by Dan Rafter
If the financial recovery was a baseball game, we’d be in inning four or five. That’s good, but it’s not as good as being in the bottom half of the ninth.
That was a key message from the Emerging Trends in Real Estate presentation at the Urban Land Institute’s fall conference in Chicago today. Stephen Blank, senior resident and fellow for finance at the Urban Land Institute, used the baseball analogy to explain where the economy was headed in 2014. The recovery will continue, he said, but there’s still a lot of baseball to be played.
“It’s like one of our members said, now we’re recovering from the recovery,” Blank said during the presentation.
Overall, though, the news from the emerging trends presentation was good, with survey respondents telling the Urban Land Institute that they expect commercial real estate in all sectors to improve in 2014.
Sure there are challenges: Blank pointed to the uncertainty that commercial pros feel over future government policies and regulations, the continuing financial problems overseas in the Euro zone and stubbornly high unemployment rates across the country as three of the most significant challenges facing commercial real estate.
But on the positive side, Blank found plenty of good news to highlight, too. There is good, if not great, job growth in industries that use lots of real estate, industries such as technology, health care and medical research. Corporations across the country are enjoying strong profits, while the single-family housing market continues a strong recovery. This all bodes well for commercial real estate in 2014 and beyond.
“Next year we think investors will continue to shift their focus to some of the country’s more overlooked markets and sectors,” Blank said during his presentation.
This last point is important for the Midwest. The Emerging Trends report highlighted the top-20 markets in terms of investor favorability ratings. To no one’s surprise, investors predicted that San Francisco would be the top market in 2014.
Only a pair of Midwest markets made this list, Nashville in 12th place and Minneapolis/St. Paul in 20th.
That last market, the Twin Cities, merited a bit of commentary from presenter Andrew Warren, director with Chicago-based auditing and consulting firm PwC. Warren said that Minneapolis/St. Paul’s inclusion on the list might come as a surprise to some, but that there were several good reasons why the Twin Cities nabbed that 20th spot.
“That area has a fairly diverse industrial base, and people are finding it an interesting market,” Warren said. “It’s attractive to recent college grads who don’t want to leave the Midwest. Minneapolis provides a lot of amenities.”
Another interesting tidbit from the presentation? CMBS lending is definitely on the way back.
“The return of the CMBS market is like a Biblical revival. It is back from the dead,” Blank said.
The numbers prove his point. It’s estimated that the CMBS market will hit $80 billion in 2013 and an even more impressive $100 billion in 2014.