Employment numbers are up according to a recent news release from the Bureau of Labor Statistics (BLS). In their analysis, BLS announced that the unemployment rate had dropped to 3.5%, with 528,000 new jobs added over the course of the month.
These figures mean that, for the first time, unemployment measures have returned to their February 2020, pre-pandemic levels. BLS also noted that the gains were led by the leisure and hospitality industry.
Strong recovery in hospitality
Reporting on the figures, Real Deal pointed out that hiring at hotels, restaurants and bars was responsible for a large percentage of the 528 000 jobs created in July. Together with construction and healthcare, these sectors accounted for 43% of the overall job gains posted. Quoted in the article, Mortgage Bankers Association Chief Economist, Mike Fratantoni added: “This is not a picture of an economy in recession.”
Mixed results for other sectors
Though the construction industry was a strong performer, with an additional 32,000 employees hired, it’s worth noting that this figure would likely have been much higher if there were more workers available. The sector is still deep in the grips of a labor shortage that has put pressure on projects across the US, and led to a slow-down in new developments.
Meanwhile, the office sector also faced constraints, with the percentage of workers staying remote due to the pandemic remaining at 7.1%, exactly the same as in June. As one of our NAI Offices recently reported, the future of offices has generated some strong dissenting opinions among those in the know, and exactly how the situation is going to pan out remains unclear.
Shifting sands
Though some of these figures certainly seem to indicate an upturn, it’s worth bearing in mind that there are still many indicators of a possible recession. As recently as a month before these figures were posted, there were announcements of cutbacks in the residential sector, and some experts were predicting a drop-off in employment rates.
For other experts, the picture is more nuanced. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR) puts it like this:
“It would be one of the most unusual recessions — if it [the economy] does technically reach it — in that there are worker shortages. Some industries will lay off workers, but there could still be more job openings than the number unemployed throughout the recession.”
Long-term prospects
How the current job situation plays out, and how this affects Commercial Real Estate professionals, remains to be seen. We do know that the employment numbers we are seeing now exceed predictions that were made just a few months ago. If the positive trend in hospitality and construction continues, there could be a lot of new projects, and prospects, on the cards.
SOCIAL: How have hiring trends impacted commercial rentals and development projects in your area?
New data from commercial real estate (CRE) data provider CRED iQ shows the delinquency rate for commercial mortgage-backed securities (CMBS) continued its downward trend in June 2022, dipping to 3.30%, marginally down from 3.32% the previous month.
CRED iQ regularly monitors distressed rates and market performance for nearly 400 Metropolitan Statistical Areas (MSAs) across the US, an enormous data set that includes some $900 billion in outstanding CRE debt.
Month-by-month improvements In the report, they’ve laid out distressed rates and month-over-month changes for the month of June 2022, for the 50 largest MSAs, as well as a breakdown by property type (see below). “Distressed rates (DQ + SS%),” they write, “include loans that are specially serviced, delinquent, or a combination of both.”
Standout areas Of the top 50 MSAs, some 43 showed month-over-month improvements “in the percentage of distressed CRE loans within the CMBS universe”. New Orleans (-9.57%) and Louisville (-3.41%) were two of the MSAs with the acutest declines [in distress rate] this month.
On the other end of the scale, Charlotte (+1.15%) and Virginia Beach (+1.12%) were among the seven MSAs showing increases in distress rates last month.
By property type “For a granular view of distress by market-sector”, the report also delves into distress by property type, which potentially holds strategic insight for regional commercial real estate professionals.
“Hotel and retail were the property types that contributed the most to the many improvements in distressed rates across the Top 50 MSAs,” they detail. “Loans secured by lodging and retail properties accounted for the 10 largest declines in distress by market-sector. This included the lodging sectors for New Orleans and Detroit as well as the retail sectors for Tampa and Cincinnati.”
SOCIAL: What data metrics do you find most useful for understanding the health of CRE in your region?
Growing up in a small town in western Pennsylvania meant that I wasn’t necessarily on the cutting edge of technology. Any new electronics took months if not years to trickle down and even then would usually mean a trip to bigger cities such as Youngstown or Pittsburgh to track down. A great example is the LED watch. It was initially developed in 1971 and became widely available by the mid-1970s. But it wasn’t until Darrell Knight showed up sporting one on his wrist right after Christmas break of 1978 that I actually saw one, live and in person.
The use of technology in real estate seems to follow a similar path, with innovations taking months, if not years, to be integrated into the industry. This month, we are going to discuss some ways, specifically in the area of smart buildings, that technology has finally begun to make a big impact.
Air quality
While certain sectors, such as medical and clean manufacturing, have been driving advances in clean air filtration and monitoring, the advent of COVID- 19 has placed a spotlight on this topic. The result is a whole ecosystem of products and strategies known as IAQ, or indoor air quality. The most common IAQ technologies revolve around higher-efficiency filters. Humidification and dehumidification systems have also become much more advanced, helping to control dust and mold while maintaining comfort. More advanced systems assist with heat and energy recovery ventilators to offset the increasingly “air- tight” nature of modern construction, as well as UV purifiers to neutralize airborne bacteria and viruses.
Voice-and touch-activated tech
Again, this type of technology received a huge boost in the wake of COVID-19. If you have ever used systems such as Alexa, Siri or Google, you are already well aware of the power and convenience voice-activation can offer. And while touch-activated technologies have been around for decades, the overwhelming popularity of smartphones and apps are leading to more advanced applications. In the commercial real estate sector, it’s no surprise that the hotel sector has taken the lead implementing this type of technology, ranging from speaking to control lights, temperature and entertainment to accessing the room and ordering room service from your smartphone. And don’t look now but many larger commercial property owners are beginning to integrate these same technologies, offering them to their tenants as a standard building amenity.
Smart parking
This may seem like something reserved for only big cities such as New York, Chicago and Los Angeles.
In the commercial real estate sector, it’s no surprise that the hotel sector has taken the lead implementing [voice activation] technology, ranging from speaking to control lights, temperature and entertainment to accessing the room and ordering room service from your smartphone.
And these cities certainly began adopting technologies years ago, with the advent of apps such as SpotHero and ParkWhiz, which allow parking operators to maxi- mize their occupancy through digital notification, reservation and even sub- leasing processes. But if you’ve ever parked in the decks at Hopkins airport, you’ve probably seen another, even sim- pler example that uses a small green or red light above each space, allowing potential parkers to quickly differentiate vacant spots from occupied spots
Energy efficient systems
This can fall into two categories:
1) systems that optimize energy via continual monitoring and 2) clean or renewable energy features. The former is the real heavyweight when it comes to smart building design and is mainly based on the autonomic cycle of data analysis tasks (ACODAT) concept. Basically, the HVAC systems have a central processor that continually monitors usage, time of day, outside air temperature, building occupancy and a host of other factors to not only be reactive in running the HVAC system at peak efficiency but also be predictive by learning patterns over days, weeks and months. The latter includes a host of advances in technologies such as heat pumps and geothermal systems as well as solar- and wind-enabled sources.
The most common acknowledgement of building technology is a certification known as Leadership in Energy and Environmental Design (LEED), through the U.S. Green Building Council. A similar certification is known as the Building Research Establishment Environmental Assessment Methodology (BREEAM) rating. Both of these involve achieving points related to set standards that address carbon, energy, water, waste, transportation, materials, health and indoor environmental quality. There are many examples of LEED-certified buildings in Northeast Ohio, including the Maltz Performing Arts Center at Case Western Reserve University, UH Avon Health Center and the Children’s Museum of Cleveland, among hundreds of others.
And there have been many noteworthy projects worldwide, including the following high-achieving facilities.
OaklandCityCenter(Oakland,CA)
Developed by Siemens, the build- ing contains a variety of dynamic and artificial intelligence to power its operation. A noteworthy feature is an advanced air volume system that can put the entire building into “green mode,” which is a setting that uses aggregated historical data to optimize humidity, air pressure and temperature. It also has a decontamination mode that raises the temperature to acceler- ate the decay of airborne virus particles.
CiscoSystemsCanadaHQ(Toronto)
This was the first building in Toronto to be rated as a LEED Core and Shell Platinum building. It links up Cisco’s business operations and helps to power Cisco’s Internet of Everything (IoE) while also streamlining all building data into a single network.
Mitie (London)
Arguably the most striking example of the IoE in smart buildings, the Mitie building uses automated alarms, remote systems management, machine learn- ing and data analytics to achieve a 95% accuracy rate for predictive main- tenance calls and a 3% improvement of energy usage by clients.
By the time we hit high school, Darrell Knight’s simple, push-button, red-hued LED watch had been eclipsed by a series of LCD watches that integrated features like alarms (with music, no less), stop watches and the ability to track multiple time zones. And while today’s smart buildings have shown great advances over the last two decades, the pace of technology promises to have an even greater impact on this sector.
New Zealand’s city of Hamilton – or Kirikiriroa in Maori – sits on the banks of the famous Waikato River which features heavily in its sights and site. In this city known for its beautiful greenery and walks, the most popular tourist attraction is the 54-hectare Hamilton Gardens.
With a population of just under 200,000 people, Hamilton is the fourth most populous city in the country. In 2020, it was named ‘most beautiful large city in New Zealand’. The wider Hamilton Urban Area includes Ngāruawāhia, Te Awamutu, and Cambridge, which collectively cover some 110 square kilometers of land. It is also the third fastest-growing urban area.
Leading industries and outputs
Hamilton’s economic heritage is as an agricultural services hub, particularly dairy cattle, and vegetable farming, but it also has thriving business services, construction, and health and community services. Additionally, R&D is an emerging sphere, given the city’s high tertiary educated population.
Residential market factors
New Zealand has typically seen high demand and low supply for residential housing in recent years which has kept prices elevated. There are, however, some movements in the markets, and new regulations around lending coming into play that could mean fewer residential buyers would qualify and those that do could be in for “bargains” in 2022 – according to a January 2022 report from Stuff.co.nz citing Mortgage Lab chief executive Rupert Gough.
Additionally, Realestate.co.nz recently reported new house listings in November 2021 were hitting their highest level in seven years, and Stuff.co.nz added that data from Infometric showing consent and permissions for new build projects were also much increased, compared year on year.
The latest CoreLogic Home Price Index (HPI) report shows that property values have declined in Hamilton, where housing values were down 0.9% in March.
Commercial property outlook
New property rating valuations from Hamilton City Council – released in April 2022 – put the city’s worth at NZ$ 71.4 billion.
Our Hamilton reports that the city’s “total property Capital Value (the total value of the land and any buildings on it) increased 53%, and Land Value 67% since 2018”. “On average,” the article continues, ‘Capital Values for commercial and industrial property have increased by 40% across the city”.
Insight from NAI Harcourts in the country suggests that industrial will remain “the darling of the three commercial property sectors”, but also that there is momentum in the Hamilton office market, which they characterized as coming from a “flight to quality” that was pushing local business in the central business districts to up their game.For more regional insight, contact NAI Global’s partners in Hamilton and surrounds.
According to a recent article by the Massachusetts Institute of Technology (MIT), things are moving fast in the Asian real estate market. More specifically, MIT outlines that: “Every 40 days, a city the equivalent size of Boston is built in Asia.”
And while this means exciting development prospects for anyone involved in Asian commercial real estate (CRE), it also means that sustainability, and an innovative approach to growth, are becoming ever more important.
With those issues in mind, MIT’s Center for Real Estate (MIT CRE) recently launched the Asia Real Estate Initiative (AREI), with the goal of “connecting sustainability and technology in real estate.”
Addressing climate issues through innovation
During 2021’s United Nations Climate Change Conference, the real estate sector was identified as a key target for reducing global emissions, and one of the sectors Asian governments are aiming to transform to meet environmental targets.
Zhengzhen Tan, director of AREI, puts it like this: “One of the most pressing calls is to get to net-zero emissions for real estate development and operation.”
As a part of that goal, AREI is focusing on research across three main themes:
The future of real estate and live-work-play dynamics;
Connecting sustainability and technology in real estate; and
Innovations in real estate finance and business
Tan points out that the choices investors and developers make in the region now will “lock in environmental footprints” for the next decade and adds: “We hope to inspire developers and investors to think differently and get out of their comfort zone.”
Sustainability in mind in 2022
The initiative comes in the midst of a strong recovery trend for Asian CRE markets, with PwC’s Emerging Trends in Real Estate® Asia Pacific 2022 report noting that: “Transactions are rebounding after nearly two years of lockdowns and travel embargoes.” The report also adds, however, that the investment landscape in Asia has changed, particularly in terms of how different real estate assets are used.
One of the key trends highlighted in the report is a move towards renovating buildings to change usage or upgrade their environmental performance to a higher standard.
Speaking to the impact AREI is expected to have on this developing landscape, faculty director of MIT CRE and AREI faculty chair, Professor Siqi Zheng, had this to say: “The research on real estate sustainability and technology could transform this industry and help invent global real estate of the future.”
He adds that merging tech and real estate can help developers build out strategies that are “green, smart, and healthy.”
Global climate concerns
In the coming years, it’s likely CRE will see a larger global shift towards these types of sustainability initiatives as developers and investors become more environmentally conscious, and aim to address climate change challenges. For the savvy CRE professional, it’s a space worth keeping a sharp eye on as we move to make green initiatives part of the broader real estate picture.
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