The world is changing — and commercial real estate along with it — according to speakers at the Coldwell Banker Commercial global conference in Nevada.
“First, the world is changing quickly and the commercial real estate market is changing with it,” said Fred Schmidt, chief executive officer of Coldwell Banker Commercial.
Schmidt said the online retailer Amazon is now building its own brick and mortar stores. He said shopping methods will change as the 76 million members of the baby boomer generation are replaced by generation X, 70 million strong; then the millennials, 76 million strong; and then generation Z, 70 million strong. Millennials and Gen Zers prefer to shop online. They don’t use the telephone in the conventional sense and prefer to shop online for both information and purchases.
As a result of demographic and other changes, buildings are becoming “greener” and offices are becoming greener as records are stored in the cloud instead of file cabinets. Millennials are taking over their grandparents’ properties, and the wealth transfer from baby boomers to generation Xers and millennials will constitute the greatest in history.
The retail real estate industry continues to make news. JAB Holdings, owner of Peet’s Coffee and Krispy Kreme, is buying Panera Bread Co. in a deal valued at close to $7.5 billion. Walgreens is still trying to acquire Rite Aid if the Federal Trade Commission will allow it. New quick-serve restaurants featuring gourmet hamburgers and frozen custard are sprouting up everywhere, including Freddy’s Steakburgers and Culver’s restaurants.
Mark G. Dotzour, chief economist at the Real Estate Center at Texas A&M University, also discussed real estate and the economy. Among Doutzour’s observations:
The U.S. economy is the strongest on earth and still has a lot of energy.
Federal Reserve Chair Janet Yellen and the Federal Reserve want to raise interest rates, making the dollar stronger. A stronger dollar will make imports cheaper and offset inflation.
The interest rate on 10-year U.S. Treasury notes, a bellwether for mortgage and commercial interest rates, is unlikely to change much in 2017.
The U.S. unemployment rate is back to normal, and inflation remains low.
The oil and natural gas industries are rebounding.
We’re entering a new bull market for single-family housing.
Our next major economic problem will be student loan defaults.
Reduced business regulation is good for many businesses.
Tax reform would be bullish for jobs, but is unlikely to happen. Infrastructure spending isn’t likely to happen, either.
In summary, this is an incredible time to buy commercial and residential real estate