Contributor Post By Richard "Rick" C. Lackey, Jr.
It seems that in past real estate cycles the recovery happened in somewhat predictable waves. As I recall, recovery began in the large urban markets followed by large suburban markets with smaller markets coming in last. This time it seems to be more fragmented and industry segment driven.
For example, the drop in oil prices has sucker punched Houston which only a few short months ago was the darling of the real estate investment community. Meanwhile Miami, Dallas and Denver are still going strong. At the same time you have smaller markets such as Austin, Raleigh and Nashville who are white hot while Atlanta and Charlotte are still heating up. All that contrasted with Northern New Jersey and Washington, DC which are not recovering quite as quickly. Each market has reasons for their growth or slow down such as the effect of oil prices in Houston versus the diverse economy in Dallas. Technology, lifestyle and millennials are driving forces in Raleigh, Denver and Austin. It is definitely more complex this time around.
The same complexities can be seen even within investment commercial real estate. A few months ago our investment brokers around the country were concerned that continued cap rate compression and challenges of replacing yield were inhibiting investment sales. But we continue to see record setting prices in all asset classes of investment sales. Then 2 weeks ago in both our Miami and Washington DC meetings, commercial real estate accountants from 2 unrelated firms reported they had high net worth clients who were either selling or strongly contemplating selling larger assets and simply paying the taxes.
As the recovery continues, there are no real conclusions and certainly no simple trends. Obviously there is still volatility and probably a few more surprises we will see in the coming weeks.
By: Richard "Rick" C. Lackey, Jr.
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