CCIM Outlook 2017 – Storm Clouds

The Miami-Dade/Monroe District of the Florida Chapter of CCIM presented their fine Outlook Conference at the Coral Gables Country Club last week (January 18).  An outstanding array of speakers provided a useful current overview of the real estate economy and the current state and prospects of the Office, Industrial, Retail and Multifamily markets.  Here is a brief bullet point style summary from my notes.  The complete pdf records of the powerpoint files used by the speakers are available at .

Economy Overview – George Ratiu NAR Economist

  • Global economies in slowdown
  • We are back to “normal”
  • U.S. population up 8.8% in last decade
  • Consumers getting squeezed – especially younger people
  • Since 1960 – wages down 2.2%
  • Consumer Credit Growing (good in the short term, not so much in the long term)
  • Labor force participation declines
  • Consumer confidence – “tentative”
  • Business inventories lose momentum
  • Corporate balance sheets reflect cautious outlook
  • Inflation expected to be creeping up with interest rate hikes
  • Large caps slide, small caps heat up
  • Yield seekers move to secondary market – 6.7% to 7% caps
  • Capital markets flush with liquidity
  • Lending conditions tighter for small cap commercial real estate

Retail – Beth Azor – Azor Advisory Services

  • Occupancy up
  • Rents up
  • Cap rates down
  • Exception – South Beach rents falling from =/-$300/SF to =/-$150-$200/SF; Brickell Rents down
  • 7.9MM SF proposed plus Macy’s and Sears closures – Sole (NMB) on hold
  • Major sale – Palms at Town and Country – $285MM for 664k SF = $429/SF
  • What’s hot? – Pop up stores and Food Halls
  • Not so hot? – Men’s ready to wear, sporting goods, office supplies
  • Millenials spend 80% of food dollars eating out
  • Experience retail
  • Who bought the most shopping centers in Florida? Publix – 71 centers (22 in 2016, 23 in 2015, 26 in 2014)
  • Storm clouds!

Industrial – Jose and Sebastian Juncadella – Fairchild Partners

Demand Drivers

  • Population – TriCounty area is the 8th most populous in the US
  • Visitor growth – 15.5 MM in 2015
  • Florida has 6 of the 20 fastest growing areas in the US
  • 65% of the population growth is from other countries (last 5 yrs)
  • Visitor growth – 15.5MM in 2015 (8MM domestic; 7.5MM intl.)
  • 136.1M jobs created in leisure and hospitality in 2015
  • Record hotel occupancy
  • Port of Miami – $28 billion economicO impact; 207k jobs
  • Miami Intl. Airport – $33.7 billion; 282k jobs

Market Statistics

  • 218.8MM SF inventory; 3.7% vacancy
  • 2.8 MM SF demand based on population growth
  • 2.1 MM SF of deliveries expected
  • New Class A product features wider columns, increased truck courts, taller heights

No Storm Clouds here!

Office – Donna Abood – Avison Young

  • 2600 buildings housing 65.6 MM SF with 8.9% direct vacancy and 9.1% vacancy overall
  • Class A asking rates at $41.26/SF; Class B $27.99
  • New space should meet design preferences of millenial workers
  • Continued improvement expected in 2017

Multifamily – Arnaud Karsenti – 13th Floor Investments

  • Trump effect – Tax reform, loosening of regulation, infrastructure spending
  • Interest rate increases will push more households into rental housing
  • Demographics are favorable to support job and wage growth and hence, rent growth
  • Florida ranks second nationally for net in migration – 1000 new residents per day
  • Inferred demand is 56.3K units per year
  • Miami-Dade exhibits lower home ownership rate than the state – 50.6% vs. 63.9%
  • New construction will outstrip demand for the next few years but a massive oversupply does not exist
  • South Florida fundamentals remain strong
  • Rent growth projected to be greater than 3% from 2018 to 2020
  • SoFl multifamily cap rates in a range from 4.9% to 5.5%
  • Conclude – Partly cloudy, but clearing

Capital Markets – Manny DeZarraga – HFF

  • Economy heading into 2017 generally looks good
  • Cost inflation limiting new supply
  • Occupancies increasing – near peaks
  • Institutional investors allocating more dollars to commercial real estate – 2.1% in 1980 vs. 8.9% in 2016
  • DOW up 25% in January 2017 over 2016
  • Oil prices down from 2014
  • Investors continue flight to quality
  • Office sector investors looking to suburbs
  • Multifamily could see some cannibalization in urban areas
  • Ample liquidity on both mortgage and equity sides
  • Some investors pulled properties from market anticipating improving tax treatment
  • Trump buoys dollar
  • Interest rates up
  • LIBOR moving up, but still “super cheap”
  • Transaction volumes lower but single trades up
  • Foreign investment down
  • $8.324 billion dollars in sales in Miami in 2016
  • Bigger deals to foreign investors
  • Conclude – Mostly sunny

Local Economy – Tom Hudson – WLRN

  • SoFL population exceeds 6MM
  • Unemployment down to =\-5% from a peak of =\-12% in 2010
  • Avg. weekly wages increasing
  • Private sector jobs up 20%
  • Housing costs disproportionately high
  • GDP growth of major South American trading partners declining, but expected to begin to improve
  • Outlook – partly cloudy

Great job to all who put the program together!

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