What has been the biggest lesson you learned this year in your RE career? Has anything surprising occurred or any interesting moments/events/trends you’ve come across at work and witnessed in the estate field? How other players are reacting to the market? 1st year at your current job or industry that stood out to you that you wouldn’t have realized before?
Any insight/advice that we can all chime in on for everyone in the industry? Whether in acquisitions (REPE), development, AM, debt, leasing, brokerage etc. Thanks.
2018 = Development Spreads Compressing, Construction Costs Increasing, Interest Rates Rising. 2019 = Clench your butt holes.
2018 onward = Lawyers continue to suck.
2018 = A lot of people realizing their market rent growth models for core assets are complete bullshit (NYC specifically)
You mean rents won't grow 3% - 5% year over year into infinity? Blasphemy.
Get into what you are most interested in and stay there. Pivoting from development to the financial intermediary space to get to REPE was a very tough road. Brokerage is much more about salesmanship and grinding than intellectual prowess. It was a wake up call to watch Marcus and Millichap experienced brokers with little understanding of JV's, structured finance, and development agreements leap over an ivy league educated coworker because they knew the game of building and maintaining a network.
On another note, way too much dumb money piling into the crowd-sourced equity space. Also, (re)development yield spreads got pinched hard due to unrealistic construction budgeting and realizable rent premiums. You might as well just add 20% construction cost contingency to every pro forma and keep this scenario as a conservative benchmark. Wayyy too many Chiefs and too few Indians in the construction space. Experienced skilled tradesmen and superintendents are in too short supply. Many don't want to admit it, but most of the development yield spread in growth markets is created on the back of cheap imported labor from Latin America.
Too much new housing has been built to unrealistic prices. Home absorption in the $400-600K range has slowed dramatically. Middle class families in America are unable (or unwilling) to afford homes in the $400K+ range; rising interest rates further exacerbates this issue.
A large bid–ask spread is developing in the land market. The big urban wrap multifamily development wave is over - the suburbs are back in vogue due to lower land costs. Millennials who wish to start a family are beginning a large migration to the suburbs. The live/work/play wet dream of Marxist urban planners is unsustainable and dangerous.
Urban planners are prioritizing mixed-use development with small unit sizes at high rent $/PSF instead of affordable residential development (think $200-300K home prices). Municipal design demands on single-family residential at this price range is far too restrictive, therefore we have a national shortage of homes at this price point in rapidly growing areas. American home ownership is a large part of what made this country exceptional because home ownership is the primary way families build wealth. Municipal planners hubris and smug surety in their commie-block live/work/play high density development is a major hindrance to suburban growth in America (the areas which used to have the highest upward mobility before commute times to the skilled employment centers become ridiculously unreasonable).
Sure, happy to give my two cents. The TLDR version is that smug out-of-touch urban planners, like central bankers, are destroying home affordability in the US and other countries by promoting crowded density which raises prices.
Really odd hard on for urban planners there.
Developers are delivering on density and mixed-use because the market, aka people, have a high demand for it. Mixed use development isn't some leftist conspiracy driven by someone making $40k a year out of a cube in the city government office and density doesn't inherently raise the price of anything except for land basis.
There is a direct correlation between bureaucrats and Marxism, because Marxism is how they justify being paid ridiculous pensions and rising salaries without having to compete in the marketplace.
Have you ever had to listen to a planner pontificate for an hour on what they demand developed on your land/capital? I see you are in development...
Because densified real estate development isn't damn near pure capitalism right?
Not when it is mandated and/or funded by municipal money through tax increment financing or infrastructure cost rebates. I do not believe municipalities should be able to pontificate what is built where on private property - the market will naturally sort this out.
For example, municipalities require retail all the time on the ground floor of multifamily where the storefronts will have limited visibility, access, parking, and signage. This stupidity just drags down the economics of the project and can actually result in a loan default. Many of the loans are made by GSE entities (Fannie/Freddie) which the taxpayers (you and I) have to backstop.
This thread took an interesting turn.... lol
My post became a land use forum...