by Dan Rafter
The Icons in Real Estate panel brought some of the biggest names in commercial real estate to REJournals’ 15th annual Commercial Real Estate Forecast Conference today in Chicago.
These commercial leaders shared their thoughts on how the commercial real estate industry has changed and is changing, and how the country’s uncertain immediate future might impact the way commercial deals are closed and new developments are built.
This year’s panel featured industry stars John Bucksbaum, founder of Bucksbaum Retail Properties; Breck Hanson, executive vice president with Associated Bank; Gail Lissner, vice president with Appraisal Research Counselors; Jim McShane, chief executive officer of The McShane Companies; and Steve Stratton, executive managing director with JLL.
The panel was especially appropriate considering that in two days Donald Trump will take over as president. What impact will the new president have on the real estate market.
Hanson said that Trump, being a real estate professional himself, should look favorably on the commercial real estate industry.
Hanson said that Trump’s plans to boost spending on the nation’s infrastructure should provide a positive jolt to commercial real estate.
“We are cautiously optimistic that a Trump industry will fuel a lot of activity in the real estate industry,” Hanson said.
McShane said that this an increase in infrastructure spending would be a definite positive for the construction industry. But he did express concerns that Trump’s plans might remain just that, plans and not action. McShane expressed doubts that Congress would be willing to release the large amount of funds that Trump will need to push his agenda of infrastructure spending.
There is hope that Trump’s administration will bring jobs back to the country, positions that were lost overseas. Stratton referred to re-shoring, the move of formerly lost jobs back to the United States.
“Jobs have gone to India, to Mexico, China and the Phillipines,” Stratton said. “I think we’ll see, because those economies are less consistent, companies coming back to the United States. I call that re-shoring. I think that will be a boon to some of our labor sectors.”
McShane, though, warned that the jobs coming back to the United States won’t be the same type of manufacturing positions that the country lost. The number of traditional manufacturing jobs will continue to shrink in the United States, with many of these jobs replaced by technology. This, McShane said, is a trend that isn’t going to slow.
McShane said that today’s young adults need to go to school and embrace tech and science.
“I caution anyone hoping for the old manufacturing jobs to come back,” McShane said. “There aren’t as many opportunities for that kind of work today.”
Panelists also looked at the near future for commercial real estate. The commercial real estate industry has been expanding at a steady pace since the end of the last recession. But no expansion lasts forever. Is there any worries today that, say, new apartment units are being built at too quick a pace?
Lissner said, though, that in Chicago, the fundamentals underneath the multifamily market continue to be strong. Supply is not yet outpacing demand, she said.
“Everyone is looking at multifamily,” Lissner said. “But I don’t think multifamily is going to crack. We are not yet at the peak of new inventory. We are still seeing inventory being added. It will have to slow. The pace is not sustainable. But we are not yet at the peak.”
Bucksbaum said that one of the biggest challenges facing the Chicago multifamily market — and many markets across the country — is the size of the monthly rents that come with new apartment buildings. As Bucksbaum said, many new apartment buildings are simply too expensive for many renters.
“We need $2-a-square-foot or $1.50-a-square-foot rents, too,” Bucksbaum said. “Everthing today is so expensive. I don’t know where the people who were paying $2 a square foot go when these buildings are torn down. Long-term, I think this is a big challenge that faces the city.”
Lissner said that there are options for people looking to rent less expensive apartment units in the city and its suburbs. These renters have to look for older units, ones that, as Lissner says, “don’t have all the bells and whistles.”