I had the privilege of moderating the 2nd Annual CCIM Broward/Fort Lauderdale Outlook Conference held at Signature Grand in Davie, Florida. Keynote speaker, Spencer Levy, Chairman of America’s Research and Senior Economic Advisor, spoke to the packed room of over 100 commercial real estate professionals about global mega-trends that impact local commercial real estate. Here are my top five takeaways:
1. No Recession! Mr. Levy contends that barring any global economic meltdown that we will not suffer from a recession as we did in 2009. But rather he predicts “secular stagnation” which will be a gradual slowing of growth in the 1% to 2% range over the foreseeable future.
2. All Real Estate is Getting “Hotel’d” – Gone are long term leases and in its place are short term rentals. This has been a disruptor in commercial real estate and is a growing trend. Investors need to react accordingly, and appraisers need to “get with it”!
3. Squeeze Those Cap Rates! Low inflation and quantitative easing by the Federal Reserves will continue to result in cap rate compression among all property classes. Because of the low-interest rate environment in Europe cap rates are 100 basis points below the US. Look for further reduction in domestic cap rates.
4. Infrastructure Matters! Ever heard of Crystal City, Virginia? Not many have but Amazon selected this suburb south of downtown Washington DC as the future home of Amazon HQ2 and its 25,000 employees. The main reason Amazon selected Crystal City? It’s infrastructure. For example, in Crystal City, you will actually be able to walk to the metropolitan airport upon completion of the proposed walkway.
5. Mega-Cities Are the Future! As Miami continues to evolve into a world-class 24-hour city, Fort Lauderdale would be wise to link itself to the Miami “market” when positioning to the global investment community This has been already occurring to some extent as investors get priced out of the Miami market seek additional opportunities just north in Fort Lauderdale. Positive features that are attractive in Fort Lauderdale include its vertical density due to lack of height limitations and access to Brightline which will only be enhanced when it connects to Orlando.