO OSAKA-KOBE MEXICO CITY CAIRO MUMBAI DELHI MANILA SAO PAULO BUENOS AIRES RIO DE JANEIRO Note: Megacities includes cities with population of at least 10 million inhabitants. Source: United Nations, 2007; McKinsey Global Institute China All City Model; McKinsey Global Institute. CBRE Page 29 29
Megacities by 2025 LOS ANGELES MEXICO CITY NEW YORK CITY BOGOTA LIMA LONDON PARIS LAGOS KINSHASA MOSCOW XI AN BEIJING ISTANBUL TOKYO SEOUL LAHORE TIANJIN OSAKA-KOBE CHENGDU TEHRAN CHONGQING SHANGHAI CAIRO KOLKATA KARACHI WUHAN HANGZHOU DELHI DHAKA GUANGZHOU AHMADABAD MUMBAI SHENZHEN HYPERABAD MANILA BANGALORE CHENNAI JAKARTA SAO PAULO BUENOS AIRES RIO DE JANEIRO Note: Megacities includes cities with population of at least 10 million inhabitants. Source: United Nations, 2007; McKinsey Global Institute China All City Model; McKinsey Global Institute. CBRE Page 30 30
% OF GDP GROWTH: 2013 TO 2030 Source: IHS Global Insight, 2013. CBRE Page 31
THE REAL ESTATE INVESTABLE UNIVERSE Source: CBRE Global Investors. CBRE Page 32
REGIONAL SHARES SHIFT OVER TIME $4.6 Trillion in 1985 $43.3 Trillion in 2020 Source: CBRE Global Investors. CBRE Page 33
E-Commerce Sales Growth Source: U.S. Census Bureau, March 2013. CBRE Page 34
Taking a Bite Out of Brick and Mortar Sales Source: U.S. Census Bureau, 2010. CBRE Page 35
Retailers are Shrinking their Footprints 200 Average Store Square Feet (x 1,000) 180 160 140 120 100 80 60 40 20 0 Best Buy Lowe's Office Depot Target Wal-Mart Sources: CBRE-EA/FW Dodge Pipeline, CBRE Research Calculations CBRE Page 36 2008 2009 2010 2011 2012
Retailing in 2025: What the Internet Does! Creates greater price competition between retailers. Competition lowers margins (and rents?) Stores become smaller display centers where clients try, size, color items which are then ordered-delivered. Big Box Small Box Small stores allow retailers to disperse into local targeted areas rather than regional centers. Inventories move from retailer (back) to warehouses. Source: U.S. Census Bureau, 2010. CBRE Page 37
From Transaction-Based to Relationship-Based Retail Experience Shopping Service- Oriented Future Functionality of Retail Space Specialty & noncommoditized Products Focus Omni- Channel Source: U.S. Census Bureau, 2010. CBRE Page 38
SHIFTS IN DEMOGRAPHIC AGE COHORTS
U.S. Age Demographic Shifts Source: U.S. Census Bureau, 2010. CBRE Page 40
Shifts in Demographic Age Cohorts Source: U.S. Census Bureau, 2010. CBRE Page 41
AGING POPULATIONS WILL SPEND LESS AND LESS Source: Bureau of Labor Statistics ( BLS ). CBRE Page 42
ALTERNATIVE?: MED-TAIL What do medical providers need? A- Significant parking ratios. What do shopping centers provide? A- Significant parking ratios? When do shopping centers need more traffic? A- M-F 9-3 When do medical providers generate the majority of their traffic? A- M-F 9-5 Source: Bureau of Labor Statistics ( BLS ). CBRE Page 43
CONCLUSION