Todays Challenges and Tomorrow's Opportunities

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Todays Challenges and Tomorrow's Opportunities
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General Session I 2009 Economic and Real Estate
Trends and Challenges
Todays Challenges and Tomorrow's Opportunities
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Tennyson Williams, CCIM Senior Vice
President Ackerman Co., LLC
Todays Challenges and Tomorrow's Opportunities
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Commercial Real Estate Outlook

• Tennyson Williams
• The Flight of Ceteris Paribus

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The Flight of Ceteris Paribus

• Latin for all other things being equal
• Experimentally, the ceteris paribus assumption
  holds constant all variables other than the one
  under study
• Not truly real world but a very popular way of
  arriving at an agreeable forecast

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Ceteris Paribus Real Estate(An office example
of Ceteris Paribus use in Real Estate)

• Holding historical Atlanta job growth constant,
  office demand should rise.
• Adding 40,000 office jobs applied against an
  office demand factor of 180 sf per office
  employee would equate to absorption of 7.2msf,
  ceteris paribus

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Enter Ceteris Paribus

• Assuming businesses wish to thrive and expand
• Assuming capital/financing is adequately
  available to facilitate investment
• Assuming city infrastructure and services are
  adequate and expanding

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Ceteris Paribus Housing(A Housing example of
Ceteris Paribus use in Real Estate)

• In Atlanta, with annual population growth among
  the highest in the nation, housing demand and
  values will rise, ceteris paribus.

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Ceteris Paribus Real Estate(A Housing example
of Ceteris Paribus use in Real Estate)

• Holding historical Atlanta job growth constant,
  housing demand and values should rise.
• Adding 70,000 new jobs will bring 175,000 new
  people to Atlanta. There are typically 2.5 people
  per household, so new housing demand should total
  70,000 new units, 60 of which is owner-occupied,
  therefore new owner-occupied housing demand
  should be 42,000 units.

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Enter Ceteris ParibusRestated In Atlanta,
with annual population growth among the highest
in the nation, housing demand and values will
rise, assuming. . . . . .

• credit/financing is available for homebuyers and
  homebuilders
• the nations biggest banks arent failing
• foreclosures within norm (not at near-all-time
  highs)
• US, State, and local governments have the
  financial resources to meet payroll, let alone
  push forward capital projects (roads, sewer,
  schools, etc)
• cost of gasoline, food, and other commodities
  isnt realizing crazy inflation
• job growth is within norm

With Ceteris Paribus you typically hold all these
things equal Ceteris Paribus is Gone!!
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The Property Markets

• Office
• Industrial
• Retail
• Apartments

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The National Office Market
Source Costar, REIS, IRR, Emerging Trends
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The Atlanta Office Market
Source Costar, REIS, IRR, Emerging Trends
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Local Markets at a Glance
Source Costar, REIS, IRR, Emerging Trends
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The South Atlanta Office Market
Source Costar, REIS, IRR, Emerging Trends
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Years Office Supply - City Comparison
Source Integra Realty Resources
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The National Industrial Market
Source Costar, REIS, IRR, Emerging Trends
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The Atlanta Industrial Market
Source Costar, REIS, IRR, Emerging Trends
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The South Atlanta Industrial Market
Source Costar, REIS, IRR, Emerging Trends
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Local Industrial Markets at a Glance
Source Costar, REIS, IRR, Emerging Trends
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Years Industrial Supply - City Comparison
Source Costar, REIS, IRR, Emerging Trends
Source Integra Realty Resources
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The National Retail Market
Source Costar, REIS, IRR, Emerging Trends
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The Atlanta Retail Market
Source Costar, REIS, IRR, Emerging Trends
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The South Atlanta Retail Market
Source Costar, REIS, IRR, Emerging Trends
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Local Retail Markets at a Glance
Source Costar, REIS, IRR, Emerging Trends
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Years Retail Supply - City Comparison
Source Integra Realty Resources
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The National Multi Family Market
Source Costar, REIS, IRR, Emerging Trends
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The Atlanta Multi Family Market
Source Costar, REIS, IRR, Emerging Trends
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The South Atlanta Multi Family Market
Source Costar, REIS, IRR, Emerging Trends
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Local Multi-family Markets at a Glance
Source Costar, REIS, IRR, Emerging Trends
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Years Apartment Supply - City Comparison
Source Integra Realty Resources
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2008 Metro Atlanta Summary By Product-type
Source Costar, REIS, IRR, Emerging Trends
Average of Studio, One, Two and Three Bedroom
Rents
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2008 S. Metro Atlanta Summary By Product-type
Source Costar, REIS, IRR, Emerging Trends
Average of Studio, One, Two and Three Bedroom
Rents
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The Capital Markets
Market Capitalization (billions)
Source IRR
Sold to Wells Fargo Seized Sold to JPM
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The Capital Markets CMBS Issuances
230
(Billions)
203
169
Source Mortgage Securities Association
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2005
2006
2007
2008
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MARKET PLAYER ENTRY POINTS Where are we now?

THE HERD Novices Beginners
Intermediates
Time to Consider Exchange or Refinance out of
properties with more exposure to economic
downturns
2nd Tier Experienced Investors
1st Tier Maverick Experienced Investors
5 to 8 Years
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South Metro Atlanta Touchpoints

• The effects of the Loss of GM are now being felt
• Camp Creek Marketplace feeling the squeeze
• With closure or cutbacks at military base(s),
  the success of the airline industry and
  Hartsfield International Airport becomes critical
  for the S. metro Atlanta
• Several Auto Dealer Rows on southside begin to
  feel stress
• Absorption of excess new lot and housing
  inventory is crucial before values will stabilize
  and AD lenders will return

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Comeback Ceteris Paribus

• The markets are in a clear state of panic/fear
• Market trust and Confidence is sorely needed
  before a rebound becomes a possibility
• There are sporadic signs of market bottom are
  they head-fakes?
• Real Estate tends to lag the overall economy
  (ceteris paribus), therefore we need calm in the
  general economy before real estate markets can
  settle and rebound.