In response to the Treasury’s yield curve inversion and escalating trade war with China, Time Equities Chairman and CEO Francis Greenberger said, “This is the 10th inning of a 9-inning game and you realize that one day, the game (and the longest economic expansion in history) is going to end.”
Still, much of the real estate industry continues to be optimistic. Just look at the Blackstone Group’s nearly $19B industrial play that we covered two weeks ago here. Why? Funds are looking to park their excess capital. Rates are at historic lows. And even when the Dow plunged 800 points last week, real estate stocks seemed to hold their own, likely due to the strong dollar. (What happened in today’s market is still up in the air as of this writing.)
If, however, the US economy goes into a full recession, Saville’s chief economist, Heidi Learner, does not think such optimism will prevail. “I think the fact that we’ve not seen a more dramatic compression…suggests there’s more concern about growth going forward.”
In Q2 2019, commercial real estate prices declined in 10 of 18 global metros that compose the Real Capital Analytics’ Global Price Index. That global price growth slowed to just 4.4%. Jim Costello, senior vice president of Real Capital analytics said, “The impacts of the trade are really being felt and that is undermining corporate investments, undermining growth.”
According to Mary Diduch with The Real Deal, landlords are already looking to secure long-term leases. Sellers of both commercial and residential properties and developments who have been holding out for better prices are tending to sell now at market prices. “Selling…is now an easier decision. Either sellers are going to take their profits or they’re going to refinance,” said Jimmy Hinton, senior managing director of research services with Transwestern. “People might keep investing in real estate (but) the question will be, what will be the most appropriate value in an environment where there is a lot of conjecture about future growth.”
Some brokerage firms, such as Paul Massey’s B6 Real Estate Advisors, are launching financing sectors of their business to “…hedge against what could be a slow period of investment sales.” Others, such as Time Equities, are buffering their businesses with extra cash and contingency credit.
Thanks to The Real Deal’s Mary Diduch for source data.