Presented By: NEAL BAWA Grocapitus & MultifamilyU 2020 REAL ESTATE TRENDS INVESTMENT FORECAST FOR 2020 – WHAT YOU REALLY NEED TO KNOW
Meet Neal President and CEO, Grocapitus & MultifamilyU About Neal Key Focus Neal’s companies have owned / managed a portfolio of over $250 Million Investor Management Over 2,000 units of Multifamily and Student Leasing and Tenant Marketing housing, in 9 states Nationally known Multifamily mentor and Submarket and Property Selection speaker Operations and Metrics Neal Bawa About 5,000 investors attend his Multifamily webinar series and hundreds attend Multifamily Boot camps CEO & Founder Co-founder of the one of the largest Multifamily Investing Meetups in the U.S. with 3,000+ members.
(Partial) Portfolio & Track Record Art City Equinox on Prince The Falls at Crismon Commons Art City Center is a beautiful Purchased March 2019, our first New 240-unit A class property in new construction mixed use property in Tucson, AZ is an older high-growth metro Mesa, AZ. project in Springville, UT. The 114 unit property in a growth area Development includes allocation of iconic mid-rise secure access with new medical centers and malls 40 vacation rentals and 200 long- residential facility nearby. Under market rents and term rentals architected to has 102 units. tired units provide true value add maximize income and profits. opportunity. We’ve boosted The project was completed in occupancy by 10% in our 1st month Ground-up construction commences April 2018 and the apartments of ownership as we re-brand and Q2 2020 with completion expected are at 100% occupancy. renovate to create a modern apt by Q3 2022. community. The GRID Chelsea Place Rails on Main 217 units ground up 174-unit Class C property in 322-unit new construction purpose- construction next to transit East Atlanta, 95% occupied. built student housing project next to and BNMC medical university Value Add project with under the university in Buffalo, NY. First campus in Buffalo, NY. market rents, raise of $6.2MM used to buy land, will undergo light rehab and demo, land remediation & rezoning. Started construction July rents pushed to market . Two Project well timed as Buffalo 2019, for Q1 2021 completion. miles from our other Atlanta economy surged in 2017. property, so lots of efficiencies here. Starting construction 2018, for 2020 completion. Property purchased December 2018. Lakewood Oaks Park Canyon Coyote Creek Apartments Our first project in Jacksonville FL 151-unit Class B Property in 116-unit new construction is a 138-unit Class C (vintage 1974) Dalton GA, Chattanooga Metro. multifamily in St George UT, a city in an emerging Class B area, Under market rents and 20 with 2% vacancy rate, and the acquired in Feb 2019. With under down units from a fire gives us property is zoned for vacation market rents, and no renovated opportunity to add significant rentals as well. units, this is a true value add. We value in this project. will re-brand it, re-position it, then Construction starts Sept 2019, for explore the possibilities to build 32 Property purchased November completion Q1 2021. additional units. 2018. AND MANY MORE…
Real Estate Trends What We Are Going to Cover Today 2020 Outlook: U.S. Economy, Jobs, Inflation, Consumer Spending, Recession Fears The economy has a huge impact on Interest Rate Real Estate prices and cap rates Forecast for 2020 Fed stays dovish in 2020, Rent Control: signals no rate hikes Landlords Under Attack More harm than good for landlords, tenants and investors
Single Family Forecast for 2020 The storm clouds are gathering, but it’s not raining yet in most parts of the Country Multifamily Forecast for 2020 A balanced market positioned for continued favorable performance bolstered by strong demand, low The Story of Apartments rates and healthy rent growth in 10 dynamic charts Learn exactly why apartment rent growth is greater than the 10-yr and 30-yr trend lines
Time for the Shootout: Best Cities ALL NEW: Best cities and states in the U.S. for Real Estate in 2020 for Neal’s Picks Both Multifamily and Single Family for 2020 One national city and underperforming city that should do really well in 2020
Two Cents From Our Lawyer Please read We are not investment advisors, and this seminar is provided for educational purposes only. • All investments involve different degrees of risk. You should be aware of your risk tolerance • level and financial situations at all times. You are free to accept or reject all investment recommendations made by us. All services • that we offer are subject to market risk and may result in loss to your investment. As you know, a recommendation is not a guarantee for the successful performance of an • investment and we cannot guarantee against losses arising from market conditions. Do not invest your money on our recommendation alone. Consult a professional advisor. • HOUSEKEEPING – Recording? Questions? •
LET’S START AT THE BEGINNING ECONOMIC & DEMOGRAPHIC TRENDS FOR 2020 CONSUMER SPENDING, INFLATION, JOB GROWTH, RECESSION FEARS
2019 In Review: U.S. Economy Remarkably Resilient U.S. expanded for a record 126 straight months The longest expansion in American history Consumer-driven growth fueled by strong labor market Sustained growth after series of three rate cuts and lowest unemployment in 50 years “Phase One” resolution to U.S -China trade progressing 2019 Trade war fears reduced. U.S.-Mexico-Canada trade agreement and de- escalation of US-Iran tensions are also major wins Key Theme for 2020 Recession risk wanes, economic slowdown likely
Let’s Explore: Is a 2020 Recession Imminent? How Long Can the U.S. Economy Keep Growing and Adding Jobs Without Stumbling? EXPANSION CYCLE DURATION PERCENT GDP GROWTH 2010 to 2019* 10.25 26% 2003 to 2008 6.25 19% 10.25 43% 1991 to 2001 EXPANSION CYCLE PERIODS 8.50 38% 1983 to 1990 1.00 1980 to 1981 4% 1975 to 1980 5.00 23% 1970 to 1974 3.75 16% 1961 to 1970 8.75 54% 1958 to 1960 2.00 13% 1954 to 1957 3.50 14% 1950 to 1953 3.50 29% AVERAGE: 25% AVERAGE: 6 YEARS Source: Marcus & Millichap, 2020 Multifamily Investment Forecast.
Yield Curve: Fact, Fiction or Proceed with Caution ? 7 of Last 9 Inversions Foreshadowed Recession Within 16 Months A recession in the next year is not guaranteed. We can make a good case that we won’t get a recession until the spread widens to 75 basis points, which is what we have seen in the past but it could take a good while to get to that point. If you look at the past 30 years, however, you have to at least consider the possibility that the countdown has started. And that is something we need to be aware of .” — Brad McMillan, CIO & Principal, Commonwealth Financial Network Source: Marcus & Millichap, 2020 Multifamily Investment Forecast.
Will the Bubble Burst in 2020? Housing Momentum In 2019 To Fuel Further Growth In 2020 Barring any unforeseen risks, CBRE assess that a recession will be avoided, thanks in large part to the stimulatory effects of the Fed’s rate cuts in 2019. Slow growth will continue in 2020 , broadly supporting already strong property market fundamentals . ” — Spencer Levy, CBRE Chairman Americas Research Source: CBRE Research: U.S. Real Estate Market Outlook 2020, December 2019.
Video Clip: How Another Recession Might Affect Real Estate Danielle Hale, Chief Economist,
Slowing Consumer Spending Enough to Propel Economic Growth What are Professional Forecasters Predicting for 2019-2020? Consumer Spending Real GDP Inflation Economy forecast to grow Slowing from 2.4% in 2019 Slowing growth to limit inflationary a modest 1.8% in 2020 to just under 2.0% in 2020 pressure at 1.7% - a dynamic likely to keep interest rates low 2018 2019F 2020F 2018 2019F 2020F 2018 2019F 2020F Final 2019 data releases: Jan 14-30, 2020 Source: Federal Reserve Bank of St Louis, Forecasters See Lower U.S. GDP Growth in 2020, www.stlouisfed.org/publications/regional-economist/fourth-quarter- 2019/forecasters-see-lower-gdp-growth-2020.
Job Growth Remarkably Stable; Rising at a Stalled Rate Growth Constrained by Labor Force Shortage 4M YEAR-ON-YEAR JOB GROWTH +8.3 MILLION +2.4.1 MILLION 2M (MILLIONS) 0 -2M -8.7 MILLION -4M 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F UNEMPLOYMENT RATE: 3.6% TOTAL: 2.7M LABOR FORCE SHORTAGE: 1.2 MILLION 2019 FORECAST: 2.0M 2020 FORECAST: 1.5M Source: Marcus & Millichap, 2020 Multifamily Investment Forecast.
Unemployment Streak Continues; Pushing Wage Growth Up 2020 Expected to See a Further Dip in Unemployment 12% 9.62% 10% 9.27% 8.94% 8.07% 8% 7.37% 6.16% 6% 5.28% 4.87% 4.35% 3.89% 3.68% 3.53% 4% 2% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: OECD, Unemployment Rate Forecast, Dec 2019; https://data.oecd.org/unemp/unemployment-rate-forecast.htm.
Rent Control Demon: Back with a Vengeance Bad Policies Do Not Fix Housing Affordability RENTZILLA
Trade War: Lingering Jitters Significantly Reduced Forces that Threatened to Topple the U.S. Economy Now Less Menacing 2019 2020 Keep Goods Tariff-Free $156 Billion China Tariffs Cancelled
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