Stocking Up on Industrial

Industrial real estate is no longer simply the steady workhorse operating quietly behind the scenes. The market sector has jumped to the forefront as the property everyone is talking about. That attention is well deserved, with secular shifts that are spurring steady demand for space and overall performance that is tough to ignore. According to the NCREIF Property Index, industrial is expected to generate returns of 10.3 percent this year, well ahead of the 6 percent returns expected in both office and apartments and 2.9 percent for retail. The market has been riding a significant tailwind from e-commerce, and that breeze is only expected to grow stronger. “Logistics real estate remains strong and, in most markets, customers are waiting for new supply to come online due to the limited availability of standing inventory in nearly all U.S. cities,” says Kim Snyder, president of the west region at Prologis. Industrial also is seeing demand coming from sources across the board – third-party logistics and logistics firms, manufacturers, light assembly, and even cannabis growers. According to the Urban Land Institute’s Real Estate Economic Forecast for Spring 2019, the industrial/warehouse vacancy rate is hovering around 7 percent, well below its 20-year average of 10.2 percent. CBRE puts warehouse vacancies even lower, at 4.4 percent. Industry sources agree that demand has been fueling a surge in warehouse development in recent years. Click to read more at www.ccim.com.

Officials Spar With Senators Over Plan For Mortgage Giants

WASHINGTON (AP) — Trump administration officials on Tuesday defended their plan to Congress for ending government control of mortgage finance giants Fannie Mae and Freddie Mac, clashing with Democratic senators on whether the change would raise home borrowing costs and neglect lower-income homeowners. The two finance companies nearly collapsed in the financial crisis 11 years ago and were bailed out at a cost to taxpayers of nearly $190 billion. Treasury Secretary Steven Mnuchin and Housing and Urban Development Secretary Ben Carson, along with regulator Mark Calabria, director of the Federal Housing Finance Agency, testified before the Senate Banking Committee on the plan for returning Fannie and Freddie to private ownership. The companies have become profitable again and have fully repaid their bailouts. Under the plan, their profits would no longer go to the Treasury but would be used to build up their capital bases as a cushion against possible future losses. Click to read more at www.marketbeat.com.

The California Real Estate Boom Is Over. What Now?

If you had invested in a property in San Francisco five years ago and cashed out in 2019, you would have made a 50% profit, never mind the rental income. But if you had bought a year ago and sold today you would have made exactly zero. The California boom is over and investors need to switch to Plan B, which is the answer to the Jeopardy question: How do you deal with a market that at best will be moving sideways, but could also drop 20%? The end of the boom in California also poses troubling questions for investments elsewhere in the country. Will other tech economies follow suit? What are the prospects for booming markets in Arizona, Nevada, Utah, Texas, and Florida? And will panic selling drive down prices everywhere, as it did in 2008, pushing an already weakened national economy into recession? Click to read more at www.forbes.com.

Years Ago a Toronto Lawyer Paid $1.50 An Acre For Barren Texas Land. Now It’s Worth $7 Billion And His Family Won’t Sell

So much of the Permian Basin is under production that the lights glowing at night, on well pads and rigs and double-wide trailers, make the place look in NASA satellite photos like a giant Lite Brite. But there’s a spot where the Permian dims. It’s a big one, covering more than 250 square miles and loaded with enough oil and gas that it could, by some estimates, fetch US$7 billion. In an era where everything in the basin seems to be for sale, though, the Fasken ranch isn’t. The owners have no interest. They don’t even want to drill very much. That’s heresy in the busiest U.S. oil patch and almost as much of a curiosity as the lack of enthusiasm for cashing in. “As long as I have been alive, I have never known anyone to successfully negotiate any type of purchase from them,” said Kimberly Wurtz, a lawyer in Norman, Oklahoma, who grew up near the ranch in the 1980s and ’90s. Click to read more at www.business.financialpost.com.

Space Consolidation Leads To A Clean Bill Of Health

It may be behind the times compared to other industries, but the healthcare sector is finally starting to consolidate space. Better technology, cost dynamics, and other factors are allowing providers to do more with less. “It’s easier to be more efficient with your use of space than it is to go build a building for $500 per foot, not counting the price of land,” said Mark Montana, principal, Cresa. “That’s the biggest driver; they want to make sure that their expense ratios and their debt ratios are in line.” This consolidation has led to cost-effectiveness within the health group organizations, making service delivery more streamlined and more patient-focused. Shaving zeroes off the bottom line is by no means a new phenomenon, but the ability to better leverage technology is providing the means for that space reduction throughout the industry. More and more providers are offering telemedicine options, for example, whereby a doctor can consult remotely with a patient. This reduces the need for extra exam rooms and a physician group can shrink their overall footprint without sacrificing capabilities. Click to read more at www.rejournals.com.

Above and Beyond: Hines’ More Than 60 Years Of Influence on Houston And Commercial Real Estate Worldwide

Whether you’re an architecture nut or a casual admirer of Houston’s marquee buildings, such as Pennzoil Place, One Shell Plaza, and Williams Tower, you have the Houston heat to thank for such handsome structures – the heat and Gerald Hines. Hines grew up in Indiana and following graduation from Purdue University with a degree in mechanical engineering, he took a job with a Detroit-based engineering company that specialized in air conditioning. After training and orientation, he was given the choice of three office locations – Indianapolis, Detroit, and Houston. He chose Houston, in part because a couple of college friends lived here, but also because, without a doubt, the air conditioning business was going to be stronger in Houston than the other cities. While still working for the air conditioning company, Hines took on his first project – a 5,000-square-foot warehouse. He met his first client at a neighbor’s barbecue, and when the fellow mentioned he needed a warehouse for his company, Gerald Hines said immediately, “I can build that for you.” And he did, eventually founding his own firm, Gerald D. Hines Interests in 1957. Click to read more at www.downtownhouston.org.