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Rocky Mountain region: CRE quarter-in-review Q3-2016

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An overview capturing the latest economic and office-oriented market intel for Denver, Salt Lake City and Phoenix

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Rocky Mountain region: CRE quarter-in-review Q3-2016

  1. 1. Denver, Phoenix and Salt Lake City economic and office overview Q3 2016
  2. 2. Economy
  3. 3. Employment growth -300.0 -250.0 -200.0 -150.0 -100.0 -50.0 0.0 50.0 100.0 150.0 200.0 12-monthnetchange(thousands) Phoenix Denver Salt Lake City Most recent annual growth slightly slower than cyclical average, but trend remains one of stability Source: JLL Research, Bureau of Labor Statistics +101,800 current cycle average growth +115,500 previous cycle average growth 2
  4. 4. 3.2% 3.1% 2.3% 1.7% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% Denver Salt Lake City Phoenix United States 12-month%changeEmployment growth and unemployment Rapid job growth is occurring throughout the region, but minimal slack may slow down future gains Source: JLL Research, Bureau of Labor Statistics 3.2% 3.2% 5.0% 5.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Denver Salt Lake City Phoenix United States Unemploymentrate(%) Employment growth Unemployment 3
  5. 5. Employment growth -5 0 5 10 15 20 25 Information Manufacturing Other services Government Trade, transportation and utilities Financial activities Leisure and hospitality Professional and business services Construction and mining Education and health 12-month net change (thousands) Phoenix Denver Salt Lake City Job growth balanced across health, construction, professional services and leisure Source: JLL Research, Bureau of Labor Statistics 4
  6. 6. Housing starts 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 Authorizedunits Phoenix Denver Salt Lake City Regional markets on track to surpass 2015 starts, but still well below previous peak Source: JLL Research, U.S. Census Bureau 5
  7. 7. Office
  8. 8. Market Inventory (s.f.) YTD 2016 net absorption (s.f.) Total vacancy (%) Average asking rent ($ p.s.f.) Under construction (s.f.) Denver 108,018,472 -20,603 13.8% $26.56 3,649,889 Phoenix 84,035,044 2,611,611 19.7% $24.22 1,692,140 Salt Lake City 49,442,083 1,247,276 7.3% $22.50 2,122,795 Region 241,495,599 3,838,284 14.5% $25.03 7,464,824 Regional office overview Even as occupancy growth stalls in Denver, vacancy is falling regionally Source: JLL Research Comparison to U.S. office market +70bp Net absorption (% of inventory) 7.1% Share of national construction 6.0% Share of national inventory +0bp Total vacancy +50bp U/C as % of inventory -$7.32 (-22.6%) Average asking rent 7
  9. 9. Net absorption -4,000,000 -2,000,000 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2016 Netabsorption(s.f.) Denver Phoenix Salt Lake City More than 1.0 m.s.f. of absorption in both Phoenix and SLC keeping annualized growth stable Source: JLL Research 5.1 m.s.f. 2016 annualized absorption 8
  10. 10. 1,384,779 625,814 413,118 246,778 239,670 224,516 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 Tempe (Phoenix) Utah County (Salt Lake City) Draper (Salt Lake City) Chandler (Phoenix) Scottsdale Airpark (Phoenix) Midtown Suburbs (Denver) YTDnetabsorption(s.f.)Net absorption Large user-heavy suburban submarkets are driving regional occupancy growth Source: JLL Research 9
  11. 11. 7.9% 8.2% 8.5% 9.7% 10.8% 10.8% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% Salt Lake City CBD Cottonwood (SLC) Tempe (Phoenix) Boulder (Denver) LoDo (Denver) South Scottsdale (Phoenix) ClassAtotalvacancy(%)Total vacancy Amenitized and in-demand submarkets have vacancy well below market and regional average Source: JLL Research 10
  12. 12. Rent growth 44.8% 23.3% 20.8% 20.0% 13.8% 13.0% 10.9% 10% 15% 20% 25% 30% 35% 40% 45% 50% Draper (SLC) Boulder (Denver) Tempe (Phoenix) Sandy South Towne (SLC) Utah County (SLC) South Scottsdale (Phoenix) Paradise Valley (Phoenix) ClassAyear-over-yearrentgrowth(%) Outside of Denver (except Boulder), double-digit rent growth unabated in many submarkets Source: JLL Research 11
  13. 13. Rent growth -10% -5% 0% 5% 10% 15% 20% 25% 30% 2010 2011 2012 2013 2014 2015 Q2 2016 Rentgrowthsince2010(%) All regional markets are experiencing rent growth on the back of both new supply and tightening Source: JLL Research +26.5% Denver +11.5% Phoenix +20.3% Salt Lake City 12
  14. 14. Under construction 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q3 2016 Underconstruction(s.f.) Denver Phoenix Salt Lake City As developments deliver, the construction pipeline will slow in response to market softening Source: JLL Research 13
  15. 15. COPYRIGHT © JONES LANG LASALLE IP, INC. 2016 TJ Jaroszewski Director – Rocky Mountains Research +1 303 260 6523 Thomas.Jaroszewski@am.jll.com Phil Ryan Senior Research Analyst – U.S. Office +1 202 719 6295 Phil.Ryan@am.jll.com

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