Commercial real estate has posted three-and-a-half years of robust total returns, attracting significant inflows of investment capital. At this point we may want to begin to fear our own good fortune, as there is nothing worse than free-flowing capital to encourage over-development which tends to kill the party.
Prices for real estate, like any other economic good, are a function of supply and demand. Since each market has different underlying demand drivers and supply constraint characteristics, investment returns vary.
When combined with access to a strong population base, reasonable barriers to entry that keep supply in check and an efficient transportation and infrastructure network, distribution facilities in global gateway ports may present a compelling opportunity.
I’m often asked for an ex-post review of my prognostications. I can’t disagree because, after all, it would be rather disingenuous to provide forecasts without any degree of back testing. So how accurate was I in 2011? Where did I get it wrong? We’ll see below.
Demography is a critical driver of real estate demand. Population growth in the world rapidly accelerated in the 20th century and is still increasing. While the growth may be leveling off in some industrialized countries, it is still robust in most countries.
The U.S. economy expanded less than forecast in the fourth quarter as consumers curbed spending and government agencies cut back. Real GDP climbed 2.8 percent on an annual rate, up from 1.8 percent in the third quarter.