U.S. OFFICE MARKET Economic & Market Overview Prepared for - PowerPoint PPT Presentation

U.S. OFFICE MARKET Economic & Market Overview Prepared for January 21, 2016 Cushman & Wakefield 1

Stock Markets are Falling China FTSE Xinhua A200 Index 13,500 12,500 11,500 10,500 9,500 8,500 7,500 6,500 US 5,500 Dow Jones Industrial Average 18,500 18,000 17,500 17,000 16,500 16,000 15,500 Sources: Moody’s Analytics, SIX Financial Information Cushman & Wakefield 2

Uncertainty is Rising Moody’s Analytics Global Business Confidence Index 4-Week Moving Average 45 40 35 30 25 20 15 10 2010 2011 2012 2013 2014 2015 2016 Source: Moody‘s Analytics Cushman & Wakefield 3

Oil Prices Are Collapsing $150.00 $130.00 $110.00 Dollars per Barrel $90.00 $70.00 $50.00 $30.00 $10.00 Source: U.S. Energy Information Administration Cushman & Wakefield 4

Impact on US Economic Growth? Minimal “The Stock market has forecast nine of the last five recessions” Paul Samuelson “Every $10 decline in oil prices frees up $30 billion for spending on other goods over the next 12 months .” Moody’s Analytics Cushman & Wakefield 5

U.S. Economy Cushman & Wakefield 6

US Economic Overview � Drivers of growth � Consumer spending strengthens � Wage growth finally increases � Housing-positive, but modest impact � Tech strength � Potential headwinds � Global volatility/China � Fed policy: How fast will interest rates rise � Oil patch weakness � Long Island Economy � Healthy for a Suburban Region � Matching US but slow compared to the City � Expect more of the same Cushman & Wakefield 7

U.S. GDP Growth in Recoveries After 6.25 Years Average Annual Growth Rate from Trough 4.0% 3.5% 3.6% 3.0% 2.5% 2.6% 2.2% 2.0% 1.5% 1.0% 0.5% 0.0% Previous 4 Recoveries 2009 Recovery 2016 Forecast Source: U.S. Bureau of Economic Analysis, Cushman & Wakefield Cushman & Wakefield 8

The Past Two Years Have Seen Extraordinary Job Growth December to December Change in Total Employment 5,000 4,000 3,000 Thousands of Persons 2,000 1,000 0 -1,000 -2,000 -3,000 -4,000 -5,000 -6,000 Source: U.S. Bureau of Labor Statistics Cushman & Wakefield 9

Growth in Real After-Tax Income 7.0% 5.0% Percent Change from 1 Year Ago 3.0% 1.0% -1.0% -3.0% National Recessions Income Growth -5.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: U.S. Bureau of Economic Analysis Cushman & Wakefield 10

The Energy Bite Spending on Energy Goods and Services as a Percent of After-Tax Income 6.5% 6.0% 5.5% Percent 5.0% 4.5% 4.0% 3.5% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 National Recessions Energy Bite Source: U.S. Bureau of Economic Analysis Cushman & Wakefield 11

U.S. Motor Vehicle Sales 21 19 17 Millions of Units 15 13 11 National Recessions Vehicle Sales 9 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: U.S. Bureau of Economic Analysis Cushman & Wakefield 12

U.S. Weekly Unemployment Claims 650,000 600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 National Recessions Unemployment Claims Healthy Labor Market Source: U.S. Bureau of Labor Statistics Cushman & Wakefield 13

U.S. Private Sector Job Openings 5,000 4,500 4,000 Thousands 3,500 3,000 2,500 2,000 1,500 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: U.S. Bureau of Labor Statistics Cushman & Wakefield 14

Jobs Getting Harder to Fill Share of firms with at least one job that is hard to fill 35 30 25 20 15 10 5 2000 2002 2004 2006 2008 2010 2012 2014 Source: National Federation of Independent Businesses Cushman & Wakefield 15

Millennials Are Now the Largest Component of the Labor Force Millions of Persons 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 15 17 19 21 23 25 27 29 Millennials: 31 33 90.8 Million 35 37 Age 39 41 43 45 47 49 51 53 55 57 59 61 63 Boomers: 65 79.1 Million 67 69 Source: U.S. Census Bureau Cushman & Wakefield 16

The Millennial Wave U.S. Population by Age 70 60 Millions of Workers 50 40 30 20 10 0 Millennials: Boomers: Generation X: 53.1M 49.3M 49.5M Workers Workers Workers Source: U.S. Bureau of Labor Statistics Cushman & Wakefield 17

Long Island Economy Cushman & Wakefield 18

LONG ISLAND POPULATION AT A RECORD HIGH 2.90 2.86 2.85 2.80 2.75 2.70 Millions 2.65 2.60 2.55 2.50 2.45 2.40 Source: U.S. Census Bureau Cushman & Wakefield 19

LONG ISLAND EMPLOYMENT STRUCTURE 1990 vs. 2014 Wholesale Manufacturing 7% Retail 14% 1990 14% T otal: 1,125,000 Professional Services Transport/Utilitis 11% 4% Government Financial 18% 8% Information 3% 2014 Leisure/Hospitality Education/Health Manufacturing 8% 13% T otal: 1,290,700 Wholesale 6% 6% Retail 14% Professional Services 14% Transport/Utilit Financial is 6% 4% Information 2% Government 17% Education/Health Leisure/Hospitality 21% 10% Cushman & Wakefield 20

EMPLOYMENT GROWTH SINCE NOVEMBER 2009 11.5% 10.0% 9.5% 7.5% 7.6% 5.5% 3.5% 1.5% -0.5% U.S. Long Island Source: U.S. Bureau of Labor Statistics Cushman & Wakefield 21

EMPLOYMENT GROWTH U.S. vs. Long Island 2.5% 2.3% 2.0% 1.8% 1.7% 1.7% 1.7% 1.5% 1.6% 1.4% 1.3% 1.2% 1.0% 1.1% 0.8% 0.6% 0.5% 0.0% 2010 2011 2012 2013 2014 2015-YTD U.S. Long Island Source: U.S. Bureau of Labor Statistics Cushman & Wakefield 22

TOTAL EMPLOYMENT: LONG ISLAND 1,300 1,250 Thousands of Persons 1,200 1,150 1,100 1,050 1,000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: U.S. Bureau of Labor Statistics Cushman & Wakefield 23

OFFICE-USING EMPLOYMENT: LONG ISLAND 280 270 Thousands of Persons 260 250 240 230 220 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Note: Office-Using employment = financial + professional & business services + information Source: U.S. Bureau of Labor Statistics Cushman & Wakefield 24

HEALTH CARE EMPLOYMENT: LONG ISLAND 220 200 Thousands of Persons 180 160 140 120 100 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: U.S. Bureau of Labor Statistics Cushman & Wakefield 25

LONG ISLAND RECESSION/RECOVERY PERFORMANCE BY INDUSTRY Employment Change Since January 2008 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% Total Financial Professional Services Information Source: U.S. Bureau of Labor Statistics Cushman & Wakefield 26

NYC EMPLOYMENT Ratio of City to MSA 46.0% 45.5% 45.0% 44.5% 44.0% 43.5% 43.0% 42.5% 42.0% 41.5% 41.0% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: U.S. Bureau of Labor Statistics Cushman & Wakefield 27

Total Job Growth January 2004 to November 2015 NYC vs. Suburbs New York City has been the focal point of the job growth in the Metro Area over the 732.8 past decade. Of the 856,300 jobs added 700 in the Metro Area 732,800 are in the City and only 123,500 in the suburbs. 600 Today, 54% of the world’s population lives 500 THOUSANDS OF PERSONS in urban areas, a proportion that is expected to increase to 66% by 2050. 400 Urbanization, combined with the overall growth of the world’s population, could add another 2.5 billion people to urban 300 populations by 2050. 200 123.5 100 0 2004-2015 Cushman & Wakefield 28

LONG ISLAND EMPLOYMENT Ratio of LI to Suburbs 26.0% 25.8% 25.6% 25.4% 25.2% 25.0% 24.8% 24.6% 24.4% 24.2% 24.0% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: U.S. Bureau of Labor Statistics Cushman & Wakefield 29

TOTAL JOB GROWTH JANUARY 2004 TO NOVEMBER 2015 LI Vs. Other Suburbs 77.9 80 70 60 Thousands of Persons 50 45.6 40 Long Island 30 Other Suburbs 20 10 0 2004-2015 Within the Suburbs, Long Island has outperformed. Of the 123,500 jobs added in the metro area 77,900 (63%) are on the Island while the rest of the suburbs have added 45,600. Long Island accounts for only 25.7% of total suburban employment Cushman & Wakefield 30