CRE News Hour 09/06/2019
From the business desk at st broadcast news this this is the c. r. e. news hour. I'm steve lebedko. It's friday september sixth twenty nineteen in this week's edition of the news hour. We'll take a look at a value add investment strategy to upgrade and enhance class b and c multifamily emily properties with castle and terra properties c._e._o. Ellie reader michelle bodak of the instant group will tell us about her firms survey of co working trends in eighteen eighteen cities worldwide and we'll look at global economic trends affecting commercial real estate with c._b._r._e.'s chief economist richard barca. We'll be back with the top news stories right after these messages <music> turn earn your podcasting passion into profits the book the business of podcasting describes the business side of podcasting including how to become a professional national podcast. You'll learn about position your clients expertise who podcasting to plus the best business models how to find clients and much more visit the the business of podcasting dot com oh today you can't wait for the media to cover your company buzney. You have to be the media. Take advantage of the power of audio and video. It's the best way to showcase your expertise to prospective customers. Let the lupatkin you bet can media companies handled the technical side. We're award winning audio and video producers. We can help you produce podcasts and video programs remotely or in our fully fully equipped studio in cherry hill visit being the media dot com for more information <music> before we get to breaking news this note of some of noticed the photo banner on our august thirtieth podcast. Show page included a photo of mark mayfield c._e._o. Of building products company sango ben but more didn't appear in the show our interview with mark mayfield will appear in next week show we fixed the photo and we apologize for any confusion listen now. Let's take a look at headlines from around the c._r._o. World see a student living the student housing investment and development division of chicago-based c._e. Ventures says it's ready to open six student housing communities with more than three thousand beds and valued in excess of five hundred fifty million dollars in florida indiana illinois iowa ohio pennsylvania w five group ralph winters family office is announced the acquisition of a significant majority freddie interest in the highline at union market. A three hundred fifteen thousand square foot mixed use property in washington. D._c.'s burgeoning union market district as part word of the hundred and fifty million dollar transaction. W five group acquired clark enterprises entire interest f._c._p._a. And level development will retain interest in the property the highlight senate union markets a three hundred eighteen unit twelve story new construction building at three twenty florida avenue northeast. It's one block from the noma. Gala debt redline metro station asian and just steps from the union market food hall tara cap management a privately held investment firm in estero florida announced the acquisition of denver corporate center two and three in denver colorado for about seventy two million dollars acquisition consists of two eleven storey office buildings it totals three hundred eighty the two thousand rentable square feet. The property is located in the denver tech center. It's become one of the strongest areas in denver and its adjacent to interstates twenty five and two twenty five life and the bellevue light rail station providing various transportation options officials broke ground on phase one of major new apartment complex in retail space in downtown town sacramento. We'd new apartment homes. The project seattle area based developer and property manager says the sacramento commons project will provide four hundred thirty six six new multifamily apartments and retail space not far from the golden one center when added to the three hundred twenty five units at the existing capital towers community pretty the development will total seven hundred sixty one apartments over the roughly ten acres site marcus and millichip's oz turk gadoe group has announced three recent transactions in essex county new jersey for twenty six point four million dollar total the transactions include an essex county portfolio one hundred thirty units in a four-building multifamily portfolio portfolio in east orange and irvington that sold for about fourteen million dollars two hundred fifty nine reynolds terrassa twenty-nine unit multifamily and orange new jersey that sold old for three point three five million and forty two unit class a multifamily property in east orange new jersey jail capital markets completed the twenty two point eight million million dollar sale of executive centers one two and three a three building office park on fourteen point one acres totalling two hundred twenty three thousand square feet in overland allen park kansas the buyer was kansas city based brain group defco group and new york-based real estate investment company purchased a ten plus acre six building complex looks at one hundred fourteen beech street in rockaway new jersey from the silverman group. It's the second industrial complex defco group edit to its portfolio. This year totals one one hundred seventy thousand square feet. It's ninety nine percent leased to seventeen tenants including light manufacturing service and distribution companies ten holds properties announced just forty two thousand seven hundred square feet of leasing activity in the cyprus industrial park in orlando florida and twenty two thousand eight hundred square feet of leasing at the silver star commerce center also orlando in the largest of the leases f s florida's taking thirty three thousand six hundred square feet of flex space at the cypress chris industrial park i._t. W food equipment group signed a renewal for ninety one hundred square feet at the property nurmi properties as another spec build warehouse project project going into ground germany scooped up more than twenty nine acres in bethel township pennsylvania for the future home of what it's calling logistics center at midway south constructions is underway on the three hundred four thousand square foot facility located at interstate seventy eight exits fifteen and sixteen with connections to interstate eighty one interstate four for seventy six and interstate seventy six also known as the pennsylvania turnpike constructions estimated to be complete by the end of the year the property suited for manufacturing whereas distribution shen and ecommerce companies tenth street ventures and brayden feldman group multiple apartment buildings in morningside lenox park atlanta they have plans to create in a unified community by rebranding them as one garden style apartment complex called the piette the exterior to be painted by artists chastain bernard will be inspired by the neoplastic neoplastic system movement with visual compositions of vertical and horizontal shapes using only black white and primary colors to simplify and unify the building's exteriors exteriors in the nearly forty two million dollar transaction t as v._n. B._f. g bought thirteen buildings from multiple owners totals three hundred thirty five units over twelve and a half acres at the complex anchored by the twenty one seventy five lennox road northeast building the team also plans to connect the nineteen sixties and seventies wendy zero buildings with walking trails to pools several dog parks more than a dozen grill stations botchy ball courts and putting greens and you're listening to the c. r. e. news hour from st broadcast news. Dot com formed in two thousand is a nine castle land. Tara properties is a privately held real estate investment company focused on the acquisition management of quality income producing multifamily properties within strategic growth markets throughout the united states to a rigorous value enhancement program that includes thoughtful renovations operational operational improvements and ancillary income development kesselman terra aims to reposition each asset with the goal of maximizing net operating income elevating waiting its competitive position within the market and generating attractive risk adjusted returns for its investment partners casselman tara properties currently owns and manages is more than seven thousand units across twenty two properties joining us to talk about gasoline tara strategy is ellie reader the founder and chief executive officer an an active real estate investor owner and manager since nineteen ninety eight mr readers been directly involved in acquiring more than fifteen thousand multifamily units and he's invested across crossed the real estate spectrum including in residential office hospitality retail and parking eliot. Thanks for joining us on the cea. Renews our tell us a little bit about castle and tara and and your investment strategy sure tassell entira family owned growthy company we own round seven and a half thousand apartments across twenty three three properties and investment strategy is to analyse rigorously analyzed the properties operational performance forming and its ability to fulfil current and future demand in the area surrounding residents people who live live in the area the demographic that were generally targeting our middle class but we define a workforce housing just sort of people below luxury a unit but a above anything that would be regulated stabilized controlled or supported by government like section eight <hes>. I'm so we're focusing on your typical middle america income earner whether it's a teacher or firemen policemen and ambulance a young lawyer doctor op there <hes> healthcare professionals etcetera and our goal was to modernize and amended i and many times the property operative by fixing the key fixing and improving and repositioning the common ground and the amenities by adding new amenities that are appropriate bridge to the neighborhood and the community and the residents that live on site and generally to evaluate strategy repositioned additional property and improve the revenue so that say profitable venture and also improving the quality of life for for the residents and that can be wife safety issues with having better whiting avoiding any hazardous cracks in concrete on crete putting in parks putting in gyms improving the interior department the exterior of the building the landscaping the management the response time maintenance calls et cetera so it's a variety of value and programs that we want to implement and capital improvements an operational enhancements and these are sometimes fixing existing issues that should have been addressed by previous owners and often bringing in new ideas new amenities new socially interactive opportunities leagues cooking classes bootcam- classes a little different kinds of things for for the residents. We know that there's a lot of demand for affordable. Workforce housing for people who work as police firefighters our fighters teachers and other public servants. Why is the supply of workforce housing so limited given the fact that there's so much demand well well first of all the majority of new construction today is luxury apartments and the reason for that is because the cost of construction and and labour has increased substantially in the last few years in addition to that millennials today make up one third of the country's total workforce sixty five percent of households are headed by people under age thirty five who choose to rent and and these millennials has significant student loan debt and often are unlikely to able to save enough for a down payment on a home that they acquire wire they also like the ability to be flexible and move from place to place the following jobs or relationships etcetera so they choose the flexibility by necessity or by choice to rent so you have an increasing amount of people that are looking to rent and you have baby boomers as well twenty three percent of the u._s. Population who are renters aged fifty five and above and that has increased this population baby boomers have increased by twenty eight percent between ten is an annoying the two thousand fifteen renters in this eight fifty. I five up and that's a trend we expect to see continuing so you have all these people who are choosing to rent not have a desire to own looking to downsize or needing being the rent and the majority of new construction is luxury because it's so expensive to build and to buy land labor and material so therefore eighty percent of new construction is luxury and there's a limited supply of new construction. That's affordable will end at the same time you have. Millennials were at unprecedented rates looking to rent as well as baby boomers for looking to downsize is that that has a very big supply in imbalanced. So wh what do you think is the solution. What are there's some of the ways <hes> i gathered. That's certainly one of the ways that this can be addressed. As by the kinds of things you're doing with the value add investing. I think that the solution is to create through renovation. A quality product that this millennial segment of society or a baby boomers feel that they're getting very very good value for their money that they feel like they're living in at time an ache quality asset at a price of what would be termed abi asset and that's that's what we're trying to do. We're trying to offer to be the value proposition saying we're offering something that has interior apartments bathrooms kitchens floors and then he package the safety social aspects of the community a sense of belonging and a sense of community similar to what a class eight does wolfer but at the same time much more affordable price point and thus. We believe that we're satisfying gene. This imbalance of this middle class in needs quality product at a price they can afford. Is it primarily because there's always going to be a need for for housing that you you see multifamily assets as strong investments are sort of recession proof ahead of a downturn. Yes i think you know because of this growing gap between disappointed men. There should be a minimal vacancy rents in the workforce housing. Have you know continued continued to grow in recent years and it's likely to continue on that trajectory the bottom line you said people need a roof over their head and in a the recession would generally has happened to starkly is at the luxury apartment buildings. The top of the market in terms of pricing has suffered. I i where people become tenny wise and are looking to cut costs and we'll leave an ultra luxury rental and take a step up down to save money on their rents and we want to be the place that they go to but to leave the type of assets that were managing and go step lower many won't because that would be a dramatic change in lifestyle so we see this as every investment has risk however when we look back historically and my family has been in this business on two sides over seventy years we have not suffered in recessions because we're catering to the middle class. Generally a nurse or a doctor is not as affected in a recession as a bank or you know making a very very different income investment investment bank. Who's paying ten thousand dollars a month for their apartment. So that banker he doesn't get his bonus may choose to cut his costs but adopt were young lawyer or a policeman or a teacher or an ambulance driver. Jolly continued to get their paycheck and continue to need a roof over their head and a place to raise their children so being in that space. We feel like it's less affected by the stock. Market growth in general is less correlated to the market. It's less correlated related to other things and in a recession if there's inflation that's a real estate is a good hedge because values go up and rents go up <hes> <hes> so we see the multifamily space for this middle classes as i don't like using the word recession proof but somewhat recession proof and that's that's what history it takes as well so. Are there any recent projects. You've worked on that <hes>. You're proud of that. You could talk about <hes> in a little bit of detail sure we can talk about some dispositions. I always say the only way to know. Something's a good deal is if you refinance yoursel so i can take it through quickly weekly a couple of our recent dispositions in the last two months <hes> the last eight weeks here couple different deals that we sold one deal is called asher. That's four hundred fifty two unit apartment community located in western texas. We embarked on a multi million dollar. Our strategic capital improvement when we acquired the property to beautiful property on around fifty acres very good location in austin and we thought as an opportunity to take an asset that was built of the class a was around ten years old when we bought it and reposition it to be a beautiful class again. The market in austin had gotten explosive growth and experienced for instance investment by employers and income average income in the area drastically grew. Oh and we felt that there was an opportunity to really raise the standard of this property repositioning back to being a beautiful class-a i say in this improved market and fast growing city so some of the things we did is we completely redid the clubhouse and leasing wolf which is a very large public area with different amenities in it we we read it from scratch converted or a laundry room to extend the gym which is open twenty me four hours it made it made extensive renovations properties to pools. We renovated around thirty five percent of the apartments and we attracted the much higher better educated clientele. We offered a superior product y y but still maintaining very good value price point in terms of rent. We were the value proposition in the area and we consistently had high occupancy and steady rank growth and had a very very favorable evaluation at the seal and you know had a mid twenties. I are on our exit and other similar. I'm laurie position that we did. <hes> a couple of months back was called the heights at skyline as the three hundred and four unit multifamily property in tuscaloosa alabama obama purchase that property in october twenty fifteen for eleven million and change we the under token extensive again in extensive capital cap ex plan to improve the property are we were attracted to that. Deal was very different different deal in a very different market. This was a it was built as a be asset and it was probably one of the nicer be assets in tuscaloosa which is a tertiary market but we were treated to the market because mercedes had invested billions of dollars into the market had <hes> has a flourishing college will no football team and this was in our opinion at the time was probably the nicest to my knowledge nicest be asset eh great bones and great amenities and we wanted to reposition it to be a beautiful bouquet plus asset which involved raising the standards of of the residents that live live live there making sure that we only the type of people with the background checks security checks and criminal lack of criminal activity. <hes> would be living there which we took a lot of work on our end. <hes> says they say we purchased purchased property for eleven million and change. We you know in crude we increase and modernize the amenities. We installed energy fishing l._e._d. Lighting ding resurfaced and refracted parking lots. We improve the landscaping throughout the property. We upgraded the interior of the apartment. Some thirty five percent of the units even its which resulted in very meaningful rim premiums and we were able to attract quality families to move to the property and we sold the property <hes> <hes> three years later. I'm sorry four years later in two hundred nineteen for twenty point seven million which was a gross i._r._r. Around forty one percent <hes> <hes> and pretty much a tripling our money over the three years of ownership so he bought an october twenty fifteen and sold it in february twenty nineteen and that was <hes> a heavy head <hes> it was rough for market required a lot of cheerful valujet evaluate execution. We ended up taking a property that was looking like is see when we bought it and making it a c plus d minus and then it'd be <hes> <hes> and the rents and occupancy were reflective of that journey enough value on the exit. <hes> another interesting exit that we had in chicago was called midpoint which was four hundred and twenty four apartments and a community located on the outskirts kurtzer chicago. It's actually interesting in chicago municipal workers at least when we bought it <hes> perhaps this changed. I'm not up to date currently ornately but to my knowledge didn't change the municipal municipal municipal workers has to live within the city. This property is in chicago chicago but across the street is not chicago so i'd have the advantages of the suburban feel being right at the edge of the city but at the same time it was attractive to city workers and employers to the city because it's still was considered legally part of chicago we bought the deal had come out of foreclosure hoosier and was stabilized but had a lot of deferred maintenance and a very rough coin. Tell again our job was to address any health or safety wife safety issues putting whites dealing with getting rid of crime getting rid of the elements and activities that we wouldn't want the community to live in making sure it was safe for anybody to walk around <hes> watts of light security et cetera and over time we acquired this property in twenty fourteen for twenty eight and a half million. We put millions of dollars into the the elevators roofs. The common quarters unit renovations created a new leasing center a new gym and we renovated resident lounge when we renovated around thirty percent of the units <hes> on the roofs we put an energy efficient roofs and we refinanced the asset france three years later for for forty million dollars and then we sold it last year for forty nine point five million dollars was generated a gross yards around thirty six percent so do that again was the heavy value wet where we wanted to upgrade the property from what was it be to maybe it'd be minus when we bought it it and we wanted to be then be plus by the time we saw the asset some recent acquisitions that we had were property overlook at stone mill which was a two hundred and sixteen unit multifamily community and links brings virginia and that was a you're asset. We're we're introducing. New community. Amenities were joined deferred maintenance <hes> again renovating apartments and an added feature to this deal is that the several acres of jason lynn that's already zoned in a prude add more units and we can increase the unit camp by forty percents and we gave zero value the land when we bought it. I'll i'll conclude we recently acquired two deals in atlanta both off market doc it <hes> one that's called premier apartments which is a two hundred eighty unit apartment property in suburban atlanta twenty four buildings on twenty four acres and <hes> <hes> the feature is a nice range of amenities tennis courts a lake upgraded swimming pool playgrounds and we're implementing property the improvements. We've raised occupancy dramatically. Since we took over the property we saw an opportunity where there were a lot of units that were damaged by a fire and left untouched three years which we are putting back online. They rebuilding those departments. <hes> making sure pindi is a nice place. I used to live in slowly. We all do build a sense of kenyan sense of belonging to the residents and then last week we were in the same area in atlanta another property property call three hundred riverside which is two hundred and twenty twenty units in <hes> austin georgia and features a fully appointed appointed clubhouse a pool tennis courts a fitness center and wide ranges community many activities and we started right after going to address for maintenance and put in water and energy efficient systems et cetera so i guess the long and short of our focus what we tried to do is to take something and make it much better for the residents of the community for the children that live there for the adult that live there all the residents from social aspects from the safety aspect from an amended aspect and from the quality of the interior of the apartments the landscaping the management and it's atra and everything we buy has a similar a similar focus. You know we're looking for strong. Diverse local economies enemies and healthy percentage of quality jobs good i find employment income growth with school districts a good business climate good infrastructure and mass transit and the markets that that we're focusing on our you know seattle area orlando tampa boston denver colorado the northeast quarter from boston down denise including virginia. We like austin texas and the mid atlantic region when you're looking at <hes> the market <hes> <unk>. How do you look for opportunities. What are the <hes> cities that you look at are. Are there any cities that you know. Maybe don't get attention from other people that you could point out as being <hes> unheralded opportunities if you will. I think we focus more on sub-markets than cities because our some markets in every area that we look to transact that we would not win and in many you said he's the markets that we would in but as a rule of thumb. We're paying a lot of attention to the political impact like we have avoided new york city manhattan. The last five years is we were very concerned about the role of politics and its impact on real estate. We're concerned on rising property level taxes and the loss of retail income and what that does to the city and very concerned with a new political political aspect that has made a dramatic impact on values of real estate in manhattan which there's no better way for meat determine termini's annoys other than socialism because it doesn't make sense from an economic perspective and there's no economist to my knowledge who would recommend our endorsed endorsed the new laws and regulations that are very very anti owners that were put into place in manhattan and new york on their own stabilize is units. We don't focus on wednesday units. <hes> we wouldn't have been affected anyway but we look at new york as the city were because of politics and because a new laws being passed and being proposed anti landlord and makes it very difficult to run a building and be motivated to investment in building when there are people who are trying to do everything they can to not allow landlords to make money. We have a lot of charity go for making investments at has to asked to make sense that being said there are markets in texas or in colorado that are very very business friendly that understand that it's a partnership if a landlord going to invest vest and building and improve the amenities and increase make sure it's safe and amenities that he has to be able to return some return on the investment the motivated to continue doing that that business plan. Are there any red flags on the economy that you're keeping an eye on any <hes> bumps in the road that we might expect over the next say six to twelve months. I would've said until a while ago concerned with interest rates but it appears that most would be of the opinion that for the foreseeable future they're not gonna go up and if anything they would go down <hes> certainly fannie and freddie to balance the two thousand nineteen or the biggest lenders for the multifamily space that we play in an invest in have definitely eh taken a much more conservative and measured approach where you know they are not as motivated or eager to put money <music> out into loans for the balance of the year the impact for many have been a dramatic reduction in interest only periods on the loan lower proceeds and lenders have been looking for higher spreads which means that if interest rates went down the that savings have has is he's not necessarily trickling down to the borrowers and freddy are looking to keep that difference and still offer similar rates as they were offering several months ago said has has made buying for many owners more difficult through challenging the same time. There's other options like c._b._s. And local community banks to to finance acquisitions where i think that the economy as a whole could be at the end of the cycle usually real else they work from cycles and this has been very long good cycle so we'll things usually come to an end that being said for the specific the civic workforce housing strategy that we focus on the data showing that space is better than ever and as a result there's more money looking to be invested in workforce multifamily than there ever was both domestic and international private and institutional national tremendous amount of money looking which was driving pricing up and the reason. There's so much money that wants to be in. This space is because risk adjusted. It's a very very attractive asset. The class it's historically performed much better than any other sector in real estate and the risks are much more minimal because you can control troll how much you spend on renovation and stopped renovating or draft innovation based on your return on investment as we said earlier people we need a roof over their head to live in and the supply demand is imbalanced for something that is affordable to most americans and that is something that many investors realize so. I think that we may be at the end of the cycle. There's always risk with interest rates but i'm personally very bullish and castle and tara is excited to continue acquiring a very disciplined away. What we believe can be the value proposition in the markets markets that we're investing in. We're offering a very good product at a price. There's affordable and attractive compared to the other assets in in the area and it's also non correlated to the market. The stock market pulled apart at the direct. Impact is obviously much west on real estate uh-huh and foreign events which can impact things have less of an impact on multifamily. Elliot's great to catch check with you and get your perspective on the market and the things that you're doing. We thank you for coming on the sierra newshour all right well. I'll leave you with one thing about the red the flag my grandfather wants told me he was my mentor in real estate he once said when times are good people think they'll never get bad and when they're bad they think will never get good so i you know i agree with the tone of your question that we might be the end of the cycle but at the same time we're very confident in this space and believe that risk address it still provides or a very attractive investment return on a good deal is located probably makes sense. Grandfather sounds like a very wise man. We thank you for sharing that with us. Okay thank you for your time. Ellie reader is the founder and chief executive officer of castle and tara properties. You can get more information at kessel. Lynn tara dot com and will put that link in the show notes for this program. You're listening to the cr news hour. I'm steve love atkin flexible workspace demand increased nineteen percent on average in the top eighteen cities around the world and larger requirements of ten desks six or more now represent twenty percent of total market demand the instant group a global flexible workspace specialists that helps clients procure cure and manage their offices and more than two thousand two hundred eighty cities across one hundred fifty three countries has released a global cities report analyzing the market for flexible rexel workspaces in those top eighteen markets and joining us to talk about the report is michelle bodak managing director of sales and marketing america's for for instance offices michelle. You've specialize in global flexible workspace. You're in a bunch of cities and a bunch of countries <hes>. What are you finding finding out about flexible workspace in the research that you're doing well. The market for flex workspace is really becoming increasingly sophisticated as operators such as we work and regis and industrious the you know fifteen thousand other providers that are around the world are really ah chasing after the larger more corporate requirements <hes> we also see requirements and spaces being taken for longer term <hes> <hes> and that demand is really <hes> continuing to grow as corporations and end users of space are really looking for greater flexibility as part of their portfolio strategies note. <hes> among the findings in your report is that not surprisingly new york remains the most expensive market based on a per desk price <hes> how does that compare to people who are looking at pricing for traditional office space in new york yeah so i think you know we get this question asked quite a lot and we look at comparisons of total cost of occupancy. Let's see so when you are looking at a traditional lease. You're typically looking at your rentable square feet and then applying that out and then you have to start adding on on top your <hes> empathy operations cost etc a real estate taxes so on and so forth so that costs per desk rate is inclusive of all those elements so i think when you really look at <hes> the <hes> comparisons and how you need to explore flax. It's really looking that that total it'll cost of occupancy over the term and really comparing those <hes> i think when you start to look at it again over the life of that lease if you have flexible least for twenty four months or twelve months or six months versus locking into a five year or ten year term and that's where the numbers getting i think interesting because again you're paying you might be paying slightly <hes> a slight premium for flex but again you have the ability to move and shift as the demands of your business shift and what are you seeing in in terms of pricing <hes> your your study indicates that pricing is cooled off a bit over the across the eighteen cities that you analyze what's taking <hes> what's making that happen so interestingly enough. It's just a demand. I think as we start to see <hes> more operators coming in more choice coming in pricing has slightly decreased <hes> but again <hes> i think we're starting to see <hes> markets evolve outside of those bigger larger. I central business districts into some of the more suburban markets so we're starting to see demand grow outside of the core cities <hes> but again the choice in those cities. He's is <hes> you know. Continuing to grow people are expanding their footprint <hes> more and more of the customized spaces where that workspaces workspaces the service offering is coming in <hes>. Those are things like <hes> industrial is offering <hes> canvas <hes>. We works h._q. Products <hes> you know a myriad of other providers have those kind of customized spaces so we're starting to see that trend kind of uptick there as as well so i would say the traditional cost desk. Yes we've seen those market rates often but we're starting to see trending increasing in other areas. Are you getting a sense that the owners of office buildings are more receptive to leasing the space to flexible work companies. Definitely i think we've seen seen <hes> a lot of the landlord <hes> community starting to figure out how are they going to integrate flex into their buildings. <hes> <hes> i think convenient has done a great job in their partnerships with landlords <hes> offering the mini side the conferencing centers and now they're moving into the workspace <hes> environments limits as well <hes> and i think you know tishman spires done a great job with studio and we're starting to see that expand so i think you will either see landlords looking for the right partners for for their buildings to fulfil the need of the clients that are in those spaces or you will start to see the operator starting to self deliver <hes> and i think that's where the market is trying to figure it out right <hes> right now as you know how to what is the right approach <hes> for the different types of building classes and the you know consumers that are in those spaces so your report looks at eighteen cities which of these cities are showing the strongest growth in the demand for flexible space and what do you think is this is underlying that <hes> so i think there's <hes> a couple of things i mean like new york san francisco <hes> certainly <hes> but we've also oh seen you know global cities growing as well <hes> and obviously those <hes> location certainly in asia pac we've seen quite <hes> good positive steady growth in tokyo and melbourne and sydney and i think you're starting to see companies really use flex <hes> as has a way to enter to enter new markets at speed or testing new markets and then putting <hes> you know a more permanent <hes> space down <hes> but that what is really what is driving this next phase of growth. I think you saw the early stages at the member small medium sized business now you're really starting to see as some of the large corporations <hes> leveraging flexes and much more strategic component of their portfolio and just looking again as another way to deliver in access space in potentially <hes> challenging markets. I think the further away companies are from their core supply chains for delivery. <hes> you know certainly multinationals who have experience <hes> in those you know probably regional and international locations but for others. Who are you know dipping their toe into a new market. This is a great way to to do it from a space perspective. Are there any concerns you have about <hes> factors that might put a dent in the demand for more flexible office space. Now i think interestingly enough. I mean <hes> quite a lot of <hes> talk around recession and other elements but i do think you know. The demand is continuing to be strong. <hes> i think that you know companies who have high growth <hes> or unpredictable growth or looking for cost savings or potentially looking for again the ability scale up or down <hes> the the demand will continue to be there <hes> there will always be opportunities <hes> for maybe some acquisition or consolidation <hes> but i do think that <hes> overall overall will continue to see the space grow <hes> over time because i think you know demand really has increased you know nineteen percent on average across i saw global cities that we cover in our report and we predict that we'll see that same level of growth continue in the coming years. We'll put a link to the report in the show uh-huh notes with this podcast michelle. Thanks for joining us today. Thank you so much. Michelle boutique is managing director of sales and marketing america's for for instant offices. You can get more information at instant offices dot com. We'll be back in a minute. This is rabbi richard address. I join us for our podcast series. From jewish sacred aging titled seekers of meeting will explore some of the issues and events that impact ourselves. Our families is in our jewish world at large in light of the current revolution in eiji. The secrets of meaning podcast airs every friday morning at eight a._m. At jewish sacred aging dot dot com <music> today. You can't wait for the media to cover your company any you have to be the media. Take advantage of the power of audio and video. It's the best way to showcase your expertise to prospective customers. Let the lou you bet can media companies handled the technical side. We're award winning audio and video producers. We can help you produce podcasts and video programs remotely or in our fully early equipped studio in cherry hill visit being the media dot com for more information. The global slowdown has seemed to ease a bit driven primarily by resurgent office investment in gateway markets. That is the assessment by c._p._r. A._p._r. e group the world's largest commercial real estate services and investments firm joining us to talk about the global economic outlook is richard barnum he he is the executive director and global chief economist at c._b._r._e. He shares c._b._r._e.'s econometric advisors and he's also visiting professor at the university. The city of london and university college london richards written two books on real estate real estate and globalization which explains the impact on western real estate markets of the rise is of emerging markets like china and brazil and the determinants of small firm growth which examines the role of small and medium sized firm play in regenerating eating regional economies richards joining from c._b._r._e.'s new york office richard. Thanks for joining us on the sierra newshour my pleasure steve so you have come out with with the some warnings or cautions about a global slowdown <hes> according to your reporting global commercial real estate investment was about a two hundred thirty one billion dollars in the second quarter and that was up seventeen percent from the previous quarter but it was down about seven and a half percent from the <music> same quarter prior year. What are the concerns you seeing. What do you think accounts for the slow down but i think the slowdown was largely focused. Just the start of the really think then the issue globally was rising u._s. Interest rates <hes> and i think that is very squarely being <hes> taken off the agenda from a bat february both the fed alternates <hes> it's monetary policy guidance and the ten year treasury. I'm starting to full so i think the issues that might have concerned investors at the start of the maybe through january through april <hes> a now no longer on the agenda so with that fall in interest rates. I think we're reasonably positive about capital markets activity in the second half of two thousand nineteen. That's encouraging <hes> last week. We saw the yield curve invert and it rattled the markets. <hes> what are folks telling you this week. Were recording on august nineteenth. What are people saying about. The market's going forward for the rest of this week in this month. Well i think one of the points that we made <hes> in our q. Two reporting with just how strongly into to the office investment had bounced back largely around the the the big gateway cities so if you don't mind me quoting some statistics say quite remarkable paris was out twenty two percent on the same in quarter last year san francisco ninety one percent new york up thirty nine interested tokyo up eighty six percent boston up fifty nine percent los los angeles up twenty five percent bird in eighteen percent so i appreciate that the the overall context investment was down seven point five on q. two but i think the interesting the global gateway cities in very important <hes> and i think people what people are looking at their. It's just extremely robust leasing leasing activity so all the talk about <hes> investment a for all the talk about a global slowdown. <hes> obviously seniors pretty strong so i think that's that's one thing that i'm hearing from investors that <hes> they like the fundamentals in the office sector and of course the other thing that <hes> <hes> we noticed in the queue to statistics is just the apartment investment was up twenty one percent from q two thousand eighteen and <hes> it's just a the the american american multifamily story remains an extremely strong global story <hes> and the fundamentals there are pretty robust as well and i think that's walk walk investors and looking at <hes> so you know we we all sailing into a period of economic uncertainty <hes> but there is <hes> the remains voice has been a very large mind capital talk in real estate and i think the fall in interest interest rates and the likelihood interest rates will stay no longer is actually very positive for real estate investment <hes> in the second half of the year. The resurgence of office investment is interesting because for a long time in the u._s. Office has sort of been on a <hes> <hes> sort of a second tier track. It's not been of as much interest to investors as say multifamily certainly and industrial <hes>. Are you getting any sense ends of what's made sentiment seemed to turn globally in the office market i think it would be this is my own personal opinion. I'm not necessarily that of c._b._r._e. But i think it's a variety of factors i think the continued strength of tech leasing is important. I think the way in which into media operators <hes> re imagining office space as <hes> kind of a much more high immunity unity high productivity space <hes> that companies can use in the war for <hes> i in the war for talent and so i think as well as that i think globally this has been one of the most disciplined real estate cycles with <hes> <hes> albeit an uptick in office development not really strong surge in office development as we might have seen in other cycles in the stage so i think <hes> just the the fundamentals of supply and demand in the office sector is what <hes> plus plus. The some excitement has come back into the office sector. I think if i were to add another maybe nuance to that. I think the first half the first half of this cycle <hes> the finance sector was hobbled. I think <hes> due to the after affects the financial crisis and regulation asian <hes> you know i think we've seen a much more active finance six two as well in the office market too when you look geographically. What are the regions that are showing you the best performance or performance that makes you comfortable and which regions are are you looking at and seeing maybe yellow flags or even read flex what was saying is a little bit of economic weakness <hes> in a pack and a little bit of economic weakness in and <hes> we see that the united states is holding up in terms of its economic growth very nicely <hes> and you you know what we've seen. <hes> <hes> is amongst a global decline in capital into real estate q two on q. two thousand eighteen <hes> america has been pretty stable <hes> and we've had <hes> open a mild climate you want <hes> and a decline in my take on that is the investors always get the best the best deals <hes> if they act somewhat counter to what other investors doing so <hes> you know i think the americas quite quite good from an economic perspective but i think emmy are apec was looking at because i think capital markets have eased a little in those <hes> in those regions and it may well be a savvy investors can get a little bit better value than they could've down this time last year as you're looking at the global supply chain <hes> how much of a factor is that in <hes> <hes> driving industrial investment around the world as companies are trying to build these supply chains. We have seen a little bit of an impact. <hes> and i think you're referring to <hes> the trade war. We've seen a little bit of an impact in our industrial markets in <hes> companies <hes> putting forward purchases <hes> from asia pacific so there was a surge in inventory <hes> on the west coast. I think yeah <hes> in advance of tariffs going in so that's one area that we have seen that <hes> the tribal has impacted. It's been positive so far as the bill that of new supply chains is concerned. I think it is too early to say <hes> we have certainly seen goods <hes> rerouted as of <hes> asia pacific <hes> <hes> industrial markets through instead of coming straight from china. They'd being diverted through other third the third countries <hes> and it's still landed up the big consumer markets. <hes> we see stories about <hes> manufacturers moving to other locations but i don't think we've seen that impact on industrial market yet. <hes> the end of the day <hes> the u._s. big consumer market <hes> and end goods is still going to come in <hes> in through the ports of needs to be rerouted <hes> through <hes> an ever more complex flex supply chain for same day film and <hes> actually we see <hes> in the in the u._s. Market <hes> sustain dimond on leasing demand when you look at the concern in europe and around the world about the potential for a hard brexit later this year <hes> does that have any impact on what people are thinking and making terms of making decisions on real estate investments well. That's a very interesting question. I mean <hes> cap rates have been stable in the u._k. <hes> actually they've compressed based in europe so <hes> there is a sense in which perhaps the <hes> investment in the u._k. Is is hanging hanging back. <hes> because of the the phase of a hard brexit i think if you look at the parliamentary mathematics and indeed our own in house house <hes> political analysis a hard brexit. It's extremely unlikely <hes> even at this stage it is extremely unlikely <hes> i would save that actually <hes> presents an opportunity for investors to again a qua- i start in the u._k. <hes> at a way that might be advantageous when <hes> brexit uncertainties <music> <hes> e- i'll likely to do <hes> by the end of the <hes> guy in two thousand twenty and then finally richard just <hes> if you could give us a sense of your overall outlook for the rest of this year and whether you think the overall economy is headed for recession in twenty twenty twenty we thought about this a lot obviously <hes> and the helping some slightly worrying economic statistics at at the economic contraction in germany <hes> was <hes> in q two was a <hes> something that investors focused on as highlighting highlighting weakness in northern europe. I also think that <hes> china <hes> is potentially <hes> continuing to slow luke <hes> against that you've got the u._s. <hes> <hes> motoring on quite nicely but i think there are some countervailing factors is that people <hes> people are not thinking about the moment one is the world conceal competence. Is that an all time high. <hes> <hes> so the consumer sector is not showing anywhere near enough stress. I think in order to <hes> have a recession another thing we've yet yet seen the full deployment of monetary policy from central banks. I think there's a lot more that central banks can do to boost the economy. I believe they're planning to do got so it is true that the global economy is <hes> sailed into a period of uncertainty particularly in europe and jonah <hes> an asia <hes> but i think there is a whole lot of stimulus yet to come which i think <hes> will will will alongside consumers support the global economy including twenty so we see slower growth but we don't see a recession richard. Markham is executive director and global chief economist at c._b._r._e. Are- richard thanks very much for taking the time to bring us your perspectives mark <music> and that'll do it for this week's edition of the news hour. Don't forget to check out our audience survey survey by clicking on the purple. 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