MC BOARD_091718_FINAL.PDF

The 7th Inning Stretch
Maricopa County
September 17, 2018
Presented By:
Elliott D. Pollack
CEO, Elliott D. Pollack & Company
Elliott D. Pollack & Company

Will the national economy
continue to grow?
-Yes
Elliott D. Pollack & Company 2

Will it continue to grow
above 3%?
-Probably not for very long.
Elliott D. Pollack & Company 3

Strong Economy
Tax cuts helped a lot
Continued fiscal stimulus
Trade war unlikely
Strong plant and equipment spending
few obvious imbalances
Elliott D. Pollack & Company 4

Too early to tell how much
of a slowdown it will be.
5
A Recession will happen at
some point but not soon.
Elliott D. Pollack & Company 5

Right now imbalances
seem relatively mild.
Elliott D. Pollack & Company 6

Strong economy (strong
consumer spending,
business investment and
exports) lead to:
Elliott D. Pollack & Company 7

Strong Growth in Demand
Strong Labor Market
Lower Unemployment
Higher Wages
Higher Rates of Inflation
Fed Tightening
Slower Growth
Fewer Jobs
Elliott D. Pollack & Company 8

Quantitative Quantitative
Easing Tightening
Elliott D. Pollack & Company 9

Quantitative Easing
Versus
Quantitative Tightening
• Bad for asset prices
• Higher short term rates
• Higher long term rates
• Flattening of the Yield Curve
• Cap rates increase
• Companies may delay investment
Elliott D. Pollack & Company 10

Where do we stand?
Elliott D. Pollack & Company 11

U.S. Leading Indicators
1970 – 2018*
Source: The Conference Board
Recession Periods
120
110
100
90
80
70
60
50
40
Elliott D. Pollack & Company *Data through July 2018 12

Consumer Confidence
1978 – 2018*
Source: The Conference Board
Recession Periods
150
140
130
120
110
100
90
80
70
60
50
40
30
20
Elliott D. Pollack & Company *Data through August 2018 13

Treasury Spread:
10 year bond rate less 3 month bill rate
1959 – 2018* Recession Periods
Source: Federal Reserve Bank of New York
5
4
3
2
1
0
-1
-2
-3
-4
Elliott D. Pollack & Company *Data through August 2018 14

U.S. Unemployment Rate
1948 – 2018*
Source: Bureau of Labor Statistics
Recession Periods
12%
10%
8%
6%
4%
2%
0%
Elliott D. Pollack & Company *Data through July 2018 15

Employment Cost Index
2002-2018*
Source: Bureau of Labor Statistics
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
16
Elliott D. Pollack & Company

Federal Surplus or Deficit
FY 1989-2018
(Millions) Source: U.S. Office of Management and Budget Recession Periods
$400,000
George Bill George Barack Donald
$200,000 H. Bush Clinton W. Bush Obama Trump
$0
-$200,000
-$400,000
-$600,000
-$800,000
-$1,000,000
-$1,200,000
-$1,400,000
-$1,600,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Elliott D. Pollack & Company 17

Pending Home Sale Index
2001-2018*
Source: National Association of Realtors
Recession Periods
130
120
110
100
90
80
70
Elliott D. Pollack & Company *Data through July 2018 18

What keeps me up at night?
Elliott D. Pollack & Company 19

Job Openings
2001 – 2018*
Source: Bureau of Labor Statistics
(1000’s) Recession Periods
7,000
6,500
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
Elliott D. Pollack & Company *Data through July 2018 20

Employment Versus Labor Force Growth
1970– 2018*
Source: Bureau of Labor Statistics
(1000’s) Recession Periods
6,000
4,000
2,000
0
-2,000
Employment
Labor Force
-4,000
-6,000
Elliott D. Pollack & Company *Data through August 2018 21

U.S. Consumer Price Index
Annual Percent Growth
1970 – 2018*
Source: Bureau of Labor Statistics
Recession Periods
15%
13%
11%
9%
7%
5%
3%
1%
-1%
-3%
Elliott D. Pollack & Company *Data through July 2018 22

Auto Loans
Source: New York Fed Consumer Credit Panel/Equifax
(Millions)
120.4 6.0%
100.4 5.0%
80.4 4.0%
60.4 3.0%
40.4 2.0%
20.4 1.0%
0.4 0.0%
No. of Accounts % of Balance Deliquent
Elliott D. Pollack & Company 23

Cyclically Adjusted PE Ratio**
1950 – 2018*
Source: Robert Shiller, Yale University
Recession Periods
50
45
40
35
30
25
20
15
10
5
0
**Price earnings ratio is based on average inflation-adjusted earnings
Elliott D. Pollack & Company from the previous 10 years, known as the Cyclically Adjusted PE Ratio *Data through September 2018 24

Effects of a Trade War
1.Higher prices on inputs
2.Jobs? Depends on structure.
Probably a minor plus
3.Intellectual Property Rights
Will have a relatively minor effect
on U.S. economy
Elliott D. Pollack & Company 25

Trade War or Negotiation?
• 23% of Chinese Exports end up in the
U.S.
• 20% of Chinese GDP is exports
• 8% of U.S. exports end up in China.
• <10% of U.S. GDP is exports
Elliott D. Pollack & Company 26

Trade War or Negotiation?
• So, 4.6% of China’s economy depends on
exports to the U.S
.
• 0.7% of U.S. economy depends on
exports to China
Elliott D. Pollack & Company 27

Trade War or Negotiation?
• China needs exports to keep jobs.
• They probably don’t want a U.S.
Recession.
Elliott D. Pollack & Company 28

This Cycle is No Spring Chicken
Elliott D. Pollack & Company 29

U.S. BUSINESS CYCLE EXPANSIONS
Source: National Bureau of Economic Research
March 1991 – March 2001 120
June 2009 - Present 111
February 1961 – December 1969 106
November 1982 – July 1990 92
November 2001 – December 2007 73
March 1975 - January 1980 58
October 1949 – July 1953 45
May 1954 – August 1957 39
November 1970 – November 1973 36
April 1958 – April 1960 24
July 1980 – July 1981 12
Elliott D. Pollack & Company 30

So, where does this leave
us?
Elliott D. Pollack & Company 31

2019 will probably still be a
good year.
Elliott D. Pollack & Company 32

Tax cuts, deficit spending and plant
& equipment spending should keeps
things going nicely.
Elliott D. Pollack & Company 33

Probability of a recession still
relatively low
Elliott D. Pollack & Company 34

We’re probably in the 8th
inning
Elliott D. Pollack & Company 35

Arizona
&
Maricopa County
Elliott D. Pollack & Company 36

Job Growth 2018
Alaska YTD July 2018 vs. YTD July 2017
49 Source: U.S. BLS
4
35
8
2
12
3
10 1 5
19
Hawaii 7 21
Jobs growing 6
Top 10
Jobs declining 9
Elliott D. Pollack & Company 37

Arizona Employment Growth
Arizona’s Rank Out of 50 States
Source: Arizona State University, U.S. Bureau of Labor Statistics
Year Rank Year Rank
1997 2 2008 46
1998 1 2009 49
1999 2 2010 49
2000 5 2011 27
2001 9 2012 9
2002 10 2013 9
2003 4 2014 18
2004 2 2015 11
2005 2 2016 7
2006 2 2017 5
2007 17 2018* 7
Elliott D. Pollack & Company *YTD July 2018 vs YTD July 2017 38

Employment Growth
From Bottom of Recession to Now
Source: BLS
% of Arizona 2017 Annual
Area % Change Growth Wages
United States 13.9% $55,331
Arizona 16.9% 100.0% $49,751
Maricopa County 20.5% 84.2% $52,377
Pima County 5.9% 5.2% $43,591
Balance of State 11.3% 10.6% $37,581
Note: Wages for Private industries
Data not seasonality adjusted 39
Elliott D. Pollack & Company Bottom of Recession Sept. 2010 to July 2018;

Phoenix-Mesa-Scottsdale Employment Growth
(Ranking among all metro areas greater than 1,000,000)
Source: Arizona State University, U.S. Bureau of Labor Statistics
Year Rank # MSA’s Year Rank # MSA’s
1997 2 22 2008 25 29
1998 1 23 2009 23 24
1999 3 24 2010 23 23
2000 7 25 2011 14 25
2001 7 26 2012 10 28
2002 5 25 2013 7 29
2003 3 25 2014 15 31
2004 3 25 2015 10 32
2005 1 26 2016 7 34
2006 1 27 2017 5 34
2007 10 29 2018* 7 34
Elliott D. Pollack & Company *YTD July 2018 vs YTD July 2017 40

Maricopa County Employment*
Annual Percent Change FY1988–2019**
Source: Office of Economic Opportunity
Recession Periods
8.0% 7.5%
7.0%
6.2% 6.3% 6.4%
6.0% 5.5%5.3% 5.4%
4.3%
Pre-2007 Avg. 3.7%
4.0% 3.4%
2.7% 2.9% 3.0% 2.8%2.8%2.6% 3.2%3.1%2.9%
2.4%2.4% 2.4%
2.0%
2.0%
1.1% 1.0%
0.1% 0.4%
0.0%
-0.3% -0.4%
-2.0%
-4.0%
-6.0%
-6.1%-5.8%
-8.0%
*Non-agricultural wage & salary employment. Changed from SIC to NAICS reporting in 1990.
41
Elliott D. Pollack & Company

Maricopa County Employment*
Net Annual Growth Change FY1988–2019**
Source: Office of Economic Opportunity
(000’s) Recession Periods
120.0 107.7
86.8
80.0 80.680.777.872.073.0
62.4 61.8
54.7 58.358.255.7
44.6 46.548.046.4
40.0 30.3 37.2 33.0
21.923.2 26.7
10.6 15.0
1.6 6.1
0.0
-3.4 -5.6
-40.0
-80.0
-101.5
-120.0 -112.8
*Non-agricultural wage & salary employment. Changed from SIC to NAICS reporting in 1990.
42
Elliott D. Pollack & Company

Employment: Maricopa County to U.S.
Annual Growth Rate
FY1990-2017
Recession Periods
Source: Bureau of Labor Statistics
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0% U.S. Maricopa
County
-6.0%
-8.0%
43
Elliott D. Pollack & Company

2018*
Net Job Growth and Wages
Educational and Health Services $51,916
Mining and Construction $56,282
Professional and Business Services $57,149
Manufacturing $74,588
Trade, Transportation, and Utilities $47,751
Leisure and Hospitality $25,199
Financial Activities $70,037
Information $74,536
Other Services $39,148
(1000’s) -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0
Elliott D. Pollack & Company Data through July 2018 44

2018*
% Job Growth and Wages
Mining and Construction $56,282
Manufacturing $74,588
Educational and Health Services $51,916
Leisure and Hospitality $25,199
Financial Activities $70,037
Professional and Business Services $57,149
Trade, Transportation, and Utilities $47,751
Information $74,536
Other Services $39,148
(1000’s) -2.0% 0.0% 2.0% 4.0% 6.0% 8.0%10.0%12.0%
Elliott D. Pollack & Company Data through July 2018 45

Where are the Inflows of
Population?
Elliott D. Pollack & Company 46

Population Growth after Recessions
Maricopa County
Source: Office of Economic Opportunity
Years % Growth APR
1975-1980 32.7% 3.6%
1981-1990 34.2% 3.7%
1991-2001 36.1% 3.9%
2001-2007 20.4% 2.3%
2009-2017 10.5% 1.3%
Elliott D. Pollack & Company 47

Growth itself is an economic driver
in Maricopa County–
People moving to the State create demand for
goods and services that create more jobs.
When you grow around 1.6% instead of 3.2%,
the part of the economy that is based on
servicing new population becomes much
smaller.
Elliott D. Pollack & Company 48

Maricopa County Population
Source: U.S. Bureau of Census; Office of Economic Opportunity; EDPCo
Period
Ending Population Change APR
1970 979,800 316,290 4.0%
1980 1,515,100 535,300 4.5%
1990 2,130,400 615,300 3.5%
2000 3,092,927 962,527 3.8%
2010 3,824,058 731,131 2.1%
2015 4,088,255 264,196 1.3%
2020* 4,466,921 642,863 1.8%
*Forecasts from EDPCo
1970-2010 10 year period
Elliott D. Pollack & Company 2010-2020 5 year period 49

Maricopa County Population
Annual Percent Change 1988–2019*
Source: Office of Economic Opportunity, EDPCo
Recession Periods
5.0%
4.7%
4.2% 4.3%4.2%
4.1%4.1%
4.0% 3.8%
3.5%
3.4%
3.2% Pre-2008 Avg. 3.2%
3.0% 2.9% 2.8% 2.8%2.8%
2.6% 2.6%
2.4% 2.4%2.4%
2.0% 1.9%1.9%
1.5%1.5%1.6%1.6%1.6%
1.5%
1.4% 1.3%
1.0%
0.7%
0.3%
0.1%
0.0%
*Estimates for 2011, 2012, 2013, 2014, 2015 and 2016 and forecasts for 2018 and 2019
Elliott D. Pollack & Company from Elliott D. Pollack & Co. as of August 2018. 50

Maricopa County Population
Annual Net Change 1975–2019*
Source: Office of Economic Opportunity, EDPCo
(000’s) Recession Periods
125.0 123.0124.9
112.6 112.7110.5
104.9107.4104.0
100.0 97.6
92.7
88.0 89.5
86.8
80.3 80.281.7
77.7
75.0
65.267.066.4
60.1 59.661.0
57.0 55.4
53.3 50.4 51.6
50.0
28.6 26.8
25.0
12.3
2.9
0.0
*Estimates for 2011, 2012, 2013, 2014, 2015 and 2016 and forecasts for 2018 and 2019
Elliott D. Pollack & Company from Elliott D. Pollack & Co. as of August 2018. 51

Population: Maricopa County to U.S.
Annual Growth Rate
1990-2017
Source: U.S. Census Bureau; Office of Economic Opportunity; EDPCo
5.0%
U.S. Maricopa
County
4.0%
3.0%
2.0%
1.0%
0.0%
52
Elliott D. Pollack & Company

Total Movers as a % of
Total U.S. Population
Source: U.S. Census Bureau Recession Periods
8%
7%
6%
5%
4%
3%
Note: Includes all movers except movers within
Elliott D. Pollack & Company same county 53

Movers from an Outside Area
1981-2017
Source: U.S. Census Bureau Recession Periods
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Same State Different State Abroad
Elliott D. Pollack & Company 54

Arizona Capture Rate
Source: U.S. Census Bureau
Recession Periods
12%
10%
8%
6%
4%
2%
0%
Note: Does not include in-state movers;
Elliott D. Pollack & Company Net migration numbers. 55

2017 Population Growth Rank
By County
Source: U.S. Census Bureau
Percent
Rank County Population Net Chg. Chg.
1 Maricopa, AZ 4,307,033 73,650 1.7%
2 Clark, NV 2,204,079 47,355 2.2%
3 Riverside, CA 2,423,266 36,744 1.5%
4 Harris, TX 4,652,980 35,939 0.8%
5 Tarrant, TX 2,054,475 32,729 1.6%
6 King, WA 2,188,649 32,687 1.5%
7 Bexar, TX 1,958,578 30,831 1.6%
8 Dallas, TX 2,618,148 30,686 1.2%
9 Denton, TX 836,210 27,911 3.5%
10 Collin, TX 969,603 27,150 2.9%
Elliott D. Pollack & Company 56

Housing Market Outlook
57
Elliott D. Pollack & Company

Overview of Single Family Housing
• Current conditions in the single family
market are the polar opposite of 2007-
2011
• No signs of over supply
• Signs of strong pent-up demand
Elliott D. Pollack & Company 58

Affordability is a key-concern, with
millennials entering the marketplace
and the retirement population
growing.
Elliott D. Pollack & Company Source: Belfiore, KnowledgeBase Current and Future Market Insights 59

Housing Opportunity Index
2018 Q2
Source: NAHB/Wells Fargo
100
80
68.6
65.3
61.3
57.1
60 54.2
49.5
41.6
40 32.8
20 14.2
8.0
0
Albuquerque Tucson Phoenix U.S. Salt Lake City Las Vegas Denver Seattle San Diego Los Angeles
Elliott D. Pollack & Company 60

Housing Opportunity Index
1992-2018
Source: NAHB/Wells Fargo
90
80
70
60
50 U.S.
Greater Phoenix
40
30
20
Elliott D. Pollack & Company 61

Greater Phoenix Month’s Supply
2002-2018*
Source: ARMLS
20
18
16
14
12
10
8
6
4
2
0
Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18
Elliott D. Pollack & Company *Data through July 2018 62

Builders are facing supply side
constraints:
• Cost of buildable lots
• Increasing construction material costs
• Sufficient labor???
And demand side constraints of rising
mortgage interest rates
The result is upward pressure on
housing prices and reduced affordability.
Elliott D. Pollack & Company 63

Pricing by Builder in Greater Phoenix
Source: Belfiore
Subdivision Name Builder Name Net Pricing Range
The Palms D. R. Horton $224,305 - $258,305
Discovery & Encore at Adora Trails Taylor Morrison $286,240 - $341,240
Cantada Ranch Garrett-Walker Homes $229,990 - $282,990
Express at Tartesso D. R. Horton $170,240 - $229,240
Magma Ranch Unit 8 D. R. Horton $170,240 - $206,240
Magma Ranch Unit 6 D. R. Horton $171,155 - $199,155
Meadows at Homestead D. R. Horton $185,532 - $200,532
Express at Santa Rosa Springs (P1) D. R. Horton $163,305 - $233,305
Saguaro & Agave at Watson Estates D. R. Horton $194,490 - $239,990
Condos at Rhythm Mattamy Homes $259,054 - $293,554
Elliott D. Pollack & Company 64

Top-seller are mostly smaller-lot,
lower-priced new home
communities- communities target
entry-level and value–oriented
buyers.
Elliott D. Pollack & Company Source: Belfiore, KnowledgeBase Current and Future Market Insights 65

Millennials
66
Elliott D. Pollack & Company

Most new Housing demand over the next
10 years will come from millennials
Source: JCHS tabulations of 2016 JCHS Household Projections, Harvard
50 Number of Households
45
40
35
30
25
20
15
10
5
0
Millenial (1985-2005) Gen-X (1965-1984) Baby-Boomer (1945-1964)
2015 2025
Elliott D. Pollack & Company 67

Baby Boomers Versus Millennials
Aged 25-34
Source: Bowling Green State University; 1980 Decennial Census; 2015 American Community Survey
Baby Boomers Millennials
(1980) (2015)
Married 68% 40%
Never Married 20% 53%
Live in Independent
Households 84% 59%
Lived with
Parents/Grandparents 9% 22%
Elliott D. Pollack & Company 68

Maricopa County
Homeownership Rates by Age Group
Source: 2016 American Community Survey 1-Year Estimates; OEO
% of Total
Householder Age Occupied
15 to 24 years 10.8%
25 to 34 years 35.8%
35 to 44 years 53.9%
45 to 54 years 63.5%
55 to 64 years 73.0%
65 to 74 years 80.5%
75 to 84 years 81.0%
85 years and over 70.1%
Total 60.5%
Elliott D. Pollack & Company 69

Arizona Population by Age
2017
(1,000’s) Source: U.S. Census Bureau
105
100
95
90
85
80
75
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64
70
Elliott D. Pollack & Company

Arizona Number of Persons vs. Home-
Purchase Loan Applications
2017
(1,000’s) Source: U.S. Census Bureau
105.0 40
35
100.0
30
95.0 25
20
90.0 15
10
85.0
5
80.0 0
Elliott D. Pollack & Company 71

Arizona Number of Persons vs. Home-
Purchase Loan Applications
2022
(1,000’s) Source: U.S. Census Bureau
105.0 40
35
100.0
30
95.0 25
20
90.0 15
10
85.0
5
80.0 0
Elliott D. Pollack & Company 72

Median Household Income
by Age Group
2017
Source: U.S. Census Bureau
$90,000
$78,368 $80,671
$80,000
$70,000 $68,567
$62,294
$60,000
$50,000
$40,093 $41,125
$40,000
$30,000
$20,000
$10,000
$0
15-24 25-34 35-44 45-54 55-64 65+
Elliott D. Pollack & Company 73

U.S. Median Age at First Marriage
1890-2017
Source: U.S. Census Bureau
30
28
26
24
22
20
Baby Boomers Gen X Millennials
18
Men Women
Elliott D. Pollack & Company 74

Mean Age at First Child
1980-2016
Source: CDC
27
26
25
24
23
22
Elliott D. Pollack & Company 75

Millennials were hit with
several factors that, for many,
delayed home buying from
their 20’s and 30’s.
Elliott D. Pollack & Company 76

These Factors Include:
• The Great Recession and the lack of job
opportunities
• Greater acceptance of larger amounts of student
debt
• Social mores are changing and becoming
acceptable:
• Delay of Marriage
• Living with Mommy and Daddy
• Becoming less materialistic
Elliott D. Pollack & Company 77

Many of those changes are coming
to an end as millennials start to:
• Pay off student loan debt
• Benefit from a strong economy
• Realize they are subject to the laws of
biology
Elliott D. Pollack & Company 78

Student Loans
• 70% of students leave college with debt
• Standard repayment plan is 10 years
• 60% of students are expected to pay off
their loan in their 40’s
Elliott D. Pollack & Company 79

Student Debt Distribution
Source: Federal Reserve Bank of New York Consumer Credit Panel / Equifax
Number of Number of Borrowers
Balance Borrowers 2016 Q4 2017 Q4 2017 Borrower
$1 and $5,000 8,769,700 8,547,500
$5,000 and $10,000 7,554,100 7,425,400 28,250,100
$10,000 and $25,000 12,368,200 12,277,200
$25,000 and $50,000 8,483,600 8,609,700 8,609,700
$50,000 and $75,000 3,539,000 3,681,000
$75,000 and $100,000 1,503,800 1,612,600
$100,000 and $150,000 1,238,200 1,347,400 7,855,700
$150,000 and $200,000 554,500 604,900
$200,000+ 521,600 609,800
Elliott D. Pollack & Company 80

Student Loan or Mortgage Payment
Original Monthly Potential
Amount Payment Mortgage
$200,000 $2,121 $418,664
$150,000 $1,591 $313,998
$100,000 $1,061 $209,332
$75,000 $795 $156,999
$50,000 $530 $104,666
$25,000 $265 $52,333
$10,000 $106 $20,933
Assumptions:
Monthly Payment
10 years
5% interest rate
Potential Mortgage
30-year mortgage 81
Elliott D. Pollack & Company 4.5% Interest rate

Most millennials should have
their student debt paid within 5
to 10 years after graduating with
their highest degree.
First millennials hit 22 in 2007.
Elliott D. Pollack & Company 82

Millennials will start turning
35 in 2020
Elliott D. Pollack & Company 83

Millennials Rent for Life?
Source: Fannie Mae
According to Fannie Mae’s Renters Survey:
• 37% are renting in order to get ready to buy a
home
• 46% said their biggest obstacle to doing so is
saving up for a down payment and closing costs
• 95% said they plan to own someday
Elliott D. Pollack & Company 84

Homeownership Percentage
Maricopa County
Source: U.S. Census, American Community Survey
70.0%
67.9% 68.0% 68.0%
68.0% 67.5% 67.5%
66.0% 65.4%
64.0% 63.1%
62.0% 61.6%
60.4% 60.3% 60.5%
60.0% 58.9% 59.2%
58.0%
56.0%
54.0%
2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Elliott D. Pollack & Company 85

Conclusion:
.
Significant of pent up
demand.
.
Outlook remains strong!
Elliott D. Pollack & Company 86

Single Family Permits
Greater Phoenix 1975–2019*
Source: RL Brown & Elliott D. Pollack & company
# Permits
(000)
70
63.6
60.9
60
50 47.7
42.4
38.9
40 34.7
31.736.035.3 36.2
29.6 31.2
30 28.9 27.4 28.5
23.2
22.3 22.6 22.7 23.024.0
18.8 19.4 18.1 17.9 18.4 18.019.3
20
15.1 15.9
11.5 11.6 12.0 13.7 12.6 12.8
11.1 10.6 10.6 11.6 10.8
10 8.7 8.0
6.86.8
0
1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
*2018 and 2019 forecast is from Elliott D. Pollack & Company 87
Elliott D. Pollack & Company

Apartments
88
Elliott D. Pollack & Company

Multi-Family Housing Market
Source: PMHS; RealData CBRE
Year Absorption (sf) Chg in Inventory (sf)
2004 4,348 3,612
2005 -275 (4,181)
2006 -6,431 (3,798)
2007 -3,058 1,797
2008 960 8,484
2009 5,151 8,443
2010 10,021 1,441
2011 3,326 1,224
2012 2,756 1,573
2013 4,584 3,830
2014 5,823 6,351
2015 6,140 6,804
2016 5,731 8,018
2017 6,179 10,033
Elliott D. Pollack & Company 89

90
Elliott D. Pollack & Company

High end apartment demand
will continue to be strong.
But there is a lot of high
priced supply coming to
market.
Elliott D. Pollack & Company 91

Where is the supply/demand
imbalance?
Elliott D. Pollack & Company 92

Worker Housing
Source: Everest Holdings
• The strongest demand is in worker housing
• Households earning between 60% and
120% of median household income.
• This is not Subsidized housing
• Police officer, firefighters, teachers, retail
workers, hospital workers, etc.
• Housing that is affordable (20 to 30 percent
of Household income).
• Traditional Apartments, SF rentals and for-
sale housing.
• Close to major employment centers and
transportation routes.
Elliott D. Pollack & Company 93

Greater Phoenix Multi-Family Average Rent
Percent Change a Year Ago
2004 – 2018* Recession Periods
Source: RealData Inc.
9.0%
7.0%
5.0%
3.0%
1.0%
-1.0%
-3.0%
-5.0%
*Data through the second quarter 2018 94
Elliott D. Pollack & Company

Multi-Family Year-End Vacancy Rates
Greater Phoenix County 1975–2017
Source: ASU Realty Studies / Berkadia**
Recession Periods
18%
15% 14.1%
13.0% 13.4% 13.4%
12.5%
12% 10.6% 10.8%
10.1% 10.0% 10.2%
9.5% 9.4%9.6%
9% 7.7% 8.0% 8.2% 7.9% 7.8% 7.5%
6.2% 6.1% 6.1% 6.9% 5.1% 6.8% 6.8% 6.6%
5.9% 6.3% 5.9%5.4% 5.8%5.8%
6% 3.9% 4.4% 4.5% 4.5%4.8%
4.1% 4.0% 3.8%
3.3%
2.8%
3%
0%
1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
**Data prior to 2005 is from ASU
Elliott D. Pollack & Company 95

OFFICE
96
Elliott D. Pollack & Company

Office Space Year-End Vacancy Rates
Greater Phoenix 1986–2019*
Recession Periods
Source: CBRE
35%
30% 26.4%
26.7% 26.7% 25.4% 26.2%25.5%
24.0% 24.5% 23.9%
25% 22.8% 22.7%
22.4%
18.8% 19.1% 21.3%
20% 18.8% 18.3% 19.4%
14.8% 16.0% 16.4% 17.4% 16.4% 16.3% 16.3%
15% 12.6% 13.9%
11.7% 11.1%
9.5% 10.0%9.9%
9.5%9.2%
10%
5%
0%
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
*2018 & 2019 are forecasts from CBRE.
Elliott D. Pollack & Company 97

Greater Phoenix Office Market*
Source: CBRE
Year Absorption (sf) Chg in Inventory (sf)
2005 3,119,293 7,987
2006 3,245,888 2,320,302
2007 1,500,704 4,905,374
2008 (603,112) 3,402,646
2009 (667,329) 1,798,415
2010 233,670 2,011,404
2011 1,857,433 3,144,910
2012 2,020,529 973,282
2013 1,721,366 (35,566)
2014 1,816,411 1,107,906
2015 3,704,039 3,763,828
2016 3,219,853 1,045,155
2017 2,839,559 1,912,217
2018** 897,284 618,824
*All Leased multi-tenant space greater than 10,000 SF.
Elliott D. Pollack & Company **Data through the second quarter 2018 98

INDUSTRIAL
99
Elliott D. Pollack & Company

Industrial Space Vacancy Rates
Greater Phoenix 1980 – 2019*
Source: CBRE
Recession Periods
20%
16.4% 16.1%
15.2% 14.8%
14.6% 14.7%
15% 13.2% 14.0% 13.6%
12.8% 12.5% 12.4%
12.8%
11.1% 10.8% 11.4%
10.3% 10.9% 11.0%
9.4% 9.7% 9.8% 9.7% 10.1%
10% 8.4% 8.1% 8.5% 8.4%
7.4% 8.0% 8.4%
6.6% 7.0% 7.1% 7.4% 6.7% 7.6%
6.8%
5.7% 5.6%
5%
0%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Elliott D. Pollack & Company *2018 & 2019 are forecasts from CBRE 100

Greater Phoenix Industrial Market
Source: CBRE
Year Absorption (sf) Chg in Inventory (sf)
2005 12,361,368 7,072,477
2006 6,179,533 7,829,959
2007 8,359,835 13,914,181
2008 629,838 13,467,215
2009 (4,649,352) 4,753,218
2010 4,455,097 2,451,202
2011 7,696,277 1,954,037
2012 6,093,132 3,358,724
2013 8,783,982 8,902,571
2014 6,214,680 6,791,313
2015 7,046,663 3,966,434
2016 9,497,677 5,136,644
2017 9,898,883 6,988,240
2018* 4,278,639 3,490,669
Elliott D. Pollack & Company *Data through the second quarter 2018 101

RETAIL
102
Elliott D. Pollack & Company

Retail Space Vacancy Rates
Greater Phoenix 1985–2019*
Source: CBRE** Recession Periods
20%
15% 14.2%
13.1% 13.5%
11.8% 12.7% 12.2%12.2%
11.1% 11.4% 11.0%
10.0% 10.2%
10% 8.9% 9.8%8.7% 9.6%9.1%8.9%
7.9%7.5% 7.5% 8.1%8.0%7.8%
6.6% 6.3% 5.3%6.6%7.3%7.4% 6.1%5.3% 6.2%
5.5% 5.1%
5%
0%
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
*2018 & 2019 are forecasts from CBRE
** Data prior to 1992 is from Grubb & Ellis
Elliott D. Pollack & Company 103

Greater Phoenix Retail Market
Source: CBRE
Year Absorption (sf) Chg in Inventory (sf)
2005 6,708,155 6,248,789
2006 5,244,597 4,582,618
2007 9,409,985 11,104,865
2008 3,395,986 6,229,205
2009 (1,117,100) 4,405,985
2010 (75,352) 902,380
2011 (152,647) 24,543
2012 1,879,005 184,932
2013 1,579,202 (325,959)
2014 1,487,313 (49,225)
2015 1,150,192 164,859
2016 1,321,833 1,204,766
2017 1,039,989 336,152
2018* (112,444) 590,123
Elliott D. Pollack & Company *Data through the second quarter 2018 104

E-Commerce Retail Sales
as a Percent of Total Sales
2000 – 2018* Recession Periods
Source: U.S. Census Bureau
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
105
Elliott D. Pollack & Company

Maricopa County Retail Sales
Percent Change Year Ago*
1999 – 2018**
Source: Arizona Department of Revenue
Recession Periods
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
*Data through June 2018
**3-month moving average 106
Elliott D. Pollack & Company Note: January 2010 and March 2010 retail sales are estimates.

Overall Conclusions:
.
Rate of growth likely to
slow somewhat in 2019.
Elliott D. Pollack & Company 107

Nothing indicates an
imminent recession.
Elliott D. Pollack & Company 108