Green Street Analyst Sees Limits to Demographic-Driven Demand Forecasting

Dave Bragg, managing director at Green Street Advisors, joined Nareit for a video interview at REITworld 2017.

Bragg leads Green Street’s strategic research efforts, focusing on broad topics that have implications across property sectors and markets.

One topic that Green Street has focused on lately is Amazon’s decision to establish a second headquarters outside of Seattle. Rather than looking at the likely candidates for the new headquarters, Bragg said Green Street has concentrated on the negative implications for Seattle.

Bragg also commented on a recent Green Street report assessing the impact of demographics.

While many investors consider demographic-driven demand as a major input in their underwriting process, Green Street looks at it differently, according to Bragg.

When demographic trends are easy to spot, oftentimes supply can react accordingly, Bragg said. Green Street’s view is that demographic-driven demand can only be helpful to an outlook when there are limitations on the ability to add new supply, he noted. Otherwise, it’s important to focus on negative demographic-driven demand, which can hinder the prospects for future growth, Bragg said.

Meanwhile, Bragg highlighted the importance of land use regulation on constraining new supply.

Land-use regulation varies dramatically at the property and submarket level, Bragg pointed out. The most important influence, he said, is not-in-my-backyard-ism (NIMBYism), especially in California.

Another factor affecting land supply is the market’s dependence on property taxes, Bragg said.

After analyzing these factors, Bragg said Green Street has concluded that the New York market is not nearly as supply constrained as most people believe. On the other hand, west Los Angeles is by far the most constrained market, he added.