Transcript No Slide Title

“Get Ready For The
Age Of Real Estate”
Portland State University
Center For Real Estate
Portland, Oregon
June 5, 2008
Presented By:
Christopher Lee, President & Chief Executive Officer
CEL & ASSOCIATES, INC.
(310) 571-3113
CEL & Associates, Inc.
1
TODAY’S PRESENTATION
 Future Headlines
 Real Estate Growth Cycles – What’s Ahead
 Five Cornerstones Of Change & Opportunity
•
•
•
•
•
Demographic Shifts
Employment & Market Shifts
Sustainability Shifts
Capital Shifts
Industry Shifts & Career Opportunities
 My Advice To You
CEL & Associates, Inc.
2
A LOOK AHEAD…
HEADLINES YOU MIGHT SEE
CEL & Associates, Inc.
3
Monday, February 18, 2011
Today's
Highlights
Daily .25¢
eBay Becomes The #1 Source For
Selling Commercial Real Estate
NYC Office
4
Monday, February 18, 2012
Today's
Highlights
Daily .25¢
Fortune 500 Firms Mandate
Green Building Standard By 2015
NYC Office
5
© 2009 Dow Jones & Company, Inc. All Rights Reserved
Tuesday, September 15, 2011
First High-Rise Farm Announced
“12 Stories Is Now Equal To 600 Acres.”
What’s News
100
80
60
40
20
0
East
West
North
1st
Qtr
3rd
Qtr
6
Tuesday, July 14, 2012
Today's
Highlights
Daily .25¢
TSA Announces Terrorist Threat
Labeling Policy For Buildings
NYC Office
7
Thursday, June 10, 2015
Today's
Highlights
Daily .25¢
Facebook Creates First
Virtual Office
“Y Generation Declares Office Space Obsolete.”
NYC Office
8
REAL ESTATE CYCLES
1973 – 2032
“Over the past 30+ years,
there has never been a time
one could not make
money in real estate!”
CEL & Associates, Inc.
9
REAL ESTATE GROWTH CYCLES
Historical
1973-1978
Growth From Pent-Up Demand Caused By Oil Embargo & Stagnation
1979-1982
1983-1988
Transition Period
Growth From The Abundance Of Capital & Financial Engineering
1989-1992
1993-1998
Transition Period
Growth From Consolidation, Securitization & The Digital Economy
1999-2002
Transition Period
Forecast
2003-2008
Growth From Customer Connectivity, Talent & Capital Shifts
2009-2012
Transition Period
CEL & Associates, Inc.
10
REAL ESTATE GROWTH CYCLES
Historical
1973-1978
Growth From Pent-Up Demand Caused By Oil Embargo & Stagnation
1979-1982
1983-1988
Transition Period
Growth From The Abundance Of Capital & Financial Engineering
1989-1992
1993-1998
Transition Period
Growth From Consolidation, Securitization & The Digital Economy
1999-2002
Transition Period
Forecast
2003-2008
Growth From Customer Connectivity, Talent & Capital Shifts
2009-2012
Transition Period
2013-2018
Growth From Globalization, Generational Shifts, New Urbanism & Greening
2019-2022
Transition Period
CEL & Associates, Inc.
11
REAL ESTATE GROWTH CYCLES
Historical
1973-1978
Growth From Pent-Up Demand Caused By Oil Embargo & Stagnation
1979-1982
1983-1988
Transition Period
Growth From The Abundance Of Capital & Financial Engineering
1989-1992
1993-1998
Transition Period
Growth From Consolidation, Securitization & The Digital Economy
1999-2002
Transition Period
Forecast
2003-2008
Growth From Customer Connectivity, Talent & Capital Shifts
2009-2012
Transition Period
2013-2018
Growth From Globalization, Generational Shifts, New Urbanism & Greening
2019-2022
2023-2028
Transition Period
Growth From Life Sciences, Suburban Recycling & Retirees
2029-2032
Transition Period
CEL & Associates, Inc.
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THE FIVE INDICATORS
WHY 2008 – 2030
WILL BE
THE AGE OF REAL ESTATE
CEL & Associates, Inc.
13
Get Ready For
The Age Of Real Estate

1st Indicator:
Emerging Demographic Trends
CEL & Associates, Inc.
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U.S. POPULATION
CONTINUES TO GROW
Population
(Millions)
400
350
Nearly 100 Million
New Residents!
300
250
200
150
100
50
0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Source: U.S. Census Bureau.
CEL & Associates, Inc.
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THE SOUTH AND THE WEST
WILL GROW DRAMATICALLY
Millions
50
40
“64 new jobs are created
for every 100 additional residents”
43.0m
- Bureau Of Labor Statistics
28.9m
30
20
“What matters most is not where
most people live…but where the
greatest number of skilled
people locate.”
10
4.1m
6.1m
0
Northeast
Midwest
South
West
Source: U.S. Census Bureau, Population Division, Interim State Population Projections, 2005.
Regional Population change from 2000 to 2030.
CEL & Associates, Inc.
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GENERATION GROUPINGS
2008
Millions
30
25
20
15
10
5
0
83+
years
78 - 82 73 - 77
years years
GI Generation
(Pre-1926)
> 82 years
7.8 million
68 - 72 63 - 67
years years
Silent Generation
(1926 - 1945)
63 - 82 years
36.2 million
59 - 62 54 - 58 49 - 53
years
years
years
Boomer Generation
(1946 - 1964)
44 - 62 years
77.2 million
44 - 48 38 - 43
years years
32 - 37 27 - 31 22 - 26 17 - 21 12 - 16
years
years
years
years years
X Generation
(1965 - 1976)
32 - 43 years
49.4 million
Source: CEL & Associates, Inc., 2005 Projected U.S. Census data.
Y Generation
(1977 - 1996)
12 - 31 years
84.0 million
6 - 11
years
<6
years
New Millennium
Generation
(1997 - )
< 12 years
48.9 million
17
GROWING POPULATION
AGE 60+
Millions
120
110
100
90
• Life expectancy now 78 years.
• Over 75 years group will
double by 2033 and triple by
2050.
80
52.2m New
60+ Citizens
70
60
50
40
30
20
10
0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
1900
6.4%
1980
15.7%
1910
6.8%
1990
16.8%
1920
7.5%
2000
16.3%
1930
8.5%
2010
18.4%
1940
10.4%
2020
22.5%
1950
12.2%
2030
25.1%
1960
13.2%
2040
25.5%
1970
14.1%
2050
26.0%
Source: U.S. Census Bureau.
CEL & Associates, Inc.
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GROWING TIMESHARE OWNERSHIP
# of Owners
Millions
5.00
4.40
3.87
4.00
4.10
3.40
3.00
3.00
2.00
1.00
0.00
2002
2003
2004
2005
2006
Source: Ernst & Young, LLP.
CEL & Associates, Inc.
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GROWING NUMBER
OF FULL-TIME STUDENTS
Millions
14,000
 Universities currently
supply only 35% of student
housing needs…and
endowments now total
$411 billion.
13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Source: National Center For Educational Studies.
CEL & Associates, Inc.
20
GROWING PRIMARY RENTER GROUP
18 – 34 YEARS OF AGE
Millions
90
85
• Emerging Y Generation (75+ million).
• Emerging Millennials (48+ million).
• 74% 15-24 years old rent.
• 51% 25-34 years old rent.
80
17.3 Million
Potential Renters
75
70
65
60
1995
2000
1995
65.8m
2005
2000
63.5m
2010
2005
64.6m
2010
68.4m
2020
2020
72.9m
2030
2030
74.6m
2040
2040
80.5m
2050
2050
85.7m
Source: U.S. Census Bureau.
CEL & Associates, Inc.
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GROWING HISPANIC POPULATION
Millions
110
100
90
80
70
• Excludes an estimated 12m illegal aliens.
• $1 trillion in purchasing power by 2010.
• Household size 3.5 (vs. 2.6).
• Median age 25.9 years (vs. 35.3 years).
• 61% population growth from 1990-2005.
• 54% of Hispanics are renters.
54.8 million new
Hispanic Residents
60
50
40
30
20
10
1980
1990
1980
14.6m
1990
22.4m
2000
2000
35.3m
2010
2010
47.8m
2020
2020
59.8m
2030
2030
73.1m
2040
2040
87.6m
2050
2050
102.6m
Source: U.S. Census Bureau.
CEL & Associates, Inc.
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CONTINUED JOB GROWTH
Millions
250
240
230
220
Sunbelt Prospers
• Pacific/Mt. Region
• Southeast Region
• South Central Region
Percent Jobs Created
24%
35%
11%
70%
210
200
47.8m Total
Jobs Created
190
180
170
160
150
2000
2010
2020
2030
2040
Source: Arthur C. Nelson, March 2006.
CEL & Associates, Inc.
23
SHIFTING TRADITIONAL HOUSEHOLD
Household
Type
Family
Households
1950
1960
1970
1980
1990
2000
2030
89%
85%
80%
73%
70%
68%
65%
Non-Family
Household
11%
15%
20%
27%
30%
32%
35%
Living Alone
9%
13%
18%
23%
25%
26%
29%
Source: U.S. Census Bureau.
By 2030 the U.S. population will be nearly 400 million
and 50% of those under 18 will be a minority.
CEL & Associates, Inc.
24
Get Ready For
The Age Of Real Estate

2nd Indicator:
Shifting Employment &
Market Trends
CEL & Associates, Inc.
25
GROWING NUMBER OF
JOBS OCCUPYING SPACE
Area
U.S.
Northeast
East N. Central
West N. Central
South Atlantic
East So. Central
West So. Central
Mountain
Pacific
2000
166.8
31.0
27.0
12.7
30.7
9.7
18.2
11.1
26.4
Projected Employment (Millions)*
%
Total
Change Change
00 - 30 00 - 30
2030
2020
2010
25.5%
42.5
209.3
193.3
177.8
12.3%
3.8
34.8
33.3
31.9
16.3%
4.4
31.4
29.5
27.6
24.4%
3.1
15.8
14.6
13.5
33.2%
10.2
40.9
37.3
33.7
25.8%
2.5
12.2
11.2
10.3
34.6%
6.3
24.5
22.2
19.9
52.3%
5.8
16.9
14.8
12.7
24.2%
6.4
32.8
30.4
28.2
* Numbers are rounded.
Source: Arthur Nelson, FAICP.
CEL & Associates, Inc.
26
GROWING TOTAL SPACE NEEDS
2000 – 2040
Region
Northeast (CT, MA, ME…)
East North Central (IL, OH, MI…)
West North Central (MN, NE, MO…)
South Atlantic (FL, GA, NC…)
East South Central (KY, IN, AL…)
West South Central (TX, OK, AR…)
Mountain (NV, CO, UT…)
Pacific (CA, OR, WA…)
U.S.
Total Growth &
Non-Residential
Space Needed
billions s.f.
%
11.7
10%
16.2
14%
7.4
7%
27.6
25%
7.0
6%
17.0
15%
9.2
8%
16.1
14%
112.2
100%
54%
Of
Total
In 2030, 50% of all space in America will have been built AFTER 2000
and only 25-50% will be conventional sprawl.
Source: Arthur Nelson, FAICP.
CEL & Associates, Inc.
27
GROWING INDUSTRY SECTORS

Software Development

Waste Management

Healthcare

Emerging Technologies

Life Sciences/Biotech

Colleges/Universities

Technology

Aging Population/Retirees

Government

Gaming

Financial Services

Science

Defense/Security

Nonprofits

Communications

Foreign Enterprises

Trade/Logistics

Banks/Lenders

Data Centers

Pharmaceutical

Leisure/Food Service

F.I.R.E.

Research & Development

Entertainment

Green Industries

Energy
“Regional economic growth is driven by the locational choices of creative people.”
Richard Florida
CEL & Associates, Inc.
28
CAN’T MISS GROWTH AREAS
Anything Around:
Anything Involving:
 Colleges/Universities
 Mixed-Use Projects
 Transportation Hubs
 Close-In Recreation Destinations
 Ports/Coastal Cities
 High Security Business Parks
 Biotechnology Enterprises
 Affordable/Workforce Housing
 Government Centers
 Pedestrian-Friendly Retail Centers
 Lifestyle Locations
 Retirement
 Digital/High Tech Enterprises
 Corporate Campuses
 Medical/Healthcare
 Urban/Suburban Redevelopment
 Large/Midsize Airports
 Technology
 Research Centers
 Non-Commodity Based Industries
CEL & Associates, Inc.
29
GROWTH MARKETS – U.S.
 Centers of Knowledge (San Francisco Bay Area, Boston, New York City,
Austin, Seattle)
 Ports (Long Beach, New York, Seattle, Oakland, Charleston, Norfolk,
Savannah, Miami and Houston)
 Lifestyle Cities (Phoenix, Tampa, South Florida, Portland, San Diego,
Minneapolis)
 Gateway and Hub Cities (Dallas/Ft. Worth, Atlanta, Miami, Los
Angeles/Orange Counties, Charlotte, Chicago)
 Capital Cities (Nashville, Austin, Washington, D.C./Northern Virginia)
 Energy States (Texas, Colorado, Central Plains States)
 Coastal Cities (52% Of U.S. Population)
 Theme Cities (Las Vegas, Orlando, Nashville)
 Corridors (Atlanta to Raleigh, Kansas City to Dallas to San Antonio,
Boston to No. Virginia, Sacramento to San Jose, Los Angeles to
Riverside/San Bernardino to Las Vegas, Portland to Seattle)
CEL & Associates, Inc.
30
PORTLAND HAS IT ALL…
 Among the Top 10 Places To Live.
 Acknowledged “lifestyle” city.
 Diverse population of nearly 2 million.
 Strong job growth.
 “Biking-friendly” environment.
 Ten colleges and universities.
 One of America’s Top 50 “Green” cities.
 Ranked by AARP as one of Top 5 cities in which to live.
 Home to major employers.
CEL & Associates, Inc.
31
Get Ready For
The Age Of Real Estate

3rd Indicator:
Shift To Sustainability
CEL & Associates, Inc.
32
SHIFT TO SUSTAINABLE ASSETS
 U.S. buildings consume 39% of U.S. energy.
 U.S. buildings account for 70% of U.S. electricity
consumption.
 Less than 1% of all commercial buildings are LEED
certified.
 More than 50% of corporate CEOs rated energy
efficiency as a corporate priority.
 Green buildings can generate a 12%-15% return on
cost, and achieve a 90% tenant retention rate.
CEL & Associates, Inc.
33
INCREASING GOVERNMENT FOCUS
 The Energy Independence and Security Act of 2007
allocates more than $1.0 billion to improve energy
efficiency in buildings.
 The Zero Net Energy Commercial Buildings Initiative
sets a carbon neutrality in all commercial buildings
by 2050.
 All existing GSA leases beginning in 2010 must be in
an Energy Star-designated building (impacting 100
million square feet of privately-owned buildings).
 All new GSA leases after 2011 must be in a LEED
certified building.
CEL & Associates, Inc.
34
GREEN BUILDINGS WORK!
Category
Difference Over Non-Sustainable Buildings
Energy Star Buildings
LEED Buildings
Occupancy
3.6% 
Energy Usage
40% 
Carbon Emissions
35% 
4.1% 
Source: 1,300 LEED And Energy Star Buildings. Co-Star.
CEL & Associates, Inc.
35
Get Ready For
The Age Of Real Estate

4th Indicator:
An Abundance Of Capital
CEL & Associates, Inc.
36
THE OPPORTUNITY
 There are over $15 trillion of global commercial real
estate properties…35% of which are in the U.S.
 50% of all global direct real estate investments occurs in
North America.
 There is estimated to be $1.5 trillion in global capital
seeking real estate opportunities.
 $1.5 trillion (or over 32,000 properties) in total
transactions in 2007…a trend likely to continue.
 Dramatic increase in fund buyers.
CEL & Associates, Inc.
37
TYPE OF BUYER
2001 - 2008
Buyer
Composition
Condo Converter
Cross-Border
Fund
Inst'l
Private - Local
Private - Nat'l
Reit/Public
Syndicator
User/Other
(N/A)
Grand Total
1
2001
2002
$0.7
$1.0
$3.0
$7.6
$6.7
$8.4
$17.4 $17.5
$15.0 $18.3
$12.3 $14.0
$8.6 $22.2
$1.3
$3.4
$7.5
$5.5
$4.9
$4.0
$77.4 $101.9
(Billions of Dollars)
2003
2004
2005
2006
2007
$2.9 $12.5 $31.1 $10.0
$2.5
$9.0 $14.0 $19.9 $16.3 $34.6
$8.5 $13.1 $23.0 $47.6 $100.6
$16.3 $31.6 $50.9 $61.6 $97.3
$24.8 $35.3 $47.8 $58.2 $60.6
$17.1 $24.6 $33.9 $53.6 $52.9
$21.4 $27.1 $34.8 $26.6 $42.3
$7.8 $11.1 $14.0
$9.9 $15.5
$6.6
$7.7
$9.2 $10.1 $11.0
$6.0 $10.4 $11.2 $13.4 $10.3
$120.4 $187.3 $275.8 $307.4 $427.6
2
2008
$0.2
$2.3
$4.2
$8.3
$9.7
$5.8
$3.7
$1.5
$2.0
$2.7
$40.2
2001
% Tot.
0.9%
3.9%
8.7%
22.5%
19.4%
15.9%
11.1%
1.7%
9.7%
6.3%
100.0%
2007
% Tot.
0.6%
8.1%
23.5%
22.8%
14.2%
12.4%
9.9%
3.6%
2.6%
2.4%
100.0%
2008
2
% Tot.
0.4%
5.8%
10.4%
20.7%
24.0%
14.3%
9.2%
3.7%
4.9%
6.7%
100.0%
1
Rounded.
First Quarter 2008 data.
Source: ©2007 Real Capital Analytics, Inc. All rights reserved.
2
CEL & Associates, Inc.
38
THE OPPORTUNITY
 There are over $15 trillion of global commercial real
estate properties…35% of which are in the U.S.
 The 20 largest economies in the world produce 65% of
the world’s GDP and 90% of its investable real estate.
 50% of all global direct real estate investments occurs in
North America.
 There is estimated to be $1.5 trillion in global capital
seeking real estate opportunities.
 $1.5 trillion (or over 32,000 properties) in total
transactions in 2007…a trend likely to continue.
 Dramatic increase in fund buyers.
 Real estate has become a preferred asset class.
CEL & Associates, Inc.
39
REAL ESTATE OUTPERFORMS
THE STOCK MARKET
NAREIT Equity REIT Index Of Total Returns
Stocks
Year
1996
Office
51.8%
Industrial
37.2%
Retail
34.6%
Apt.
28.9%
All Equity
REITs
35.3%
S&P 500
22.7%
Russell
2000
16.5%
NASDAQ
23.0%
1997
29.0%
19.0%
17.0%
16.0%
20.3%
33.1%
22.4%
22.1%
1998
17.4%
-11.7%
-4.9%
-8.8%
-17.5%
28.3%
-2.5%
40.1%
1999
4.3%
3.9%
-11.8%
10.7%
-4.6%
20.9%
21.3%
85.9%
2000
35.5%
28.6%
18.0%
35.5%
26.4%
-9.0%
-3.0%
-39.1%
2001
6.7%
7.4%
30.4%
8.7%
13.9%
-11.8%
2.5%
-20.8%
2002
-6.8%
17.3%
21.1%
-6.2%
3.8%
-22.0%
-20.4%
-31.2%
2003
34.0%
33.1%
46.8%
25.5%
37.1%
28.7%
47.3%
50.0%
2004
23.3%
34.1%
40.2%
34.7%
31.6%
10.8%
18.3%
8.6%
2005
13.1%
15.4%
11.8%
-14.7%
12.2%
4.9%
4.5%
1.4%
2006
45.2%
28.9%
29.0%
40.0%
35.1%
15.8%
18.4%
9.5%
2007
0.4%
-19.0%
-15.8%
-25.2%
-17.8%
5.5%
-1.6%
9.8%
2008*
4.5%
-0.5%
5.2%
14.5%
4.7%
-4.8%
-2.8%
-6.1%
Average
Annual
Return
19.9%
14.9%
17.0%
12.3%
13.9%
9.5%
9.3%
11.8%
Total Return: A stock's dividend income plus capital appreciation, before taxes and commissions.
* June 2, 2008.
Source: NAREIT and CEL & Associates, Inc.
CEL & Associates, Inc.
40
GROWING VALUE OF REAL ESTATE ASSETS
HELD IN EQUITY MUTUAL FUNDS
Billions
$100
$90 billion
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
1992
1998
2001
2003
2005
2010 *
2030 *
* Projected.
Source: AMG Data, BB&T Capital Markets and CEL & Associates, Inc.
CEL & Associates, Inc.
41
GROWTH IN SYNDICATOR BUYERS
OVERALL 2001 - 2008
Sales (in billions)
$6
5.7
5.0
$5
4.4
4.0
$4
3.8
3.7
3.4
3.1
$3
2.9
2.7
2.5
2.4
2.5
2.7
2.3
2.0
$2
1.5
1.4
1.3
1.2
$1
0.7
0.1
0.2
0.2
0.3
0.7
0.8
0.5
0.3
$0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2001
2002
2003
2004
2005
2006
2007
2008
Source: ©2008 Real Capital Analytics, Inc. All rights reserved.
CEL & Associates, Inc.
42
GROWTH IN CROSS-BORDER BUYERS
OVERALL 2001 - 2008
Sales (in billions)
$16
14.5
$14
• Foreign investors own $230
billion in U.S. real estate assets.
$12
11.0
$10
$8
7.7
6.8
$6
5.5
5.1
4.8
3.8
$4
3.2
2.4
$2
2.8
2.2
5.5
4.7
4.9
4.0
3.6
3.1
2.6
2.3
2.0
1.4
1.4
0.7
6.5
5.9
0.6
0.9
0.9
$0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2001
2002
2003
2004
2005
2006
2007
2008
Source: ©2008 Real Capital Analytics, Inc. All rights reserved.
CEL & Associates, Inc.
43
SALES VOLUME – OFFICE
2001 - 2008
Sales (in billions)
$90
79.4
$80
$70
Portland (Past 12 Months)
• $1.2 billion sold
• 6.8% average cap rate
• 93% of asking price
$60
60.5
$50
46.4
47.2
$40
34.3 34.2
30.6
$30
23.5
22.5 23.4
$20
$10
28.8
27.6 27.8
7.6
9.5
9.2
8.9
6.4
11.8
6.5
14.0
13.6
9.2
16.4
15.3
18.7
14.4
12.2
8.3
$0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2001
2002
2003
2004
Office - CBD
2005
2006
2007
2008
Office - Sub
Source: ©2008 Real Capital Analytics, Inc. All rights reserved.
CEL & Associates, Inc.
44
OFFICE FLIGHT TO QUALITY
Category
Space Per Employee
Office Job Growth – Annual
Government Job Growth – Annual
Professional Services Job Growth – Annual
National Vacancy Level
Net Completions – Annual
New Construction (% Of Supply)
Rent Growth
TI As % Of Rents
Cap Rate – CBD
Cap Rate – Suburban
NOI Margin
2007
175 sf
2.0%
1.0%
2.0%
12.4%
57 msf
1.8%
3.0%
11.7%
5.9%
6.9%
58.8%
2010
167 sf
2.1%
1.0%
2.0%
13.9%
49 msf
1.6%
2.3%
12.0%
6.7%
7.5%
59.8%
Source: Bank of America, Real Capital Analytics, SNL Financial and CEL & Associates, Inc.
CEL & Associates, Inc.
45
SALES VOLUME – RETAIL
2001 - 2008
Sales (in billions)
$30
27.2
26.5
Portland (Past 12 Months)
• $280 million sold
• 6.6% average cap rate
• 93% of asking price
$25
20.0
$20
17.4
17.5
16.5
$15
14.8
14.1
12.6
12.5
11.4
$10
11.2
9.2 9.6
9.5
9.2
11.0
9.1
7.6
5.8
$5
3.8
1.9
2.6
3.4
6.5
6.1 6.3 6.3
3.9
$0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2001
2002
2003
2004
Mall & Other
2005
2006
2007
2008
Strip
Source: ©2008 Real Capital Analytics, Inc. All rights reserved.
CEL & Associates, Inc.
46
RETAIL LIKELY TO SLOW
Category
National Vacancy Level
Rent Growth
Retail Sales Growth
Store Closings
New Construction Starts
Net Absorption
Cap Rate – Strip
Cap Rate – Mall
NOI Margin
2007
90%
3.1%
3.1%
4,200
300 msf
62 msf
7.1%
6.3%
61.5%
2010
87%
1.6%
2.7%
4,000
180 msf
60 msf
7.9%
7.3%
60.2%
Source: Bank of America, Real Capital Analytics, SNL Financial and CEL & Associates, Inc.
There could be as many as 5,800 store closings in 2008.
CEL & Associates, Inc.
47
SALES VOLUME – APARTMENTS
2001 - 2008
Sales (in billions)
$40
36.9
$35
Portland (Past 12 Months)
$30
28.2
• $1.1 billion sold
• 5.2% average cap rate
• 95% of asking price
$25
27.2
26.1
24.8
23.2
20.3
$20
17.4
$15
18.3
17.7
20.4
19.8
18.2
13.3
12.0
11.3
9.8
$10
$5
8.1
4.3
5.2
5.6
5.5
4.9
5.8
5.7
6.7
9.1
7.2
5.3
$0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2001
2002
2003
2004
2005
Garden
Mid/Highrise
2006
2007
2008
Source: ©2008 Real Capital Analytics, Inc. All rights reserved.
CEL & Associates, Inc.
48
MULTIFAMILY WILL BENEFIT FROM
SUBPRIME MALAISE
Category
National Home Ownership
Unemployment Rate
Compensation Growth
Multifamily Starts
Net Absorption
National Occupancy Level
Rent Growth
Cap Rate – Mid/Highrise
Cap Rate – Garden
NOI Margin
2007
68.2%
5.0%
3.3%
282,000
150,000
94.5%
3.1%
5.3%
6.3%
46.6%
2010
67.0%
4.8%
3.3%
300,000
185,000
95.0%
3.1%
5.7%
6.8%
58.7%
Source: Bank of America, Real Capital Analytics, SNL Financial, CEL & Associates, Inc., Wall St. Journal.
Home prices will decline 8%-12% nationwide in 08 after a 12%
decline in 07…which means 15 million mortgages (30% of total or
$3 trillion) will be worth more than the homes they financed.
CEL & Associates, Inc.
49
DEMISE OF CONDO CONVERTER
BUYERS – OVERALL 2001 - 2008
Sales (in billions)
$10
9.1
$9
8.7
$8
$7
6.7
$6
5.7
5.2
4.9
$5
3.9
$4
$3
2.1
2.0
$2
1.5
$1
0.2
0.2
0.2
$0
0.1
0.1
0.3
0.3
0.3
0.5
0.7
0.8
1.4
0.9
0.7
0.7
0.3
0.3
0.3
0.2
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2001
2002
2003
2004
2005
2006
2007
2008
Source: ©2008 Real Capital Analytics, Inc. All rights reserved.
CEL & Associates, Inc.
50
SALES VOLUME – INDUSTRIAL
2001 - 2008
Sales (in billions)
$16
$14
13.4
13.9
Portland (Past 12 Months)
$12
• $486 million sold
• 6.6% average cap rate
• 93% of asking price
$10
11.9
11.7
10.5
9.5
$8
11.2
10.8
9.9
9.8
9.0
7.5
7.1
6.7
6.1
$6
5.4
4.9
4.5
$4
3.0 3.2
3.1 3.2
2.4
$2
2.0
2.4 2.6
3.5
3.8
2.7
$0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2001
2002
2003
2004
Flex
2005
2006
2007
2008
Warehouse
Source: ©2008 Real Capital Analytics, Inc. All rights reserved.
CEL & Associates, Inc.
51
INDUSTRIAL REMAINS HEALTHY
Category
U.S. GDP Growth
Global Trade
Global Air Cargo
Port Volume
National Vacancy Level
Net Completions – Annual
Rent Growth
Cap Rate – Warehouse
Cap Rate – Flex
Capacity Utilization
NOI Margin
2007
2.2%
6.7%
6.1%
6.7%
9.9%
115 ksf
3.5%
7.4%
7.2%
81.5%
57.3%
2010
2.5%
7.4%
4.8%
7.2%
9.4%
171 ksf
3.8%
8.0%
7.9%
80.7%
62.6%
Source: Bank of America, Real Capital Analytics, SNL Financial and CEL & Associates, Inc.
CEL & Associates, Inc.
52
SALES VOLUME – MEDICAL OFFICE
2001 - 2008
Sales (in billions)
$1.8
1.6
$1.6
• 3 out of 10 jobs created between 20072015 will be in healthcare.
• Healthcare to be 20% of GDP by 2015.
$1.4
1.4
1.4
1.3
$1.2
1.1
1.1
1.0
$1.0
0.9
0.9
0.8
$0.8
1.0
0.9
0.9
0.8
0.7
0.6
$0.6
0.5
0.4
$0.4
0.2
$0.2
0.4
0.3
0.1
0.1
0.3
0.2
0.2
0.1
0.1
0.1
$0.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2001
2002
2003
2004
2005
2006
2007
2008
Medical Office
Source: ©2008 Real Capital Analytics, Inc. All rights reserved.
CEL & Associates, Inc.
53
TOTAL SALES VOLUME – COMBINED
2001 - 2008
Sales (in billions)
$160
139
$140
During the past 12 months, Portland had
over $3.4 billion in asset sales.
$120
115
104
103
$100
87
$80
$60
55
43
$40
$20
78
76
33
19
19
27
23
17
26
24
26
30
72
81
77
79
71
53
42
41
34
17
$0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2001
2002
2003
2004
2005
2006
2007
2008
Source: ©2008 Real Capital Analytics, Inc. All rights reserved.
CEL & Associates, Inc.
54
CAP RATES – U.S. OVERVIEW
2001 - 2008
Cap Rate
11.0%
10.5%
10.0%
9.5%
9.0%
8.5%
8.0%
7.5%
7.0%
6.9%
6.8%
6.7%
7.0%
6.5%
6.2%
6.0%
5.5%
5.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2001
2002
Apartment
2003
Industrial
2004
Office
Source: ©2008 Real Capital Analytics, Inc. All rights reserved.
2005
Retail
2006
Medical
2007
2008
Combined
55
PLUS…

Continued increase in public-private partnerships.

Continued investments in real estate resulting
from a $45 trillion wealth transfer (1997 – 2052).

Continued increase in the number of “green
building conversions.”

Continued scarcity of developable land within
“reasonable” commuting distances of the CBD.

Continued increase in pension fund target
allocations into real estate (up 100bsp – 250bsp).
CEL & Associates, Inc.
56
PLUS…

Cap rates will remain low by historical standards.

New valuation methodologies will likely sustain an
active acquisition environment.

“Fringe-based” opportunistic investors will be
“flushed-out” during this downturn leaving a more
structured and organized investment environment.

Continued growth in new urbanism and use of real
estate assets to revitalize cities and communities.

Credit crisis will be cured within 24 – 36 months.
CEL & Associates, Inc.
57
Get Ready For
The Age Of Real Estate

th
5
Indicator:
Real Estate Industry Shifts
& Career Opportunities
CEL & Associates, Inc.
58
2008 – CEO PRIORITIES
Top CEO Priorities
Retention Of Talent
Recruitment Of Talent
Business Development
Managing Client Relationships
Creating A Differentiating Story
Increasing Broker Production
Improving Leadership/Communications
Getting Brokers To Collaborate
Controlling Operating Costs
Getting Brokers To Share Information
Integrating Technology
Working Within Corporate Structure
Managing Prima Donnas
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
Source: CEL & Associates, Inc. and Participating Firms.
CEL & Associates, Inc.
59
UNEMPLOYMENT RATE
COLLEGE GRADUATES
Percent
3.50%
3.25%
3.00%
Females now comprise 57%
of college enrollment.
2.75%
2.1% (04/08)
2.50%
2.25%
2.00%
1.75%
1.50%
1.25%
1.00%
0.75%
0.50%
0.25%
0.00%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: Bureau of Labor Statistics.
CEL & Associates, Inc.
60
EMERGING REAL ESTATE
SERVICE COMPANY TRENDS
 30% - 40% of real estate service companies that
exist today will be gone by 2017.
 The emergence of the Big 3 or Big 4 will create 3 - 4
niche opportunities for everyone else.
 By 2017, 50% of today’s Brokers will be replaced by
collaborative teams of professionals and Advisors.
A new Brokerage Model will emerge.
 The shift to a knowledge-based, client-centric and
talent-focused business model will be fairly
commonplace.
CEL & Associates, Inc.
61
THE NEW BUSINESS MODEL
Current Model
Future Model
Dominated By Personalities
Dominated By Knowledge
Staffed By Employees
Comprised Of Free Agents
Hierarchical Structure/Silos
Virtual Integration & Teams
Geo-Centric
Knowledge-Centric
Driven By Process
Driven By Creators Of Value
Governed By Organizational Charts
Consisting Of Networks & Alliances
Controlling Power
Shared Power
Based On Contracts
Based On Relationships & Connectivity
On-Time Fulfillment
Real-Time Fulfillment
Commodity-Driven
Experience-Driven
Explaining Competitor Differences
Focus On Service
Creating A Differentiating Story
Focus On Solutions
CEL & Associates, Inc.
62
REAL ESTATE
SERVICE COMPANY PERFORMANCE
Percent Change Over Prior Year
Category
2008
2009
2010
-9.0% to -17.0%
-7.0% to -11.0%
+6.0% to +9.0%
Investment Sales
-17.0% to -25.0%
-6.0% to -12.0%
+5.0% to +8.0%
Property Management
+7.0% to +10.0%
+9.0% to +12.0%
+6.0% to +9.0%
NOIs
-10.0% to -14.0%
-8.0% to -11.0%
+7.0% to +10.0%
Leasing
Source: CEL & Associates, Inc.
CEL & Associates, Inc.
63
EMPLOYEE TURNOVER TRENDS
COMMERCIAL
Employee
Turnover Rate
1998 Average
1999 Average
2000 Average
2001 Average
2002 Average
2003 Average
2004 Average
2005 Average
2006 Average
2007 Average
Overall
Rate
35.6%
36.3%
34.5%
32.5%
34.3%
29.1%
28.4%
29.2%
27.9%
28.5%
Senior
Executive
6.8%
6.4%
5.8%
5.2%
5.4%
4.9%
4.2%
4.1%
3.8%
3.9%
Regional
Executive
10.5%
9.9%
9.2%
8.4%
7.6%
7.3%
6.9%
7.1%
6.8%
7.0%
On-Site
Manager
19.7%
20.5%
18.3%
17.2%
16.1%
17.4%
16.6%
17.1%
16.8%
17.9%
On-Site
Leasing
32.4%
33.7%
31.3%
30.8%
29.1%
26.7%
25.5%
26.3%
25.1%
24.8%
On-Site
Maintenance
42.7%
41.8%
39.3%
37.9%
36.7%
35.2%
34.4%
33.7%
31.9%
32.5%
Source: CEL & Associates, Inc.





Average Employee Tenure: 3.5 Years.
Average Age of a Construction Executive: 51.4 years.
Average Age of a Construction Superintendent: 48.6 years.
Average Age of a Property Manager: now 43.5 years.
Average Age of a Broker: now 46.2 years.
CEL & Associates, Inc.
64
EMERGING TRENDS
BASE SALARIES*
Line
1
2
3
4
5
6
7
8
9
10
11
12
Position
Chief Executive Officer/CEO
Chief Operating Officer/COO
Chief Investment Officer
CFO/Top Financial Executive
Top Business Development Exec.
Top Human Resources Executive
Payroll Manager/Specialist
Benefits Manager/Specialist
General Counsel
Top MIS Executive/IT Director
Network Administrator
Corp. Comm./Investor Relations
2004
$390,100
$348,100
$309,600
$242,600
$230,000
$118,600
$62,900
$70,500
$247,100
$131,100
$77,000
$161,000
2005
$414,500
$363,300
$325,500
$251,900
$246,400
$122,800
$64,300
$73,000
$256,900
$134,300
$79,000
$168,800
2006
$520,800
$376,800
$394,000
$266,100
$254,500
$126,600
$66,200
$75,000
$278,800
$138,400
$81,400
$175,200
2007
$550,400
$427,800
$435,600
$290,200
$263,100
$135,600
$68,800
$75,800
$303,700
$147,400
$82,600
$178,700
2008
$636,300
$491,500
$494,000
$368,400
$292,400
$174,200
$77,700
$78,000
$338,700
$184,900
$92,700
$190,300
%
Change
04–08
41.1%
22.9%
40.7%
19.6%
14.4%
14.3%
9.4%
7.5%
22.9%
12.4%
7.3%
11.0%
* 75th Percentile.
Source: CEL & Associates, Inc. 2007 National Real Estate Compensation Survey (Office/Industrial).
CEL & Associates, Inc.
65
EMERGING TRENDS
BASE SALARIES*
Line
13
14
15
16
17
18
19
20
21
Position
Research Director
Training Director/Manager
Finance Director
Controller
Accounting Supervisor
Property Accountant - Senior
Property Accountant
Financial Analyst
Tax Manager
2004
$143,200
$92,800
$176,400
$118,500
$73,800
$59,900
$47,400
$75,000
$97,800
2005
$147,100
$105,300
$183,800
$121,400
$76,600
$62,200
$48,900
$77,100
$104,100
2006
$151,900
$114,100
$194,000
$125,300
$79,900
$63,900
$51,300
$79,400
$111,000
2007
$156,400
$116,800
$199,800
$143,000
$82,100
$65,500
$52,600
$82,200
$114,400
2008
$158,900
$120,000
$213,400
$163,700
$90,700
$72,600
$61,200
$91,500
$145,200
%
Change
04–08
9.20%
25.9%
13.3%
20.7%
11.2%
9.3%
11.0%
9.6%
17.0%
* 75th Percentile.
Source: CEL & Associates, Inc. 2007 National Real Estate Compensation Survey (Office/Industrial).
CEL & Associates, Inc.
66
EMERGING TRENDS
BASE SALARIES*
Line
22
23
24
25
26
27
28
29
30
31
Position
Top Division Executive
Top Regional Executive
Top Acquisitions Executive
Acquisitions Associate
Top Asset Mgmt. Executive
Portfolio Manager
Top Property Mgmt. Exec.
Off/Ind Prop. Mgr. (< 500k sf)
Off/Ind Prop. Mgr. ( 500k-1m sf)
Off/Ind Prop. Mgr. (>1m sf)
2004
$217,400
$223,900
$185,600
$95,200
$191,300
$105,400
$175,200
$72,300
$88,600
$119,800
2005
$227,500
$231,500
$193,700
$98,600
$197,700
$110,600
$182,100
$74,600
$91,500
$123,900
2006
$241,200
$244,500
$206,100
$103,000
$208,500
$114,700
$190,700
$76,900
$94,400
$128,600
2007
$261,800
$252,600
$219,800
$111,100
$221,700
$121,000
$201,600
$79,600
$98,400
$135,200
2008
$282,100
$272,200
$230,500
$116,400
$235,200
$134,000
$209,700
$83,400
$102,300
$139,800
%
Change
04–08
20.4%
12.8%
18.4%
16.7%
15.9%
14.8%
15.1%
10.1%
11.1%
12.9%
* 75th Percentile.
Source: CEL & Associates, Inc. 2007 National Real Estate Compensation Survey (Office/Industrial).
CEL & Associates, Inc.
67
UNLIMITED
CAREER OPPORTUNITIES!
CEL & Associates, Inc.
68
WHY A CAREER IN THE REAL ESTATE
INDUSTRY
 Profession always in demand.
 Highly Rewarding.
 Opportunity to shape live, work, play shop
environments.
 Opportunity to create communities.
 Shortage of talent.
 Growing opportunities.
 Opportunity to start your own business.
 Independence.
 Not a desk job.
 Work with others who share the same passion.
CEL & Associates, Inc.
69
EMPLOYERS

Advisors

Mutual Funds

Appraisal Firms

Non-Profits

Commercial Banks

Partnerships

Construction Firms

Pension Funds

Consultants

Private Investors

Corporate

Public Sector

Foreign Investors

REITs

Fund Sponsors

REOCs

Insurance Companies

Service Companies

Investment Banks

Syndicators
Source: CEL & Associates, Inc.
CEL & Associates, Inc.
70
EMPLOYERS ARE SEEKING

Academic Training

Global Perspective

Analytical Skills

Integrity

Business Acumen

Interpersonal Skills

Collaboration Skills

Leadership Skills

Communication Skills

Relationship Builders

Creativity

Self-Motivators

Entrepreneurial Attitude

Value Creators

Flexibility

Writing Skills
Source: CEL & Associates, Inc
CEL & Associates, Inc.
71
POPULAR JOB SEARCH WEBSITES
 www.realestatejobs.com
 www.retsusa.com
 www.californiarecruiter.com
 www.specon.com
 www.christophergroup.net
 www.jcrexecutivesearch.com
 www.heidrick.com
 www.crownsearch.com
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REAL ESTATE ORGANIZATIONS
American Hotel & Lodging Association (AH & LA). . . . . . . . . . . . . . . . .
American Planning Association (APA). . . . . . . . . . . . . . . . . . . . . . . . . .
American Real Estate Society (ARES) . . . . . . . . . . . . . . . . . . . . . . . . .
American Society Of Appraisers (ASA). . . . . . . . . . . . . . . . . . . . . . . . .
Building Owners Managers Association (BOMA). . . . . . . . . . . . . . . . .
Commercial Real Estate Women (CREW). . . . . . . . . . . . . . . . . . . . . .
Counselors Of Real Estate (CRE). . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Institute Of Real Estate Management (IREM). . . . . .. . . . . . . . . . . . . . .
International Council Of Shopping Centers (ICSC). . . . . . . . . . . . . . . .
International Facility Management Association (IFMA). . . . . . . . . . . . .
National Apartment Association (NAA). . . . . . . . . . . . . . . . . . . . . . . . .
National Association Of Home Builders (NAHB). . . . . . . . . . . . . . . . . .
National Association Of Industrial And Office Properties (NAIOP). . . .
National Association Of Real Estate Investment Managers (NAREIM)
National Association Of Real Estate Investment Trusts (NAREIT). . . .
National Association Of Realtors (NAR). . . . . . . . . . . . . . . . . . . . . . . .
National Multi Housing Council (NMHC). . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Research Institute (RERI). . . . . . . . . . . . . . . . . . . . . . . . .
Urban Land Institute (ULI). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
www.ahla.com
www.planning.org
www.aresnet.org
www.appraisers.org
www.boma.org
www.crewnetwork.org
www.cre.org
www.irem.org
www.icsc.org
www.ifma.org
www.naahq.org
www.nahb.com
www.naiop.org
www.nareim.org
www.nareit.com
www.realtor.org
www.nmhc.org
www.reri.org
www.uli.org
Source: CEL & Associates, Inc.
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TAKE A GUESS…
How Many
Website Hits Under
“Real Estate Jobs” ?
CEL & Associates, Inc.
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TAKE A GUESS…
1,060,000,000!!
CEL & Associates, Inc.
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MY ADVICE TO YOU…
CEL & Associates, Inc.
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MY ADVICE TO YOU…

For Lenders…2010 will be your transformative year.
CEL & Associates, Inc.
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MY ADVICE TO YOU…

For Lenders…2010 will be your transformative year.

For Developers…Focus on building valued Tenant relationships.
CEL & Associates, Inc.
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MY ADVICE TO YOU…

For Lenders…2010 will be your transformative year.

For Developers…Focus on building valued Tenant relationships.

For Brokers…Find your niche and be the best at it!
CEL & Associates, Inc.
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MY ADVICE TO YOU…

For Lenders…2010 will be your transformative year.

For Developers…Focus on building valued Tenant relationships.

For Brokers…Find your niche and be the best at it!

For Investors…Capitalize on a market in transition.
CEL & Associates, Inc.
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MY ADVICE TO YOU…

For Lenders…2010 will be your transformative year.

For Developers…Focus on building valued Tenant relationships.

For Brokers…Find your niche and be the best at it!

For Investors…Capitalize on a market in transition.

For Real Estate CEOs…Surround yourself with the best talent.
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MY ADVICE TO YOU…

For Lenders…2010 will be your transformative year.

For Developers…Focus on building valued Tenant relationships.

For Brokers…Find your niche and be the best at it!

For Investors…Capitalize on a market in transition.

For Real Estate CEOs…Surround yourself with the best talent.

For Students & Recent Grads…Pursue your dreams in an
industry poised for incredible opportunities for decades to come.
CEL & Associates, Inc.
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MY ADVICE TO YOU…

For Lenders…2010 will be your transformative year.

For Developers…Focus on building valued Tenant relationships.

For Brokers…Find your niche and be the best at it!

For Investors…Capitalize on a market in transition.

For Real Estate CEOs…Surround yourself with the best talent.
For Students & Recent Grads…Pursue your dreams in an
industry poised for incredible opportunities for decades to come.
 For Everyone…Have fun…the next 20 years will be the best
time of your life!

CEL & Associates, Inc.
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“Get Ready For The
Age Of Real Estate”
Portland State University
Center For Real Estate
Portland, Oregon
June 5, 2008
Presented By:
Christopher Lee, President & Chief Executive Officer
CEL & ASSOCIATES, INC.
(310) 571-3113
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