Why Portland? Portland CRE Trends and Regional Market Overview - PowerPoint PPT Presentation

Why Portland? Portland CRE Trends and Regional Market Overview

Portland – Why all the hype? Healthiest Economy Best Place to Live in US #1 #1 Bloomberg - Economic Evaluation of Money magazine 2015 States 2016 Top Moving US City for Quality of Destination Life #1 #1 #3 United Van Lines Monocle 2015 National Movers Study 2013-2015 Overall real estate prospects – ULI Emerging Trends #1 Destination for migrating #1 in Real Estate 2017 workers from SF Best Food City LinkedIn 2017 in America Washington Post - 2016 #1 #1 Food & Drink Capital of America Best Airport The telegraph 2016 Travel + Leisure – America’s Best Airports 2013-2016

Portland job growth stands out Employment growth by US City The Portland economy is among the fastest growing in the US 2013-2015 Miami 14% America’s fastest -growing cities 2017 – Forbes Portland San Francisco 9% Boston 9% 10% GMP growth 2016 Raleigh 8% Phoenix 8% Atlanta 8% Austin 8% San Diego 7% Sacramento 7% Seattle 7% job growth #2 Jacksonville 7% Paradise, NV 6% Minneapolis 6% El Paso 6% Dallas 6% Salt Lake City 5% #9 #3 Denver 5% Los Angeles 5% #8 Washington DC 5% #1 Chicago 5% Tampa 5% #7 New York 5% Houston #10 5% Philadelphia 5% Charlotte 5% Milwaukee 4% Las Vegas 4% Orlando 4% Nashville 4% #5 San Antonio 4% Irvine 3% St. Louis 3% Sustained growth #6 Tulsa 3% #4 Honolulu 3% Indianapolis 3% Louisville 3% Fort Worth 2% Kansas City 2% Omaha 2% A point in time Tucson 1% Memphis 1% Columbus 1% Albuquerque 1% Pittsburgh 1% Oklahoma City 0% Baltimore 0% Cleveland 0% San Jose -2% Source: Forbes, Axiometrics Detroit Source: BLS -2%

Portland demographics are enviable Population growth by US City Growth of college graduates of working age by US City 2013-2015 2010-2015 Austin 37% Austin 14% Miami 34% Denver 13% Denver 34% Seattle 12% Washington DC 29% New Orleans 12% Philadelphia 28% Charlotte 12% Irvine 28% Fort Worth 12% Baltimore 28% Washington DC 11% Portland 27% Raleigh 11% Jacksonville 26% San Antonio 10% 27% New Orleans 24% Miami 10% Fremont 23% Atlanta 10% Seattle 23% Houston 9% Nashville 23% Colorado Springs 9% Tampa 23% Oklahoma City 8% 8% San Jose 22% Dallas 8% Columbus 22% Nashville 8% job growth Charlotte 22% Portland 8% El Paso 21% Phoenix 8% Atlanta 21% Columbus 8% Dallas 21% Boston 7% San Diego population growth 21% San Jose 7% Boston 20% San Francisco 7% Raleigh 20% Minneapolis 7% Houston 18% Mesa 7% Oklahoma City 18% Oakland 7% San Francisco 17% San Diego 7% New York 17% Las Vegas 7% Las Vegas 16% Arlington 6% Oakland 16% Jacksonville 5% Colorado Springs 16% Sacramento 5% Fort Worth 15% Fresno 5% Phoenix 15% Los Angeles 5% Milwaukee 14% El Paso 5% Minneapolis 14% Sought-sfter demo New York 4% Omaha 13% Indianapolis 4% Chicago 13% Kansas City 3% Los Angeles 13% Virginia Beach Sustained growth 3% Scottsdale 12% Louisville 3% Kansas City 12% Tulsa 3% Arlington 12% Omaha 3% Indianapolis 12% Philadelphia 3% Jersey City 12% Long Beach 2% San Antonio 11% Albuquerque 2% Sacramento 11% US Avg Tucson 2% Long Beach 10% Wichita 2% Louisville 9% Chicago 1% Memphis 6% Milwaukee 1% Virginia Beach 5% Memphis 1% Plano 4% Baltimore 0% Source: BLS Albuquerque Source: BLS 1% Detroit -5%

Workers moving where income buys more Portland is a net attractor of talent Median HH income growth by US City 2010-2015 Seattle Where SF workers are moving - Portland 23% Austin 21% Portland 19% LinkedIn 2017 Denver 18% San Francisco 18% Washington DC 14% 19% El Paso 11% Atlanta 11% Nashville 10% Philadelphia 10% Oakland 10% San Jose 10% Louisville 9% Income growth Kansas City 8% Minneapolis 8% Omaha 8% Boston 7% Fort Worth 7% Oklahoma City 6% Baltimore 6% Phoenix 5% Columbus 5% New York 5% Raleigh 5% Milwaukee 5% Houston 4% Tulsa 4% Chicago 4% San Diego 4% Dallas 4% Colorado Springs 3% San Antonio 3% Sacramento 3% Cleveland 2% Los Angeles 2% Mesa 1% Miami 1% Wichita 1% Charlotte 0% Indianapolis 7 times US growth -1% Long Beach -2% Jacksonville -3% Fresno -3% Virginia Beach -4% Tucson -4% New Orleans -5% Albuquerque -6% Detroit -7% Memphis -8% Las Vegas Source: US Census -10%

Portland has what millenials want… Affordability keeps Portland a winner for net migration Low cost of living Cost of Doing Business Cost of living index, national The cost of doing business in Portland is 4% lower average = 100.0 than the national average. 121.4 Seattle 132.5 111.3 Boston Relative affordability Portland 164.0 185.8 61% San Francisco NewYork 156.1 San Jose 24% 136.4 22% 23% 20% 132.3 Los Angeles 7% San Diego 3% Portland Seattle LosAngeles San Diego Boston San Jose San Francisco New York -4% Source: 2016 data, ULI, Bureau of Economic Analysis Source: US Census

Portland has what millenials want… Multifamily fundamentals among strongest in US Housing permits have not kept up with population growth MF construction activity concentrated in urban areas 2.2 4.0 NW 1,013 SSC units CBD 1,029 1,241 units units East 1,981 units Source: Housing Bureau Source: Housing Bureau

Portland has what millenials want… Strong rent growth - maintaining comparative affordability Vacancy remains low, rent growth among highest in US Despite rising costs, Portland remains affordable 10% 50% 43.5% 45% 40% 37.2% 35% 35.5% 32.0% 30% 29.9% 25% 23.2% 22.7% 20% 15% 10% 4Q96 4Q97 4Q98 4Q99 4Q00 4Q01 4Q02 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 Los Angeles Oakland Silicon Valley San Francisco Seattle Portland San Diego Source: YARDI Source: Axiometrics

Portland has the most diverse economy on the West Coast Diversity of regional economy Portland economic clusters drive growth 0.80 Athletic & Outdoor Industry Software 0.70 0.60 0.50 0.40 0.30 0.20 0.10 Clean Tech Advanced Manufacturing 0.00 Index measures how closely a region’s economy resembles that of the whole U.S., with a score of 1.0 representing an exact match to the U.S. economy Source: JLL Research, Moody’s Analytics Source: JLL Research

Portland has what millenials want… Portland’s office market observations Tech firms have been driving 1 Tech leasing has doubled since 2011, now stable demand in the office market 5,000 Thousands Tech makes up between 25-30% of all leasing 4,500 4,000 3,500 Construction has surged with 3,000 2 virtually all activity in urban core 2,500 2016 marked 1 st year in 6 where supply 2,000 exceeded demand 1,500 1,000 Rents far exceed previous 500 3 13.6% 19.3% 30.6% 26.7% 27.4% 26.4% 0 cyclical peaks 2011 2012 2013 2014 2015 2016 Overall rents were up 13% in 2016 Tech Other Finance Govt Health Care Insurance Law Mfg Other Svcs PBS Source: JLL Research

Portland has what millenials want… Portland office market one of tightest on West Coast Still remains one of the most affordable Ave asking rents Vacancy $80 16% 15.1% 14.6% $70 14% 13.2% 12.9% 12.5% 12.4% $60 12% 11.3% 10.7% $50 10% 9.4% 9.2% 8.2% $40 8% 7.3% $30 6% $20 4% $10 2% $23.76 $27.13 $27.56 $31.44 $32.12 $32.51 $34.90 $38.27 $41.62 $47.88 $58.02 $73.65 $0 0% Source: JLL Research

Construction concentrated in Urban markets – mixed-use Major urban development underway Top Leases of 2016 show increasing size 101,400 82,140 78,000 Field Office TowneStorage 299,056 s.f. 108,750 s.f. $29.00-$32.00 NNN p.s.f. $31.00-$33.00 NNN p.s.f. 58,000 53,793 ARK P 50,000 47,788 Macy’s Building Broadway Tower 171,067 s.f. 158,500 s.f. $31.50-$35.50 NNN p.s.f. $35.00-$37.000 NNN p.s.f. 45,617 45,313 Source: JLL Research

Office sales – volumes elevated, cap rates all-time low $2,000 Volume in $M Millions $1,826 10% $1,800 CBD Core Cap Rates 9.5% Increased liquidity 8.7% $1,600 8.3% 7.7% 8% 7.4% $1,400 Relative value 7.2% 7.0% 6.9%6.6% 6.8% 6.6% $1,200 5.9% $1,076 6.5% Core Assets 6% $928 5.4% $1,000 5.6% Value-add Assets 4.8% $800 $702 4% $638 $601 $600 $518 $437 $377 $364 $400 2% $282 $247 $257 $180 $200 $200 $142 $123 $50 $- 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 17

High water mark and avg price per SF – CBD Core assets Re Rece cent nt no notable le sale le CBD BD - Cla lass A 1320 Broadway Buyer: Credit Suisse Seller: URG/Clarion Price p.s.f.: $541 Price: $95,000,000 Cap rate: 4.9%

Portland’s industrial market observations Development takes center stage, 1 Industrial tenants getting bigger and more of them both BTS and spec 20 45,000 20 Bigger projects in more remote locations to accommodate larger tenants 18 40,000 Portland population growth 35,000 15 2 driving demand for distribution 13 Increase in same day/last mile distribution has 30,000 12 12 pushed demand to new areas 11 25,000 10 Rents far exceed previous 3 20,000 7 cyclical peaks Rents are up 11.8% YOY reaching new high- 24,854 21,706 24,748 23,095 25,761 35,146 38,227 15,000 5 water mark for Portland 2010 2011 2012 2013 2014 2015 2016 Avg Size Lease # of leases > 100K