HOUSTON-At Transwestern's Sept. 24 Twitter conference, "State of CRE," Chip Clarke underlined a basic premise; namely that geographic areas producing more jobs will end up with more real estate activity.
In answering the question about hottest cities for commercial real estate investment, Clarke tweeted that those job-creating cities are seeing the best CRE activity. As such, its "hard to top Houston or San Francisco for job creation. Obviously, NY remains strong from investment standpoint."
And those were the geographic areas targeted when it came to increases in office asking rents. "Many Texas markets, led by Houston," he said, adding that Northern California and certain areas in Manhattan were also experiencing rental increase. "There continues to be a flight to extreme quality and companies want to be in environments where they can retain top talent," he noted.
Speaking of such environment, Clarke also pointed out that demographics are changing the face of office space. Millennials, he commented, are viewing office space as more of a connective platform, rather than a physical location. As such, "SF per employee is definitely on the decrease," he tweeted. "However, companies are investing in highly creative collaborative areas."
On the flip side, Clarke pointed out that "states with high taxes and high regulatory burdens will struggle." Geographically, this means the tertiary Midwest markets, he added.
Meanwhile, in discussing investments, Clarke commented that, with many institutional players trolling in the same markets, assuming interest rates stay near their current levels, look for "continued pressure on cap rates and continued fierce competition for the best projects," Clarke said.
Speaking of competition, one challenge of which Clarke tweeted involved difficulties in planning for growth (especially in already tight submarkets) and increased pressure on space utilization. In other words, "balancing me vs. we space," Clarke tweeted.
In terms of predictions for Q4 and beyond, Clarke returned to his commentary about jobs and commercial real estate activity. "It's really ALL about the jobs," he said. "All commercial real estate segments will do well with job growth."
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