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

Airbnb: Innovative or Illegal?

GavelThe jury is still out on this one…literally. Airbnb is facing off against New York City’s attorney general, Eric T. Schniederman for the right to exist. Strong opinions are doing the dance, as property owners and managers claim that this is a major security, safety and management issue. The legitimate tenants’ safety and security are considered as compromised by Airbnb “vagrants” taking up residence in their buildings for an unknown period of time with no signed rules of engagement.

The property owners are screaming because they aren’t even made aware these strangers are in their buildings.  Suburban Airbnb’ers have HOA’s and neighbors up in arms alike. Mr. Schniederman seems to be “loaded for bear”, as he has subpoenaed Airbnb users detailed contact information and usage details. Well, Airbnb has apparently wiped out quite a few of the NYC online innkeepers in a perceived act of compliance and showmanship. A good move, since it is alleged that 2/3rd of the listings in New York City were in violation of the law. Another crucial item of dispute is the loss of tax revenue. Oh yes, the tax man has his hand out and Airbnb users are not paying up. That’s an issue that the government is not taking lightly. But NYC officials aren’t the only ones that are outraged at this newcomer. NYCThe hospitality industry sees Airbnb as a viable threat to the industry. Hotel chains have struggled with maintaining costs, the evidence thereof in the rise in rates around 20% within the last few years. In their opinion, it is a hit to the tourism industry as a whole. Oh, lest we forget the Airbnb “victims” that assume “reasonable risk” of which Airbnb assumes no responsibility should your arranged sub-let go awry . Neglected users are coming out of the woodwork, becoming quite a PR risk. As of late, Airbnb is said to have tried to make amends by a request to become a sanctioned hotel entity and pay their share of those taxes and change the way NYC officials, property owners and neighborhoods view their service.  They are swinging an approximate $21 million in front of lawmakers as a pendulum symbolizing prosperous success for everyone involved. NYC..ball’s in your court…courtroom that is. Some say that money can fix anything.  Good luck Airbnb…we think you might need it.

NYC2