•

•

•

•

•

N o t e : D a t a a r e s e a s o n a l l y a d j u s t e d

S o u r c e : B L S , D e l t a A s s o c i a t e s ; F e b r u a r y 2 0 1 6

NE

T J

OB

CH

AN

GE

(T

HO

US

AN

DS

)

-1,000

-800

-600

-400

-200

0

200

400

600

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Payroll Job GrowthUnited States | Month-to-Month

14.5 MILLION JOBS ADDED SINCE THE RECESSION

75 CONSECUTIVE MONTHS OF POSITIVE JOB GROWTH

5

-1,000

-800

-600

-400

-200

0

200

400

600

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

14.5 MILLION JOBS ADDED SINCE THE RECESSION

75 CONSECUTIVE MONTHS OF POSITIVE JOB GROWTH

NE

T J

OB

CH

AN

GE

(T

HO

US

AN

DS

)

-20%

-15%

-10%

-5%

0%

5%

10%

15%

2008 2009 2010 2011 2012 2013 2014 2015 2016

CH

AN

GE

IN

ME

DIA

N P

RIC

E,

SIN

GL

E-F

AM

ILY

HO

ME

S

0%

1%

2%

3%

4%

5%

6%

7%Effective Federal Funds Rate

10-Year Treasury

30-Year Treasury

0.24%0.54%

2.15%

2.45%

2.98%3.03%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2015 2016 2017

Effective Federal Funds Rate

10-Year Treasury

30-Year Treasury

December 16, 2015 December 14, 2016

0%

1%

2%

3%

4%

5%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

2.6%

Average 2016

12

-MO

NT

H C

HA

NG

E

3.1%

Average 2007 – 20092.0%

Average 2010 – 2015

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

Q107

Q307

Q108

Q308

Q109

Q309

Q110

Q310

Q111

Q311

Q112

Q312

Q113

Q313

Q114

Q314

Q115

Q315

Q116

Q316

Q117

Q317

AN

NU

AL

CH

AN

GE

F O R E C A S T

2.2%

2017 Average2.1%

Post-Recession Average

0

20

40

60

80

100

120

140LA

Bas

in NY

DFW

SF B

ay Atl

Was

Sou

th F

L

Den

ver

Bo

s

Ch

i

Ph

x

Ho

u

NE

W J

OB

S (

TH

OU

SA

ND

S)

67K

-5,000 0 5,000 10,000 15,000 20,000 25,000 30,000

Information

Financial Activities

Transportation/Utilities

Manufacturing

Construction/Mining

Wholesale Trade

Other Services

State and Local Government

Retail Trade

Federal Government

Leisure/Hospitality

Education/Health

Professional/Business Services

71,300

- 4,700

J O B C H A N G E

23,900

0%

1%

2%

3%

4%

5%

6%B

os

Den

DFW SF Bay

Was

Ph

x

NY

LAB

asin Atl

S Fl

a

Ho

u

Ch

i

November 2015 November 2016

-50 -50-40-170 -10 +10-80 -20-90 -10-40 -10

13

National Rate

4.8%

Basis Point Change

4.5%

NE

W J

OB

S (

TH

OU

SA

ND

S)

-60

-40

-20

0

20

40

60

80

100

120

1402

00

0

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

District Suburban MD Northern VA

F O R E C A S T

48,600

4-Year Average43,400

20-Year Average

0%

2%

4%

6%

8%

10%

12%

14%

20 Years 10 Years 1 Year

STOCKSS&P 500

REAL ESTATENCREIF Property Index

T-BILLS(90 day)

TO

TA

L A

NN

UA

L A

VE

RA

GE

RE

TU

RN

0%

2%

4%

6%

8%

10%

12%

14%

Retail Industrial Apartment Office

TO

TA

L A

NN

UA

L R

ET

UR

N

Washington

US

$0

$5

$10

$15

$20

$25

$30

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

TOTA

L V

OLU

ME

(BIL

LIO

NS)

Office Multifamily Retail Flex/Industrial

4%

5%

6%

7%

8%

9%

6.3% 5.8% 5.4%5.6%

Office Flex/Industrial

Grocery-Anchored

Apartments

0%

10%

20%

30%

40%

50%

Very Negative SomewhatNegative

Neutral Somewhat Positive Very Positive Unclear/Don'tKnow

SH

AR

E O

F R

ES

PO

ND

EN

TS

Stimulus + Higher Deficits

Higher Inflation

Higher Interest Rates

Immigration

Wall: $15B? $40B $285B?

Infrastructure: $1T over 10 years?

Warehouse/Distribution

Ports of Entry

Export-intensive Metro Areas

FINANCIAL INSTITUTIONS

Eased regulations

Home mortgage underwriting

Fannie Mae, Freddie Mac?

LOW INCOME HOUSING

TAX CREDITS

Lower tax rates

↓Fewer affordable

units

WASHINGTON METRO AREA

Federal hiring freeze

Defense spendingvs.

Other spending

Federal agencies moved out of region?

TOTAL FEDERAL

39.8%60.2%NON-FEDERAL

10.7%

10.0%

19.1%

TOTAL FEDERAL

27.2%72.8%NON-FEDERAL

7.7%

6.7%

12.8%

2010 2020

OTHER FEDERAL FEDERAL WAGES & SALARIES PROCUREMENT

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1950 1960 1970 1980 1990 2000 2010 2016

38%

11%

45

46

47

48

49

50

51

52

53

54

2010 2011 2012 2013 2014 2015 2016

SQ

UA

RE

FE

ET

(M

ILL

ION

S)

47

Aviation D

Bridges C+

Dams D

Drinking Water D

Energy D+

Hazardous Waste D

Inland Waterways D-

Levees D-

Public Parks and Recreation C-

Rail C+

Roads D

Schools D

Solid Waste B-

Transit D

Wastewater D

Ports C

Overall grade:

27.2

23.3

20.1

24.4

28.4

16

18

20

22

24

26

28

30

1999 2001 2003 2005 2007 2009 2011 2013 2015

Health Care Educational Transportation Power Plants, Lines Highways and Streets

YE

AR

S

SH

AR

E O

F G

DP

0.50%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

$1.72

$0.74

$0.39

$0.79

$0.0

$0.5

$1.0

$1.5

$2.0

Surface Transportation Electricity Schools Other

Identified Funding Funding Gap

20

10

TR

ILL

ION

S

Total Funding Required: $3.6 trillionTotal Funding Gap: $1.6 trillion

Surface Transportation

Electricity

Inland Waterways & Marine Ports

Water/Wastewater

Airports

Public Transportation

Storm Water

Drinking & Waste Water

Public Buildings

Roads

Electric

Bridges

Gas

450,000

500,000

550,000

600,000

650,000

700,000

750,000

800,000

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

-4%

-2%

0%

2%

4%

6%

8%

2010 2011 2012 2013 2014 2015

Washington Metro New York Chicago San Francisco

54.3

19.7

31.2

0

10

20

30

40

50

60

District Northern Virginia Suburban Maryland

SQ

UA

RE

FE

ET

(M

ILL

ION

S)

Office Development Under Construction Within ½ Mile

of a Metro Station:93% of Total in Region

$2.3

$0.5$0.4

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

DC Virginia Maryland

BIL

LIO

NS

Within 1/4 Mile Within 1/2 MileDistance from Metrorail station:

28% of Total Area Tax Base

State & Local Funds Fares & Parking Federal Debt Other

Compared to FY 2017: $2.8B (+11%)

FY18 BUDGET GAP

FTA Grants $60M

Management/Labor $50M

Riders $50M

District of Columbia $47M

Maryland $44M

Virginia $39M

TOTAL $290M

MetroForward$5 billion over 2014-2020 for

safety and reliability improvements

SafeTrackIntensive program to

improve safety and reliability

3 years of work in 12 months (completion June 2017)

Back2Good

Safety

Reliability

Financial management

Customer experience

Federal Transit Administration

Safety oversight (October 2015)

Proposals

Overhaul the governance structure

Fix the funding problem Improve the Board’s

capabilities Put the Federal

Government in charge

Funding Needed

$1 billion for regular life cycle maintenance and replacement

$600 million per year for capacity improvements

Annual operating deficits

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

SF Bay Phil NY Bos LA Basin Was DFW Hou Atl Chi

OV

ER

AL

L V

AC

AN

CY

RA

TE

14.1%

9.8%

National Rate

0

2

4

6

8

10

12

14

16

18

20

NY SF Bay Was DFW LA Basin Phil Bos Chi Hou Atl

CO

NS

TR

UC

TIO

N (

MIL

LIO

NS

OF

SF

)

11.3

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

2001 to 2009 2010 to 2016

CH

AN

GE

IN

SF

LE

AS

ED

U

PO

N R

EL

OC

AT

ION

OV

ER

AL

L V

AC

AN

CY

RA

TE

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

14.8%

14.1%

-5%

0%

5%

10%

15%

20%

Change in Asking Rent

Overall Vacancy Rate

Natural Vacancy Rate

F O R E C A S T

The amenities game: what tenants want.

Older product: consider renovation or conversion.

Tenants to target: which industries are leasing space?

Target submarkets: select submarkets will turn to landlord.

0%

2%

4%

6%

8%

10%

12%

LA Basin Det SF Bay NY Phi Hou Chi DFW Was/Bal Atl Bos

OV

ER

AL

L V

AC

AN

CY

RA

TE

7.6%

5.3%5.3%

National Rate

-4

-2

0

2

4

6

8

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

NE

T A

BS

OR

PT

ION

(M

ILL

ION

S O

F S

F)

Long-Term Average3.6 MSF

6.3

Retail

Services

Agri/Mining/Utilities

Manufacturing

Business Services

Transportation

Other Sectors

49%

23%

14%

12% 2%

FLEX/INDUSTRIAL

RETAIL SELF STORAGE

MULTIFAMILY

OFFICE

OV

ER

AL

L V

AC

AN

CY

RA

TE

0%

2%

4%

6%

8%

10%

12%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

7.0%

7.6%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Change in Asking Rent

Overall Vacancy Rate

Natural Vacancy Rate

F O R E C A S T

Submarkets to outperform?

Product types to outperform: data centers, retail distribution, biotech, and self-storage.

Undersupply of new inventory.

VA

CA

NC

Y R

AT

E (

AL

L C

LA

SS

ES

)

0%

1%

2%

3%

4%

5%

6%

7%

NY LA Wash DFW Atl SF Bay Chi Phi Phx South FL Balt Hou

3.8%

4.2%

National Rate

UN

ITS

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

F O R E C A S T

6,806

Long-Term Average

8,063

Average Since 2008

0

2

4

6

8

10

12

14

16

No VA Sub MD The District

MA

RK

ET

-R

AT

E U

NIT

S (

TH

OU

SA

ND

S)

PROJECTED STABILIZED VACANCY AT DEC. 2019

Projected Stabilized Vacancy Rate at Dec. 2019: 3.9% Metro-Wide

DEMAND

27,100 units

SUPPLY*

33,649 units

Planned

Under Construction

3.5%

3.7%4.7%

-4%

-2%

0%

2%

4%

6%

8%

10%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

EF

FE

CT

IVE

RE

NT

CH

AN

GE

F O R E C A S T

4.0%

Long-Term Average

Consider developing smaller-scale buildings in the District.

Differentiate from the competition.

Convert obsolete office buildings to apartments.

There are pockets of undersupply around the region.

NU

MB

ER

OF

UN

ITS

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Suburbs

District

1,900

F O R E C A S T

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

PR

ICE

CH

AN

GE

F O R E C A S T

AV

ER

AG

E P

RIC

E P

ER

SF

$2,799 $1,275 $1,213 $1,204 $1,150 $920 $802 $731 $678 $665 $638 $411 $0

$400

$800

$1,200

$1,600

$2,000

$2,400

$2,800

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

NU

MB

ER

OF

UN

ITS

2,566

MA

RK

ET

-R

AT

E U

NIT

S

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

The District No VA Sub MD

DEMAND

6,225 units

SUPPLY*

5,016 units

Planned

Under Construction

Be mindful of design and amenities depending on the buyer.

Build boutique or medium-sized condo projects.

Consider converting obsolete office buildings to condos.

Many development opportunities exist in the right locations.