1 / 36

Session IV | Downtown vs. Suburban Investing

Session IV | Downtown vs. Suburban Investing. Presented by: Gleb Nechayev , Senior Economist Umair Shams, Economist William Wheaton, Senior Consultant. Urban Core vs. Encompassing MSA Markets: Differences in Pricing versus Performance.

bernie
Download Presentation

Session IV | Downtown vs. Suburban Investing

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Session IV | Downtown vs. Suburban Investing Presented by: GlebNechayev, Senior Economist Umair Shams,Economist William Wheaton, Senior Consultant

  2. Urban Core vs. Encompassing MSA Markets: Differences in Pricing versus Performance

  3. Re-Defining America’s Downtowns:From Central Business District to Central Urban Core

  4. Re-Defining Downtowns: Motivation • Our ultimate goal is to understand property performance within metropolitan markets: • Are there any advantages to most central locations? • Are patterns of urban economic activity changing spatially? • The challenge is in defining the “central location”: • Definitions based on political boundaries are too broad and encompass suburban areas • CBD or “downtown” definitions are too narrow in their focus on office business districts. Hence, they fail to capture variations in demographic and employment trends. • As a result, we have embarked on an effort to re-define “downtowns” with a new definition that is broader than CBD, but narrower than “Central City”

  5. Re-Defining Downtowns: Motivation • We call such areas the “Central Urban Core” (CUC) of a region, where CUC must meet several objectives: • It covers the major employment center within the central city, generally comprising financial and service firms • It expands the area to include major shopping venues and cultural attractions (museums, theaters, and sports complexes) • It then expands that area to encompass contiguous denser residential neighborhoods whose residents generally work at the employment central and patronize the retail and cultural amenities • Based on zip code areas to make it usable for investors • We utilize a GIS-based methodology (Google Earth), which layers several sources of data on the map and then make our selections

  6. Re-Defining Downtowns: Motivation

  7. Re-Defining Downtowns: Method Let’s illustrate this process using San Francisco CBD

  8. Step 1: San Francisco CBD

  9. Step 2: Population Change

  10. Step 3: Income Distribution

  11. Step 4: Density Distribution

  12. Pre-Final Result: San Francisco CUC

  13. Step 5: QC and Finalize, San Francisco CUC

  14. Pricing and Growth Since 2000 Sources: RCA, CBRE Econometric Advisors, Census Bureau.

  15. Key Questions

  16. Outline of the Study • Compare growth in population (2000-2010), employment (1999-2009) and revenue (2001-2011) in CUCs relative to their markets • Compare cap rates (2003-2012 average) in CUCs and their encompassing markets • Compare differences in cap rates between CUCs and their markets with the differences in revenue, population, and employment growth between CUCs and their markets)

  17. Population Growth 2000-2010 Average Population Growth Miami San Diego Raleigh Atlanta Charlotte Austin Jacksonville Phoenix San Antonio Detroit Memphis Sources: Census Bureau, CBRE Econometric Advisors.

  18. Employment Growth 1999-2009 Average Employment Growth Washington DC Sources: Census Bureau, CBRE Econometric Advisors.

  19. Office

  20. Pricing Differences Over Time: Office 150 bps gap Sources: RCA, CBRE Econometric Advisors.

  21. Pricing Differences Across Office Markets 2003-2012 average cap rates Sources: RCA, CBRE Econometric Advisors.

  22. Office Revenue Growth Over Time Source: CBRE Econometric Advisors.

  23. Office Revenue Growth Across Markets 2001-2011 Average Revenue Growth (Gross Asking Rents) Sources: CBRE Econometric Advisors.

  24. Cap Rate Spread vs. Job Growth Spread Sources: RCA, CBRE Econometric Advisors.

  25. Cap Rate Spread vs. Revenue Growth Spread Sources: RCA, CBRE Econometric Advisors.

  26. 2007-2012 Office Returns and Revenue Growth: CUC vs. Market Spreads Sources: NCREIF, CBRE Econometric Advisors.

  27. Multi-Housing

  28. Pricing Differences Over Time 10-15% gap Sources: RCA, CBRE Econometric Advisors.

  29. Pricing Differences Across Markets 2003-2012 Average Cap Rates Sources: RCA, CBRE Econometric Advisors.

  30. Revenue Growth Over Time Source: CBRE Econometric Advisors.

  31. Revenue Growth Across Markets 2001-2011 average revenue growth, % Sacramento Oklahoma City Norfolk Cincinnati Riverside El Paso Salt Lake Indianapolis Baltimore Memphis Fort Lauderdale Mean Denver LA Miami Seattle Newark San Jose San Diego Oakland St. Louis Atlanta Charlotte Source: CBRE Econometric Advisors.

  32. Cap Rate Spread vs. Population Growth Spread San Antonio Pittsburgh Los Angeles Austin San Diego Mean Miami Philadelphia Sacramento Boston Orlando Nashville Sources: RCA, Census Bureau, CBRE Econometric Advisors.

  33. Cap Rate Spread vs. Revenue Growth Spread Sources: RCA, CBRE Econometric Advisors.

  34. 2007-2012 MH Revenue Growth & Returns: CUC vs. Market Spreads Difference in total return (CUC-Market) Difference in revenue growth (CUC-Market) Sources: NCREIF, CBRE Econometric Advisors.

  35. What Will Drive Future CUC Returns? Sources: CBRE Research, CBRE Econometric Advisors.

  36. Conclusions

More Related