Waldorf Hotel Sale: Here is a confluence of an offshore investor seeking to park money in a safe place, the power of 24-hour city, global gateway dynamics, and overshooting on iconic properties. Just up Park Avenue two condo developers hope to cash in on the same factors by building sky-high trophy towers to attract skittish overseas capital. You think wealthy Chinese are not nervous over the Hong Kong demonstrations—highlighting the widening gap between rich and poor? How about if you live in the “peaceful” Middle East? Or do you feel confident if your home base is in one of the other BRICs? Expect the money to keep pouring in to a few select elite cities for now and push up pricing to even more unsustainable levels.
Strong Dollar Buoys U.S. Stocks Well, the strengthening U.S. dollar also buttresses the aforementioned 24-hour U.S. real estate markets. Again offshore capital has another reason to look to New York, San Francisco and the handful of other top cities for husbanding wealth. And if these players expect the dollar to maintain its current run, then in the short-term it makes sense to invest sooner rather than later to take advantage of the currency bet.
Office Sector Plods Ahead Meanwhile, the office market nationwide steadily improves at a still uncomfortably tepid pace—overall vacancies remain in the low teens and rents only inch higher. The lowering unemployment rate hasn't translated into historically typical demand improvement, because new jobs are mostly at lower wage rates in non-office related work.
Apartments are the place to be After six straight years of quarterly rent gains, you might wonder if the apartment sector is due for a slide. Since the majority of Americans have missed out on compensation gains over the last decade and meaningful raises remain extremely elusive, renting looks like the practical (for many: read necessary) alternative, especially when lenders hold to tough mortgage underwriting requirements. The luxury rental sector could get overbuilt—folks here can afford condos or in close suburban homes—but demand will remain extremely strong for middle income housing and affordable housing is in severe shortage. This asset class has legs.
Rate Rise Expectations Pummel REITs Private equity real estate investors should take note—this is what will happen to their values when interest rates actually do increase and cap rates head north. It's only a matter of time, but are we talking six months or another six years?
Industrial is the New Retail? Have you bought a new iPhone 6? If you go to an Apple store or mobile phone outlet, you will find they do not have them in stock except to service pre-order pick-ups. Now you can go to a store to order or to save time just go on line. And instead of going back to the store for pickup just have it sent directly to home or office. As far as set up, the stores will have you go on line to transfer all your data in any case. So why go to a store at all? Order on line and let the distribution chain take over. We need fewer stores, less inventory space in stores, and fewer warehouses too. New translates into less all around.
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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.
