When it comes to the U.S. and global economies – and specifically the impact of industrial and office performance and investment – what comes to mind? Listen in as a panel of experts discuss the top trends in interest rates, the millennial effect, and cap rate compression.
A few quick takeaways:
- Looking at growth rate trends [in September], we were in the seventy-fifth month of an economic growth cycle – and that’s exactly how long the last growth cycle lasted in total.
- We are seeing steady employment gains across the country, supporting broad-based economic growth. This trend is expected to continue, with professional business services (important note: these are the primary users of office space) growing, as well as health care, construction and manufacturing.
- Companies have done well in the most recent quarters, stockpiling cash and reducing equipment costs. So what are they doing with the cash? Answer: dividends, stock buybacks and acquisitions. So is that good or bad for commercial real estate? Organic growth is always better than acquisitions, as there aren’t redundancies and overlap.
- Although there is continued and forecastable lift in terms of U.S. economic activity, there is some drag effect from global economies that intertwine with our national economy. Wages and employment are growing, and companies are expanding their payrolls with increased job openings – 5.7 million currently, and the highest since the Bureau of Labor Statistics started tracking it 15 years ago.
- To address the generation gap, companies are examining how they can change business practices to attract millennials, rather than expecting them to conform to operations as usual. This generation has a huge effect on office space and preferred urban environments, as well as the demand for collaborative space. Will the pendulum swing back?
- E-commerce sales are outpacing store-based retail sales, and the competitive space has moved from prices to delivery times – getting that item in your hands asap. Amazon and other major retailers have to locate storage and delivery systems in closer-in urban areas to expedite delivery – driving demand for local industrial space.
Marcus & Millichap led the webcast conversation last September with three real estate investment gurus: Ashley Powell, senior vice president, head of transactions, Bentall Kennedy and 2016 NAIOP chairman; Bill Hughes, senior vice president of Marcus & Millichap Capital Corporation (MMCC); and John Chang, first vice president of research services, Marcus & Millichap. The conversation was led by Al Pontius, senior vice president at Marcus & Millichap Real Estate Investment Services in San Francisco.