The pandemic uncovered weaknesses in U.S. manufacturing and a dependence on foreign nations, but a push to bring industry back home will help the commercial RE market.
WASHINGTON – U.S. companies are looking to bring operations home from overseas, which will open new opportunities for commercial brokers, speakers at the National Association of Realtors®’ (NAR) C5 Summit said.
Speakers discussed the nuances of onshoring, friendshoring, nearshoring and repatriating, but they agreed on this: U.S. companies are looking to bring operations home from overseas – or at least closer to home – in part to prevent future supply chain issues.
“COVID was a wake-up call,” CNBC commentator Ron Insana told conference attendees in a conversation with Nadeem Meghji, Blackstone’s head of Real Estate America. “We’re seeing companies move from a just-in-time model to a just-in-case model.” That means more opportunity for U.S. brokers, especially those in business-friendly environments.
Blackstone, which purchases companies as well as their underlying real estate assets, owns nearly $600 billion in property worldwide.
“One of the benefits of a global business is being able to see what works and what doesn’t,” Meghji said. “Broadly speaking, warehouse logistics has been a theme for us, not just in the U.S. but now also in Europe and Asia.”
Nearly 500 brokers, trade organizations and economic development professionals gathered for the C5 Summit in New York, the second year NAR has hosted the commercial real estate conference. The “5” in the event title stands for capital, connect, commerce, community, and commercial.
Meghji wasn’t the only speaker touting the strength of the warehouse sector. Other brokers and analysts speaking at the conference agreed that warehouses were expected to remain strong. Several speakers also mentioned life sciences, biotechnology and health care as sectors that will continue to perform well. With the growth of streaming content, Blackstone is investing in movie production facilities as well.
Self-storage facilities, which took off in 2019 and 2020, were cited by many speakers as a sector with staying power. NAR economist Lawrence Yun said one factor was the housing shortage and resulting high prices. People are doubling up to save money, moving in with parents or grandparents. “They need someplace to put all their stuff,” he said. “So I think self-storage will continue to have legs.”
Although the office market remains a question mark, 2021 was a phenomenal year for many commercial real estate sectors, and 2022 and 2023 are shaping up to see only a slight drop-off. Concerning factors include continued interest rate hikes and geopolitical conflict. But holding real estate in the right location and the right sectors is a great hedge.
“We’ve oriented our entire business around assets with cash-flow growth,” Meghji said.
Location is key. For example, Meghji says Blackstone isn’t looking at warehouse facilities or distribution centers in remote locations, but concentrating on locations near larger populations, where companies can meet the demands of last-mile delivery.
Throughout the conference, speakers touched on the importance of setting and meeting environmental, social and governance goals. Investors and tenants demand it, and governments are mandating and incentivizing it.
“And it’s the right thing to do for the planet,” Meghji said. “Real estate happens to be a pretty big greenhouse emitter.”
Blackstone has its sights set on being carbon neutral by 2025. It’s doing that not only by improving energy efficiency in its buildings but also by investing in renewable solutions, such as hydroelectric, wind and solar.
With the strength of the U.S. dollar, there was also a lot of talk at C5 about whether the U.S. would continue to be a target for foreign investment. The consensus was that it would, but other countries are competing. In a session on opportunities within Dubai, Shadi Bteddini, CEO of Century 21 United Arab Emirates and Century 21 India, said money is pouring into Dubai because the government has made the right moves to attract foreign investment. Bteddini is also CEO of Front Desk Real Estate, the international trustee of the Dubai Land Department, a role aimed at attracting global investors to Dubai.
Blackstone’s Meghji called India a growth market; the country is “producing hundreds of thousands of engineers” and moving from being a source of mostly low-level tech support to being an innovator. And the Indian government is finally taking steps to build needed infrastructure to support the demands of a growing middle class.
But both speakers said the U.S. continues to be a safe haven for investment. Bteddini said Dubai has $8 billion worth of assets under management in the U.S. and is looking to double that.
Meghji said the U.S. is still the best place for investment. “I would not bet against this country and the opportunity we have right in front of us,” he said.
Source: National Association of Realtors® (NAR)
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