Presentation at NAR Annual Convention Orlando, FL, November 2012

1. Commercial Real Estate and
Economic Outlook
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation at NAR Annual Convention
Orlando, FL
November 9, 2012

2. Don Faught
Chair
Commercial Real Estate Forum

3. Commercial Investments
Sales Slowly Recovering for Large/Expensive Properties
Source: Real Capital Analytics
billions $ Volume
$80
$70
$60
$50
$40
$30
$20
$10
$0
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
200% Year-Over-Year % Change
100%
0%
-100%
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

4. Apartment Investments – Fast Comeback
$40
Billions
$35
$30
$25
$20
$15
$10
$5
$-
Source: Real Capital Analytics

5. Billions
$-
$10
$40
$50
$60
$70
$80
$90
$20
$30
01Q1
01Q2
01Q3
01Q4
02Q1
02Q2
02Q3
02Q4
03Q1
03Q2
03Q3
03Q4
04Q1
04Q2
04Q3
04Q4
05Q1
05Q2
05Q3
05Q4
06Q1
06Q2
06Q3
06Q4
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
Office Investments – Slow Steps
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
Source: Real Capital Analytics

6. 100
150
200
250
300
350
400
0
50
2002.Q1
2002.Q2
2002.Q3
2002.Q4
2003.Q1
2003.Q2
2003.Q3
2003.Q4
2004.Q1
2004.Q2
2004.Q3
2004.Q4
2005.Q1
2005.Q2
2005.Q3
2005.Q4
2006.Q1
2006.Q2
2006.Q3
2006.Q4
2007.Q1
2007.Q2
2007.Q3
2007.Q4
2008.Q1
2008.Q2
2008.Q3
2008.Q4
2009.Q1
2009.Q2
2009.Q3
2009.Q4
Origination Volume Index (2001 Qtr Avg=100)
2010.Q1
2010.Q2
Commercial Loan Originations
2010.Q3
2010.Q4
2011.Q1
2011.Q2
2011.Q3
2011.Q4
2012.Q1
2012.Q2
Source: Mortgage Bankers Association

7. Commercial Financing from CMBS - Faint Life
CMBS Issuance ($ Mil.)
80,000.00
70,000.00
60,000.00
50,000.00
40,000.00
30,000.00
20,000.00
10,000.00
0.00
2000.1Q
2001.1Q
2002.1Q
2003.1Q
2004.1Q
2005.1Q
2006.1Q
2007.1Q
2008.1Q
2009.1Q
2010.1Q
2011.1Q
2012.1Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
3Q
Source: CRE Financie Council

8. Commercial Financing from REITs
Public Equity
Monthly US REIT Equity Issuance ($ Mil)
14,000
12,000
10,000
8,000
6,000
4,000
2,000
-
J MM J S N J MM J S N J MM J S N J MM J S N J MM J S N J MM J S N J MM J S
06 07 08 09 10 11 12
Source: SNL Financial, NAREIT

9. 110
130
150
170
190
210
90
2000 December
April
August
2001 December
April
August
2002 December
April
August
2003 December
April
August
2004 December
Apartment
April
August
2005 December
April
Retail
August
2006 December
April
August
2007 December
Industrial
April
August
Property Prices Rising
Moody's/RCA CPPI - Composite Indices
2008 December
April
Office
August
2009 December
Apartment with the strongest gain
April
August
2010 December
April
August
2011 December
April
Source: Real Capital Analytics

10. 25,000
29,000
31,000
33,000
35,000
39,000
41,000
27,000
37,000
1980 - Q1
1981 - Q3
1983 - Q1
1984 - Q3
1986 - Q1
1987 - Q3
1989 - Q1
1990 - Q3
1992 - Q1
1993 - Q3
1995 - Q1
1996 - Q3
1998 - Q1
Rental Households
1999 - Q3
2001 - Q1
2002 - Q3
2004 - Q1
2005 - Q3
2007 - Q1
Rental Occupied Housing Units
2008 - Q3
2010 - Q1
2011 - Q3

11. Cap Rates Continue Downward Trend:
Apartment/CBD Office with Lower Yields
Avg Cap Rates by Sector
10.0%
9.5%
Sub - Office
9.0% Industrial
8.5%
Retail
8.0%
7.5%
7.0%
6.5%
6.0% CBD - Office
Apartment
5.5%
Source: Real Capital Analytics
5.0%
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

12. 10
12
14
16
0
2
4
6
8
1982 - Aug
1983 - Oct
1984 - Dec
1986 - Feb
1987 - Apr
1988 - Jun
1989 - Aug
1990 - Oct
1991 - Dec
1993 - Feb
1994 - Apr
1995 - Jun
1996 - Aug
1997 - Oct
1998 - Dec
2000 - Feb
10-year Treasury Yield
2001 - Apr
2002 - Jun
2003 - Aug
2004 - Oct
2005 - Dec
2007 - Feb
2008 - Apr
2009 - Jun
than Treasury Yields or Bank CDs
2010 - Aug
Cap Rates Still Much Better Yielding
2011 - Oct

13. Monetary Policy by Federal Reserve
(no change to 2015?)
%
Fed Funds
6
5
4
3
2
1
0

14. 200
400
600
800
1000
1400
1600
1800
2000
1200
0
1976 - Jan
1977 - Jan
1978 - Jan
1979 - Jan
1980 - Jan
1981 - Jan
1982 - Jan
1983 - Jan
1984 - Jan
1985 - Jan
1986 - Jan
1987 - Jan
1988 - Jan
1989 - Jan
1990 - Jan
1991 - Jan
1992 - Jan
1993 - Jan
1994 - Jan
1995 - Jan
1996 - Jan
1997 - Jan
1998 - Jan
1999 - Jan
2000 - Jan
2001 - Jan
2002 - Jan
2003 - Jan
2004 - Jan
2005 - Jan
Gold Price: Leveling off?
2006 - Jan
2007 - Jan
2008 - Jan
2009 - Jan
2010 - Jan
2011 - Jan
2012 - Jan

15. 1000
1500
2000
2500
3000
3500
2005 - Jan
2005 - May
2005 - Sep
2006 - Jan
2006 - May
2006 - Sep
2007 - Jan
2007 - May
2007 - Sep
2008 - Jan
2008 - May
2008 - Sep
NASDAQ
2009 - Jan
2009 - May
2009 - Sep
2010 - Jan
2010 - May
2010 - Sep
2011 - Jan
S&P 500 (Almost 100% from low point)
2011 - May
2011 - Sep
Strong Stock Market Recovery
NASDAQ (More than 100% increase from low point)
2012 - Jan
2012 - May
2012 - Sep

16. 0
5
10
20
25
30
35
15
1988 - Oct
1989 - Oct
1990 - Oct
1991 - Oct
1992 - Oct
1993 - Oct
1994 - Oct
1995 - Oct
1996 - Oct
1997 - Oct
1998 - Oct
1999 - Oct
2000 - Oct
2001 - Oct
2002 - Oct
S&P 500 stocks
2003 - Oct
2004 - Oct
2005 - Oct
2006 - Oct
2007 - Oct
2008 - Oct
2009 - Oct
2010 - Oct
Price-Earnings Ratio is Reasonable
2011 - Oct
2012 - Oct

17. What about Commercial
Real Estate Opportunities?

18. Office Market Fundamentals and Outlook
Office Fundamentals
Completions Absorption Vacancy
150,000 20.0
18.0
100,000
16.0
14.0
50,000
Square Feet ('000s)
12.0
Percentage
0 10.0
2012.1
2012.2
2012.3
2013.1
2013.2
2013.3
2013.4
2012.4
2003
2000
2001
2002
2004
2005
2006
2007
2008
2009
2010
2011
8.0
-50,000
6.0
4.0
-100,000
2.0
-150,000 0.0
Source: NAR / REIS

19. Industrial Market Fundamentals and Outlook
Industrial Fundamentals
Completions Absorption Vacancy
150,000 14.0
12.0
100,000
10.0
Square Feet ('000s)
50,000
8.0
Percentage
6.0
0
4.0
-50,000
2.0
-100,000 0.0
Source: NAR / REIS

20. Retail Market Fundamentals and Outlook
Retail Fundamentals
Completions Absorption Vacancy
50,000 12.0
40,000
10.0
30,000
8.0
Square Feet ('000s)
20,000
Percentage
10,000 6.0
0
4.0
-10,000
2.0
-20,000
-30,000 0.0
Source: NAR / REIS

21. Apartment Market Fundamentals and Outlook
Multifamily Fundamentals
Completions Absorption Vacancy Rate
250,000 9.0
8.0
200,000
7.0
150,000 6.0
Percentage
5.0
Units
100,000
4.0
50,000 3.0
2.0
0
1.0
-50,000 0.0
Source: NAR / REIS

22. Commercial Rents Rising:
Only Apartment Rents outpacing Inflation
National Rents
Office Industrial Retail Multifamily
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
-2.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
-4.0
-6.0 Source: NAR / REIS

23. Economy Supports Commercial
Market Recovery

24. Economy Growing, though Slowly
(No Fresh Recession because of Housing Recovery)
Real GDP Growth Rate
4
%
3
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013
-1
forecast forecast
-2
-3
-4

25. Payroll Jobs Changes
(December to December)
In millions
3
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013
-1
forecast forecast
-2
-3
-4
-5
-6

26. 54%
58%
60%
64%
66%
56%
62%
2000 - Jan
2000 - Jul
2001 - Jan
2001 - Jul
2002 - Jan
2002 - Jul
2003 - Jan
2003 - Jul
2004 - Jan
2004 - Jul
2005 - Jan
2005 - Jul
2006 - Jan
2006 - Jul
2007 - Jan
2007 - Jul
2008 - Jan
2008 - Jul
Employment Rate
2009 - Jan
2009 - Jul
2010 - Jan
2010 - Jul
2011 - Jan
2011 - Jul
2012 - Jan
(How many are working, rather than how many are unemployed)
2012 - Jul

27. %
10
20
30
40
50
60
70
80
90
0
100
1948 - Jan
1951 - Jan
1954 - Jan
1957 - Jan
Source: BLS
1960 - Jan
1963 - Jan
1966 - Jan
1969 - Jan
1972 - Jan
1975 - Jan
1978 - Jan
1981 - Jan
1984 - Jan
1987 - Jan
1990 - Jan
1993 - Jan
Women
1996 - Jan
Men
1999 - Jan
Labor Force Participation Rate
2002 - Jan
2005 - Jan
(Men are dropping out, Women are joining)
2008 - Jan
2011 - Jan

28. -500
500
1000
1500
2000
2500
0
2000 - Q1
$ billion
2000 - Q3
2001 - Q1
2001 - Q3
2002 - Q1
2002 - Q3
2003 - Q1
2003 - Q3
2004 - Q1
2004 - Q3
2005 - Q1
2005 - Q3
2006 - Q1
2006 - Q3
2007 - Q1
2007 - Q3
2008 - Q1
2008 - Q3
2009 - Q1
2009 - Q3
2010 - Q1
Corporate Profits … Sky High
2010 - Q3
2011 - Q1
2011 - Q3
2012 - Q1

29. 10
20
30
-40
-30
-20
-10
0
2000 - Q1
2000 - Q3
2001 - Q1
2001 - Q3
2002 - Q1
2002 - Q3
2003 - Q1
2003 - Q3
Non-residential fixed investment growth rate
2004 - Q1
2004 - Q3
2005 - Q1
2005 - Q3
2006 - Q1
2006 - Q3
2007 - Q1
2007 - Q3
2008 - Q1
2008 - Q3
2009 - Q1
2009 - Q3
2010 - Q1
2010 - Q3
2011 - Q1
2011 - Q3
Business Spending … Grew but now Pausing
2012 - Q1

30. Existing Home Sales
In million units

31. Rising Median Price Helps Improve
Bank Balance Sheets

32. 50000
100000
150000
200000
250000
0
1992 - Jan
1993 - Feb
1994 - Mar
1995 - Apr
1996 - May
1997 - Jun
1998 - Jul
1999 - Aug
2000 - Sep
2001 - Oct
2002 - Nov
2003 - Dec
2005 - Jan
2006 - Feb
2007 - Mar
2008 - Apr
2009 - May
2010 - Jun
(Doubles every 10 years)
2011 - Jul
2012 - Aug
U.S. International Trade Going Strong
Exports
Imports

33. Economic Forecast
2011 2012 2013 2014
History Forecast Forecast Forecast
GDP Growth +1.8% +2.0% +2.5% +3.1%
Payroll Job +1.7 million +1.8 million +2.5 million +2.6 million
Gains
Fed Funds 0.1% 0.1% 0.1% 0.1%
Rate
10-yr 2.8% 1.9% 2.2% 3.0%
Treasury

34. Huge Federal Budget Deficit …
Future Borrowing Cost will be High
(Deficit as % of GDP)
4
2
0
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
-2
- Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan
-4
-6
-8
-10
-12

35. Risks to Economic Forecast
– Fiscal Cliff on January 1, 2013 … if no new
compromised budget then …
• Automatic deep cuts to military and domestic spending
• Automatic higher taxes
• 3% shave off GDP growth, which is currently growing at
2%
– Smaller Players Knocked Out of Commercial Real
Estate Deals

36. What about Smaller/Inexpensive
Properties?
• Not captured in data
• No consistent measurement
• REALTOR® members deals are generally under
$2 million properties
• Survey indicated only slight increase in
transactions

37. Realtors® Commercial Market Survey
REALTORS® Commercial Activity – 2012.Q3
Sales Volume Compared with Previous Year Up 6%
Sales Prices Compared with Previous Year Down 4%
Rental Volume Compared with Previous Quarter Down 1%
Rental Rates Compared with Previous Quarter Down 3%
Level of Rent Concessions Compared with Previous Quarter Down 1%
Volume of New Construction Compared with Previous Quarter Down 2%
Direction of Business Opportunities Compared with Previous Quarter Up 0.3%
Source: National Association of REALTORS®

38. SIOR Member Survey of Market Activity
SIOR Commercial Real Estate Index
160.0
Northeast Midwest South West
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
Source: SIOR, NAR

39. REALTORS® Commercial Market Survey
(Nearly all are under $2 million properties)
Dollar amount of last transaction
Under $250K 33%
Between $250K and $500K 23%
Between $500K and $1 M 19%
Between $1 M and $2 M 17%
$2 M and $5 M 6%
Between $5 M and $10 M 1%
Over $10 M 1%

40. Small Banks Important to REALTORS®
Current sources of financing for commercial deals
National banks (“Big four”)
3% 8% Regional banks
1% 11%
Local banks
Credit unions
17%
Life insurance companies
REITs
18%
Private investors
Public companies
Small Business Administration
4%
25% Other, please specify
6%
7%
Source: NAR

41. Big Banks getting Bigger
Top 10 Banks' Share of Total Deposits
60% 54.30%
50%
40%
30%
20%
10%
0%
1970 1980 1990 2000 2012
Source: Janicki and Prescott, BankRate.com

42. Regulation Consistently Cited as Top 5
Concern for Bankers Since 2009
• 2008-’09: Legislative and regulatory action (i.e.
bankruptcy cram-downs, TILA, RESPA,HMDA)“
• 2009-’10: Regulatory burden and examiner scrutiny
• 2010-’11: Regulatory burden and compliance costs
• 2011-’12: Regulatory burden and compliance costs
Source: American Bankers Association

43. Commercial Financing—Lending Remains Tight
Changes in lending conditions over past 12 months
Eased significantly 1%
Eased somewhat 27%
Not changed 30%
Tightened somewhat 20%
Tightened significantly 23%
Source: National Association of REALTORS®

44. Commercial Financing—Lending Hampers Sales
Have you had a sales transaction fail Have your clients failed to complete a
during the past 12 months due to re-financing transaction during the
lack of financing? past 12 months?
33%
Yes Yes
No
50% 50%
No
67%
Source: National Association of REALTORS®

45. Commercial Market Forecast
OFFICE 2011 2012 2013
Vacancy Rate 16.6% 16.1% 15.7%
Net Absorption ('000 sq. ft.) 20,714 24,064 47,821
Completions ('000 sq. ft.) 12,324 13,746 34,146
Rent Growth 1.6% 2.0% 2.6%
INDUSTRIAL 2011 2012 2013
Vacancy Rate 12.0% 10.8% 10.5%
Net Absorption ('000 sq. ft.) 78,118 59,889 67,169
Completions ('000 sq. ft.) 15,700 28,386 57,086
Rent Growth -0.5% 1.7% 2.4%
RETAIL 2011 2012 2013
Vacancy Rate 12.5% 11.0% 10.7%
Net Absorption ('000 sq. ft.) 4,297 10,252 20,106
Completions ('000 sq. ft.) 4,899 5,567 15,899
Rent Growth -0.2% 0.8% 1.3%
MULTI-FAMILY 2011 2012 2013
Vacancy Rate 5.2% 4.3% 4.2%
Net Absorption (Units) 200,720 219,318 236,559
Completions (Units) 37,678 79,845 148,623
Rent Growth 2.2% 4.1% 4.4%

46. For Daily Update and Analysis
• Twitter
@NAR_Research

47. Commercial Real Estate and
Economic Outlook
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation at NAR Annual Convention
Orlando, FL
November 9, 2012

48. Commercial Real Estate Business
Trends Forum
National Association of REALTORS®
November 9, 2012
Calvin Schnure
VP, Research & Industry Information
NAREIT®

49. Vacancy rates are elevated, apartments are the big
exception
20 Percent
Apartment
18 Office
Retail
16
14
12
10
8
6
4
2
Annual Top 50 Market Data Quarterly Metro Data
0
1980 1986 1992 1998 2001 2002 2004 2005 2007 2008 2010 2011
49
Source: Reis

50. Rent growth is sluggish for retail and office, slowing for
apartments
15 Percent, Ann
ualized
Retail
Office
10
Apartment
5
0
1988 1992 1996 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-5
-10
-15 Annual Top 50 Market Data Quarterly Metro Data
50
Source: Reis

51. The State of Commercial Real Estate
• Q3 saw modest improvements nationwide;
– Multifamily: vacancy rates slide lower still, rent growth slows;
– Office: vacancies edging down, rent growth weak. CBD vs
suburban;
– Retail: regional malls seeing improvements in vacancies,
rents, while neighborhood and community centers lag.
• A puzzle: the macro economy is at a crawl; why did
CRE show any improvement?
– New supply is negligible, so even a tiny bit of absorption
yields improvements.
– But robust gains will need a robust macroeconomy.
• Rates are low but access to financing still tight.
51

52. Construction at decades-low levels generates more
pent-up demand
Private Construction
70
(SAAR, Mil. $)
60 Retail
50
40
Office
30
20
10 Multifamily
0
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Source: U.S. Census Bureau, Haver Analytics.
52

53. Apartments and CBD Office prices leading the way;
Retail and Suburban Office lag
Commercial Property Prices
Peak = 100
100
National All-Property
Apartment
90 Retail
Office-CBD
Office-Suburban
Industrial
80
70
60
50
2007 2008 2009 2010 2011 2012
53
Source: Moody’s/RCA

54. The “Tug of War” on economic growth:
Drags Sources of strength
• Housing crisis/ mortgage mess/ • Productivity growth
deleveraging
• Wealth effect
• Fiscal drag, incl. state & local
• Monetary policy
• Uncertainty, lack of confidence…
• Growing pent-up demand
and Europe, US fiscal cliff
54

55. When did the “New Normal” begin?
112 Payroll employment, past 6
recessions/recoveries
110 Job market trough = 100
108
106
104
102
100
2008
98
2001
1991
96
1982
1975
94
1970
Trough
-6
-9
-3
3
6
9
-36
-33
-30
-27
-24
-21
-18
-15
-12
12
15
18
21
24
27
30
33
36
Months since trough
Source: Bureau of Labor Statistics, Haver Analytics.
55

56. Productivity growth hasn’t flagged
6 Percent
1-year change
5
4
3
2
1 5-year change
0
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
-1
“Stagflation” was the original “New Normal”
-2
Source: U.S. Census Bureau, Haver Analytics.
56

57. Productivity growth stagnated during Japan’s “Lost Decade”
Percent change
8
6
1-year change
4
3-year change
2
0
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011
-2
The "Lost Decade" is into re-runs
-4
-6
Source: Haver Analytics
57

58. Pent-up demand continues to drive multifamily sector,
while new supply still falls short
Focus on
Multifamily
• Market conditions in multifamily rental housing have
tightened since the housing crisis began;
• Sustained low household formation has caused
unprecedented pent-up demand;
• New supply falls far short of potential demand;
• Key factor limiting rent growth: wages.
58

59. Household formation plunged during the Great
Recession, well below its trend pace
Focus on
Percent change over year ago Multifamily
3
2
Fitted Trend
1
0
1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010
Source: U.S. Census Bureau, Haver Analytics. 59

60. Millions have moved in with parents, other family, or
nonfamily housemates
Focus on
Shared households, percent of total Multifamily
25
24
The number of shared
households, defined as those
with an extra adult, rose 2.9
million in 2008-2010.
23
22
21
20
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Source: U.S. Census Bureau, Haver Analytics. 60

61. Multifamily housing construction since 2008 has totaled
700,000 below the prior trend pace Focus on
Thousands of units, seasonally-adjusted annual rate
Multifamily
600
500
400
Average, 2000-2007
300
200
100
0
2000 2002 2004 2006 2008 2010 2012
Source: U.S. Census Bureau, Haver Analytics. 61

62. Pent-up demand is driving rental occupancy higher,
even as the macro economy drifts
6 Household formation
Percent change
5
4
3
2
1
0
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
-1
-2
Owner
-3 Renter
Owner: 3 yr ave
Renter: 3 yr ave
-4
62
Source: U.S. Census Bureau, Haver Analytics

63. Borrowing demand for commercial mortgages is gaining
momentum
63
Source: Federal Reserve Board Senior Loan Officer Survey, October 2012.

64. But standards are still tight
64
Source: Federal Reserve Board Senior Loan Officer Survey, October 2012.

65. The CMBS market continues to contract
1,000 $ Billions
900
800
700
600
500
400
300
200
100
0
65
Source: SIFMA

66. Forecasters have been expecting long term interest rates
to rise… for a decade, now.
Percent Percent
6 6
5 5
4 4
3 3
2 2
Actual 10-year Treasury yield (solid black line)
1 Predictions out to five quarters ahead of professional forecasters (hatched lines) 1
0 0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Philadelphia Federal Reserve Survey of Professional Forecasters, Bloomberg
66

67. REITs are raising record amounts of capital Focus on
Acquisitions
60 Billions of dollars
Debt
Preferred shares
50 IPO
Secondary equity offerings
40
30
20
10
0
2004 2005 2006 2007 2008 2009 2010 2011 2012*
*2012 offerings through September. Source: SNL Financial, NAREIT. 67

68. REIT acquisitions benefit from access to capital, market
discipline
Focus on
Acquisitions
• The REIT business model influences property
acquisitions in two ways:
– Access to capital allows REITs to buy properties when they
are available at attractive prices—rather than being rationed
by credit standards or driven by investment fund flows;
– Market discipline discourages REITs from over-paying at
the market peak—in fact, REITs sold at the top of the 2000s
boom.
• REIT acquisitions early in a price cycle add value
over the long haul… and REITs are the main buyers
today.
68

69. Commercial Property Prices Focus on
Percent change over year ago Acquisitions
Source: NAREIT Pure Property Index® 69

70. Net Acquisitions Adjusted* Focus on
Acquisitions
* Adjusted to remove the Equity Office and Archstone transactions
Source: RCA
70

71. Net Acquisitions… buy low, sell high Focus on
Acquisitions
Pre-boom Boom and Bust Recovery
market peak
2001-2003 2004-2007 2008-2009 2010-Current Total
$ Millions $ Millions $ Millions $ Millions $ Millions
REITs 15,400 (20,898) (7,425) 27,313 14,390
Private 11,760 (81,483) 9,120 (22,957) (22,360)
Inst'l/Eq (13,101) 141,731 5,579 (2,439) 131,771
Cross-Border 736 38,140 2,533 1,054 42,464
Other (14,795) (77,490) (9,808) (2,971) (166,264)
Source: RCA
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72. REITs have posted a strong performance in 2012
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73. Disclaimer
NAREIT is the worldwide representative voice for REITs and listed real estate companies with an interest in U.S. real estate and
capital markets. Members are REITs and other businesses that own, operate and manage income-producing real estate, as well as
those firms and individuals who advise, study and service those businesses. NAREIT is the exclusive registered trademark of the
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Copyright© 2012 by the National Association of Real Estate Investment Trusts, Inc.® All rights reserved.
This information is solely educational in nature and is not intended by NAREIT to serve as the primary basis for any investment
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Performance results are provided only as a barometer or measure of past performance, and future values will fluctuate from those
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Before an investment is made in any security, fund or investment, investors are strongly advised to request a copy of the
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For more information please visit: www.reit.com
73

74. Commercial Real Estate and
Economic Outlook
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation at NAR Annual Convention
Orlando, FL
November 9, 2012