October 18, 2019
Sounding the alarm for a near-term downturn is premature, despite recent industry data pointing to low investment sales numbers. That was one of the key takeaways at NAIOP CRE Converge 2019 from 33-year industry veteran Hessam Nadji, CEO of Marcus & Millichap, which completed more than $46 billion of investment sales in 2018.
Not only do the fundamentals continue to look good from the consumer side, but Nadji told a NAIOP audience that the fundamentals are in line with low interest rates. Declaring a recession based on the time-honored formula of two quarters of GDP growth rates isn’t the right approach anymore, he emphasized.
“We’ve gotten away from the formulaic definition only,” Nadji said. “The two quarters of GDP were clearly the classic way of thinking about it. We moved away from that a long time ago. It’s one in a basket of indicators to consider. There is no doubt that the economic risk levels have been elevated due to the Fed’s aggressive hikes last year and trade fears. In fact, real estate sales have slowed quite a bit in the past few months as reported by Real Capital Analytics (RCA). But, it’s too soon to call this expansion over. We’re still creating solid job numbers, and there’s ample capital in the marketplace looking for real estate opportunities. Assuming the worst-case scenario is avoided on the trade front, both the economy and real estate sales will get a boost.”
GDP numbers and employment statistics may make for interesting data points, said Nadji. However, he emphasized, “What’s important is the trend. People are arguing that the unemployment rate is faulty because the surveys are faulty. Well, they’ve been faulty forever—they’re faulty in a consistent fashion.
“The rate may be off, but the pattern is probably pretty accurate,” he continued. “That’s what we look at.”
Nadji took the stage with Richard Fry, Ph.D., senior economist at Pew Research Center, for the keynote general session, “The Forming Demographic and Market Wave: How to Invest Amid Change.”
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