May 1, 2019
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Spring has definitely sprung – and this is what a robust economic recovery looks like.
After last Friday’s +3.2 percent Advanced Estimate for Q1 2019 GDP - and another quarter of strong earnings thus far from banks, consumer staple companies (Procter & Gamble and Coca Cola), and even manufacturers like Caterpillar, there is little risk this economic expansion – which began in July 2009 – will NOT break the record 120 months set between November 2001 and December 2007.
The National Bureau of Economic Research (NBER) tracks U.S. business cycles. This second-longest economic growth cycle has surpassed the 106 months expansion set between February 1961 and December 1969 – and it is proving that this expansion period has attained a healthy second wind to break the record. The Advanced Estimate of Q1 GDP at +3.2 percent released April 26th beat all expectations and defied the historic norm in which Q1 GDP slows back to - or below - a 1.0 percent pace after the holidays and onset of Winter. In July of 2019, this recovery will tie the record 120 months expansion period set between November 2001 and December 2009. This economist is not betting against it!
What is the difference now despite the head winds of a slowing global economy, higher energy prices, and the Federal Reserve being all over the board on interest rates? The difference is Organic Sales Growth (OSG) and jobs. Company after company in Q1 has been reporting healthy 4.0 to 6.0 percent OSG – as well as an ability to raise prices due to a vibrant U.S. economy that is still producing nearly 200,000 jobs per month, maintaining <4.0 percent unemployment rate, and is also experiencing good supply/demand balance across commercial real estate property types. In short, this is what a real economic recovery should look like – even if it is a decade late.
There has been a plethora of “KC Leading Indicators” that have foretold that 2019 was NOT going to slip into a recession or be problematic for commercial real estate. Some of those indicators included:
- RailTime Indicators by AAR.org (which continues to show healthy Intermodal rail traffic – or the carloads that move all the containers of goods we manufacture and consume).
- Consumer Spending (which rose +0.9 percent in March, and was the best monthly reading since August 2009’s +1.2 percent - and best monthly rate since the onset of the 2009 Housing and Financial Crisis).
- ADP and LinkedIn Workforce Report that analyzes what the 190 million employed adults with LinkedIn accounts are doing in the workforce (both show strong demand for STEM (Science, Technology, Engineering and Medical/Math) workforce with hiring up 1.8 percent over February – and expanding 2.0 to 5.0 percent in Corporate Services, Logistics, IT Services and Real Estate industry sectors).
- Commercial Property Price Indices like that produced by Green Street ( Green Street CPPI - March 2019 period). While Green Street CPPI shows some flattening in the rate of commercial real estate price appreciation rates, the fundamentals of occupancy, NOI growth and balance between new supply and demand/absorption are all in balance for all core property types. This is like déjà vu the 1980s - and it can run well into 2020, and maybe beyond if we get USMCA ratified this Summer and a trade deal with China.
NATIONAL NETWORK MEMBER NEWS
Colliers International Reports First Quarter 2019 Results
Head to Head Review: Voltari (VLTC) and Colliers International Group (CIGI)
3 Reasons to Value the Process Over the Outcome
Hunt Real Estate Capital forms new niche financing team
Hunt Real Estate Capital Provides $33M to Refinance a Dayton, OH, Multifamily
Profile: 100 People to Know in Shelby County: Lake Homes Realty CEO Glenn Phillips
Lake Homes Realty Expansion Continues, Now in 6 New States
Yungwoo Plans to Turn Ellsworth Industrial Facility into Mixed-Use Destination
Mortenson breaks ground Emily Griffith Opportunity School redevelopment
1906’s Grocery Store Becomes Luxury Hotel in the Desert
Opportunity Zone Funds Have Already Hit $20 Billion
A Deeper Dive into the Second Tranche of OZ Regulations
Qualified Opportunity Zones: Proceed with Caution
REIT’s View Opportunity Zones as source of long-term capital for development. Lawyer says.
Modular Housing May Help Bridge The Affordable Housing Gap
To Break Free of the Past, New Jersey Developers Are Tearing it Down.
Marriott Building World’s Tallest Modular Hotel in NYC
Amazon Chooses Whiting-Turner, Kokosing to Build $1.5B Air Cargo Hub
Cap Rates in the Net Lease Sector Continue to Inch Up
America’s homeownership rate didn’t budge in the first quarter — should you be concerned?
U.S. Economy Grows by 3.2% in the First Quarter, topping expectations
Can Commercial Real Estate Assets be Wholesaled?
Record $573.9 Billion of U.S. Commercial, Multifamily Mortgage Originations Made in 2018
Key Trends Driving Investors Away from Traditional Lenders in 2019
LEGAL / RISK MANAGEMENT
Legislation to Cut Carbon Emissions Will Cost Property Owners Billions
Massachusetts Mortgage Company Founder Jailed for Defrauding Ginnie Mae out of $2.5 Million
Target Ends fight for Lower Property Taxes in Upstate New York
Big Warehouse Owners Plan to go Public
Amazon Investing $800M this Year to make 1-Day Shipping its New Standard
Matching Amazon’s 1-Day Pledge Won’t be too Hard for Walmart
Investcorp Acquires 8 Distribution Centers Across U.S. for $170M
WORKFORCE DEVELOPMENT (powered by CCAP)
Tariffs, Diversity Quotas Contributing to Construction Hiring Challenges
Commercial Real Estate Still Struggles with the Talent Deficit. What Solutions are Available?
Who is Generation Z, the Next Workforce Pool?