Chicago, IL – May 13, 2013 – (RealEstateRama) — A noted investment strategist, a top economic forecaster and the CEO of a major property group tackled the question of demand for real estate investment — or lack thereof — at The Counselors of Real Estate’s recent midyear conference in New York City. The discussion took place during the invitation-only professional association’s panel discussion titled “Economic Point-Counter Point – and Another Point,” at the Waldorf Astoria hotel.
The panel featured David Lynn, Ph.D., CRE, executive vice president and chief investment strategist, Cole Real Estate Investments, Phoenix; David A. Levy, chairman, The Jerome Levy Forecasting Center LLC, Mt. Kisco, NY; Owen Thomas, CEO, Boston Properties, New York; and was moderated by Byron Koste, CRE, Executive Director Emeritus, University of Colorado Real Estate Center, Centennial, CO.
“It’s not all bad news in the investment area,” Lynn said. He cited the technology, energy and agriculture sectors as bright spots in the economic recovery and noted the commercial real estate market is performing better than the general economy. He explained that some secondary markets have been experiencing “institutional neglect,” resulting in current investment opportunities in those markets, particularly in class A properties. A self-described optimist about the U.S. economy, Lynn says with the unemployment rate improving, homebuilding beginning to recover, low cap rates and a reviving CMBS market, real estate practitioners and investors can be optimistic about the recovery.
But Levy took a different view, describing the economy as mired in a “contained depression.” He called himself “probably the most optimistic person in the room” about the economy – but in the very long term. In the medium term, he pointed out demand is underperforming expectations, private debt is high and asset valuations have further to go in a secular correction, creating an environment not well suited for real estate investment, for a while. “The U.S. is perhaps midway through its contained depression,” he said, while predicting more balance sheet corrections ahead. He agreed with David Lynn, however, on the point of pent-up demand for real estate investment. “Be defensive,” he said, “And be prepared to go shopping…but in a few years.”
Owen Thomas, who is the former chairman and currently a director of Lehman Brothers Holdings, agreed that economic growth is likely to be slow, but risky. He said capital is being driven into real estate because of low interest rates.
The panelists agreed there will be not be a quick economic turnaround, but slow, steady growth. Levy said consumer reaction to the 2013 tax increase is lagging – and while not apparent in the first quarter, over time consumers will notice they have less disposable income, resulting in reduced spending. Lynn noted that in a high productivity low cap rate environment, there is little need for companies to increase wages – further depressing spending power. The net result is a slower-than-desired recovery.
At the conclusion, the panelists agreed on a final point regarding the pent-up demand for real estate investment: it’s there, but be patient.
The Counselors of Real Estate®, established in 1953, is an international group of high profile professionals including members of prominent real estate, financial, legal and accounting firms as well as leaders of government and academia who provide expert, objective advice on complex real property situations and land-related matters. Membership is selective, extended by invitation only. The organization’s CRE® (Counselor of Real Estate) credential is granted to all members in recognition of superior problem solving ability in various areas of real estate counseling. Only 1,100 people in the world hold the CRE credential. For more information, contact The Counselors of Real Estate, 430 N. Michigan Avenue, Chicago, IL 60611; 312/329.8427; http://www.cre.org
