We at BGP give credit to Susan Piperato for her predictions for 2015, although we at BGP still have not had time to provide strong economic projections based upon the low and changing price of oil, and the transitional effect that this will have on the overall economy. More on this later. -BGB Editor
MULTI-HOUSING, MEDICAL OFFICE, SELF STORAGE AND FULFILLMENT CENTERS
MULTIFAMILY PROPERTIES: Top 5 Predictions for the Multifamily Sector in 2015
Jan 13, 2015 Susan Piperato
In the year ahead, demand for multifamily properties in urban areas and in the affordable housing sector will continue increasing, while appetite for luxury condos may slow down, predicts Byron Carlock, Jr., U.S real estate practice leader with consulting firm PwC. Carlock, whose past stints included the role of CEO and President of CNL Lifestyle Properties and Chief Investment Officer of Post Properties. He is also a member of the Urban Land Institute, and a board member Emeritus at Harvard Business School.
Below, he shares his predictions for the multifamily sector in 2015:
- There will still be a shortage of housing units in most major markets, and the industry will see an affordable housing problem in the top markets.
- Multifamily demand will continue to increase with urbanization trends, which are attracting baby boomer and Millennial cohorts to multifamily housing.
- Nearly 29 million Millennials still live at home (due to student debt and delayed entry into jobs that allow self-sustenance). They will move out and start their own households over the coming years as the economy's slow recovery continues.
- Ultra-high-end multifamily condo housing in certain major markets is seeing high prices supported by foreign buyers, although questions are emerging as to the depth of that buying community. A slowdown in the escalating prices in New York City is starting to be discussed.
- Multifamily housing will continue to provide greater flexibility and mobility, and be deemed more convenient by those seeking to simplify their lifestyle, downsize, or maintain locational flexibility due to job or family issues.
Top 5 Predictions for Medical Office Real Estate in 2015
Jan 20, 2015 Susan Piperato
The “retailization” of healthcare will continue to increase this year, according to executives at Revista, an Annapolis, MD based research firm that focuses on the medical real estate industry. Revista was founded in 2013 by seniors housing industry veterans Elisa Infante Freeman, Mike Hargrave, and Hilda Flower Martin. The company tracks investment sales and construction statistics in the medical office sector, as well as publishing the Top 50 Owners report for the industry. Here are Revista’s predictions for the year ahead:
- Transaction levels will remain near record highs due to strong valuations and capital availability.
- Development will continue to increase as industry focus remains on outpatient services.
- The "retailization of healthcare" trend will continue, with patients being viewed as customers and healthcare providers focusing on providing services to those customers in convenient locations.
- As short-term interest rates begin to rise, the change will likely cause a corresponding increase in the cost of capital, as well as in the medical real estate buyer landscape.
- Consolidation among healthcare providers will continue as systems acquire hospitals and hospitals, in turn, acquire medical practices to improve efficiency and combat increasing cost pressure.
Top 5 Predictions for the Self-Storage Sector in 2015
Jan 14, 2015 Susan Piperato
Aaron Swerdlin, Executive Managing Director with NGKF Capital Markets, based in Houston, sees a strong year ahead for the self-storage sector. Swerdlin, who has more than 20 years of experience in the industry and in the past worked in the self-storage groups at HFF and CBRE, as well as at Storage Investment Advisors, represents clients including Clarion, CubeSmart, GE Capital/Storage USA, Public Storage, and Storage Choice, among others. Over the course of his career, he closed approximately $4 billion in self-storage transactions. Below are his five takeaways for the sector in 2015.
- Year-over-year NOI growth will be surprisingly strong: With limited new supply coming on-line, all-time-high occupancies, and limited rent concessions, 2015 will be the strongest year ever for revenue per available sq. ft.
- New development will continue to be in the headlines, but won’t have a material impact on sector performance: With cap rates at all-time lows, development continues to make sense, even at all-time low returns on cost. However, unless banks begin to make low-/no-equity construction loans, over-supply will not be widespread.
- Occupancy will decline slightly, but that’s a good thing: 2014 [marked] an all-time record high occupancy, at over 90 percent. With more confidence in what drives pricing equilibrium, operators will benchmark more off achieved rental rates rather than target occupancy, so that leasing will yield [higher] rents than in 2014.
- The acquisition field will extend beyond the REITs: With an abundance of large portfolio transactions feeding the institutional appetite [in the last three years], there’s been little room for smaller, local and regional operators, to deploy capital in the transaction market. A combination of REITs [pulling] back a little and deal size shrinking, 2015 will [present] a more balanced and diverse roster of buyers for marketed deals.
- Private equity will enter the picture: Although most of the large portfolios that were likely to trade fee-simple already traded between 2011 and 2014, and most of the fee-simple transactions in 2015 will be one-offs and small portfolios, there will be a very large (maybe more than one) joint venture/recapitalization deals that will give entry to the product type to brand name private equity firms.
FULFILLMENT CENTERS: Top 5 Predictions for Fulfillment Centers in 2015
Jan 26, 2015 Susan Piperato
For the fulfillment center sub-sector in 2015, Matthew E. Galligan, president of CIT Real Estate Finance, a New York City-based financial holding company, predicts a year with many variables. Galligan’s group provides loans greater than $20 million for stabilized, value-add, and construction properties in the core commercial real estate sectors, including industrial.
- We will see a proliferation of fulfillment centers to meet the growing needs of e-commerce.
- There may be a steady buildup of traditional industrial space to meet the needs of the economy growing in the 3 percent-plus range.
- There could be a slowdown in the Houston market and attendant sub-markets caused by a decrease in oil prices.
- There could be decreased investment in New York State caused by the fracking ban. However, we may see more investment in the U.S. in places where goods and services are produced, especially in gateway markets, due to the strengthening dollar and relatively weaker foreign markets.
- We will witness an increase in banks willing to finance speculative construction lending on fulfillment, and traditional warehouse and storage facilities.