Commercial real estate is a complex and dynamic sector that requires a sharp understanding of economic, demographic, and cultural trends. In a recent episode of America’s Commercial Real Estate Show, the host spoke with Phil McAllister, head of research with Inland, about these trends and how they might impact decision-making in the real estate industry.
The show opened with a discussion on the economy, which is currently a topic of great interest due to global events and new policies introduced by the U.S. government. McAllister highlighted the importance of distinguishing between short-term and long-term economic trends. In the short term, the economy faces challenges like potential tariffs, immigration changes, and regulatory changes. However, looking at the long term, McAllister pointed out that the economy remains resilient, with a strong labor market and potential for steady growth.
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Looking specifically at Miami, Florida, the impact of tariffs on commercial real estate investments could be significant. Miami, known as the “Gateway to the Americas,” is a thriving hub for international trade and commerce. Any changes in tariff policy could influence the cost of imported goods, affecting retail businesses and commercial real estate in the area. If tariffs make imported goods more expensive, retail businesses may suffer, leading to less demand for retail space. Conversely, if tariffs lead to increased domestic production, there could be a greater demand for industrial and warehouse spaces. However, these potential impacts would need to be balanced against Miami’s continued population growth and its status as a desirable location for both domestic and international businesses. Overall, investors should closely monitor these economic trends and policies when making real estate investment decisions in Miami. Of course, at any time this tariff storm could blow over.
The conversation then shifted to the topic of demographics, where McAllister spoke about the aging population and its impact on employment growth and productivity. An interesting point he raised was the increasing reliance on productivity growth due to an aging demographic and a decreasing population. McAllister also noted the potential for Artificial Intelligence (AI) to drive productivity growth by taking over menial tasks, thereby boosting the economy.
Discussing geographic areas, McAllister noted that states like Tennessee, Georgia, North Carolina, South Carolina, Florida, and Texas are expected to continue attracting population growth due to factors like cost of living, weather, and ease of doing business. However, he also cautioned about the potential risks of over-supply in these markets.
The show also touched on the topic of inflation, with the host and McAllister debating the potential impacts. While inflation can increase the cost of new supply, thereby making existing properties more valuable, it also poses several economic challenges. McAllister, however, is a “disinflation guy” and believes that aging economies and slow growth economies do not produce significant inflation.
Regarding the timing for acquisitions, McAllister suggested that now might be an interesting time to buy, particularly for long-term investments. He believes that the current environment offers attractive valuations and the potential for future growth, especially in sectors with demographic demand drivers like senior housing and medical outpatient buildings.
Finally, the conversation turned to cultural trends, with McAllister discussing how changing lifestyles and preferences among millennials and baby boomers are shaping the real estate market. He highlighted the growing demand for self-storage, senior housing, and medical outpatient buildings.
In conclusion, the show offered a comprehensive overview of the key trends influencing the commercial real estate market. Whether you’re a seasoned investor or a novice, being aware of these trends can help you make informed decisions and capitalize on opportunities in the market.