2021 Economic Forecast: You Can’t See the Lightning Bolt…
CRE 2021 Economic Outlook

2021 Economic Forecast: You Can’t See the Lightning Bolt…

8 months ago 0 0 292

This 2021 economic forecast questions economists’ predictions of a roaring recovery in the second half of 2021, looks at the state of CRE sectors today and checks in with the real estate cycle.

Commercial Real Estate Status

What is the Status of Commercial Real Estate Today?

11 months ago 0 0 578

In May, I think we all thought (or at least hoped) that the COVID -19 situation would be under control by now. Well, it isn’t nor is it clear what the long-term impact on our lives will be.

Change Is New Constant As We Consider Coronavirus Impact

Coronavirus Impact: Change Will Be Our Constant

1 year ago 0 0 674

Change will be our constant as we consider the impact of the coronavirus on the economy, urbanization, healthcare and, perhaps most importantly, people and their habits.

Coronavirus COVID-19 impacts all sectors of the commercial real estate industry

Coronavirus Pandemic Impacts Commercial Real Estate Sectors

1 year ago 0 2 770

Coronavirus COVID-19 is impacting all commercial real estate sectors, some more drastically than others.

Restaurants Hit Hard during the Coronavirus Pandemic

Restaurants Hit Hard Amid Coronavirus Pandemic

1 year ago 0 2 652

You never see the lightning bolt that hits you. Coronavirus COVID-19 has taken us all by surprise and continues to baffle us with its strength and uncertainty. It’s difficult to write a post about the current climate because it changes daily, hourly even. Every day, we hear of communities requiring residents to shelter-in-place as more orders are announced, clarifying which businesses can operate and which must shutter their doors. Real Estate Recessions: Causes Real estate market recessions are NOT always the result of real-estate activities, such as overbuilding, loose underwriting or easy financing. Sure, there have been real estate recessions caused by these actions, but not always. Often there are non-real estate triggers—think of the mid-70’s oil embargo, the Iraq War, inflation in the 80’s and 9/11. These events usually expose underlying market weaknesses and cause the debt markets to lock up, resulting in sharp declines in real estate fundamentals.

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The CRE Bubble will pop. But when?

CRE Bubble? Not If, But When

1 year ago 0 0 675

Recent NREI article “Low U.S. Interest Rates Are Fueling a Bubble in Commercial Real Estate” claims it is not a matter of if the CRE bubble will pop, but when it will pop. I wholeheartedly agree with author Jay Rollins’ assessment and strategy. We’ve already seen investor push back on properties purchased post-2015 that are now back on the market. The current owners paid too much, thinking prices would increase, but in my opinion, the market has flattened—with further appreciation less likely than price deflation. The spreads between real estate yields and other financial instruments are historically low, and like Rollins, I have to believe that interest rates will increase sooner rather than later. I certainly don’t see them decreasing. The best opportunity for upside today is in new development, which has considerably more risk than buying existing assets. Historically, developers get caught by recession and rising interest rates. This time will be

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In the Development Market Phase of the real estate cycle

Development Market Phase: How Long Will It Last?

2 years ago 0 0 816

The business cycle is “long in the tooth,” and the real estate cycle is also very, very mature. Last year, in Timing the Real Estate Cycle, I focused on real estate cycle phases, which included Recession, Distressed Selling, Value Creation (Stage 1 + Stage 2), Mature Investment Market, Development Market and Overdevelopment + Bust. Right now, we are in the Development Market phase. Here’s how I previously described it; see if it rings true. Rents and values are up. Vacancies are down. New construction accelerates. Investors…are flush with cash. Lenders are aggressive. Values of existing properties are peaking. There is simply more capital chasing deals than there are opportunities. The downside risk is increasing. The “nothing can go wrong” mentality is taking over.  New project announcements are appearing almost daily. Development Market Phase: Alive and Well Here’s what I see now: Transaction volume on the sale/investment side of business has

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Past the Value-Add Cycle in the Real Estate Cycle

Where is the “Add” in “Value-Add”?

3 years ago 0 0 4950

Late in the Cycle As discussed in previous blogs, I believe we are very late in the real estate cycle, a period which is characterized by fully priced assets and increasing ground-up development. Yet, I keep hearing the term “value-add” tossed around both by brokers trying to sell properties with low current yields and buyers convinced that rents will continue to increase and add value. I am skeptical. In addition, with fewer transactions occurring, lenders are becoming more aggressive by offering longer “interest-only” periods and equity funds are becoming lenders to make up for the lack of good buying opportunities. I find these trends troubling. This is the sort of activity that usually pushes the market over the edge. The Real Deal  In a true value-add market, sellers are usually under pressure, rents are low, and vacancies are high. Buyers in this market are more risk-tolerant and are focused on

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Inevitable RE Downturn

Are You Prepared for the Inevitable Real Estate Downturn?

3 years ago 0 0 1166

Heading for a Correction? A BisNow article from earlier this year directly asks the question on everyone’s mind: “When is the correction going to hit?” In “From Bullish To Bearish: Tips To Prepare For The Inevitable Real Estate Downturn,” the author says not to worry so much about when it hits, but more so with how prepared you will be when it does. The article offers these four tips: Negotiate long-term leases Pursue Rehabs and Upgrades Stop Putting Off Maintenance Embrace Technology Stan’s Viewpoint For the most part, I agree with this article. I would add that the strategy for a given property really depends on the property’s current status. That status will dictate whether to sell (if a key lease has just been extended), upgrade (a longer-hold strategy) or refinance. I would caution this: If an owner is looking at new financing, the debt/value ratio and debt service coverage should

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Current Real Estate Recovery Has Been Impacted by Shifts in Office

Crosscurrents Impact Real Estate Recovery

3 years ago 0 2 1242

My last blog “Not Your Standard Recession and Recovery” discussed how—due to the disruption in the financial markets—the most recent real estate recovery was anything but straightforward. In addition, this real estate recovery has experienced crosscurrents, which have made it even more unpredictable. These include the impact of global markets, technology disruptors, high construction costs and demographic shifts. Global Market + Economy Impact As world economies become more intertwined, foreign markets more broadly impact the U.S. economy. The Chinese economy’s size and its growth impacted demand for U.S.-made products, resulting in drastic increases in some material prices. Weak European economies and actions of European central banks created greater demand for U.S. Treasury notes, which has kept interest rates artificially low. More foreign investors have sought U.S. assets, including real estate, with safety being a greater priority than yield. All of these factors contribute to a spike in U.S. property values.

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