11:50 pm
10 May 2016

2015 Investment Trends

2015 Investment Trends

PLACES sat down with Merle Brann, Director of Investments at Madison Marquette, to get an insider’s look at how real estate investments are determined and where they should be made.

Q. What trends are important to monitor in today’s real estate investment market?

M: It is very important to look at population growth as well as the jobs which drive the need for more office and retail space. In addition to tracking millennial trends, we also look at where people are retiring to and where young families are moving. To stay informed and make good decisions, it’s critical to examine where the growth is occurring.

Q. What are some of the most important factors institutional investors look for when making real estate investments?

M: They are looking for long-term durability, strong credit ratings and whether there are stable anchors. On the office side, in addition to larger private-sector credit tenants, some institutional investors look for General Services Administration (GSA) buildings – office buildings that have government agencies as tenants. While these kinds of investments have a low yield and low return, they are very secure, which is a plus.

Q. What are some of the most interesting investment opportunities for 2016 and beyond?

M: Emerging submarkets that are on the cusp of becoming primary submarkets are going to be very interesting. Recent examples of this include targets like Miami’s Wynwood District, Design District, downtown Brickell area and Flagler Street. Brickell and Flagler were part of a sleepy downtown Miami, and Wynwood and Design District were industrial areas comprised mainly of old warehouses and low-income housing. With the growth of the urban core of Miami taking off in the last few years, we have seen leasing take off in these submarkets with new, hip retailers and restaurants, along with some of the more desirable high-lux standard bearers, and in turn, we have also seen soaring property valuations.

Other interesting investment opportunities include secondary markets that have been devoid of a dynamic urban core environment, but are now experiencing an influx of young professionals from markets such as New York, Boston and San Francisco. Whether their relocation is due to their attending school in the market or because of a job relocation, they originally hail from markets with strong and vibrant downtowns, and therefore are driving growth in the urban core of their new cities and leading the change to a dynamic downtown. Sun Belt cities seem to have been the primary beneficiary of this trend.

Q. Why should real estate investors look to cities with an upsurge in millennials for new investment opportunities?

M: People in their 20s and 30s typically spend more because they have more disposable income. This is why millennials are a great target for retailers. There are great opportunities for those investing in assets that house retail stores, restaurants and bars since millennials tend to spend freely on things like clothing and eating out. On the flip side, millennials can be transient, and their patterns may change as they marry and start families, so you have to be mindful of this trend.

Q. Are retail-centric properties a safe investment?

M: Yes. Grocery-anchored centers are your bread-and-butter investment, especially if they are in a good location. So, if a center has the right grocery anchor, is well located, and has services and restaurants that cater to an affluent and meaningful local population, we consider it to be a safe, or core investment. Urban properties also tend to fall into the core investment group. Think about downtown assets in markets like New York City, San Francisco, Boston and Washington, D.C., where the foot traffic is significant at all hours of the day.

Q: How do you select the right asset to invest in?

M: There are a number of factors that must be taken into consideration when selecting an asset to invest in: Where is the location? What is the transportation situation? Where is the competition located? What is the makeup of the market? Madison Marquette likes to invest in coastal areas, for example, because they tend to have built-in barriers to entry, established or growing employment industries, and strong population growth trends.