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! " February 1, 2018 ULI Cleveland
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February 1, 2018 ULI Cleveland
# REAL ESTATE FORECASTS FROM OTHERS o MULTIFAMILY o COMMERCIAL o RETAIL o INDUSTRIAL
# RESULTS OF ULI TRENDS SURVEY
! Longer view: since @1970; recessions in 1974 (oil shock) 1979-1981 (more oil and stagflation ) 1982 (double dip); 1986-1989 (real estate only – tax code driven); 1991 (economic exhaustion) and 2001 (9-11)
! Expansion from 2002 until 2007-2008 recession (Financial rules and liquidity driven, FNMA, FMC, AIG)
! 7 recessions in 47 years=A recession every 6.6 years.
! Since 1999=average cycle: 2 recessions in 17 years
! It’s been 9 years since beginning of last recession
! Housing construction leads us out of a recession: NOT!
Homebuilding in the U.S. has traditionally led the country out of recessions
Expect slow recovery as housing supply and demand re-equilibrate
Source S&P Dow Jones
Housing NOT repeating bubble period
BUT DEFAULTS HAVE LESSENED PEOPLES’ DESIRE TO OWN A HOME, EVEN IF THEIR CREDIT HAS BEEN FIXED
Source: Downtown Cleveland Alliance Q3 2017
e.g. 2001
e.g. 2006
e.g. 2008-9
e.g. 2014 e.g. 1991
2018 Forecast
EXECUTIVE SUMMARY
Prepared by Robert Simons, Ph.D. Alexandra Malkin
Levin College of Urban Affairs Cleveland State University
Prepared for ULI Cleveland February, 2018
# Takes the pulse of the region’s real estate market, including capital markets, various property types, and geographic submarkets.
# Survey complements the national PWC/Urban Land Institute’s Emerging Trends in Real Estate, adding in-depth local perspective.
# In September, 2017, ULI Cleveland distributed a link to an online survey to its e-mail contact list. The survey was available online between September 20 and October 25, 2017 and 77 non-random responses were collected, a response rate of about 9%. Additionally, 16 in-person interviews were conducted with key local experts from the private and public sectors across a range of professional disciplines, in particular real estate development, management, finance, and planning.
# Generally, the Cleveland and Northeast Ohio RE market is good ,and consensus is about the same next year.
# Respondents expect to see a good profitability in real estate businesses in 2018, especially in multifamily, with a focus on townhomes
# The most important financial issues for real estate investment and development in 2018 will be: o job, income and wage growth, follow closely by o interest rates, inflation, and o state and local budget problems.
# The top potential needs for land development are o more economic growth (a greater demand for real estate), o infrastructure, more workforce for construction and skilled trades, and o better transportation.
# Residential rental and office sectors are still strong, even with a little decline, especially in residential-rental. The industrial and distribution sector has increased in percentage growth compared to last year.
# The majority of respondents (68%) feel the real estate capital markets through 2018 are in balance, and half the respondents felt that some increase (34%) is expected in the availability of equity capital.
0%#
20%#
40%#
60%#
80%#
ACTIVE'SECTORS,'201402017'CHANGES'
2014#2015#2016#2017#
# Compared with last years’ survey, it is evident that respondents agree that the apartment sector and the residential for-sale sector have been growing. However, respondents expressed concern that there has been too much focus on high-end rental units.
# Respondents agree that the office sector has been in a steady recovery/growth stage.
# The industrial sector has picked up significantly compared to last year.
# The general view is that most of the markets are currently moving from a recovery/growth stage to growth stage potential, while retail continues on a declining trend with regional malls in advanced decline.
# Hospitals lead the growth of the institutional/public sector, with higher education following close behind. Such institutions are investing in the market, which contributes to the jump from last year.
# Hottest submarkets with good-excellent prospects continue to be University Circle and Downtown Cleveland.
# All respondents regard the economic health of the region as vital to continued growth
0#
2#
4#
6#
8#
10#
12#
14#
16#
Peak' Early'Decline' Advanced'Decline' Bottomed'Out' Recovery/Growth' Growth'
Number'of'Respondents'
CURRENT'STAGE'OF'REAL'ESTATE'CYCLE0APARTMENT'(N=25029)'
All#Apartments# Luxury#Apartments# Moderate#Apartments# Tax#Credit#Apartments# Student#Housing#
0#
2#
4#
6#
8#
10#
12#
14#
16#
Peak' Early'Decline' Advanced'Decline' Bottomed'Out' Recovery/Growth' Growth'
Number'of'Respondents'
CURRENT'STAGE'OF'REAL'ESTATE'CYCLE0RETAIL'(N=23025)'
All#Retail# Regional#Malls# Power#Centers# Neighborhood/Community#Shopping#Centers#
0"
4"
8"
12"
16"
Peak' Early'Decline' Advanced'Decline' Bottomed'Out' Recovery/Growth' Growth'
Number'of'Respondents'
CURRENT'STAGE'OF'REAL'ESTATE'CYCLE0OFFICE'(N=30031)'
All#OfKice# Central#City#OfKice# Suburban#OfKice# Medical#OfKice#
0#
2#
4#
6#
8#
10#
12#
14#
16#
18#
Peak' Early'Decline' Advanced'Decline' Bottomed'Out' Recovery/Growth' Growth'
Number'of'Respondents'
CURRENT'STAGE'OF'REAL'ESTATE'CYCLE0INDUSTRIAL'(N=19021)'
All#Industrial# Bulk/Distribution#Space# General#Industrial# R#&#D#Industrial# SelfSStorage#
1# 2# 3# 4# 5#
ClevelandSEast#
Lorain#County#
Portage#County#
Lake#County#
Geauga#County*#
Cuyahoga#County#South#Central#and#
Cuyahoga#County#Southeastern#
City#of#Akron#
Medina#County#
Summit#County#
Cuyahoga#County#Eastern#Suburbs#
ClevelandSWest#
Downtown#Cleveland#
University#Circle#
ABYSMAL''''''''''''POOR'''''''''''FAIR''''''''''''''GOOD''''''''''EXCELLENT'
2018#2017#
*#No#comparable#data#available#from#2017#
# Executive in Residence at CSU, Levin College # Director of NEOSCC, Vibrant NEO 2040 # Former Planning Director at City of Cleveland
o Civic Vision 2000: 1992 APA National Planning Award for Comprehensive Planning
# Former Director of the Center for Urban and Regional Studies at YSU
# Degrees from Yale College (City Planning & Political Science), Harvard Graduate School of Design (City Planning), & CSU (Bus. Admin.)
