CBRE Sees Moderate Investment & Rental Growth for 2016 Global CRE Market

CBRE Group released its 2016 Global Real Estate Market Outlook this month, which anticipates that moderate economic growth with low interest rates are likely to continue in 2016, and expects a year of "volatile markets but steady economic growth." Highlights from sectors include:

Economy
Expect 2016 to be a year of volatile markets but steady economic growth. Consumers in the U.S., EU and many parts of Asia Pacific are spending gains from rising incomes, low interest rates and low oil prices, which should support GDP growth.

Capital Markets
Global commercial real estate investment markets are expected to remain active in 2016, but the pace of growth is anticipated to slow after six years of recovery and price appreciation.

Office
Most U.S. and European office markets are expected to tighten further in 2016 as demand for space is expected to outpace limited new development. However, Asia Pacific office markets will be more mixed.

Industrial
Robust demand from e-commerce and third-party logistics companies for warehouse and distribution space—including for smaller in-fill locations within major metros—will continue to reshape the industrial market.

"The current environment of variable but generally improving growth in the developed world, alongside low interest rates and low inflation, is very supportive of consumers and commercial real estate markets," said Richard Barkham, CBRE's global chief economist. "There are some risks for sure, including weakening sentiment due to volatile stock markets, rising interest rates in the U.S. and the U.K., financial stress in emerging markets and the slowdown of the Chinese economy. However, because consumers in the U.S., Europe and even China are in good shape, we think the global economy is strong enough to withstand these challenges and that the real estate and economic reality will be better than expected in most places in 2016."

To access the full CBRE report, click here. For more news and information visit Blumberg Partners.

Record Year in the Making for US Industrial

Cushman & Wakefield released its Q3 2015 research findings this week, revealing that despite concerns about slower growth in China and increased volatility in the U.S. and global financial markets, the U.S. economy maintained its trajectory of steady and modest growth in the third quarter. The MarketBeat U.S. Industrial Snapshot report for Q3 shows industrial vacancy rates at their lowest level since 2007, with significant absorption and low vacancies, both of which are placing upward pressure on rents in most major industrial hubs.

"This has been a fairly healthy and long cycle," John Morris, logistics and industrial services lead, Americas, Cushman & Wakefield, told GlobeSt.com. But even though the good times have now stretched out for several years, "there is still a lot of net new development, much of it driven by e-commerce." According to the report, the economic environment in 2016 should support continued job gains, pushing the unemployment rate down below 5% and improving the outlook for the American consumer.

To read the full report, click here. For more news and information visit Blumberg Partners.

CRE Takes Note of Warehouse Boom

A new article from the Wall Street Journal titled Raising the Roof Making All the Difference in Warehouses examines the growth in the industrial market as e-commerce continues to boom, and the needs of these net-based businesses. An excerpt follows:

Real-estate firm Prologis Inc.'s latest project, a one-million-square-foot warehouse in Tracy, CA, will boast a 40-foot-high ceiling, 25% taller than the typical 32 feet. The project isn't pre-leased, making this the first speculative building of such dimension that the company has built.

Prologis executives said it is going bigger to tap into the e-commerce boom, which is changing the way industrial properties such as warehouses and fulfillment centers are built. E-commerce retailers need more space than do wholesalers that ship goods in bulk to stores, because they transport a vastly wider variety of products in much smaller batches.

"If your stapler breaks, you go online and you order a single stapler. If you're delivering to OfficeMax, you don't go into a warehouse and pull one stapler off the rack, you pull out a whole pallet of them," says Scott Lamson, president of Prologis' northwest region.

As a result, e-commerce companies need workers to pick out and pack each product by hand. They often build multiple mezzanine levels and racking systems known as "pick modules," which are typically about nine feet high. Ceiling heights of 40 feet, rather than the industry-standard 32 feet, allow a distributor to build three levels above the ground floor instead of two, and still leave room for light fixtures and fans.

For more news and information visit Blumberg Partners.

USAA Acquires Industrial Portfolio

USAA Real Estate Company, a subsidiary of USAA, announced this week that it had purchased a two building bulk warehouse distribution portfolio located in Stockton, CA totaling 916,035 square feet. CBRE's Industrial Real Estate team consisting of Tyson Vallenari, Blake Rasmussen, Kevin Dal Porto and Ryan McShane, represented USAA in the portfolio transaction and are currently representing USAA as the listing team for both properties. Terms of the deal were not disclosed.

"The Stockton Industrial Portfolio represents a compelling opportunity for USAA to add value to two outstanding and versatile industrial properties in centrally located Stockton, California," said USAA Real Estate Company President and CEO, Len O'Donnell. "Just two hours from the West Coast and the Bay Area, Stockton is enjoying growing demand as a distribution point for industries operating in Northern California."

Built in 2008 and 2009, the first building in the portfolio features 30,000 square feet of state-of-the-art freezer space and 190,000 square feet of state-of-the-art cooler space, plus 500,000 square feet of dry storage space as well as 32,000 square feet of office space located across three distinct locations. Building two, originally built as a speculative, multi-tenant warehouse and distribution center features approximately 500 square feet of office space along with around 165,000 square feet of cold, dark warehouse and distribution space.

For more news and information visit Blumberg Capital Partners.

C&W See Positive Outlook for U.S. Industrial RE Through 2013

Mid-year statistics reported by Cushman & Wakefield reflect a "widely sustained positive outlook" for the industrial real estate market in the United Sates for the balance of 2013. "Retail, wholesale, e-commerce and logistics requirements are driving demand in many of the nation's major industrial hubs,"according to Cushman & Wakefield's John Morris, leader of Industrial Services for the Americas. The commercial real estate services firm's mid-year statistics released today reflect this positive trending.. "In Houston, however, the energy industry accounted for a bulk of the leases signed in the last 18 months. Overall, Class A space continues to disappear in many markets as tenant demand remains steady. With quality options dwindling, both speculative and build-to-suit construction have gained some momentum in a number of markets."

"Retail, wholesale, e-commerce and logistics requirements are driving demand in many of the nation's major industrial hubs," Morris noted. "In Houston, however, the energy industry accounted for a bulk of the leases signed in the last 18 months. Overall, Class A space continues to disappear in many markets as tenant demand remains steady. With quality options dwindling, both speculative and build-to-suit construction have gained some momentum in a number of markets."

But, as the Wall Street Journal reports, much of the new construction is speculative, meaning developers are looking for tenants even as the walls are raised on new buildings. Prologis, for example, just completed an 800,000-square foot warehouse in Redlands, California, that has yet to be leased. Speculative development was the rage in all commercial real-estate sectors before the economic downturn. But developers of office buildings, shopping centers and most other property types have been slow to return to this high-risk strategy, primarily because they can't obtain debt financing.

New industrial construction completions during the first half of 2013 totaled 19.7 million square feet, including 12.5 million square feet of speculative development. An additional 21.8 million square feet of spec projects are scheduled to be completed by year-end.

For more news and information visit Blumberg Capital Partners.

Brookfield, Hillwood Form $1B Industrial JV

Brookfield Asset Management announced this week that it had formed a joint venture with Hillwood to acquire, develop and manage industrial property, principally large warehouses, across the United States. With an equity commitment of $400 million, the partnership is expected to deploy up to $1 billion within the first three years.

"The partnership between Brookfield and Hillwood is not only the right fit, it’s happening at the right time," said Ross Perot, Jr., Chairman, Hillwood. "Industrial development slowed during the downturn due to a lack of equity and debt. Given the liquidity and resources supporting our investment, our joint venture is well-positioned to benefit from renewed demand for industrial space which will increase as the economy continues to show signs of improvement."

Overall, the fund is targeting returns in the 13 percent to 16 percent range reported the National Real Estate Investor. The average investment size will be between $20 million and $60 million. And David Arthur, Managing Partner at Brookfield Asset Management, expects the fund will hold assets three to five years after repositioning them.

"As long-term, value-oriented real estate investors, we believe this is an excellent time to selectively build a portfolio of high-quality industrial properties, and we look forward to expanding our relationship with Hillwood," said Arthur. "This initiative expands the scope of our real estate platform in an exciting asset class, strengthening our global property operations in line with the expected launch later this year of our flagship property vehicle, Brookfield Property Partners."

For more news and information visit Blumberg Capital Partners.