SAN FRANCISCO—Wouldn't it be convenient if someone had clear, intelligent answers to most of your CRE-related questions? Problem solved. Nina J. Gruen, a.k.a. Ms. Real Estate, a.k.a. the principal sociologist overseeing market research and analysis at Gruen Gruen + Associates, is here to answer readers' questions.
Dear Ms. Real Estate,
I am contemplating investing in one or more REITs in 2017. I understand well that prior to any purchase, it's important to evaluate the company's management and previous history. But I would like your opinion as to the overall demand for multifamily, office, retail and industrial uses. If you had to choose between these uses, which do you believe will experience the greatest demand over the next several years? I will be able to narrow my search by concentrating on the use that is likely to have the most robust demand.
—REITing the Tea Leaves
Dear Tea Leaves,
Not an easy question, given the fact that all markets are local. But I will give it a try. Over the last several years – at the end of the Great Recession – there has been robust demand for multi-family housing in both first and second tier cities, as well as higher density suburban locations. However, there are already signs of overbuilding in markets like the Phoenix region, which is likely to reduce demand for new multifamily over the next couple of years. I also do not see a significant increase for office demand except in locations with robust economies. Demand for retail space is likely to continue its decline, particularly in secondary markets, as the larger national chains continue to reduce the number of their on-the-ground locations.
The most robust unmet demand in many first and second tier cities will continue to be last mile high tech warehouse space. As an increasing percentage of all retail goods are purchased on the internet and the patience of consumers continues to decline, a three to five-day delivery standard is no longer viable. No longer are delivery providers like UPS, FedEx and the US Postal Service the only players in town, though they are still the largest providers of last mile delivery. New players like Uber Rush and Google Express are also in the game. Amazon Flex, Walgreens, Postmates and Deliv are all testing same day, and in some cases, same hour delivery. This requires a significant number of underused, accessible sites at locations adjacent to major distribution hubs like Chicago, Los Angeles and New York, as well as many secondary hubs in Florida, the Carolinas, Louisville, Memphis and Nashville. I expect that last mile retailing will continue to be a major engine of growth through the coming decade and beyond.
SAN FRANCISCO—Wouldn't it be convenient if someone had clear, intelligent answers to most of your CRE-related questions? Problem solved. Nina J. Gruen, a.k.a. Ms. Real Estate, a.k.a. the principal sociologist overseeing market research and analysis at Gruen Gruen + Associates, is here to answer readers' questions.
Dear Ms. Real Estate,
I am contemplating investing in one or more REITs in 2017. I understand well that prior to any purchase, it's important to evaluate the company's management and previous history. But I would like your opinion as to the overall demand for multifamily, office, retail and industrial uses. If you had to choose between these uses, which do you believe will experience the greatest demand over the next several years? I will be able to narrow my search by concentrating on the use that is likely to have the most robust demand.
—REITing the Tea Leaves
Dear Tea Leaves,
Not an easy question, given the fact that all markets are local. But I will give it a try. Over the last several years – at the end of the Great Recession – there has been robust demand for multi-family housing in both first and second tier cities, as well as higher density suburban locations. However, there are already signs of overbuilding in markets like the Phoenix region, which is likely to reduce demand for new multifamily over the next couple of years. I also do not see a significant increase for office demand except in locations with robust economies. Demand for retail space is likely to continue its decline, particularly in secondary markets, as the larger national chains continue to reduce the number of their on-the-ground locations.
The most robust unmet demand in many first and second tier cities will continue to be last mile high tech warehouse space. As an increasing percentage of all retail goods are purchased on the internet and the patience of consumers continues to decline, a three to five-day delivery standard is no longer viable. No longer are delivery providers like UPS, FedEx and the US Postal Service the only players in town, though they are still the largest providers of last mile delivery. New players like Uber Rush and
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