George Ratiu gave a presentation to CCIM members today in regards to the state of commercial real estate (CRE) and its outlook. Here are a few take aways that I gleaned from the presentation:
- 2005 - 2015 the US Population grew by 26M people, which is 8.8%.
- 2005 - 2015 the US Labor Force grew by 8M people, which is 5.2%. This is interesting because population growth is outpacing labor growth, which he later shows can be attributed to a decline in the labor force participation rate.
- Consumer consumption makes up 70% of the US economy.
- New household formations in the US are typically 1.2-1.5M, and new housing starts have only been around 600k-800k, which means demand is outpacing supply. This has led to housing prices out-gaining wage increases.
- Leasing concessions have been decreasing every year since 2011. *National Association of Realtors
- CRE investment sales had been increasing since 2011, but took a small step backward in Q1 of 2016. *Real Capital Analytics (RCA)
- Current cap rates show central business district (CBD) office is the lowest while hotels are the highest. *RCA
- The property price index shows CBD office has risen the most since 2009 while suburban office has risen the least of all commercial property types. *RCA. To me, this shows a national trend of people investing in downtown locations. What we are seeing in Boise as a downtown commercial real estate boom, must be happening in other locations as well!
- A survey by George Ratiu shows that lending conditions have tightened in 2016, which is the first tightening in a number of years.
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