Economy
Deal-making has lately proved to be tough sledding for the commercial real estate industry. Although 2024 brought a welcome rise off the bottom in year-over-year sales, total sales still came in at the second-lowest level since 2013. The latest data from MSCI Real Assets shows $438 trillion in 12-month trailing sales volume through February, a 15 percent increase on a year-over-year basis.
At the recent 2023 ULI Spring Meeting in Toronto, panelists noted that transaction volumes have dropped significantly with the slowing of lending and bank failures.
AFIRE, the association for international real estate investors focused on commercial property in the United States, has released its AFIRE International Investor Survey: Q1 2023 Pulse Report, underwritten by Holland Partner Group. U.S. market shows stability as a preferred global destination for investment with allocations up 6 percent from 2022, relative to a 5 percent decline in European investment.
For grizzled veterans of commercial real estate, the return to a “negative leverage” environment may have been unforeseen but surely was not unique.
The boom in private-equity real estate fundraising that has delivered a slew of billion-dollar megafunds in recent years has slammed into some formidable headwinds. Yet, near-term challenges are not diminishing the appetite for capital among a still-crowded field of fund managers and sponsors.
Developers and investors seeking capital to finance commercial real estate are facing a new reality in which capital is both more expensive and less available. Borrowers still have options, but those options depend on the credit quality and type of deal, as well as what that borrower is looking for in that loan.
Real estate economists offered a less optimistic forecast of the near-term U.S. real estate and economic environment compared with six months ago, downgrading predictions for a wide range of economic, capital market, and real estate variables. Some of the biggest changes to forecasts included 2023 gross domestic product, job growth, and private real estate returns, according to the Fall 2022 ULI Real Estate Economic Forecast.
Growth pours north out of Dallas, the city nicknamed “the Big D,” and one result has been a boom in the suburb of Frisco, which earned the title of the nation’s fastest-growing city of the 2010s, according to the U.S. Census Bureau. Frisco’s growth has spread to nearby Celina, which has grown 10x since 2010.
The Dodge Momentum Index, a monthly measure of the initial report for nonresidential building projects, improved 5.7 percent in September from the revised August reading. In September, the commercial component of the index rose 2.9 percent, while the institutional component also increased, seeing a double-digit gain of 11.7 percent.
At the 2022 ULI Housing Opportunity Conference, a session looked at the high cost of the gap between U.S. population and job growth and the creation of housing where people want to live.
The pandemic is a bit like jury duty: no one quite knows just how long it’s going to last. That analogy set the stage Tuesday morning for a panel discussion titled “Economic Outlook and What It Means for Real Estate”—with a keynote by Austan Goolsbee, professor of economics at the University of Chicago’s Booth School of Business, followed by a discussion with Constance Moore, former president and chief executive officer of BRE Properties and a ULI trustee and governor, and Roy March, chief executive officer of Eastdil Secured, also a ULI governor.
The Dodge Momentum Index fell to 155.8 in July, a 6 percent decline from the revised June reading of 164.9. The index, issued by Dodge Data and Analytics, is a monthly measure of the initial report for nonresidential building projects in planning, which has been shown to lead construction spending for nonresidential buildings by a full year. The two components of the index fell in July—commercial planning by 3 percent and institutional planning by 9 percent.
Mohamed A. El-Erian, chief economic adviser at Allianz, warns of the danger of significant inflation and calls for a more comprehensive policy approach that speaks to both the supply and demand sides of the economy.
The real estate industry is tackling the twin challenges of a cyclical downturn juxtaposed with the long-term consequences from the disruption caused by COVID-19, and the environmental, social, and governance agenda becoming increasingly important.
During the recent ULI Asia Experience the Experience retail summit, real estate developer, owner, and operator Sid Yog, founder of the Xander Group and chairman of Virtuous Retail (VR) South Asia, discussed the broader Indian retail sector, as well as several of the company’s recent urban Indian retail developments. Joining him in the conversation was Susheela Rivers, office managing partner, co-chair for the global real estate sector, and head of real estate Asia Pacific for DLA Piper.
A study by the U.S. Federal Reserve Bank of Philadelphia showed that tenants who lost jobs during the COVID-19 pandemic may have already amassed $11 billion in rental arrears. Procedures for evictions and foreclosures may be failing the most vulnerable tenants and landlords.
The U.S. industrial real estate market finished 2020 with a remarkably strong quarter, much of its resilience hinging on the acceleration of e-commerce, according to data from Cushman & Wakefield. The fourth quarter was the strongest for absorption ever, accounting for 89.8 million square feet (83.4 million sq m).
Europe’s property sector is in the midst of a cyclical downturn that is coinciding with long-term structural changes in real estate, according to the 18th edition of the Emerging Trends in Real Estate ® Europereport. However, according to the PwC and ULI survey of almost 1,000 industry leaders across Europe, real estate generally is seen as one of the few asset classes to generate acceptable returns at a time of low or negative interest rates.
ULI MEMBER–ONLY CONTENT: As other segments of the real estate business adjust to challenges presented by the COVID-19 pandemic and economic recession, the industrial sector is looking to capitalize on greater demand for its facilities resulting from the explosion of e-commerce, panelists said at a Trends and Outlooks session during the 2020 ULI Virtual Fall Meeting.
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U.S. real estate economists predict generally improved economic and property market news for the rest of 2020, as well as for the following two years, compared with their forecasts of six months ago, according to the fall 2020 ULI Real Estate Economic Forecast.
Zanny Minton Beddoes, editor in chief of the Economist, outlined several trends accelerated by the global COVID-19 pandemic in a presentation at the 2020 ULI Virtual Fall Meeting.
The ULI Center for Capital Markets and Real Estate’s latest semiannual consensus forecast of real estate and economic indicators anticipates a 5 percent decline in real gross domestic product (GDP) for this year, with increases of 3.6 percent and 3.2 percent in 2021 and 2022, respectively. The semiannual survey based on the median of the forecasts from 43 economists and analysts at 37 leading real estate organizations completed in late September through early October, also anticipates this year’s unemployment rate to be 8 percent, declining to 6.6 percent in 2021 and 5.5 percent the following year.
A recent webinar organized by ULI Japan helped envision this “new normal,” looking at the current state of the global economy to make predictions about the “post-pandemic world.” The online forum was moderated by Jon Tanaka, managing director and cohead of Japan Real Estate, Angelo Gordon, who was joined by Izumi Devalier, chief Japan economist, Bank of America Merrill Lynch.
The latest “Real Estate Economic Forecast,” produced by the ULI Center for Capital Markets and Real Estate, points to a U.S. economy that has likely already hit bottom, with growth resuming in the second half of the year that will soften some of the blow. Panelists on a ULI webinar said that this outlook comes with crossed fingers due to uncertainty related to the path of COVID-19 and the time it takes to develop an effective vaccine.
In a follow-up to Promoting Housing Affordability, a report released earlier this year, ULI Europe held a webinar to look further into the report’s recommendations and how the COVID-19 crisis will affect the delivery of affordable and intermediate housing.
The U.S. Federal Reserve’s interest rate reductions, combined with continued economic growth, supported strong commercial real estate lending activity in the fourth quarter of 2019, according to the latest research from CBRE. The CBRE Lending Momentum Index, which tracks the pace of commercial loan closings in the United States, reached a value of 263 in December 2019—virtually unchanged from its third-quarter 2019 close and up 4.2 percent from a year earlier.
Nearly every speaker at the ULI Europe 2020 Conference in Amsterdam had something to say about one issue: climate change. The property industry is directly at risk from increasingly frequent extreme weather events, and stricter regulations are shaping the development and maintenance of properties.
Talk of a true urban “transformation” tends to carry more weight when it comes from a former police chief-turned-mayor speaking at a reinvented former trolley warehouse. The mayor of Tampa, Florida, Jane Castor, greeted attendees at a recent ULI Tampa Bay conference at the brick-walled Armature Works project.
How can public/private partnerships succeed in a politically fractious era?
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Panelists talked about how the San Antonio region is faring versus other cities in Texas in attracting talented workers and corporate office tenants and where it can improve compared with cities of a similar size.
