Development Market Phase: How Long Will It Last?
In the Development Market Phase of the real estate cycle

Development Market Phase: How Long Will It Last?

6 days ago 0 0 31

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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Many Co-Working and Incubator Models Exist

The Sharing Economy: Co-Working and Incubator Models

3 months ago 0 0 170

I recently asked the question, Does WeWork Work? And answered the question with a “We’ll see…” But there’s other co-working/incubator models out there worthy of discussion. Co-Working and Incubator Models On a recent panel at GSU’s Views From the Top was a Roam Innovative Workspace representative. Like WeWork, Roam is an alternative office model, but currently boasts only five locations. There are also Incubator tech business models out there. One such model is the Atlanta Tech Village. One model is not necessarily better than the other, but what is certain is they all disrupt the office market. Quick Thoughts on WeWork I dove deep into WeWork previously and questioned how the concept can compete with traditional landlords, REGUS and CBRE’s Hana concept, which can easily adapt to the changing market. Essentially, WeWork acts as a landlord, but offers more flexible leasing options. It is very much a real estate-based model, with

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Amazon HQ2 Not Landing in Atlanta—Rejoice!

7 months ago 0 0 308

I started talking about Atlanta’s Amazon HQ2 potential a year back in my post “Amazon HQ2 and The Gulch: A Symbiotic Relationship?” and continued the discussion in a follow-up post. Now, Amazon announced its intention to co-locate Amazon HQ2 in New York and the DC metro areas, and I am pleased with the result. Sometimes, you can score just as many runs hitting singles and doubles—so in that regard, Atlanta and Georgia are doing just fine. Thank you very much. Good Things Already Happening Here In my opinion, Atlanta is already winning the corporate relocation game as well as nurturing our own future Amazons through such initiatives as Atlanta Tech Village and the ATDC at Georgia Tech. Need evidence? Think Mercedes-Benz, Norfolk Southern, Apple, State Farm, Athena, and Accenture. All have announced either relocation or workforce expansion in the Atlanta metro area. And these are just a few. Some May

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Past the Value-Add Cycle in the Real Estate Cycle

Where is the “Add” in “Value-Add”?

9 months ago 0 0 3259

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?

10 months ago 0 0 524

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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Great Recession and Recovery is Unique

Not Your Standard Recession and Recovery

11 months ago 0 0 507

Most recessions and recoveries are straightforward. There’s oversupply, too much money and aggressive lending. The economy goes into recession. Values plummet, lenders foreclose, and occupancies and rents go down. Everything is distressed. Then, distressed assets are sold, the economy improves and rents and occupancies increase. Happy days are here again. But the Great Recession of 2007-09 and subsequent recovery have been anything but straightforward. Due to financial chaos and a slow-to-recover economy, the road from the valley to the mountain top has been long and winding. Financial Chaos In 2007-2008, government policy and deregulation encouraged overaggressive lending and leveraging of lender’s balance sheets, not unlike when the government deregulated the Savings and Loans and changed the tax laws in 1986. Not only did this create a deep recession, but it also caused a near collapse of the U.S. financial system. So, how did this impact real estate? Bank Failures +

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Atlanta's Edge Cities are creating downtown centers, like Sandy Spring's City Springs, to offer amenities to attract future residents to the area, like the Sandy Springs Performing Arts Center

Atlanta’s Edge Cities: Alive and Well

1 year ago 0 0 817

Two years ago, in Atlanta’s Edge Cities Develop New City Centers, I focused on how several of Atlanta’s edge cities, like Sandy Springs and Alpharetta, were attempting to create an “attractive sense of place.” This trend continues today, with Sandy Springs’ continued development, Roswell’s success and Peachtree Corners’ growth. More millennials are in their 30’s, and they’re looking for affordable housing in Atlanta to own, proximity to quality schools and work, convenience and, above all, a sense of place. With the rise of multi-use developments and entertainment centers in Atlanta’s suburbs, these folks are settling more and more in edge cities. Let’s take a closer look at some of these communities: Sandy Springs In my first blog, City Springs, the soon-to-be 14-acre civic and cultural center of Sandy Springs, was still renderings and plans, but earlier this year, it announced its first [retail] tenants, with construction expected to reach completion

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Altanta BeltLine Westside Trail

Atlanta BeltLine’s Westside Trail: Open for Business?

1 year ago 0 0 622

My partner and I recently looked at a property on the newly-opened Westside Trail of the Atlanta BeltLine. This got me thinking about one of blogs I wrote last year, “The Atlanta BeltLine: Will the Westside Trail Match the Eastside Trail’s Success?”. In that blog, I suggested the expectation that the Westside Trail’s success would equal the Eastside Trail’s success was unrealistic. With the Westside Trail now open for six months, it’s a good time to consider what’s happening in the area and whether it’s a good place to invest. Westside Trail: A Description On its website, the Atlanta BeltLine describes itself as “a transportation and redevelopment initiative.” The Westside Trail, a $43 million project, is the largest section of the BeltLine yet—it runs from University Avenue between Oakland City and West End MARTA rail stations up to Washington Park, near the Ashby MARTA rail station. The Atlanta BeltLine sees

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Should Atlanta Lure Amazon HQ2?

1 year ago 0 0 482

A recent Atlanta Business Chronicle article, “Atlanta Activists: We don’t want Amazon ‘HQ2’ here, touts “a growing sentiment that the resulting income inequality, unaffordable housing and traffic congestion is not worth even the 50,000 jobs” that landing Amazon HQ2 would bring to Atlanta. Stan’s Response  While I’m not as opposed to Amazon choosing Atlanta for its HQ2 as these folks appear to be, I do question why our City, which is experiencing a booming film industry and new corporate move-ins and expansions on a regular basis, offer what looks like a “distressed sale” giveaway. If we have so much to offer, and I believe we have a lot, why set this precedent? In my recent blog, Amazon HQ2 and The Gulch: A Symbiotic Relationship?, I address many of the pros and cons of swallowing the Amazon Whale.

Smart Real Estate Investing in 2018

1 year ago 0 0 638

It’s a new year, and we’re moving full steam ahead. It’s a great time to check in with current real estate trends and events shaping this year’s market and then decide how you will respond to them to meet your 2018 investment objectives. Current Real Estate Market Trends Money Chasing Deals: It will come as no surprise that demand for real estate still far exceeds supply. This results in peak prices, which equals lower yields, and makes it increasingly more difficult to “win” deals. Risk/Potential: With the market peaking, there is more downside risk and less upside potential. Hesitation: Current owners are hesitant to sell because opportunities to reinvest their money at acceptable returns just do not exist. Low Prices: Prices per square foot on existing properties seem low compared to replacement costs. Core Investment: Institutional investors now consider real estate a core investment, thus eliminating the need for a

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