The Urban Land Institute’s Fall Meeting got underway this Tuesday in Dallas, and between Brexit, Asian capital inflows and of course the upcoming U.S. Presidential election, there was plenty to talk about.
Here are some takeaways from the general sessions and panel discussions that took place on October 25.
- Even when it comes—whenever that may be—the increase in interest rates won’t be a big deal for investors. As long as the increase in the Fed’s benchmark rate comes as a result of greater economic growth, “nobody is worried about interest rates,” according to Jack Chandler, chairman of global real estate at asset management firm BlackRock, who served as one of the panelists at the “Globalization of Capital: the Short and Long-Term View” general session.
- The true impact of Brexit on global capital flows won’t be apparent for several years, claimed Jon H. Zehner, global head of the client capital group at LaSalle Investment Management, who spoke at the same session. “As far as rental experience, it was largely a non-event across asset classes in London,” he noted. In the immediate aftermath of the vote, pricing on assets got hit. “And now prices are pretty much where they were, maybe a little softer,” he added. “I think it will be a long time [before the real impact becomes clear.]”
- For many global investors, returns on stocks and bonds are currently so low they consider returns on real estate of 5.0 to 6.0 percent quite attractive, according to both Chandler and Michael Spies, senior managing director for Europe and India with investment and development firm Tishman Speyer.
- Regardless of who wins the Presidential election this November, foreign investors will continue to view U.S. property markets as an attractive investment choice, noted Peter Ballon, managing director and head of real estate investments with Canada Pension Plan Investment Board (CPPIB).
- Headlining a session on “Real Estate’s Hardest Decision: Sell vs. Hold,” John E. McNellis, principal of McNellis Partners LLC, an investment and development firm, noted that McNellis Partners prefers to sell those assets that are located in markets with low barriers to entry, in less-than-attractive neighborhoods and feature tenants that might close stores. As an example, he spoke about two nearly identical properties—both occupied by a Walmart Neighborhood Market—in two very similar towns, Stockton and Modesto, Calif. He described both as A-plus locations in C-plus markets. McNellis Partners sold the Stockton asset, but kept the Modesto one. Why? “The key difference was the immediate neighborhood in Modesto. The barriers to entry were quite high, it was built out. And there was a Leslie’s Pool [in the area]—that tells us there is a lot of disposable income.”
- McNellis prefers to invest in supermarket-anchored neighborhood shopping centers, partly because he feels necessity retail is here to stay. “I do not think the Internet is all that much of a threat to retail, that has been overstated,” he noted. “But I definitely don’t think it’s a threat to supermarkets, pizza parlors and community banks.”
- During a session on “Shaping Cities and Communities,” Sarah Filley, co-founder and executive director of Popuphood, a small business incubator that started in Oakland, Calif. and launched the first retail incubator in the U.S. in 2011, spoke about the need for urban redevelopment efforts to focus on small time entrepreneurs that already serve the community, rather than prospective national tenants. “We didn’t talk about attracting big retail to Oakland” in the aftermath of the Great Recession, she noted. “We didn’t go after those big whales. What we did was aggregate the micro, the nano, and cluster them in one place.” Developers often create buildings and then expect businesses to materialize to fill those buildings, she added. A more sustainable urban development model is to build on the foundation of businesses that are already there.