Emerging Trends in Real Estate 2021 - .NET Framework

Emerging Trends in Real Estate 2021

ULI Baltimore Emerging Trends in Real Estate 2021 January 28, 2021

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Dealing with

Certain Uncertainties

The Economy Stumbles: Real estate has the potential to hang on

The Economy

$211.5

Baltimore Real GMP Trillions 2012$

? Unprecedented mandated recession impacted population and businesses unevenly

? Federal Reserve monetary support has put a floor under asset prices

? Capital still available for real estate

? Pace of the recovery will be key to the real estate sector

$201.5 $191.5 $181.5 $171.5

Pre-Vaccine Recovery

Post-Vaccine Recovery

Recession Re-Opening

? Confidence will be needed for full recovery

$161.5

? Employment recovery may be uneven

$151.5 2019

2020

2021

2022

Emerging Trends in Real Estate 2021 PwC

Sources: US Bureau of Economic Analysis, IHS Markit

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Real Estate and the new Administration: Potential opportunities and challenges

Additional ? "America Rescue Plan" a $1.9T relief COVID Relief package

Infrastructure ? "Build back Better Plan"

Affordable Housing

? 10 ? year $640B plan to increase the stock of affordable housing

Immigration ? Reform needed to raise immigration

Reform

levels above 2020's 600,000

SALT Deduction

? Restore SALT deduction from current $10k limit

Emerging Trends in Real Estate 2021 PwC

1031 Exchange

? Elimination of the 1031 exchange benefit for anyone with income over $400k

Capital Gains Tax

? Proposed increase in capital gains tax rate

Opportunity Zones

? Increased oversight and enhanced proof of economic benefit

Increased Oversight

? Higher level of oversight on the shadow lending industry by FSOC

Corporate and Individual Taxes

? Proposed increase in tax rates for corporations and individuals with income over $400k

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Accelerated trends or

fundamental changes

Work from Home: Attitudes are changing

Work from home (WFH)

Work from home experiment has changed attitudes toward remote working - "working is working no matter where you are"

In the short term has led to rising productivity, but will gains be sustainable over a longer-term?

Office is still going to be relevant, but role may evolve to meet different needs

.

Emerging Trends in Real Estate 2021 PwC | Strictly Priv ate & Conf idential | Not For Distribution

What percent of your office employees do you anticipate will work remotely at least one day a week?

Few (0 - 29%) Many (30 - 59%) Most (60 - 100%)

Before COVID-19

36%

25%

39%

During COVID-19

2%

21%

77%

After COVID-19 (projected)

11%

34%

55%

Source: PwC US Remote Work Survey, June 25, 2020

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Future remote work plans

Executives and employees may have different plans

? Executives feel time in the office is needed to maintain culture

? Employees are focused on flexibility ? more than 50% favor working remotely at least 3 days a week

? Future will depend on role and company

Source: PwC US Remote Work Survey January 12, 2021. Base: 1,200 US office workers

Emerging Trends in Real Estate 2021 PwC | Strictly Priv ate & Conf idential | Not For Distribution

Remote work days per week

FIVE DAYS FOUR DAYS THREE DAYS

TWO DAYS

5%

10% 5%

16% 15%

19%

ONE DAY 0%

10% 18%

5%

10% 15% 20%

Employees Executives

29%

29% 25% 30%

35%

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The Great American Move

Flexibility increases choices

The great American Move

WFH has increased flexibility about where employees can live

Ongoing trend toward sunbelt 18hour cities has accelerated during the pandemic

Permanent move to retirement/vacation homes

City to suburb dynamics have also changed with suburbs even more attractive ? "willing to commute further, if you don't have to do it every day"

Emerging Trends in Real Estate 2021 PwC | Strictly Priv ate & Conf idential | Not For Distribution

Outflow

Inflow

Market

Austin Las Vegas Phoenix Sacramento Dallas

# of HHs

10,268 9,467 9,414 9,283 8,017

% Change from 3rd Qtr

Market of Origin

148% San Francisco

67%

Los Angeles

45%

Los Angeles

62%

San Francisco

133% Los Angeles

Market

New York San Francisco Los Angeles D.C. Chicago

# of HHs

43,765 41,741 24,139 12,417 6,163

% Outside of Metro

35.4% 25.1% 18.1% 13.3% 12.5%

Destination

Philadelphia Sacramento San Diego Salisbury, MD Los Angeles

Households looking to relocate in 4th Quarter 2020

Source: Data provided by Redfin, a national real estate brokerage.

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