The Weekly Take from CBRE

In a wide-ranging discussion, RXR CEO Scott Rechler opines on everything from the future of cities to leveraging AI in decision-making to office-to-multifamily conversions.Insights to Share: ·      Commercial real estate investors can find opportunity in a higher-cost environment.·      The outlook for office is brightest in areas where talent wants to live, work and play.·      RXR uses market intelligence combined with data to inform their strategies. Key data sources include VTS, cell phone activity, AI and predictive analytics.

The Francis Scott Key Bridge’s collapse in late March closed down the Port of Baltimore, resulting in the tragic loss of six lives and threatening massive disruptions to U.S. supply chains. Maryland Port Administration’s Jonathan Daniels recounts the Herculean efforts to mitigate the disaster’s worst effects and restart port operations in 11 weeks.  Insights to Share:  To practice effective crisis management, focus only on what’s important. The Port of Baltimore partially reopened in just 11 weeks, well ahead of the 11-12 month timeline some experts predicted. The network of East Coast ports has provided flexibility that mitigated the worst impacts on supply chains. 

Senior Managing Director of Lone Star Funds, Bob Ricci, discusses challenges in real estate investing, including skyscrapers sold for low prices in depopulated areas. They also explore the appeal of investing in Sun Belt states, capital requirements for office assets, and the importance of tier one capital for banks when assessing commercial real estate risk.

The real estate capital markets can be complex in the best of times and vexing in the worst of times. Lone Star Funds’ Bob Ricci and CBRE’s Tom Rugg share some insights on succeeding in a sluggish time, finding opportunity amid headwinds and where those headwinds have started to ease.Insights to Share:As challenges in the capital markets persist, properties that were financed with heavy leverage may present opportunities.Higher interest rates will make rolling over debt a pervasive issue for several years.Distress is unlikely to reach the levels of the post-Great Financial Crisis years.

San Francisco has been facing extraordinarily high office vacancy rates since the pandemic. But more recently, the rise of artificial intelligence (AI) has stimulated demand for space and an influx of capital. Real estate investor Glenn Gilmore and CBRE’s Mike Taquino discuss the city’s history of resilience, culture of innovation and greatest opportunities.Insights to Share: Venture capital firms, particularly those focused on AI, are increasingly establishing offices in San Francisco, which is driving demand for office space. San Francisco’s well-known headwinds have caused investors to shy away from what could be  generational buying opportunities. AI is driving significant changes in San Francisco's real estate market, in terms of the types of offices needed and the locations most in demand. AI is also encouraging shorter lease terms, reflecting the fast-moving nature of tech companies.  San Francisco’s tenants are showing a preference for high-end and creative office space, as well as a preference for sustainability and adaptive reuse.

Belinda Román, 2023’s most accurate forecaster, according to The Wall Street Journal, and CBRE Econometric Advisors’ Dennis Schoenmaker opine on the art, science and technology involved in predicting the ebbs and flows of the global economy.Insights to Share: Belinda Román, Associate Professor of Economics at St. Mary’s University, expects GDP growth of 3% this year.CBRE EA’s Dennis Schoenmaker expects GDP to hover around 2%.Even with slower economic growth, there will be opportunities in commercial real estate.Regional, national and global forecasting requires a deep understanding of the available data.In commercial real estate, where information has historically been opaque, future forecasting can be enhanced by  AI.

Experts Melinda McLaughlin from Prologis and Chris Riley from CBRE discuss the enduring appeal of industrial real estate despite recent market adjustments. They highlight the viability of conversions to industrial spaces near urban centers, the integration of automation in manufacturing and warehousing, and the long-term stability of the sector amidst evolving trends and challenges.

This podcast discusses the uncertainty of interest rates in commercial real estate, highlighting the challenges faced by industrial and multifamily sectors. It explores the importance of maintaining strong lender relationships and the split nature of the office sector. Retail is gaining significance to institutional investors amidst the evolving economic landscape.

Julia Coronado, from Macro Policy Perspectives, discusses cooling global inflation, higher neutral interest rates, and relief for multifamily developers. She shares insights on Federal Reserve decision-making, economic outlook, interest rates, stock market dynamics, retirement planning, immigration impact, urban development challenges, and lessons from the financial crisis.

Siemens Real Estate CEO Stephanie Dorsey shares insights on managing global portfolios, emphasizing talent attraction, sustainability, and technology manufacturing. Discussions include site selection strategies, sustainability as a must-have for occupiers, and return-to-office strategies benefiting everyone.