The Waldorf-Astoria Hotel, courtesy of Chris Breeze, CC BY 2.0.
I recently had the pleasure of attending the 10th annual Goodwin Procter Real Estate Capital Markets Conference, held January 29 at the Waldorf Astoria Hotel in New York City. The half-day program featured an investment banker, two panels, and a leading economist presenting their views of current trends in real estate.
Seth Weintrob, Managing Director of Real Estate at Morgan Stanley, gave the “State of the Market” presentation. He began with general market data, highlighting this last year’s declines in raw materials prices and low 10‑year Treasury yields. Of particular interest was the increased activity in real estate investment trust (REIT) consolidation, with most publicly traded REITs trading at a discount to private valuations. This is a trend that Mr. Weintrob expected to see for the foreseeable future.
The first panel, led by Leanne Lachman, professor of real estate at the Columbia Business School, consisted of real estate investors, such as Lee Menifee of Prudential Real Estate Investors, and advisors, such as Jim Sullivan of Green Street Advisors. The panel was conducted in a survey format, with Dr. Lachman leading off with and ending with questions such as, “What do you see as the best thing that could happen in real estate in 2016?” and “What do you see as the worst thing that could happen in real estate in 2016?” Panelists varied in their opinions on hot geographies. One panelist, Tim Wang of Clarion Partners, noted that Denver, Colorado now derives more tax revenue from marijuana sales than from real estate taxes, and that it was a geography to watch. There seemed to be a consensus around “work-live-play” districts—that is, a growth in urbanization and shorter commute times. Multifamily housing was also viewed as “hot.” However, panelists had mixed feelings about industrial space, although Wang was very satisfied with Clarion’s position in Amazon warehouses. Most panelists saw hotels softening.
The second panel focused on public and private real estate equity capital markets. An audience survey was conducted, and in an audience that numbered well over 200 real estate professionals, most saw a likely downturn in real estate in 2016; some of the panelists estimated declines of 5%, 10%, or even 15% to 20%. Jacqueline Brady noted the unpredictability of the markets, including disruptive market models such as Airbnb.
The conference concluded with a presentation by the distinguished Dr. Carmen Reinhart of the Harvard Kennedy School. Dr. Reinhart’s commentary was more global in nature than the previous discussions, and she noted the unanticipated duration of the 10-year recovery. She highlighted the weight that countries such as Greece with its 300% debt-to-GDP ratio still hold on the global economy. She also discussed the cycle of financial regression—the increase in regulations that results from a financial crisis that then dampens growth as the economy comes out of a recessionary cycle. She is co-author of the book, This Time Is Different.
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