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Real Estate Analysis and Investor Presentation. Table of Contents. Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals. Executive Summary. - PowerPoint PPT Presentation
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Real Estate Analysis and Investor Presentation
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Table of Contents Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals
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Executive Summary The objective of this presentation is to analyze the various cities in terms
of their attractiveness to real estate investment. The 3 main real estate product types analyzed are rental apartments,
office and retail. First the cities are classified based on basic real estate fundamentals like
migration, cost of living, employment growth and population growth. Then the cities are classified based on specific fundamentals for each of
the 3 product types. A cross analysis of various factors are used to achieve efficient analysis.
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
4
Basic Fundamentals1)Migration & Cost of
Living2)Employment &
Population growth
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Basic Fundamentals
1) Migration & Cost of Living Migration of people in to a city/metro can have stellar impact on
the economy of that area. In particular it has a deep impact on real estate.
Therefore, migration trends of a city/area can be considered as a very important factor in determining the demand trends for various types of real estate space.
Another factor which is worthy of being included in the analysis is the cost of living, which is one of the major factors influencing people to migrate in to a particular city.
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
6
Cities with high incoming migration
City Average migration (2003-07) (in 000)
Phoenix 93.4Atlanta 86.8Inland Empire 67.1Dallas- Fortworth 61.5New Orleans 60.9
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
Phoenix has the highest incoming migration with an average of 93400 for the last 5 years.
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Cities with low cost of living
City Living Cost Index (US=100)
Cleveland 87Pittsburgh 87Oklahoma city 88Indianapolis 88Cincinnati 88
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
The living cost index for these 5 cities are almost the same, with Cleveland topping the list with 87. Note that US is taken as the base 100.
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Strong
Weak
1) Both incoming migration number and cost of living index favorable2) Attractive markets for real estate investment based on these 2 factors
1) Incoming migration is low, but cost of living index favorable
2) Markets weak, because these cities are not able to attract people
1) Though incoming migration is high, cost of living index is not favorable2) Solid markets because, it is able to attract large number of people, though cost of living is high
1) Both incoming migration number and cost of living index unfavorable
2) Unattractive markets because both factors are not in favour
Explanation Strong Solid
Weak Disaster
9
Solid
Migration & Cost of Living
87 147
2600
93400
-88200
Living cost index
Mig
ratio
n
1234
5
12
34 5
1
2
Strong 1.Phoenix 2.Atlanta 3.Dallas 4.Orleans 5.Houston
1.Inland Empire
2. San Jose
1.Pittsburg 2.Chicago 3.Cleveland 4.Detroit 5.New York
1.San Diego 2.Long Island 3. San Francisco
4.Orange County
5.Los Angeles
5
4
3
21
WeakDisaster
117
10
Phoenix
Attractiveness matrix
Based on incoming migration and cost of living the attractiveness of cities are plotted.
Attracts the highest incoming migration
Attracts high incoming migration & cost of living lower than phoenixAttracts people in to the city due to low living cost
Attracts people due to low living cost
Both factors quiet favorable
City Score Factors
Low High
Low High
Low High
Low High
Low High
Atlanta
Dallas
New Orleans
Houston
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2) Employment & Population growth Employment growth in a particular city is a crucial factor in
determining the demand for real estate in that city. It is crucial for demand creation in all types of real estate products
like single family homes, apartments, office & retail. Similarly population growth, in a city is also considered as a
crucial factor in determining the demand trends for real estate. Increase in population leads to increase in demand for housing,
and increase in public utilities and it also leads to increase in consumer businesses.
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
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Cities with higher employment growth City Average deviationLas Vegas 2.15%Orlando 1.85%Austin 1.85%Raleigh 1.55%Phoenix 1.45%
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
Average deviation=[(avg employment growth last 5 years- national avg)+ (avg projected growth next 5 years-national avg)]/2
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Cities with higher population growth City Average deviationLas Vegas 2.45%Raleigh 2.20%Austin 2.15%Charlotte 1.95%Phoenix 1.90%
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
Average deviation=[(avg population growth last 5 years- national avg)+ (avg projected growth next 5 years-national avg)]/2
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1) Though employment growth is high, population growth is low 2) Solid markets as they are able to generate high employment growth leading to higher per capita income
1) Both employment growth and population growth is low2) Unattractive markets as these cities are neither able to generate employment growth nor population growth
1) Both employment growth and population growth is high2) Attractive markets for real estate investment
1) Employment growth is low, but population growth is high2) Markets weak as lack of employment growth leads to lack of increase in per capita income
Explanation Solid Strong
Disaster Weak
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Disaster
Weak
Solid
Strong
Employment & Population growth
-3.00%
2.45%
-0.28%
-0.05%
2.15%
-2.25%
Population growth
Empl
oym
ent
grow
th
123
4 5
1.Ft Lauderdale 2.Honolulu
1.Boston 2.Pittsburgh 3.Cleveland 4.Detroit 5.New Orleans
1.Columbus 2.Memphis 3. Chicago 4.San Jose 5.East Bay
1.Las Vegas 2.Austin 3.Orlando 4.Raleigh 5. Phoenix
1
2
12345
123 4
5
16
Las Vegas
Attractiveness matrix
Based on employment growth and population growth the attractiveness of cities are plotted.
Generates the highest employment and population growthGenerates 2nd highest employment & population growth
Employment growth & population growth favorable
Population growth second highest and 4th highest employment growth5th highest in both factors
City Score Factors
Low High
Low High
Low High
Low High
Low High
Austin
Orlando
Raleigh
Phoenix
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Apartment Fundamentals
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Apartment fundamentals For the creation of new demand for apartments for rent, a very important
factor is the percentage of population in the age group (20-34), who are
most likely to rent apartments for living, than buy/own a house.
Also in addition to this factor, another factor that shall be considered is
forecasted vacancy rate for the next 5 years (2008-2012).
Using a cross analysis we can classify cities in to different categories.
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
19
Cities with high % of population in 20-34 age group
City % of population in (20-34)
Austin 25.8%Salt Lake City 25.2%Inland empire 23.8%Raleigh 22.9%Dallas-Fortworth 22.6%
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
Austin has the highest % of population in the apartment dwelling age group of 20-34
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Cities with low forecasted vacancy rates-apartment
City Vacancy rate
San Francisco 3.56%San Jose 3.84%San Diego 4.02%Seattle 4.30%Minneapolis 4.32%
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
San Francisco has the lowest average forecasted vacancy rate for apartments over next 5 years
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1) Population %in 20-34 age group is high and avg forecasted vacancy rate for apartments for next 5 years is low 2) Attractive markets for investment in rental apartments as people in 20-34 are most likely to rent apartments and vacancy rate is also favorable
1) Population % in 20-34 age group is low, but forecasted vacancy rate is low2) Solid markets as low vacancy rate forecasted means there is no oversupply
1) Both population % in 20-34 and forecasted vacancy rate is high2) Markets considered weak, because, though the population % in apartment dwelling age group is high, high vacancy rates implies oversupply situation
1) Population % in 20-34 age group is low and forecasted vacancy rate is also low
2) Unattractive markets, because both the factors are unfavorable
Explanation Strong Weak
Solid Disaster
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Solid
Strong
Population in 20-34 age group & forecasted apartment vacancy rate
3.56% 11.62%
7.59%
21
25.8
16.1
Avg forecasted vacancy rate
Popu
latio
n %
(20-
34)
Strong Weak
Solid Disaster
123 4
5
1.Salt Lake City
2.Inland Empire
1.Austin 2. Raleigh
1.Boston 2.San Jose 3.Orange County 4.San Francisco 5.New Jersey
1.Charlotte 2.Jacksonville 3.Hartford 4.Tampa 5.Stamford
3. Atlanta 4. Houston 5. San Antonio
3.San Diego 4.Columbus 5.Sacramento
1
243
5
12 34
5
12
345
Weak
Disaster
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Salt Lake City
Attractiveness matrix
Based on population in age group 20-34 and growth and forecasted vacancy rate for apartments the attractiveness of cities are plotted.
Has very high % of population in 20-34 and vacancy forecast also favorableHas a high % of population in 20-34 and vacancy rate slightly above Salt Lake CityThough % of population is low compared to top 2 cities vacancy rate is lowerPopulation % in 20-34 almost similar to San Diego but vacancy slightly highBoth factors favorable
City Score Factors
Low High
Low High
Low High
Low High
Low High
Inland Empire
San Diego
Columbus
Sacramento
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Office Fundamentals
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Office fundamentals Two of the most important factors determining the space for office
demand in a particular market is the percentage of office using
employment in that market and the forecasted annual growth.
While the existing share of office using employment determines the
base for new demand, the growth in office using employment is the
factor which determines the growth in demand or new demand.
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
26
Office using employmentCity Office using employment %
Washington-Nova-MD 43.7%
San Francisco 34.0%
New York 31.8%
Tampa 30.0%
Denver 29.5%
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
Washington has the highest office using employment % at 43.7%, followed by San Francisco and New York.
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Office using employment growthCity Projected growth
San Antonio 2.6%
Phoenix 2.5%
Austin 2.5%
Baltimore 2.3%
Atlanta 2.1%
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
San Antonio is projected to generate the highest growth in office using employment, followed by Phoenix & Austin both at 2.5%
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1) Though existing share of office using employment is low, projected growth in this metric is high2) These markets present an opportunity, because the projected growth in office using employment is high
1) Both existing share and growth is low
2) Unattractive markets as these cities neither have a substantial office using employment base nor seeing growth in this metric
1) Both existing share of office using employment and it’s growth is high
2) Attractive markets for investment in Office real estate space
1) Existing share of office using employment is high, but growth is low2) Doubtful because though there is an existing base of office using employment, it is not seeing much growth
Explanation Opportunity Strong
Disaster Doubtful
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Strong
Office using employment % and growth
17.5 43.730.6
1.2%
2.6%
-0.2%
Existing Share
Grow
th
12 3
4 5
1.San Antonio 2.Austin
1.San Francisco
2. Denver
1.Detroit 2.Miami 3.Jacksonville
4.New Orleans
5.Kansas City
1.Tampa 2.New York 3. Washington
3.Phoenix 4.Baltimore 5.Atlanta
2 1
12 3
4 5
1 2 3
Opportunity
Weak
Disaster
30
San Francisco
Attractiveness matrix
Based on office using employment % and projected annual growth rate in this aspect the attractiveness of cities are plotted.
Has very high % of office using employment at 34% providing a substantial base for demand
Though the existing share is not as high as San Francisco, but substantial, the growth rate is higher
City Score Factors
Low High
Low HighDenver
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Retail Fundamentals
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Retail fundamentals Two of the most important factors determining the space for demand is the
percentage of population falling in the age category of 35-54, who are
usually the prime spending age group.
In addition to the above factor, the per capita real retail sales figure is also
another adjoining factor that plays critical role in determining the demand.
Therefore, it is useful to do a cross analysis of these 2 factors in
determining the attractive markets for retail real estate investment.
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
33
Cities with high % of prime spendersCity Prime
Spenders (35-54) %
National average
San Francisco 32.7% 28.5%Seattle 31.7% 28.5%Atlanta 31.1% 28.5%San Jose 31.1% 28.5%Minneapolis 30.9% 28.5%
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
San Francisco has the highest % of population in the prime spenders age group of 35-54 with 32.7%, whereas the national average stands at 28.5%
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Cities with high per capita retail salesCity Real retail sales
per capitaPalm beach county $7470Las Vegas $7210Long Island $7072Fort Lauderdale $6894Orlando $6880
Executive Summary
Basic Fundamentals
Apartment Fundamentals
Office Fundamentals
Retail Fundamentals
The real retail sales per capita is the highest in Palm beach county, standing at $7470, while :as Vegas is a close second
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1) Though population % of prime spenders is high, retail sales per capita is low
2) These markets present an opportunity, as there is a substantial share of population in prime spenders category
1) Both population % in prime spenders and retail sales per capita is low2) Unattractive markets as these cities neither have a substantial prime spending population nor higher per capita retail sales
1) Both population age group in 35-54 and retail sales per capita is high
2) Attractive markets for investment in Retail real estate space as both factors are favorable
1) Population % in prime spending age group is low, but retail sales per capita is high2) Doubtful because though per capita retail sales is high, there is no high % of population in prime spending age category
Explanation Opportunity Strong
Disaster Doubtful
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Population % in prime spenders (35-54) and retail sales per capita
4537 74706003.5
29.2
32.7
25.7
Retail Sales per Capita
Prim
e Sp
ende
rs 12345
1.San Jose 2.Atlanta
1.San Francisco
1.Oklahoma City
2.San Antonio 3.Phoenix 4.Inland Empire 5.Salt Lake City
1.Orange County
2.Austin 3. Orlando
3.East Bay 4.Detroit 5.Raleigh
12
345
123 45
12
34
5
5.Boston4.Long Island3.Minneapolis2.Seattle
4. Las Vegas 5. Palm Beach
Strong
Opportunity
Doubtful
Disaster
37
San Francisco
Attractiveness matrix
Based on population in age group 20-34 and growth and forecasted vacancy rate for apartments the attractiveness of cities are plotted.
Has the highest % of population in prime spending age group of 35-54Has 31.7 % of population in 35-54 next only to San Francisco
Has more than 30% of population in prime spending age category
Retail sale per capita more than $7000
Both factors quiet favorable
City Score Factors
Low High
Low High
Low High
Low High
Low High
Seattle
Minneapolis
Long Island
Boston