Through the Looking Glass (Part 1) – Commercial Real Estate in 2015

MirrorMirrorWell it is that time again when the economists, financiers, commercial real estate execs and genies make their predictions for the New Year. As predicted by the Delloitte Center for Financial Services, rents and vacancies showed improvement, development pressed pause, REIT’s and foreign investment led the charge in activity, the standards for CRE lending were allayed and leasing was partially determined by tenant’s use of technology. The majority of sources remain positive regarding 2015’s outcome.

We have good news on the unemployment sector. The majority of the US saw a downturn in unemployment. That evidence includes those that vacated the workforce. For 2014, here are the stats:

States where unemployment experienced an annual increase:

  • Alaska
  • Louisiana
  • North Dakota
  • Vermont
  • W Virginia
  • Wyoming

States that experienced no change:

  • DC
  • Iowa
  • Oregon
  • Virginia

While Puerto Rico’s unemployment decreased, they still hold the highest unemployment rate at 14 percent.  The average in the nation in December was 5.69 according to NCSL data.

Alice_through_the_looking_glassThe prevailing inclinations as we gaze “through the looking glass” are:

  • Enduring returns of REIT’s
  • Expanded funding sources on a global scale
  • GDP growth trend
  • Investment transactions rise
  • Construction Industry gradual recovery
  • Technology advances
  • Industrial property development growth
  • Suburban markets making a comeback

queensThe potential perils and pitfalls foreseen in wonderland, pardon me, CRE-land include currently delayed, yet inevitable Treasury rate escalations, federal regulatory ambivalence, the predicted plunge in US labor force growth two years from now, aging infrastructure and vacillating energy prices.

In Through the Looking Glass (Part 2) we will further explore the nuts and bolts of the industry findings…stay tuned.

Resources:

Deloitte Center for Financial Services, Deloitte Development LLC, 2014 “2015 Commercial Real Estate Outlook”

Urban Land Institute & PWC, “Emerging Trends in Real Estate – US and Canada 2015”

National Conference of State Legislatures, http://www.ncsl.org/research/labor-and-employment/2014-state-unemployment-rates.aspx, December 19, 2014

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Google Glass for #CRE

With the emerging tech eye candy that is finally making its way into the Commercial Real Estate Industry, there is a unusually balanced amount of excitement versus concern. Sites such as View the Space give you the try before you buy realistic experience before you even bother to make the appointment with the listing agent.  With all the available data flooding the consumer base, most of which we as Commercial Brokerages are willingly supplying to the CRE data storehouses such as CoStar and LoopNet, you have to wonder if you really need to show up in person ever again, right? Boy, that’s really going to cut down on that tax break for the dry cleaning, huh?

Enter, stage right….Google Glass, Google Tango. If you didn’t have to actually wear it or carry it you would be having eery flashbacks to the Matrix wondering if reality is overrated. From all of the reviews we’ve watched, comments included “efficient”, “time-saver”, “get more deals done quicker”, etc. Google Glass allows you to video tour the property for your client who may just happen to be on the other side of the hemisphere, virtually interacting while providing a more “personalized” experience.

But wait, behind door number three…Google Tango materializes, furnishing mobile devices a “human-scale understanding of space and motion”{1} .  The possible applications are endless in regards to Google Tango, because a user can be impaired and be empowered to navigate in a way they never thought possible. The application for the retail environment could be epic. Instead of the individual store apps, Google Glass could direct you to that much desired item through a captivating virtual and realistic experience combined without proprietorially taking up more memory on your tablet or your mobile.

For the Commercial Real Estate Industry, virtual tours are not the only tool in its belt folks. Google Glass can create 3D advertising images such as “For Sale” and “Office Space Available for Lease”. Google Glass Real Estate Layer App Tenant improvements could be visualized in that same 3D format, bringing vision to reality in a potentially shorter time frame. For Property Manager, this technology could prove helpful in maintenance, security and construction on-site.

Keep your camera button on your smartphone on the ready for now. With a limited quantity of glass users and Project Tango still in the incubation stages, you, our Commercial Realtor friend, and your camera app are still needed. Uneasiness lies in the guts of more than one industry, let alone governmental authorities regarding safety, security and privacy concerns.  How many times do pass people on the highway who are texting away while holding 70+.  The Department of Transport in the UK has deemed using Google Glass while driving as careless driving and is a penalty offense. West Virginia’s Gary Howell proposed an amendment to their state’s law including bans against any wearable computer  out of concern for safety. Video capture is not welcome everywhere, people. I know the minute you finally got your turn when the I-Phone came out you felt an empowerment to share EVERYTHING. However, companies hold proprietary information, private records, personal data, codes, strategies…the list goes on.  The cyber-crime units see the vast buffet of new ways to commit felony “virtually”. And lest we forget, Big Brother Google is able to track your every movement while utilizing Glass or Tango. This gives new meaning to “personalized ads”, doesn’t it?

References: {1} Project Tango https://www.google.com/atap/projecttango/

And the winning category is…

Distribution CenterEveryone is speculating, forecasting, throwing their opinions up against the wall to see what sticks in regard to 2014 and what it holds for the commercial real estate industry. Realistic observations made by many in #cre present the industrial category as the contender for 2014. When serious Commercial Real Estate Investors were polled and they cited “warehousing” as a hot commodity and a leading performer.

This is a natural response to the retail industry’s desire to move the distributable goods closer to metro areas for effortless dissemination. There are new players trying their hand at the e-commerce game. It’s not just for the colossal behemoths like Amazon.com. Oh no sir or madam. Little mom and pop shops are bellying up and saying, “pour me some of what he’s having”. The warehouse industry doesn’t have to thank their lucky stars. They need to be thanking the retail industry not only getting them back on their feet, but in running shape once again.

As you may have guessed, development has increased in reply to the shout-out for logistics for the e-commerce business models. While our brick and mortar stores limp along, the fulfillment centers are exceeding expectations. Maybe, just maybe this will provide a much-needed boost for the commercial construction industry as well. They are still attempting to recover from their fall from glory in 2007. Watch for potential cost increases in materials, services and land. Welcome to the new age of retail, people. Tech forward, mobile friendly and innovative.

Rental Construction Activity Increases in Greater Delaware Valley Region

As the housing market slowly attempts to turn the corner, the rental demand remains high for our particular region. Some areas report up to 20% increases in rental inventory. New construction is playing a large part in those numbers. Does this mean that the financial institutions are loosening up the purse strings for development loans? Possibly. In 2011, there was a 60% increase in Multi-Family Development Lending as compared to the previous year on a national level. The Census Bureau reported one outstanding statistic that 53% of the total number of renter households faced a housing cost burden last year. Unemployment remains high. Affordable housing is a treasure anxiously sought after. Rental rates remain high even paired alongside of the housing market slight improvements. Right now as it stands, renters make up approximately 22.64% of the Chester County, PA, population. 4.97% of houses and apartments in Chester County, PA, are unoccupied (vacancy rate).