Navigating the narrow shoals
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Navigating the Narrow Shoals. Recession, Recovery & The Apartment Market Peter C. Burley, CRE SDCAA/CCIM - San Diego - September 30, 2010. Navigating the Narrow Shoals.

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Navigating the Narrow Shoals

Recession, Recovery

& The Apartment Market

Peter C. Burley, CRE

SDCAA/CCIM - San Diego - September 30, 2010


Navigating the Narrow Shoals

Opinions expressed herein are those of the speaker and do not reflect those of any organization, vendor, data provider, partner, colleague, friend, or spouse. No statement should be construed as an offer or solicitation. Except as noted as source material, the speaker is solely responsible for the content herein.


Navigating the Narrow Shoals

Data, consultation, and support graciously provided by:Moody’s Economy.com

Reis, Inc.

Axiometrics Inc.

Real Capital Analytics

The Counselors of Real Estate


Stuff Happens


A Little Worse than Expected


Stocks Tanked


Soaring Profits Crashed


Credit Crunched and Remains Tight


Employers Took Action to Cut Costs


Job Growth Turned South


Unemployment Remains High


Consumer Issues


Consumers Have Been Shaken


And, Consumers Remain Pinched


Closed Wallets Are only Cautiously Opening


Housing Market Issues


Housing Markets Are In the Well


Despite Attractive Pricing


And, Despite Generationally Low Rates


And, the Highest Affordability We Have Seen


Commercial Property Dynamics


“We may never go back to the kind of pricing

and availability of debt we had…”

-- PwC/Korpacz Real Estate Survey, 9/16/2010


Job Cuts a Direct Hit on All Sectors


Office

Absorption 2010

-13.6m sf

Vacancy Rate:

Q2:10 –16.7%

Q2:11 – 17.0%

Rent:

2010: -2.7%

2011: -2.1%

Industrial

Absorption 2010

-31.7m sf

Vacancy Rate:

Q2:2010 – 14.1%

Q2:2011 – 13.7%

Rent:

2010: -5.4%

2011: -4.7%

Retail

Absorption 2010

-2.3m sf

Vacancy Rate:

Q2:2010 – 13.1%

Q2:2011 – 13.1%

Rent:

2010: -2.6%

2011: -0.1%

Job Cuts a Direct Hit on All Sectors

Source: NAR, August 26, 2010


Credit Remains Tight


Transaction Activity has been Limited


Commercial Properties Have Taken a Hit


Commercial Property Pricing is off More than 40%


Commercial Property Pricing is off More than 40%


Apartment Fundamentals are Improving


Apartment Rents Reflect Somewhat Better Times


Concessions are Easing


Distress is a Bit Lower, But…


The Volume of Distressed Properties Has Not Subsided

Source: Real Capital Analytics (www.rcanalyics.com)


Apartment Transactions


A Quick Look at the San Diego Economy


San Diego took a Big Hit in 2009


Growth Has Generally Outpaced the USBut the Contraction was Steeper


Like Much of California, Joblessness Remains High


Spending is Down Sharply


Home Sales Have Improved


Home Prices Have Struggled


Never a Very Affordable Market


Foreclosures Have Spiked to New Highs


New Housing Stock Looks for a New Bottom


The San Diego Apartment Market


A Recent Employment Recovery has Contributed to “Stronger” Absorption


Relatively Limited New Supply and Absorption has Begun to Recover


Rents Begin to Recover


Concessions are Off Their Highs


San Diego is Sometimes A Tale of Two Markets (Occupancy)


San Diego is Sometimes A Tale of Two Markets (Rents)


San Diego is Sometimes A Tale of Two Markets (Rents)


Transactions are Down Sharply


Transactions on the “Floppy Bottom”


Buyers

Sellers

Private Investors, REITs Dominate BuyersPensions, REITs, Privates the Sellers

Source: Real Capital Analytics (www.rcanalytics.com)


New Pricing Realities ?


An Outlook


“We're still in a recession. We're not gonna be out of it for a while, but we will get out.”

-- Warren Buffett


Stuff Could Still Happen


Stuff Could Still Happen(An Alternate Scenario)


The Focus is on Jobs


The Focus is on Jobs in San Diego Too


Balance First, Improvement Later


photo: www.sandiegocoastlife.com


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