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Real Estate Industry Practice Group
Joe Fobert, Real Estate Practice Leader
2013 Economic Outlook for the Real Estate Industry
Keynote Speaker:
Ken McCarthy
Chief Economist
Research
Real Estate Industry Practice Group REAL Industry Expertise You Can
Trust
Real Estate Industry Practice Group
Highlights
• Write all lines of business: Property, Casualty, Environmental,
Excess, D&O and E&O
• Over 11,000 clients and 13,000 policies
• Largest writer of real estate business by GWP in the U.S.
• 2011 paid approx. $266 million in real estate claims
Real Estate Industry Practice Group
An integrated service platform that provides seamless access to the industry’s
foremost real estate insurance products and services. AIG has written
insurance for the real estate industry for over 40 years, with substantial market
penetration and long-term dedication to many classes.
• Multi-line, high-limit product offerings
• Industry-focused claims expertise, loss control capabilities & risk management
services
• Transactional insurance products & expertise
• Synergies with the Construction Solutions industry practice - for the needs of
large construction and development projects
•
•
•
•
REITs, Asset, Investment and Fund Managers
Residential & Non-Residential Property Owners, Operators & Managers
Land Developers & Sub-dividers
Office Buildings, Apartments, Retail Centers and Industrial Parks
• Multinational Coverage – operations in over 90 countries – CMP, Passport,
Local policies & services
Real Estate Industry Practice Group
Industry Expertise!
•
2012 Conducted 3 CE Seminars, 3 Webinars, over 300
client meetings
•
2013 5 CE Seminars, 4 Industry White Papers
•
Partnership with GlobeSt.com as Industry Thought Leader
•
2013 Economic Outlook for the Real Estate Industry
US AND MANHATTAN OFFICE
MARKET
Economic & Market Overview
JANUARY 17, 2013
Cushman &
Wakefield
Research
OVERVIEW
Global Slowdown
Growth in 2013 will be slower in most countries as Europe, US weigh on Asia.
Uncertainty Reigns in US
Healthy Fundamentals
Technology, Energy, Profits, Pent-Up Demand
Issues to resolve
US Fiscal Challenges
European Challenges
Real Estate Impact
Most markets flat-near term
Exceptions depend on industrial structure
Fundamentals still positive
Long Term Forecasts-lower vacancy higher rent
CUSHMAN &
7
US GDP GROWTH IN RECOVERIES AFTER 13 QUARTERS
Cushman &
Wakefield
Research
16%
14%
15.0%
12%
10%
8%
7.5%
6%
4%
2%
0%
Previous 5 Recoveries
Source: US Bureau of Economic Analysis
2009 Recovery
CUSHMAN &
8
Cushman &
Wakefield
Research
US PRIVATE SECTOR EMPLOYMENT GROWTH
MONTHLY AVERAGE PER QUARTER
250
225.7
200
212.3
183.7
2010-2012 Average: 144
Thousands of Persons
150
156.7
123.0
100
158.0
168.3
147.7
151.0
111.7
66.7
50
24.7
0
-50
-100
-131.3
-150
Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12
CUSHMAN &
9
HOUSEHOLD DEBT BURDEN
Cushman &
Wakefield
Research
14.5%
Percent of Disposable Income
14.0%
13.5%
13.0%
12.5%
12.0%
11.5%
11.0%
10.5%
10.0%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: Board of Governors Federal Reserve
CUSHMAN &
10
US MOTOR VEHICLE SALES
Cushman &
Wakefield
Research
21
Millions of units
19
17
15
13
11
9
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: US Bureau of Economic Analysis
CUSHMAN &
11
US CORPORATE PROFITS
Cushman &
Wakefield
Research
2,000
1,800
Billions of Dollars
1,600
1,400
1,200
1,000
800
600
400
Source: US Bureau of Economic Analysis
CUSHMAN &
12
Cushman &
Wakefield
Research
US WEEKLY UNEMPLOYMENT CLAIMS
650,000
600,000
550,000
500,000
450,000
400,000
350,000
300,000
250,000
2002
2003
2004
National Recessions
2005
2006
2007
Unemployment Claims
2008
2009
2010
2011
2012
Healthy Labor Market
CUSHMAN &
13
Cushman &
Wakefield
Research
EMPLOYMENT CHANGE SINCE FEBRUARY 2010
BY INDUSTRY SECTOR
December 2012
1,530
Total Increase: +4.8 mil.
Private Sector: +5.3 mil.
1,523
1,425
Thousands of Persons
1,138
925
860
526
425
506
274
116
-75
-109
-575
-546
CUSHMAN &
14
Cushman &
Wakefield
Research
JOBS RECOVERED SINCE TROUGH
AS A PERCENT OF JOBS LOST
200.0%
33.0%
36.6%
37.9%
43.4%
44.7%
45.2%
46.7%
47.5%
50.1%
50.6%
52.7%
71.1%
72.4%
26.5%
0.0%
63.0%
20.0%
74.7%
40.0%
82.3%
60.0%
91.4%
80.0%
107.8%
100.0%
117.5%
120.0%
139.3%
140.0%
145.2%
160.0%
178.3%
180.0%
CUSHMAN &
15
Cushman &
Wakefield
Research
OFFICE-USING JOBS RECOVERED SINCE TROUGH
AS A PERCENT OF JOBS LOST
160.0%
24.7%
31.2%
31.3%
36.2%
37.6%
43.6%
48.1%
60.5%
65.2%
65.3%
78.0%
91.6%
101.3%
74.6%
52.4%
18.5%
0.0%
48.3%
20.0%
67.6%
40.0%
88.9%
60.0%
103.8%
80.0%
112.5%
100.0%
114.8%
120.0%
135.6%
140.0%
CUSHMAN &
16
5%
10%
15%
20%
25%
CUSHMAN &
27.5%
27.0%
24.0%
23.9%
22.7%
22.6%
21.7%
20.4%
20.1%
18.7%
18.3%
18.1%
17.9%
17.4%
16.2%
15.9%
15.8%
14.1%
14.1%
13.9%
13.1%
13.0%
12.3%
11.9%
11.4%
10.7%
10.3%
9.9%
8.8%
8.7%
7.1%
Cushman &
Wakefield
Research
VACANCY RATE BY MAJOR METRO
30%
0%
17
Cushman &
Wakefield
Research
VACANCY RATE BY MAJOR METRO
Change From a Year Ago
3%
2.3%
2%
1.9% 1.8%
1.7%
1.3% 1.3% 1.3%
1%
1.1%
0.7% 0.6%
0.4% 0.4%
0.1%
0%
-1%
-2%
-3%
-4%
-0.4%-0.5%
-0.6%
-0.7%-0.7%-0.7%-0.8%
-1.0%-1.0%
-1.9%-2.1%
-2.5%
-3.0%-3.0%
-3.6%
-3.9%-4.0%
-5%
-5.6%
-6%
CUSHMAN &
18
Cushman &
Wakefield
Research
PAYROLL EMPLOYMENT US COMPARED WITH NYC
3,900
Thousands of Persons
135,000
3,800
130,000
3,700
125,000
3,600
120,000
3,500
115,000
NYC Job Change
4/08-11/09
110,000
3,400
-140,800
11/09-11/12 +195,100
105,000
3,300
100,000
3,200
1987
1989
1991
1993
1995
National Recessions
Source: US Bureau of Labor Statistics
1997
1999
2001
US Employment
2003
2005
2007
2009
2011
NYC Employment
CUSHMAN &
19
Cushman &
Wakefield
Research
NYC EMPLOYMENT:
BUSINESS SERVICES AND FINANCIAL SERVICES
Thousands of Persons
610
560
Employment Change
4/08-11/09 11/09-11/12
Business Services -46,100
+84,000
Financial Services -44,100
+13,900
510
460
410
1990
1992
1994
1996
National Recessions
Source: US Bureau of Labor Statistics
1998
2000
2002
2004
2006
Professional Business Services
2008
2010
2012
Financial Services
CUSHMAN &
20
Cushman &
Wakefield
Research
HIGH TECH EMPLOYMENT: NEW YORK METRO AREA
250
Thousands of Persons
240
230
220
210
200
190
180
170
1990
1992
1994
Source: Moody’s Analytics
1996
1998
2000
2002
2004
2006
2008
2010
2012
CUSHMAN &
21
Cushman &
Wakefield
Research
VENTURE CAPITAL FUNDING CHANGE: 2007-2011
NY Metro
44.7%
Texas
24.8%
Midwest
6.8%
LA/Orange County
4.7%
Silicon Valley
3.1%
US
-7.6%
New England
-20.5%
DC/Metroplex
-31.0%
Southeast
San Diego
-42.5%
-50.2%
Philadelphia -52.5%
-65.0%
-45.0%
-25.0%
Source: PricewaterhouseCoopers Money Tree Report
-5.0%
22
15.0%
35.0%
55.0%
CUSHMAN &
22
Cushman &
Wakefield
Research
MANHATTAN OFFICE USING EMPLOYMENT VS. VACANCY
13.0%
1,260
12.0%
Thousands of Persons
1,240
11.0%
1,220
10.0%
1,200
9.0%
1,180
8.0%
1,160
1,140
7.0%
1,120
6.0%
1,100
5.0%
2002
2003
2004
2005
2006
2007
2008
Office Using Employment
Source: US Bureau of Labor Statistics
2009
2010
2011
2012
Vacancy Rate
CUSHMAN &
23
Cushman &
Wakefield
Research
MANHATTAN NEW LEASING
10.1
10.0
Millions of Square Feet
8.0
6.6
6.5
6.0
7.5 7.6
7.1
10-Year Average 6.0 msf
5.0
5.0 5.0
5.7
6.4
6.0
6.4
5.8
5.4
5.7
4.2
4.0
3.4
3.1 3.3
2.0
0.0
CUSHMAN &
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Cushman &
Wakefield
Research
MANHATTAN QUARTERLY NEW LEASING
4.5
4.02
4.0
Millions of Square Feet
3.5
3.50
3.0
2.5
2.0
1.5
0.89
1.0
1.02
1.12
1.29
0.5
0.0
10-Year Average
2012 Average
CUSHMAN &
25
Cushman &
Wakefield
Research
MANHATTAN OFFICE MARKET: VACANCY RATE
All Classes
15.0%
13.0%
11.0%
10.3%
9.0%
8.8%
7.0%
7.1%
5.0%
3.0%
2002
2003
Midtown
2004
2005
Downtown
2006
2007
2008
2009
2010
2011
2012
Midtown South
CUSHMAN &
26
Cushman &
Wakefield
Research
MANHATTAN OFFICE MARKET: VACANCY RATE
Class A
16%
14%
12%
10.9%
10%
8.2%
8%
6%
4.8%
4%
2%
0%
2002
Midtown
2003
2004
Downtown
2005
2006
2007
2008
2009
2010
2011
2012
Midtown South
CUSHMAN &
27
Cushman &
Wakefield
Research
MANHATTAN OFFICE MARKET
Overall Rental Rates
$85.00
$75.00
$67.36
$/sf
$65.00
$55.00
$49.69
$45.00
$40.75
$35.00
$25.00
2002
2003
Midtown
2004
2005
Midtown South
2006
2007
2008
2009
2010
2011
2012
Downtown
CUSHMAN &
28
Cushman &
Wakefield
Research
MANHATTAN OFFICE MARKET
Class A Rental Rates
$90.00
$80.00
$72.54
$70.00
$63.59
$/sf
$60.00
$50.00
$45.16
$40.00
$30.00
2002
2003
2004
2005
Midtown
2006
2007
2008
Midtown South
2009
2010
2011
2012
Downtown
CUSHMAN &
29
Cushman &
Wakefield
Research
RENTAL RATES:
Asking versus Net Effectives
Midtown Class A Rents
Net Effective Change
$55.88
$57.69
$57.84
$56.47
$71.76
+20.1%
$71.67
1Q10 - 3Q12
$72.08
-47.6%
$71.22
1Q08 - 1Q10
$69.75
$68.47
$51.86
$67.77
$57.82
$67.27
$50.37
$66.24
$47.07
$65.54
$65.61
$67.64
$65.85
$50.22
40
$46.54
45
$51.60
50
$49.77
55
$50.08
60
$63.32
65
$71.58
$92.59
$86.40
$79.13
70
$63.89
$/SF
75
$78.75
80
$80.42
85
$88.79
$86.12
90
$92.30
95
$52.06
100
35
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
Net Effective Rent
Asking Rent
CUSHMAN &
30
Cushman &
Wakefield
Research
MIDTOWN CLASS A RENTS
$90.00
2010-2012 +9.4%
$80.00
2004-2008 +83%
$70.00
$/sf
$60.00
1996-2001 +98%
$50.00
$40.00
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
$30.00
CUSHMAN &
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Cushman &
Wakefield
Research
NYC MONTHLY EMPLOYMENT
4,000
3,900
Thousands
3,800
3,700
3,600
3,500
3,400
3,300
3,200
3,100
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
CUSHMAN &
32
NYC OFFICE-USING EMPLOYMENT FORECAST
Cushman &
Wakefield
Research
1,500
1,450
Thousands of Persons
1,400
1,350
1,300
Projected NYC Job Growth
2011
35.3
2012
40.7
2013
11.6
2014
42.2
2015
46.6
1,250
1,200
1,150
1,100
1,050
1,000
Source: US Bureau of Labor Statistics, Moody’s Analytics
CUSHMAN &
33
Cushman &
Wakefield
Research
MANHATTAN INVENTORY OVER TIME
400
MSF
361
364
373
380
348
360
392
396
400
398
400
394
392
389
389
392
392
379
387
389
391
390
389
391
395
393
393
393
392
398
399
401
404
404
409
409
409
420
320
321
337
340
300
1984
1987
1990
1993
1996
1999
2002
2005
Expected Additions:
2013:
55 West 46th (292,500 sf)
330 Hudson Street (395,000 sf)
51 Astor Place (307,839 sf)
One World Trade Center (3.0 msf)
Four World Trade Center (2.0msf)
2014:
250 West 55th (1.0 msf)
7 Bryant Park (434,000 sf)
2015:
Hudson Yards (1.7 msf)
2016:
Three World Trade Center (2.5 msf)
2018:
Manhattan West (2.5 msf)
2008
2011
2014
2017
2020
CUSHMAN &
34
Cushman &
Wakefield
Research
MIDTOWN CLASS A ASKING RENT AND VACANCY FORECAST
$110
14.0%
$100
$50
10.0%
8.0%
Vacancy
psf / yr
$99.75
$60
$74.84
$72.54
$70
$83.07
$80
$92.36
$90
12.0%
6.0%
$40
4.0%
$30
$20
2.0%
Rent
Vacancy
CUSHMAN &
35
Cushman &
Wakefield
Research
MIDTOWN CLASS A RENTAL RATES:
Asking versus Net Effectives
$40
$99.75
11.0%
9.0%
Vacancy
$85.21
$83.07
$74.84
$59.62
$72.54
$58.16
$67.27
$56.47
$50
$50.37
$65.61
$60
$71.22
$70
$51.60
psf / yr
$80
13.0%
$92.36
$90
$67.84
$100
$76.53
2012-2016 Change
Vacancy:
6.5pp
Asking Rents
+36.5%
Net effective Rents
+46.5%
7.0%
5.0%
$30
$20
3.0%
Asking Rents
Net Effective Rents
Vacancy Rate
CUSHMAN &
36
www.cushmanwakefield.com
1290 Avenue of the Americas
New York, NY 10104
(212)-841-7500
American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries and jurisdictions. AIG companies serve commercial,
institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance
and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. Products and services are written or
provided by subsidiaries or affiliates of American International Group, Inc. Not all products and services are available in every jurisdiction, and insurance coverage is governed by actual policy
language. Certain products and services may be provided by independent third parties. Insurance products may be distributed through affiliated or unaffiliated entities. Certain property-casualty
coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.
The data contained in this presentation is for general informational purposes only. The advice of a professional insurance broker and counsel should always be obtained before purchasing any
insurance product or service. The information contained herein has been compiled from sources believed to be reliable. No warranty, guarantee, or representation, either expressed or implied, is
made as to the correctness or sufficiency of any representation contained herein.
© 2012 American International Group, Inc. All rights reserved.
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