SMART CITIES: SMART REAL ESTATE STRATEGIES

By Professor Richard Barkham, Global Chief Economist, CBRE.

With real estate prices at cyclical highs, investors must look to the long term for outperformance. Understanding the evolution of global cities provides the best framework for alpha-generating real estate strategies in the current economic climate.

We have discussed the opportunities created by smart technology such as blockchain before, but it is worth discussing the practices and measurable benefits in the light of McKinsey Global Institute (MGI)’s excellent recent report: Smart Cities: Digital Solutions for a More Livable Future.

Trade Disputes So Far Having Little Impact on CRE

• The U.S. and China recently imposed import tariffs on $34 billion worth of each other’s products and may add more in coming weeks.
• The U.S. has also threatened tariffs on imports from Europe, Canada and Mexico, which also likely would respond in kind.
• While little economic impact has been seen thus far, the potential impacts for commercial real estate—should the trade disputes escalate—will likely result in less demand for industrial space, as U.S. imports require more space than U.S. exports.
• Disruptions to supply chains that were developed under the free-trade agreements may accelerate the automation of U.S. industrial production, reducing the absorption of factory space.

Q2 2018 National Hospitality Research Report

Economic Momentum Propels Occupancy to New Heights; Private Investors Fuel Bidding in Secondary and Tertiary Markets

Hotel sector on track for exceptional room demand. Healthy employment growth and increased consumer spending continue to drive hotel performance nationwide. Occupancy rose to a 30-year high in March, driving increases in ADR and RevPAR. The trend will continue as the stimulative effects of the new tax laws drive economic growth and unemployment remains low. Several markets with large development pipelines, however, may face supply pressures, reducing occupancy and slowing RevPAR growth.