{"id":1004357570,"date":"2019-10-03T03:56:23","date_gmt":"2019-10-03T11:56:23","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004357570"},"modified":"2019-10-04T01:56:17","modified_gmt":"2019-10-04T09:56:17","slug":"qa-an-under-the-radar-look-beyond-late-cycle-plays","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/qa-an-under-the-radar-look-beyond-late-cycle-plays\/","title":{"rendered":"Q&A: An Under-the-Radar Look Beyond Late-Cycle Plays"},"content":{"rendered":"
\"\"<\/a>

John Sullivan, co-chair of global real estate practice & chair of U.S. real estate practice, DLA Piper. Image courtesy of Michelle Weeks<\/em><\/p><\/div>\n

At the close of DLA Piper\u2019s 2019 Global Real Estate Summit, Commercial Property Executive<\/em> had the opportunity to sit down and chat with John Sullivan, co-chair of the firm\u2019s global real estate practice & chair of its U.S. real estate practice.<\/p>\n

Sullivan\u2019s work encompasses all aspects of commercial real estate, with emphasis on representing public and private pension plans, opportunity funds, investment advisors and non-U.S. investors in equity, debt, hybrid and joint venture transactions throughout North America.<\/p>\n

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See our full coverage of the 2019 DLA Piper Global Summit<\/a><\/p>\n

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The conversation covered what might be under the radar, noteworthy secondary asset classes, and if it even matters whether CRE causes the next recession.<\/p>\n

Is anything running under the radar right now? Is there anything the CRE industry should be paying more attention to? <\/strong><\/p>\n

Sullivan:<\/strong> There\u2019s a tendency\u2014at least in the real estate industry, it might be true in all industries\u2014to get a little myopic. You look at sort of your own world. You look at the fundamentals of the real estate market now, and they\u2019re generally pretty good across the country, in most markets and for most asset types.<\/p>\n

You look at leverage levels, they\u2019re pretty low. Even the leverage that\u2019s there, the underwriting that\u2019s gone into that leverage has been pretty conservative as compared to before the recession. So in general, you can look at the real estate industry and say it looks pretty solid.<\/p>\n

In our report<\/a> that came out last week, somebody made kind of a quip. They said, \u201cWell, real estate in the past has caused some recessions. But we\u2019re in good shape, so if there\u2019s a recession, at least it\u2019s not going to be our fault this time.\u201d<\/em><\/p>\n

\"\"<\/a><\/p>\n

Which is sort of funny in a way. But I think that what we maybe are missing with that mentality is that if there is a recession, it\u2019s not going to matter what caused it! And the fact that we didn\u2019t cause it isn\u2019t really going to matter. Because, for example, if you have a recession, you are going to expect consumer spending to decrease. Consumer spending is 70 percent of the economy, right? So that\u2019s going to have a significant impact on commercial real estate.<\/p>\n

So it\u2019s not necessarily something that\u2019s under the radar, it\u2019s more kind of hovering above and around the market.<\/p>\n

Are there things the CRE industry could be doing, or doing better, right now, to prepare for the next recession<\/a>? <\/strong><\/p>\n

Sullivan:<\/strong> What people need to do, and most are doing, is look closely at their balance sheet, because if there a recession is in the offing, you want your balance sheet to be in order, you want your debt levels to be manageable.<\/p>\n

Which asset types are most vulnerable right now?<\/strong><\/p>\n

Sullivan:<\/strong> Assets that are more highly leveraged, have more debt, are going to be more at risk. Assets that have significant ongoing capital needs are going to be more at risk. So hotels<\/a>, they\u2019re very expensive assets to run. Some office, it depends on how much leasing you have to do. When you have a lot of leasing to do in office buildings, it\u2019s very expensive to build out that space. If your property lacks functionality, you\u2019re more at risk.<\/p>\n

Some real estate asset classes are directly impacted by consumer spending, like retail<\/a>. People have less money in their pockets, they buy less and they take vacations less, stay at hotels less.<\/p>\n

On the flip side, what may be less vulnerable? Multifamily, because housing is a basic human need. Everybody has to have a roof over their heads. And if you look back at the last recession, multifamily held up better than most of the other asset classes. I think that would be true again<\/a>.<\/p>\n

And you heard a lot of talk today about logistics and warehousing, all being driven by the e-economy, this growing demand that all of us have as consumers for wanting to be able to buy anything we want with the click of a mouse, and then we want it tomorrow. So I think that asset class is likely to do OK through a recession, because there are so many macro forces behind that.<\/p>\n

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READ ALSO:<\/strong> Industrial Outlook Calls for Steady Growth in 2020<\/a><\/p>\n

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I think the same thing is true of data centers<\/a>. We have an insatiable appetite as people in the West for better and faster cloud-based services.<\/p>\n

How are the secondary product types doing at the moment? There was at least one mention earlier today about overbuilding of student housing. <\/strong><\/p>\n

Sullivan:<\/strong> It seems to be true for some markets with student housing, but some of those newer asset classes \u2026 medical spending is roughly 20 percent of the U.S. economy, so medical space isn\u2019t some little caboose at the end of a long train.<\/p>\n

\"\"<\/a><\/p>\n

I think that\u2019s true for life sciences as well, in certain markets. Boston is one of those markets, where you have a confluence of medical facilities and colleges and research facilities. That\u2019s a very expensive business, it\u2019s expensive real estate, but I do think that\u2019s real estate that has a good future. <\/p>\n

There are cities that are going to try to duplicate that kind of environment. Philadelphia is trying to do that. Dallas would like to do that.<\/p>\n

Going back to what you said about myopia, and given that this conference has focused in various ways on disruption, how would you summarize what this day represents? <\/strong><\/p>\n

Sullivan:<\/strong> Today has been about the future of real estate and innovation and change. Real estate, which has historically been an industry that has been slow to adapt, is finally coming around. We\u2019re looking to the future and ways that we need to use technology and innovation to be smarter about real estate.<\/p>\n

We need to reimagine how we think about real estate and think about it more from an experiential and people perspective and build for that, as opposed to just building buildings.<\/p>\n","protected":false},"excerpt":{"rendered":"

DLA Piper\u2019s John Sullivan ties together key points from the law firm\u2019s 15th Global Real Estate Summit in Chicago.<\/p>\n","protected":false},"author":882,"featured_media":1004357597,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21808,21825,21783,23891,21742,21744,21787],"tags":[33026,47279],"class_list":["post-1004357570","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-finance","category-investment","category-national","category-latest","category-people","category-technology","tag-dla-piper","tag-john-sullivan"],"acf":[],"yoast_head":"\nQ&A: An Under-the-Radar Look Beyond Late-Cycle Plays - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/qa-an-under-the-radar-look-beyond-late-cycle-plays\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Q&A: An Under-the-Radar Look Beyond Late-Cycle Plays\" \/>\n<meta property=\"og:description\" content=\"DLA Piper\u2019s John Sullivan ties together key points from the law firm\u2019s 15th Global Real Estate Summit in Chicago.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/qa-an-under-the-radar-look-beyond-late-cycle-plays\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2019-10-03T11:56:23+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2019-10-04T09:56:17+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2019\/10\/John-Sullivan-co-chair-of-global-real-estate-practice-chair-of-U.S.-real-estate-practice-DLA-Piper-e1570103607541.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1310\" \/>\n\t<meta property=\"og:image:height\" content=\"985\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Scott Baltic\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/qa-an-under-the-radar-look-beyond-late-cycle-plays\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/qa-an-under-the-radar-look-beyond-late-cycle-plays\/\",\"name\":\"Q&A: An Under-the-Radar Look Beyond Late-Cycle Plays - 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