CCIM Outlook 2017 – Storm Clouds
January 30, 2017 Leave a comment
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!