Nothing really meaningful is going to happen until we fix the job situation, said Sinkuler.
Part 2 of 2
SAN FRANCISCO-In an earlier story, GlobeSt.com reported on ULI Real Estate Consensus Forecast from ULIs Real Estate Finance and Investment conference here, noting that real estate is much safer for investors than it has been for some time. It is an attractive environment, agreed panelists.
The discussion then moved on to the topic of returns, where David Lynn, EVP and chief investment strategist of Cole Real Estate Investments, predicted that, going forward, a majority of returns will come from income. According to Lynn, the 8% to 10% total return range is probably there.
Andrew Nelson, director of research and strategy at Deutsche Asset Wealth Management, added that We will see increasing NOI growth starting in 2014. We expect to see more income based returns.
Attendees watch the opening panel discussion at the ULI Real Estate Finance and Investment Conference.
Drilling down to each property type, Richard Sinkuler, partner and global real estate markets leader at Ernst Young, forecasts a big demand in warehouse. Office is having a sluggish time recovering, he said. Retail is doing well at the high end and the low end, but the folks in the middle are having a tough time.
In terms of unemployment, there is no more national average, said Sinkuler. Nothing really meaningful is going to happen until we fix the job situation.
To be considered unemployed, you have to be looking, he continued. That cuts behind all the numbers. Dont look at the flat percentage as a national average Look at the various places where the unemployment growth is taking place. That growth, he said, is where the demand is coming from. Demographics is playing more of an important role than it ever has before.
When discussing the 10-year treasury, Lynns prediction is that the Fed will scale back gradually because we have been in this period of free money for four years. But the change has occurred, he said, but it has to. They cant continue to stimulate the economy forever, and it will have an effect on cap rates, but that will be gradual as well.
According to Sinkuler, The Fed isnt going to do anything drastic. We are going to have stimulus for some time to come, but the question is whether you are going to get the central banks and everyone on the same playing field because everyone is at a different stage in the game and that remains to be seen.
Check back with GlobeSt.com for more from the ULI Investment conference.
Article source: http://www.globest.com/news/12_620/sanfrancisco/finance/Panelists-More-Income-Based-Returns-in-2014-334130.html