economic update - ccim.com · welcome to central florida learn something new about msa where you...

Economic Update and

Networking BreakfastFeaturing CCIM Chief Economist K.C. Conway

April 10, 2018 | Grand Hyatt Tampa Bay

Disclaimer: Protecting CCIM, ACRE, UA, and Sponsors

Neither CCIM, it’s Leaders, CCIM sponsors nor CFDC make any representations or warrantiesabout the accuracy or suitability of any information in this presentation. CCIM does not guarantee,

warrant, or endorse the advice or services of K.C. Conway, but we do hang out pontificate over theeconomy and real estate☺

This presentation consists of materials prepared exclusively by K.C. Conway, MAI, CRE, and isprovided during this event solely for informational purposes of attendees and CCIM

membership. This presentation is not intended to constitute legal, investment or financial advice orthe rendering of legal, consulting, or other professional services of any kind.

CCIM Leaders MeetingTampa FL - April 10, 2018

This Presentation reflects the analysis and opinions of the author, but not necessarily those of the faculty and staff of the Culverhouse College of Commerce or the administrative officials of The University of Alabama.

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Welcome to Central FloridaLearn something new about MSA where you are meeting!

Sean Malott

President/CEO – www.cfdc.org

Central Florida Development Council5908 Hillside Heights Drive

Lakeland, FL 33812

P: 863.937.4430

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Polk County, FL (Lakeland/Winter

Haven MSA) is the 6th fasting growing

area in the country. In addition, the

nation’s largest steel manufacturer,

Nucor, announced that they will be

building their latest steel micro mill in

Polk. It is a good time to be in or invest

in Polk. For more information about the

area. www.cfdc.org

Welcome to Central FloridaLearn something new about MSA where you are meeting!

Key Points:• “Inland Empire” of FL• HQ to Publix – Walmart #2• Largest Steel Manufacturer• 8 Colleges & Tech Schools• 6th Fastest growing area • I-4 corridor between Tampa & Orlando• Detroit Tigers Spring BB

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Economic OverviewWhat Was & What to Watch: Nov. 2016-Dec 2017 Vs Apr. 2018 to Nov. 2018?

Nov 2016 – Dec 2017 Period Q2 2018 thru Q4 2018

National Elections:• Trump Elected – Tax Bill Passed?• Stock Market – Crash or Boom?• FED Leadership Change & Interest Rates

Economy:• GDP was stuck < 2% level • Jobs: Struggling to sustain +200k/month• NFIB and NAHB Optimism building

Economy:• Tr-3 Qtrs GDP avg >3%. A Trade War drags GDP <2%• Jobs: BLS-L=BS / ADP/LinkedIn Workforce• NFIB & NAHB HMI tie or set record highs

Housing & CRE Conditions:• HPA rising but Builders not building• No Fear of a rising 10-Yr Treasury Bond

Housing & CRE Conditions:• HPA rising faster; Builders slow to build >1.1 million units• CRE activity in a Rising Interest Rate Environment?

The Risks:• TRUMP, Immigration, new FED Chair

The Risks:• Still Trump & FED, but now add 10-Yr Tr & Trade War

Mid-Term Nov. 2018 Elections:• Does Congress Revert to Dems & undo Tax Bill• Reintroduction of Stock Market Volatility – up 40%• FED Chair Powell indicates less QE & more QN (normal)

Q4 ’17 GDP final revised up

to +2.9%

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ACRE WIRE (Week in R.E.) & KC’s Column

Click here to register for ACRE content/publications

http://www.acre.culverhouse.ua.edu

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C

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R

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ACRE / KC's Economic Score-Board

Q1 2018 38 27

YTD 38 27

January 19 12

February 7 10

March Madness 12 5

Prior Wk 4 5

Current Week 8 3

Looking for a Sponsor of Column and/or Scoreboard

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GDP: Why Rates are really rising. It’s U.S. Debt!

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i) Only Three economies produce more than $10 trillion in annual GDP (U.S., European Region, and China);

ii) Only Eight economies in the world that produce between $1.5 and $5.0 trillion in annual GDP led by Japan and Germany and rounded out by Brazil and Canada with$1.8 and $1.5 trillion, respectively; and.

The U.S. remains the dominant global economy despite the Great Recession with a population (324 million) smaller than both the European region (341 million) and China (1.379 billion).

https://tradingeconomics.com/countries

US Debt: GDP ratio is

part of the rise in 10-Yr Tr.

Uncontrolled Deficits

have a price

Why is the 10-Yr Tr. &

Mortgage Rates Rising?• $1.5 Tr Tax Bill

+

• $300b Budget Deal+

• $1.0 Tr sell down of FED

Balance sheet in 2018 & 2019 ($400+$600)

2.9%

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GDP Update: Q2-Q4 2017 +3%; Trade War slows +3% GDP

https://bea.gov/newsreleases/national/gdp/2018/pdf/gdp4q17_3rd.pdf

The US economy expanded an annualized 2.9 percent on quarter in the last three months of 2017, higher than 2.5 percent in the second estimate and beating market expectations of 2.7 percent.

Personal consumption expenditure (PCE) contributed 2.75 percentage points to growth and rose 4 percent. Services and nondurables rose more than anticipated while durables increased less. We are buying houses and cars not clothes.Fixed investment and increased 8.2 percent. (All before passage & implementation of Tax Bill) Investment rose more than expected for structures. Meanwhile, exports jumped 7 percent.

This will unwind with a Trade War! Exports ADD to GDP

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GDP Update: Q2-Q4 2017 +3%; Trade War slows +3% GDP

https://bea.gov/newsreleases/national/gdp/2018/pdf/gdp4q17_3rd.pdf

• AG exports• Auto Mfg in SE &

MW• Less TEU containers

at ports• Ind’l R.E.

NFIB Small Business Optimism – The Biz-Investment Story in GDP!

SMALL BUSINESS ECONOMY HEATS UP AFTER YEARS ON THE SIDELINEOPTIMISM, CAPITAL SPENDING, COMPENSATION, JOB CREATION – ALL UP, ACCORDING TO THE

MARCH NFIB SMALL BUS. ECONOMIC TRENDS SURVEY

Small business owners are showing unprecedented confidence in the economy as the optimism index continues at record high numbers, rising to 107.6 in February. (February NFIB Small Business Economic Trends Survey).

“When small business owners have confidence and certainty in the economy, they’re able to hire more workers and invest in their business,” said NFIB President and CEO Juanita Duggan. “The historically high readings indicate that policy changes – lower taxes and fewer regulations – are transformative for small businesses. After years of standing on the sidelines and not benefiting from the so-called recovery, Main Street is on fire again.” For the first time since 2006, taxes received the fewest votes as the number 1 business problem for small business.

http://www.nfib.com/surveys/small-business-economic-trends/10


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Job Growth is Solid: ADP (+242) & LinkedIn (+20%) Vs. BLS (+103)

2018 is on track to be the 8th consecutive year in which the economy creates over 2 million jobs.

ADP: It’s Tr.-3 mo. average is +242,000/month

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ADP: Small Biz (<500) & Services creating 2/3rds of the jobs.



LinkedIn Workforce: 146m / 3m / 50k / Feb ‘18 hiring 20% > Feb ‘17

See Linkedin Workforce Report

This new “Skills-Gap” analysis in LinkedIn Workforce jobs report is a must-teach in CCIM Site Selection

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LinkedIn Workforce: 146m / 3m / 50k / Feb ‘18 hiring 20% > Feb ‘17

This new “Skills-Gap” analysis in LinkedIn Workforce jobs report is a must-teach in CCIM Site Selection

17See Linkedin Workforce Report

K.C.’s Top 10 for Q2-Q4 2018Those items that begin with the letter “A” or “T”

Amazon: from HQ2 search to becoming #1 retailer venturing into grocery, media, and space.

Autonomous everything

Artificial Intelligence

Adaptive Reuse: figuring out what to do with empty malls, retail, parking garages, etc.

Aquaponics and vertical farming - check out Plenty and Bezos move into vertical AG.

Affordable Housing: we have a mega affordable housing crisis from NY to Nashville.

Top-5 “A”s after Amazon: Top-5 “T”s starting with Trump:

Trump: How can he not be on the Top 10 of every list (good and bad)

Tax Act: It will be with us for years as deductions burn-off.

Transportation: Trucking and ELD mandate, trains and intermodal, Tesla and Greeley Wolds top electronic vehicle makers.

Trade and Tariffs

Ten-yr Treasury and interest rate rise. How does CRE and an economy function in a rising interest rate environment?

CCIM Institute should have a Top-10 List relating to R.E.CCIM Institute Top 10 Commercial R.E. Investment Strategies 18

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https://www.ccim.com/newscenter/commercial-real-estate-insights-report/amazon-hq2/?gmSsoPc=1

✓ The Amazon RFP process will be emulated. Does your community know how the new game is played?

✓ Traditional Industries (Retail-malls & Financial-Banks) need to be replaced.

✓ It’s all about access to Workforce – Atlas Van Lines 50-year study of Corp Relocations reinforces the key driver in decision to relocate or expand.

20View the first edition of the Commercial Real Estate Insights Report

Amazon HQ2 Paper & Media (Radio, Biz Papers, WSJ …)

Rich, Silva, Sam Moon, etc. delivered Visibility for Members

That is why Conway stills considers Pittsburgh, Columbus and Nashville to be near the top for HQ2. He said Amazon executives were in Columbus over the weekend for the women’s Final Four NCAA basketball championship at Nationwide Arena. “They love your town. You talk to anyone in Amazon at any different level they glow over their experience,” he said. “They love the market.”Amazon and central Ohio do have some history. The internet company has three data centers in central Ohio along with distribution centers in Obetz and near Etna in Licking County. “They are very familiar with Columbus. There are no unknowns,” he said.

CCIM Media arranges KC to be interviewed on Michael

Bull Commercial R.E. Show April 17

Columbus OH Radio Show: Link to the podcast, if producer Tom Schmid hasn’t sent it – Sam

https://www.iheart.com/podcast/76-Joel-Riley-28190899/episode/kc-conway-chief-economist-at-ccim-28976509/

National media coverage in Washington Post, WSJ, Globe Street, Connect Media, Atlanta, Columbus, DC, Denver, Pittsburgh, Raleigh, etc. Biz Media!

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Amazon HQ2 – The 20 FinalistsWhat 20 made the cut from 238 Applicants? Only 4 in West

K.C’s one-time pick of Top-5 Sept. 2017 - 2 weeks after Amazon RFP in Tampa @ REIAC:

Atlanta, GA Columbus, OH

Metro DC - NoVA Nashville, TN

Pittsburgh, PA Orlando as tie for #5

LinkedIn Workforce Skills Gap ReportThe final list includes 20, but really 17 (Metro DC = 3 of 20):

Atlanta, GA – Lt.Gov/DL-NRA Montgomery County, MD

Austin, TX – West/SG Nashville, TN

Boston, MA - SG & Affordability Newark, NJ– incentive play

Chicago, IL – Fiscal/Crime New York City, NY - SGColumbus, OH Northern Virginia, VA

Dallas, TX - West Philadelphia, PA – runner up

Denver, CO – West/Doesn’t want Pittsburgh, PA

Indianapolis, IN – a runner up Raleigh, NC– SG/wins if NoVaLos Angeles – West/SG Toronto, ON – a runner up

Miami, FL - SG / Climate Change Washington DC – SG/Site?

But … SNL probably captured the competition & 20 finalists best!

What are Best R.E. Markets?ULI Updated for 2018 - AMZN HQ2 Finalists make Top 5, 10, 25 & 50 showing.

Austin #2, Raleigh #4, Dallas #5, LA #7, Nville #9, DC #15 & Atl #17, Pittsburgh #26, Columbus #44

https://urbanland.uli.org/economy-markets-trends/smaller-slower-emerging-trends-real-estate-2018-report-predicts-u-s-real-estate-market-cruising-altitude/

Port Markets40% of Top 20

E-commerce & RemakingSupply-Chain.

Also note: i) the Amazon HQ2 20-Finalists MSAs; and

ii) the “Inland Port markets like Greenville SC,

Kansas City, Phoenix, Indianapolis, Columbus OH.

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Atlanta & DC/NoVa

Port Markets

Inland Port Markets

Amazon HQ2 Finalists

✓ 17 of 20 in Top 50

✓ 10 of 20 in Top 20✓ 7 of 20 in Top 10

Note: 3 of 20 Metro DC

Note: Toronto only Top 20 outside US

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Amazon HQ2: What to know about the Search?Amazon’s Business Clients are > East / 16 of 20 Finalists East

https://www.bisnow.com/national/news/office/ccims-official-prediction-for-amazons-hq2-contains-a-few-surprises-83802

The tech goliath whittled 238 proposals down to a selection of 20 metro areas across North America, including major East Coast markets like Boston, New York City, Newark, Washington, D.C., Atlanta and Miami. KC Conway, the new chief economist at CCIM Institute — a global real estate organization recognized throughout the industry for its real estate designations — said though the site selection for HQ2 is about talent acquisition and expanding Amazon’s presence across the country, a number of business benefits will also factor into Amazon’s decision. Below are three reasons Amazon is strongly considering the East Coast for its second headquarters, which will house 50,000 Amazon employees and involve an estimated $5B investment, according to the company.

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Amazon HQ2: What to know about the Search?Amazon’s Business Clients are > East / 16 of 20 Finalists East

https://www.bisnow.com/national/news/office/ccims-official-prediction-for-amazons-hq2-contains-a-few-surprises-83802

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Amazon HQ2 & Atlas Van Lines 50-Yr Corp. Relocation SurveyWorkforce #1 Factor / R.E. Conditions bottom of Top-5 for 1st time

The top three factors affecting relocation last year were lack of local talent (44%); Economic Conditions (34%); and Company growth (22%).

Lack of local talent remains the top external factor.

Real Estate Market Conditions has fallen to the bottom on the Top 5 Factors for the 1st Time in 50-year Survey.

The decline in importance of R.E. Conditions does NOT mean R.E. is not important. It means the SITE SELECTION variables are changing. It’s less about traffic count, vacancy % and cost of rent and more about STEM Workforce count, Band-width, Util cost, etc.

View the Corporate Relocation Survey Results

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Amazon HQ2 & Atlas Van Lines 50-Yr Corp. Relocation SurveyWorkforce #1 Factor / R.E. Conditions bottom of Top-5 for 1st time

28https://www.ccim.com/newscenter/commercial-real-estate-insights-report/amazon-hq2/?gmSsoPc=1

http://www.businessinsider.com/best-cities-millennials-jobs-affordable-2017-9?utm_content=buffer80dae&utm_medium=social&utm_source=linkedin.com&utm_campaign=buffer/#1-

pittsburgh-pennsylvania-10

What do places like Pittsburgh have that Amazon might be interested in? Millennial Workforce!

10 places in the US where young people are happy, rents are affordable, and jobs are plentiful

Oct. 1, 2017, Pittsburgh tops the list.If you're a millennial in search of a good place to live, you might find what you're looking for in

Middle America.Popular coastal markets like New York City, Boston, and San Francisco remain unaffordable for the average millennial.

Cities in the Midwest and South, however, offer affordable housing, stable and well-paying jobs, and a good quality of life. That's according to a study by Apartment List, which evaluated the housing and job markets of US metro areas to discover the best places for millennials to live.

To compile its ranking, Apartment List gathered metrics for the 75 largest US metro areas:• Affordability: Median rents and the share of households that can afford median-priced home.• Jobs: Median wages, wage growth, and the millennial unemployment rate.

• Livability: Renters' satisfaction with weather; community activities; safety and low crime rates.

The “Golden Triangle” – Amazon gets it & It’s all about Logistics!”

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The Golden Mfg & Logistics Triangle:SE (#1 @ 22%) + SW + Great lakes

47% US GDP

Remaking the Supply-Chain – A GREAT story for Mid-Central &SE U.SThe GDP Golden Triangle

Q. What is it about the “Golden Triangle” that makes it tops in GDP, Logistics & Supply-Chain?

A. Best “Freightways!”

Amazon’s HQ2 FInalists:15 of 20 Finalists are

located within the“Golden Triangle”

Remaking the U.S. Supply-Chain:The new CORE for Industrial will be in new markets aligned with Rail

The 7- Class I RRs (Note CN (red) & KCS (brown)

AAR.org – American Assoc. of RRs

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Port of Mobile: + 5 Class 1 RR connections;+ Only CN to Gulf RR connection;+ Largest Steel Port in US; + Huge auto mfg state (Mercedes etc.); but- 2nd largest estuary in No.Am (Env. Challenges)

KC Southern✓Only direct to all Mexico.

✓ Link KCS with BNSF or CSX and create a mega RR/E-commerce power!

CSX:✓The East-coast RR line

serving E-coast ports.✓CSX and NFS are to SE &

Mid-Atlantic what UP is to CA & West-coast

Remaking the U.S. Supply-Chain:The new CORE for Industrial will be in new markets aligned with Rail

The 7- Class I RRs (Note CN (red) & KCS (brown)

“All that happens on the ports, doesn’t stay on the ports” – Rail, Intermodal!

http://www.intermodal.org/

AAR.org – American Assoc. of RRs

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CCIM / ACRE Q2 Paper

How to top 1st CCIM/ACRE Amazon HQ2 Paper? Next Paper for Q2: FOCUS on CCIM Skill Set Post Great Recession:

➢ Tentative Title(s):

• R.E. Skills for the Next-Gen of Real Estate Impermanence

• CCIM Institute’s Calculus and Physics for R.E. Investing

• The Formula for R.E. investing in an Artificial Intelligence economy

• Refocusing One’s Field-of-Vision during periods of Disruption

• Preparing for the next Real Estate Roller-Coaster Ride?

• What is the Formula for Career-Long R.E.-Investment Success?

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CCIM / ACRE Q2 Paper: Participation Time

How to top 1st CCIM/ACRE Amazon HQ2 Paper? Next Paper for Q2: FOCUS on CCIM Skill Set Post Great Recession:

➢ Beyond the Title to Property Sector and Specialty Focus: For Example …

i) Convergence of Retail & Industrial CRE? Remaking the Supply-Chain

ii) What is Adaptive Reuse? What is Affordable Housing

iii) Office beyond Densification to “AI-ication”

iv) Housing – Everything from Student to Workforce Affordable to Senior.

➢ What areas do CCIMs need additional Curriculum, Information, Knowledge?

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CCIM / ACRE Q2 Paper: If the Question is … then … Is the Answer …

Q. – What’s the FORMULA for success in Commercial R.E.?

1-part Networking & Building Relationships

1-part Skill-set Diversity (Adaptive Reuse)

A R.E. SME (Subject Matter Expert) is more than a transaction broker. They are an ADVISOR with skills that run across property types and disciplines (Property Mgmnt, Site Selection, Valuation)

1-part Market Knowledge (Migrate from just Data to Analytics/Dashboards such as those now in LinkedIn Workforce or Rail-Time Indicators)

1-part Diagnostician! CCIMs Solve Problems/Puzzles1-part “Enjoy the Ride” Enjoy what you do!

We want to ID & teach the

FORMULA to avoid a

Career Crash!

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economic update - ccim.com · welcome to central florida learn something new about msa where you...

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