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Worth Magazine – Destinations – Salt Lake City

October 17, 2017

This week I was reading through my most recent issue of Worth Magazine.  I enjoy their take on alternative investments.  As those of you who know me will often hear me say that every commercial real estate investment needs to be assessed in terms of the next best alternative for those investment dollars.

In this issue they highlighted 15 of the Most Dynamic Cities in America and Salt Lake City made the list.  A few of the highlights that caught their eye were:

  • Fastest growing population in the nation
  • Real GDP growth at 3.4% compared to a 1.6% national average last year
  • Strong employment growth
  • Major convention center city
  • Health conscious, sporty, laid-back vibe
  • Close proximity to ski resorts
  • Business friendly environment
  • Low taxes
  • Affordable real estate
  • Next destination for the tech industry

Pretty impressive accolades.  The article went into a detailed interview with Gail Miller and her decision to place the Utah Jazz into a Legacy Trust making a big commitment to her hometown.

Most things I read are from the angle of the impact on commercial real estate investment and as I look at the reasons Salt Lake  City is on their list I note that these are many of the reasons that commercial real estate investors choose in any particular market.

I encourage you to read the article.   Following is the link:

FULL ARTICLE LINK – CLICK HERE

The full text of the article is below but I highly recommend going to the link above.

Salt Lake City – By Michelle Celarier

When Utah Jazz owner Gail Miller decided to place the NBA team in a legacy trust, she was making a commitment to her hometown.

For most of its 170-year history, Salt Lake City was known primarily as the home of the Mormon religion, a conservative Christian sect whose collective industriousness made the desert bloom in a valley surrounded on all sides by breathtaking mountains.

These days Salt Lake is turning into another type of paradise, luring both millennials and retirees from all over the country who appreciate its health-conscious, sporty, laid-back vibe. The metro area, with more than 1 million residents, boasts broad city streets, bright sunshine and a sparkling clean downtown whose center remains Temple Square, home to the 19th-century Salt Lake Temple, the neo-Gothic Assembly Hall and the domed Mormon Tabernacle.

Salt Lake’s proximity to ski destinations in the snowcapped Wasatach Mountains, only 20 minutes away, has made it a sports enthusiasts’ haven. And with Utah’s business-friendly environment, low taxes and affordable real estate, it also looks to be the next destination for the tech industry. Amazon just announced plans to build a $200 million distribution facility there, and tech startups have invaded the mountains from Ogden to Provo, giving the area the nickname “Silicon Slopes.”

The state’s population is the fastest growing in the nation, with its current real GDP growth rate at 3.4 percent, compared with a national average of 1.6 percent last year, according to the Utah Economic Council. Employment grew by 3.6 percent last year. Salt Lake is also fast becoming a major convention-center city, especially for the controversial multilevel marketing industry that has long had close ties to the state. When Worth visited Salt Lake in June, a convention for Young Living, an MLM company that markets essential oils and is headquartered in Lehi, Utah, was drawing 30,000 conference attendees from around the world.

Mormons no longer dominate Salt Lake, making up only around 40 percent of the population. Politically, the state is staunchly Republican with a Western independent streak, leading 21 percent of the state’s voters to cast their ballots for third party candidate Evan McMullin in the last presidential election. Salt Lake City, meanwhile, is a liberal haven that has one of the largest gay populations in the country; the city’s mayor, Democrat Jackie Biskupski, is a gay daughter of Catholics who grew up in Minnesota and decided to move there after a ski trip to the nearby mountains.

As Salt Lake lurches from its sober religious past to its modern future, it does have one unifying obsession: the Utah Jazz, the NBA basketball team that has called the city home since 1979, when it moved from New Orleans. The Jazz have been owned since 1985 by the Larry H. Miller Group of Companies, which paid Sam Battistone $8 million for a half stake in the team, and then a year later paid another $14 million for the second half. The Miller Group owns 80 other businesses including auto dealerships, movie theaters, a minor league baseball team and an auto financier. Its chairman is Gail Miller, who, with an estimated $1.2 billion worth, became the wealthiest person in the state after her husband, Larry, died in 2009. In January, Miller did something with the Jazz without precedent in modern sports: She placed the team in an irrevocable legacy trust.

Why is that important? Well, while other sports teams may be jostled from city to city, the irrevocable nature of the trust ensures that it can’t be dissolved. As a result, the Jazz can never be sold and will remain a fixture in Salt Lake City, where they are an important part of the local economy. Salt Lake City’s Vivint Smart Home Arena, which is home to the Jazz and was also placed into the trust as it undergoes extensive renovations, is expected to generate $4.4 billion in revenues for the area between 2015 and 2041, according to U.S. commercial real estate services firm CBRE. The Jazz alone are valued at $900 million, according to Forbes. And placing both in the trust shields them from creditors and inheritance taxes.

This groundbreaking move is all part of the stewardship that Miller says stems from her Mormon faith. Worth recently talked with Miller at Salt Lake City’s Zions Bank Basketball Center, where the team practices, to discuss her hometown, why the Jazz matter and how they came to be placed in a trust.

Q: You grew up here, then moved away, then came back and helped start a business empire. now there’s this—the legacy trust. Can you walk us through the history a little bit?
A: Larry and I were both born and raised here. We didn’t know each other until we were 12, and we married at 21. We moved to Colorado because he played softball, and an amateur team in Colorado recruited him. He had to get a job, so he interviewed with a Toyota store there and got the job. It was new in the U.S. This was 1970.

What did that lead to?
He built that up from one store to five. We were frugal. We’d grown up poor. We only lived on what we needed, so we put that money away and invested. We knew we’d come back to Salt Lake City. In 1979, we happened to come back for a family vacation and visited a friend who owned a Toyota store. Larry always asked him, “When are you going to sell me your store?” That day, he asked the question again, and the man said, “How about today?” That was how we bought that first Toyota store. We did not intend to build an empire. We thought we’d have one store. It would be enough to keep us secure for a long time.

When did buying the Jazz become a possiblity?
The Jazz moved to Utah the same year we moved back from Colorado. By then we had five children, and we were busy building our company. In 1985, there was danger of the Jazz leaving—the owner had a buyer from Minnesota who was ready to take them. So the general manager called Larry, and Larry said, “I’m interested in keeping the Jazz,” because he understood how important the team was to the community as a business. The GM came down and talked to Larry, and that’s what started our interest in the team.

Salt Lake City is obviously a special place for you. What do you love about it?
It’s a very big city, but it’s small enough that people know each other. The real charm of Salt Lake City is the heritage that came with the pioneers, because they came with a work ethic that they were all in this together, and they were going to build something worthy of their effort. It was a desert when they came. There was one tree in the valley and a river that came out of the mountain that they used to irrigate the fields. The people have carried on that tradition. When I look at the Jazz and the way they unify this city—it’s something that everybody can get behind and feel good about.

So the Jazz are the pride of Salt Lake City?
They are. If the Jazz ever left, Salt Lake is not going to attract another major league team. We have to be really frugal about how we run the team and how we spend the money, and be creative in getting good players and keeping them.

If the Jazz left Salt Lake, what impact would that have on the city’s economy?

It would be devastating. Because they’re an infrastructure for all of the businesses downtown. They promote business. They draw people into the city to buy things, to spend money at dinner, to go to the game, buying products and paying taxes. It’s a big impact. The other thing is that we don’t draw financially from the city, because we built our own arena.

So what made you decide to put the Jazz into a legacy trust?
This came up as a way to not have to worry about passing it on. The best solution we came up with was the legacy trust. The team is going to be there for as long as it can last. There will be enough money in there to take care of the expenses. I don’t have to worry about it. It’s still run by our company, but it’s not owned by me. It’s owned by the trust, which is irrevocable.

So one of your heirs can’t decide, “Well, wait a minute, we want to sell this.”
No. And the kids are fine with it. They believe in it. They know how important the team is to the community and how important it was to their dad and what it cost for us to do it.

The Jazz constitutes a substantial part of your net worth. Does their new status in the trust mean that the team is no longer considered part of your net worth?
Right.

So you’re not the richest person in Utah anymore?
No. Thank goodness.

You didn’t like that?
It’s an awful moniker. We don’t need all the money we have. We just want to be able to make life good for as many as we can.

What about the NBA? Did the league have concerns about the structure?
We worked with them for 18 months. We were blazing new ground. They are very careful about who can see into their world and what might be exposed by what the owners do. One thing they don’t want to have happen is for the trust to be able to transfer to a foundation.

Why not?
A foundation is vulnerable to government scrutiny. The way I want my estate to work is that when it comes to the end of my life, everything will be sold and all of the proceeds will go into our family foundation and be used in perpetuity for charity. We’re not leaving anything to our children. So in order for us to put the Jazz in a trust, we had to assure the NBA that it would not be sold or ever be given to the charity.

Because it’s in a trust, not a charitable foundation, the team is still a for-profit entity, right? So those profits are plowed back into the trust but you don’t have to pay taxes on them.
Right.

Do you feel you’ll be competitive in terms of having money for player salaries and attracting talent?
Probably more so.

What reaction have you gotten from people in Salt Lake?
They are thrilled. The governor said, “That is a great gift to the state. Thank you for doing it.”

What about the players?
I think the players, too, are quite pleased. I don’t know that it impacts them like it would the management, the staff, the coaches, because their jobs are to stay here and make it work and not have to worry about whether the team’s going to go.

Have you found any resistance from players not wanting to live in Salt Lake City?
There are some things that basketball players who like the nightlife talk about. But it’s not sterile here. It’s not just Mormons. In fact, Salt Lake is only around 40 percent Mormon. Our mayor is a gay woman. We have two councilmen who are gay men. It’s really changing and becoming more open and tolerant. The interesting thing about the Jazz players is that they may balk when they get traded to Utah because they don’t understand it, but once they get here, they’re treated as royalty. The fans are fantastic. They are so dedicated. We are a great basketball town, and we raise our own fans, because we have a Jr. Jazz program that has 60,000 kids in it. That teaches them basketball and builds the fan base to continue loving the Jazz.

Your ancestors were some of the original Mormon settlers here?
They were converted and came to Utah [from Denmark and England] in the 1800s.

How has your Mormon faith affected your decisions with regards to the Jazz?
It sounds corny, but we really feel like what we have is our stewardship, that it doesn’t really belong to us. That somebody out there is watching over us and saying, “You are taking care of it in a way I would like it to be done. You’re doing good things with it. I’m going to help you get more.” That’s the way we’ve looked at our life, that the more good we do, the more comes to us, and then, the more responsibility we have and the more good we can do. In fact, before Larry died, he said, “Wouldn’t it be great if everybody in the world would go about doing good until there was too much good in the world?” Now, think about that. If there was too much good in the world, how would that be?

  • Cityscape

    WHERE TO WORK, INVEST AND PLAY IN SALT LAKE CITY

CHURCH & STATE

With its high standard of living, Salt Lake City has drawn a bevy of tech companies in recent years. Church & State is the top incubator in the city and has an innovative, debt-free model designed to nurture startups while ensuring that founders retain control of their companies. 370 S. 300 E., info@cs1893.com, 801.901.0459, cs1893.com

BOOMSTARTUP

Another key player in the city’s startup ecosystem is this accelerator and mentorship network focused on the fields of education, government and space technology. It’s been ranked among the best accelerators in the country by the likes of MIT Sloan School of Management and TechCrunch. Impact Hub, 150 S. State St., shaun@boomstartup.com, 801.633.2004, boomstartup.com

ECONOMIC DEVELOPMENT CORPORATION OF UTAH

Utah’s EDC is the best starting point for executives or investors looking to take advantage of the state’s positive demographic trends and competitive labor market. 201 S. Main St., 800.574.8824, edcutah.org

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Just Sold – Family Dollar

September 13, 2017

We are proud the announce the sale of the Family Dollar Retail building located at 750 North Redwood Road, North Salt Lake, Utah. The property consists of a 8,000 square foot and was recently constructed in 2011. Please contact us for more detailed information or for further info on commercial real estate in Utah.

 

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Just Sold – Layton Medical

September 11, 2017

We are proud to announce the sale of the Layton Medical Building a Multi- Tenant office building located at 2086 North 1700 West in Layton, Utah on the campus of Davis Hospital. This property consists of approximately 8,641 square feet of medical office space.

Please contact us for more detailed information or for info on commercial real estate in Utah.

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Just Sold – Prows Office Buildings

September 11, 2017

We are pleased to announce the sale of the Prows Office Buildings located at 299 North 200 West, Bountiful, Utah. The two buildings have approximately 6,824 square feet total, sitting on 0.72 acres. More information regarding this sale is available upon request.

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Just Sold – South Ogden Office Investment

September 11, 2017

We are proud the announce the sale of the South Ogden Coldwell Banker building located at 6033 Fashion Point Blvd, South Ogden Utah. The property consists of a 13,124 square foot building sitting on 1.61 acres close access to Highway 89. Please contact us for more detailed information or for info on commercial real estate in Utah.

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Just Sold – Riley Court Apartments

September 11, 2017

We are pleased to announce the sale of the Riley Court  Apartments located 517 South 100 East, Bountiful, Utah. The project is a 70 unit independent living project.  More information regarding this industrial building sale is available upon request.

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Just Sold – Layton Kier

May 18, 2017

We are pleased to announce the sale of Kier Warehouse located 928 East Highway 193 Layton, Utah. The building is approximately 9,921 square feet and sits on 3.04 acres. More information regarding this industrial building sale is available upon request.

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Just Sold – Woodland Park

March 2, 2017

We are pleased to announce the sale of The Woodland Park office complex located at 1528 North Woodland Park Drive in Layton, Utah. The project consists of approximately 45,468 square feet of office space in four buildings.   More information regarding this sale is available upon request.

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ULI/McCoy Symposium on Real Estate Finance: Facing Uncertainty

March 1, 2017

I recently read an article from Urban Land Magazine written by Bendix Anderson on sixty real estate leaders coming together for the 23rd annual ULI/McCoy Symposium on Real Estate Finance, in New York City.

The invited executives that attended were high-level decision makers from major real estate investment and capital markets firms that invest or lend in the commercial real estate market. They also hail from Wall Street Firms.

In this article Urban land gave us insight and some key findings from ULI life trustee Bowen H. “Buzz” McCoy on the symposium event. I found it to be useful information.

The link for this article is below and the full text is in the body of this post following the link:

ULI/McCoy Symposium on Real Estate Finance: Facing Uncertainty

 

 

ULI/McCoy Symposium on Real Estate Finance: Facing Uncertainty – Urban Land Magazine 

Sixty real estate leaders came together for the 23rd annual ULI/McCoy Symposium on Real Estate Finance, held in December in New York City.

Invited executives are high-level decision makers from major real estate investment and capital markets firms that are actively investing or lending in the commercial real estate market. Typically, they hail from major Wall Street firms, institutional investment management firms, real estate investment trusts (REITs), private equity firms, commercial banks, insurance companies, and leading private owner/development firms.

All comments made at the invitation-only event are strictly off the record. However, ULI life trustee Bowen H. “Buzz” McCoy shared with Urban Land some key findings and insights from the symposium.

How was the mood at the conference different this year than in previous years?

Everyone was unsettled because of the victory of president-elect Donald Trump. People are off-balance because of the continued uproar, day after day. The fundamental question is the world order and how provocative he gets with Ukraine, Belarus, Taiwan, and Mexico.

Would that affect international investment in U.S. real estate?

McCoy: There could be a de-globalization of real estate. I don’t think it would have such an adverse effect on pricing because it’s such a broad market.

Are there any short-term risks to real estate?

McCoy: It’s Donald Rumfeld’s “unknown unknowns” or a black-swan event. . . . I think that someone like Trump makes a black-swan event more likely. Trump himself is a black swan because nobody factored his victory into their projections. I also think he’s going to be highly inflationary. Increased military spending, increased entitlements, increased infrastructure. The consensus of speakers at the symposium was that inflation will rise to a rate of 3 percent or perhaps 4 percent and unemployment would fall as low as 4 percent. It is hard to find skilled labor. Wages are going up.

Is there any clear direction for real estate?

McCoy: The greatest friend and the greatest enemy of real estate is debt because real estate follows the interest-rate cycle so closely. Those interest rates are, sooner or later, going to increase. So if you are going into risky times, you want to be underleveraged, not overleveraged. And you want to finance long. All sides said that there is tremendous interest in current cash flow. Cash is king, and it all goes back to uncertainty, and Trump is a big part of it.

How will this uncertainty affect the real estate capital markets? For example, experts used to worry about more than $1 trillion in ten-year CMBS [commercial mortgage–backed securities] loans made before the crash that would expire over the next few years.

McCoy: Speakers at the symposium still mentioned the “wall of CMBS,” but with less fear and trepidation. A lot of the good properties got sold. That’s the good news. The bad news is that you don’t want to open the door and look at what is left. Also, banks and insurance companies won’t make loans with terms longer than seven years, but the loans that are maturing are ten-year loans. So there is a gap of about a third, and there is no one around to fund it. Also, what is the likely capitalization rate on the sale of a property? Somewhere between 6 and 8 percent is a normalized cap rate. We are way off from that. CMBS rollovers are also lower loan-to-value. Also, the junk markets are simply not there that were before.

Experts at the symposium also talked about the new risk-retention rules as being an imminent factor for CMBS. The people at the conference weren’t worried about it. The banks are so well capitalized—they thought risk retention could be handled by financial institutions.

How well are banks positioned to handle uncertainty?

McCoy: Commercial bank liquidity is at an all-time high—but the cost of regulation is very deleterious to community banks and small banks, and a record number of them are going under. The Comptroller of the Currency and the Federal Reserve and the Securities Exchange Commission have permanent offices in the large banks.

How is the incoming administration likely to affect these regulations—such as the Dodd-Frank financial reform act?

McCoy: People agree that the banks are safer. Banks say they are too safe. With Dodd-Frank, I don’t think that people who are sensible want a repeal. It’s like Obamacare—you tinker around the margins.

Do you see any signs of a bubble in the property markets? You mentioned that cap rates are unlikely to stay low.

McCoy: That depends what “low” is. We used to think 5 percent was low, when a regional mall sold at a 5 percent cap rate. And then some sell for 4 percent.

Do you see a possibility for a hard landing for real estate?

McCoy: It’s more individual sectors and individual cities. A couple of speakers thought that we could have a recession in a couple of years. I thought that was a little extreme. It would be a recession with higher interest rates.

If I were an investor about to buy a property, maybe some strip centers or apartment buildings, what would you advise?

McCoy: I would say borrow now, borrow long, and keep some powder dry.

But what if the only loan I can get is short-term, high-leverage debt?

McCoy: Sell as soon as you can. It’s a time bomb.

We are sailing into unpredictable waters. Real estate generally is in good shape. Keep your powder dry. Avoid overborrowing, but take advantage of still historically low interest rates. Extend maturities. Manage your debt. The next three years could bring about increased risk and turmoil. Be prepared!

Bowen H. “Buzz” McCoy, formerly responsible for the real estate financing unit at Morgan Stanley, is a ULI life trustee and president of Buzz McCoy Associates in Los Angeles. His most recent books are Living into Leadership: A Journey in Ethics (Stanford University Press, 2007) and The Dynamics of Real Estate Capital Markets: A Practitioner’s Perspective (ULI, 2006).

 

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Commerical Real Estate’s Slow-Motion Slowdown: E-Commerce and Other Disruptors of the Seven-Year Boom

November 2, 2016

The Magazine of the Urban Land Institute recently published an article written by David Schulman on Commercial Real Estate’s continuing shift toward E- Commerce in a slow motion Seven-Year Boom.

I felt that this article provides an interesting commentary relative to the E-commerce disruption across each of the major commercial real estate  property types.

Also, it important to understand how these national and global trends relate to each individual local market whereas commercial real estate market fundamentals are very different.

The link for this article is below and the full text is in the body of this post following the link:

http://urbanland.uli.org/capital-markets/commercial-real-estates-slow-motion-slowdown-e-commerce-disruptors-7seven-year-boom/

Commercial Real Estate’s Slow-Motion Slowdown: E-Commerce and Other Disruptors of the Seven-Year Boom – Urban Land Magazine

These are heady times for commercial real estate. Fueled by cheap money, low levels of new construction (except for apartments), and modestly improving demand, commercial real estate values have more than doubled from their financial-crisis lows of 2009.

Nevertheless, prices are leveling off as investors have become concerned that the period of extraordinarily low interest rates may soon be coming to an end. In addition, job growth—the source of much real estate demand—will inevitably slow as the economy approaches full employment. At the same time, supply will pick up as more construction is completed in 2017 and 2018.

Thus, the overall environment for commercial real estate will become less favorable over the next few years. Further affecting the sector will be technological disruption from e-commerce and reduced square footage of office space per worker.

Continuing Shift toward E-Commerce

A report by Green Street Advisors shows that about 800 department stores—about 20 percent of all anchor space in U.S. malls—will likely close over the next few years, and many malls will close with them. Mall problems are not limited to the anchor department stores: in the first quarter, Simon Property Group, the largest owner of regional U.S. malls, once again reported that same-store sales for in-line shops were down on a year-over-year basis.

It is not that overall retail sales have been declining; to the contrary, retail sales have been increasing at a modest pace. However, a decided shift toward e-commerce has taken place. For example, in April on a year-over-year basis, department store sales declined by 1.7 percent and clothing store sales rose 1.3 percent while nonstore retail (e-commerce) surged by 10.2 percent. Indeed, since 2000 the e-commerce share of retail sales advanced from just under 1 percent to about 8 percent for the first quarter of this year.

fredgraph

However, the data understate the impact of e-commerce on retail sales: with retail sectors not amenable to e-commerce (automobiles, gasoline, food, and restaurants) removed from the calculation, the e-commerce share of sales rises to 14 percent. Moreover, e-commerce since 2000 has accounted for about 30 percent of the growth in retail sales excluding the categories cited above. For just the past five years through April, the e-commerce share of sales growth has increased to 44 percent. Indeed, it would not be surprising in the coming decade to see significant e-commerce penetration in the grocery sector, which currently is not included in the 44 percent share.           

In an effort to stay competitive, major mall operators have ramped up capital spending to make their assets more attractive to consumers, adding restaurants and experiential activities not subject to internet competition. Examples of the high level of capital spending include two competing malls in west Los Angeles—Westfield’s Century City, with an $800 million program, and Taubman’s Beverly Center, with a $500 million program.

Thus far, grocery-oriented shopping centers have been immune to the impact of e-commerce, but with Amazon moving into the private-label grocery business and attempting same-day deliveries, convenience-oriented retail may soon be disrupted as well. Indeed, the still-prized Whole Foods Market anchor is now suffering from increased competition in the organic food space.

Two years ago, it was noted that the bright spot in retail real estate was street-level retail in dense urban centers with significant tourist components. That proved true until very recently, when a strong dollar and weakness in much of the global economy diminished international tourism. As a result, asking rents are beginning to drop in Manhattan, for example, which has been a major beneficiary of luxury tourism.

Industrial: A Beneficiary of E-Commerce

What has been bad for retail real estate has been good for industrial real estate. E-commerce is warehouse intensive, and as the need to shorten delivery times has increased, the demand for close-in modern warehouses in major population centers has soared. Overall warehouse rents have been growing at a 5 percent clip. And in markets such as Los Angeles, East Bay San Francisco, and northern New Jersey, rents have increased at a double-digit pace over last year.

Office: In a Late-Cycle Recovery

After seven years of slow economic recovery, the national office vacancy rate has barely come down—from about 18 percent to 16 percent. New construction has been very sluggish until recently, and demand has been far more muted than in past cycles.

Technological disruption is obviating the need for physical file space and reference rooms, and a shift to open floor plans is reducing the square footage needed per employee. Instead of allowing for 200 square feet (19 sq m) of space per employee, planners are now allowing for 150 square feet (14 sq m). This trend is far from running its course.

One truly bright spot for office demand has been in the technology sector, including computer-systems design and related services, where 120,000 jobs were added in 2015. However, as the venture-capital tech startups wane, employment growth has slowed to 80,000 per year. This slowdown has raised worries about the sustainability of office demand in tech hubs.

Multifamily Housing: Running Out of High-Income Renters

Multifamily residential housing has seen a sustained boom since 2011. Despite a surge in new supply—starts are on track to reach 400,000 units this year—rents continue to climb much faster than the Consumer Price Index (CPI). According to official CPI data, residential rents were up 3.7 percent year-over-year in April, but because of quirks in the data, the true increase in market rents tops 4 percent—and in more than a few markets, the increase is twice that. The rise in rents is supported by a dramatic decline in the apartment vacancy rate, which of late has leveled off at a very low 4.5 percent.

A powerful factor affecting rental demand has been the long decline in homeownership. This partly reflects a preference for a more urban lifestyle and a delay in such life-cycle events as marriage and childbirth. But with the gradual rise in single-family home starts, we believe that the long decline in the homeownership rate has about run its course. Apartment owners may soon discover there might not be enough tenants to support $3,500-a-month rent for one-bedroom units. The apartment business now appears to be in transition from great to good.

Conclusion

The combination of a less favorable financial environment with weakening fundamentals arising from increased supply and reduced demand will likely bring to an end the seven-year bull market in commercial real estate. To be sure, we are in no way forecasting a crash, but rather an extended period of sideways to down prices. Simply put, financial conditions will move from being extraordinarily easy to just plain easy, making it unlikely for us to witness a repetition of the events of 2007–2009.

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