Market Trends
Housing Industry Finds Unexpected Strength in Certain Products in the Face of COVID-19 and Recession
Despite COVID-19 and the recession, the housing industry is seeing unexpected resilience in certain segments of the market, speakers said at the Housing Trends and Outlook session at the ULI Virtual Fall Meeting.
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.
According to survey data from the latest ULI Real Estate Economic Forecast, the current economic recession will be short-lived in the United States, with above-average gross domestic product growth returning in 2021 and 2022. Second, the impact on real estate market conditions and values will be relatively modest and much less severe than the impact experienced during the global financial crisis, with some exceptions by sector.
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.
The Dodge Momentum Index moved 4.1 percent higher in September to 143.6 from the revised August reading of 137.9. The gain in September was due entirely to an 8.9 percent increase in the commercial component, while the institutional component fell 4.8 percent.
A new report from the ULI Greenprint Center for Building Performance shows that the real estate industry has made significant progress over the past 10 years in reducing carbon emissions and energy consumption while increasing asset value. Volume 10 of the Greenprint Performance Report™, which measures and tracks the performance of 8,916 properties owned by Greenprint’s members, demonstrates a 10-year improvement of 17 percent in energy use intensity, which is the annual energy consumption divided by gross floor area. The report also finds that Greenprint members are still on track to reduce carbon emissions by 50 percent by 2030.
A CBRE analysis of U.S. consumer spending and demographic patterns suggests significant changes for food-and-beverage operators and the real estate they occupy, including a greater push for convenient, prepared foods; a growing millennial influence; and the emergence of inner-ring suburbs as the industry’s hottest market.
A series of presentations at the ULI China Mainland Winter Meeting, held in Shanghai in December, demonstrated how the growth of the sharing economy, combined with the desire for social connectivity, is affecting the development and management of office, residential, and hotel properties.
As part of a wide-ranging panel on adapting development to new technologies, held at the ULI Japan Fall Conference in Tokyo in November, industry leaders discussed using e-commerce data to drive development decisions, adapting Japan’s traditional banking sector for the future, and creating a more innovative startup culture.
Millennials living in the nation’s capital and its close-in suburbs can be characterized as “committed urbanists,” according to a just-released ULI Washington survey. This new study, which updated a 2015 survey, included more households with children—an increase from 12 to 20 percent. Almost half (49 percent) of respondents are married or partnered—up from 39 percent in 2015. Homeownership has increased from 28 to 33 percent. And median income has increased over 11 percent, exceeding the national growth rate.
According to a new report from Cushman & Wakefield, flexibile office space could triple in size in the coming years, representing 5 to 10 percent of office inventory in many markets. Investors also believe coworking is well positioned to weather an economic downturn.
According to a survey by RCLCO, sentiments about the real estate conditions in the U.S. remain at a relatively high level, but slightly below where they were six months ago. Just over one-half (51 percent) of RCLCO’s Mid-Year 2018 Sentiment Survey respondents say U.S. real estate market conditions are moderately or significantly better today than they were 12 months ago, five percentage points lower than in the year-end 2017 survey.
From macro-economic forces to social, environmental, technological, and political disruption, property and the wider built environment are facing change on a scale not seen for decades, said panelists speaking at the 2018 ULI U.K. National Conference in London, including increased migration, ongoing low interest rates, and increased political discord.
With more than $3.6 billion in investment taking place in its downtown alone, Indianapolis has been on the radar of many out-of-state investors. At a recent ULI Indiana event, panelists described the investment appeal of secondary cities.
JLL’s head of research for Asia Pacific chats with the chairman of Global Logistic Properties—and outgoing ULI Asia Pacific chairman.
Companies may be starting to see that squeezing more employees into less space is starting to be counterproductive, but panelists at ULI’s 2018 Spring Meeting agreed that expansive offices were largely a thing of the past, especially with wireless communications and cloud-based applications increasingly allowing employees to get much of their work done off site.
At the 2018 ULI Europe Conference in Berlin, a number of discussions on the future of the retail business looked at the changing shopping center ecosystems and what developers could be doing better.
According to the Wall Street Journal, the median size of a new single-family home declined for the first time since 2009, slipping 2 percent to 2,422 square feet (225 sq m) in 2016. This is only the third time in the last 20 years that it has fallen, according to U.S. Census Bureau data.
U.S. multifamily rents increased in May for the third month in a row, according to Yardi Matrix’s monthly survey of 121 markets, but the rate of growth continues to decelerate. On a year-over-year basis, U.S. monthly rents were up 1.5 percent nationwide in May. The year-over-year growth rate has decreased for 13 straight months since peaking at 5.4 percent in April 2016.
As job growth in the professional services sector has increased substantially over the past several years, office real estate investment trusts (REITs) have benefited from strong leasing fundamentals. However, more office construction and oversupply concentrated in major metro areas such as New York City, Houston, and Washington, D.C., continue to concern those in the market. Plus, interest rate survey data from Trepp.
Brexit and the recent U.S. and French elections came up in many conversations at ULI Germany’s recent Urban Leader Summit in Frankfurt. Although panelists said they are concerned about the geopolitical changes afoot, the domestic German economy remains strong.
The latest survey of U.S. real estate economists showed a marked increase in expected economic measures, most likely due to federal proposals to reform the tax code, reduce regulatory burdens, and invest in infrastructure. Compared with the same survey from six months ago, real estate economists have higher expectations about gross domestic product (GDP) growth, employment growth, and housing starts.
The “Markets to Watch” section of the 2017 edition of Emerging Trends in Real Estate® offers an expanded look at all 78 markets included in this year’s survey, including the industry outlook for the primary markets in the U.S. Pacific Northwest. Here is the industry outlook for the primary markets in the U.S. Pacific Northwest.
According to the latest forecast from the Joint Center for Housing Studies at Harvard University, spending on home improvements is projected to strengthen in the majority of America’s largest metro areas in 2017, with many markets in the East and Midwest expected to post double-digit annual growth. The residential remodeling market reached a record high of $340 billion in 2015—surpassing its previous peak in 2007—and is projected to increase 2 percent per year on average through 2025 after adjusting for inflation.
Europe is a divided continent in many ways. While markets like Spain, Portugal, and Croatia are experiencing a surge in visitors, France, Belgium, and Turkey face a tourism crisis. Performance varies from country to country.
The U.S. property market landscape in 2017 will be characterized by continued strong fundamentals, increased investment flows, and high transaction volume, while the broader U.S. economy should continue to grow moderately and add jobs.
When it comes to the e-commerce explosion, it’s all about “the last mile,” and almost anything is imaginable. “The last mile can be executed on foot, bicycle, hand cart, unicycle, skateboard, jetpack, Uber, Lyft—the list goes on,” said Benjamin Conwell of Cushman & Wakefield, a former director of Amazon’s North American real estate operations, speaking at the 2016 ULI Fall Meeting.
Landlords are confident that apartments are not overbuilt, and rents continue to increase in many markets, but real estate investment trust investors are less certain. This year, deliveries are reaching new peaks, and investor worries about a market softening are reflected in the sector’s –1.12 percent year-to-date total return. Plus, interest rate survey data from Trepp.
Implementation of the Affordable Care Act has driven both health care–related job growth and demand for real estate in the United States. But health care REITs are not immune from external market challenges, and they have thrived in the current low interest rate environment. Plus, interest rate survey data from Trepp.
