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 miamidadeccim.com/ .

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!