Sands Anderson’s Commercial Real Estate Law practice group was again pleased to sponsor the annual VCU Real Estate Trends Conference in Richmond, Virginia. The conference is one of the leading forums on commercial real estate in the region and provides useful insights and information on what the future may hold for the real estate industry. This year, those insights were offered by the conference’s two presenters: Hessam Nadji, the president and chief executive officer for Marcus & Millichap, a leading commercial real estate brokerage firm; and Kenneth W. Gronbach, the president of KGC Direct, LLC and author of numerous books in the field of demography.
The presenters offered their perspective on what to expect in the years to come, both for the U.S. economy at large and in the real estate sector in particular. Mr. Nadji highlighted a variety of different topics that may be of particular interest to commercial real estate practitioners. Based on research conducted by his firm, Marcus & Millichap, Mr. Nadji found that current statistical indicators point to an overall strong economy with stable growth in the United States, even though market memory remains dominated by the 2009 downturn. For example,
- Mr. Nadji’s firm found durable and remarkably stable employment growth, with 15 million jobs added since 2011, representing 72 months of continuous gains.
- The top 3 sectors of job growth are in (1) Education and Health; (2) Professional and Business Services; and (3) Trade and Transportation Utilities.
- The top three cities in which to find this growth are (1) Dallas/Fort Worth; (2) New York; and (3) DC, although Richmond has one of the highest rates of growth nationwide at 3.7%.
- Moreover, the country’s GDP has seen $4 trillion in growth since 2006. The contribution of the housing market to this figure remains well behind its historic average, but it continues to trend upward at a steady rate.
Based on these and numerous other factors researched by Marcus & Millichap, Mr. Nadji said that he continues to recommend light value added projects such as bringing Class B- apartment and commercial properties up to B+/A- as a “best play” in the commercial real estate industry.
Both presenters also focused intently upon the millennial generation as a cornerstone of economic outlook. Marcus & Millichap’s research found that as of 2015, this market segment of individuals aged 18 to 34 – representing a group of 66.3 million consumers – have a 68% propensity to rent their residential property. The census bureau also recently found that 3 million more individuals in this sector are living at home with their parents. This shift in demographics is likely to have significant impacts on demands for certain kinds of real estate, such as apartments, self-storage, and retail.
For those looking to purchase their homes, Marcus & Millichap’s research found that home prices are 1.2% below their 2000-2013 peak here in Richmond. Furthermore, apartment and retail vacancies are at record lows, and the promising rate of job creation is quickly consuming excess office space, suggesting that this lagging sector may soon begin to catch up with the other two. Finally, Marcus & Millichap expects the local population to grow by 49,600 between 2016 and 2020, representing a 0.8% growth rate and very positive forecast for this region overall.
Sands Anderson was pleased to be a sponsor of the 2016 VCU Real Estate Trends Conference and looks forward to more engaging and informative presentations in the years to come. For assistance with commercial real estate issues, please feel free to contact us.