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United States - Real Estate 0072 - 2130 - 2014 ? MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 1
EXECUTIVE SUMMARY
Market value
The United States real estate market grew by 3.4% in 2014 to reach a value of $657.4 billion.
Market value forecast
In 2019, the United States real estate market is forecast to have a value of $711.1 billion, an increase of 8.2% since 2014.
Market volume
The United States real estate market grew by 1.8% in 2014 to reach a volume of 42.9 million units.
Market volume forecast
In 2019, the United States real estate market is forecast to have a volume of 45.8 million units, an increase of 6.8% since 2014.
Geography segmentation
The United States accounts for 18.1% of the global real estate market value.
Market rivalry
Competitive pressure in this industry is intensified by the ongoing uncertainty surrounding the global economic climate, something which, in turn can hamper access to necessary capital. However, the recent growth of the US real estate industry in terms of value helps to ease the rivalry somewhat as rental demand is growing.
TABLE OF CONTENTS
Executive Summary (2)
Market value (2)
Market value forecast (2)
Market volume (2)
Market volume forecast (2)
Geography segmentation (2)
Market rivalry (2)
Market Overview (7)
Market definition (7)
Market analysis (7)
Market Data (8)
Market value (8)
Market volume (9)
Market Segmentation (10)
Geography segmentation (10)
Market Outlook (11)
Market value forecast (11)
Market volume forecast (12)
Five Forces Analysis (13)
Summary (13)
Buyer power (14)
Supplier power (15)
New entrants (16)
Threat of substitutes (17)
Degree of rivalry (18)
Leading Companies (19)
American Homes 4 Rent (19)
Apartment Investment and Management Company (20)
Camden Property Trust (23)
Equity Residential (26)
Macroeconomic Indicators (29)
Country Data (29)
Methodology (31)
Industry associations (32)
Related MarketLine research (32)
Appendix (33)
About MarketLine (33)
Table 1: United States real estate market value: $ billion, 2010–14 (8)
Table 2: United States real estate market volume: million units, 2010–14 (9)
Table 3: United States real estate market geography segmentation: $ billion, 2014 (10)
Table 4: United States real estate market value forecast: $ billion, 2014–19 (11)
Table 5: United States real estate market volume forecast: million units, 2014–19 (12)
Table 6: American Homes 4 Rent: key facts (19)
Table 7: Apartment Investment and Management Company: key facts (20)
Table 8: Apartment Investment and Management Company: key financials ($) (21)
Table 9: Apartment Investment and Management Company: key financial ratios (21)
Table 10: Camden Property Trust: key facts (23)
Table 11: Camden Property Trust: key financials ($) (23)
Table 12: Camden Property Trust: key financial ratios (24)
Table 13: Equity Residential: key facts (26)
Table 14: Equity Residential: key financials ($) (26)
Table 15: Equity Residential: key financial ratios (27)
Table 16: United States size of population (million), 2010–14 (29)
Table 17: United States gdp (constant 2005 prices, $ billion), 2010–14 (29)
Table 18: United States gdp (current prices, $ billion), 2010–14 (29)
Table 19: United States inflation, 2010–14 (30)
Table 20: United States consumer price index (absolute), 2010–14 (30)
Table 21: United States exchange rate, 2010–14 (30)
Figure 1: United States real estate market value: $ billion, 2010–14 (8)
Figure 2: United States real estate market volume: million units, 2010–14 (9)
Figure 3: United States real estate market geography segmentation: % share, by value, 2014 (10)
Figure 4: United States real estate market value forecast: $ billion, 2014–19 (11)
Figure 5: United States real estate market volume forecast: million units, 2014–19 (12)
Figure 6: Forces driving competition in the real estate market in the United States, 2014 (13)
Figure 7: Drivers of buyer power in the real estate market in the United States, 2014 (14)
Figure 8: Drivers of supplier power in the real estate market in the United States, 2014 (15)
Figure 9: Factors influencing the likelihood of new entrants in the real estate market in the United States, 2014 (16)
Figure 10: Factors influencing the threat of substitutes in the real estate market in the United States, 2014 (17)
Figure 11: Drivers of degree of rivalry in the real estate market in the United States, 2014 (18)
Figure 12: Apartment Investment and Management Company: revenues & profitability (21)
Figure 13: Apartment Investment and Management Company: assets & liabilities (22)
Figure 14: Camden Property Trust: revenues & profitability (24)
Figure 15: Camden Property Trust: assets & liabilities (25)
Figure 16: Equity Residential: revenues & profitability (27)
Figure 17: Equity Residential: assets & liabilities (28)
MARKET OVERVIEW
Market definition
The real estate industry looks at renting and leasing residential properties. The industry is valued using the total revenues generated by landlords via leasing and renting private and council properties. Values are calculated using the average annual rent multiplied by the number of rented properties. Volume includes number of houses/propierties rented out (vacant properties excluded). leading companies sections relates to companies that are involved in residential property rental and development business. Any currency conversions used in the creation of this report have been calculated using constant annual average 2014 exchange rates.
For the purposes of this report, North America consists of Canada, Mexico, and the United States.
South America comprises Argentina, Brazil, Chile, Colombia, and Venezuela.
Europe comprises Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.
Scandinavia comprises Denmark, Finland, Norway, and Sweden.
Asia-Pacific comprises Australia, China, Hong Kong, India, Indonesia, Kazakhstan, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan, Thailand, and Vietnam.
Middle East comprises Egypt, Israel, Saudi Arabia, and United Arab Emirates.
Market analysis
The American real estate market grew moderately from 2010 to 2014 in terms of value. This growth rate is forecast to slow over the forecast period from 2014 to 2019, posting low growth overall.
Growth in recent years is in part due to the rise of renting in the US, which has seen increases across nearly all age groups. Studies suggest that this trend is set to continue, with renters already overtaking home owners in nine out of 11 of America’s largest metropolitan areas.
The US real estate industry had total revenues of $657.4bn in 2014, representing a compound annual growth rate (CAGR) of 3.3% between 2010 and 2014. In comparison, the European and Asia-Pacific industries grew with CAGRs of 2.5% and 8.8% respectively, over the same period, to reach respective values of $628.0bn and $1,908.2bn in 2014.
The number of rented properties increased with a CAGR of 2.7% between 2010 and 2014, to reach a total of 42,896.3 thousand units in 2014. The industry's volume is expected to rise to 45,794.6 thousand units by the end of 2019, representing a CAGR of 1.3% for the 2014-2019 period.
The performance of the industry is forecast to decelerate, with an anticipated CAGR of 1.6% for the five-year period 2014 - 2019, which is expected to drive the industry to a value of $711.1bn by the end of 2019. Comparatively, the European and Asia-Pacific industries will grow with CAGRs of 2% and 7.4% respectively, over the same period, to reach respective values of $693.6bn and $2,728.5bn in 2019.
MARKET DATA
Market value
The United States real estate market grew by 3.4% in 2014 to reach a value of $657.4 billion. The compound annual growth rate of the market in the period 2010–14 was 3.3%.
Market volume
The United States real estate market grew by 1.8% in 2014 to reach a volume of 42.9 million units. The compound annual growth rate of the market in the period 2010–14 was 2.7%.
MARKET SEGMENTATION Geography segmentation
The United States accounts for 18.1% of the global real estate market value. Asia-Pacific accounts for a further 52.4% of the global market.
MARKET OUTLOOK
Market value forecast
In 2019, the United States real estate market is forecast to have a value of $711.1 billion, an increase of 8.2% since 2014.
The compound annual growth rate of the market in the period 2014–19 is predicted to be 1.6%.
Market volume forecast
In 2019, the United States real estate market is forecast to have a volume of 45.8 million units, an increase of 6.8% since 2014.
The compound annual growth rate of the market in the period 2014–19 is predicted to be 1.3%.
FIVE FORCES ANALYSIS
The real estate market will be analyzed taking companies and individuals engaged in real estate renting out as players. The key buyers will be taken as individual customers through to large businesses, and building companies, construction companies and renting agencies. as the key suppliers.
Summary
Competitive pressure in this industry is intensified by the ongoing uncertainty surrounding the global economic climate, something which, in turn can hamper access to necessary capital. However, the recent growth of the US real estate industry in terms of value helps to ease the rivalry somewhat as rental demand is growing.
The US real estate industry continues with growth. Due to the generally high purchase prices of housing and problems with financing such a purchase, the rental market is doing well and is forecast to continue with growth, albeit at a decelerated rate.
Buyers within this industry are of widely disparate size and financial strength, so the effect of their large number, usually weakening buyer power, may be mitigated by their strong financial muscle and ability to negotiate hard with players. Building and construction contractors as well as property agencies are often key suppliers and their services are often of high importance to players, boosting supplier power. Entry to this market requires substantial capital in order to buy and maintain property; such capital can often be raised through means such as business loans or mortgage loans. However, in the face of recent economic turbulence, business in some segments has been affected, causing increased tenant bankruptcies, which in turn have led to an increase in vacancy rates and losses in companies' revenues. For final consumers the main alternative to renting a property is buying one. Whether this is more costly or not is not always easy to determine. Financial pressure can arise for new companies as significant investment is required and there is usually a period of time before significant revenues and profits are generated. Rivalry in this industry is rather high due to a number of factors such as the uncertainty of the business environment however, the forecasted growth in this market is facilitated by the lack of volatility in property prices and a growing number of people interested in renting.
Buyer power
Buyers within this industry are of widely disparate size and financial strength, so the effect of their large number, usually weakening buyer power, may be mitigated by their strong financial muscle and ability to negotiate with players. Name recognition can play a role in attracting buyers in this industry. However, price, location, suitability, and related factors, are likely to be more important. This is especially true in the case of a small, individual buyer who wishes to rent a property in a big city. The growing tendency of living within walking distance from city centers has led to a situation where demand for apartments has increased, weakening buyer power. The vacancy rate across the country is well below its ten year historical average.
Switching costs for buyers are dependent on whether a property is leased directly or indirectly by an estate agent. In the latter situation, buyers may have to pay higher fees for contract termination. A tenant's legal contract generally covers a specified time period, which can result in switching costs in the form of an early termination fee should a tenant wish to exit a contract early. Switching costs may be lower if the property is directly leased. Market players can differentiate themselves through types of property offered and services provided, such as help with renting. Buyer power in this industry is assessed as moderate overall.
Supplier power
Companies and individuals operating in this industry are engaged in the letting and maintenance of property. Consequently, building, repairing and letting contractors are key suppliers. The large number of such companies serves to weaken supplier power considerably. Renting agencies and the majority of building and repair companies are offering a largely undifferentiated service which tends to diminish supplier power significantly.
Market players will often enter into contracts with suppliers on certain projects and long-term maintenance contracts are likely to be in place. Such strategies strengthen supplier power as switching costs may be incurred for market players should they wish to change provider.
Furthermore, the services offered by suppliers are of importance to market players, strengthening supplier power further. Employees with relevant skills and qualifications are a further input to this industry. The ability of market players to attract and retain employees is generally vital to the success of a business.
The tendency of suppliers to integrate forward is occurring in this market although in the majority of cases it is happening among smaller companies that are interested in increasing their profits by long term rent agreements on property that has been purchased and often renovated. The suppliers with greater financial muscle generally do not tend to be involved in the leasing or renting of property .
Overall, supplier power in this industry is assessed as moderate.
New entrants
Entry to this industry requires substantial capital in order to buy and maintain property. Such capital can often be raised through means such as business loans or mortgage loans. However, the economic crisis has led to more stringent credit market requirements and regulations, making the raising of necessary capital more difficult. Financial pressure can arise for new companies as significant investment is required and there is usually a period of time before revenues on let properties are generated.
Entry into this market can be achieved on a small scale, reducing barriers for new companies. Large companies do not tend to benefit much from economies of scale; however they can enjoy greater name recognition, something which is a factor in this industry. The markets in which players operate can often be uncertain. During times of strong economic growth, companies usually generate higher revenues. For example, increasing demand for office space tends to drive up commercial rents. However, in the face of recent economic turbulence, business in some segments has been affected, causing increased tenant bankruptcies, which in turn have led to an increase in vacancy rates and losses in companies' revenues. Such uncertainty can be off-putting for potential new entrants. Moreover, the decelerating growth of the market over the coming years will tend to deter new entrants to the market. Overall the threat of new entrants to this industry is assessed as moderate.
Threat of substitutes
From the point of view of customers, the main alternative to property renting is to buy it, rather than lease it. Whether or not this is more costly is not always easy to determine as the cost calculations are based on many variables, like interest rates, length of the mortgage/lease or the rent/mortgage agreement. Both interest rates and rents can be unpredictable in the medium to long term. Also, property owners will have responsibilities for maintenance, which management and development companies would often include as part of their service - decreasing the expense of the tenants. Overall, the threat of substitutes is weak.
Degree of rivalry
The US real estate industry is highly fragmented with small companies competing alongside large multinational players. Rivalry is further intensified by the fact that a typical player generates little revenue in other markets, meaning that real estate is highly important to revenues. Nationally, growth rates in recent years have been moderate making this market relatively appealing for new entrants. This tends to mitigate the strong competition further. However, a player able to diversify geographically may find some regions more profitable than others (the rental market differs from one city or state to another). The opportunities in the US renting industry may lie within the retail sector. Competitive pressure in this industry is intensified by the uncertainty of the economic environment. Companies are not always assured that money received from a property will be greater than the investment put in. A tight mortgage market along with limited supply and rising property prices has pushed many would-be purchasers into rental accommodation, easing the level of rivalry further. Overall, rivalry within this industry is assessed as moderate.
LEADING COMPANIES
American Homes 4 Rent
The company was founded in 2012 and is specialized in renting mainly single family residential properties around the United States. The company operates through 23 offices around the country.
American Homes 4 Rent is focused on acquiring, renovating, leasing and operating its properties which number totaled to 25,505 single family properties in 22 states as of the beginning of May 2014.
The company is developing at a fairly fast speed, increasing the number of leased properties from 1,164 in December 2012 to 17,328 a year later. The occupancy level at the end of 2013 accounted for 74.5%, rising to 80% in March 2014.
The company was listed on the New York Stock Exchange in August 2013.
Key Metrics
The company’s revenues accounted for $139m as of Decem ber 2013 as compared to revenue of $4.5m for the previous year. The net loss for financial year ending in December 2013 totaled to -$20.1m which is a further decline compared to the 2012 net loss of -$10.8m.
Apartment Investment and Management Company
Apartment Investment and Management Company (AIMCO or 'the company') is a self-administered REIT based in the US and is involved in the acquisition, ownership, management and redevelopment of apartment properties. As of December 31, 2012, the company owned 265 properties with 67,977 apartment units. AMICO holds equity interest in the real estate properties and earns revenues by charging fees for maintenance or by selling its stake in the properties.
AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, owns a majority of the ownership interests in the AIMCO Operating Partnership. The company conducts all of its business and owns all of its assets through the AIMCO Operating Partnership.
The company operates through two business segments: conventional real estate operations, and affordable real estate operations.
The conventional real estate operations segment consists of market-rate apartments where the rent is paid by the residents. At the end of 2012, AIMCO operated 175 conventional properties with 55,879 units.
In the affordable real estate operations segment, rents are generally paid in whole or part, by a government agency. At December 31, 2012, the segment consisted of 90 properties with 12,098 units.
The company owns and manages a broad range of real estate properties including suburban garden-style, urban high-rise properties, etc. at a range of average monthly rental rates. AIMCO's real estate operations comprise a dedicated construction services group which manages all on-site improvements other than routine maintenance. The company undertakes the redevelopment work to add value to the properties ranging from minor to thorough renovation. It conducts the redevelopment through a specialized redevelopment and construction services group, which includes developers, engineers, architects and construction managers, to oversee the projects.
Key Metrics
The company recorded revenues of $984 million in the fiscal year ending December 2014, an increase of 4.7% compared to fiscal 2013. Its net income was $309 million in fiscal 2014, compared to a net income of $207 million in the preceding year.