CAR Commercial Forum Meeting – September 2013 (Chicago Metro) Robert Carrillo September2013
Macro Economic Trends and Forecast • Estimate for 2013.Q2 GDP is 1.7 indicating modest but sustained growth QOQ • Quantitative Easing and Tapering is coming • QE4? Fed likely to taper back on asset purchases • Key interest rates expected to leave rates near 0 (until unempl. rate nears 6.5%). Economists split on when Fed will raise but most say 2015. *Reporting and polling by DeeptiGovind
Jobs • Unemployment dropped to 7.3% Nationally • 63.2% Participation Rate (lowest since 1978) • Economists Mixed (sustained growth at subpar pace
Business Sentiment • Business spending shows growing confidence in the first half of the year • The first quarter spending was down 4.6 percent, with a decline driven by a 25.7 percent drop in spending on commercial structures • However, the second quarter posted a much better performance, with an annual growth rate of 4.6 percent • Spending on commercial buildings rose 6.8 percent • In line with growing demand for properties, prices rose 8 percent on a yearly basis, according to RCA’s Commercial Property Price Index. Prices rose the most for apartments (15%) and retail buildings (13%).
General Market Info • Chicago is the 3rd largest US city by population • Employment lagging US and unemployment still high, 10.3 (Chicago) and 9.1 (Illinois), but positive movement being made • Multi-family projected increase of over 225%
Risks and Opportunities • Foreclosure in SFR sector is still a little high • Unemployment slow to recover • Apartments greatest improvement, • due to increased household formations and tight • mortgage underwriting • Multi-family permits forecasted to increase • exponentially, vacancy rates declined sharply • and now stabilizing, inventory dropping and rent • forecasted to increase. Supply and Demand coming in line.
Overall Snapshot Los Angeles = Los Angeles County New York = Manhattan, Brooklyn, Queens and The Bronx Miami = Miami-Dade County Chicago = Illinois component of Chicago MSA Philadelphia = Philadelphia County San Francisco = San Francisco County Population data from US Census Bureau, July 2011 *estimate
BREF Partner Value • Underserviced Market • Our customer is your customer • There are over 27 million small business owners* in the U.S. and they are heavily invested in real estate • Ninety-five (95) percent of small business owners own their personal residence per the National Federation of Independent Business, Access to Credit Study in 2008 • Twenty-two (22) percent have taken out at least one mortgage on their personal residence to finance business activities • Thirty-four (34) percent own the commercial property that houses their small business • Forty-one (41) percent own investment real estate, excluding their residence and business • The majority, fifty-eight (58) percent of those owning investment property, own more than one such property “In Chicago over the past 12 months 82% of CRE sales transactions were <$1million compared to 53% in LA, 62% in New York and 77% in Miami.”
Sources • NAR 2013 CRE Outlook • REIS • CNNMoney.com • Wells Fargo Securities, LLC