By Marcelo Berm?dez, President, Figueroa Capital Group, a subsidiary of Charles Dunn Co.
One of the benefits of working in the commercial real estate capital markets is receiving invitations to attend economic forecasts and roundtables, and even participating as a panelist. I was asked recently to respond to and comment on a poll asking, ?What is the biggest threat to your business?? There were several options to choose from, and at the end of the poll, the clear frontrunner answer was ?the economy.? I easily pointed to six months of negative economic reports, 2013 Tax Code changes, the fiscal responsibility summits in Europe, CMBS delinquencies and persistently high unemployment, but these are obvious sound bites. What seems to be different is that we?re actually seeing inflation fall and innovation increase.
The Fed is implementing more than 200 easing actions to support economic growth, which means rates will stay low for an extended period of time. This will result in increased interest in higher-yielding investment vehicles with a recurring income component, such as real estate. We are already seeing it happen. Normally, July and August are slower months for the commercial real estate industry, but our office is the busiest it has ever been. Existing clients are calling in to re-engage in debt financing and equity raising services for properties that have crossed occupancy threshold projections sooner than anticipated. Owners are clearly interested in collaborating to ensure a property is bought or sold and are being particularly flexible and creative. Unsolicited calls from buyers at all levels have been pouring in to seek out non-institutional acquisition opportunities and request assistance in structuring their capital stack. Debt funds with ?softer? rates?below the 8 percent mark?are popping up and betting on real estate as their source for best yields.
While this is great news, I am still a big believer that unemployment needs a new approach to cure its ills. In the late 1990s, I read a book called ?The New, New Thing? by Michael Lewis. It was an easy read and one of those books you pick up at the airport because you forgot yours and the title was catchy. Among the topics that stuck with me was the fact that today?s new thing will be obsolete tomorrow so you cannot be satisfied with what you know currently. I am thankful my office is busy, but I know I must continue to pursue the unknown and find solutions to existing problems that will help investors maximize returns. Unemployment still needs a swift kick in the pants, and innovations in technology, education and healthcare will pave the way.
Big-box tenants like Best Buy are realizing it?s time to create smaller footprints and adapt to consumers? ever-changing buying habits. Healthcare providers and science and technology development spaces, often known for working in separate silos, are bringing down the walls and co-locating so basic research facilities, clinics and small-scale manufacturing are all in one place. Apple?s soon-to-be-built 2.8 million-square-foot campus will not only house 13,000 employees but also create 1.5 jobs elsewhere in the county for every job added there. Using innovation to create market power is a fantastic approach to reposition a property and combat one of our biggest misfortunes in today?s economy.
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