CRE Market

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  • Crystal Ball

My 2017 Forecast for Commercial Real Estate

January 19th, 2017|

Recently I heard a humorous quip that is appropriate for the moment we are in: “If you are not confused, it’s because you haven’t been paying attention.”  In preparation for writing this blog post I’ve read several 2017 forecasts from well-meaning and well-qualified economists and political commentators.  Their opinions vary widely as to what this year is going to bring, much more so than you normally see.   Economists usually succumb to the herd mentality.  They don’t want to be wrong so they more or less follow what everyone else is saying.  Not this year.  There are many contradictory opinions about 2017.

Before I give you my thoughts, let me start by saying that the most important events of 2016 were not anticipated.  No one predicted that:

  • The United Kingdom would vote last June to the leave the European Union.
  • Donald Trump would be the Republican presidential nominee, let alone win the presidential election.

And I’m confident there will be other important events in 2017 that no one, not the most seasoned prognosticators, will anticipate.  That said, there are really two questions that need to be answered in order to make accurate predictions about commercial real estate in 2017.

  1. What is the health of the U.S. economy?
  2. What phase is the real estate market cycle currently in?

Answering these two questions will go a long way in predicting the health of the commercial real estate market in the Pacific Northwest and beyond. (more…)

  • Sell your property

Timing is Everything – When is the Right and Wrong Time to Sell Your Property?

January 5th, 2017|

The question all good investors must ask is, “When is the right time to sell my rental properties?”  All markets, including commercial real estate, go through cycles.  Riding a market when it’s on a strong upswing is truly a euphoric feeling.

Where are we on the Real Estate Market Cycle?

But where will the real estate market go from here?  Shown below is a chart that shows the four phases of the real estate market cycle.  I believe in 2016 the Pacific Northwest commercial real estate market moved from Phase II – Expansion to the beginning of Phase III – Hypersupply.  Why?  Because we are seeing for the very first time vacancy rates beginning to rise.  Secondly, it’s all about rent growth.  It’s still positive but rent increases are substantially less than they were a year ago.   This puts us firmly in Phase III where rent growth is still positive but declining.

rents-in-4-phases-of-re-market-cycle

4 Questions Before You Decide

So is it time to divest of your real estate?  Before making that decision, here are four questions to ask yourself: (more…)

  • Commercial Real Estate Investing

2 Important Truths About Commercial Real Estate Investing

November 12th, 2016|

Truth #1 about commercial real estate investing

A wise man once said, “The season of failure is the best time for sowing the seeds of success.”  So how does this truth relate to commercial real estate investing?  When the real estate market is in its season of failure (think 2008-2009) is when you sow your seeds of success. Those who buy when everyone else is selling usually end up the big winners.  This is true of all types of investing but it’s especially true with commercial real estate.  We all know that those who bought CRE at the bottom of the market during the tough years from 2010-2012 made out like bandits.  As the saying goes, “You make your money when you buy, not when you sell.”

Truth #2 about commercial real estate investing

But the corollary of this truth is unfortunately also true.  It’s during the prosperous times that investors sow their own seeds of failure.  How you ask?  By acting like the good times will last forever they make foolish investment decisions.  They forget the tough times and the hard lessons that were learned.  They say during the bleak times, “Never again will I (fill in the blank)” only to have selective amnesia when the market turns around.

Potential seeds of failure

So as I was saying, it’s during the prosperous times (like now) that investors sow their seeds of failure.  Here are a few examples: (more…)

4 Lessons Learned from Investing In My Loser Property

July 23rd, 2016|

I want to let you in on a little secret: Not every commercial real estate property I invest in turns out to be a “home run.”  Now that I got that confession off my chest, maybe some of you can relate.  In the summer of 2007, which turned out to be the absolute peak of the last real estate cycle, I, along with a like-minded group of investors, purchased a 32 unit apartment located in a small town.

Indicators of a Good Commercial Real Estate Investment

At the time it seemed to be a good investment:

  • Large unit sizes
  • One story buildings
  • Nice, quiet little town
  • The potential down the road to convert to condominiums

Hey, what could go wrong, I asked myself?  Well it turns out that plenty could go wrong, some of which could not have been predicted by even the most savvy of real estate investors.  Because of that I needed to extend mercy to myself instead of beating myself up over investing in this property, which I eventually did.  In 2015, with a sigh of relief, we sold this apartment.  For several weeks after the sale you could see me doing “back flips” celebrating the sale of this loser property.

A year has passed since we sold this property and from the vantage point of time I now realize that I learned some invaluable lessons: (more…)

5 Trends That Will Impact Your Real Estate Investments

May 10th, 2016|

 

 PORTLAND ECONOMY & REAL ESTATE MARKET

The Portland economy and real estate market are clicking on all cylinders right now.  All you have to do is read The Barry Apartment Report Spring 2016 edition to realize just how good we’ve got it:

  • Unemployment at 4.3%
  • Job growth at 3.2%
  • Population growth at 1.6%
  • Portland-Salem Consumer Price Index at 1.2%
  • Apartment values up 10 to 20% in 2015
  • Apartment income up 4% to 7% in 2015
  • Apartment vacancies at 3.5%

Life is good.  Isn’t it?  It’s so good that there are days that I pinch myself to see if I’m living in reality or some make believe world.

But how is the rest of the U.S. real estate market doing?  You may be thinking, “Why should I care?” The answer is simple: You should care because sometime in the not too distant future we will follow down the same path.  In some instances we’re already doing so but we have yet to feel the full affect of the nascent trend.  The Portland market is not an island unto itself that is unaffected by the rest of the country.  So Portlandia and the Pacific Northwest in general will inevitably follow.

FIVE GROWING REAL ESTATE TRENDS

So what’s going on?  There are some interesting trends happening even as we speak: (more…)

Pending Recession? 8 Survival Tips for the CRE Professional

February 25th, 2016|

The Devastating Impact of the Great Recession

I recently came across this blog post “8 Tips to Survive an Economic Downturn” I wrote in the winter of 2009.  As you may recall, our economy at that point in time was in a free fall.  The banks were on the brink of collapse, the economy was losing 700,000 jobs a month and commercial real estate transactions had come to a complete halt. No one was buying or selling commercial real estate.  The recession was hitting hard.  Life at that moment looked bleak.  My blog post spoke to the fear we all felt at that time and hopefully it generated a bit of hope for the CRE professional who didn’t know when they would receive their next paycheck. (more…)

Negative Interest Rates – Coming to a Bank Near You

February 5th, 2016|

 

In my January 9th blog post, “My Crystal Ball Forecast for Commercial Real Estate in 2016” I stated that even the most seasoned prognosticators will fail to predict major events occurring in 2016. And these unexpected events will have enormous influence on the economy and specifically on commercial real estate. (more…)

  • Tipping Point Marshall Commercial Funding

Apartment Rental Rates – Are We at a Tipping Point?

January 23rd, 2016|

In my last blog post, My Crystal Ball Forecast for Commercial Real Estate in 2016, I made five predictions about the coming year. One of my predictions was that 2016 will be the last year for modest growth for the US economy. Unfortunately it appears the world is heading towards a recession this year and the US will likely follow sometime early next year. (more…)

  • Crystal Ball

My Crystal Ball Forecast for Commercial Real Estate in 2016

January 9th, 2016|

I’ve always believed it’s better to have an opinion and later be found wrong than to be a person who has either no convictions or doesn’t have the courage to express them. So I respectfully disagree with the saying, “It is better to remain silent and be thought a fool than to open your mouth and remove all doubt.” (more…)

My Crystal Ball Forecast for 2015 – 7 Predictions

January 10th, 2015|

I’ve always believed it’s better to have an opinion and later be found wrong than to be a person who has no convictions, or courage to state one’s opinion, and be safe from the criticism that naturally follows from missing the mark. As the saying goes, “Fools rush in where angels fear to tread” applies to me. (more…)