I’ve been away the past two weeks—about as far as you can go and mostly out of communication in Patagonia. I came back to repercussions of the Japan earthquake and tsunami as well as the ongoing Middle East news headlined now by Libya and Yemen. One of my first blackberry emails off the plane was an account of last week’s PREA meeting where a record number of attendees where reportedly especially upbeat, buoyed by what else—the increasing number of deals. Properties are moving again—year over year sales for January and February up around 50%. Transactions have begun in secondary and some tertiary markets. Prices are increasing and the CMBS market is bouncing back. A fee based industry sees momentum returning and everybody feels more confident about deals, deals, and the possibility of more deals.
In the real estate Traderama, the properties and buildings are almost beside the point now. Fundamentals—supply and demand, leasing trends—are covered perfunctorily in investment committee reports, but the idea isn’t to hold a property and nurture it. It’s to ride an expected market upswing, and sell as soon as possible for as big a gain as possible. Timing plays don’t require much real estate management acumen, and when the Traderama gets going with advisors and investment bankers using Other People’s Money, you have plenty of interchangeable buyers and sellers transacting with one another to keep the prices moving higher and the fees flowing. That’s really all that counts.
Of course, as we all learned just a few short years ago, the Traderama stops cold when it becomes clear properties cannot produce enough to cover expenses. Mortgage markets today remain fairly disciplined and most of the current deals have heavy outlays of cash involved. So we’re a long way from going off any cliff. And fundamentals are (slowly) improving. So in fact there is reason for optimism about a decent year ahead.
But for any transaction upsurge, players would be wise to pay attention to the anemic U.S. economy, structural shifts in how companies do business, and the beleaguered state of the average American who copes with weakening long-term earnings prospects, depleted savings, and restricted access to easy credit. All these factors will place limits on the length of any Traderama bull market. Then again, in the current moment we don’t have to care. Current nuclear plant meltdowns, the potential for sharply higher energy prices, and widespread public employee layoffs apparently don’t matter in the Traderama bubble when we can cash in now.
Of course, the Traderama extends well beyond real estate. AT&T buying T-Mobile gives more hope to corporate traders that M&A activity will get stoked for more big transaction fees on all fronts. The stock market keeps going up on such happy news and Manhattan co-op prices register upticks as Wall Street folks fatten their wallets.
As long as we can concoct deals, nothing else really matters.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
