elliott d. pollack & company outlook 2012: a grind of a recovery september 30, 2011 by: elliott...
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Elliott D. Pollack & Company
Outlook 2012:A Grind of a Recovery
September 30, 2011
By:Elliott D. Pollack
CEO, Elliott D. Pollack & Company
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Elliott D. Pollack & Company
U.S. Economy
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Elliott D. Pollack & Company
United States Real Gross Domestic Product* Annual Growth 1970 - 2012**
Source: U.S. Bureau of Economic Analysis & Blue Chip Economic Indicators
0.2%
3.4%
5.3%
5.8%
-0.6%-0.2%
5.4%
4.6%
5.6%
3.1%
-0.3%
2.5%
-1.9%
4.5%
7.2%
4.1%
3.5%3.2%
4.1%
3.6%
1.9%
-0.2%
3.4%2.9%
4.1%
2.5%
3.7%
4.5%4.4%4.8%
4.1%
1.1%1.8%
2.5%
3.5%3.1%
2.7%
1.9%
-0.3%
-3.5%
3.0%
1.6%2.2%
-4%
-2%
0%
2%
4%
6%
8%
* Based on chained 2005 dollars.
** 2011 - 2012 are forecasts from the Blue Chip Economic Indicators, September 2011Recession Periods
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Elliott D. Pollack & Company
Recession End v. 8 Quarters LaterSources: NAHB; Census, BEA, BLS
40.7%
10.7%
21.6%
10.0%
17.6% 18.7%
5.2%
7.5%8.0%
11.5%
5.0%
10.4%
6.7%
0.5%0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Housing Starts Retail Sales IndustrialProduction
GDP Non-ResidentialConstruction
Nonfarm Payroll NonfarmEmployment
Average of 8 Prior Recoveries Current Recovery
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Elliott D. Pollack & Company
Economy is likely to continue to grow, but growth will remain weak because of the following:
• Consumer spending weak.• Excess industrial capacity.• No immediate housing recovery.• Limited commercial construction.• Continued pressure on state
and local government.• Limited policy options on part of
Federal government.
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Elliott D. Pollack & Company
Comments on Debt & Jobs
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Elliott D. Pollack & Company
The Federal government is…
….Forcibly impoverishing future generations with a colossal debt
incurred on behalf of current beneficiaries.
~Mark R. Levin
The Intellectual Approach
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Elliott D. Pollack & Company
The Redneck Approach
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Elliott D. Pollack & Company
“I’ll gladly pay you
Tuesday for.
a hamburger today”
1.3 million jobs
Wimpy (Friend of Popeye)
The Real Approach
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Elliott D. Pollack & Company
Obama’s Job PlanPLAN COST
Payroll tax cuts from 6.2% to 3.1% for workers in 2012, down further from a 2% reduction this year.
$175 BILLION
Payroll tax cut from 6.2% to 3.1% for employers and eliminated for qualifying new hires in 2012, plus 100% expensing for new investments.
$70 BILLION
Infrastructure investments, including modernizing schools and rehabbing vacant homes, and funding states to rehire teachers and first responders.
$140 BILLION
Extending unemployment insurance and new programs for the jobless.
$62 BILLION
TOTAL $447 BILLION
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Elliott D. Pollack & Company
$447 billion1.3 – 1.9 million jobs
= $235,000 to $345,000 per job
*Job estimates from Mark Zandi Moody’s Economy.com and MacroEconomics
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Elliott D. Pollack & Company
American Recovery and Reinvestment Act of 2009
= $1,000,000 per job*
*Source: Environmental Protection Agency
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Elliott D. Pollack & Company
National Outlook
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Elliott D. Pollack & Company
ARIZONA
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Elliott D. Pollack & Company
Arizona & US Move Together (Nonfarm Employment Percent Change 1980 – Aug 2011)
-9%
-7%
-5%
-3%
-1%
1%
3%
5%
7%
9%
11%
U.S. Arizona Recession Periods
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Elliott D. Pollack & Company
Think of Arizona in 2 parts:
Export Domestic
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Elliott D. Pollack & Company
Export – function of the U.S. economy
(and, the U.S. economy is weak)
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Elliott D. Pollack & Company
The health of an economy is a function of its export,
or “base” industries.
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Elliott D. Pollack & Company
Arizona Economic Drivers (Base Industries):
Base Industry Current Health
Manufacturing +Tourism +Advanced Business Services +Federal government -Retirement and second homes -Others ?
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Elliott D. Pollack & Company
Flow of a Region’s Economy
Base IndustriesManufacturing, Tourism, Export-Related Business Services,
Retirement, Etc.
Local Market IndustriesRetail, Construction, Local Business Services, Banks,
Local Government
Spendingby
Base Industries
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Elliott D. Pollack & Company
Arizona
Domestic Industry ExamplesGeneral merchandise stores Home Improvement Stores
Restaurants & bars Gas Stations
Realtors Mortgage brokers
Title companies Lawyers
Banks Education
Construction Landscapers
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Elliott D. Pollack & Company
Domestic – ripple effects of the export sector
(Direct indirect induced)
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Elliott D. Pollack & Company
A new suit at Dillard’s A Slurpee at 7-11 Gas for their car Dinner at a nice restaurant.
Employee of Intel spends their wages on….
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Elliott D. Pollack & Company
Right now the ripple effects won’t be as strong as normal because…
1) Consumers are still paying down debt.
2) Demand for new construction is currently being met by existing inventory (so no need for new construction).
3) It is difficult for people to sell their homes in other states and move to Arizona.
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Elliott D. Pollack & Company
Because all of these
problems are cyclical and/or
transitory.
You can pull your head out…
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Elliott D. Pollack & Company
• When consumers finish restructuring their balance sheets.
• When home prices and wealth levels stabilize across the U.S.
• When those that postponed retirement, retire and absorb Arizona housing.
• When local job creation accelerates and people move here for a new job.• When people reverse the doubling up process.
When will things accelerate?
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Elliott D. Pollack & Company
Now through about 2015 will still be slower than normal;
but 2015 through 2020 should be strong.
When will things accelerate?
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Elliott D. Pollack & Company
One of the differences this time is the
population slowdown.
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Elliott D. Pollack & Company
Greater Phoenix Net Migration1975–2011
Source: University of Arizona
23.2
17.3
38.147.3
56.1
38.0
42.4
32.335.4
58.5
74.5
59.466.5
36.930.3
6.3
44.8
54.5
70.2
98.5105.9
85.5
80.6
82.8
74.2
65.4
51.058.9
69.8
90.8
102.5 101.0
73.8
36.0
(21.1)(20.6)
(22.9)
-40
-20
0
20
40
60
80
100
120
140
Recession Periods
*Forecasts from UofA 2011 Q3
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Elliott D. Pollack & Company
SRP Residential Utility Hookup Percentage Growth Greater Phoenix 2003 – 2011*
Source: SRP
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
*Data through June 2011.
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Elliott D. Pollack & Company
APS Residential Utility Hookup Percentage Growth Greater Phoenix 1955 – 2011*
Source: APS
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
*Data through Quarter 2 2011.
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Elliott D. Pollack & Company
School Enrollment Growth2001-2011
Source: Arizona Department of Education
2.8%3.2%
6.1%
3.5%
3.1%
4.9%
2.4% 2.5%
0.7%
-0.7%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
N/A
*Collection methodology changed in 2009, rendering 2009/2008 comparisons null.
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Elliott D. Pollack & Company
We are optimistic about the long term and cautious about the short term.
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Elliott D. Pollack & Company
It’s all about the basics: jobs and population growth.
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2.1%
3.7%
4.2%
4.7%
3.9%
3.3%
3.0%
3.1%
4.3%
5.1%
4.2%4.4%
2.9%
2.5%
1.3%
2.4%
2.8%
3.5%
4.3%
4.6%
4.2%4.2%
3.8%
4.3% 4.3%
2.5%
2.7%3.1%
3.6% 3.8%3.7%
3.0%
1.9%
0.5%
0.3%
0.9%
1.2%
0%
2%
4%
6%
1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Greater Phoenix Population Annual Percent Change 1976–2012*
Source: Arizona State University & Department of Commerce, Research Administration
.
* 2011 & 2012 forecast is from Elliott D. Pollack & Co.
Recession Periods
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Elliott D. Pollack & Company
Greater Phoenix Employment* Annual Percent Change 1975–2012**
Source: Department of Commerce, Research Administration
-3.7%
4.9%
8.7%
13.3%
10.4%
3.7%
3.0%
-0.1%
5.8%
11.2%9.3%
4.8%3.5%
5.9%
2.5%
2.2%
-0.3%
1.1%
4.9%
6.6%7.2%7.3%
5.4%5.4%
4.6%3.5%
1.2%
-0.1%
1.5%
3.9%
6.2%5.4%
1.6%
-2.5%
-7.9%
-2.1%
1.0%
2.0%
-10%-8%-6%-4%-2%0%2%4%6%8%
10%12%14%
*Non-agricultural wage & salary employment. Changed from SIC to NAICS reporting in 1990.
** 2011& 2012 forecast is from Elliott D. Pollack & Co.
Recession Periods
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Elliott D. Pollack & Company
Arizona was one of the only two states to be in the top 5 growth states in terms of population,
employment and personal income every decade since WWII.
Pre 2007
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Elliott D. Pollack & Company
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Elliott D. Pollack & Company
Below average performance in many economic categories, but…
Post 2007
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Elliott D. Pollack & Company
How Arizona Ranks Among the States in Percentage Growth
Source: U.S. Bureau of Census; Bureau of Labor Statistics; Bureau of Economic Analysis PERSONAL DECADE POPULATION EMPLOYMENT INCOME
1950 - 1960 4TH 3RD 4TH
1960 - 1970 3RD 3RD 4TH 1970 - 1980 2ND 3RD 3RD
1980 - 1990 3RD 3RD 5TH
1990 - 2000 2ND 2ND 3RD
2000 – 2006 3RD 2ND 3RD
2007—2010 44TH 49TH 46TH
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Elliott D. Pollack & Company
…this is a temporary condition and is already improving.
Post 2007
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Elliott D. Pollack & Company
The recovery
has already started.
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Elliott D. Pollack & Company
Signs of Recovery• Jobs• Retail Sales• Jobs rebound in other cities• Fewer excess homes• Population growth
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Elliott D. Pollack & Company
Greater Phoenix - Jobs Finally in the Black
Over last 12 months: 31,300 12 months before that: (15,000)
12 months before that: (169,600)12 months before that: (61,800)12 months before that: 31,600
* As of August 2011
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Greater Phoenix Employment* Source: Bureau of Labor Statistics
Sectors in Decline
Net
Change
Federal Government -1,000
Prof. & Bus. Services -4,200
*August 2011/August 2010
Sectors Improving
Net
Change
Education & Health Services 14,700
Leisure & Hospitality 7,100
Transp, Trade, & Utilities 4,900
Construction 2,300
Financial Activities 2,300
Manufacturing 1,900
Other services 1,800
State Government 600
Local Government 400
Mining 300
Information 200
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Elliott D. Pollack & Company
Employment Levels: Greater Phoenix back to Peak in 2015?
Source: ADOC
1,000.0
1,200.0
1,400.0
1,600.0
1,800.0
2,000.0
2,200.0
2,400.0
Recession Periods
Peak
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Year Rank # MSA’s
2000 8 26
2001 6 28
2002 5 28
2003 3 29
2004 4 29
2005 1 30
2006 1 31
2007 10 32
2008 29 32
2009 31 32
2010 31 32
2011ytd 17 32
Year Rank # MSA’s
1991 4 20
1992 5 20
1993 2 20
1994 1 20
1995 1 21
1996 1 23
1997 2 23
1998 1 24
1999 3 26
Phoenix-Mesa Employment Growth(Ranking among all metro areas greater than 1,000,000)
Source: Arizona State University, U.S. Bureau of Labor Statistics
*YTD through August
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Elliott D. Pollack & Company
Maricopa County Retail Sales*Percent Change Year Ago
1990 to 2011**Source: Arizona Department of Revenue
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
*3-month moving average**Data through June 2011.
Recession Periods
![Page 49: Elliott D. Pollack & Company Outlook 2012: A Grind of a Recovery September 30, 2011 By: Elliott D. Pollack CEO, Elliott D. Pollack & Company](https://reader034.vdocuments.mx/reader034/viewer/2022042718/56649e4f5503460f94b467b9/html5/thumbnails/49.jpg)
Elliott D. Pollack & Company
“No strong recovery withouta recovery in construction.”
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Elliott D. Pollack & Company
Spec commercial construction
approaching 0.
New single family residential
construction 89% off peak.
![Page 51: Elliott D. Pollack & Company Outlook 2012: A Grind of a Recovery September 30, 2011 By: Elliott D. Pollack CEO, Elliott D. Pollack & Company](https://reader034.vdocuments.mx/reader034/viewer/2022042718/56649e4f5503460f94b467b9/html5/thumbnails/51.jpg)
Elliott D. Pollack & Company
For Housing -This is NOT a multi decade
recovery…
Think 2015 or so for a full recovery, but growth
before then.
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Elliott D. Pollack & Company
Single Family Permits (Forecast)Greater Phoenix 1975–2015*
Source: RL BROWN
8.711.1
22.3
28.9
18.8
11.510.6
11.6
19.4 18.1
22.623.2
17.915.1
12.010.6
13.7
18.4
22.7
27.428.5
29.631.7
36.035.3
34.736.2
38.9
47.7
60.9
63.6
42.4
31.2
12.6
8.06.8
5.07.08.0
15.0
25.0
0
10
20
30
40
50
60
70
# Permits(000)
* 2011 - 2015 forecast is from Elliott D. Pollack & Co.
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Elliott D. Pollack & Company
• Across the US, little new building has been occurring.
• This helps reduce theoversupply.
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Elliott D. Pollack & Company
U.S. Single-Family Starts1978–2011*
Source: Census Bureau
1.4
1.2
0.9
0.7 0.7
1.1 1.1 1.1
1.2 1.11.1
1.00.9
0.8
1.01.1
1.2
1.1
1.21.1
1.3 1.31.2 1.3
1.4
1.5
1.6
1.7
1.5
1.0
0.6
0.4 0.50.4
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
(Millions)
*YTD through August 2011
Recession Periods
Over-supply
Under-supply
LTA: 1.2
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Elliott D. Pollack & Company
Excess supply in Greater Phoenix is
about 50-55k units as
of today, down from
about 80k units.
SUPPLY
demand
![Page 56: Elliott D. Pollack & Company Outlook 2012: A Grind of a Recovery September 30, 2011 By: Elliott D. Pollack CEO, Elliott D. Pollack & Company](https://reader034.vdocuments.mx/reader034/viewer/2022042718/56649e4f5503460f94b467b9/html5/thumbnails/56.jpg)
Elliott D. Pollack & Company
• Think of what the housing market is going through as the same as any manufacturer that finds themselves with excess inventory…
• Prices are cut until the excessis sold.
• Then prices rise.
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Elliott D. Pollack & Company
As excess is absorbed, prices will increase.This is Economics 101
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Elliott D. Pollack & Company
Single-Family Vacant UnitsMaricopa County 1993–2011
Source: Phoenix Metro Housing Study
0
20,000
40,000
60,000
80,000
100,000
120,000
13,600
15,250 14,800
13,550 13,925 14,725
17,550 20,000
18,725 23,850 24,725
16,755 19,400
30,200
51,725
60,175
106,125 101,625
83,475
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Elliott D. Pollack & Company
Single-Family Vacancy RateMaricopa County 1993–2011
Source: PMHS
0%
2%
4%
6%
8%
10%
12%
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Elliott D. Pollack & Company
US Total Vacant Housing Units1965-2011*
Source: US Census Bureau
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
*Data through 2011 Q2
Recession Periods
Excess inventory is about 800k homes
Longer term trend
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Elliott D. Pollack & Company
Household Formations
Lower during recessions (doubling up, living at home with mom & dad, etc)
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Elliott D. Pollack & Company
Percent of 25-34 Year Olds Living With Parents vs. Homeownership Rate, Under 35 Years Old
U.S.: 1983 – 2010 Source: US Census Bureau
10.0%
10.5%
11.0%
11.5%
12.0%
12.5%
13.0%
13.5%
14.0%
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
% L
ivin
g w
/ Pa
ren
ts
36%
37%
38%
39%
40%
41%
42%
43%
44%
Ho
me
ow
ne
rsh
ip R
ate
% Living w/ parents Homeownership Rate
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Elliott D. Pollack & Company
Why are households not forming?
1. Lack of jobs,
2. Lack of jobs,
3. Lack of jobs,
4. Lack of jobs
5. Inability to sell home elsewhere
and move to Greater Phoenix.
![Page 64: Elliott D. Pollack & Company Outlook 2012: A Grind of a Recovery September 30, 2011 By: Elliott D. Pollack CEO, Elliott D. Pollack & Company](https://reader034.vdocuments.mx/reader034/viewer/2022042718/56649e4f5503460f94b467b9/html5/thumbnails/64.jpg)
Elliott D. Pollack & Company
Historically, there is a one-to-one relationship between population growth and household growth
(meaning a 1% increase in population growth leads to a 1% increase in household growth).
Source: Linneman Letter
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Elliott D. Pollack & Company
When unemployment exceeds 7%, a 1% increase in population leads to a
0.3% increase in households.
When unemployment falls below 7%, each 1% increase in population
leads to a 1.9% increase in households.
Source: Linneman Letter
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Elliott D. Pollack & Company
Thus, in a weak economy, population growth fails to
translate into household growth, but when the economy begins to
strengthen, there is pent-up demand for housing.
Source: Linneman Letter
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Elliott D. Pollack & Company
In Arizona, the same basic trend has occurred.
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Elliott D. Pollack & Company
A Credit Score of less than 650is considered Subprime
Source: FICO
% of population
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Elliott D. Pollack & Company
Homeownership Rate1994-2011*
Source: Census Bureau
63
64
65
66
67
68
69
70
*Data through 2011 Q2
Recession Periods%
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Elliott D. Pollack & Company
Foreclosures at an all time high1979-2011*
Source: MBA%
*Data through 2011 Q1
mln
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Elliott D. Pollack & Company
How Investors Impact the Market:
Investors temporarily create demand.
They are creating rentalunits for people who are losing their homes anddo not want to live inapartments.
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Elliott D. Pollack & Company
0%
10%
20%
30%
40%
50%
1998
Q1
1998
Q3
1999
Q1
1999
Q3
2000
Q1
2000
Q3
2001
Q1
2001
Q3
2002
Q1
2002
Q3
2003
Q1
2003
Q3
2004
Q1
2004
Q3
2005
Q1
2005
Q3
2006
Q1
2006
Q3
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q3
Investors: 40% Market?Percent of Non-Owner Occupied Sales of Total Sales
Greater PhoenixSource: DataQuick
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Elliott D. Pollack & Company
Greater Phoenix Median Price of Single Family Homes - Resale 2002 – 2011*
Source: MLS
$119.1$118.0
$264.8
0
25
50
75
100
125
150
175
200
225
250
275
*Data through August 2011.
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Elliott D. Pollack & Company
Greater Phoenix S&P/Case-Schiller Home Price Index** Percent Change Month Ago
1990 – 2011* Source: Macro Markets, LLC
-6%
-4%
-2%
0%
2%
4%
6%
Jan-
90Ju
l-90
Jan-
91Ju
l-91
Jan-
92Ju
l-92
Jan-
93Ju
l-93
Jan-
94Ju
l-94
Jan-
95Ju
l-95
Jan-
96Ju
l-96
Jan-
97Ju
l-97
Jan-
98Ju
l-98
Jan-
99Ju
l-99
Jan-
00Ju
l-00
Jan-
01Ju
l-01
Jan-
02Ju
l-02
Jan-
03Ju
l-03
Jan-
04Ju
l-04
Jan-
05Ju
l-05
Jan-
06Ju
l-06
Jan-
07Ju
l-07
Jan-
08Ju
l-08
Jan-
09Ju
l-09
Jan-
10Ju
l-10
Jan-
11
Recession Periods
*Data through June2011**Measures changes in existing single family home prices given a constant level of quality.
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Elliott D. Pollack & Company
100.0%
120.0%
140.0%
160.0%
180.0%
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Median Price of New Homes as a Percent of the Median Price of Resale Homes
Maricopa County 1985–2011*
Source: ASU Realty Studies
*YTD through second quarter 2011
![Page 76: Elliott D. Pollack & Company Outlook 2012: A Grind of a Recovery September 30, 2011 By: Elliott D. Pollack CEO, Elliott D. Pollack & Company](https://reader034.vdocuments.mx/reader034/viewer/2022042718/56649e4f5503460f94b467b9/html5/thumbnails/76.jpg)
Elliott D. Pollack & Company
Balance between supply and demand will not be fully achieved until about
2015.
But building will get progressively better
between now and then.
Balance = when you have to build for net in-migration
![Page 77: Elliott D. Pollack & Company Outlook 2012: A Grind of a Recovery September 30, 2011 By: Elliott D. Pollack CEO, Elliott D. Pollack & Company](https://reader034.vdocuments.mx/reader034/viewer/2022042718/56649e4f5503460f94b467b9/html5/thumbnails/77.jpg)
Elliott D. Pollack & Company
Home Price Indices 2000 – 2011
Source: Macro Markets, LLC; AMLS
70
90
110
130
150
170
190
210
230
250
Recession MLS Index Case-Shiller Index Trendline (4.0%)
Recession Periods
?
![Page 78: Elliott D. Pollack & Company Outlook 2012: A Grind of a Recovery September 30, 2011 By: Elliott D. Pollack CEO, Elliott D. Pollack & Company](https://reader034.vdocuments.mx/reader034/viewer/2022042718/56649e4f5503460f94b467b9/html5/thumbnails/78.jpg)
Elliott D. Pollack & Company
The Real Problem:• Too many vacant homes (but amount of excess is declining).• Not enough new households(but this will change as jobs increase).
![Page 79: Elliott D. Pollack & Company Outlook 2012: A Grind of a Recovery September 30, 2011 By: Elliott D. Pollack CEO, Elliott D. Pollack & Company](https://reader034.vdocuments.mx/reader034/viewer/2022042718/56649e4f5503460f94b467b9/html5/thumbnails/79.jpg)
Elliott D. Pollack & Company
What about the future?
![Page 80: Elliott D. Pollack & Company Outlook 2012: A Grind of a Recovery September 30, 2011 By: Elliott D. Pollack CEO, Elliott D. Pollack & Company](https://reader034.vdocuments.mx/reader034/viewer/2022042718/56649e4f5503460f94b467b9/html5/thumbnails/80.jpg)
Elliott D. Pollack & Company
Various Population Forecasts
Greater Phoenix
Source 2010 2020 2030
ADOC 4,192,887 5,385,944 6,460,836
Annual Growth 2.6% 2.5% 1.8%
U of A 4,192,887 5,044,130 6,088,575
Annual Growth 2.6% 1.9% 1.9%
Global Insights 4,192,887 5,111,106 6,291,762
Annual Growth 2.6% 2.0% 2.1%
Census 4,192,887 5,432,612 6,970,080
Annual Growth 2.6% 2.6% 2.5%
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Elliott D. Pollack & Company
Single Family Forecasts
Greater Phoenix
Source 2000-2010 2010-2020 2020-2030
Person / HH 2.5 2.6 2.6
% Single family 85% 70% 70%
Projected Permits per Year
ADOC 31,900 32,100 28,900
U of A 31,900 22,900 28,100
Global Insights 31,900 24,700 31,800
Census 31,900 33,400 41,400
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Elliott D. Pollack & Company
Commercial Markets…
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Elliott D. Pollack & Company
APARTMENTS
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Elliott D. Pollack & Company
Multi-Family Year-End Vacancy RatesMaricopa County 1986–2012*
Source: ASU Realty Studies
6.2%
4.1%3.3%
2.8%
3.9%
6.1%
4.4%
6.1%
6.9%7.7%
10.1%10.6%
13.0%14.1%
13.4%
10.0%9.5%
8.0%
4.0%3.8%4.5%4.5%4.8%
5.1%5.9%
6.8%
8.2%
9.4%9.6%
7.9%
5.0%5.3%
8.5%
10.8%
14.2%
10.3%9.5%
9.5%
0%
3%
6%
9%
12%
15%
18%
*2011 -2012 are forecasts from the Greater Phoenix Blue Chip
Recession Periods
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Elliott D. Pollack & Company
Absorption Chg in Inventory*
2006 (4,653) (3,828)
2007 (5,846) 4,979
2008 (4,466) 3,234
2009 (5,319) 6,831
2010 20,743 8,493
2011q2 (1,737) 463
Multi-Family Construction Activity
Source: PMHS
*There were 19,949 condo conversion in the Greater Phoenix area from q1 2005 through q4 2009.
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Elliott D. Pollack & Company
There are currently 191 multi-family units under
construction (Q2 11).
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Elliott D. Pollack & Company
OFFICE
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Elliott D. Pollack & Company
Office Space Year-End Vacancy RatesMaricopa County 1986–2012*
Source: CB Richard Ellis
26.7%
22.8%
24.0%
26.7%26.4%
25.4%
22.7%
18.8%
14.8%
11.7%
9.5% 9.2%9.5%
10.0%9.9%
16.0%
18.8%18.3%
16.4%
12.6%
11.1%
13.9%
19.1%
24.5%
26.2%25.6%
23.6%
0%
5%
10%
15%
20%
25%
30%
35%
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
*2011 -2012 are forecasts from CB Richard Ellis
Recession Periods
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Elliott D. Pollack & Company
Greater Phoenix Office Market Construction Activity
Source: CB Richard Ellis
Year Absorption (sf) Chg in Inventory (sf)
2005 3,119,293 7,987
2006 3,245,888 **2,320,302
2007 1,500,704 4,905,374
2008 (603,112) 3,402,646
2009 (677,329) 1,798,415
2010 233,670 2,011,404
2011q2 960,477 ***2,408,630*Only includes multi-tenant space greater than 10,000 SF
** A number of buildings in downtown and mid-town are being converted to office condos.***The 2.4 million square feet in 2011 are build-to-suit FBI building and Univ. of Phoenix building
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Elliott D. Pollack & Company
There is currently NO spec multi-tenant office space
under construction (q2 11).
*Greater than 10,000 sf
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Elliott D. Pollack & Company
There will be no significant spec office construction in Greater Phoenix* for next
3-5 years.
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Elliott D. Pollack & Company
Under any reasonable employment growth scenario,
we believe it will be 2016 before any significant office construction occurs
(although some sub-markets will be sooner).
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Elliott D. Pollack & Company
INDUSTRIAL
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Elliott D. Pollack & Company
Greater Phoenix Industrial Market Construction Activity
Source: CB Richard Ellis
Year Absorption (sf) Chg in Inventory (sf)
2005 12,339,591 7,072,477
2006 6,032,175 7,829,959
2007 8,359,835 13,914,181
2008 629,838 13,467,215
2009 (4,649,352) 4,753,218
2010
2011q2
4,455,097
2,931,634
2,451,202
580,554
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Elliott D. Pollack & Company
There are currently 3.9 million square feet* of
industrial space under construction (q2 11).
*2.4 million sf major users(Intel and First Solar)
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Elliott D. Pollack & Company
Industrial Space Vacancy RatesMaricopa County 1980 – 2012*
Source: CB Richard Ellis
8.4%
9.4%
11.1%
9.7%
12.8%
13.2%
16.4%15.2%
14.6%
12.8%14.0%
14.8%
13.6%
10.8%
7.4%
6.6%5.7%
7.0%7.1%8.1%
7.4%
9.8%10.3%
9.7%
8.5%
5.6%
6.7%
8.4%
12.5%
16.1%
14.7%
13.1%
11.5%
0%
5%
10%
15%
20%
* 2011 - 2012 are forecasts from CB Richard Ellis
Recession Periods
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Elliott D. Pollack & Company
RETAIL
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Elliott D. Pollack & Company
Greater Phoenix Retail Market Construction Activity
Source: CB Richard Ellis
Year Absorption (sf) Chg in Inventory (sf)
2005 6,708,155 6,248,789
2006 5,244,597 4,582,618
2007 9,424,362 11,104,865
2008 3,395,986 6,229,205
2009 (1,117,100) 4,405,985
2010
2011q2
(75,352)
(648,697)
902,380
(181,048)
NOTE: 325,000 sf were deleted from inventory during 2011 due to market data updates and demolitions.
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Elliott D. Pollack & Company
Retail Space Vacancy RatesMaricopa County 1985–2012*
Source: CB Richard Ellis**
6.6%
8.9%
10.0%
11.8%13.1%
14.2%13.5%
12.7%
11.1%
9.8% 8.7%
7.9%7.5%
6.3%5.5%
5.3%6.6%7.3%
7.4%
6.1%5.3%
5.1%6.2%
7.5%
11.4%12.2%
12.6%12.7%
0%
5%
10%
15%
20%
* 2011-2012 are forecasts from CB Richard Ellis** Data prior to 1992 is from Grubb & Ellis
Recession Periods
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Elliott D. Pollack & Company
Back to Normal Vacancy?
• Office = 2015 – 2016
• Industrial = 2014 – 2016
• Retail = 2015 – 2016
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Elliott D. Pollack & Company
How will it allturn out?
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Elliott D. Pollack & Company
There is a BOOM for Arizona out there somewhere.
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Elliott D. Pollack & Company
But not in 2011, 2012 or 2013.
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Elliott D. Pollack & Company
Patience, my ass!
I am going to kill something!!
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Elliott D. Pollack & Company
The long term economic outlook remains favorable.
The near term outlook calls for modest growth.
Arizona will once again be a national growth leader by
mid-decade.
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Elliott D. Pollack & Company
ELLIOTT D. POLLACK & Company
7505 East Sixth Avenue, Suite 100 Scottsdale, Arizona 85251
480-423-9200 P / 480-423-5942 F / www.arizonaeconomy.com / [email protected]
• Economic and Fiscal Impact Analysis/Modeling
• Real Estate Market and Feasibility Studies
• Litigation Support
• Revenue Forecasting
• Keynote Speaking
• Public Finance and Policy Development
• Land Use Economics
• Economic Development