I was recently invited to a dinner as a guest of Alan Fuller and my daughter Chappell, both of Alliance Real Estate, to hear Alliance’s thoughts on what is happening in the CRE world along with those of Suzanne Mulvee, Director of Research for Costar Group. It was nice that they chose the mountains of Cashiers, NC as the venue.

Costar is one of the largest CRE research platforms in the U.S. While my bandwidth is the general construction business, it was interesting to hear some of the topics shared relative to the general economy, retail and housing. My takeaways:

• Liquidity in the market is still strong and is still aimed at CRE. General belief is that the current market cap rates have already priced in an adjustment in the fed rate increase, which is expected to hit in the next couple of quarters or so. (But what else is new?)
• Secondary and tertiary markets should continue to see demand for investment properties strengthening beyond the larger markets.
• Population growth is outpacing new GLA retail development. Circa 2007, approximately 175 million of new GLA SF came online. This year only about 55 million of new GLA SF is being developed. Changing shopping patterns, more disciplined lending and the impact of Internet shopping have all contributed. The good news for the industry is that changing demographics means assets will be repositioned, as shopping patterns will continue to change.
• The economy looks solid. We’re seeing steady job growth, wage gains and continued rebound in the single-family arena. While single family starts have gone from about 1.2 million in ’96 to a high of 1.8 million in ’07, they dropped to .4 million in ’09. We’re now in a upward trend, picking up to about .8 million starts in 2016.

Once again, steady as we go.

{Image Source = Steve Johannessen}