An overview of the changing demographics in New Jersey, including the rise in the number of childless households, and what the influx into urban areas of both Baby Boomers and Millennials will mean for real estate development.

1. New Jersey
Redevelopment Forum
www.otteau.com
800.458.7161

2. Barbell Demographics
Shifting Demand Patterns Real Estate Demand
78 Million Baby-Boomers
▫ Turning 65 @ 10k/day
▫ Childless, Downsizing & Lifestyle
Oriented
48 Million Gen-X
▫ Suburban-Centric Families
79 Million Gen-Y
• Turning 35 @ 11k/day
▫ Childless & Seeking Lifestyle

3. Changed Circumstances

4. © Copyright 2011 Otteau Valuation Group, Inc.
Financial Realities
Constrained Income Drives More Efficient Lifestyles
Household Income Decline
US Standard of Living 2006-2010
2000-2005
55.0%
46.0%
45.0%
35.0%
0.0%
25.0%
-2.0%
15.0%
-4.0% -3.7% -3.8%
5.0%
-6.0%
-5.0% House Prices HH Income -6.4%
-3.3% -8.0%
-15.0%
-10.0%
-10.4%
Middle Class Retirement -12.0%
Funding Credit Card Debt for 25-35 Yr HH
$6,255
$5,700
$6,500
Average Credit Card Debt
$5,414
$5,250
$5,200
$6,000
$5,050
$5,025
$4,800
$4,800
$5,500
$4,500
$4,450
$4,400
$4,293
$5,000
$3,900
Underfunded $4,500 $3,500
$3,449
$3,349
$3,249
Adequately Funded $4,000
$3,100
$3,500
$3,000
Source: Ernst & Young 25-35 Yr. Olds

5. Financial Realities
Confirm Inadequacy of Current Development Model
NJ Net Domestic Migration
2002 2003 2004 2005 2006 2007 2008 2009 2010
0
-10,000
-20,000
-30,000 -23,759
-33,225 -31,690
-40,000
-50,000 -45,045
-60,000 -56,989 -56,208
-70,000 -66,603
-69,160
-80,000 -72,547
© Copyright 2011 Otteau Valuation Group, Inc.

6. Financial Realities
US Economy Less Dominant in Global Economy
• Labor Markets Will Employee Fewer People
• Industrial Revolution Has Shifted to Emerging Low-Cost Labor Market
• Off-Shoring of Jobs due to High Labor & Tax Rates
• Technology Advances Require Fewer ‘hands-on-deck’
• Job Growth Relocating to Urban Places
US GDP vs. US Non-Farm Jobs
13,500.0 139,000
13,400.0 138,000
Total Non-Farm Jobs in Thousands
137,000
13,300.0
GDP in Billions
136,000
13,200.0
135,000
13,100.0
134,000
13,000.0
133,000
12,900.0
132,000
12,800.0
131,000
12,700.0 130,000
12,600.0 129,000
© Copyright 2011 Otteau Valuation Group, Inc. US GDP (2005 $) US Non-Farm Employment

7. Oil Prices Reshuffle the Deck
New Dynamics of Locational Efficiency
• Cheap Oil Supply About to Peak
• Recession’s End Increases Demand
• Emerging Economies Consume More
• Middle East in Crisis
• National Conscience Rising
• Transportation = 15% of HH Spending
• Economic Growth Moves Inward
© Copyright 2011 Otteau Valuation Group, Inc.

8. © Copyright 2011 Otteau Valuation Group, Inc.
Changing Household Dynamics
Fewer Households with Children
70
US Birth Rates Declining
69.6
68.9
69 68.5
68
66.9 66.7
67 66.2 66.5
65.9
66 65.2 65.1
64.7
65
64
63
62
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Births per 1,000 Women
Source: Pew Research Center
NJ Total Households by Type
551,262 Married-Couple Family, with children
796,958 Other Family, Male Householder, with children
Other Family, Female Householder, with children
Nonfamily, Male Householder, with children
438,102
75,601 Nonfamily, Female Householder, with children
258,685 Married-Couple Family, no children
Other Family, Male Householder, no children
156,262 Other Family, Female Householder, no children
5,588 Nonfamily, Male Householder, no children
73,715
862,721 1,670 Nonfamily, Female Householder, no children

9. © Copyright 2011 Otteau Valuation Group, Inc.
50+ Divorce Wave

10. A Different CastCohorts
Demand of Characters
Downtown Residents with Greater Spending Power
An Unusual Cast of Characteristics
• Affluent & Childless
• Gen Y – Millennials
• Baby Boomers
• Relocated Employees
• Student Housing
• Upscale Rental Apts
Rental Inversion 71.5
36.0
34.0 69.5
32.0 67.5
30.0 65.5
28.0 63.5
© Copyright 2012 Rate Valuation Group, Inc.
NJ Rentership Otteau

11. Urbanization of
Real Estate
Demand
55% NJ Rail Towns Share of BP's
49%
45%
35% 32%
24%
25%
15%
5%
1990-1999 2000-2009 2008-2010
-5%
Population Growth & Job Creation More Urban-Centric
© Copyright 2011 Otteau Valuation Group, Inc.

12. © Copyright 2011 Otteau Valuation Group, Inc.
Current Trends Just Beginning

13. Bringing Clarity to Real Estate
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14. About OTTEAU Valuation Group
Bringing Clarity to Real Estate
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© Copyright 2012 Otteau Valuation Group, Inc.

15. © Copyright 2012 Otteau Valuation Group, Inc.
Bringing Clarity to Real Estate
As President of Otteau Valuation Group Mr. Otteau manages
facets of the firm's business including serving as General Manager
of www.otteau.com which is an information provider on real
estate trends. He has been actively engaged in real estate
consultation and valuation since 1974 and holds the State
Certified General Real Estate Appraiser certification, the highest
level offered. His practice is concentrated in providing project
feasibility, marketing analysis, redevelopment guidance and
valuation analysis to developers, financial institutions,
Governmental entities and investors. Frequently quoted in the
New York Times and Wall Street Journal, and having made
television appearances on CNBC, Bloomberg and NBC, Mr. Otteau
is widely respected for his knowledge and insight into real estate
trends. His attention to detail and comprehensive fact finding has
made him the go-to person for industry professionals seeking to
enhance their competitive position in the marketplace. Jeffrey
has provided testimony as an expert witness at the municipal,
county and state levels, authored several texts on property
Valuation techniques and has lectured throughout the United
States and in Canada. He served on the Appraisal Standards
Advisory Council, which consulted with the Appraisal Foundation
in Washington, D.C. on its agenda of projects and major technical
issues. Mr. Otteau served as a past Chairman of the Employee
Relocation Council's Appraisal Standards Council and was inducted
into their distinguished Hall of Leaders in 1995.