Bluestone & Hockley | Portland Property Management https://www.bluestonehockley.com Portland Property Management Tue, 12 Feb 2019 22:22:43 +0000 en-US hourly 1 https://wordpress.org/?v=5.0.3 The Forecast of the Oregon Economy for 2019 https://www.bluestonehockley.com/the-forecast-of-the-oregon-economy-for-2019/ https://www.bluestonehockley.com/the-forecast-of-the-oregon-economy-for-2019/#respond Tue, 12 Feb 2019 22:21:43 +0000 https://www.bluestonehockley.com/?p=26002 As real estate investors, we always want to guess what the future will bring so we can position our budgeting and assumptions and better manage our investments.  In an effort to prepare investors I have abridged a recent update regarding the Oregon economy published by the Oregon State Department of Administrative Services, Office of Economic... Read more ›

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As real estate investors, we always want to guess what the future will bring so we can position our budgeting and assumptions and better manage our investments.  In an effort to prepare investors I have abridged a recent update regarding the Oregon economy published by the Oregon State Department of Administrative Services, Office of Economic Analysis, released November 14, 2018.  I have highlighted text that I think is particularly important.

In short 2019 looks great for Oregon real estate investors, but the demographic and growth picture is slowing and changing.   This overview will be helpful for both commercial and multifamily investors. Please read the detail below.

Oregon Economy

Oregon’s expansion continues to outperform the typical state due to our industrial structure and ability to attract and retain young, working-age households. That said, job growth continues to slow as the regional economy transitions down to more sustainable rates. Oregon today is growing just a notch faster than the average state. This slowdown is not driven by one or two industries in particular but has been broad-based across different sectors and regions within the state. Encouragingly, job growth remains strong enough to keep up with population gains and to absorb the workers coming back into the labor market.

In the near-term economic outlook, our office’s forecast calls for ongoing, but slowing growth in the coming years. Like most national forecasts, Oregon employment growth in 2019 will be above potential or more than the amount needed to keep pace with population gains. In 2020 job growth slows to around potential, while in 2021 and 2022 growth slows to below potential.

 This forecast is not a recession hedge. It is more in-line with slower growth due to an economy reaching capacity and running into supply-side constraints.

In the event of a true recession, and once economists can see the whites of its eyes in the data, the outlook will be downgraded accordingly. Right now, this is simply not the case. Leading indicators and the data flow remain healthy. The outlook calls for ongoing growth.

Economists are articulating the risks to the outlook. There are no clear bubbles, or imbalances in the economy today. As such, this has many forecasters thinking the next recession will be different than the last two where there were clear issues in overinvestment in technology in the late 1990s and housing in the mid-2000s. Many are pointing at the 1990 recession as a plausible past example.

As a case study, the 1990 recession in Oregon is unique. It is the only post-World War II recession in which Oregon’s job losses were less severe than the nation. The question then becomes, is this replicable? Unfortunately, the answer is likely no. Back in 1990, Oregon’s natural resource and manufacturing industries were hit every bit as hard, if not more than their national counterparts. This is typical during downturns where Oregon’s goods-producing industries are hard hit and help drive Oregon’s larger losses.

However, the sectors that outperformed the nation were largely consumer-driven, and population-led industries. Construction in Oregon during the early 1990s really didn’t experience job losses, nor did retail. Now, these industries flattened out and didn’t grow for a couple of years, but overall, they did not see declines like one would expect during a downturn.

One reason for the strength in these sectors is migration flows into Oregon at this time were as large as the state has ever experienced. Typically, people hunker down during recessions and do not move unless in search of better job opportunities elsewhere. This pattern is clearly seen in Oregon’s experience in the early 1980s, early 2000s and again in the aftermath of the Great Recession. But not so in the early 1990s. The large influx of new residents offset some of the underlying economic declines, helping propel Oregon forward faster than in the typical state.

In the event of a future recession, migration flows like those seen in the early 1990s are unlikely to repeat. It is possible, however, 1990 is the outlier and not the typical recessionary pattern of population growth. When combining slower population gains with hard-hit goods-producing industries, a generic recession forecast for Oregon would include larger losses than those seen in the typical state.

All told, and despite the higher risk of recession over the next few years, the current outlook for Oregon remains positive. The labor market is tight, helping to drive wages and overall household incomes higher. As the recently released 2017 Census data shows, the feel-good part of the business cycle is here. It only comes when the economy is at or near full employment. More Oregonians are working but an even larger gain has been seen in the number working full-time. Additionally, poverty rates continue to fall while employment rates rise. These improvements are seen across all racial or ethnic groups and all age cohorts in recent years. Oregon’s economy is expected to continue to hit the sweet spot between now and whenever that next recession comes.

Oregon’s Labor Market

The Office of Economic Analysis has examined four main sources for jobs data: the monthly payroll employment survey, the monthly household survey, monthly withholding tax receipts and the quarterly census of employment and wages.

Right now, all four measures of the labor market are improving. Jobs are being added, albeit at a slower rate. Wages are rising, both in aggregate and for each worker. The unemployment is under what would historically be considered full employment for Oregon.

No question, standard measures of the labor market like the unemployment rate suggest the Oregon economy is healthy. However, the underlying figures behind the headline suggest even better numbers may lie ahead. For one, current estimates of the labor force in Oregon are declining in recent months, in large part due to a falling participation rate. We know the population overall is increasing with migration flows, but on the other hand, Baby Boomer retirements are also currently at their peak. It is likely that Oregon’s labor force is increasing overall and participation rates are at least holding steady. Employment rates by age cohort are still looking solid, as are overall job openings, so a drop in participation is somewhat unlikely. All of this suggests that the unemployment rate would be even lower than current estimates.

Wages in Oregon remain relatively strong, although different measures of wages have diverged a bit in recent years. As previously discussed, expectations were the U.S. Bureau of Economic Analysis (BEA) would revise up their Oregon estimates and growth rates. The BEA recently did just that, however, their figures still trail withholding collections and wages as reported through the unemployment insurance system (QCEW).

Now, measures of economic wages remain below withholding, which does include revenue from bonuses, stock options, retirement accounts, and the like. Withholding is more than just wages. However, this gap never existed before the last couple of years. It remains an important issue for our office to track. Overall, getting a handle of the health of Oregon’s labor market is being somewhat complicated by technical issues within the underlying payroll jobs data. For this reason, the employment data in our office’s forecast is adjusted for two important technical purposes: seasonality at the detailed industry level and the upcoming benchmark revisions. Specifically, our office uses the benchmarked, or revised employment data through 2018 q2 and imputes the 2018 q3 employment data based upon the available preliminary Oregon estimates, national data, and our office’s economic forecast model. As such, for this quarterly forecast, the first pure forecast period is 2018 q4.

In the third quarter, total nonfarm employment increased 1.8 percent over the past year with the private sector growing at 2.1 percent and the public sector growing 0.7 percent. These rates of growth are a clear step down from the full-throttle rates seen in recent years, however, still remain faster than needed to keep pace with population gains so far.

Increasing Job Growth

So far in recovery, the large service sector industries have generally led job growth in terms of the number of jobs added and with above-average growth rates. These include jobs in professional and business services, health services, and leisure and hospitality industries. These three industries have gained 13,400 jobs in the past year and account for 39 percent of all job gains across the state. The good news is that this share has fallen as the expansion continues and other industries add jobs, which was not the case earlier in the expansion.

Currently, ten major industries are at all-time highs. Private sector food manufacturing, education, and health never really suffered recessionary losses – although their growth did slow during the recession. Professional and business services and leisure and hospitality have each regained all of their losses and are leading growth today. In recent quarters retail employment, other services, transportation, warehousing and utilities, and construction, in addition to the public sector have surpassed their pre-recession levels and are at all-time highs. The nine private sector industries at all-time highs account for 64 percent of all statewide jobs. The public sector accounts for an additional 16 percent of all jobs.

With the Great Recession being characterized by a housing bubble, it is no surprise to see wood products, construction, mining and logging and financial services (losses are mostly real estate agents) among the hardest hit industries. These housing and related sectors are now recovering, although they still have much ground to make up. Transportation equipment manufacturing suffered the worst job cuts and is likely a structural decline due to the RV industry’s collapse. With that being said, the subsectors tied to aerospace are doing better and the ship and boat building subsector is growing again. Metals and machinery manufacturing, along with mining and logging, have shown the largest improvements since the depths of the recession.

Coming off such a deep recession, goods-producing industries exhibited stronger growth than in past cycles. While all manufacturing subsectors have seen some growth, they are unlikely to fully regain all their lost jobs. The good news, certainly in the short-term, is that much of the manufacturing sector has returned to growth in recent months following declines a year ago. All told, Oregon manufacturers typically outperform those in other states, in large part due to the local industry make-up. Oregon does not rely upon old auto makers or textile mills. The state’s manufacturing industry is comprised of newer technologies like aerospace and semiconductors. Similarly, Oregon’s food processing industry continues to boom. All told, each of Oregon’s major industries has experienced some growth in recovery, albeit uneven. As the economy continues to recover there will be net winners and net losers when it comes to jobs, income and sales.

The Portland region continues to experience transformational growth. When compared with the other big metro areas around the country, Portland’s growth in high-wage jobs, increases in educational attainment, and household income gains all rank in the Top 5 among the 100 largest metros. Portland’s median household income now ranks 16th largest and is 18 percent higher than the typical large metro.

The rest of the Willamette Valley are likewise experiencing strong income growth in recent years to accompany their underlying economic improvements. Corvallis and Salem are at historic highs for median household income, while Albany and Eugene are close. The gains in Lane County (Eugene MSA) are especially encouraging given the severity of the Great Recession and restructuring of the regional economy after the permanent closure of two major manufacturing sectors.

Bend continues to defy expectations in the aftermath of one of the nation’s worth housing bubbles a decade ago. Relative to the 20 typical housing bust metro, Bend’s income gains rank 5th best and is at an all-time high

Population and Demographic Outlook

Oregon’s population count on April 1, 2010, was 3,831,074. Oregon gained 409,550 persons between the years 2000 and 2010. The population growth during the decade of 2000 to 2010 was 12.0 percent, down from 20.4 percent growth from the previous decade. Oregon’s rankings in terms of decennial growth rate dropped from 11th between 1990-2000 to 18th between 2000 and 2010. Oregon’s national ranking, including D.C., in population growth rate was 12th between 2010 and 2017 lagging behind all of the neighboring states, except California. Slow population growth during the decade preceding the 2010 Census characterized by double recessions probably cost Oregon one additional seat in the U.S. House of Representatives. Actually, Oregon’s decennial population growth rate during the most recent census decade was the second lowest since 1900. As a result of economic downturn and sluggish recovery that followed, Oregon’s population increased at a slow pace in the recent past.

However, Oregon’s current population is showing very strong growth as a consequence of state’s strong economic recovery. Population growth between 2016 and 2017 was 10th fastest in the nation. Based on the current forecast, Oregon’s population of 4.14 million in 2017 will reach 4.63 million in the year 2026 with an annual rate of growth of 1.2 percent between 2017 and 2026.

Oregon’s economic condition heavily influences the state’s population growth. Its economy determines the ability to retain existing work force as well as attract job seekers from national and international labor market.

As Oregon’s total fertility rate remains below the replacement level and number of deaths continue to rise due to ageing population, long-term growth comes mainly from net in-migration. Working-age adults come to Oregon as long as we have favorable economic and employment environments. During the 1980s, which include a major recession and a net loss of population during the early years, net migration contributed to 22 percent of the population change. On the other extreme, net migration accounted for 76 percent of the population change during the booming economy of early 1990s. This share of migration to population change declined to 32 percent in 2010, lowest since early 1980s when we actually had negative net migration for several years. As a sign of slow to modest economic gain, the ratio of net migration-to-population change has registered at 88 percent in 2017 and will continue to rise throughout the forecast horizon. By 2026, nearly all population growth in Oregon will come from net migration due largely to the combination of continued high net migration, a decline in the number of births, and the rise in the number of deaths among elderly population associated with increasing number of elderly population. With Oregon’s favorable economic and environmental conditions, high level of net migration into Oregon will continue.

Age structure and its change affect employment, state revenue, and expenditure. Demographics are the major budget drivers, which are modified by policy choices on service coverage and delivery. Growth in many age groups will show the effects of the baby-boom and their echo generations during the forecast period of 2017- 2026. It will also reflect demographics impacted by the depression era birth cohort combined with changing migration of working age population and elderly retirees through history.

After a period of slow growth during the 1990s and early 2000s, the elderly population (65+) has picked up a faster pace of growth and will surge to the record high levels as the baby-boom generation continue to enter this age group and attrition of small depression era cohort due to death. The average annual growth of the elderly population will be 3.4 percent during the 2017-2026 forecast period.

However, the youngest elderly (aged 65-74) has been growing at an extremely fast pace in the recent past and will continue the trend in the near future exceeding 4 percent annual rate of growth due to the direct impact of the baby-boom generation entering the retirement age and smaller 31 pre-baby boom cohort exiting the 65-74 age group.

This fast-paced growth rate will taper off to one percent by the end of the forecast period as a sign of the end of the baby-boom generation transitioning to the elderly age group. Reversing several years of slow growth and shrinking population, the elderly aged 75-84 started to show a positive growth as the effect of depression era birth-cohort has dissipated. An unprecedented fast pace of growth of population in this age group has started as the baby-boom generation starts to mature into the 75-84 age group. Annual growth rate during the forecast period is expected to be unusually high 5.7 percent. The oldest elderly (aged 85+) will continue to grow at a slow but steady rate in the near future due to the combination of cohort change, continued positive net migration, and improving longevity. The average annual rate of growth for this oldest elderly over the forecast horizon will be 2.0 percent. An unprecedented growth in the oldest elderly will commence near the end of the forecast horizon.

 As the baby-boom generation matures out of oldest working-age cohort combined with slowing net migration, the once fast-paced growth of population aged 45-64 has gradually tapered off to below zero percent rate of growth by 2012 and will remain at slow or below zero growth phase for several years. The size of this older working-age population will remain virtually unchanged at the beginning to the end of the forecast period.

The 25-44 age group population is recovering from several years of declining and slow growing trend. The decline was mainly due to the exiting baby-boom cohort. This age group has seen positive growth starting in the year 2004 and will increase by 1.7 percent annual average rate during the forecast horizon mainly because of the exiting smaller birth (baby-bust) cohort being replaced by baby-boom echo cohort. The young adult population (aged 18-24) will remain nearly unchanged over the forecast period. Although the slow or stagnant growth of college-age population (age 18-24), in general, tend to ease the pressure on public spending on higher education, college enrollment typically goes up during the time of very competitive job market, high unemployment, and scarcity of well-paying jobs when even the older people flock back to colleges to better position themselves in a tough job market.

The growth in K-12 population (aged 5-17) will remain very low which will translate into slow growth in school enrollments. This school-age population has actually declined in size in recent past years and will grow in the future at well below the overall state average. The growth rate for children under the age of five has remained below or near zero percent in the recent past due to the sharp decline in the number of births. This cohort of children will see steady positive growth after 2016. Although the number of children under the age of five declined in the recent years, the demand for child care services and pre-Kindergarten program will be additionally determined by the labor force participation and poverty rates of the parents. Overall, elderly population over age 65 will increase rapidly whereas population groups under age 65 will experience slow growth in the coming years. Hence, based solely on demographics of Oregon, demand for public services geared towards children and young adults will likely to increase at a slower pace, whereas demand for elderly care and services will increase rapidly.

Summary

As we inch closer to an expected slowdown in the economy, Investors need to contemplate their strategies regarding lease renewals, tenant improvements and rent increases.  These decisions will vary depending on the location and type of real estate investments, the temperament of the property owners and the financial success of tenants. Remember too that office space demand will change to smaller spaces. This is driven by the significant increased cost of new Class A office space, and the increased flexibility in working conditions demanded by employees.

As strategic advisors, we would probably suggest making key decisions in 2019 regarding capital improvements not already completed. So, you can complete upgrades while you have tenants in your building. As Californians continue to migrate to Oregon (as economic refugees) the pool of employees will stay consistent. At the same time older Oregonian Baby Boomers will be retiring, which leaves room for the next generation to take their place. The fastest growing population as forecast will be older Oregonians.  They will need housing that they can afford and that is age appropriate.

As you review the national population distributed by age below, you can see a longer lifespan for many Oregonians and a significant lower birthrate. Based on the current forecast, Oregon’s population of 4.14 million in 2017 will reach 4.63 million in the year 2026 with an annual rate of growth of 1.2 percent between 2017 and 2026.

This is a slow but steady growth rate, which bodes well for Oregon, but should remind investors that we are out of the boom of the last 8 years.

Age Distribution United States 2017

Information for the above notes was culled from the attached report from the  Oregon Department of Administrative services, Office of Economic Analysis.

https://www.oregon.gov/das/OEA/Documents/forecast1218.pdf

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Portland Apartments Sector Primed for More Expansion in 2019 – CoStar https://www.bluestonehockley.com/portland-apartments-sector-primed-for-more-expansion-in-2019-costar/ https://www.bluestonehockley.com/portland-apartments-sector-primed-for-more-expansion-in-2019-costar/#respond Thu, 07 Feb 2019 23:03:48 +0000 https://www.bluestonehockley.com/?p=25976 Declining Vacancy with Increased Rents, Supply and Investment Activity Characterize Portland’s Multifamily Market. It’s clear from almost every metric that the Portland multifamily sector’s performance in 2018 outstripped that of the prior year in virtually every respect: rent growth increased, sales volume was up more than 30 percent and the number of new units added... Read more ›

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Declining Vacancy with Increased Rents, Supply and Investment Activity Characterize Portland’s Multifamily Market.

It’s clear from almost every metric that the Portland multifamily sector’s performance in 2018 outstripped that of the prior year in virtually every respect: rent growth increased, sales volume was up more than 30 percent and the number of new units added to the market during the year is way, way up.

Here is a quick look at the major performance measures for the past year.

Supply

The Portland apartment market added about 5,700 new market-rate units in 2018, a 20 percent increase over 2017 when about 4,800 units delivered. The significant increase in Portland’s multifamily supply in 2018 bucked the national trend which saw an average of a 20 percent decrease in the number of new apartment completions.

In all, developers completed 79 new apartment projects in Portland during 2018. Of these communities, 22 had more than 100 units. Modera Pearl was the largest with 290 units. Southeast Portland attracted the greatest concentration of newly built apartments in 2018, with 1,025 new units added during the year, followed by Downtown Portland with 977 units.

The average asking monthly rent for the new deliveries is $1,714 per unit, 31 percent higher than the Portland area’s average rent of $1,305 per unit. Three new communities, Dianne, The Windward and 21 Astor, set a new rent benchmark for Portland with eye-popping average rents greater than $2,500.

Vacancy

What makes the Portland multifamily market’s performance in 2018 even more compelling is that vacancy actually contracted in 2018, despite the ongoing wave of new supply. Underscoring the tremendous demand from renters, the market set a new record for absorption, with about 6,600 units rented in 2018.

That in turn pushed the vacancy rate down to 5.5 percent in 2018 – a contraction of 0.6 percent from the prior year. New residents helped drive the record absorption in 2018, even as Portland’s net migration fell for the third consecutive year.

Rent Growth

At the end of 2018, the typical market-rate Portland apartment rented for $1,305 per unit, a healthy 2.6 percent increase from the prior year.

Rent gains were strongest in the mid-quality 3-Star rated apartments, at 3.2 percent. The higher quality and more expensive 4- and 5-Star luxury apartments also posted strong growth, but at a lower rate of 2 percent. In 2018, only one neighborhood in Portland saw average rents go down: North Portland, which saw rents shrink by 1.3 percent.

Investment

In 2018, Portland multifamily investment sales volume reached $2.1 billion, an astounding 31 percent increase from the prior year.

And with the July trade of the 273-unit Indigo @ Twelve West for $206 million at $682,000 per unit, 2018 also set a record as Portland’s most expensive post-recession multifamily sale – and likely the market’s biggest ever. Greystar acquired the community located in downtown Portland’s West End neighborhood, between the pedestrian-friendly Pearl District and the central business district from Gerding Edlen.

Helping to drive up prices was an influx of out-of-state investors who ‘discovered’ the attributes of the Portland apartment market in 2018. None of the 10 investment firms that acquired the most multifamily property in Portland last year were based within Oregon.

Looking Forward

Perhaps the biggest news of 2018 occurred on December 13th when the Metro Council voted to expand the Urban Growth Boundary by about 2,200 acres, marking the 36th expansion since the Urban Growth Boundary was established in 1979.

While the biggest near-term impact will likely be on single-family residential development in King City, Beaverton, Hillsboro and Wilsonville, the boundary expansion will ultimately affect all real estate sectors.

Meanwhile, news is trickling out of Oregon’s state capitol regarding high-level discussions on limiting annual rent increases. Locally, the Portland City Council is expected to entertain regulation aimed at nudging tenant rental applications toward a first-come, first-serve model, restricting landlord ability to select tenants with an array of criteria. This proposal may also reduce the maximum amount allowable for tenant security deposits.

However, none of these potential regulations will alter the fact that Portland’s multifamily market has an additional 10,512 market-rate units under construction at the close of 2018, a level of supply that will test the strength of demand for apartments that was demonstrated in 2018.

And, in just the first two weeks of 2019, another 244 units have broken ground.

Article written by:

EMILY ANDERER | CoStar

February 01, 2019

 

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Condominium & HOA Management Newsletter https://www.bluestonehockley.com/condominium-hoa-management-newsletter-3/ https://www.bluestonehockley.com/condominium-hoa-management-newsletter-3/#respond Mon, 04 Feb 2019 19:03:20 +0000 https://www.bluestonehockley.com/?p=25951 Read this months condominium & HOA management newsletter HERE!

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Read this months condominium & HOA management newsletter HERE!

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Why Developers Are Warming Up to Co-Living – GlobeSt.com https://www.bluestonehockley.com/why-developers-are-warming-up-to-co-living-globest-com/ https://www.bluestonehockley.com/why-developers-are-warming-up-to-co-living-globest-com/#respond Fri, 01 Feb 2019 00:18:57 +0000 https://www.bluestonehockley.com/?p=25934 Developers are showing an increasing interest in co-living because it can accommodate more rental needs and family types. As Los Angeles—and, really, greater Southern California—moves toward density, developers have been challenged to find affordable ways to house the growing population. Co-living has quickly moved to the top of that list. The model can support more... Read more ›

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Developers are showing an increasing interest in co-living because it can accommodate more rental needs and family types.

As Los Angeles—and, really, greater Southern California—moves toward density, developers have been challenged to find affordable ways to house the growing population. Co-living has quickly moved to the top of that list. The model can support more lifestyle needs and family structures than typical multifamily and at a lower cost. KTGY, which has recently expanded its co-living brand Co-Dwell, says that co-living could be an answer to affordable housing, and developers are showing increasing interest.

“The Co-Dwell concept was developed in response to many discussions we have had with several of our clients who see a need for additional attainable, high-density housing,” Aimee Ho, senior designer at KTGY Architecture + Planning, tells GlobeSt.com. “The need for more housing in urban areas is clear, but much of the focus of recent development has been on high-end residential or tax-credit affordable housing. The need for market-rate housing that addresses the challenges of affordability has been difficult to resolve. We felt it was important to design a high-quality solution that addresses both the individual experience and the community aspects of providing attainable housing.”

Co-Dwell is a hybrid between shard and private living, and one of the early co-living concepts. It seeks to use design to solve challenges in housing today, like space and affordability, while accommodating modern living needs. “Co-Dwell unit plans achieve a balance between shared space and private space,” says Ho. “The design concept for the unit plans centers around a common kitchen and living room. Two private wings, each with two bedrooms and shared bathroom, branch off the common area, each with its own individual entry off the walkway. Each wing can also be closed off from the common area with sliding doors to create another layer of privacy.”

While affordability is the biggest benefit of the co-living, the model is also a way to achieve density in growing cities, particularly in land- and development-challenged markets, like Los Angeles. “At about the same square footage of a market-rate three-bedroom apartment, the four-bedroom Co-Dwell unit accommodates a broader mix of household compositions,” Ho explains. “The layers of privacy—from shared space to private space—appeal to individuals, couples, families of various sizes, and other combinations. This ability to attract a broad demographic of residents further enhances the community, resource-sharing, and support network.”

Article by:  Kelsi Maree Borland | January 2019  | Freelance writer/editor | https://www.globest.com/ 

For other news and our lastest QuickFacts click HERE.

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https://www.bluestonehockley.com/25874-2/ https://www.bluestonehockley.com/25874-2/#respond Fri, 25 Jan 2019 23:15:20 +0000 https://www.bluestonehockley.com/?p=25874 The SVN | Bluestone & Hockley corporate office at 9320 SW Barbur Blvd. Suite 300, Portland, Oregon will conduct a class taught by Managing Principal of KPFF, Blake Patsy. In this presentation, Blake will present the latest updates on the City of Portland’s ordinance changes for Unreinforced Masonry (URM) buildings, including placarding and tenant notification... Read more ›

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The SVN | Bluestone & Hockley corporate office at 9320 SW Barbur Blvd. Suite 300, Portland, Oregon will conduct a class taught by Managing Principal of KPFF, Blake Patsy. In this presentation, Blake will present the latest updates on the City of Portland’s ordinance changes for Unreinforced Masonry (URM) buildings, including placarding and tenant notification requirements.

This event will be held on Thursday, February 21st from 4:30pm – 6:00pm at 9320 SW Barbur Blvd. Suite 300 Portland, OR 97219

Light refreshments will be provided.

To register for this event please visit B&H University URM Ordinance Changes

About the Speaker

Blake Patsy PE, SE | Managing Principal, KPFF

As a principal-in-charge for seismic renovation projects at KPFF, Mr. Patsy works with his clients and the other members of the design team to determine the appropriate rehabilitation objective for each project.   Mr. Patsy also advises his clients on selecting the proper structural upgrade approach that best meets the agreed upon objectives. Mr. Patsy oversees comparative analyses between structural systems including each approach’s cost analysis. Over the years, Mr. Patsy has obtained a vast knowledge of differing construction techniques and analytical methods (ASCE 41-06 Seismic Rehabilitation of Existing Buildings) used to obtain the best renovation possible. He joined KPFF in 1989 as an intern, was named an associate of the firm in 1996, and was promoted to principal in 2000 and became Managing Partner in 2008.

  • Bachelor of Science, Civil Engineering, Portland State University
  • Registered Structural Engineer: OR, WA, CA, AZ, DC, ID, IL, NV
  • Registered Civil Engineer: AL, AR, CA, CO, FL, Guam, MD, MI, NJ, NY, OK, PA, UT, SD, MO
  • Earthquake Engineering Research Institute
  • International Conference of Building Officials
  • Structural Engineers Association of Oregon
  • National Institute of Building Sciences
  • National Assoc. of Industrial and Office Properties
  • International Code Council

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Potential one-two punch of recession and shifting demographics could reduce total US vehicle demand to about 11.5 million by 2025 – Bain & Company https://www.bluestonehockley.com/potential-one-two-punch-of-recession-and-shifting-demographics-could-reduce-total-us-vehicle-demand-to-about-11-5-million-by-2025-bain-company/ https://www.bluestonehockley.com/potential-one-two-punch-of-recession-and-shifting-demographics-could-reduce-total-us-vehicle-demand-to-about-11-5-million-by-2025-bain-company/#respond Fri, 18 Jan 2019 20:19:53 +0000 https://www.bluestonehockley.com/?p=25843 While auto leadership teams prepare for technological disruption, few are focused on the possible double punch of a recession and shifting demographics that is likely to slash automotive sales before new technologies take off. That scenario could leave many companies weakened and some unable to survive the transition. New research from Bain & Company, Automakers’ Triple... Read more ›

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While auto leadership teams prepare for technological disruption, few are focused on the possible double punch of a recession and shifting demographics that is likely to slash automotive sales before new technologies take off. That scenario could leave many companies weakened and some unable to survive the transition.

New research from Bain & Company, Automakers’ Triple Threat: Recession, a Demographic Time Bomb and Disruption, reveals that by 2025, demographic trends, absent other changes, will reduce total U.S. vehicle demand to about 11.5 million. Demand could drop even further in this time if immigration rates decline. Compare that to the demand for light vehicles in the U.S., absent the impact of the great recession, which was roughly 16 million in 2009 and 13.5 million in 2018.

“Sometime in the next 12 to 18 months, a recession is likely. Soon after that, a demographic time bomb will go off, permanently reducing the number of new car buyers,” said Mark Gottfredson, who leads Bain & Company’s Automotive & Transportation Vehiclespractice in the Americas.  “By the start of the 2020s, the population growth of 15- to 64-year-olds will decline to nearly zero, which will have huge repercussions for the automotive industry.  Our research shows that by the mid- 2020s, U.S. unit sales could fall to the same level as in 2008-2009, when GM and Chrysler declared bankruptcy and Ford reported a record $14.6 billion loss.”

Additionally, Bain & Company identifies a third shock that will hit the industry in the mid-2020s:  in six to eight years – one product cycle away – a rapid shift to electric and autonomous vehicles and shared mobility services could leave companies with billions of dollars in stranded assets—a shock that many may not survive.

The analysis suggests that the next recession and an aging population are likely to hit the U.S. auto market first and hardest. These forces will affect global markets as well, with some variation in timing. By contrast, the shift to electric vehicles and new mobility services may come sooner to Europe and Asia and spread faster. While the report focuses primarily on U.S. data, Bain & Company expects the same set of factors to transform auto markets in Europe and Asia by the mid-2020s.

This coming era of disruption poses two major risks for automakers:  committing to a single course of action that ends up being the wrong one, and waiting too long to see how things will play out while putting a bet on every possible outcome.

“Once distinguished by powerful brands, autos increasingly will become commodities, particularly to the next generation of consumers,” said Mr. Gottfredson.  “As new automotive services continue to multiply, based on changing customer demand, OEMs will have less and less control over the market.”

Leadership teams can develop a strategy in uncertainty by taking three key actions:

1) Invest in no-regret moves:  These are actions that improve a company’s resilience and generate benefits under any scenario. For example, one major automotive supplier cut $600 million in annual costs as it prepares to invest in electric vehicle partnerships and acquisitions. The leadership team aims to use the cash it generates to pay down debt and strengthen the company’s balance sheet. Preparing the balance sheet for adversity is one of the most important no-regret moves because if cash flow turns negative under any scenario, the ability to act strategically is often crippled.

2) Develop options and hedges:  Successful companies avoid betting on every square because it risks underinvesting in all options. Instead, they develop strategic options aimed at specific scenarios, such as joint ventures that provide lower-cost market entry or changes to projects that add cost but provide additional flexibility.

3) Prepare for big bets:  Timing is critical when making large-scale investments since different scenarios are likely to impact the payoff of these big bets. Companies may wait to pull the trigger until it’s clear which scenario is most likely to play out. But advance planning gives them the critical flexibility to move quickly once they have it. Identifying the right signposts before competitors do can give companies a valuable 6-12 month lead.

“Companies that create a clear portfolio of options are more nimble in periods of uncertainty because they balance commitment and flexibility,” said Dr. Klaus Stricker, who co-leads Bain & Company’s global Automotive & Transportation Vehiclespractice. “Instead of basing a strategy on conditions at a discrete point in time, leaders engage in a continuous cycle of execute, monitor and adapt, redirecting the company toward the best opportunities over time.”

Article by Bain & Company | December 18, 2018

www.bain.com

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Top 8 Commercial Real Estate Predictions for 2019 – GlobeSt.com https://www.bluestonehockley.com/top-8-commercial-real-estate-predictions-for-2019-globest-com/ https://www.bluestonehockley.com/top-8-commercial-real-estate-predictions-for-2019-globest-com/#respond Thu, 10 Jan 2019 23:45:58 +0000 https://www.bluestonehockley.com/?p=25806 Top 8 CRE Predictions for 2019 If you are looking for predictions for 2019 for the commercial real estate market, you aren’t alone. Here are my  Joseph J. Ori’s 8 CRE predictions for 2019. Industrial markets will continue to sizzle. The industrial real estate market will continue to be the favored real estate sector with... Read more ›

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Top 8 CRE Predictions for 2019

If you are looking for predictions for 2019 for the commercial real estate market, you aren’t alone. Here are my  Joseph J. Ori’s 8 CRE predictions for 2019.

Industrial markets will continue to sizzle.

The industrial real estate market will continue to be the favored real estate sector with robust demand, growth and investor capital. This boom has been the result of strong economic growth, record consumer optimism, low-interest rates and the growing demand for products by e-commerce next day delivery. Average rent growth during the last two and a half years through Q-2 2018 was a strong 7.8%. In 2018, industrial cap rates fell by .5% to 1% to a national average of about 6.25% and through the first six months of 2018, 128 million square feet of industrial space was absorbed.

Apartment rents will continue to moderate.

Apartment rents that have increased by 50% during the last few years in some hot markets on the West Coast and Northeast, will continue to moderate with national rent increases in the 1%-2.5% range. Per apartmentlist.com, the Q-3 YoY national rent increase was only 1.2%. Many more markets will begin offering “free rent” as the more than 1.5 million new units built during the last five years begin to further soften markets.

Interest rates will continue to rise.

Although interest rates have dropped the last two months, with the 10-Year Treasury sliding from 3.22% in September to 2.90% in December, we continue to believe the trade skirmish with China will be settled, stock market volatility will subside, and the economic boom will continue. The Federal Reserve may pause on raising rates in 2019, but the long end of the curve will increase with the 10-Year TNote at over 3.5% by the summer of 2019.

Opportunity zones will draw billions in capital.

Opportunity zones which were created in December 2017 as part of the Tax Cut and Jobs Act, will continue to flourish with billions of capital invested in individual opportunity zones and opportunity zone funds. This is the first part of the current administration’s infrastructure spending policy that will benefit many blighted urban areas with new low and moderate-income development. Treasury Secretary Steven Mnuchin estimated as much as $100 billion in private capital could be invested in opportunity zones.

Public REITs will generate sold returns.

Public REITs which will end 2018 with about a 5%-6% total return (including dividends) will post higher returns in 2019, estimated at 10% with 4% in a dividend and 6% in price appreciation. Even though we here at VOM expect long-term interest rates to increase in 2019, which will hurt REIT net asset values in the short run, the longer-term outlook is positive for public REITs. The average annual return for the FTSE-NAREIT All Equity Index was 11.69% during the last 10 years per NAREIT.

Class B malls will generate robust returns.

The class B mall sector has been battered the last four years, especially in the REIT space, with many public REITs like CBL, DDR, Brixmor and Washington Prime Group, selling well below private market net asset values. Many class B malls are trading at 7%-10% cap rates, which are deep value plays in this market. With most retail bankruptcies in the rear-view mirror and less competition among large national retailers for consumer dollars, retail tenants and their landlords should see higher rents, sales per square foot, occupancies and CRE values.

Shadow CRE lenders will increase market share.

The shadow or non-bank CRE lending market should see increased activity and deal flow in 2019. This sector includes public and private mortgage REITs, private funds, mortgage bankers and CMBS conduits. These lenders will benefit from slower loan growth by commercial banks as they become more risk averse due to pressure from the various regulatory agencies to temper CRE lending. According to the Mortgage Bankers Association, non-bank CRE loan volumes were $32 billion in 2016, $52 billion in 2017 and $23 billion through Q-2 2018. Some of the largest non-bank lenders include; Blackstone Mortgage Trust, Apollo Commercial, KKR Real Estate Finance, Mesa Capital and Hunt Mortgage.

Tech slowdown will lead to lower Northern California housing prices

The median price of a single-family home in San Francisco was $1.45 million at the end of November 2018. This is a reduction in the price of $265,000 or 15.5% from the bubble peak hit in February of $1.7 million. During the last five years housing prices in San Francisco and Silicon Valley have doubled, but they are beginning to come back down to earth. There are two primary reasons for the price declines, higher interest rates and a slowdown in the growth of technology stocks, which are the economic engine for Northern CA. As tech growth slows, the stock prices decline and the firms from Google to Facebook to Square, pull back their hiring quotas. For example, let’s say Facebook is still in a high growth mode and plans to hire 20,000 employees in 2019, with 15,000 in No CA. If their growth is slowing, then they will reduce the new headcount to 12,000, with only 10,000 in No CA. The effect of this is less demand for office space and apartments and less disposable income, which affects housing prices. We don’t think there will be a crash in Bay Area housing prices, but they can certainly decline about 20% during the next few years.

Joseph J. Ori is Executive Managing Director at Paramount Capital Corp. The views expressed here are the author’s own and not that of ALM’s real estate media group

By Joseph J. Ori | January 04, 2019 at 04:00 AM

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Report from India https://www.bluestonehockley.com/report-from-india/ https://www.bluestonehockley.com/report-from-india/#respond Thu, 10 Jan 2019 10:00:12 +0000 https://www.bluestonehockley.com/?p=25794   As some of you may know, we travel to India once a year for my wife’s specialized medical treatment. India is changing, growing and quickly becoming a very strong worldwide economic power. I researched information that might help you see how India compares to the United States. The current population of India is estimated... Read more ›

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As some of you may know, we travel to India once a year for my wife’s specialized medical treatment. India is changing, growing and quickly becoming a very strong worldwide economic power. I researched information that might help you see how India compares to the United States.
  • The current population of India is estimated at 1,361,535,342, based on the latest United Nations estimates. India’s population represents 17.74% of the total world population.
  • As compared to the current population of China at 1,417,597,567, which is equivalent to 18.41% of the total world population.
  • The current population of the United States is 327,954,399, which is equivalent to 4.27% of the total world population.

While the U.S. is the world’s third largest country by population, it is small when compared to the population of India and China.

GDP as a gauge of economic growth

According to the December 15, 2018 issue of Economist Magazine, Gross Domestic Product % growth from a year ago was estimated as follows (for 2018):

India: 7.4%

China: 6.6%

USA:  2.9%

You can see that the Indian economy is very strong.  More importantly, India is rapidly transforming itself from a bottom-tier international market to becoming a truly middle-income country in the next 12 years.

By 2030 India will probably add close to 140 million middle income jobs and an additional 30 million high income households, according to Bain & Company.  The number of upper income households will more than double to 168 Million or 44% of the total households in the country.  This means more cars and less motorcycles, more homes for families and fewer multigeneration households. (Indian Times, Business section, Middle Class to Boost Premium Biz, January 1, 2019)

In the United States the numbers on average look like this:

About half of American adults lived in middle-income households in 2016, according to a new Pew Research Center analysis of government data. In percentage terms, 52% of adults lived in middle-income households, 29% in lower-income households and 19% in upper-income households.

(http://www.pewresearch.org/fact-tank/2018/09/06/are-you-in-the-american-middle-class/)

How does the affect us?

At face value this does not affect the United States at all, except that India should continue to become a larger trading partner.  There is more opportunity for growth in all sectors of the Indian economy, from consumer goods to real estate, from e-business to airplanes, from plastic surgery to the sale of make-up and skin products.  This creates opportunity for U.S. investment and diversification in India as we cope with slowing immigration, population and economy at home.

The other upside is that Indians speak many languages including English.  This makes it easier to have Indian trading partners.  As the Indian economy keeps developing, Indians are becoming more sophisticated as reflected in their goal to send three astronauts into space by 2022.  This will continue to drive their technical innovation and create more competition for the U.S. economy.

(https://www.indiablooms.com/news-details/N/45089/union-cabinet-approves-gaganyaan-project-three-indian-astronauts-will-be-sent-to-space-in-2022.html).

Bear in mind that Indians work 6 days a week and their children go to school 6 days a week.

Not only has Hollywood has set a living standard for Indians they want to aspire to, their families are focused on not being poor and are pushing their children hard. There is demand for Indian labor in the gulf and all over the world.  Not only do expatriate Indians bring home money, but also western living expectations. That is driving the Indian’s to compete.

The United States has always looked to China and Russia first, as competitors; but needs to realign its sights to include India as well or work hard at keeping India in the fold as a key strategic partner.

The India of old is vanishing.  Colorful saris are beautiful, but western garb is taking its place.  Economic growth is occurring and in a big way in India. We need to be aware of these changes and figure out how to get involved or be left behind. The Indians are focused on constant innovation. Ever wonder why Satya Nadella and Sudar Picnchai ended up leading Microsoft and Google respectively? It did not happen by accident.

 

 

 

 

 

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How to Prepare for the New Office Space Trends – GlobeSt.com https://www.bluestonehockley.com/how-to-prepare-for-the-new-office-space-trends-globest-com/ https://www.bluestonehockley.com/how-to-prepare-for-the-new-office-space-trends-globest-com/#respond Fri, 04 Jan 2019 00:36:29 +0000 https://www.bluestonehockley.com/?p=25765 CHICAGO, IL—-The average worker spends 40% of the day at their desk. Eighty percent of work is defined as “collaborative.” Forty-three percent of respondents in a survey indicate that less than 5% of their worksite include enclosed offices. More than 80% of workers spend their time engaged in collaborative work. So says JLL’s 2018 Occupancy... Read more ›

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CHICAGO, IL—-The average worker spends 40% of the day at their desk. Eighty percent of work is defined as “collaborative.” Forty-three percent of respondents in a survey indicate that less than 5% of their worksite include enclosed offices. More than 80% of workers spend their time engaged in collaborative work. So says JLL’s 2018 Occupancy Benchmarking Report.

What do all these stats ultimately mean? “In this new era, there is no one-size-fits-all flex approach, even within a single corporation,” says Ed Nolan, Managing Director and Workplace Strategy Practice Lead, JLL. “Options are key.”

The use of flex space is becoming just as much art as science, Nolan continues, with flexible spaces inspiring uses that trigger creativity and organically shape collaboration. This could mean employees working from home, a café, an outdoor park or a quiet lounge, kitchen, or conference room within the office. “For every business need, there is an ideal space at any given point in time,” he says.

This is one of the reasons why tracking workplace occupancy is so important. Without the proper tracking in place, it’s nearly impossible to make informed decisions about how much and what type of space is needed. According to the 2018 Occupancy Benchmarking Guide, most corporate space is underutilized 60% of the time and those empty desks represent a significant financial opportunity, given that real estate is typically the second- or third-largest item on a balance sheet.  “For most companies, workplace flexibility means financial flexibility, bringing flexible lease terms and portfolio agility—both critical in today’s business climate,” Nolan tells GlobeSt.com.

A Recruiting Edge

In addition to the financial benefits, workplace flexibility gives companies a powerful talent recruitment and retention edge.

“The workforce has become more technologically confident and fluid, with many more telecommuters, freelancers and contractors who make up the gig economy,” Nolan says. “Companies have realized the need for flexible space arrangements to better manage this “liquid” workforce.”

In fact, more than half of companies JLL talked to in a recent survey have some form of mobility program in place, meaning employers are strategically promoting employee choice on where to work and more employees operate without any assigned space. “The changing workforce, combined with the digitization of enterprise work processes, has organizations looking for flexibility in where and how their people work so they can find and attract the best talent, whether they’re permanent employees, contractors or freelancers,” Nolan says. Organizations may also be looking to use short-term space that can incubate innovation, accommodate rapid growth or keep productivity high. Even firms in more traditional industries like law and banking are transforming their workspace to create more collaborative environments and support employee choice, he says.

To read the full article click HERE

By Tanya Sterling | December 28, 2018 at 07:16 AM | GlobeSt.com

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