Capri Capital cofounder and Chairman Quiti Primo appears on CNBC to discuss the wave of recapitalization headed toward commercial real estate. Interesting to hear repeated that CRE investments “should perform” somewhere between equities and bonds. Also that REITs are the investment play to get on board with 3 million-plus new renters added in recent years.
Unlike a leading indicator such as residential RE, commercial real estate tends to trail mainline economic indicators. CRE tends to grow as a result of economic growth, not vice versa. With cautious optimism reappearing across the broader economy in recent months, what are the signs the CRE cart is following the general economy’s rejuvenated horse?
- An M&A study by Mergermarket found a 23.6% increase in the total value of commercial real estate deals for 2010 compared to 2009. In the United States, the value of M&A activity in the real estate sector increased from $3.8 billion in 2009 to $11.0 billion last year. The number of deals that took place almost doubled, climbing from 20 to 36.
- Occupied US Office space is up for the first time in three years. In its report, property research firm Reis, Inc also found a 0.2% raise in rents, which is the first uptick since 2Q 2008.
- Retail fundamentals appear to be turning around. Vacancies at malls have declined and stayed flat at shopping centers (source: RetailTraffic.com).
- Office-space — the commodity as well as the-underlying property in CMB securities is enjoying a rise in popularity on Wall Street and in primary markets.
- A greater than expected drop in unemployment to 9.4% was released on Friday by the Bureau of Labor Statistics.
When it comes to green buildings, most commercial real estate brokers are in a bind. They have the trusted business relationships, they have the ear of the clients, and they’re positioned to stay put. But adding value to deals is harder than ever when the buildings themselves demand more and more from their handlers.
Changes in technology affect all stakeholders – brokers, property managers, and owners – in a increasing number of ways. Technology changes in building controls, new goals in sustainability and energy efficiency, new regulations and the rise of the smart electrical grid all add up to headaches for the average commercial broker. Whether under the heading “green” or “smart”, brokers are caught without enough information about the new trends and struggle to add value.
Part of this is because what architects and engineers used to handle exclusively – usually at build time – is now an ongoing process that absolutely impacts bottom lines on property deals. New technologies affect all the areas that brokers traditionally advise on – leases, pro formas, financing. While brokers aren’t supposed to become experts in technology, the days where a couple of cliches about green this or smart that just don’t cut it any more.
NAR Commercial has put out a great podcast that addresses the basics in green technology in an interview with Tom Shircliff of Intelligent Buildings Incorporated. As a strategic consultant to key stakeholders, it’s Tom’s job to keep CRE pros aware of green/smart building terminology and some tech too – just enough to add value to a deal. Check it out here. And don’t fear the new: make it work for you!