Archives for June 2018

These presentation slides are from Richard Barkham’s talk, “Politics, Economics, and U.S. Commercial Real Estate,” at the Commercial Economic Issues and Trends Forum at the REALTORS® Legislative Meetings & Trade Expo in Washington, DC, on May 17, 2018. Dr. Barkham is Global Chief Economist at CBRE.
Download the PDF here.
By: NAR
Click here to view source article.
 

A strengthening economy and job growth nearing historic levels have given Realtors® confidence in future commercial real estate market conditions, according to speakers at a commercial real estate forum during the 2018 REALTORS® Legislative Meetings & Trade Expo.
Lawrence Yun, chief economist of the National Association of Realtors®, led a panel discussion about the economic forces shaping commercial real estate markets and expressed that a favorable environment will lead to a rise in demand for commercial spaces in 2018 and 2019.
“Even after 90 straight months of job gains, the economy looks likely to expand over the next two years with job openings at the highest level in nearly 10 years. The gross domestic product should experience a 2.7 percent growth, therefore the demand for commercial spaces is expected to rise this year and next year,” Yun said.
One area of concern for Realtors® is the lack of construction, which is hindering inventory. Yun pointed out that with subdued construction activity in commercial real estate in recent years, vacancy rates will continue to fall and rents will rise. “Concerns are growing around commercial property prices, which have dramatically shot up by 85 percent in the past seven years. With interest rates recently rising, commercial prices could decline and commercial investment sales may see an additional dip, though at a modest pace,” he said.
Most commercial sectors are on the upswing, according to Yun. Office demand is strong because of rising employment and moderate office supply, which will lead to modest vacancy rates, mainly due to the expansion of telecommuting. Increased trade and rising e-commerce has the industrial sector on a hot streak, with a growth of 20 percent, while retail sales are growing at 5 percent and completions remain low, with rents experiencing solid growth.
Two panelists joined Yun to discuss trends in multi-family demand and the impact the global economy could have on commercial real estate over the next year. Richard Barkham, global chief economist at CBRE, gave his perspective on global economic trends and his outlook for commercial real estate.
“Commercial real estate is buoyant these days, and first quarter leasing is through the roof. Interest rates may turn up, but slowly over the next few years, and inflation remains weak, as wage growth has failed to gain traction. Relatively, supply is in line with demand and cap rates have hit a bottom and remain extremely firm,” Barkham said.
Danielle Hale, chief economist at realtor.com® also shared highlights from her outlook for multi-family households.
“Apartment demand remains robust and the sector is seeing growth, especially in mixed-use urban development, as many consumers prefer a neighborhood close to work and entertainment,” said Hale. “Millennials are shifting into the largest generation of homeowners and will be a huge boom to the multi-family market in recent years. Multi-family building has seen the largest four-year stretch in supply since the 1980s and vacancy rates are trending at the lowest in years.”
By: Cole Henry (NAR)
Click here to view source article.

Jobs in the Albuquerque metropolitan area pay about 8 percent less per hour than the national average, according to newly released figures from the U.S. Bureau of Labor Statistics.
The data shows the average wage in the metro area is $22.31 per hour. Nationally, the average is $24.34.
Those figures reflect wages across 22 occupational categories as of May 2017.
In Albuquerque, wages are significantly less than the national average in 15 of the 22 categories. The most substantial difference is found in legal jobs, which make $36.94 per hour here and $51.62 per hour nationally, a difference of 28 percent.
Among other occupations with significant differences, according to the data:
— Construction and extraction: $19.36 per hour, 19 percent less than the U.S. average
— Sales and related: $15.91 per hour, 19 percent less than the U.S. average
— Building and grounds, cleaning and maintenance: $11.85 per hour, 15 percent less than the U.S. average
— Business and financial operations: $48.98 per hour, 15 percent less than the U.S. average

Rising interest rates and the economy are the top two current issues to watch in real estate, according to the Counselors of Real Estate’s Top Ten Issues Affecting Real Estate 2018-2019, a list of the biggest threats to the housing market. For the first time, CRE broke its annual list down into current and longer-term issues to watch during the industry’s next year.
Top Current Issues to Watch
1. Interest rates and the economy: As interest rates rise, commercial and residential real estate markets are seeing several changes, such as decreasing demand for commercial property and higher home mortgage rates. Rate increases are making homes less affordable and are also limiting the value appreciation for commercial real estate. “Lack of wage growth for all but the wealthiest population segment is dampening housing demand, and limiting consumer spending that the economy needs for growth,” the report notes.
2. Politics and political uncertainty: Tax reform and policies aimed at balancing trade with other countries will have an impact on jobs, incomes, and both commercial and residential property, according to the report. “Congressional action to relax certain bank lending and asset management regulations was also among developing trends that may improve access to capital,” the report notes.
3. Housing affordability: The lack of affordable homes across income brackets, excluding the most wealthy, is being fueled by low wages, rising mortgage rates, and the underproduction of housing for nearly two decades, according to the report.
4. Generational change/demographics: Four distinct generations are exerting influence on commercial and residential real estate, such as in office design, student and elder housing, amenities, and location preferences.
5. E-commerce and logistics: Volatility in the retail sector, such as from the increase of e-commerce, is leading to a growth in warehouses.
Top Longer-Term Issues
1. Infrastructure: Roads, bridges, airports, water and sewer lines, electricity, and public transit are rapidly deteriorating, the report notes. An estimated $4.5 trillion is needed to improve critical infrastructure by 2025, according to the American Society of Civil Engineers. “The lack of serious effort by the U.S. to address its condition and much-needed revitalization leads the list of broader and emerging issues affecting real estate,” the report notes.
2. Disruptive technology: The report highlights advances in robotic manufacturing and warehousing; driverless cars and trucks; the extensive availability and utilization of personal and transactional data (aimed at enhancing business decisions); “smart” building technology that enables efficiency; global connectivity; automated business processes; and information protection through cybersecurity. “Nearly every aspect of real estate is undergoing dramatic change as these types of technology are adopted,” the report notes.
3. Natural disasters and climate change: The ongoing threat of natural disasters and climate change can result in high-priced property and environmental damage. This includes everything from severe storms, wildfires, and floods to earthquakes, volcanic activity, and rising sea levels.
4. Immigration: “If reduced by law, will have a negative impact on new housing starts and home purchases as well as worsen the current skilled labor shortage in the U.S.,” the report cautions.
5. Energy and water: Natural resources that are vital to property and quality of life are being threatened by environmental damage (manmade and from changing climates) as well as “entangling state and local regulations that are complicating development and lack the standardization that national regulations would provide.”
CRE additionally notes several other issues making its “watch list,” including rising construction costs; urbanization/suburbanization (with suburbs adapting citylike development and amenities); tax cuts (which may positively impact commercial properties; legislation is still developing); and societal leadership (social activism among younger Americans that is fueling business and social reform at many levels).
By: NAR
Click here to view source article.