The climb out of the real estate depression will be a long, slow one for all but one market sector: apartments, according to the annual Emerging Trends outlook report.
The multifamily niche gains high marks in the 33rd edition of the report, which is one of the most highly regarded in the industry. "Everybody loves apartments," said author Jonathan Miller. "The rest of the landscape is underwater."
The report found investors concentrating on just a handful of "wealth islands," notably diversified, 24-hour gateways located along global trade groups. "Otherwise," it said, "capital generally avoids the surrounding sea of mostly commodity real estate."
But even in such places as New York City, Washington, D.C., San Francisco and other "safe-bet" markets "where the nation does most of its business and the affluent settle," the reports warns of a "slow-going grind" because stubbornly high unemployment results in delays filling office space and a lack of consumer spending that is a drag on retail and industrial space.
The survey is based on the opinion of 950 investors, developers, lenders, consultants and property company representatives. About 275 were interviewed face-to-face during the late summer to early fall, while the rest completed online surveys.
Miller, an independent consultant who has written the Emerging Trends report for more than 20 years, told reporters at ULI's Fall Meeting in Los Angeles that "next year is not going to be as strong as our industry would like." While there is plenty of capital flying around, he said, the lack of fundamentals is keeping it from landing.
"It's a real estate market with too many dollars for too few opportunities," one respondent told the surveyors.
Interviewees mentioned a bakers' half-dozen of concerns that still weigh heavily on real estate, especially on the demand side. Perhaps No. 1 among these "anchors" is the continued loss of American jobs to workers in other countries. And a close second is improved productivity, which may help companies fatten their bottom lines but at the same time leads to reductions in hiring and a demand for space.
"Real estate needs jobs to recover," commented Stephen Blank, ULI Senior Resident Fellow for Real Estate Finance.
