Bankable Predictions Taking CRE Into The Future PDF

Megashifts, Real Estate Cycles &
Bankable Predictions. . .
Taking CRE Into the Future
Christopher Lee
CEL & Associates, Inc.
Christopher Lee
 30+ years of real estate industry experience.
 Founder and CEO of CEL & Associates, Inc.
 Over 500 real estate clients.
 Editor Strategic Advantage newsletter.
 Author From Good to Great to Outstanding and Transformational

Leadership In the New Age of Real Estate.
 Membership on multiple Boards of Directors and industry

committees.
 Ph.D. in Management and Organizational Development
 10,000,000 frequent-flyer miles. . .with one airline!

TODAY’S PRESENTATION
 Future Headlines
 A Perfect Storm of Market Factors and Shifts
 Real Estate Cycles Are Real and Predictable
 Emerging Talent Trends
 Real Estate Industry Sector Outlook
 Predictions
 Take-Away Actions
FUTURE HEADLINES
Robots Construct First Mid-Rise
Office Building
A PERFECT STORM
OF MARKET FACTORS
& SHIFTS
THE PERFECT STORM HAPPENING
SIMULTANEOUSLY
 Abundance of Capital  Legacy Exits
 Accelerating Technological Advancements  Multi-Purpose Real Estate
 Changing Global Economy  Product & Service Innovation
 Declining Workforce Participation Rate  Retrenchment of Debt Markets
 Demographic Shifts  Rise of Experiential Retail
 Disappearing Middle Class  Rising Operational Costs
 Flattening Global Marketplace  Robotics & Artificial Intelligence
 Geo-Centric Market Shifts  Sharing & Collaborative Economy
 Housing Affordability  Shifting Consumption Patterns
 Increasing Government Regulations  Stagnant Household Income
 Increasing Role of Big Data  The Internet of Everything
 Industry Consolidation  Unprecedented Federal Debt
 Information Transparency  Urbanization
REAL ESTATE INDUSTRY’S MEGASHIFTS
Category Yesterday
Business Focus Local / Regional
Collecting
Operational Focus
Assets
Seeking
Market Focus
Sites
Focus On
Service Platform
Service
Business Driver Market-Driven
Brokerage A Representative
Property Management Facility Manager
Leadership Founder(s)
Organization Organization
Training Manuals
Source: CEL & Associates, Inc.

Category Yesterday Today
Business Focus Local / Regional Regional / National
Collecting Collecting
Operational Focus
Assets Fees
Seeking Seeking
Market Focus
Sites Market Share
Focus On Focus On
Service Platform
Service Solutions
Business Driver Market-Driven Capital-Driven
Brokerage A Representative A Broker
Property Management Facility Manager Property Manager
Leadership Founder(s) Executives
Organization Organization Flatarchies
Training Manuals Trainers

C a te g o ry Y e s te rd a y Today T o m o rro w
B u s in e s s F o c u s L o c a l / R e g io n a l R e g io n a l / N a t io n a l N a t io n a l / G lo b a l
C o lle c t in g C o lle c t in g C o lle c t in g

O p e r a t io n a l F o c u s
A s s e ts Fees R e la t io n s h ip s
S e e k in g S e e k in g S e e k in g
M a rk e t F o c u s
S it e s M a rk e t S h a re C u s to m e r S h a re
Focus O n Focus O n Focus O n

S e r v ic e P la t f o r m
S e r v ic e S o lu t io n s C o n n e c t iv it y
B u s in e s s D r iv e r M a r k e t - D r iv e n C a p it a l - D r iv e n K n o w le d g e - D r iv e n
B ro k e ra g e A R e p r e s e n t a t iv e A B ro k e r A C o n s u lt a n t
P ro p e rty M a n a g e m e n t F a c ilit y M a n a g e r P ro p e rty M a n a g e r B u s in e s s L e a d e r
L e a d e r s h ip F o u n d e r(s ) E x e c u t iv e s T r a n s f o r m a t io n a l
O r g a n iz a t io n O r g a n iz a t io n F la t a r c h ie s H o la c r a c y
T r a in in g M a n u a ls T r a in e r s O n lin e
S o u r c e : C E L & A s s o c ia te s , In c .
C a te g o ry Y e s te rd a y Today T o m o rro w O v e rm o rro w
B u s in e s s F o c u s L o c a l / R e g io n a l R e g io n a l / N a t io n a l N a t io n a l / G lo b a l C yb e r
C o lle c t in g C o lle c t in g C o lle c t in g C o lle c t in g

O p e r a t io n a l F o c u s
A s s e ts Fees R e la t io n s h ip s P r e d ic t iv e D a t a
S e e k in g S e e k in g S e e k in g S e e k in g
M a rk e t F o c u s
S it e s M a rk e t S h a re C u s to m e r S h a re C o n n e c t iv e S h a r e
Focus O n Focus O n Focus O n Focus O n

S e r v ic e P la t f o r m
S e r v ic e S o lu t io n s C o n n e c t iv it y C u s t o m iz a t io n
B u s in e s s D r iv e r M a r k e t - D r iv e n C a p it a l - D r iv e n K n o w le d g e - D r iv e n A I D r iv e n
B ro k e ra g e A R e p r e s e n t a t iv e A B ro k e r A C o n s u lt a n t A n A d v is o r
P ro p e rty M a n a g e m e n t F a c ilit y M a n a g e r P ro p e rty M a n a g e r B u s in e s s L e a d e r E n t e r p r is e L e a d e r
L e a d e r s h ip F o u n d e r(s ) E x e c u t iv e s T r a n s f o r m a t io n a l V is io n a r y
O r g a n iz a t io n O r g a n iz a t io n F la t a r c h ie s H o la c r a c y V ir t u a l
T r a in in g M a n u a ls T r a in e r s O n lin e P e r s o n a liz e d
S o u r c e : C E L & A s s o c ia te s , In c .
SHIFT FROM GEOGRAPHY TO KNOWLEDGE
Optimal
Performance
Knowledge
Driven
Relationship-
Customer Based
Driven
Team-
Geo-Centric Based
Driven
Personality-
Based
Time
SHIFT FROM BUILDINGS TO CUSTOMERS
Optimal
Performance
Customer-
Centric
Solutions-
Services- Based
Centric
Company-
Building- Based
Centric
Market-
Based
Time

SHIFT FROM INTUITION TO ANALYTICS
Optimal
Performance
Big Data
Era
Predictive
Digital Analytics
Era
EXCEL
Boots On The Spreadsheets
Ground Era
Back Of The
Envelope
Time

SHIFT FROM CONTROL TO FACILITATION
Optimal
Performance
Data
Transparency
Customer
CRE Controlled
Data
Company
Opinions & Controlled
Insights
Broker
Controlled
Time
THE CONFLUENCE RESULT
New Dynamic
The Perfect
Delivery Systems
Storm
Emerge
New Business
Models
Emerge
Create
Disruptive Opportunities,
Innovation Differentiators &
Challenges New Services
& Products
Emerge
New Stakeholder
The
Relationships
Megashifts
Emerge

MAJOR OFFICE SHIFTS ARE UNDERWAY
From… To…
 Managing Four Walls  Managing Inside the Four Walls
 Dedicated Offices  Unassigned Work Space
 Locked Doors  Collaborative Space Designs
 Work From Offices  Work Remotely
 Face-to-Face Meetings  Virtual, Skype, GoToMeeting
 Fixed Walls  Movable Walls
 Attached Workforce  Untethered Workers
 Controlling Boomers  Collaborative Millennials
 Office Buildings  Workplace Environments
 Old Technologies  New Technologies
 9:00 to 5:00 Office Day  24/7 Workplace
MEGASHIFT TAKE-AWAYS . . .
 The current service delivery system [brokerage and property management] is changing rapidly.
 Customer access to data means the roles and characteristics of a Broker will be dramatically different.
 Tenants and investors will control the process…the CRE professional will be an advisor and a
knowledge contributor to the process.
 Today’s current business models, practices and processes will need to change in order to stay
competitive and relevant.
 Status quo is not an option.

REAL ESTATE CYCLES ARE
REAL AND PREDICTABLE
REAL ESTATE CYCLE PHASES
Ends On
Yr. 7, 8 or 9
Starts On
Yr. 2, 3 or 4

PRIMARY DRIVERS OF REAL ESTATE CYCLES
 Access to Credit  Inflation
 Acts of Terrorism  Interest Rate/Fed Policy
 Capital Markets  Job Growth
 Commodity Pricing  Lifestyle Choices
 Competition/Industry Factors  Market Deregulation
 Consumer Confidence  Monetary Policy
 Demographic Shifts  Natural Disasters
 Disruptive Technologies  Regulations - State/Local
 Economic Growth  Resource Scarcity
 Global Uncertainty  Supply/Demand Factors
 Government Policies  Tax Policy
 Household Formation  Technology
 Household Income  Trade Agreements
REAL ESTATE CYCLES HAVE NAMES
Time Period Cycle

1983 - 1988 Age of Awakening Boomers & Entrepreneurism
1993 - 1998 Age of Technology & Start-Ups
2003 - 2008 Age of Exuberance & Debt
2013 - 2018 Age of Capital, Asset & Entity Rebalancing
2023 - 2028 Age of Globalization & Knowledge
2033 - 2038 Age of Technology & Non-Land-Based Environments
Source: CEL & Associates., Inc.
WHERE ARE WE TODAY?
Ends On
3rd Quarter
Yr. 7, 8 or 9
2016
Starts On NAIOP
Yr. 2, 3 or 4 Symposium
4/17/2013

REAL ESTATE CYCLE TRENDS TO WATCH
OVER THE NEXT 18 – 24 MONTHS
2016 - 2018
 Rising Occupancy Levels  Generous TIs
 Hard-to-Find Deals  Rent Concessions
 High Investment Sales Activity  Protracted Negotiations & Entitlements
 Peaking Asset Values  Slowly Rising Cap Rates
 Abundance of Capital  Limited Access to Credit
 Global Uncertainty / Unrest  Struggling Competitors
 Emerging Economic Slowdown  Reduced Target Returns
 Niche Consolidation  Focus On Recurring Income

CYCLE
PROOF POINTS
SALES VOLUME & CAP RATES – COMBINED
Sales (in billions) Cap Rate
$200 10%
$180 9%
$160 8%
$140 7%
$120 6%
$100 5%
$80 4%
$60 3%
$40 2%
$20 1%
$0 0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: ©2016 Real Capital Analytics, Inc. All rights reserved.
Combined
COMMERCIAL / MULTIFAMILY
LOAN ORIGINATIONS INDEX
Through 1Q 2016, there was $2.86 trillion of commercial and

Note
multifamily outstanding debt…39% is held by banks and thrifts.
100
110
120
130
140
150
160
170
180
190
200
210
220
80
90
D ec 2000
M ar 2001
Jun 2001
Sep 2001
D ec 2001
M ar 2002
Jun 2002
Sep 2002
D ec 2002
National - All Properties
M ar 2003
Jun 2003
Sep 2003
D ec 2003
M ar 2004
Jun 2004
Sep 2004
D ec 2004
M ar 2005
Jun 2005
Sep 2005
D ec 2005
M ar 2006
Jun 2006
Sep 2006
D ec 2006
M ar 2007
Source: Moodys / ©2016 Real Capital Analytics, Inc. All rights reserved.
Jun 2007
Sep 2007
D ec 2007
M ar 2008
Jun 2008
Sep 2008
D ec 2008
M ar 2009
Jun 2009
Sep 2009
D ec 2009
M ar 2010
Jun 2010
Sep 2010
D ec 2010
M ar 2011
MOODYS / RCA
Jun 2011
Sep 2010
D ec 2010
M ar 2012
Jun 2012
Sep 2012
D ec 2012
M ar 2013
Jun 2013
Sep 2013
D ec 2013
Peaking?
M ar 2014
Jun 2014
Sep 2014
D ec 2014
M ar 2015
Jun 2015
ALL PROPERTIES NATIONAL INDEX
Sep 2015
D ec 2015
M ar 2016
Jun 2016
NAREIT TOTAL RETURN INDEX
VALUE OF U.S. OFFICE FURNITURE MARKET
Sales (in millions)
$16,000
$15,000
Peak
Peaking?
$14,000
Peak
$13,000
$12,000
$11,000
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: BIFMA (2016 and 2017 projected).

WHAT HAPPENS WHEN A
REAL ESTATE CYCLE
IS PEAKING?
CONSOLIDATION OCCURS
 CBRE acquires Global Workplace Solutions ($1.5 billion) from Johnson Controls.
 DTZ/Cassidy Turley merger ($500 million - $600 million).
 DTZ/Cushman & Wakefield merger ($2.0 billion).
 Newmark acquires ARA ($100+ million).
 Landmark Apartment Trust acquired by Starwood Capital/Milestone ($1.9b).
 CBRE acquires Forum Analytics and Tax Credit Group.
 Cushman & Wakefield acquires Multi Housing Advisors.
 MAA (Mid-America Apt. Communities) acquires Colonial Properties Trust ($8.6b).
 Essex Property Trust acquires BRE Properties ($4.3b).
 Multiple regional and niche mergers/acquisitions pending.
“Real estate company mergers and acquisitions are approaching the 2007 peak.” Ernst & Young
Source: Various sources and multiple publications.

M & A ACTIVITY INCREASES
 Blackstone takeover of Biomed Realty Trust $ 8.0 billion
 Blackstone takeover of Excel Realty Trust $ 2.0 billion
 Blackstone takeover of Strategic Hotels & Resorts $ 6.0 billion
 Colony America Homes merged into Starwood Waypoint Residential $ 7.7 billion
 Global Logistics Properties acquired Industrial Income Trust $ 4.5 billion
 American Healthcare Investors and Griffin-America Healthcare merger $ 4.0 billion
 Gramercy Property Trust merged with Chambers Street Properties $ 5.7 billion
 Marriott takeover of Starwood Hotels & Resorts $14.4 billion
 Weyerhauser Co. and Plum Creek Timber merged $23.0 billion
 Ventas acquires American Realty Capital Healthcare Trust $ 2.6 billion
There were 34 or $79.3 billion of M&A transactions in 2015…

Second highest to the peak in 2007 of $113.6 billion.
Source: CEL & Associates, Inc. and SNL Financial.
NON-RESIDENTIAL PERMITS DECELERATING
Non-residential
construction spending is
expected to peak around
$415 billion in 3Q 2016.
Source: Census Bureau, Morgan Stanley Research.

RUSH TO DEPLOY CAPITAL BEFORE CYCLE SHIFT
49% of Real Estate

Fund Managers are
concerned about
asset pricing.
FUNDRAISING STARTS TO SLOW
2016 Fundraising
will likely peak
around $30 billion.
PAST 48 HOURS
Asset Category YOY Transactions

Office -20%
Industrial -17%
Retail -35%
Multifamily -11%
Source: ©2016 Real Capital Analytics, Inc. All rights reserved.
In a recent survey, 76% of real estate respondents believe

that there will be more consolidation.
Source: Thomson Reuters
TIME FOR
INTERACTIVE SESSION
#1
INTERACTIVE SESSION # 1
This real estate cycle will end sometime in the near future…perhaps
sooner than you think.
What are the top five steps your firm is taking today
to prepare for and capitalize during the eventual slowdown/cycle change?
EMERGING TALENT TRENDS
EMERGING TALENT TRENDS
 73% of real estate firms are hiring.
 Average job tenure below the C-suite is 2.5 – 4.5 years.
 Today’s leaders are not trained or prepared to manage a multi-generational work force.
 Colleges and universities are not producing “job-ready” graduates.
 Managing internal and external networks is as important as managing talent.
 Prima donnas are on the way out.
 Title transformation is underway (Portfolio, Investment, Asset and Property Managers are becoming one).
 Locking in High Potentials, Next-Generation Stars/Leaders.
 Benefits are expanding.

BENEFITS ARE EXPANDING
Percent Real Estate

Benefit Firms Are Providing
Telecommuting 42%
Flex Time 48%
Free/Subsidized Parking 51%
Business Casual Days 71%
Wellness Programs 55%
Onsite Workout Facility 31%
Paid/Subsidized Professional Dues 55%
Tuition Reimbursement 62%
Source: CEL & Associates, Inc. 2016 Compensation & Benefits Survey
PROFILE OF EMPLOYEES IN
REAL ESTATE FIRMS*
% Of Total
Generation Employees
Age 51 Years or Older
45% - 50%
Baby Boomers
Age 39 – 50 Years
35% - 40%
Generation X
Age 19 – 38 Years
25% - 35%
Millennial Generation
Source: CEL & Associates, Inc., IREM Survey 2015.
* Non-Administrative.
Nearly 60% of real estate firms do not have a clear

succession plan for mission critical leaders.
BIGGEST CONCERNS OF CEOs
%
Rank Issue Responses
1 Attracting and retaining talent. 58%
2 Acquiring and keeping clients. 56%
3 Increasing cost of insurance. 48%
4 Increasing government regulations. 45%
5 Downward pressure on fees. 43%
6 Increasing cost to conduct business. 37%
7 Cyber security. 35%
7 Increasing legal risk. 35%
8 Keeping up with technology. 32%
9 Increase in interest rates. 24%
9 Tax reform. 24%
11 Demand/Requirements to “Go Green”. 14%
12 Increasing Tenant demands. 13%
PROFILE OF REAL ESTATE INDUSTRY’S
RETIREMENT PLANS
Percent
Category Respondents
Within:
― 1 – 2 Years 7%
― 3 – 4 Years 12%
― 5 – 6 Years 13% 55% plan to retire
within 10 years.
― 7 – 8 Years 9%
― 9 – 10 Years 14%
― More Than 10 Years 37%
― Don’t Know 8%
Total 100%
% OF CURRENT REAL ESTATE EXECUTIVES
BY TITLE EXPECTED TO RETIRE BY 2025
% Expected
Title / Level To Retire*
President / CEO 57% – 62%
Chief Financial Officer 43% – 48%
Executive Vice President 46% – 51%
Senior Vice President 40% – 45%
Vice President 38% – 43%
*Includes resignation, retirement, permanent disability and death.

BOTTOMLINE TALENT TRENDS
 Between 2016 – 2025, the real estate industry will likely be faced with a shortage of 15,000 – 25,000
qualified workers per year. The talent war will rage over the next decade.
 A majority of C-suite executives will be retiring over the next decade.
 New technologies, diversity, collaboration, specialization, redefined titles and values-based hiring will
reshape CRE employment practices.
 By 2020, around 50% of the workforce will be Millennials.
 The workplace environment, culture and employment practices must change to reflect the “new
workforce.”
TIME FOR
INTERACTIVE SESSION
#2
INTERACTIVE SESSION # 2
What are the top five actions your company has taken or
plans to take over the next 1 – 2 years to recruit, retain,
reward and motivate next-generation stars?
REAL ESTATE INDUSTRY
SECTOR OUTLOOK
OFFICE
THE GREAT GENERATIONAL TRANSFER
View Of Work View Of Square Feet Per
Generation View Of Work
Environment Office Space Worker
Baby Boomers Dedicated office
74.4 million “About to retire…not “I want the trappings
with title-based 350 Square Feet
(1946 – 1964) about to change.” of success.”
amenities.
Gen Xers
“I want more money,
65.8 million “Flexible hours for Cube space with
(1965 – 1980) portable skills and to 250 Square Feet
more personal TO.” external amenities.
work on my own.”
Millennials “Meaningful “I want teamwork, Collaborative space

75.9 million hours…no personal growth and with internal <150 Square Feet
(1981 – 1997) schedule.” opportunities.” amenities.
Generation Z Digital / virtual

77.9 million “Productive hours “I want it my way,
space with 24/7 <100 Square Feet
(1998 – ) on my terms.” when I need it.”
mobile connectivity.

OFFICE SPACE TRENDS
 By 2020, around 50% of the U.S. workforce will be Millennials.
 50% of the workforce will work remotely 50% of the time.
 Only 10 of the top 50 occupations with the most job openings require office space.
 By 2020, 40% of the U.S. workforce will be freelancers.
 The average individual workspace is occupied only 55% of the time in a normal work week, and
only 18% of the time over the entire week.
 The average U.S. tenant has 33% of its space as excess shadow space based on the new square
footage per employee.
OFFICE PORTFOLIO SALES ARE GROWING
T r a n s a c tio n S u m m a r y ($ B illio n s )
Year In d iv id u a l P o r tf o lio E n tity T o ta l

2010 $ 3 8 .5 $ 7 .6 $ 0 .6 $ 4 6 .8
2011 $ 5 7 .2 $ 9 .1 $ 0 .5 $ 6 6 .9
2012 $ 6 7 .4 $ 1 1 .6 $ 2 .6 $ 8 1 .6
2013 $ 7 9 .9 $ 1 9 .9 $ 5 .6 $ 1 0 5 .4
2014 $ 9 6 .1 $ 2 7 .4 $ 2 .4 $ 1 2 5 .8
2015 $ 1 0 5 .2 $ 3 6 .2 $ 4 .4 $ 1 4 5 .8
S o u r c e : © 2 0 1 6 R e a l C a p ita l A n a ly tic s , In c . A ll r ig h ts r e s e r v e d .
INDUSTRIAL
INDUSTRIAL TRENDS
 Robots will replace around 5.1 million workers worldwide by 2020.
 The robotics industry will grow from $28 billion in 2015 to $152 billion by 2020.
 The number of annual robot unit shipments will jump from 8.8 million in 2015 to 61.4 million by
2020.
 By 2025, there could be more technical than manual workers in industrial/warehouse space.
− Foxconn (an Apple/Samsung supplier) just replace 60,000 workers with robots.
 Just-in-time delivery of goods over the internet will be a boon for warehouse/distribution facilities.

INDUSTRIAL PORTFOLIO SALES ARE GROWING

2010 $ 1 3 .0 $ 7 .8 $ 0 .0 $ 2 0 .8
2011 $ 2 0 .1 $ 8 .4 $ 7 .8 $ 3 6 .3
2012 $ 2 5 .8 $ 1 1 .3 $ 0 .2 $ 3 7 .4
2013 $ 2 9 .2 $ 1 0 .7 $ 6 .4 $ 4 6 .3
2014 $ 3 5 .7 $ 1 1 .1 $ 3 .1 $ 4 9 .9
2015 $ 3 8 .3 $ 1 8 .1 $ 2 0 .1 $ 7 6 .5
RETAIL
GENERATIONAL SHIFTS IN RETAIL SHOPPING
View Of… Baby Boomers Xers Millennials
Retailers Trust the brand. Trust the connectivity. Trust the experience.
Groceries Food as a necessity. Food as a connector. Food as a nutrient.
Frequency Of Shopping Structured and consistent. Based on time availability. As needed…24/7.
Retail Motivation Advertisements. Ratings. Word-of-mouth/Twitter.
Shopping One stop. Digital retailing. Unlimited stops.
Physical Plant Mega centers. Smaller stores. Omni-channel.
Restaurants Place to eat. Place to socialize. Place to connect.
Stores Place to see products. Place to interact with products. Place to experience products.
Display Space Floor space. Display space. Mental space.
“Technology has changed the definition of retail real estate.”
“When online sales reach 15% – 20%, the current retail model begins to fail.”
RETAIL IS GOING DIGITAL
 The consumer has now taken hold of retail interactions.
 81% of consumers go online before going to a store to make a major purchase.
 On average, consumers visit three online and two brick-and-mortar stores before making a major purchase.
 66% of mobile shoppers comparative shop online while in a retail store.
 66% of major-purchase shoppers do product research at home.
 52% of online shoppers have purchased products directly from the manufacturers.
 Only 41% of Millennials shop at traditional grocery stores.
 Mobile commerce sales will reach $108 billion by 2017.

RETAIL PORTFOLIO SALES ARE GROWING

2010 $ 1 6 .9 $ 6 .2 $ 0 .0 $ 2 3 .1
2011 $ 2 6 .0 $ 9 .1 $ 9 .4 $ 4 4 .6
2012 $ 4 1 .5 $ 1 2 .4 $ 3 .7 $ 5 7 .7
2013 $ 4 0 .4 $ 1 5 .8 $ 6 .1 $ 6 2 .2
2014 $ 5 4 .5 $ 1 9 .5 $ 1 2 .7 $ 8 6 .7
2015 $ 5 9 .2 $ 2 0 .9 $ 7 .5 $ 8 7 .6
MULTIFAMILY
GENERATIONAL SHIFTS IN HOMEOWNERSHIP
MULTIFAMILY TRENDS
 Median age at first marriage rising [men age 29; women age 27].
 Median age when first child is born is increasing.
 Nearly 50% of adults have cohabitated (vs. 34% in 1995).
 32% of Millennials still live at home.
 10,000 people turn age 65 each day. This trend will continue for the next 20 years.
 55% of renters are renewing their leases.
 Amenities and services are increasing.
 Location is more important than unit size.

HOUSING PRICES DRIVE RENTAL DEMAND
% Households Can Afford A
Market Median-Priced Home In 2017
Atlanta, GA 77.8%
Charlotte, NC 62.2%
Nashville, TN 60.2%
Houston, TX 59.0%
Washington, D.C./Northern Virginia 56.5%
Salt Lake City, UT 56.3%
Phoenix, AZ 55.9%
Las Vegas, NV 54.1%
Dallas, TX 54.0%
Austin, TX 52.3%
Denver, CO 44.1%
San Diego, CA 44.1%
Seattle, WA 41.7%
Los Angeles, CA 25.8%
Orange County, CA 20.9%
San Jose, CA 18.5%
San Francisco, CA 16.9%
Source: RCG
MULTIFAMILY PORTFOLIO SALES ARE GROWING

2010 $ 3 0 .8 $ 6 .5 $ 0 .0 $ 3 7 .3
2011 $ 4 6 .9 $ 1 1 .3 $ 0 .3 $ 5 8 .6
2012 $ 6 3 .6 $ 1 4 .2 $ 9 .8 $ 8 7 .7
2013 $ 6 4 .4 $ 3 8 .1 $ 1 .1 $ 1 0 3 .6
2014 $ 8 5 .5 $ 2 2 .9 $ 4 .9 $ 1 1 3 .2
2015 $ 1 0 9 .2 $ 2 7 .4 $ 1 3 .4 $ 1 5 0 .0
S o u r c e : © 2 0 1 5 R e a l C a p it a l A n a ly t ic s , I n c . A ll r ig h t s r e s e r v e d .
PREDICTIONS …
WHAT IS AHEAD FOR 2025?
2025 REAL ESTATE INDUSTRY OUTLOOK
Number Prediction
The U.S. will move ever closer to becoming a cashless society…the impact
1.
on retail real estate will be significant..

Number Prediction
1.
Between 25% - 30% of real estate firms in existence in 2015 will be gone by
4.
2025.

Number Prediction
1.
4.
2025.
Between 60% - 70% of training for real estate professionals will be online or
6.
led remotely. Training will be more “on-demand.”

Number Prediction
1.
4.
2025.
6.
Online retail sales could be 19% of all retail sales (currently around 7%),
8.
rendering many retail centers irrelevant or in need of drastic transformation.

Number Prediction
1.
4.
2025.
6.
8.
Watch for the emergence of the “Certified Underwriter.” Within a decade,
11.
50% of today’s real estate Brokers will be gone.

Number Prediction
1.
4.
2025..
6.
8.
Watch for the emergence of the “Certified Underwriter.” Within a decade,
11.
50% of today’s real estate Brokers will be gone.
By 2025, 10 million or more jobs will be lost to robotics. Do not be surprised
14. to see many office buildings less than 250,000 sf in size being managed
remotely.
Number Prediction
Homeownership will drop to the high 50s (currently around 63%) as America
16.
shifts to a renter-based society.

Number Prediction
16.
Growing food in commercial buildings will be commonplace and many of the
18.
700,000 unused shipping containers will become urban farms.

Number Prediction
16.
18.
Watch for the rapid adoption of taxes and fines for all commercial and
21. residential buildings unable to meet energy efficiency standards. The
“Green” escrow could be commonplace.

Number Prediction
16.
18.
33. Do not be surprised if Amazon controls 15% - 20% of grocery sales.

Number Prediction
16.
18.
There will be multiple cyber attacks on real estate firms over the next
35.
decade.

Number Prediction
Homeownership will drop to the high 50%s (currently around 63%) as
16.
America shifts to a renter-based society.
18.
There will be multiple cyber attacks on real estate firms over the next
35.
decade.
Women could compose nearly 40% of the C-Suite positions within real
40.
estate firms.
Number Prediction
Human Resources Directors increasingly will make or have significant
41.
impact on lease negotiations and space design.

Number Prediction
41.
The real estate industry will be faced with a potential shortage of 15,000 –
44.
25,000 “qualified” workers per year through 2025.

Number Prediction
41.
44.
Watch for legislation requiring ALL Property and Community Managers to be
49.
“licensed and certified.”

Number Prediction
41.
44.
49.
Do not be surprised to see the government require monies to be set aside
50. when a building is sold to bring that building into compliance with a minimal,
government “Green” standard.

Number Prediction
41.
44.
49.
Do not be surprised to see the government require monies to be set aside
50. when a building is sold to bring that building into compliance with a minimal,
government “Green” standard.
100. Cell phones will be replaced by . . .

TAKE – AWAY ACTIONS
TAKE-AWAY ACTIONS
 Need to prepare for an eventual slowdown.
 Focus on recurring income and get rid of distractions.
 Reduce risk and eliminate redundancy and non-essentials.
 Accelerate the accumulation of dry powder.
 Need to create sustainable governance.
 Provide opportunities for High Potentials.
 Consider the creation of a Board of Directors or Advisors.
 Empower others to lead/make decisions.

TAKE-AWAY ACTIONS
 Need to create/retool your strategic plan.
 Create a plan to win.
 Develop performance-based growth strategies.
 Define your measures of success in 2020.
 Need to critically examine your talent management plans.
 Make sure you have the right people in the right places.
 Create a compensation plan reflective of today’s reality.
 Develop your succession plans for all C-Suite leaders.

TAKE-AWAY ACTIONS
 Solidify/strengthen your capital plan.
 Secure “growth” capital.
 Secure capital that is aligned with your goals.
 Secure capital that values your opinions/perceptions.
 Become client-/customer-centric.
 Build valued, recurring relationships.
 Inject the voice of the customer in all you do.
 Perfect proprietary knowledge into a customer advantage.

TAKE-AWAY ACTIONS
 Need to make technology an ally not a tool.
 Streamline business operations.
 Embrace transparency.
 Enable 24/7 Stakeholder connectivity.
 Need to perfect your brand management plan.
 Create a differentiating story.
 Ensure consistent messaging.
 Build brand value and equity.

Megashifts, Real Estate Cycles &
Bankable Predictions. . .
Taking CRE Into the Future
Christopher Lee

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Megashifts, Real Estate Cycles &

 30+ years of real estate industry experience.

 Founder and CEO of CEL & Associates, Inc.

 Over 500 real estate clients.

 Editor Strategic Advantage newsletter.

 Author From Good to Great to Outstanding and Transformational

 Membership on multiple Boards of Directors and industry

 Ph.D. in Management and Organizational Development

 10,000,000 frequent-flyer miles. . .with one airline!

Business Focus Local / Regional

Business Driver Market-Driven

Property Management Facility Manager

Source: CEL & Associates, Inc.

Business Focus Local / Regional Regional / National

Business Driver Market-Driven Capital-Driven

Brokerage A Representative A Broker

Property Management Facility Manager Property Manager

Leadership Founder(s) Executives

Organization Organization Flatarchies

Training Manuals Trainers

Source: CEL & Associates, Inc.

C o lle c t in g C o lle c t in g C o lle c t in g

Focus O n Focus O n Focus O n

P ro p e rty M a n a g e m e n t F a c ilit y M a n a g e r P ro p e rty M a n a g e r B u s in e s s L e a d e r

C o lle c t in g C o lle c t in g C o lle c t in g C o lle c t in g

Focus O n Focus O n Focus O n Focus O n

P ro p e rty M a n a g e m e n t F a c ilit y M a n a g e r P ro p e rty M a n a g e r B u s in e s s L e a d e r E n t e r p r is e L e a d e r

Source: CEL & Associates, Inc.

Source: CEL & Associates, Inc.

Source: CEL & Associates, Inc.

 Status quo is not an option.

Source: CEL & Associates, Inc.

Source: CEL & Associates, Inc.

Time Period Cycle

Source: CEL & Associates, Inc.

Source: CEL & Associates, Inc.

Source: ©2016 Real Capital Analytics, Inc. All rights reserved.

Through 1Q 2016, there was $2.86 trillion of commercial and

Source: BIFMA (2016 and 2017 projected).

Source: Various sources and multiple publications.

There were 34 or $79.3 billion of M&A transactions in 2015…

Source: Census Bureau, Morgan Stanley Research.

49% of Real Estate

Asset Category YOY Transactions

In a recent survey, 76% of real estate respondents believe

 Average job tenure below the C-suite is 2.5 – 4.5 years.

 Colleges and universities are not producing “job-ready” graduates.

 Managing internal and external networks is as important as managing talent.

 Prima donnas are on the way out.

 Locking in High Potentials, Next-Generation Stars/Leaders.

 Benefits are expanding.

Source: CEL & Associates, Inc.

Percent Real Estate

Nearly 60% of real estate firms do not have a clear

Chief Financial Officer 43% – 48%

Executive Vice President 46% – 51%

Senior Vice President 40% – 45%

Vice President 38% – 43%

*Includes resignation, retirement, permanent disability and death.

 A majority of C-suite executives will be retiring over the next decade.

 By 2020, around 50% of the workforce will be Millennials.

Millennials “Meaningful “I want teamwork, Collaborative space

Generation Z Digital / virtual