When the commercial real estate market is in turmoil, valuations are needed. And when the market is stable, valuations are needed. Either way, a professional valuation is not guided by a magic crystal ball—the process is both art and science. North Texas had been humming along thanks to an 11-year long bull run. The region was leading the country in job growth. The prospects for relocating companies to the area from out of state fueled a seemingly ever-robust office market. Businesses saw record profits and income close to historical highs at the end of 2019. Meanwhile, the DFW real estate market paced the country in multifamily and industrial construction. That all came to an abrupt stop with COVID-19. Many of us have dealt with natural disasters, such as tornadoes, hurricanes, floods, wildfires, earthquakes, and drought. Human-caused disasters include riots, mass violence, terrorism, shootings, and industrial accidents. COVID-19 is like nothing we have ever seen; it seems to have touched nearly every aspect of our lives. Click to read more at www.dmagazine.com.
The real estate sector includes companies that own, develop, and manage residential, commercial, and industrial properties. Each of these three real estate segments includes publicly traded real estate investment trusts (REITs). REITs are vehicles that legally allow individual investors to buy shares in real estate portfolios that receive income from a variety of properties. REITs’ key metric is funds from operations (FFO), a measure of earnings particular to the industry. Some big names within the sector include American Tower Corp. (AMT), Prologis Inc. (PLD), and Digital Realty Trust Inc. (DLR). Real estate stocks, as represented by the Real Estate Select Sector SPDR ETF (XLRE), have underperformed the broader market with a total return of -5.8% compared to the S&P 500’s total return of 8.7% over the past 12 months.1 These market performance numbers and the statistics in the tables below are as of May 26. Here are the top 3 real estate stocks with the best value, the fastest earnings growth, and the most momentum. Best Value Real Estate Stocks: These are the real estate stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated. Click to read more at www.investopedia.com.
American cities face an increasingly uncertain future in what is already an uncertain time for when and how to reopen businesses and public spaces during the coronavirus outbreak. Elevated concerns over density and a shift in the mindset about remote work underscore the need to assess what matters most to urban residents. Measuring the value of urban amenities such as arts, cultural activities, recreation opportunities, and overall quality of life and how they relate to a neighborhood’s perception and satisfaction is more important than ever as cities look for a way forward in the post-pandemic future. A landmark Urban Institute report, commissioned by the Knight Foundation, surveyed 11,000 residents across 26 metro areas before the national coronavirus shutdown to understand what determines residents’ sense of attachment and connection to their city or community. It examines the trade-offs people make and the role they think amenities play in their satisfaction of locations. Click to read more at www.forbes.com.
The world’s biggest real estate investors are sitting on piles of cash, preparing for once-in-a-lifetime opportunities created by the pandemic. With economies around the world sputtering, commercial real estate prices are expected to come down. How much they’ll fall is the key question.Sellers are currently willing to concede discounts of around 5%, while bidders are hoping for about 20% off pre-pandemic prices, said Charles Hewlett, managing director at Rclco Real Estate Advisors. That estimated gap, which is likely wider in specific cases, has put a freeze on deals. “The mantra for anything that hasn’t gotten started is delay, defer, and in many cases, renegotiate,” Hewlett said. “If I’m going to have vintage May 2020 on my books, I want to be able to demonstrate to my investors that I got an exceptionally good deal.” Dry Powder: Private equity firms across the globe hold an estimated $328 billion in dry powder for real estate deployment, according to the data firm Preqin Ltd. Prior to the crisis, asset prices had been pushed up as investors chased yield in riskier corners of the property market. Now, Blackstone Group Inc. and Brookfield Asset Management Inc., the largest real estate investing companies, are expected to hunt for bargains among the fallout from the pandemic. Click to read more at www.bloombergquint.com.
In an interview with the TreppWire podcast, Lonnie Hendry, vice president of commercial real estate product management at Trepp, shared with the show’s hosts his ideas around securing accurate evaluations of commercial properties while operating under the cloud of COVID-19. Hendry, also a professor of Finance at Texas Tech, said one of the biggest challenges appraisers are facing is providing a view on a property that can actually be backed up with hard, timely data. “That opinion has to be based on facts,” Hendry said, adding that the data used to calculate property values during periods of market stability – occupancy, revenues, cap rates and expense ratios – all come into question during a period like the current one, where sales are non-existent and comps from the last two months are largely worthless. Click to read more at www.mpamag.com.
2020 is a census year, so soon we’ll have a pretty good picture of the demographics, location and size of the U.S. population. But we’re pretty good at estimating too, and the estimates thus far show that Texas is definitely in growth mode. There are storm clouds on the horizon for one market, however. According to data from the U.S. Census Bureau, Texas was home to six of the 10 counties with the largest population gains: Bexar, Collin, Dallas, Harris, Tarrant and Travis Counties. Among the fastest growing counties in the nation, Texas tallied more than any other state as Comal, Hays, Kendall and Williamson Counties all made the list. Among metro areas that the Census Bureau analyzed, Texas was home to three of top ten MSAs with the largest population gains between 2010 and 2019. The Dallas-Fort Worth-Arlington metro had the greatest jump in that time frame, increasing by 1,206,599 residents—a 19.0 percent rise. Meanwhile, the 510,760 new residents in the Austin metropolitan area accounted for a whopping 29.8 percent increase. Click to read more at www.rednews.com.