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NAIOP CRE Sentiment Index

Posted on May 8, 2019

The NAIOP Sentiment Index is designed to predict general conditions in the commercial real estate industry over the next 12 months. The forecast is not based on an analysis of historical data, but rather it represents a look into the future by real estate developers, investors, operators and brokers. These NAIOP members are asked to respond to questions based on their ongoing work, including projects in their pipelines. For more information, see Understanding the Index.

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Creating a Private Equity Fund: A Guide for Real Estate Professionals

Posted on April 16, 2019

By Jan A. deRoos, PhD and Shaun Bond, PhD

The NAIOP Research Foundation has published a new white paper titled "Creating a Private Equity Fund: A Guide for Real Estate Professionals," by Jan A. deRoos, Ph.D., HVS Professor of Hotel Finance and Real Estate at SC Johnson College of Business, Cornell University; and Shaun Bond, Ph.D., West Shell Jr. Chair in Real Estate at Lindner College of Business, University of Cincinnati.

Key Takeaways:

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Big Data in Office Buildings Holds Promise Despite Privacy Worries

Posted on March 29, 2019

By Margarita Foster

Property managers are using “dynamic and multidimensional” information for operations but not yet for tenant engagement.

A white paper published by the NAIOP Research Foundation titled “The Office Property and Big Data Puzzle: Putting the Pieces Together”found that office building owners are capturing, storing and analyzing data to operate building systems but not to recruit and retain tenants.

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Industrial Demand to Remain Level as Economy Steadies

Posted on March 20, 2019

By Dr. Hany Guirguis and Dr. Joshua Harris

The forecast for net industrial space demand will remain steady in 2019. According to Dr. Hany Guirguis of Manhattan College and Dr. Joshua Harris of New York University, demand will remain at approximately 57 million square feet per quarter for 2019. That is unchanged from the average actual 2018 quarterly absorption of 57 million square feet. Industrial absorption in the final half of 2018 came in slightly above expectations due to higher consumer spending and retail sales, which were buoyed by a strong job market.

Industrial demand will be off to a strong start in 2019 with a potential tapering off into 2020 as rising interest rates moderate the economy’s growth rate. At present, the risk of a downturn in the industrial space market appears slim as the nationwide vacancy rate sits at a historically low 7.0 percent. Further, gross and net asking rents are at all-time highs, indicating that the market supply continues to tighten at a steady rate.

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New Report: Industrial Demand to Remain Level as Economy Steadies

Posted on March 4, 2019

The NAIOP Research Foundation has published the NAIOP Industrial Space Demand Forecast for Q1 2019.

Key Takeaways

  • Demand will remain at approximately 57 million square feet per quarter for 2019. That is unchanged from the average actual 2018 quarterly absorption of 57 million square feet.
     
  • At present, the risk of a downturn in the industrial space market appears slim as the nationwide vacancy rate sits at a historically low 7.0 percent. Further, gross and net asking rents are at all-time highs, indicating that the market supply continues to tighten at a steady rate.
     
  • While data are somewhat suppressed due to the U.S. government shutdown that took place from December 22, 2018, until January 25, 2019, economic indicators point to moderate growth.
     
  • Overall U.S. economic activity will remain steady in 2019, with annualized rates of GDP growth in the mid-2 percent range. Steady growth is the biggest factor keeping the industrial demand forecast stable. The labor market and overall consumer confidence are also expected to grow for the year, with industrial space demand increasingly influenced by consumer spending.

Overall, the U.S. industrial real estate markets appear to be healthy and stable. It is the asset class that is potentially in the best position to weather any macroeconomic downturn that may come in the next several years.

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New Report: Economic Impacts of Commercial Real Estate (2019 Edition)

Posted on February 20, 2019

The NAIOP Research Foundation has published the Economic Impacts of Commercial Real Estate report.

Combining the economic contributions of new development with the economic contributions from operation of existing buildings, the following economic contributions were made:

  • Contributed $1.0 trillion to U.S. GDP
  • Generated $325.9 billion in salaries and wages
  • Supported a total of 8.3 million new and existing jobs

Key factors impacting economic growth in 2019 and beyond include the following:

  • Interest rates. They are projected to move higher in 2019 as the Federal Reserve raises its rate three-quarters of a point in two or three increments over the year;
  • Labor shortages. They are already appearing in several key sectors—construction is one of them—and will tighten further in 2019 with resulting increases in wage inflation;
  • Energy prices. which unexpectedly declined during the second half of 2018 are expected to rebound in 2019 to their highest levels since 2014; and
  • The resolution of trade wars and higher tariffs instituted in 2018 and how these might affect U.S. exports, which increased their contribution to GDP expansion in 2018.
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How Technology Will Change the Brokerage Business

Posted on January 16, 2019

Written by Joan Woodard

Commercial real estate is in the midst of a digital revolution, and some of the biggest upheavals will affect professionals who work closely with property owners and tenants.

Technological innovation is accelerating in the commercial real estate space, and it has the potential to disrupt a large segment of the brokerage business.

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The Positive Impacts of Big Data on the Supply Chain

Posted on December 19, 2018

As companies collect and analyze more data, supply chains and warehouses operations will most likely be improved, trending towards transparency and efficiency. JLL identified six likely benefits of big data across the supply chain:

  • Enhancing predictions and planning: What do customers want and when? Being able to predict the demand of shoppers can make supply chains and warehousing more proactive. Greater use of consumer spending data through algorithms should make supply chains more nimble and reactive.
  • Keeping a closer eye on goods: Technological advancements mean it’s now easier to track and trace products than ever before. Track and trace systems will create more certainty along the entire supply chain.
  • Getting more from distribution networks: Many businesses only review their distribution networks on an infrequent basis, often using incomplete data sets and with limited insights on developing trends. This is where big data could prove useful.
  • Delivering goods more efficiently: The growth of e-commerce has meant that more packages leave warehouses than enter them; one box of gadgets from a wholesaler could go on to 10 or more separate addresses. Being able to improve scheduling and routing of deliveries is a potential cost cutter especially when it involves multiple drops.
  • Reducing risk from the elements: Big data can help lessen supply chain risk from external factors – such as the weather.
  • Creating smart warehouses: Another way to improve efficiency and cut costs is within the walls of the warehouse itself. More connectivity – for example through new 3D digital tools – can boost the efficiency of operations inside, as well as energy performance.

Why Losing Out on Amazon's HQ2 Isn't So Bad for Cities

Posted on December 14, 2018

GOVERNING reports that Amazon’s decision to locate its second headquarters in already economically strong areas drew the ire of those who had hoped the company would choose a city that needed a boost. However, landing a large corporation isn’t the best way to improve a local economy and spur job growth. The article cites a report by the Urban Institute and the Brookings Institution that advised cities to concentrate on growing existing business and not luring outside companies. “Most job expansion and contractions come from birth and deaths of homegrown businesses or expansion or contractions of existing home-based businesses,” said Megan Randall, a coauthor of the report.

The report also cautioned that tax incentives do not play a significant role in attracting businesses. Although New York City and Virginia offered tax subsidies to Amazon, the company claimed the incentives were not the deciding factor, but rather the highly skilled and educated labor force in each of the locations. Offering generous tax incentives can be especially onerous on localities which do not have the fiscal strength of New York or Washington, D.C., and force difficult trade-offs in levels of public services. Additionally, when a city offers tax giveaways to lure a company, the government goes into the negotiation at a disadvantage because it may not have all the information about the company’s relocation criteria. In some cases, a company may choose a city it would have moved to anyway, pocketing the tax incentives even though they weren't a requirement.

Resurgence in Office Leasing Due to Breakout Economic Growth

Posted on December 13, 2018

By Dr. Hany Guirguis and Dr. Joshua Harris

The U.S. office market posted solid net absorption levels in the second and third quarters of 2018 of 18.0 million and 11.0 million square feet, respectively. This level of new leasing is likely due to higher-than-expected economic growth and the subsequent demand brought about by jobs created in the office-using sectors.

Due to third quarter 2018 U.S. GDP growth of 3.5 percent and a current unemployment rate of 3.7 percent, 2018 is expected to register nearly 13.0 million square feet of net absorption per quarter, significantly outpacing 2017 and 2016 when the quarterly figures averaged 9.5 million and 10.4 million square feet, respectively. The forecast is strongly dependent on continued annual economic growth near 3.0 percent, which seems plausible for all of 2019 and into 2020 given current data.

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Resurgence in Office Leasing Due to Breakout Economic Growth

Posted on November 21, 2018

The NAIOP Research Foundation has published the NAIOP Office Space Demand Forecast for Q4 2018.

Key Takeaways

  • 2018 is expected to register nearly 13.0 million square feet of net absorption per quarter, significantly outpacing 2017 and 2016 when the quarterly figures averaged 9.5 million and 10.4 million square feet, respectively. 
  • The current macroeconomic expansion will most likely continue beyond next summer, which will officially make it the longest sustained economic growth period in U.S. history. 
  • However, the biggest limitation to the expansion of firms that use office space is likely to be the ability to hire qualified employees.

Regarding office space demand, the ultimate determinant of long-term growth will be how the business sector reacts to rising wages and interest rates.

View the forecast.

NAIOP CRE Sentiment Index: Positive Reading Reaches All-time High

Posted on November 2, 2018

The NAIOP CRE Sentiment Index for September 2018 (a composite of nine survey questions), showed positive changes in seven of the nine questions that underpin the Index. This survey's 0.66 Sentiment Index reading is the highest posted since the full survey commenced in March 2016.

Key takeaways:

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New 2018 CRE Compensation Reports Now Available

Posted on October 9, 2018

Recruiting and retaining top talent has become essential in today's highly competitive marketplace.

Is your 2019 salary and bonus package competitive? Find out with the 2018 NAIOP/CEL Commercial Real Estate Compensation and Benefits Reports.

These valuable reports enable commercial real estate businesses to stay current on salaries, bonuses and benefits for CRE professionals from executive to entry level positions. The reports include submissions from 400 companies; salary, bonus, incentives and benefits for 200 positions; and data from 100,000 distinct jobs in the office/industrial, retail and residential property sectors.

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Q3 2018 Industrial Space Demand Forecast Now Available

Posted on September 4, 2018

Written By: Dr. Hany Guirguis and Dr. Joshua Harris

The forecast for demand for industrial space has risen because of increased expectations of broad macroeconomic growth and job generation for the remainder of 2018 and 2019. According to Dr. Hany Guirguis of Manhattan College and Dr. Joshua Harris of New York University, quarterly net absorption is expected to increase to an average of 60 million square feet for the latter half of 2018 and then moderate to 56 million square feet per quarter in 2019.

Advance indications for gross domestic product (GDP) growth for the rest of 2018 show consensus forecasts approaching annualized growth of 4.0 percent for the second quarter, which could result in sustained growth of 3.0 percent or more for the rest of the year and into 2019. Higher oil prices are a leading cause of increased business investment because as oil prices rise, there is more incentive to increase energy production and commence energy exploration – activities that significantly stimulate the overall economy. Another major force at play is consumer spending, as e-commerce continues to generate demand for industrial space.

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Marcus and Millichap: Competition for Staff Invigorates Office Space Demand

Posted on July 16, 2018

The number of available U.S. jobs now exceeds the number of people out of work and seeking employment. At the end of April, job openings stood at 6.7 million while the number of unemployed reached 6.3 million. The June 2018 Marcus and Millichap Research Brief finds that an effect of a competitive labor market is that office-using employment is driving down office vacancy rates, and over the past 12 months, the professional and business sector has been expanding at a faster pace than overall employment, driving up office demand. The professional and business sector added almost 500,000 jobs and grew at 2.5 percent compared to the national rate of 1.6 percent. The increased hiring, according to the report, drove down the national office vacancy to 13.8 percent in the first quarter of 2018.

The Impact of Ridesharing on Real Estate

Posted on July 13, 2018

recent report by MetLife states that the expansion of ridesharing, autonomous vehicles and electric vehicles will result in “highly accessible, highly efficient and comparatively inexpensive transportation” over the next decade. Researchers believe that alternative transportation, including ridesharing, will partially substitute public transportation in some areas of the U.S. and complement it in other areas, while also bringing transit access to areas not served by public transportation. The report concludes that the greater acceptance of ridesharing will lead to an increase in value for development sites with good access to uncongested roadways but limited access to public transportation.

Build Smarter: Seven Ideas for Containing Construction Costs

Posted on June 29, 2018

By Clay Edwards

Though the real estate industry has seen a development rebound over the past decade, rising construction costs are weighing down the buoyant market. The persistent skilled labor shortage makes staffing and maintaining sites expensive. Materials are pricier, and now tariffs on steel, aluminum and lumber imports may only make the problem worse. At the same time, interest rate growth is converging with all these issues, making project financing more difficult to obtain and more costly.

recent survey of top construction lenders conducted by Construction Lender Risk Management Roundtable found that almost two-thirds said they saw projects running over budget either more often or much more often, and 87 percent said they saw projects running behind schedule, driving up the risk of project defaults and unfinished sites.

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Recognition for Foundation-sponsored Research

Posted on June 21, 2018

Emil Malizia, Ph.D., former NAIOP Distinguished Fellow, was featured in Planning magazine's July 2017 "Research You Can Use" column for his NAIOP-sponsored study, Preferred Office Locations: Comparing Location Preferences and Performance of Office Space in CBDs, Suburban Vibrant Centers and Suburban Areas.

Dustin Read, Ph.D., former NAIOP Distinguished Fellow, received a prize for research based on Case Studies in Innovation District Planning and Development, a NAIOP report he authored in 2016. His paper, entitled "Innovation Districts at the Crossroads of the Entrepreneurial City and the Sustainable City," won best paper in the mixed-use development category at the 2017 American Real Estate Society meeting.

Amenitize to Survive: Why traditional amenities are no longer enough

Posted on June 19, 2018

Years ago, the key to attracting and retaining a talented workforce was to relax the rules a bit: Casual Fridays, flexible work hours and teleworking were the employee perks du jour.

Now, the competition for top talent is driven by the demand for amenities of the less tangible type. The highly specialized labor force seeks a “more interactive, collaborative and socially vibrant office environment,” with “amenities that enliven the workplace and create the elusive concept of community,” according to NAIOP Research Foundation report, Activating Office Building Common Spaces for Competitive Advantage.

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Southern US Cities Gaining Population

Posted on June 15, 2018

The U.S. Census’ newest population estimates reveal that eight out of the 15 U.S. cities with the largest population gains are in the south, with three of the top five located in Texas. San Antonio topped the list with an increase of just over 24,000 people between 2016 and 2017. Some of the other cities with the largest population gains were Phoenix, Arizona (24,000); Dallas, Texas (18,900); Fort Worth, Texas (18,700); Los Angeles, California (18,600); Seattle, Washington (17,500); and Charlotte, North Carolina (15,600). Fort Worth, Texas, surpassed Indianapolis, Indiana, to become the fifteenth-largest city in the U.S., with a population of 874,168. The list of the top 14 largest U.S. cities has not changed since 2016.