THE ECONOMY THE NATIONAL ECONOMY Source: Delta Associates; October - - PowerPoint PPT Presentation

THE ECONOMY

THE NATIONAL ECONOMY

Source: Delta Associates; October 2019.

AMAZON HQ2

How Will it Impact the Washington Metro Area?

Source: Amazon, Delta Associates, October 2019.

PAYROLL JOB GROWTH

Selected Large Metro Areas | 12 Months Ending August 2019

PAY R O L L J O B S ( T H O U S A N D S )

20 40 60 80 100 120 140 NY DFW Hou LA Basin Phx Atl Bos Was Den 33.6

Source: Bureau of Labor Statistics, Delta Associates; October 2019.

0% 1% 2% 3% 4% 5% 6% Bos Den SF Bay Was DFW S Fla Atl NY Hou Chi LA Phx

July 2018 July 2019

National Rate 4.1% 4.0%

YoY Basis Point ∆

UNEMPLOYMENT RATE *

Selected Large Metro Areas | July 2018 vs. July 2019

*Not seasonally adjusted.

+50

• 10
• 10
• 50
• 40
• 50
• 40
• 30
• 20
• 50
• 70

Source: Bureau of Labor Statistics, Delta Associates; October 2019.

PROJECTED JOB GROWTH

Washington Metro Area | 2000 - 2021

PAY R O L L J O B S ( T H O U S A N D S )

• 60
• 40
• 20

20 40 60 80 100 120 140 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 District

• Sub. MD
• No. Virginia

20-Year Annual Average = 41,400/Year 3-Year Projected Average = 27,800/Year

Source: Bureau of Labor Statistics, George Mason University Center for Regional Analysis, Delta Associates; October 2019.

J O B C H A N G E

PAYROLL JOB GROWTH

Washington Metro Area | 12 Months Ending August 2019

Source: Bureau of Labor Statistics, Delta Associates; October 2019.

• 10,

10,000 00

• 6,

6,00 000

• 2,

2,00 000 2, 2,000 000 6, 6,000 000 10, 10,000 000 14, 14,000 000 18, 18,000 000 Reta tail Tr Trad ade Fi Fina nanci ncial Act Activities Inform

• rmation

ion Who holesa esale T e Trade de Manuf nufactur uring ng Fe Feder deral G Gover ernm nment ent Tra ransport rtation

• n/U

/Util ilit itie ies State a e and L nd Loca cal Go Gover ernm nment ent Cons nstruct uction/Mini ning ng Other S r Serv rvic ices Educa ducation/ n/Hea ealth Profes essiona nal/Busi usines ness S s Ser ervices es Lei eisur sure/ e/Hospi spitality

43, 43,700 700

• 10,

10,100 100

J O B C H A N G E

PAYROLL JOB GROWTH

Washington Metro Area | 12 Months Ending August 2019

Source: Bureau of Labor Statistics, Delta Associates; October 2019.

• 10,

10,000 00

• 6,

6,00 000

• 2,

2,00 000 2, 2,000 000 6, 6,000 000 10, 10,000 000 14, 14,000 000 18, 18,000 000 Reta tail Tr Trad ade Fi Fina nanci ncial Act Activities Inform

• rmation

ion Who holesa esale T e Trade de Manuf nufactur uring ng Fe Feder deral G Gover ernm nment ent Tra ransport rtation

• n/U

/Util ilit itie ies State a e and L nd Loca cal Go Gover ernm nment ent Cons nstruct uction/Mini ning ng Other S r Serv rvic ices Educa ducation/ n/Hea ealth Profes essiona nal/Busi usines ness S s Ser ervices es Lei eisur sure/ e/Hospi spitality

43, 43,700 700

• 10,

10,100 100

J O B C H A N G E

PAYROLL JOB GROWTH

Washington Metro Area | 12 Months Ending August 2019

Source: Bureau of Labor Statistics, Delta Associates; October 2019.

• 10,

10,000 00

• 6,

6,00 000

• 2,

2,00 000 2, 2,000 000 6, 6,000 000 10, 10,000 000 14, 14,000 000 18, 18,000 000 Reta tail Tr Trad ade Fi Fina nanci ncial Act Activities Inform

• rmation

ion Who holesa esale T e Trade de Manuf nufactur uring ng Fe Feder deral G Gover ernm nment ent Tra ransport rtation

• n/U

/Util ilit itie ies State a e and L nd Loca cal Go Gover ernm nment ent Cons nstruct uction/Mini ning ng Other S r Serv rvic ices Educa ducation/ n/Hea ealth Profes essiona nal/Busi usines ness S s Ser ervices es Lei eisur sure/ e/Hospi spitality

43, 43,700 700

• 10,

10,100 100

THE WASHINGTON METRO AREA APARTMENT MARKET

500 1,000 1,500 2,000 2,500 3,000 NY LA Basin Chi SF Bay DFW Hou Wash So FL Bos Atl

565

U N I T S ( T H O U S A N D S )

LARGEST APARTMENT MARKETS

Selected Metro Areas | 2017

Source: U.S. Census Bureau, Delta Associates; October 2019.

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 06 07 08 09 10 11 12 13 14 15 16 17 18 19* 20 21 22 M A R K E T - R AT E U N I T S

*12 months ending September 2019.

Long-Term Average = 7,334 Average Since 2014 = 10,502

Source: Delta Associates; October 2019.

CLASS A APARTMENT ABSORPTION

Washington Metro Area | 2006 - 2019

Annual Average ~ 9,000

U N I T S

Source: Delta Associates; October 2019.

200 400 600 800 1,000 1,200 1,400 The District No VA Sub MD

CLASS A APARTMENT ABSORPTION

Top 10 Submarkets in Washington Metro Area | 12 Months Ending September 2019

ABSORPTION PACE

Class A Projects in Initial Lease-Up | Washington Metro Area

15 25 35 45 55 65 75 85 2 4 6 8 10 12 14 16 18 20 9/12 9/13 9/14 9/15 9/16 9/17 9/18 9/19 Absorption Pace Number of Projects N U M B E R O F P R O J E C T S I N A C T I V E L E A S E U P

Source: Delta Associates; October 2019.

U N I T S P E R P R O J E C T P E R M O N T H

0% 1% 2% 3% 4% 5% 6%

LA Balt Phi NY Phx Wash Atl Chi DFW Hou

VA C A N C Y R AT E ( A L L C L A S S E S )

STABILIZED APARTMENT VACANCY RATES

Major Apartment Markets | Second Quarter 2019

National Vacancy Rate = 4.7%

Source: REIS, Delta Associates; October 2019.

4.8%

• 4%
• 2%

0% 2% 4% 6% 8% 10%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Long-Term Average Rent Growth = 3.9%

*12 months ending September 2019.

ANNUAL EFFECTIVE RENT GROWTH

Class A Apartments | Washington Metro Area | 2006 - 2019 2.8%

Source: Delta Associates; October 2019.

PROJECTS CURRENTLY UNDER CONSTRUCTION

District of Columbia

In Lease-up Not Yet Leasing

Source: Delta Associates; October 2019.

APARTMENT DELIVERIES

Washington Metro Area | 2016 - 2019

1,000 2,000 3,000 4,000 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 The District Sub MD No VA

Class A Quarterly Absorption = 2,480

C L A S S A M A R K E T - R AT E U N I T S 2017 2018 2019 2016

Source: Delta Associates; October 2019.

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 M A R K E T - R AT E U N I T S

*Market-Rate Units Planned and Under Construction After Attrition. **As of Third Quarter. Source: Delta Associates; October 2019.

36-MONTH APARTMENT DEVELOPMENT PIPELINE*

Washington Metro Area | 2006 - 2019

APARTMENTS UNDER CONSTRUCTION IN OPPORTUNITY ZONES

Washington Metro Area | Third Quarter 2019

Source: Delta Associates; October 2019.

M A R K E T - R AT E U N I T S 500 1,000 1,500 2,000 2,500

District of Columbia Prince George's Montgomery Prince William

SHARE OF APARTMENTS U/C IN OPPORTUNITY ZONES

Washington Metro Area

Source: Delta Associates; October 2019.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Prince George's Prince William District of Columbia Montgomery

Non-Opportunity Zone Opportunity Zone

1,000 2,000 3,000 4,000 5,000 6,000 7,000

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 The District Sub MD No VA C L A S S A M A R K E T - R AT E U N I T S

Class A Projected Quarterly Absorption = 2,250

2019 2020 2021

Source: Delta Associates; October 2019.

PROJECTED DELIVERIES

Washington Metro Area | 2019 - 2021

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Source: Delta Associates; October 2019.

36-MONTH APARTMENT DEVELOPMENT PIPELINE*

Top 10 Submarkets in Washington Metro Area | Third Quarter 2019

The District No VA Sub MD C L A S S A M A R K E T - R AT E U N I T S

*Market-Rate Units Planned and Under Construction After Attrition.

2 4 6 8 10 12 14 16 18 No VA Sub MD The District Net Absorption: 9,000/Year = 27,000

DEMAND SUPPLY

Planned and may deliver by 9/22: 4,475 units

1

Under construction: 34,276 units

2

Total = 38,751 units

1 Probable supply after projected attrition. 2 Includes unleased units at projects in lease-up.

4.5% 4.1% 5.0% Projected Stabilized Vacancy % at September 2022 4.5% Metro-Wide

MARKET-RATE UNITS (THOUSANDS)

DEMAND AND SUPPLY PROJECTIONS

Washington Metro Area Class A Apartments | 36 Months Ending September 2022

Source: Delta Associates; October 2019.

• 4%
• 2%

0% 2% 4% 6% 8% 10% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* 2020 2021 2022

ANNUAL CLASS A APARTMENT EFFECTIVE RENT GROWTH

Washington Metro Area | 2006 - 2022

Long-Term Average = 3.9%

* Annual rent growth at Second Quarter 2019 is 2.8%. Source: Delta Associates; October 2019.

THE BALTIMORE METRO AREA APARTMENT MARKET

2,398 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* 2020 - 2022

M A R K E T - R AT E U N I T S

10-Year Average = 2,103 Annual Average ~ 2,067

CLASS A APARTMENT ABSORPTION

Baltimore Metro Area | 2010 - 2022

Source: Delta Associates; October 2019. *12 months ending September 2019.

EFFECTIVE RENT AND VACANCY RATE

Class A Apartments | Baltimore Metro Area | 2001 - 2019

$800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 $1,700 $1,800 0% 1% 2% 3% 4% 5% 6% 7% Average Effective Base Rent Stabilized Vacancy

S TA B I L I Z E D V A C A N C Y R AT E A V E R A G E E F F E C T I V E B A S E R E N T

3 . 8 % / Y E A R L O N G - T E R M R E N T G R O W T H

* As of Third Quarter. Source: Delta Associates; October 2019.

**As of Third Quarter.

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

36-MONTH APARTMENT DEVELOPMENT PIPELINE*

Baltimore Metro Area | 2006 - 2019

M A R K E T - R AT E U N I T S

*Market-Rate Units Planned and Under Construction After Attrition. Source: Delta Associates; October 2019.

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 So Sub No Sub Balt City Net Absorption: 2,067/Year = 6,200

DEMAND SUPPLY

Planned and may deliver by 9/22: 882 units

1

Under construction: 6,809 units

2

Total = 7,691 units

1 Probable supply after projected attrition. 2 Includes unleased units at projects in lease-up.

2.9% 3.5% 4.4% Projected Stabilized Vacancy % at September 2022 3.6% Metro-Wide

MARKET-RATE UNITS

DEMAND AND SUPPLY PROJECTIONS

Baltimore Metro Area Class A Apartments | 36 Months Ending September 2022

Source: Delta Associates; October 2019.

• 2%
• 1%

0% 1% 2% 3% 4% 5% 6% Long-Term Average = 3.8%

ANNUAL CLASS A APARTMENT EFFECTIVE RENT GROWTH

Baltimore Metro Area | 2006 - 2022

Source: Delta Associates; October 2019. * Annual rent growth at Third Quarter 2019 is 2.6%.

THE WASHINGTON/BALTIMORE AREA CAPITAL MARKETS

$0 $2 $4 $6 $8 $10 $12 $14 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* LA DFW Chi Was Bal

B I L L I O N S

APARTMENT INVESTMENT SALES

Selected Metro Areas | 2010 - 2019

*Sales through September annualized. Source: Real Capital Analytics, Delta Associates; October 2019.

0% 2% 4% 6% 8% 10% 12% 14% 16% Phx Aus Den Atl Bos Hou Was DFW Chi

6.2%

NCREIF RETURN INDEX FOR INVESTMENT-GRADE APARTMENTS

Selected Metro Areas | 12 Months Ending June 2019

Source: NCREIF, Delta Associates; October 2019.

National Average = 6.1%

Source: Delta Associates Market Maker Survey; October 2019.

CLASS A HIGH-RISE APARTMENT CAP RATES

Washington Metro Area | 2008 - 2018

6.44% 6.61% 5.29% 4.94% 5.06% 5.11% 4.92% 4.75% 4.80% 4.88% 4.99% 0% 1% 2% 3% 4% 5% 6% 7% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

THE WASHINGTON/BALTIMORE AREA APARTMENT MARKET TAKEAWAYS

YEARS OF SUPPLY

Low-Rise Class A Submarkets | Washington Metro Area

1.0 – 1.9 Less than 1.0

Source: Delta Associates; October 2019.

2.0 – 2.9

1.0 – 1.9 Less than 1.0 2.0 – 2.9 3.0 – 3.9

Source: Delta Associates; October 2019.

YEARS OF SUPPLY

High-Rise Class A Submarkets | Washington Metro Area

1.0 – 1.9 Less than 1.0 2.0 – 2.9

Source: Delta Associates; October 2019.

YEARS OF SUPPLY

Class A Submarkets | Baltimore Metro Area

3.0 – 3.9

TAKEAWAYS

Washington/Baltimore Area Apartment Market

Source: Delta Associates; October 2019.

• ABOVE-AVERAGE

ABSORPTION TO CONTINUE, BUT DECREASE IN VELOCITY

• RENT GROWTH

EXPECTED TO STRENGTHEN

• DEVELOPMENT IN

OPPORTUNITY ZONES TO INCREASE

THE WASHINGTON METRO AREA CONDOMINIUM MARKET

100 200 300 400 500 600 700 NY Chi So FL LA Basin Bos Wash SF Bay Sea Tampa Bay Den

127

U N I T S ( T H O U S A N D S )

LARGEST CONDOMINIUM MARKETS

Selected Metro Areas | 2017

Source: U.S. Census Bureau, Delta Associates; October 2019.

CONDOMINIUM SALES ACTIVITY

Washington Metro Area | 12 Months Ending September 2019 Compared to Prior Year

Source: Delta Associates; October 2019.

Down 26% - 50% Down 1% - 25% Up 0% - 25% Up 26% - 50%

8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000

U N I T S

Average From 2004 - 2007 = 17,612

Source: MRIS, Delta Associates; October 2019.

ANNUAL CONDOMINIUM RESALES

Washington Metro Area | 2004 - 2019

*12 months ending September 2019.

8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000

U N I T S

Average From 2008 - 2012 = 11,280

Source: MRIS, Delta Associates; October 2019.

ANNUAL CONDOMINIUM RESALES

Washington Metro Area | 2004 - 2019

*12 months ending September 2019.

8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000

U N I T S

Average Since 2013 = 15,352

Source: MRIS, Delta Associates; October 2019.

ANNUAL CONDOMINIUM RESALES

Washington Metro Area | 2004 - 2019

*12 months ending September 2019.

• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* 2020

1.5% 1.1%

Source: Delta Associates; October 2019. *12 months ending September 2019.

EFFECTIVE NEW CONDOMINIUM SALES PRICE CHANGE

Washington Metro Area | 2006 - 2020

$1,194 $1,009 $909 $730 $711 $674 $577 $257 $239 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 Upper NW DC Central DC Arl/Alex Cap East DC Mideast DC Ffx/FC Mont

• Pr. George's

Lou/PrWm

Source: Delta Associates; October 2019.

NEW CONDOMINIUM AVERAGE PRICE PER SF

Washington Metro Area | Third Quarter 2019

$2,559 $1,268 1,194 $1,127 $1,060 $1,009 $984 $966 $730 $711 $707 $405 $0 $300 $600 $900 $1,200 $1,500 $1,800 $2,100 $2,400 $2,700 $3,000

Manhattan San Francisco Upper NW DC Seattle L.A. Central DC Brooklyn Queens Capitol East DC Mideast DC San Diego Baltimore City

*Third Quarter 2019 except for New York City Submarkets which are as of Second Quarter 2019. Source: The Mark Company, Miller Samuel Inc., Delta Associates, October 2019.

NEW CONDOMINIUM AVERAGE PRICE PER SF

Selected Downtown Areas in the U.S. | Third Quarter 2019*

4.7%

• 10%
• 5%

0% 5% 10% 15% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

* 12 months ending August 2019. Source: MRIS, Delta Associates; October 2019.

RESALE CONDOMINIUM SALES PRICE CHANGE

Washington Metro Area | 2006 - 2019

M A R K E T - R AT E U N I T S

Note: Number of units are for September of each year.

UNSOLD NEW CONDOMINIUM UNITS ACTIVELY MARKETING OR UNDER CONSTRUCTION

Washington Metro Area | 2006 - 2019

Source: Delta Associates; October 2019.

4,000 8,000 12,000 16,000 20,000 24,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3,588

13.6 10 20 30 40 50 60 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* 2020

Source: Delta Associates; October 2019.

MONTHS OF NEW CONDOMINIUM SUPPLY

Washington Metro Area | 2006 - 2019

*as of Third Quarter 2019.

Source: Delta Associates; October 2019.

MONTHS OF NEW CONDOMINIUM SUPPLY BY SUBMARKET

Washington Metro Area | Third Quarter 2019

500 1,000 1,500 2,000 2,500 3,000

The District No VA Sub MD

Net Sales: 1,975/Year = 5,925 units

D E M A N D SUPPLY

Planned and May Begin Marketing by 9/22: 1,673 units

1

Under Construction and/or Marketing: 3,588 units

2

Total = 5,261 units M A R K E T - R AT E U N I T S

1 Probable supply after projected attrition. 2 Includes unleased units at projects in lease-up. Source: Delta Associates; October 2019.

DEMAND AND SUPPLY PROJECTIONS

Washington Metro Area Condominiums | 36 Months Ending September 2022

THE WASHINGTON AREA CONDOMINIUM MARKET TAKEAWAYS

TAKEAWAYS

Washington Area Condominium Market

Source: Delta Associates; October 2018.

• S A L E S E X P E C T E D TO

I N C R E A S E I N 2 0 2 0

• P R I C E I N C R E A S E I S TO

R E M A I N M U T E D

• AVA I L A B L E I N V E N TO R Y

I N C R E A S I N G B U T S T I L L S U P P LY C O N S T R A I N E D