Michael Hudgins, managing director and global strategist at Ell Capital Management, Inc., joined REIT.com for a video interview at REITWeek 2017: NAREIT’s Investor Forum at the New York Hilton Midtown.
Hudgins discussed trends in transaction volumes across major real estate markets. He pointed to the United States’ office market, where transaction volume is about 6 percent lower nationwide. At the same time, investors are showing interest in secondary markets, he added.
Hudgins explained that although the trend is lower, it remains in balance due to the offsetting impact of secondary markets.
Overall, the U.S. is seeing a mix in terms of real estate transaction activity, according to Hudgins. He added that with declining net operating income (NOI) occurring across the REIT industry and little room for job market acceleration, now is the time to anticipate a drop in valuations.
Hudgins stressed, however, that he does not expect the highest-quality cap rates to move yet, “but that’s something you need to watch very carefully now.”
Looking ahead, Hudgins said he expects gains in property values to be “spotty” for the remainder of the current cycle “and then a more significant move downwards when we hit the next recession.”