Angelos Angelou Greg Ip

AngelouEconomics The Economist

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Agenda
The U.S. Economy in 2010
The Austin Economy in 2010
Forecast 2011-2012
Real Estate Outlook
Economic Development Trends
Closing Remarks

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2010 At a glance – U.S.
2010 Change
Employment 130,262,000 -657,600
New Jobs -657,600 -0.5%
Unemployment 9.4% 9.9%
Population 308,745,500 4,297,500
New Population 4,297,500 1.6%
Retail Sales $3.92 trillion 7.4%
Venture Capital $21.82 billion 19.4%
GDP $14.75 trillion 3.6%

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Foundation for economic recovery

6 Consecutive quarters of GDP growth

US Household net worth is up

Fewer people loosing jobs or filling for unemployment

Consumer debt is deceasing

Foreign direct investment is up

Strong US exports

Housing sales are up

Diminished risk of a double dip recession

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Continuing challenges

High unemployment

Job growth is not sufficient

Closure rate of regional banks will peak in
2011.

High rate of foreclosure in the residential
& commercial market

Unsustainable budget deficits - $1.3 trillion

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2010 At a glance – Texas
2010 Change
Employment 10,337,400 26,300
New Jobs 26,300 0.3%
Unemployment 8.2% 8.0%
Population 25,145,600 363,300
New Population 363,300 1.4%
Retail Sales $271 billion -9.7%
Venture Capital $890.6 million 29.5%
GSP $1.14 trillion -5.0%

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Job growth – select MSA’s
Industry Growth 2009-2010 New Jobs
Austin 1.1% 8,200
Dallas/Ft. Worth 0.0% 1,200

El Paso -0.3% -900

San Antonio -0.5% -3,800

Houston -1.0% -26,600

Texas 0.3% 26,300

Source: Bureau of Labor Statistics
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2010 At a glance – Austin
2010 Change
Employment 766,300 1.1%
Average Wage $47,200 -0.4%
Unemployment 7.1% 6.7%
Population 1,775,000 55,000
Housing Starts 6,100 -6.2%
Avg. House Sales Price $247,000 4.5%
Retail Sales $21.5 billion 0.5%
Venture Capital $344.4 million 101.4%
GDP $80.1 billion 4.4%
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New Austin jobs by industry 2010
Industry New Jobs Growth Rate
Leisure & Hospitality 6,900 8.3%
Government 3,300 2.0%
Education & Health Services 2,500 3.0%
Other Services 800 2.4%
Professional Services 300 0.3%
Financial Activities 100 0.2%
Transportation -100 -0.8%
Wholesale Trade -700 -1.8%
Information -900 Total Job -4.5%
Manufacturing -1,200 Growth -2.5%
Retail Trade -1,400 8,200 (1.1%) -1.7%
Construction -1,400 -3.4%
Source: Bureau of Labor Statistics
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Job growth – Austin vs. benchmarks
Industry Growth 2008-2009 New Jobs
Austin 1.1% 8,200
Boston 0.0% -350
Raleigh -0.7% -3,300
Phoenix -0.8% -13,200
Seattle -1.1% -15,800
San Diego -1.2% -14,300
Colorado Springs -1.8% -4,500
Portland -1.8% -17,700
U.S. -0.5% -657,600
Source: Bureau of Labor Statistics

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Austin jobs forecast, 2011-2012
Industry New Jobs Annualized Growth Rate
Leisure & Hospitality 7,900 4.3%
Government 7,500 2.2%
Retail Trade 5,500 3.4%
Education & Health Svcs. 5,500 3.2%
Professional Services 4,800 2.2%
Manufacturing 2,500 2.6%
2-Year
Other Services 2,500 3.6%
Construction
Total Job
2,100 2.6%
Wholesale Trade 1,900
Growth 2.5%
Information 1,500 43,900 (2.8% 3.9%
Financial Activities 1,500 annualized) 1.7%
Transportation 700 2.7%

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Austin population growth
Forecast
80,000
65,000
60,000
60,000 51,000 55,000
48,500 49,600
40,000

20,000

0
'07 '08 '09 '10 '11 '12
Source: AngelouEconomics, U.S. Census Bureau

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 Austin migration patterns - 2008
Seattle

San Francisco
CA
New York
San Jose
Washington
L.A.
Overseas
San Diego
TX New Orleans
Net Change: 24,700 San Antonio Houston
Source: IRS
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Austin metro retail sales
Billions Growth Rate
Forecast
$28 $24.00 10%
$22.41 $22.70
$24 $22.27 $20.56 $21.49
$20 6.9% 5%
5.6% 5.7%
$16 4.5%
0%
$12 0.6%
$8 -8.3%
-5%
$4
$0 -10%
2007 2008 2009 2010 2011 2012
Source: AngelouEconomics, Office of Texas Comptroller
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Tech industry growth
Industry 2010 ’10-’11 Growth
Semiconductor $295 Billion Chip Sales 8%
PCs 356 Million Shipments 13%
IT $3.4 Trillion in Spending 5%

 Technology expenditures are growing substantially

 Near-term growth will be fueled by investment in productivity

enhancement, especially in software and necessary hardware

 Continued shifts towards mobile computing will also contribute to

industry growth in laptops, tablets, and smartphones
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Austin metro office market
Absorption
Vacancy Rate
(Millions of SF)
1.0 0.8 23% 21% 25%
0.6
18% 20%
0.5
14% 13% 0.5
0.3 15%
0.0
10%
-0.5 5%
-0.5
-1.0 0%
2006 2007 2008 2009 2010
Source: AngelouEconomics, CBRE, Grubb & Ellis

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Austin metro industrial market
Absorption
(Millions of SF) Vacancy Rate
22%
2.5 25%
1.9 18%
2.0 0.1
20%
1.5 13%
1.0 14% 15%
9%
0.5 0.2
10%
0.0
5%
-0.5 -0.2
-1.0 -0.6 0%
2006 2007 2008 2009 2010
Source: AngelouEconomics, CBRE, Grubb & Ellis

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Austin metro retail market
Total Market
(Millions of SF) Vacancy Rate
76 7% 8%
7% 6% 7% 6%
74 6%
72
75.1 75.2 4%
70 74.4
73.3
68 2%
69.9
66 0%
2006 2007 2008 2009 2010
Source: AngelouEconomics, Costar

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Austin metro housing market
Homes Months of
MLS Sales
(Thousands) New Housing Starts
Inventory
35 Months of Inventory 8
30 7
25 6
20 5
4
15 28.6 3
10 22.4 20.7 19.6 2
5 12.4 8.2 1
6.5 6.1
0 0
2007 2008 2009 2010
Source: Texas A&M Real Estate

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Optimal housing market
Housing Starts Issued per 1,000 Residents 2010 Market
12
Equilibrium
9 20-Year Average – 7.35
per 1,000
6 13,050 Annual
3
Housing
Starts
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Home Sales per 1,000 Residents

20

15 20-Year Average – 13.32 per 1,000

23,600 Annual
10
Home Sales
5

0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Source: AngelouEconomics, Texas A&M Real Estate Center, U.S. Census Bureau
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 Housing opportunity index
2000: Q3 2010:Q3 10-Year Low Point
Phoenix 64.8 83.5 26.6
Colorado Springs 49.8 79.9 49.8
Austin 50.8 73.9 49.9
Raleigh 60.6 73.1 52.6
United States 58.1 72.1 40.4
Portland 27.6 68.9 22.2
Seattle 44.5 62.4 19.3
Boston 45 60.5 22.3
San Diego 24.6 51.1 3.6

Source: Wells Fargo Housing Opportunity Index

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Austin metro apartment market
Homes
Rental Rate
(Thousands)
Occupancy Rate Rental Rate Per SF
100% $1.00
$0.94 $0.97 $0.98 $0.94 $1.00
95%
$0.90
90% 95%
93% 93% $0.80
90% 89%
85% $0.70
2006 2007 2008 2009 2010
Source: AngelouEconomics, Grubb & Ellis, OConnor & Associates, CBRE, Texas A&M Real Estate Center

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Real estate forecast, 2011-2012
Market Expected Absorption
Office 1,300,000 sq. ft.
Industrial 500,000 sq. ft.
Retail 800,000 sq. ft.
Single Family 18,000 units
Multi-Family 19,000 units

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Economic development trends
§ Clean Technology
§ Data Centers
§ Semiconductor Design
§ Creative Industries
§ Medical Devices

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Clean technology
 Stimulus, state demand, and
Austin Renewable Portfolio
Standards (RPS) are increasing
demand

 UT has strong programs in

clean technology research

 Texas leads in wind and is

growing in solar

 Numerous solar companies

have been attracted to Austin

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Utility Scale Solar Farms
Solar Projects MW’s Location
RRE 60 Austin
Fotowatio 30 Austin
International Power 20 San Marcos
Toshiba 10 Bastrop
SunEdison 30 San Antonio
Duke Energy 14 San Antonio
Concentrated Solar 30 Austin
Total 194 Central Texas

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 Data centers
 The U.S. is considered to be a very
ECONOMIC DEVELOPMENT TRENDS

secure location for hosting servers

 Medical Digital Services, Social

Networking, Electronic Commerce,
On-lines Video Games, Music and
Application Downloads, Data Mining
are key drivers

 Average wage is more than $80,000; the industry also features high
levels of capital investment

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 Semiconductor design
 Average wages are over $100,000
ECONOMIC DEVELOPMENT TRENDS

 Growing opportunities in high

speed, low-powered devices,
including laptops, netbooks,
tablets, and smartphones

 Austin’s reputation as a national technological hub, combined with

its history in semiconductor design and manufacturing make it a
strong competitive location

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Creative industries
 Creative industries are responsible
for new ideas, innovations, and media,
including film, photography, design,
research and development

 Texas has the third highest

concentration of businesses in creative
industries in the United States (more
than 45,000)

 Firms in creative industries require agglomerations of

professionals to build synergies

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 Medical devices
 Medical devices is a high value-add
ECONOMIC DEVELOPMENT TRENDS

manufacturing and design industry.

 Estimated at $312 billion, the global

industry is expected to grow 4%-6%
annually.

 As emerging economies grow, market

capitalization for the industry will expand to meet increased
demands for healthcare.

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Austin venture capital funding
Sector Companies Investment ($M)
Industrial/Energy 9 $81.8
Software 25 $78.8
Biotechnology 2 $29.2
Medical Devices/Equip 4 $27.1
Semiconductors 4 $24.7
IT Services 5 $20.0
Healthcare Services 3 $19.7
Electronics/Instrumentation 2 $18.5
All other sectors 18 $50.4
2010 Total 73 $344.4
2009 Comparison Total 43 $171.0
Source: PWC Moneytree
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Austin economic trends, 2011-2012
Decline No Change Growth

Job Growth
Population Growth
Venture Capital
Residential Real Estate
Office Real Estate
Retail Real Estate
Industrial Real Estate
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Job growth forecast
Job Creation Forecast
40,000 31,000
34,200
30,000 25,100
19,200 18,800
20,000
8,200
10,000
0
-10,000
-20,000 -18,500
-30,000
2006 2007 2008 2009 2010 2011 2012

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 8121 Bee Cave Road, Suite 200
Austin, Texas 78746
512.225.9322
angelos@AngelouEconomics.com
www.AngelouEconomics.com

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