The commercial real estate industry has seen its share of tumult in recent years. The credit crunch and Great Recession hit hard. And a world full of uncertainties and change has kept investors constantly on their toes.
In the face of it all, the industry has recovered. Fundamentals improve quarter by quarter. Lenders get more comfortable every day. Investors are increasingly buying non-core assets and taking on more risk. There are even the first signs of an uptick in development.
In this context, there are pros in the industry that are “positive disrupters”—people who are making changes in the industry and how it functions.
The NREI staff identified key ways that the commercial real estate industry is evolving and issues that will shape the coming years, and found people who are positioned to greatly influence those trends.
Vincent Gray is the mayor of what has been the top commercial real estate market in the country in recent years: Washington, D.C. The city has enjoyed a resurgence and seen numerous high-profile projects in its Northwest quadrant. Some of what’s driven D.C.’s development has stemmed from economic activity generated by the federal government.
Now austerity and cutbacks are the theme. In the face of that, many expected Washington to slow down. But the Gray administration has accelerated programs to incentivize private sector growth. Redevelopment of the St. Elizabeth’s campus in the Southeast quadrant is moving ahead and holds the promise of revitalizing that section of the city. That could keep Washington, D.C.’s commercial real estate market robust and help counteract any reductions in demand from federal agencies.
Nicholas Schorsch is another of our disrupters. American Realty Capital Properties has emerged as an aggressive buyer and major force in the REIT sector on both the public and non-traded sides. The firm’s aggressiveness captured headlines in the first half of 2013, and how the company continues to grow and integrates all of its pieces will be a great story to follow.
Another story that will dominate in the coming years will be the maturation of 10-year loans done at the peak of the last cycle, which could lead to another wave of distress. KeyBank recently made a bold move to put itself in the path of that wave with the pending acquisition of a massive servicing portfolio from Bank of America and Berkadia Commercial Mortgage. KeyBank’s Clark Rogers explains what he expects to unfold there.
Green building has been around for years, but its influence continues to grow. Measuring its effectiveness, however, is still a somewhat elusive task. But economist Nils Kok is at the forefront of an industry-wide effort to construct better benchmarks.
The commercial real estate industry also continues to evolve as nontraditional asset types—student housing, seniors housing and single-family homes, for example—are becoming more institutionalized and bigger parts of the industry. Campus Apartments’ David Adelman, Ventas’ Debra Cafaro and MACK Companies’ Eric Workman are three figures positioned to influence the development of those respective spaces.
In the mainstream, there has been an almost complete collapse in new development in recent years. One firm on the forefront of the next wave of building is Related Companies. Most notably, the firm is working on the massive Hudson Yards project that will redefine Manhattan’s Midtown West district. But Related has shovels in the dirt elsewhere as well. New CEO Jeff Blau will shepherd the firm through its bold push.
On the financing side, there are two big factors that will determine the scope of lending in the years to come: the reemergence of the CMBS sector and the 10 percent reduction in multifamily activity by government-sponsored enterprises Fannie Mae and Freddie Mac. With CMBS, Wells Fargo has emerged as one of the largest players. Doug Mazer talked to us about what the continued growth of CMBS lending will look like. And on the agency front, Sandra Thompson, the deputy director with the Federal Housing Finance Agency, spoke to us about how the FHFA will play a vital role in determining what the 10 percent reduction looks like.
These are our “10 Disrupters.” View the slides and click the links to learn more about them. And then let us know what you think.