BEVERLY HILLS, CA – May 8, 2014 – As global markets continue to emerge from the economic downturn, recovery of the commercial real estate market will drive unfathomable flows of capital, according to Dr. Peter Linneman, Chief Economist at NAI Global. His remarks were delivered to a group of nearly 700 individuals from NAI Global firms and their clients this week at the NAI Global Market Outlook event. Dr. Linneman was joined by Jay Olshonsky, President of NAI Global and Mauro Keller Sarmiento, NAI Global Executive Managing Director of International Business. The presentation was opened by special guest Richard Ziman, Founding Chairman of Rexford Industrial Realty, Inc. and Founding Member of the UCLA Ziman Center for Real Estate.
“As the global economy recovers, the potential flow of funds into commercial real estate is staggering,” said Linneman.
Slow, but steady, US job growth continues to drive economic recovery and its impact is evident on the global commercial real estate market. The most telling economic indicator for most commercial real estate markets remains the proportion of lost jobs recovered to date, and when lost jobs are 100% or more recovered, real estate space demand is roughly back in balance.
The US lost nine million of 140 million jobs in a period of nine months when the recession hit. Today, the US has regained 8.5 million jobs, the majority of which are higher quality, higher paying jobs, according to Linneman. Some markets, notably Washington, DC and Texas have an all-time high number of new jobs. On the other end of the spectrum, Los Angeles has only regained 50% of jobs lost and currently has 9.5% unemployment.
Diverse economic circumstances continue to exist across the US, ranging from strong job growth in Houston to struggling in Los Angeles. In December 2013, Minneapolis, Austin, Washington, D.C., Fort Lauderdale, Seattle, and Durham, were the only US markets that showed particularly durable job growth. The next best-performing markets include Long Island, Kansas City, Raleigh, and Orange County, while Atlanta, Cleveland, Philadelphia, and Miami lag far behind. Los Angeles and Riverside-San Bernardino were the only major markets with Recession-level unemployment rates at the end of 2013. Linneman forecasts that 2.6 million jobs will be added in the US during 2014 and 2.8 million in each of 2015-2018. These estimates imply that total employment will surpass its pre-recessionary peak in the second quarter of 2014, although by then the U.S. population will surpass 2008 levels by15 million.
“As the global economy continues to stabilize, we are seeing more available capital and increased investment activity across sectors worldwide, driven in particular by technology companies, medical facilities and those with needs for warehouse space and logistics facilities,” said Olshonsky. In the US, the office sector is showing growth in urban core properties, but the suburban office market is growing due largely to job growth and the desire for access to quality public schools. The US retail market is driven by internet sales, which account for eight percent of total retail sales, up from three percent 10 years ago. Brick and mortar stores haven’t lost ground, but haven’t grown, and plenty of inventory exists.
Access to capital, availability of inventory and low US interest rates are attracting investors from Europe and Asia to the US. “Cross-border investments continue to rise, and we are seeing an increase in foreign direct investment,” said Keller Sarmiento. Expanded investment opportunities in Latin America, particularly Peru, Panama, Colombia, and Brazil, are drawing increased foreign capital. Mexico is a very competitive market for institutional investors. As the economies in these countries grow, they present new opportunities for investors to realize returns. Keller Sarmiento notes that the current political situation in Russia will present ripple effects throughout the world, but the impact is hard to predict. Turkey was cited as a market with strong investment potential, despite geo-political unrest, due to its strong industrial base, strategic location and young population.
“The flow of funds into the commercial real estate markets worldwide signifies an increased appetite for investment, and increased opportunities for NAI Global Members and their clients,” said Olshonsky.
About NAI Global
NAI Global is the single largest, most powerful global network of owner-operated commercial real estate brokerage firms. NAI Global provides a full range of corporate real estate services, including brokerage and leasing, property and facilities management, real estate investment and capital market services, due diligence, global supply chain and logistics consulting and related advisory services. NAI Global Member firms, leaders in their local markets, are actively managed to work in unison and provide clients with exceptional solutions to their commercial real estate needs. Founded in 1978, today NAI Global has more than 375 offices strategically located throughout North America, Latin America, Europe and Asia Pacific, with over 6,700 local market professionals, managing over 380 million square feet of property. Supported by the central resources of the NAI Global network, Member firms deliver market-leading services locally and combine their in-market strengths to form a powerful bond of insights and execution for clients with multi-market challenges.
NAI Global was acquired in 2012 by C-III Capital Partners, a commercial real estate services company engaged in a broad range of activities, including primary and special loan servicing, loan origination, fund management, CDO management, principal investment, title services and multifamily property management.
To learn more, visit www.naiglobal.com.