As we dove into 2015’s waters, investment capital stats were already at in influx. The US has traditionally been a favorite depository for said capital. With US Treasury Rates on a decline due to demand and the US Stock Exchange experiencing new elevations, commercial real estate is an attractive invitation for both foreign and domestic investors. The evidence of this is the growth of overall commercial property transactions in the US by foreign investors has now arrived at a level that we haven’t seen since 2006/2007. Firms aim a close eye at interest rates and market stability as they compare these current statistics with historical data. The timing for interest increases is concerning for most, and whether long term and short term rates will increase in a united or disjointed manner. A majority of soothsayers, (correction: forecasters), hold the belief that the Federal Reserve will raise rates Summer of 2015. Out of the estimated $5 trillion plus capital invested in the United States, over $3 trillion is debt-driven. Commercial real estate loans are steadily gaining as per the Feds, with private equities and REIT’s in the lead. There is speculation that we will see a “re-do” of 2006 where large sums will be reinvested into #cre in 2015 if all goes according to pattern. Is your brokerage positioned for these potential opportunities? Are you as an investor positioned to take advantage of this stimulative climate and seize the day?
Do you see what I see?
There is a gargantuan player in this game of whom some of us may be unaware. Recall the “Defined Contribution Real Estate Council”? It was originally created to assist sponsors/participants get better results via institutional quality properties. According to the Urban Land Institute, 2014 was monumental for US retirement assets achieving the 23 trillion mark. A good portion of those funds were in defined contribution or IRA funds.
As of first quarter 2014, it was reported that there were $6.6 trillion dollars in IRA funds and 6 trillion in defined contribution 401k’s. Our industry is being propositioned to produce improved selections for real estate investing. Institutional allocations can potentially mean billions of investment capital. Because liquidity is imperative to retirees, REIT’s may outshine direct investing options.
Urban Land Institute & PWC, “Emerging Trends in Real Estate – US and Canada 2015″
Well 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:
- North Dakota
- W Virginia
States that experienced no change:
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.
- 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
The 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.
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