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Will commercial real estate values fall? This is how investors can prepare

Will the commercial real estate market always go up? Of course not.

But investors have been spoiled by two decades of double-digit returns that were too good to last. In 2016, returns on institutional-grade property fell below a 20-year 10.1% average for only the first time since the Great Recession, and the latest Urban Land Institute’s Real Estate Economic Forecast puts estimated 2018 and 2019 returns around 6%.

Commercial real estate is cyclical, so it’s logical to expect a downturn at some point. But conventional wisdom holds that it won’t come soon. Colliers International’s 2018 Outlook on U.S. property markets says 2017 was the market’s peak, but the commercial real estate industry is expected to show continued growth, albeit at a more moderate pace, making a real estate market crash less likely.

Although the commercial real estate market’s outlook is still respectable, should investors be deterred by a potential decrease in returns from investment properties in the coming years? As the founder of a real estate investment firm, my informed answer is no. In fact, I believe investors should own private commercial real estate in every market cycle for the following reasons.

Read more from Forbes

 

What’s Up With Retail?

Rent, online shopping, regulations, and a higher minimum wage reduce the brick-and-mortar presence.

Omar Mughannam of Beauty Center faced a 30 percent rent increase at one location.

For local retailers, whose inventory costs are high and whose profits depend on foot traffic and fickle consumer demand, even small increases in rent can be difficult to bear. And when rent increases hit double digit percentages, owners are often forced to relocate to a more affordable space, consolidate multiple outlets, or close altogether.

Empty stores are everywhere, in Rockridge where Itsy Bitsy, Cotton Basics, Rockridge Home, and See Jane Run once seemed to thrive; in Elmwood where the corner of College and Ashby looks sparse without Jeremy’s, and in Montclair Village, too, where the local bike shop and Daisy’s are no more.

Exclusive Research Reveals Stable Outlook for the Multifamily Sector

Capital is continuing to flow to the multifamily sector. Despite concerns that the real estate cycle is peaking—and with high levels of multifamily construction in some metros—fundamentals have steadily improved and investment sales remain robust. Exclusive research conducted by NREI indicates that the market is likely to stay that course for at least another 12 months.

Apartments remain a favored property type among commercial real estate investors. When asked to rate the attractiveness of the different core property types on a scale of 1 to 10, survey respondents scored multifamily the highest at 7.9, but the score on industrial properties continues to gain ground. It now stands at 7.5. Hotels and office assets both scored at 5.9, while retail’s score has crashed to 4.5.

Read more from National Real Estate Investor

NAI Northern California celebrates continued growth with 21% revenue increase by third quarter of 2017

The tech-forward, collaborative brokerage continues to emerge as an up-and-comer on the Bay Area commercial real estate scene

SAN FRANCISCO, CA – October 17, 2017–  Continuing to evolve as a growing force in the San Francisco Bay Area commercial real estate landscape, NAI Northern California forges into the third quarter of 2017 with revenue already surging past 2016. As of October, the brokerage has increased gross revenue by 21% over last year. Across retail, multifamily, office, industrial, and land, the total square footage of transactions closed by the team more than tripled.

In regards to NAI Northern California’s growth and the current market, President James Kilpatrick points out, “While the Bay Area has been experiencing an extraordinarily long real estate cycle, this seems to be accelerating further as our number of successful transactions is up by 31%.”

Multifamily investment sales are active as investors focus on residents looking beyond San Francisco to the East Bay. Top producing broker Shivu Srinivasan closed the $28.75 million acquisition of an 88 unit apartment complex at 4445 Stevenson Boulevard in Fremont and the $13 million sale of a 70 unit property at 250 West Jackson in Hayward.

In retail, NAI Northern California is carving out a niche by successfully closing over $100 million in triple net shopping centers and single tenant properties this year.Top producer Mary Alam spearheaded the $13.6 million sale of the Newark Shopping Center and several Walgreens properties among others.

Growing market share is directly impacted by the addition of talent. In 2017, experienced industry professionals Tony Alanis, Kevin Flaherty, Fritz Jacobs, Matt Gorman, Gregg Steele, Reggie Regino, Brent Stiggins, and Darija Walker joined the company’s brokerage and financing groups.

James Kilpatrick remarks, “Our growth is truly predicated on our talented team. We are unique in the commercial real estate industry, empowering our professionals to take a collaborative approach supported by a tech-forward platform that helps them be nimble as they get deals done for our clients.”

About NAI Northern California
NAI Northern California is a progressive, full service commercial real estate firm serving the Bay Area. Recognized as one of the Top 25 Commercial Real Estate Firms by the East Bay and San Francisco Business Times, we are committed to delivering best in class services for our clients.

www.nainorcal.com

How California’s State And Local Governments Are Addressing The Affordable Housing Crisis

With the highest cost of housing in the nation, California’s affordable housing crisis is threatening the economic vitality of the state.

The majority of renters, more than 3 million, pay more than 30% of their gross monthly income for housing, and one-third of renters, about 1.5 million, pay more than 50% of their income for a place to live, according to a California Department of Housing and Community Development report.

Read more from Bisnow