Mixed Economic Signals Don’t Dampen Real Estate Fundamentals

Michael Hedden

In the latest episode of the NAREIT Podcast, Michael Hedden, managing director with FTI Consulting, assessed the state of real estate fundamentals amid muddled signals from the broader economy.

Measures of gross domestic product (GDP) and job growth are mixed, according to Hedden. Capital continues to flow into real estate, though, he said.

“There is concern that we are at the top of the cycle and that prices are starting to ebb and starting to cool off a little bit, but we haven’t seen it in the actual data,” Hedden said. He noted that foreign capital is helping to bolster prices.

Regarding operating fundamentals in specific real estate sectors, Hedden cited multifamily as the “poster child” for the industry. Demographic shifts are still working in favor of multifamily property owners, according to Hedden, as supply continues to lag demand.

Hedden also pointed out that office occupancy rates are showing signs of improving. Additionally, he said results from the holiday season would go a long to weigh to determining the health of retail sector.

“All in all, I think that many of the sectors are improving from the past and are getting stronger,” Hedden said.

Property valuations should remain “strong” going forward, according to Hedden.

“There’s a lot of capital chasing fewer products,” he said. “You’re going to continue to see price appreciation.”

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