NEW YORK CITY—Usually, five years into an economic recovery, things begin to look frayed and the fear begins to take hold that the next recession is around the corner. But not this time, says New York City-based Stuart Saft, a partner at Holland & Knight LLP.
Saft exclusively tells GlobeSt.com that this can be due to “the result of how steep the fall was in 2008, the subsequent deleveraging or the way the planets line up, but this time it is different.” He pointed out that what we are seeing is more than a recovery—“we are in the midst of a transformation in our economy.
Saft says “The US is suddenly the largest oil producer in the world and the price of oil has plunged 40% in a few months, which means that consumers will be paying lower gas and home heating costs thereby putting more money in their pockets,” says Saft. “America has a supply of natural gas that could last hundreds of years, making us almost permanently free from the addiction of imported oil. Our deficit has fallen from $1.4 trillion in 2009 (9.8% of our GDP) to approximately $500 billion (2.8% of our GDP). In fact, the GDP is up 3.8% in the third quarter.”
Another positive point Saft mentions is that unemployment is below 6% and the labor force participation rate is the highest since the 1970s.
The Dow Jones Industrial Average is nearly 18,000 and the dollar is one of the strongest currencies in the world, he adds.
“At the same time Europe and Russia are facing recession, the Mideast is, as usual, in turmoil, China is attempting to correct its economic problems and there is instability in many places in the world,” he says, noting that none of those above facts are going to change overnight.
“What we have seen in 2014 is a flood of money coming into the real estate market making loans for construction, investing in existing properties, buying extremely expensive apartments in New York and Miami, buying commercial buildings in mid sized cities across the country looking for class A properties in secondary markets/cities and class B properties in major markets/cities,” he says.
Some of the “flood of money” he points to includes the Chinese buying trophy properties all over the country, a point that was recently also made by Marcus & Millichap's Hessam Nadji. “Whether they're high net worth individuals or large-scale institutions, investors from China and other overseas markets see US real estate as a long-term play,” Nadji previously said. The GlobeSt.com Thought Leader said these buyers “really want the real estate. They're not too concerned about immediate returns, short-term returns. They have a very long-term horizon.”
Other points Saft mentioned to point to the flow of capital to the US from around the world include “Russian oligarchs wanting to protect their money; and middle eastern billionaires looking for the safety afforded to their investments in the US.”
And that flow, he says, “continues regardless of the politics or the fear of Ebola or anything else.”
Funds are coming here, Saft says, “because we are the only industrialized country in the world with a growing population; the only country in the world where investors know they will be able to get their money back even if there are temporary problems, which could reduce their return.”
All of the above, Saft says, translates into a strong and growing real estate market. “The one fact is that the population of the United State will be 400 million in little more than 20 years; 100 million larger than a decade ago and we need housing, office buildings, malls, stores, warehouses, and infrastructure and the cost of the foregoing will increase every year, so it makes sense to buy it or build it now. Will this strong market last forever? No. Will it last through 2020, almost assuredly yes.”
Do you have any thoughts on this transformation? Do you agree? Disagree? Please weigh in and tell us your thoughts below in the comments section.
Continue Reading for Free
Register and gain access to:
- 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
© 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.
Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
