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

Advertisements

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.