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Report: Commercial real estate outlook for 2016 solid

Real Estate outlook for 2016 solid

Real Estate outlook for 2016 solid

Recent numbers predict slow job growth for the Wichita area, but that hasn’t stopped NAI Martens from anticipating an uptick in the commercial real estate market next year.

In its annual forecast for 2016 released this week, the real estate firm referred to the general tone of the market as “optimistic,” adding that “virtually all economic indicators are positive” for next year.

That’s despite the prediction by Wichita State University economist Jeremy Hill at Thursday’s Wichita Economic Outlook Conference that the city would gain just 3,360 jobs in 2016, a number that would represent a 1.1 percent increase for its workforce.

“Commercial real estate and deal flow is outpacing the economy,” Tom Johnson, NAI Martens president, said during the conference at Century II. “Industrial has really kind of turned around. The manufacturers are more confident. Commercial aviation and their supply chain have done well.”

The industrial real estate market in Wichita is expected to be “solid” in 2016 with “gradual expansion,” according to the report. NAI Martens’ most-recent numbers show that the most expensive properties on average can be found on the southwest side of town ($4.63 per square foot) and the northeast side of town ($4.61). By far, the highest vacancy rate in the city is in southeast Wichita (20.6 percent).

Overall, NAI Martens is more bullish on the 2016 industrial outlook than it has been in years.

“The whole environment is much more positive,” Johnson said. “It’s nothing dynamic, just really solid going forward. In retail, we’re in good shape, there’s no downside. The concern is about how we diversify the economy.”

Partly due to growing consumer confidence as a result of low gasoline prices, the firm expects retail growth to carry over to 2016. While Johnson said some businesses could suffer because of more retail coming online, he noted the general forecast for the sector is positive.

“We have a lot of new development coming online,” Johnson said. “In northeast, the new parts at NewMarket Square, the Cadillac Lake area; the Greenwich Road corridor is very strong.

“We will have some winners and losers because we don’t have disposable income growth to support increased sales. You add new product, somebody’s going to have to suffer, but there’s going to be some interesting concepts, some things that are new to the market.”

Overall, NAI Martens is predicting higher occupancy rates for 2016 and “marginally” increased retail rents. The report notes that urban locations could prove fertile for growth, stating that “urban locations can emerge as the darlings of retail as millennials continue to migrate to the central business district.”

Johnson hinted that millennials — generally thought of as current adults between the ages of 18 and 34 — might also play a more important role in the further development of the Wichita economy.

“The challenge is to look at opportunities that we maybe haven’t uncovered yet,” Johnson said. “Where are the emerging technologies and industries that I think we have the opportunity to capitalize on?

“Who are going to be the emerging leaders now that make that happen? I think the big opportunity is to capitalize on this new millennial generation that is coming through and to identify some emerging leaders.”

The biggest challenge in commercial real estate in Wichita in 2016, according to the report, is in the office sector, where limited growth in financial, professional, technical and information services is expected to carry over.

“We have some excess inventory downtown,” Johnson said. “The accounting firms and law firms aren’t expanding, they’re just moving from one place to another. There’s good deal flow, but not much absorption.

“Our biggest problem is Class B downtown and it will continue to be. We have an aging inventory and it’s traditional office space — what we’ve had for 40 years. The demands of office tenants are changing — they want higher ceilings, more light, more open space.”

Overall, the firm thinks that Wichita is “well-positioned for growth through 2016 and 2017.”

Original article: http://www.kansas.com/news/business/retail/article37315332.html#storylink=cpy
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Six Trends in Commercial Real Estate to Watch for in 2015

While many variables will determine the course of  U.S. commercial real estate, here are six potential trends for 2015 based on the current outlook:

    • Increased allocations and capital flows. With most institutions—not to mention high-net-worth investors—still being underallocated to real estate, combined with the strong four- and five-year performance of both NCREIF and NAREIT, we can expect more investment capital coming into commercial real estate. The significant amount of capital would be vexing if not for the fact that real estate seems to offer some of the best risk/reward propositions around, particularly given the multiyear run-up in equity and bond values. Look for higher allocation targets, and more foreign and retail investor money to continue to push capital values up well beyond the 2007 peaks, which should be cause for concern.
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Image Via http://urbanland.uli.org/

  • Continued low supply. New supply is at a historic low (see figure above), in part because market rents generally have not justified new construction and because financing has remained constrained. This leaves enormous upside potential in the property sectors to push occupancies and rents.
  • Increased appetite for risk. It has only been in recent quarters that investors have been willing to accept some additional risk to achieve higher yields. That has brought new activity to a number of secondary markets, including Philadelphia, Denver, Austin, and Charlotte, where well-priced Class A properties have come into play. In addition, there has been some “trickle out” through the marketplace into still-riskier placements in the suburban office arena, and into some Class B and C properties, where some investors are making strategic value plays. Finding the best investments in unfamiliar markets can be difficult. Class A office properties in one market are not always comparable to Class A office properties in another. The same is true across the spectrum of property sectors across the range of markets—from secondary markets to tertiary markets—anywhere in the country.
  • Investors continue to follow the jobs and people. Markets such as San Francisco, Austin, Seattle, and others have demonstrated advantageous population and job growth dynamics. Many of the jobs that are created in those cities are tied to technology as well as to energy and banking. Employment growth in the San Francisco area, for instance, outpaced the nation’s last year, with job gains exceeding 4 percent, and San Francisco is among the top tier of cities where a solid mix of job-creating industries is concentrated. Other Pacific Coast cities, including Seattle and Portland, also exhibit high concentrations of job-creating industries, driven in large part by technology. Other metropolitan areas, including Washington, D.C., with its still-substantial government employment base and growing financial services and technology sectors, and Houston, with its enormous energy sector and export machine, promise to be near the top of any list for investment—and not just in the office sector.
  • Multifamily still popular. Multifamily transaction volume has reached pre-recession levels, outstripping office transactions for the first time in ten years, as real estate investment trusts (REITs) and pension funds have fed a fierce appetite for the multifamily sector. The pace is unlikely to slow anytime soon. Apartment demand has been—and is expected to be—robust, supercharged by the shock waves of the recession and by strong demographic trends that are only beginning to manifest. And, as values moved ever higher, cap rates fell back toward 6 percent, close to where they stood in 2005 and 2006. Most deals have been concentrated in larger urban markets, such as New York, Washington, Los Angeles, and Chicago, with considerable focus on the echo boomers, who are partial to the amenities of an urban lifestyle, and their parents, who are realigning their housing needs toward walkable surroundings and mass transit.
  • Ongoing retail bifurcation. A confluence of factors including, especially, the economic recession and the inexorable wave of e-commerce has redefined the retail market equation. The day of the suburban mall, anchored by a mid-market department store, has probably passed. There will be no return. And, although the industry’s evolution continues, we are already beginning to see a deeply bifurcated mix of high-end urban retail destinations at one end of the retail spectrum with discounters at the other, and a scattering of local grocery-anchored strips in between. It may not be a formulaic trend, after years of consumer caution and austerity, but an improved housing market should lead to an improved retail environment. With home prices recovering and financial markets making strong gains, household wealth has risen to more than 5.5 times disposable income, the 20-year average. In addition, the annual expansion in retail sales, 6 percent per annum, is an indication that retail activity is well on its way to achieving a rate consistent with job creation and income growth.

Original article: http://urbanland.uli.org/economy-markets-trends/six-trends-commercial-real-estate-watch-2015/

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Brian Fielding of Fielding Investments reveals that there are few wiser investments than commercial real estate.

Whether diversifying a portfolio or looking for a profitable venture, investors should be confident that acquiring commercial real estate property can be a safe and advantageous decision for many reasons that Brian Fielding, of Fielding Investments   

  1. Return on investment: When looking at how profitable the investment can be, commercial real estate has advantages both because it will increase in value over time, and because it can produce income for the investor on a regular basis. Historically, commercial properties have appreciated more than inflation all the while delivering a fairly reliable return. With tenants, investors should expect a monthly income that they might not see with other investments. Brian Fielding also reminds investors that they may well see their property increase in value quite substantially in the relatively near term with the promising prospects for the economy that have been widely reported.
  2. There is diversification within the market: For those looking to diversify their portfolio, commercial real estate is an ideal choice because even within the field there is diversification. Each type of commercial real estate has its own factors. Office spaces, for example, may depend on the job market, hotels depend on travel frequency, and retail spaces on other spending trends. Investing in a number of different properties in commercial real estate that serve different purposes can help diversify a portfolio according to Brian Fielding.
  3. They are safer investments: In comparison to other investments types, there is consistent intrinsic value to a piece of commercial property. This is because the potential for the investment can be improved simply by the signing of quality tenants. Additionally, the structure itself as well as the land on which it rests can appreciate if one has bought wisely. Brian Fielding points out that the result of these factors is that there will always be an opportunity for significant return on the investment.

Investing wisely can help individuals prepare themselves for their future financial security, and commercial real estate is one of the smartest and safest investments. Brian Fielding stresses the importance and advantages of understanding and considering commercial real estate investment. For more information, please visit http://fieldinginvestments.com/. 

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Brian Fielding Offers Advice for Investors Considering Commercial Real Estate Properties

Fielding Investments

Fielding Investments

There are many factors that must be considered by an investor when they enter a new market. Brian Fielding, an experienced and gifted mind in the industry of commercial real estate and the founder of Fielding Investments, offers the following tips to make sure that investors can make well-informed decisions that will in turn lead to worthwhile investments.

  1. Consider properties that need work: While new investors may be hesitant to purchase a property that needs to be renovated, Mr. Fielding believes that these pieces of commercial real estate actually have the most potential. Additionally, these assets can usually be purchased for a lower price and thus have more room for profit once they have been improved upon. However, the buyer must take time to find out exactly what the property is lacking. Doing this will allow him to negotiate a price that lets him afford the needed property improvements.
  2. Commit to long term ownership:Brian Fielding says that in most cases, properties give an owner the biggest return over a long period of time. Unfortunately, some investors may try to dump out of a property the moment the market sees any kind of downturn, and the result is that they lose a large percentage of their investment. If, however, the owner is prepared to see it through these tough times, they can make it past the downturn and wait until the market is sound before they sell their real estate for a profit. Additionally, the longer an owner holds on to the property, the longer they can be making money off of tenants. Remember, even when the value of the property falls, the investor can still be making rental money.
  3. Decide how to manage the property: Many of those who lease residential real estate are accustomed to dealing directly with their tenants. However, when an investor has purchased a property with a number of available spaces to lease, or has acquired several different properties, Mr. Fielding believes that they should consider hiring a full time manager. While the owner can certainly manage the property himself, he must understand the personal commitment that it requires, and should consider all his options before the purchase and decide if he will hire a manager or not.

Brian Fielding is an expert in the field of commercial real estate and he believes that many individuals can benefit from investing in a commercial real estate property. However, he knows that for these investors to be successful, they need to be knowledgeable about the industry, and that is why Mr. Fielding has made it his mission to share his adept knowledge with investors. To learn more about the commercial real estate market visit www.brianfielding.com. 

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