HOUSTON (June 12, 2014) – The Commercial Real Estate Symposium at NAREE 14 lived up to expectations and provided some of the day's best soundbites. It's no surprise given the caliber of the panelists, who represented CRE heavyweights such as CBRE Global Investors, JLL and Transwestern.
– Office tenants are seeking cooler, open spaces because millennials want more "'we' space, less 'me' space," Transwestern's Chip Clarke told the gathering. In other words, big corporations run by 40- and 50-somethings are smart enough to cater to up-and-coming 20-somethings for the sake of their business. Of course, the bigwigs are making these decisions from their large corner offices with tons of "me space."
– Tech and energy companies – combined with record corporate profits, white-collar resilience - saved the office sector. "We're more optimistic today than we've been in 7.5 years," thanks to tech and energy – JLL's John Sikaitis said, and he was armed with data to prove it. While this has been a great ride, other industries must pick up the pace to keep the recovery going. Diversity = office growth, Sikaitis said.
– During each CRE upswing, people love to say something along the lines that capital is chasing deals. That's happening this time, but it's still worth noting. "I have never seen more capital chasing commercial real estate, and that's since 1980," CBRE Global Investors' Khourie told the gathering of real estate journalists and PR pros.
– Better yet, if the chasers armed with cash happen to be from China, yield is not paramount, Khourie said. "Chinese buyers are willing to give up some yield for trophy assets."
– And trophy assets are practially all anyone wants to lease. Trophy and Class A demand accounted for 80% of occupancy growth in office sector since 2011, JLL's Sikaitis said.
– On the industrial side, private REITs have a big advantage over REITs and other buyers. Private REITs have been most aggressive industrial buyers due to their "untouchable" cost of capital," Trey Odom of Avera Cos. said.
– Finally, longer-terms offices leases are back and will ensure buildings hold value longer. Tenants willing to sign 10-, 15-year leases for office space again, Transwestern's Clarke said.