Conference Presentation, Panel
Global Opportunities in Commercial Real Estate (mobile v2)
Milken InstitutePeter Lowy, William McMorrow, Nicholas Schorsch, Barry Sternlicht, Sam Zell, Lewis Feldman, Lou Feldman, Bill McMorrow
- The industry is expected to return to a "normal state" over an unspecified future timeline, with a current global slowdown in the economy and visible leasing slowdowns in Brazil.
- Irish markets are projected to remain positive for the next ten years due to population growth and over 500 U.S. companies, with Dublin high-quality rents rising, vacancies staying low near 95%, and Google occupying nearly 600,000 square feet.
- The Western U.S. apartment sector and UK secondary markets are identified as the greatest opportunities for the next 12 months, while the U.S. multi-family market offers loved risk-adjusted returns.
- A $1.4 billion mall is expected to begin construction in Milan (8–9 km from the center) by the end of next year, with security costs in retail anticipated to remain at 25% of operating expenses.
- Physical retail is predicted to endure, with 90% of sales remaining offline and 70% of customers researching online before purchasing in malls, leading to retailer concentration in better assets.
- Bookstores are expected to return to future mall developments, though not in previous forms, and Brazil is projected to see 10% same-store sales growth.
- Brazil's real estate environment is considered attractive but will grow slower than the last decade, facing economic blockages in São Paulo where vacancy rates could double to negative levels next year.
- Mexico is forecasted to replace Brazil as the primary growth destination due to capital market developments like "fibra" executions in hotels and is expected to be the single biggest beneficiary of Asia hedges over the next five years.
- Colombia is viewed as the best Latin American market with expected capital flow from stock market mergers with Peru and Chile, while Venezuela's current administration is not expected to remain dominant.
- The U.S. real estate environment offers opportunities for the next year and a half due to a market aberration, though the housing market is expected to rise less strongly than investor trends suggest.
- European markets face significant risks, including social unrest driven by 30% youth unemployment, a "basket case" of social issues, and France being described as a place not to invest.
- The European Central Bank is expected to lower rates on a specific upcoming Thursday, and liquidity is expected to increase with rapid debt entry, though leasing in the U.S. may slow.
- Debt markets are expected to lack discipline, with lenders potentially stopping lending on three-year leases due to rollover risk and inflation in available capital without discipline.
- Tax regimes and exit costs in the U.S. are expected to require higher returns compared to the UK or Australia, and the expiration of TRIA within the next 12 months is a major political issue with high resistance to renewal.
- Investing in the U.S. without TRIA is expected to carry higher terrorism risk than anywhere else from an insurance perspective.
- Japan presents a "lunatic" environment regarding debt-to-GDP ratios, with rents expected to be flat or grow slightly, leading to a strategy of financing rather than buying new apartment buildings.
- The time horizon for returns in India is expected to exceed investor patience, and the industry must adapt to a flat ride of low growth and low inflation.
- Institutions are expected to lower return criteria to focus on yield rather than capital appreciation, with a new fund expected to achieve returns better than a 12% current yield.
- Office investment in Europe is expected to triple over the next period, while a home builder is expected to go public due to the interesting state of the housing market.
- Natural disasters, terrorism, and unforeseen events remain expected concerns for the industry, and Century City is anticipated to be the best location in the future.