January 31 is the due date for Brexit to happen. Boris Johnson, Great Britain’s Prime Minister, selected that date as the date for his nation to divorce itself from the European Union, with or without a deal. The result, not surprisingly, is that those on both sides of the issue have varying predictions about the impact of the transition period—ranging from a slight blip to a collapse of the global economy.
While many of the issues will most likely be contained to Great Britain and other EU-member nations, investors in the United States are curious about what to expect when the Brexit pebble is tossed into the pond and the ripples or tidal waves arrive on American shores.
From the moment of its inception, much of the UK was never really convinced that a coming together of European nations could work. In recent years, though, that uncertainty has grown, especially as additional countries were allowed to enter. There is notable skepticism from some analysts about Central and Eastern European nations that have not fully embraced representative democracy, and Southern European nations that are not considered fiscally disciplined.
The Brexit issue is a divisive one for Europe, and it has turned out to be just as divisive on British soil. While EU-member nations will certainly feel the loss, experts generally agree that UK citizens will most likely absorb the brunt of the divorce, deal or no-deal. How long those consequences last is anyone’s guess. Among the key predictions are:
Brexit has a history of being an ever-changing process, and the word at the outset of its execution is caution. The greatest worry is that the level of uncertainty will result in a decrease in demand for UK properties, falling prices, and a reluctance to enter the UK CRE market.
Additionally, the dust of transition will settle at varying speeds. Besides labor and building material shortages, there may also be changes made to safety and building codes and legal and tax regulations, as well as to the process of moving funds across borders. To help navigate these waters, it will be essential to work with a UK-skilled due diligence consultant.
While a cautious approach certainly sounds like a wise option in times of change, it’s also important to remember that potential opportunities also appear. When Great Britain leaves the EU on January 31, expect to see an increase in new deals and projects, especially as UK investors seek to partner with the US, Canada, India, and China.
The most volatile Brexit challenge that may impact US CRE firms is cross-border investment, especially if other EU nations either leave the union or re-examine their own policies as a result of policy changes in the UK.
That being said, the US CRE marketplace is expected to see more positive outcomes as a result of Brexit. The combination of chaos in the UK, the attractiveness of REITs and EB-5 investments, and continued low-interest rates translate into global investors seeking the stability and economic security found in the US commercial sector.
When reading Brexit predictions and various what-if scenarios, it’s inevitable to have even more questions and concerns. Because the situation is uncertain now—and likely to remain so for the next several years—US and global commercial real estate investors should seek answers from a skilled team, like the professionals at Morris Southeast Group.
To learn more about investment opportunities and what Morris Southeast Group can do for you, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at firstname.lastname@example.org.
Not a day goes by when there isn’t some sort of mention of climate change and sea-level rise. Pundits may debate the validity of the science behind the issue, but Miamians and other South Floridians are becoming increasingly adept at wading and driving through flooded streets and sidewalks.
Businesses, too, keep a supply of sandbags on hand to protect their investment from flood damage, while neighborhoods have seen tidal flooding rise from an infrequent to a regular occurrence.
With more than $130 billion of US commercial real estate (CRE) located in the top 10% of cities most vulnerable to sea-level rise, the CRE industry is at looking at ways to help investors weigh the risks, prepare for the challenges, and make wiser investment decisions.
While experts are in no way recommending a mass sell-off of coastal properties, they are advising that if investors do not prepare today, their real estate values could be severely impacted tomorrow.
Because the real estate industry is especially vulnerable to climate change, the Urban Land institute embarked on a global study that looked at the issue and its long-term impact on property investment. Results indicate that meeting the climate-change challenge will require futureproofing structures and projects, as well as working with governments to develop proactive policies and plans.
When assessing the risks associated with a particular property, developers and investors generally rely on insurance data. But because insurers usually determine prices on an annual basis, long-term risk factors—such as those associated with climate change—are often not considered. It’s difficult for that industry to use actuarial science to charge for future risks that are as unpredictable as the weather.
As a result, a new analytics industry—one that merges climate science with business and policy decisions—is emerging. It allows real estate professionals and investors to become better informed and it’s rapidly becoming a part of the due diligence process.
In addition to assessing the physical risks to a specific property as it’s impacted by climate change, these analytics also include transition risks or those factors that will most likely occur as a result of climate change. These include:
In case you haven’t figured it out, the Morris Southeast Group team fully believes that South Florida is worth fighting for—and it will meet the challenges posed by climate change. And we’re not alone.
In more and more projects around the region, developers are adding soil to raise the ground level beneath new construction, as well as investing in and incorporating climate-mitigation and adaptation technologies. These building-for-resilience strategies, in turn, help to lower operational costs while increasing the potential return on a CRE investment.
Speaking of resilience, it’s more than just a means of meeting the needs of a property. City leaders, for many reasons, want to ensure that their municipalities remain attractive for residents and developers.
In many regions, resilience strategies are taking center stage, and it’s important for investors to let policymakers know—on local, state, and national levels— that they’re interested in the issue and want to see action.
To learn more about these issues or Morris Southeast Group’s commercial real estate investment and property management services, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at email@example.com.
A television commentator recently claimed that 2020 isn’t a year. He did say, tongue-in-cheek, that it’s the name of a news show on a competing network. He also said it’s a word that defines hindsight and perfect vision—but not a year.
In commercial real estate (CRE), though, hindsight and vision are essential to determine the trends and cycles that will define the industry in 2020 (which is, indeed a year).
It’s no wonder, then, that as the calendar page has turned to a new year and a new decade, so many experts have offered their insights on the shape of things to come. Here are 5 of the top things that may be on the horizon:
At the moment, the United States is in the midst of its longest expansion in history. While there are national issues (constant talk of an approaching recession, a looming Presidential election and an impeachment process, and a slowing down of GDP) and global issues (Brexit and the potential for war), the steady strength of an expanding economy is expected to continue.
This could further expand job growth and consumer confidence. And, according to CBRE, these factors and Federal interest rate cuts are expected to have a positive impact on continued CRE growth.
Just about everything that could be said about Baby Boomers (aging) and Millennials (blamed for just about everything) has been said, but it’s still worth noting that both generations will continue to have an impact on all real estate sectors. At the same time, Generation Z and a yet-to-be-named generation will also start to exert their influence on the CRE marketplace.
CRE opportunities are expected to meet the needs of longer life expectancies among Boomers and steady population growth that has already outpaced Japan and is expected to surge past Europe. Ground Zero for many of these projects will be seen in the Sunbelt states.
A word often repeated in many of the 2020 predictions is “steady.” In other words, trends, especially as they relate to properties, will follow the same path seen in recent years:
No matter if a CRE transaction involves a single party or a group, and no matter if a CRE project is small or grand, there are risks. As a result, due diligence is a must—and that simple fact cannot be stressed enough, particularly as we move into 2020 and beyond.
A key tool aiding due diligence is the gathering and use of data in all areas—from the state of a building’s operating systems today and how they are expected to perform tomorrow, to funding issues and the impact of climate change on specific properties in specific locations. And this last item is expected to become a larger one as we move into this decade.
What hasn’t changed and won’t? A well-informed CRE deal is still far likelier to be a strong one.
At the start of the 21st century, most people in the developed world were terrified of Y2K and the potential collapse of the global economy. Twenty years later, globalization, urbanization, a changing workforce, AI, and the IoT have transformed CRE. That’s why the findings of Deloitte’s recent survey of 750 CRE executives in 10 countries are so interesting.
While most respondents rated tenant experience as a top priority, the majority had not truly addressed the digital tenant experience. To that end, expect investors, owners, managers, and landlords to embark on a smart building, mobile app odyssey to meet tenant demands while improving efficiency and performance.
When you look at these trends through a South Florida lens, the region appears to be headed in the right direction. As a Sunbelt state, Florida has already witnessed an increase in population, a building boom, and an embrace of co-living and co-working environments.
At the same time, there are large tracts of industrial and warehouse spaces, as well as climate-change-mitigation technologies that are being incorporated into new construction and retrofits. To learn more about these trends and what Morris Southeast Group can do for you in the coming year and beyond, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at firstname.lastname@example.org.
For developers, one of the keys to seeing a proposed project completed is sufficient capital. At the same time, investors are looking for the right projects with the best potential returns on their investments—wherever those investors are from. Enter the Immigrant Investor Program or EB-5.
Created by Congress in 1990, the program was designed as an incentive for foreign investors to help stimulate the US economy through capital investments and job creation in exchange for green cards and eventual US citizenship. In its early years, the program was practically dormant. But during the Great Recession, when banks were reluctant to approve construction loans, EB-5 was able to help fill that void.
Mixing immigration with money, it’s no wonder the EB-5 has, over the decades, seen its share of criticism. While some have seen this as a green-card-for-cash initiative that favors wealthy investors, others view it as a highly beneficial job (at least 10 jobs per project) and investment program that’s good for the US economy.
Nevertheless, the Obama and Trump administrations have each taken a very critical look at EB-5, with each making its own set of recommendations and changes. In July 2019, the Department of Homeland Security (DHS), which oversees the program, released its latest rules:
Very often, EB-5 is considered an immigration program—but that doesn’t even begin to scratch the surface. It is, in fact, so much more than that and it’s constantly evolving. As a result, developers and investors have to be aware of the changes and be willing to adapt to them.
It’s important for all parties to work with a team skilled in the nuances of EB-5. Morris Southeast Group is one such group. And because of our reputation in South Florida, we are especially skilled at building the EB-5 bridge between Latin America and the SoFlo region.
To learn more about what Morris Southeast Group can do for you, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at email@example.com.