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1 Economic Recovery on the Horizon? Unemployment and GDP Growth - PDF document

Dec 29, 2023 •406 likes •630 views

Metro Atlanta First Quarter 2010 Overview Prepared by Cushman & Wakefield Atlanta Overview Gradual improvement in economic conditions in first quarter 2010. Significant downside risks to sustained recovery persist. Including

  1. Metro Atlanta First Quarter 2010 Overview Prepared by Cushman & Wakefield Atlanta Overview ■ Gradual improvement in economic conditions in first quarter 2010. ■ Significant downside risks to sustained recovery persist. ■ Including limited job growth and depressed business and consumer sentiment. ■ Weak commercial markets and lingering housing market issues continued to weigh on smaller banks in the metro Atlanta area. 1

  2. Economic Recovery on the Horizon? Unemployment and GDP Growth Trends Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 2.5% 11.0 2.0% 10.0 1.5% 9.0 % Unemployment 1.0% 8.0 GDP Growth 0.5% 7.0 0.0% 6.0 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 -0.5% 5.0 -1.0% 4.0 -1.5% 3.0 -2.0% 2.0 Quarterly GDP Growth US Unemployment Rate Atlanta Unemployment Rate Source: Moody’s | Economy.com Stabilizing Employment Situation in Atlanta Atlanta Monthly Employment Trends 20000 10000 Change in Total Employment 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -10000 -20000 -30000 -40000 -50000 2008 2009 2010 Source: BLS 2

  3. Though Unemployment Remains Elevated Atlanta MSA Employment Trends 2,500 12.0 Nonfarm Employment (thousands) 2,450 10.0 2,400 8.0 2,350 6.0 % 2,300 4.0 2,250 2.0 2,200 0.0 Jan-2000 Jan-2002 Jan-2004 Jan-2006 Jan-2008 Jan-2010 Total Nonfarm Employment (Ths) Unemployment Rate (SA) Source: Moody’s | Economy.com Stabilizing Consumer Confidence and Retail Sales Advanced Durable Goods Orders and Monthly Retail Sales Trends vs. Consumer Confidence 400,000 160.00 350,000 140.00 300,000 120.00 250,000 100.00 Mil. $ 200,000 80.00 150,000 60.00 100,000 40.00 50,000 20.00 0 0.00 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Consumer Confidence Index (SA) Advanced Durable Goods: New Orders (Mil. $, SA) Estimated Monthly Retail Sales ($mil., SA) Source: Moody’s | Economy.com 3

  4. Continued Expansion in the Industrial Sector ISM Index and Durable Goods Orders 70.0 280,000 60.0 240,000 50.0 200,000 40.0 160,000 30.0 120,000 20.0 80,000 10.0 40,000 0.0 0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 ISM Purchasing Managers' Index (SA) Advanced Durable Goods: New Orders (Mil. $, SA) Source: Moody’s | Economy.com Atlanta Office Market ■ Demand rebounded slightly to yield flat absorption in first quarter following near-record net occupancy losses in 2009. ■ Last speculative office towers of current construction cycle completed. ■ Overall vacancy continued to grow, though sublease vacancies decreased slightly. ■ Excess supply and weak demand continued to weigh on effective rents. 4

  5. Few Bright Spots Among Office-Using Industries Atlanta MSA Nonfarm Employment Job Gains - Office Sectors (2000 - 1Q 2010) Health Care & Social Assistance 63.63 Educational Svcs 20.01 Mgmt., Sci. & Tech. Consulting Svcs 5.43 Real Estate, Rental & Leasing 1.50 Other Prof., Sci., & Tech. Srvcs 4.12 1.87 Other Financial Inv. Activities Arch., Eng., & Related Srcs -1.25 Computer Sys. Design & Related -2.12 -2.97 Insurance Carriers & Related Mgmt of Companies & Enterprises -5.51 -7.88 Credit Intermediation & Related -25.63 Admin., Support and Waste Mgt. -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Net Change (In 000s, SA) Source: Moody’s | Economy.com Job Losses Continue… Office-Using Employment Trends 40.00 30.00 20.00 10.00 Thousands 0.00 1982 1986 1990 1994 1998 2002 2006 YTD 2010 -10.00 -20.00 -30.00 -40.00 Source: Moody’s | Economy.com 5

  6. … Though Employment is Gradually Stabilizing Atlanta MSA Yearly Employment vs. Overall Absorption 12.0 40 Year-Over-Year Change in No. of Jobs 9.0 30 6.0 20 3.0 10 (thsnds) MSF 0.0 0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 -3.0 -10 -6.0 -20 -9.0 -30 -12.0 -40 Year-Over-Year Change in Office-Using Employment Overall Absorption Source: Moody’s | Economy.com, Cushman & Wakefield Office Supply and Demand Trends Atlanta Office Annual Absorption & Vacancy Trends 10.0 32% 28% 8.0 24% 6.0 20% 4.0 MSF 16% 2.0 12% 0.0 8% 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 (2.0) 4% (4.0) 0% Overall Absorption Construction Completions Overall Vacancy Source: Cushman & Wakefield 6

  7. End of the Current Construction Cycle Office Supply Trends 8.0 32.0% 7.0 28.0% 6.0 24.0% 5.0 20.0% MSF 4.0 16.0% 3.0 12.0% 2.0 8.0% 1.0 4.0% 0.0 0.0% 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 Under Construction Overall Vacancy Source: Cushman & Wakefield Excess Development Had Many Root Causes… Atlanta Office Construction Starts vs. Investment Trends 2.8 $2,800 2.4 $2,400 2.0 $2,000 1.6 $1,600 million msf 1.2 $1,200 0.8 $800 0.4 $400 0.0 $0 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 Speculative Construction Starts Investment Activity ($) Source: Moody’s | Economy.com, Cushman & Wakefield 7

  8. Attractive Trends in Investment and Easily-Secured Financing… Atlanta Office Speculative Construction Starts vs. RHLB Construction Cost Index 2.4 180.00 2.1 170.00 1.8 160.00 1.5 150.00 MSF 1.2 140.00 0.9 130.00 0.6 120.00 0.3 110.00 0.0 100.00 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 Construction Starts RHLB Construction Cost Index, (April 2001 = 100) Moody’s/REAL Commercial Property Price Index - National Office, (2000Q4=100, NSA) Source: Moody’s | Economy.com, Cushman & Wakefield Positive Trends in Overall Vacancy … Atlanta Office Development vs. Overall Vacancy 2.4 26.0% 2.1 24.0% 1.8 22.0% 1.5 20.0% MSF 1.2 18.0% 0.9 16.0% 0.6 14.0% 0.3 12.0% 0.0 10.0% 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 Speculative Construction Starts Construction Completions Overall Vacancy Source: Cushman & Wakefield 8

  9. … And Aggressive Underwriting to Rental Rate Growth Atlanta Office Development vs. Class A Asking Rents 2.4 $25.00 2.1 $24.50 1.8 $24.00 1.5 $23.50 MSF 1.2 $23.00 0.9 $22.50 0.6 $22.00 0.3 $21.50 0.0 $21.00 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 Speculative Construction Starts Construction Completions Class A Direct Avg Rent Source: Cushman & Wakefield Soft Demand and Development Activity Yielded Steadily Increasing Vacancies Atlanta vs. U.S. Office Overall Vacancy and Rent Trends 30.0% 25.0% 20.0% PSF 15.0% 10.0% 5.0% 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD 2010 Atlanta Overall Vacancy US Overall Vacancy Source: Cushman & Wakefield 9

  10. Excess Supply Included Expanding Subleases Sublease and Overall Vacancy Trends 6.0 30% 5.0 25% 4.0 20% MSF 3.0 15% 2.0 10% 1.0 5% 0.0 0% 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 Sublease SF Overall Vacancy Source: Cushman & Wakefield Above-Market Average Vacancies… Non-CBD Overall Vacancy Comparison New Haven, CT Baltimore, MD Los Angeles CBD Northern VA San Francisco Peninsula, CA New Jersey - Northern San Diego, CA San Gabriel Valley CA Hartford, CT Philadelphia, PA Houston, TX Miami, FL Denver, CO Tampa, FL Atlanta, GA Dallas, TX US 0% 5% 10% 15% 20% 25% Source: Cushman & Wakefield 10

  11. … Even in the Absence of New Construction CBD Overall Vacancy Comparison Midtown South, NY Downtown, NY New Haven, CT Houston, TX Midtown, NY San Francisco, CA Portland, OR Philadelphia, PA Boston, MA Washington, DC San Diego, CA Westchester County, NY Chicago, IL Denver, CO Miami, FL Tampa, FL Atlanta, GA Dallas, TX US 0% 5% 10% 15% 20% 25% 30% Source: Cushman & Wakefield Few Barriers to Entry Constrain Rental Rate Growth Atlanta Office Overall Vacancy and Rent Trends $24.00 30% $20.00 25% $16.00 20% PSF $12.00 15% $8.00 10% $4.00 5% $0.00 0% 1Q87 1Q89 1Q91 1Q93 1Q95 1Q97 1Q99 1Q01 1Q03 1Q05 1Q07 1Q09 Overall Wtd Avg Rent Overall Vacancy Source: Cushman & Wakefield 11

  12. Atlanta Industrial Market ■ Demand rebounded slightly to yield flat absorption in first quarter following near-record net occupancy losses in 2009. ■ Last speculative office towers of current construction cycle completed. ■ Overall vacancy continued to grow, though sublease vacancies decreased slightly. ■ Excess supply and weak demand continued to weigh on effective rents. Industrial Sector Displayed Earliest Signs of Recovery Industrial Demand vs. ISM Purchasing Managers' Index Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 35.0 65.0 30.0 60.0 25.0 55.0 20.0 50.0 MSF 15.0 45.0 10.0 40.0 5.0 35.0 0.0 30.0 2001 2005 2009 -5.0 25.0 Overall Absorption Leasing Activity ISM Purchasing Managers' Index (SA) Source: Moody’s | Economy.com, Cushman & Wakefield 12

  13. Healthy Demand Coupled with a Lack of Speculative Development Atlanta Industrial Supply-Demand Trends 35.0 20.0% 30.0 16.0% 25.0 20.0 12.0% 15.0 MSF 10.0 8.0% 5.0 0.0 4.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD 2010 -5.0 -10.0 0.0% Leasing Activity Overall Absorption Construction Completions Overall Vacancy Source: Cushman & Wakefield Helped Stabilize Overall Vacancy Overall Rental and Vacancy Rate Trends 15.0% 12.0% 9.0% PSF 6.0% 3.0% 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD 2010 Atlanta Overall Vacancy US Overall Vacancy Source: Cushman & Wakefield 13

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