The CRE 2013 Top 10 Issues Affecting Real Estate

CRE-LogoThe Counselors of Real Estate (CRE) have recently released their Top 10 Issues Affecting Real Estate in 2013.  Both Logan Babin, Jr. and Logan “Hank” Babin, III are members of this international, invitation only organization.

The Counselors of Real Estate Top Ten Issues in 2013

The growing integration of global and local economies, rising economic and political uncertainty, and the need for thoughtful analysis of industry trends inspired The Counselors of Real Estate to initiate its first annual Top 10 Issues Affecting Real Estate report in July 2012.  The Counselors, an international group of high profile professionals, includes principals of prominent real estate, financial, legal and accounting firms as well as recognized leaders of government and academia.

Our 2013 Top Ten Issues Affecting Real Estate report is based on surveys of our members worldwide, independent research, and spirited deliberation in an effort to stimulate thought, debate and progress in moving the industry forward.

1. Low Interest and Capitalization Rate Risks

The Fed has signaled that interest rates will remain low through 2014.  Historically, low interest rates have propelled capital to leave bank accounts in search of high returns. Real estate has benefitted from low interest rates because it employs a lot of debt. Cap rates continue to decline in primary, secondary and tertiary markets, but are especially low in global gateway markets, posing a serious risk to equity values were cap rates to rise significantly. There is fierce competition for core assets and so much capital chasing them that cap rates will likely remain low in the near term. However, inherent risk of equity investments premised on the continuation of low interest and capitalization rates could be a risky proposition in 2013 if higher rates lead to cap rate decompression.

Key implications of interest and capitalization rate risks are that investors should be locking in low interest debt, reconsidering strategies based on significant price appreciation, and focusing and refocusing on meeting tenant needs and operating their properties more efficiently.

 

2. Health Care

While it is too soon to gage how The Obama Health Care Plan will affect the American economy long-term, demand for medical services and facilities nationwide is expected to increase, including a need for more hospitals, more clinics, and more health care professionals. While there is always  some chance the program could be rescinded or altered, the President’s re-election and the Supreme Court’s affirmation of its constitutionality seem to have quieted voices urging repeal, making the increased demand and related real estate consequences a likely reality.

As the Program moves toward implementation, drugstores such as the Walgreens chain have announced plans to expand their role in the communities they serve, offering basic diagnostic services, in addition to filling prescriptions and providing simple inoculations. It is estimated that an additional 50 million Americans will be covered under the new plan.

An associated factor also increasing the demand for health care services is the aging of the “Baby Boomer” generation which, with longer life expectancies, is rapidly increasing the need for assisted living communities, day-care facilities geared to the elderly, and modifications that enable senior citizens to remain in their homes well into their 80s and 90s.

All of these factors will spur development of a variety of new healthcare facilities, different forms of housing, and expanded retail centers serving not only an aging population but those seeking access to the medical assistance and products to which they are now entitled.

A significant challenge of the increased demand, and cost for health care, will be the burden it places on younger Americans, already saddled with enormous college debt, a weak job market, and aging parents who will rely on them for various forms of support.

Of one thing we can be sure: a myriad of changes will occur as a result of expanded health care coverage and demographic change impacting the property markets (both residential and commercial), America’s  fiscal environment, the delivery of medical services, employment opportunities, and the role of Generations X and Y in contributing to payment of the bills.

 

3. Capital Market Resurgence

Capital markets surged in 2012, with ample debt and equity in most major markets. Transaction volumes rose dramatically over those experienced in 2011. A major question in 2013: will the resurgence continue and grow even stronger or will growth be constrained by economic and fiscal problems at the Federal and State levels as well as financial issues and uncertainty in other parts of the world?

Debt markets have fallen in love with real estate again and money is pouring back into the industry to finance new properties and refinance those that already exist. Debt is becoming widely available to borrowers in the form of whole loans, mezzanine debt and preferred equity financing.  Underwriting requirements are becoming less stringent and LTVs are increasing.

Secondary and tertiary markets are back on investors’ market screens as they seek yield, less competition and higher capital value growth. Capital is being drawn to attractive cap rate spreads that can be 400 to 500 basis points between primary, secondary, and tertiary  markets. It is no longer only a coastal economic recovery story, but a heartland growth story with energy, agriculture and manufacturing leading the way. There is also more money for development projects (particularly multifamily), raising concerns of a return to the period from 2004-2007 where bad underwriting and overleverage prevailed.

 

4. Event Risks Dominate Today’s Headlines and Real Estate  Risks

“Event Risks” as a group–such as the terrorist attacks on September 11, 2001, and more recently the tragedy in Boston, weather or natural disaster catastrophes, financial meltdowns exemplified by the recent situation in Cyprus, the U.S .and European financial crises—always make the Top Ten List…often in hindsight. In 2013, the potential  for a world-altering event with major consequences for real estate is so high, it ranks as a Top Ten Issue without having yet occurred. North Korean aggression and potential responses, continuing problems in Italy, Greece and other parts of Europe, continuing uncertainty and inability to compromise on fiscal issues in the U.S., and the ongoing threat of natural disaster are just a few of the events which could emerge. What and when? Without a crystal ball, we cannot know…yet it is likely that a major event will occur that will significantly affect how we think, live and invest.

 

5. Implications of Climate Change /Weather on Coastal Property Markets

Weather patterns have become increasingly unpredictable as of late, resulting in more frequent, more severe storms catastrophically impacting coastal cities and leaving extensive long-term damage in their wake (i.e. Super Storm Sandy, which immobilized parts of America’s Northeast and Middle Atlantic regions and Hurricane Katrina, which virtually leveled much of New Orleans). This extreme weather, regardless of its cause, has rendered some coastal areas more dangerous and less desirable (on a bluff overlooking the water is still good) — lowering the value of many coastal assets and reigniting intense debate about how new building and investing requirements will adapt to new realities.

Whether or not one believes in climate change, potential tenants and buyers — and a majority of local governments — are taking seriously forecasts predicting significant water rise and weather turbulence in the next 10 to 50 years. As a result, these groups are taking action to properly position themselves and their communities to withstand the atmospheric conditions they expect. What this will mean to infrastructure, tenants, homeowners, businesses, and affected cities as a whole remains to be seen. Yet, change is in the works, precautions are being taken and cities and towns, particularly those in coastal areas, no longer have the luxury of thinking “it can’t happen here.”  Realizing it can, the emphasis is on preparedness — geographically, fiscally and legislatively.

 

6. Echo Boomer Housing Demand Defines Winners and Losers

The largest generation of young people since the ‘60s is called the “Echo Boomers” because they are the genetic offspring and demographic echo of their parents, the “Baby Boomers.”  Born between 1982 and 1995, there are nearly 80 million of them, and they are having a huge impact on entire segments of the economy.  Echo  Boomers are drawn to the urban lifestyle, unlike their parents and grandparents, who fled cities for the suburbs. Typically, Echo Boomers gravitate to the urban core with access to diverse activities, cultural amenities, restaurants, and perhaps most importantly greater employment opportunities.  They are willing to trade size for location and are moving into smaller housing units proximate to employment and affordable mass transit options.   In many locations (such as the San Francisco Bay Area), Echo Boomers continue to work in the suburbs, yet choose to commute from the City. This generation tends to be renters and is not necessarily seeking, or financially capable of buying a home. A highly mobile generation, they are not chained to their automobiles, as were their predecessor generations. Walking, bicycling, and car sharing are in their DNA.

These and related Echo Boomer trends are exacerbating many of the current problems confronting suburban locations due to decreased housing and retail demand, transportation problems, a shrinking tax base, and a variety of related issues. Yet suburbs are not standing still, as they reinvest in parks, bike paths, and mass transit, and identify creative new uses for obsolete shopping malls and other antiquated symbols of a suburban lifestyle — which, for a younger, less possession-driven generation, has lost its appeal and affordability.

 

7. Implications of Increased Natural Gas and Reserves on the US Economy

New technologies have enabled access to vast reserves of natural gas in North America, resulting in an economic boom throughout America’s heartland with strong potential growth in California and other states.  This trend is marked by low unemployment and increased investment options in many secondary and tertiary markets where drilling is prevalent, creating an array of real estate investment opportunities associated with housing, offices, retail, hotels, and industrial warehousing. Natural gas exploration is not without risk and cost, including increased carbon emissions due to methane leakage, groundwater contamination from the fracking process, reduced economic activity in alternative energy sectors, and the potential for boom and bust local economies susceptible to rapid declines in production.

 

8. Global Real Estate Growth and Risk

U.S. investors are becoming confident again, focusing not only on residential real estate in the U.S., but emerging markets such as China, Brazil and India, which reflect potential for higher growth and return. Investors are also looking to Europe, purchasing distressed properties and distressed debt. While, for many, the world remains a scary place to invest, U.S. investors have become accustomed to a permanent state of potential crisis and have not let uncertainty curb their appetite for investment abroad.  At the same time, foreign investors, despite U.S. fiscal balance sheet woes, are finding the U.S. an attractive investment destination because of strong yields and returns, and the legal and institutional environment that protects property and individual rights — offering a level of transparency uncertain in many parts of the world.

 

9. The Impact of Technology on Office Space

The development of increasingly sophisticated and innovative technologies coupled with growing acceptance of flexible, less conventional workspace models have greatly reduced the demand for physical office space in the traditional sense—a trend that is likely to continue. The 21st Century worker is electronically connected 24/7 to the boss, one’s co-workers, clients, and prospects with the ability to effectively participate in “virtual” meetings, from home, the local Starbucks, the airport, or any location with a “Wi-Fi” connection. Workers are more interested in collaborative space and the flexibility to move their computers to the areas that best support their work that day, rather than fixed offices or cubicles. Collaborative meeting spaces, not individual offices, have become more prevalent. All of these trends have led to dramatic reductions in dedicated space per office worker from about 225 sq. ft. in 2010 to 176 sq. ft. in 2012, according to CoreNet Global.

There has been some push back recently to getting rid of personal offices and cubicles, as certain research has shown that creativity and innovation are often best fostered in quiet contemplative work spaces. In some cases, employers are concerned that more chatting is going on than productive work. Like most trends, the best space configuration will depend on a company’s particular business and people, and the debate will continue, but trends towards reduced space use are forecasted to continue.

Another, perhaps more important trend is the change in the workforce.  As a greater portion of the work force moves from salaried to independent contractor status (an estimated 30% in 2013, forecasted to reach 50% in 2020, and a whopping 80% by the year 2030), will the home office become the “new normal” as the corporate headquarters becomes a smaller, more streamlined version of its former self? Countering this trend are recent announcements by companies such as Yahoo that have changed policies to encourage people to work at the office, believing that face to face collaboration and relationships are essential to firm productivity.

Have we finally reached the point where forecasted declines in office space are a reality? How widespread is this phenomenon? Smart investors are examining these questions and taking action to both protect their portfolios and carefully consider new acquisitions.

 

10. Retail Malaise and Repositioning

The rapid ongoing growth of Internet retailing has reduced overall demand for physical stores, reshaping the type and amount of physical retail space tenants need. This has been particularly acute for retailers specializing in electronics, music, and books, but it is quickly affecting the way consumers purchase clothing, shoes and just about everything else.

Retail space is becoming smaller with more attention to innovative display and “order capability” which is fast and user friendly.  In this environment, retail that provides a rich, interesting, multi-faceted shopping experience is thriving. Successful shopping centers are designed with the pedestrian in mind, catering to an adventure the whole family can enjoy. It is increasingly imperative that the “physical retailer” not only provide an appealing selection and high quality product, but an engaging, pleasurable “in-person” experience unavailable to the online retailer.

Rapid change has created losers, as many retail centers are dead or dying. Yet, opportunities abound for developers and investors with the vision and property savvy to create an appealing shopping and entertainment experience in the right location. Repositioning and even new construction opportunities exist for those investors who understand the trends—and are willing to take risks.

Conclusion

Many other issues were suggested, but, of course, we have limited our list to the ten issues we believe will have the greatest impact on real estate in 2013 and the years that immediately follow. We hope identifying these issues and their implications motivates productive discussion of how individuals, companies, and governments should respond to these and other changes in the investment environment that simultaneously challenge our industry while creating opportunities for growth.

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Two Light Industrial Facilities Listed

Logan Babin Real Estate has recently listed two light industrial facilities in Houma, one in East Houma and one in West Houma.

 5343 Hwy 311 For Sale5343 Highway 311 in West Houma is a 15,380 SF machine shop with over 3,300 SF of office area and two 6,000 SF shops (one climate controlled).  It is centrally located near all Houma development and is 8.3 miles from US Hwy 90 (Future I-49).  The machinery and equipment is also available to be purchased, if desired.

For more details, please click: http://www.lacdb.com/listing/28609838

 

175 Thompson Rd - For Sale175 Thompson Road in East Houma is a 8,750 SF light industrial facility with 2,500 SF of office space, 6,250 SF of shop, and 3,600 SF of covered work area.  It is located in the Houma-Terrebonne Industrial Park off of the Houma Navigational Canal and many large oilfield service companies (Gulf Island Fabrication, LAShip, etc.).  For more details, please click: http://www.lacdb.com/listing/28650315

If your company needs light industrial space, please contact Logan “Hank” Babin, III to see if either of these facilities will work for your business.

Local Knowledge…National Reputation.

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Danos Relocating to Terrebonne

Danos, a construction and service partner for major oil and gas firms, announced this week that it would be building a new $10 million headquarters in Terrebonne Parish.  Gov. Bobby Jindal made the announcement with Danos President and CEO Hank Danos at Nichols State University.

Logan Babin Real Estate is proud to have served Danos in their site selection needs for the new headquarters in Terrebonne Parish.  According to reports, the new headquarters will add 326 direct new jobs to Danos’ 1,100 employee base.  This continues a string of positive economic news for the Houma-Thibodaux MSA.

At the event Gov. Jindal stated, “Today’s announcement is great news for the Bayou Region and for our entire state. Danos is one of Louisiana’s deeply rooted homegrown companies renowned for its technical expertise, performance and, above all, outstanding safety in the oil and gas business. The company has proudly called Louisiana home for decades, and it knows that our state is home to an incomparable workforce, a strong business climate and a tremendous energy infrastructure.

“Despite a challenging federal regulatory environment, Louisiana companies like Danos are rising to new heights in business performance and leading the way in solving our nation’s energy challenges. This growth by Danos in south Louisiana will continue bringing great new career opportunities to Louisianians for generations to come.”

Danos President and CEO Hank Danos said, “The Danos family business has deep roots in South Louisiana: The heritage and culture of this area are important to who we are as a company.  We appreciate the commitment of our state’s leadership. The Governor and the Secretary of Economic Development are shaping an environment that is beneficial to attracting and retaining companies who are creating good jobs in our state and region. We are thankful that our employees, customers and the state recognize the importance of our dedication to excellence in safety and job execution.”

Like Danos, Logan Babin Real Estate has been serving the people and industry in South Louisiana for three generations and 50+ years.  Our dedication to our client’s needs and expertise in commercial and industrial real estate bring results to our clients.  That is why we say:

Logan Babin Real Estate and Appraisals.  Local Knowledge…National Reputation.

Contact us today and put our experience to work for you.

Links to Media Reports on Danos Announcement:

The Advocate: Click Here

Fox 8 News: Click Here

LA Economic Development: Click Here

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Houma-Thib Ranked High by Area Development Magazine

The Houma-Thibodaux Metropolitan Service Area (MSA) was recently ranked #24 out of all 380 MSA’s in the United States in a recent article in Area Development Magazine.  The article, “Leading Locations for 2013: Ranking MSAs for Econimic & Job Growth”, analyzed economic and work force data to rank the MSAs.  When segregated into mid-sized cities, Houma-Thibodaux ranked 6th.

When discussing where businesses should consider to locate, the article said “it is important to locate the operation in a city or region that knows how to grow its economy and has the track record to prove it.”

Its summary of Houma-Thibodaux states:

“This 200,000-person MSA is in the heart of Bayou Country, along the Gulf of Mexico in southern Louisiana. It covers two parishes — Lafourche and its parish seat of Thibodaux, and Terrebonne with its main cities of Houma and Bayou Cane.

Both natural waterways and industrial channels provide easy shipping access from the Gulf of Mexico to these cities. This inland port system is well-developed enough to service both heavy manufacturing and the oil and gas industries; key intermodal centers are nearby, as well as easy access to all six of North America’s Class I railroads.

Top industries for Houma-Bayou Cane-Thibodaux include oil and gas, metal manufacturing, food manufacturing, plastics, medical, seafood, agriculture, biofuels, and professional services. Over the years, this MSA has ranked consistently as one of the strongest economic regions in the U.S., thanks to its natural resources, low business costs, and highly skilled work force. The unemployment rate is about 4 percent — about the same as it was during the Great Recession.”

Logan Babin Real Estate is proud to have helped many companies large and small find the proper location in Houma-Thibodaux for their business to thrive!  Contact one of our agents today and put our expertise and experience to work for you.

You will then see what we mean when we say: Local Knowledge.  National Reputation.

To read the full article in Area Development Magazine online, please CLICK HERE.

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Agent Hank Babin Mentioned in Article

MULBERRYMISSIONFISHLOGOAgent Logan “Hank” Babin, III was recently mentioned in an article in Church Executive magazine for his work with Mulberry Baptist Church’s unique fundraiser for mission work in Haiti. The article discussed various church related fundraisers and featured Mulberry’s annual Online Auction for Haiti on eBay Giving Works as a prime example of how online fundraisers can benefit churches.

Babin said the reporter contacted them after doing a Google search on online fundraising. “After viewing the articles and video that eBay featured about Mulberry Baptist on their website, she contacted us for more information. She said Mulberry was ‘way ahead of the curve’ on this one.”

Mulberry is gearing up for their 3rd Annual Online Auction for Haiti to be held again in August. Babin said the church is looking for extra tickets to sporting events, concerts, theater, etc. To donate an item and help this worthwhile cause, you can contact him at our office at 985-872-4597.

Over the last 2 years, Mulberry has funded over $100,000 in projects in Haiti through YWAM Haiti. Our teams have travelled to Haiti on 4 mission trips to build duplexes, a school, provide medical and dental care, distribute food and medical supplies, as well as participate in many other worthwhile activities.

At Logan Babin Real Estate, we believe deeply in investing in communities. That includes communitites in South Louisiana, nationally, and internationally.

To read the full article online at Church Executive’s website, click here: Church Executive Article

To view the eBay Giving Works video on Mulberry’s Online Auction for Haiti, click here: eBay’s Video on Mulberry Baptist Church

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Logan Babin Real Estate Brokers Transaction for Another Waterfront Industrial Property

For the 2nd time in as many months, Logan Babin Real Estate has brokered the sale of a large waterfront industrial facility in Terrebonne Parish.  The 90,000+ SF office/shop had frontage along a private slip and the Gulf Intracoastal Waterway in Houma, LA and was purchased by Gulfstream Services, Inc., a global oilfield services corporation with seven locations in the U.S. and one in Aberdeen, Scotland.

The facility, formerly part of Marine Systems, Inc., a diesel engine services subsidiary of the Kirby Corporation, will now be the new base of operations for Gulfstream Services.

In March of 2013, Logan Babin Real Estate also brokered a sale of the former Quality Shipyard Facility on the Intracoastal Waterway in Houma.

“We continue to strive to offer the most complete level of service to the commercial and industrial real estate market in South Louisiana,” agent Logan “Hank” Babin, III said.  “We are proud that both of these companies, with local roots and national and international reach, trusted our office to navigate them through this process to a satisfying conclusion for all involved.”

If you are buying or selling commercial or industrial real estate in South Louisiana, trust the team at Logan Babin Real Estate to produce for you.  We don’t just place a sign on your property.  We place our reputation on it.

Logan Babin Real Estate and Appraisals.  Local knowledge.  National reputation.

Follow us on Twitter at @LoganBabinRE or click HERE for one of our downloadable brochures.

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Logan Babin Jr. Attends CRE Conference

Logan Babin, Jr. recently attended The Counselors of Real Estate (CRE) Mid-Year Meetings in New York City with some of the leading practitioners in real estate.  The conference featured sessions on real estate economics, emerging markets, data, and the current state of retailers.  It included speakers such as the Presidents and CEOs of Cushman & Wakefield and Silverstein Properties, as well as the Lt. Governor of New Jersey and the Borough President of Brooklyn.

The Counselors of Real Estate is an invitation-only membership organization established exclusively for real estate advisers who provide intelligent, unbiased, and trusted advice for a client or employer.

Both Logan Babin, Jr. and Logan “Hank” Babin, III are members of the CREs.  Logan Jr. previously served as President of the CRE and served on their Board of Governors for years.

Give us a call at Logan Babin Real Estate and let us provide solutions to your complex real estate issues.

LOGAN BABIN REAL ESTATE   Local knowledge.  National reputation.

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Two New Properties Listed

Logan Babin Real Estate, commercial and industrial specialists in South Louisiana, has two new vacant land listings to announce.

The first is 9.55 acres of cleared land near the corner of LA Hwy 24 and Coteau Road. It is 1.8 miles south of US Hwy 90 and has frontage on Hwy 24, Coteau Rd., and access to Alcee St. It is prefect for commercial, industrial, or residential development. This listing can be viewed at: 2764 Coteau Road – 9.55 Acres

The next new listing is a 0.972 acre lot just off of Hwy 311 on N. LaCarpe Court. It is zoned I1-Heavy Industrial and is in current Flood Zone C and proposed Flood Zone X. This listing can be viewed at: 142 North LaCarpe – 1 Acre Industrial Lot

If you are looking to buy or sell commercial, industrial, or development property, contact Hank Babin at Logan Babin Real Estate.  We don’t just place our sign on your property….we place our reputation on it!

Logan Babin Real Estate and Appraisals.  Local Knowledge…National Reputation.

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Logan Babin Real Estate Brokers Sale of Shipyard

Logan Babin Real Estate, commercial and industrial real estate specialists in South Louisiana, recently brokered the sale of the former Quality Shipyard facility on LA Hwy 182 in Houma.  The 24.6 acre fabrication yard on the Gulf Intracoastal Waterway was purchased for $3.15 million.  The site was strategically located to take advantage of road and water accessibility.  It featured a fabrication building, warehouses/shops, offices, and over half of a private slip.

“We are proud to be able to close this transaction to the benefit of our clients,” agent Logan “Hank” Babin, III said.  “And we look forward to seeing this site continue to be a productive economic engine for Terrebonne Parish.”

If you are buying or selling commercial or industrial real estate in South Louisiana, trust the team at Logan Babin Real Estate to produce for you.  We don’t just place a sign on your property.  We place our reputation on it.

Logan Babin Real Estate and Appraisals.  Local knowledge.  National reputation.

Follow us on Twitter at @LoganBabinRE or click HERE for one of our downloadable brochures.

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Forbes names LA “America’s New Frontier for Business”

Louisiana’s commercial and industrial real estate market should get a boost as Forbes magazine recently named Louisiana “America’s New Frontier for Business Opportunity”.  The article suggests this is due to our governmental reform, economic development efforts, and adapting and overcoming.

You can read the full article here: Forbes Article  And if you are searching for the perfect location for your business opportunity, contact Hank Babin at Logan Babin Real Estate.  We are your source for commercial, industrial, and agricultural real estate advice!

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