We’re halfway through 2019, and the general outlook of our members remains positive as the industry and economy continue to operate on all cylinders. According to NAIOP’s twice-yearly Sentiment Index, our members largely believe that CRE conditions will be the same or better during the next 12 months. This is good news for an industry that has seen a longer-than-usual sustained period of growth.
I’ve enjoyed traveling to several chapters this year. While the chapters and the markets run the gamut from small to large, what I’ve found interesting is that no matter the size, these four themes are consistent:
- Deals are hard to come by.
- Capital structures can be complicated.
- Politics is creating uncertainty.
- And no one knows what inning we are in!
These views are underpinned by refrains that reverberated throughout 2018 and are continuing forward into this year, including:
Capital – There continue to be increased capital commitments for commercial real estate, and much of it is in North America. Agile operators are garnering the most attention and capital. Everybody is trying to figure out how to capitalize on Opportunity Zones. The potential consolidation of REITs is driven by public companies wanting to propel investment value and increase efficiency in management and operations through larger firms and portfolios.
Technology – Artificial intelligence, augmented reality, virtual reality, predictive analytics and other types of “proptech” are being woven throughout the tenant experience. The result of all this technology is an endless pile of data that must be sorted and understood before it can become useful knowledge for space planning and decision-making. It’s no wonder that industry job titles and expectations are undergoing changes. Select Leaders, an online career center that partners with NAIOP, recently reported on the new job title of “occupancy planner.” These jobs require skillful use of technology for workplace planning, relocation and build-out, as well as understanding of 3-D modeling software to allow users to visualize and customize space layouts. (See Commercial Real Estate and the Big-Data Deluge.)
Real estate – The core product of real estate is transforming as tenant preferences change how physical space is consumed, from flexible workspaces in an office to experiential retail settings. During the April meeting of the NAIOP Board of Directors, we heard from three experts in the Vancouver market who shared insights into the unique aspects of this region. In short, space is at a premium everywhere: the market’s industrial vacancy rate stands at 1.9 percent, fueled by e-commerce, television production and demand for port facilities. Net rental rates for Class AAA office space will exceed $70 per square foot for the first time in Vancouver’s history. The Port of Vancouver has one of the lowest land availability rates in North America, and the need for expansion will likely drive multistory development.
I have found NAIOP to be the best venue for staying on top of news and trends that help my business adapt in our ever-changing industry, and I look forward to connecting with many of you at our two I.CON industrial conferences, as well as our annual fall conference, CRE.Converge 2019 (October 14-16 in Los Angeles).
Gregory P. Fuller, 2019 NAIOP Chairman