September 12, 2019
Allen Matkins 12th annual View from the Top Economic Overview and Predictions event, held this week at The Beverly Hilton in Beverly Hills, provided a perspective from key industry leaders about what to expect as 2019 draws to a close and what’s ahead in 2020. The gathering featured a real estate economic overview by Eastdil Secured’s Michael Van Konynenburg, as well as four presentations and panels.
The investment sales discussion, moderated by Allen Matkins’ Tony Natsis, highlighted the key issues the industry should be closely monitoring. The panelists (pictured above) included NKF’s Kevin Shannon, Boston Properties’ Jonathan Lange, Los Angeles Stadium & Entertainment District at Hollywood Park’s Jason Gannon, Strada Investment Group’s Scott Stafford and Brookfield Properties’ Jack Sylvan.
Natsis asked the panel to share their biggest near-term concern that would potentially freeze today’s robust real estate market. Though it was noted, conditions were largely positive with all green lights in the investment market, there are signs to watch.
NKF’s Shannon noted corporate debt levels and China are his main concerns, but he feels good about where we are right now. Though there may be some “thinner bidder pools in some markets, that’s opportunity since the debt is so unbelievably good right now,” he notes. He pointed out an issue he’s watching is the level of corporate debt companies are carrying. Corporate debt compared to GDP is all time record of 56%, he says. If there’s a “couple of corporate debt defaults it tends to lead to others,” he says. When companies shut down, he says, investment clients also tend follow suit and halt activities.
Boston Properties’ Lange advised being cautious in order to mitigate the downside, though he noted if you are in an acquisitions or development mode, you need to be bullish or optimistic. He also noted that group psychology has a big impact on investment decisions. Though the fundamentals are strong and healthy, companies will start to “button up their capital spend,” when they sense negativity may be coming, whether it is real or not, he says. Typically, when corporate debt starts to increase compared to GDP, it tends to slow down investment. He’s also watching what the Fed’s actions are, and how it will impact yield.
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